Q2 2025 Agilysys Inc Earnings Call
Good day ladies and gentlemen, and welcome to a gelisess 2025 Second Quarter Carfins call. As a reminder, today's conference may be recorded. I'll now like to send the conference over to Jessica Hennessy, Senior Director of Corporate Strategy and Investigation at gelisess you may begin.
Jessica Hennessy: Thank you, Marvin and good afternoon everybody. Thank you for joining the Agiluses 2025 Second Quarter Conference Call. We will get started in just a minute with management's comments, but before doing so, let me read the safe Arbor Language.
Jessica Hennessy: Some statements made on today's call will be predictive and are intended to be made as forward-looking within the state-parbo protections of the private securities litigation reform act of 1995, including statements regarding our financial guidance.
Jessica Hennessy: All of the company believes that it's forward-looking statements are based on reasonable assumptions.
Jessica Hennessy: Such statements are subject to risks and uncertainties that could cause results to differ materially.
Jessica Hennessy: Important factors that could cause actual results to very materially from these four looking statements include our ability to meet the provided guidance levels.
Jessica Hennessy: Our ability to increase sales and market share, our ability to maintain profitability levels, and the risk set forth in the company's reports on a form 10K in 10K, and other reports filed with the Securities and Exchange Commission.
Jessica Hennessy: As a reminder, any references to records financial and business levels during this call refer only to the time period after a result this made the transformation to an entirely hospitality focused software solutions company in fiscal year 2014.
Jessica Hennessy: with that. I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and CEO of the Jilibus. Ramesh, please go ahead. Thank you, Jess. Good evening. Welcome to the Siskles 2020-25 Second Quarter Learning School.
Speaker Change: Joining Jessica Nee on the call today at our Alfrita Atlanta headquarters is day wood, RCFO.
Speaker Change: Let me first cover brief details about the book for time acquisition, we completed during the quarter, followed by a summary of our recent selling success.
Speaker Change: Before Moving On to Revenue and Other Details.
Speaker Change: We acquired the leading spa management software provider book for time and it's excellent high talent theme, a little more than midway during the quarter.
Speaker Change: Bookford Time is a number one enterprise-sash solution for sparse within hospitality. Currently serving more fobs, five star rated sparse than any other competing product.
Speaker Change: Bookford time at the enjoyed a good reputation in hospitality over the last couple of decades for its superior product and world class customerservice.
Speaker Change: Bookfootimes revenue is almost entirely based on subscription licenses.
Speaker Change: They are customer-based similar to ours and includes many of the sorts, casinos, golf, private member clubs in more than 100 countries.
Speaker Change: and Major Brand Hotel chains including Marriott and Hilton who are common customers with edelices.
Speaker Change: and also other chains like IHG, Hyatt, Acorn and Four Seasons who are at best only partial legacies customers currently at a small portion of their properties.
Speaker Change: In this narrative, we will do our best to highlight sales revenue and other details, separately applicable to book for time. With the caveat that such differentiation is going to become increasingly more difficult during subsequent quarters.
Speaker Change: The process of integrating book for time into the fabric of a jellisess has moved along faster than we anticipate during the couple of months since the acquisition. And it is soon going to be difficult for us to attribute various business metrics separately to book for time and a jellisess.
Speaker Change: Adulance of Sales Personal now have an additional spa management product to sell to various customers where applicable.
Speaker Change: and Book for Time Sales Personnel in Coordination with the bigger Agilacy Sales Team, have an entire smogous boat of hospitality software products they can sell to their current customers and to new ones in their sales territories.
Speaker Change: As you will see from the numbers we discussed during this call, we are having considerable success selling additional products to current customer properties.
Speaker Change: R. Windloss Ratio remained high when we reached the product demonstration stage in our sales process.
Speaker Change: The book for time acquisition by itself in one stroke has increased the number of customer properties currently running, at least one of our software products or modules by as much as 30% or 30% by as much as 30%.
Speaker Change: Less than 15, that is one file, less than 15% of book-for-time customer properties are common with the analysis, try to the transaction.
Speaker Change: One of Bookford's insignificant strengths is a strong sales team, which is experienced and accomplished in selling to the global hospitality industry.
Speaker Change: The book for time sales team was eager for a broader base of products to sell to hospitality, even before the acquisition happened.
Speaker Change: They have certainly come to the right place now and have an entire ecosystem of state-of-the-art technology-based and feature which set of software products and modules They can sell into more or less the same buyers they are used to selling to them
Speaker Change: Overall, we are happy we got this opportunity to add a world-class professional team and product that further enhances our improving competitive positioning within hospitality.
Speaker Change: During the quarter, around the same time, almost to the date of the book for time acquisition, we welcome Mr. Joe Yusuf to our Executive Team as Chief Commercial Officer.
Speaker Change: Jokek comes to us after a close to two decades tenure at Ame Desh Hospitality.
Speaker Change: Focused on hotel technology products like CRS, Business Intelligence, Sales and Catering and PMS, where he led the expansion of that division by a couple of orders of magnitude.
Speaker Change: When Joe joined Ahmedayas, its hospitality division was generating annual revenue of less than ten million dollars, and by the time he left about 18 years later, he was mocking on the doors of being close to a billion dollar business unit.
Speaker Change: We are obviously thrilled to add such a senior accomplished growth mindset officer to our team who shares a DNA of employee and customer-centric discipline profitable growth.
Speaker Change: and Paul Seek, the Executive at the right time.
Speaker Change: and the two details regarding our recent selling success.
Speaker Change: We measure sales in annual contract value terms.
Speaker Change: One slide additional nuance, they actually measure it in net annual contract value. The net represents our conservative practice of counting only additional incremental sales generated in transactions with current customers.
Speaker Change: That's an important distinction as we continue to see more growth in subscription sales from our current customer base.
Speaker Change: Excluding.
Speaker Change: Aditional sales generated for the book for time product since late August after the acquisition.
Speaker Change: Fiscal 2020-5 second quarter.
Speaker Change: was our best ever July to September 2nd quarter of sales and the second best of any sales quarter.
Speaker Change: Sales level discord or where excellent for the gaming casinos, Rizhwak's hotel and cruise ship verticals in the US and for overall India.
Speaker Change: Sales in the U.S. Food Service Management Vertical continue to be disappointing, and APEC had a challenging quarter following a strong sales quarter during Q1.
Speaker Change: Siskal 2025, second quarter July to September sales of property management systems, PMS, and related add-on experience enhance of software solutions.
Speaker Change: Serpa's first quarter sales and also matched our previous record established about nine years ago when we were selling mostly chanty perpetual licenses.
Speaker Change: We are seeing a clear trend of increasing sales in the TMS category for more than a year now.
Speaker Change: Fiskult 2025, 2.4 PMS and PMS related product sales nearly doubled year over year, compared to the 2.4 of last Fiskult year.
Speaker Change: The number of field implementations of the fully modernized set of PMS solutions are increasing, giving us a growing number of reference customers who are willing to discuss their success stories with others in the industry.
Speaker Change: One recent example of the power of integrated PMS solutions was that a major popular result, that the combination of expressed checking checkout key asks.
Speaker Change: and our core PM resolution, Reduce guest checking wait times during peak holiday checking times from a few hours to a matter of minutes.
Speaker Change: The values of such powerful customer testimonials about the recently modernized PM resolutions cannot be overstated.
Speaker Change: Physical 2025 April to September was the best ever first half of a fiscal year with respect to sales. A head of last year's record first half days by a comfortable distance.
Speaker Change: We have a long runway of sales growth ahead of us across all sales verticals.
Speaker Change: The sales verticals of the area are performing well, can sustain a lot more growth due to current lower market share levels.
Speaker Change: and the verticals which have still not performing well, will scale great heights, once we turn the corner with the newer version of the products now available to sell and increased market awareness.
Speaker Change: Our market share remains low in most of our sales verticals.
Speaker Change: and we are at only the early innings of effectively bringing to all relevant marketplaces an entire ecosystem of hospitality focused products.
Speaker Change: Each of them, based on state-of-the-art cloud-native technology, that can also perform well on premise for the many hospitality customers who still prefer on premise implementations.
Speaker Change: We are expanding our marketing efforts, have greatly increased our thought leadership presence, are establishing a good presence in a lot more trade shows.
Speaker Change: Have increased our global quota carrying sales personnel strength by 50% that's 50% by 50% As at the end of September, compared to a year ago
Speaker Change: And added to the Executive Team and accomplished senior sales and commercial leader who has an established track record of driving growth, is well respected and wheels great influence in the hospitality industry.
Speaker Change: Having said all that, the present truth is much of the hospitality industry has not discovered the new
Speaker Change: The Lahitas Gauls Resort in Texas
Speaker Change: Recently implemented 14, that is 14 modern technology-based Agilator Software Solutions, and all of them went into production use over a two-day window, weekly things several competitive solutions.
Speaker Change: The hospitality industry in general, it's just not used to such reality yet and it is going to take us more time to be more convincing about what can be accomplished today with an integrated ecosystem of modern solutions.
Speaker Change: We do not see the possibility of any external factors slowing us down.
Speaker Change: If the global customer base and hospitality experience of any slowdown due to the economy, interest rates, elections, inflation or any other external factor.
Speaker Change: We believe that only increase the need for technology that can help improve operational efficiencies and provide ways to enhance guest experience and guest loyalty without increasing operational costs.
Speaker Change: During Q2 of fiscal 2025 July to September, we added 18, that is 18, we added 18 new customers and all but one of them was subscription based.
Speaker Change: Each of these new customer sales wins involved, and average of 5.4 products per deal, which is a new high for us.
Speaker Change: and was driven by PMS New Customer Wins which featured an average of 1313 13 products per day.
Speaker Change: In addition to the 18, five new customers signed up for the Book for Times Spa Product from the time of the acquisition during the third week of August.
Speaker Change: We also added 85 new properties which did not have any of our products before but the parent company was already in customers.
Speaker Change: of the 108 new properties added during the quarter across new customers and new properties of current parent customers, about 90% 9000, about 90% of them when either partially or fully subscription based.
Speaker Change: In addition, there were 102 instances of selling at least one additional product to properties which were already running at least one of our other products.
Speaker Change: These 102 instances involved a total of 247 new products sold to current customer properties.
Speaker Change: The average D size across these 102 instances of new product sales was about 14% 14% higher than the sequentially preceding Q1 quarter.
Speaker Change: Annual Contract Value of New Product Sales, Soul to Current Customer Properties during the first of fiscal 2025 increased 84% year over year compared to the first half of last year.
Speaker Change: Now on to revenue.
Speaker Change: Swiss skills 20, 25, Q2 revenue was a record 68.3 million dollars. The 11th consecutive record revenue quarter, 16.5% that is 16.5% higher than the comparable prior year quarter.
Speaker Change: 2.2 million of the 68.3 million dollars was attributable to book for time, meaning you would have been a record revenue quarter, even without revenue from book for time.
Speaker Change: Overall revenue during the first half of fiscal 2025 was $131.8 million, 15% that is
Speaker Change: Siskaliar 2020-25Q2 recurring revenue grew 21% year over year and 8.9% sequentially quarter over quarter to a record 41.4 million.
Speaker Change: Recaring revenue year over year increase of 7.2 million dollars and sequential quarter over quarter increase of 3.4 million are both record best increases.
Speaker Change: This recurring revenue increase was driven mainly by a 36.6% increase in subscription revenue
Speaker Change: which grew to $25.1 million during fiscal 2025 Q2.
Speaker Change: This 25.1 million included 2.1 million of subscription revenue attributable to book for time since the acquisition.
Speaker Change: Without the Book for Time Contribution, subscription revenue year over your growth would have been 25.2% during Q2 and 28.5% during the first half of fiscal 2025
Speaker Change: 2.4 Siskaliar 2025 was the 3rd consecutive quarter of year over year subscriptions have been growth of 30% 30% or higher.
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Speaker Change: Annual Maintenance Revenue, which is about 40% 40% of total recurring revenue currently, will remain a low-to-no-growth revenue line, as the preference for subscription-based agreements, and cloud-based implementations.
Speaker Change: By both new and existing customers, is driving the vast majority of our sales currently.
Speaker Change: Excluding Book for Time, subscription revenue from add-on, experience, enhance their software modules. Most of which were developed during the past few years, constitute 21.1% of total subscription revenue, the highest level reached so far.
Speaker Change: These add-on software modules working with each other and with the core POSPMS and Inuitary Properiment modules are adding immense value to customer operations.
Speaker Change: When customers like the Lahitas resort in Texas, by multiple such modules from us, along with core POS and TMS products.
Speaker Change: Not only do they get the benefit of far less integration work, they have to manage across multiple vendors.
Speaker Change: But a lot more valuable than that, they also get the benefit of a far higher pace of future innovation.
Speaker Change: When there is a new innovative features set we have to create that cuts across multiple software modules, it is far easier for customers. When we can get that coding done in multiple integrated products simultaneously, in the subsequent release of each of them.
Speaker Change: Then for customers to go about convincing multiple vendors about the need for such an enhancement and dealing with various different product roadmap timelines.
Speaker Change: The hospitality industry is only beginning to embrace such distinct advantages.
Speaker Change: Excluding Book for Time
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Speaker Change: While subscription revenue from point of sale, POS and POS related ad on modules during Q2 grew by 25%.
Speaker Change: Our PUS business continues to work through a tough transition phase as we discuss last quarter.
Speaker Change: The good news is, implementations involving only recently modernized versions are going well and we expect to get our point of sale TOS Mojo back in short order.
Speaker Change: Our current POS modernised and unified solution set is vastly superior and carries tangible competitive advantages.
Speaker Change: The POS project we completed at a prestigious well-known last week is property a couple of months ago, replacing a major well-established comparator, who just could not match the benefits of our modernized POE solution set brought to the customer is one such recent example.
Speaker Change: We work through a tough face without POF's business for the past several quarters and a cautiously optimistic that we are turning the corner now.
Speaker Change: Sales of point to sales POS and POS related modules during fiscal 2025 July to September 2, quarter.
Speaker Change: 171, 17% higher than the sequentially preceding Q1 quarter and was the best quarter of Q2 has failed in about a year.
Speaker Change: Giving us increasing confidence that we have worked through the low point of our POS business challenges related to the period of transformation from all to new technology.
Speaker Change: and a major theme park International site.
Speaker Change: The fully modernized POS solutions.
Speaker Change: which were installed recently at one foot outlet. Health increased guest transactions by more than 15% one-five by more than 15% through the use of self-service kiosks.
Speaker Change: and also drove a 5% increase in upsell rates while freeing up their employees to provide more attention to guests.
Speaker Change: These kinds of numbers when applied on huge high-walling, thin parks and other beset sites make a real difference to customer bottom-lines this earth.
Speaker Change: Driving additional revenue while also increasing get satisfaction levels is an extremely valuable combination for customers.
Speaker Change: This was also one of the fastest executed software projects this customer has experienced thanks to the power of modern technology solutions which enable relatively faster implementations and easier ongoing maintenance and management.
Speaker Change: Thank you for your time.
Speaker Change: Fraudic revenue, which has been affected by the POS transformation from old to new difficulties during the past few quarters,
Speaker Change: improved slightly sequentially from Q1 to 10.5 million dollars, but was still 16.7 percent, that is one-sixth, 16.7 percent less year over year compared to Q2 last fiscal year.
Speaker Change: fiscal 2025 Q2 July to September services revenue was a record 16.3 million that is one six sixteen point three million dollars thirty nine point two percent higher than the comparable prior year quarter
Speaker Change: Services Avenue continues to be a good indicator of future subscription growth.
Speaker Change: Services and subscription revenue are two main growth engines.
Speaker Change: compromised
Speaker Change: comprised 60.6% that is 6-0, comprised 60.6% of total revenue in the second quarter compared to only 51% of total revenue during Q2 last fiscal year.
Speaker Change: These two revenue drivers continue to support strong top-line growth.
Speaker Change: and the rest of the team. Thank you. Thank you.
Speaker Change: Fiscal 2025 Q2, being the second best sales quarter on record, drove combined product, recurring revenue and services backlog levels, not including book for time, to 94% of peak record levels.
Speaker Change: product backlog improved slightly but remains far short of previous peak levels
Speaker Change: Services backlog grew to record levels with customers continuing to sign up for projects faster than implementations are getting scheduled.
Speaker Change: Recording revenue and within its subscription revenue backlog is at about 90 percent, 9-0, about 90 percent of record lists.
Speaker Change: Thank you.
Speaker Change: Sales momentum, strong in Q1 and even better in Q2, along with the book for time acquisition, has been positive for subscription revenue growth.
Speaker Change: As a result, our expectations for the full fiscal year 2025 have increased.
Speaker Change: enabling us to raise all three guidance levels.
Speaker Change: We now expect the full year revenue range to be $280 million to $285 million.
Speaker Change: Subscription revenue growth to be better than 38 percent.
Speaker Change: And EBITDA as a percentage of revenue to be 18%, that is 1.8, to be 18%
Speaker Change: Higher than the 16% expectation at the beginning of the fiscal year.
Speaker Change: With that, let me hand over the call to Dave for further color.
Dave: Thank you, Ramesh.
Dave: Taking a look at our financial results, beginning with the income statement, second quarter fiscal 2025 revenue was a quarterly record of $68.3 million, a 16.5% increase from total net revenue of $58.6 million in the comparable prior year period.
Dave: One-time revenue consisting of product and professional services was up ten point two percent over the prior year quarter while recurring revenue was up twenty one percent.
Dave: As a reminder, the Book for Time acquisition during August added $2.2 million in total revenue.
Dave: Without Book for Time, total revenue increased 12.8% over the prior fiscal year, despite a 16.7% decrease in product revenue.
Dave: We continue to see significant positive momentum in the business.
Dave: Our sales momentum remains strong, with Q2 bookings at near-record levels. Our backlog is also at near-record levels, and we have significant visibility into revenue for the remainder of the year.
Dave: Product revenue will continue to be the biggest headwind in the business and pose the biggest challenge during the second half of the fiscal year.
Dave: However, POS bookings are improving and up 17% over the prior quarter with product bookings at the highest level in the last four quarters providing additional confidence and acceleration through the second half.
Dave: Professional services increased 39.2 percent over the prior year quarter to a record 16.3 million with services gross margin at 32.4 percent.
Dave: We expect the service margin to remain in the high 20 or low 30% range during the next few quarters as we work to catch up to sales velocity.
Dave: Professional service backlog once again increased to record levels despite record professional services revenue.
Dave: Total recurring revenue represented 60.7% of total net revenue for the fiscal second quarter compared to 58.4% in the second quarter of fiscal 2024.
Speaker Change: Ramesh Srinivasan, Jessica Hennessy, William Wood
Speaker Change: Fiscal 2025 second quarter subscription revenue grew 36.6% over Q2 last fiscal year. Subscription revenue comprised 60.5% of total recurring revenue compared to 53.6% of total recurring revenue in the second quarter of fiscal 2024.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: Subscription revenue increased sequentially $3 million from the first quarter of fiscal 2025, which included $2.1 million in book-for-time subscription revenue.
Speaker Change: Subscription growth, when excluding Book for Time, was 25.2% for the quarter, with the first half of the year 28.5% higher than the first half of fiscal year 2024.
Speaker Change: This was the second best quarter for subscription sales when excluding book for time.
Speaker Change: Subscription backlog remains high and increased over our FY24 and Q1 FY25 exit rates.
Speaker Change: Thank you.
Speaker Change: Moving down the income statement, gross profit was $43.2 million compared to $35.1 million in the comparable prior year quarter. Gross profit margin was 63.3% compared to 59.9% in the second quarter of fiscal 2024.
Speaker Change: Overall, total gross margin should remain just north of 60% for the full fiscal year.
Speaker Change: Combined, the three main operating expense line items, product development, sales and marketing, and general and administrative expenses when excluding stock-based compensation were 45.6% of revenue in the fiscal 2025 second quarter.
Speaker Change: compared to 46.2% of revenue in the prior year quarter.
Speaker Change: Excluding stock-based compensation, product development decreased to 20.3% of revenue during Q2 of fiscal year 2025, compared to 22.8% of revenue in the comparable prior year.
Speaker Change: General and administrative expenses remain steady at 12.7% of revenue while sales and marketing increased from 10.8% of revenue to 12.5% of revenue.
Speaker Change: Operating income for the second quarter of $4.1 million, net income of $1.4 million, and gain per diluted share of $0.05 compares favorably to the prior year's second quarter gain of $3.6 million, $4.1 million, and $0.16.
Speaker Change: The reduction in net income was primarily due to tax expense in the quarter along with lower operating income associated with one-time costs for the book-for-time acquisition.
Speaker Change: Adjusted net income, normalizing for certain non-cash and non-recurring charges of $9.5 million, and adjusted diluted earnings per share of $0.34 were both improvements over the prior year's second quarter results of $6.6 million and $0.25.
Speaker Change: Thank you.
Speaker Change: For the 2025 second quarter, adjusted EBITDA was $12.2 million, compared to $8.1 million in the year-ago quarter.
Speaker Change: We are pleased to see our profitability levels being well ahead of the original FY25 plan with adjusted EBITDA coming in at 17.9% of revenue.
Speaker Change: Moving to the balance sheet and cash flow statements.
Speaker Change: Cash and marketable securities as of September 30, 2024 was $54.9 million compared to $144.9 million as of March 31, 2024.
Speaker Change: The cash decrease was related to the portion of the Book for Time acquisition paid with cash on hand.
Speaker Change: As a reminder, we added $50 million in debt for the Book for Time acquisition.
Speaker Change: Subsequent to Q2, we paid down $12 million of outstanding debt, leaving the current debt balance at $38 million.
Speaker Change: Thank you.
Speaker Change: Free cash flow in the quarter was $5.9 million compared to $2.5 million in the comparable prior year quarter.
Speaker Change: As we've said in the past, adjusted EBITDA and free cash flow continue to be good proxies for health of the business over the course of a fiscal year.
Speaker Change: Due to working capital fluctuations, our free cash flow tends to be significantly better during the second half of each fiscal year compared to the first half.
Speaker Change: Armin Armin Armin Armin
Speaker Change: With the inclusion of Book for Tom Revenue, we are increasing our top-line revenue guidance to $280 to $285 million.
Speaker Change: with subscription growth of at least 38%.
Speaker Change: Our profitability levels are coming in above our original plan, and so we are increasing our expectations to 18% full-year adjusted EBITDA as a percentage of revenue, ahead of the 16% full-year guidance provided earlier.
Speaker Change: In closing, we are pleased with our Q2 fiscal year 2025 financial results and the solid business fundamentals for future revenue growth.
Speaker Change: With that, I will now turn the call back over to Ramesh. Thank you, Dave. In summary, we are happy to post good results and increase guidance levels, despite several areas of the business not yet firing on all cylinders.
Ramesh Srinivasan: We are confident the point-of-sale POS business will move up a couple of gears from its low point during the past few quarters, now that we have moved fully to modernized solutions for new implementations.
Ramesh Srinivasan: and gone past the challenges of having to work with combinations of old and new technologies at various implementations.
Ramesh Srinivasan: We are growing the list of reference customers who are gaining significant value from the ecosystem of modernized property management system, PMS solutions.
Ramesh Srinivasan: Book for Time is a great addition to our team talent level and portfolio of products.
Ramesh Srinivasan: The number of customer properties running at least one Agilisys product increased by about 30 percent, 3-0, 30 percent during the quarter because of the acquisition.
Ramesh Srinivasan: The hundreds of book-for-time properties currently running, no other Agilisys product, opens up another major area of possible sales and revenue growth.
Ramesh Srinivasan: We are not seeing any challenges to our business momentum due to any external factor.
Ramesh Srinivasan: Our combined product, recurring revenue and services backlog levels are at close to record levels, giving us good visibility into the second half of the fiscal year.
Ramesh Srinivasan: We continue to increase investments in sales and marketing while maintaining a healthy level of spend on products and innovation.
Ramesh Srinivasan: In conclusion,
Ramesh Srinivasan: to repeat what we have said before.
Ramesh Srinivasan: While our overall business remains in excellent shape, we are only beginning to scratch the surface of the kind of progress and growth possible in this industry.
Ramesh Srinivasan: for a well-run technology vendor with a modernized integrated set of products.
Ramesh Srinivasan: driving must have business functions at customer sites.
Ramesh Srinivasan: and the size of the total addressable market remains orders of magnitude bigger than our current size.
Ramesh Srinivasan: With that, Marvin, can we open up the call for questions please?
Speaker Change: Thank you. Thank you.
Marvin: Thank you. At this time, we will conduct the question and answer session. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from a line of Mayank Tanen of New Ham. Your line is now open.
Mayank Tanen: Thank you. Good evening, Ramesh, Dave, and Jess.
Mayank Tanen: I wanted to just clarify the guide first and foremost. So the subscription revenue guidance that goes from 27% to 38%, just to be clear, how much of that is booked for time versus what is organic? And then related to that, Ramesh and Dave, would be what is embedded in terms of the growth for both point of sale and for PMS?
Mayank Tanen: and the second half guide.
Speaker Change: Yeah, so the guidance is there's about $10 million in this year's guidance on the subscription. So the 38% would be a little over 25% organic and then the remainder would be the book for time acquisition.
Speaker Change: And as far as the point of sale guidance goes and property management, we're not guiding to that, but we expect the property management to be growing faster than overall subscription guidance because we're starting from a much lower base.
Speaker Change: and then the POS should take out from here as well.
Speaker Change: Got it. Okay, I'll...
Speaker Change: That's actually clear. And then I just wanted to ask about margins too, Dave.
Speaker Change: You know, you obviously outperformed on margins pretty consistently over the course of time. Just want to understand, given the scale and the business and some of the leverage in the model, I would think margins would actually ramp up from here. So anything that we should note in terms of why second half margins might be
Speaker Change: you know, not scaling faster, just given the leverage in the model that's inherent, just given the makeshift as well and some operating leverage. So any just...
Speaker Change: factors you could point out just why margins would not be better than the first half of the second half.
Speaker Change: Yeah, I mean, we think margins will be consistent. I mean, most of it is related to the product revenue.
Speaker Change: coming back into the business. So, you know, we're at a pretty high mark right now at 63% gross margins. As product continues to increase through the year, that'll pull down margins. So, I mean, we're seeing, we're definitely seeing operating leverage.
Speaker Change: in our OPEX and obviously our subscription revenue. But the slow first half start to the year kind of attributes to a lot of the better than expected EBITDA percentage. So
Speaker Change: We expect gross margin to come down a tick or two from the 63% where we're at today.
Speaker Change: Got it. I'll get back in the queue. Thank you so much.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Manvip Neet of BayTeachIG. Your line is now open.
Manvip Neet: Thanks for taking my question. Good afternoon. I guess when you look at the success of Booker Time so far that it's been in the portfolio, you mentioned, you know, a fair amount of opportunities that you've...
Manvip Neet: already uncovered, but curious what the expectations are, what kind of market
Manvip Neet: size you've you've sort of calculated in terms of their existing customers that you can sell some of your own products into
Manvip Neet: maybe short term, obviously long term, maybe the entire stack can go into some of those, but where do you think there's the most opportunity? How big of a opportunity do you think that is? And then what are the key factors in terms of the timing around that impacting the model?
Speaker Change: Hi Matt, it is difficult to specify an exact timing Matt, but the way to think through that is we are having obviously terrific success.
Speaker Change: in what we call new product sales, that is selling additional products to properties that have at least one other product already there. And that new product sales has increased 84% year over year when you compare this first half with last time's first half.
Speaker Change: So, fundamentally the larger picture is, Matt, that when we can get customers to the demonstration stage of seeing the products, we are having very good success.
Speaker Change: and it is a higher probability for us to get current customers with whom we have a relationship to take a look at the ecosystem we have built. Now you extend that to the book for time properties, literally hundreds of properties, it's well more than a thousand.
Speaker Change: that are book-for-time properties that do not have a single other agilisys product.
Speaker Change: So, if you extend the new product sales success we have been having with our own properties,
Speaker Change: who don't have too many Agilisys products, we think we'll have good success.
Speaker Change: convincing a growing percentage of book for time customer properties to just take a look at the ecosystem we have built and we think that will lead to good success.
Speaker Change: Now the book for time product itself has a lot of growth ahead of it because the market share in the overall spa market is still nothing overwhelming and also spa is a growing presence.
Speaker Change: In hospitality resource and in terms of guest satisfaction and all that, SPA is a growing presence.
Speaker Change: And in terms of getting introduced to hospitality properties, SPA is a pretty good side door. It's not a small door. It is a pretty good side door to get into hospitality properties and then convince those customers about looking at our other products.
Speaker Change: So all told Matt revenue synergies is a big part
Speaker Change: of the upside we are looking at.
Speaker Change: But can't put a particular time on it. It will continue to enhance over time. And in fact, even during these two months, there is one particular deal we have sold.
Speaker Change: where our membership module was bought along with the Book for Time spa product. That will continue to grow.
Speaker Change: month after month, quarter after quarter.
Speaker Change: Very helpful. And then as you look at sort of the early returns from this deal, and how those are, I guess, measuring up to the initial diligence around the deal, how does this impact your M&A strategy going forward? Do you anticipate maybe being a little more acquisitive than you have over the last couple of years, now that the product
Speaker Change: at the core level is all modernized and sort of in a full cloud-based structure. How should we think about this deal relative to future M&A?
Speaker Change: Yes, Matt, the way I think I would recommend we think about this deal is that the resort suite acquisition close to three years ago was very successful for us.
Speaker Change: and the book for time acquisition is showing all signs of being successful. It's too early to judge. It's only two months down, but it's showing all signs of being successful.
Speaker Change: And we think the reason for that is that we have been very careful.
Speaker Change: We've been conservative, we've been patient, we've been opportunistic.
Speaker Change: We can't be considered an acquisitive company. We are not going after these acquisitions, but when opportunities come, we are very careful with our analysis and we take our time, which I think has to do with the fact that we have done two successful acquisitions so far.
Speaker Change: So that attitude is not changing. We are going to remain conservative. We are going to remain patient. We are going to remain opportunistic Keep our eyes and ears open for and we have a couple of you know product gaps to fill in our ecosystem
Speaker Change: Geographic expansion is always possible
Speaker Change: Yes, you know, the market expansion, market share roll-up, those kinds of opportunities also are attractive to us. But the reason why we have been successful so far, we think, is because we've been careful and not going after everything, and I think that attitude will remain.
Speaker Change: Great, thank you.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Neha Dokshay of Northland Capital Markets. Your line is now open.
Neha Dokshay: Yeah, thank you and congrats on good results, raised items.
Neha Dokshay: and the acquisition. Talking on the acquisition first, in the
Neha Dokshay: spa booking space.
Neha Dokshay: What are the other...
Neha Dokshay: companies out there that
Neha Dokshay: also provides spa booking with tight integrations with PMS and POS systems.
Neha Dokshay: like a Joseph Spah software does as well as Book for Time software does.
Speaker Change: Yeah, hi Nehal. So it is fair to say, I'm trying to be conservative here Nehal, it is fair to say
Speaker Change: Between Book for Time, which was far and out the number one spa product in the industry, and Agilis Spa, which is a little bit new to the space, but has been completely modernized and is state-of-the-art cloud technology and all that, which was introduced, say, 3-4 years ago, between the two of them,
Speaker Change: It is fair to say that those two are the leading products in the spa market. There is one other product that is also pretty widely used, but not of the most modern technology that you can find.
Speaker Change: So when you combine cloud-native modern technology along with a very rich feature set,
Speaker Change: It's fair to say that Book for Time and Agilis is part of the two leading products in the industry and we are happy to have both of them with us now.
Speaker Change: And in terms of SPAR products being tightly integrated, most of them are well integrated to POS, PMS. I don't think that is a differentiating factor.
Speaker Change: But in terms of the state-of-the-artness of the technology and the feature set within SPA, these are the two leading products, Book for Time and Agilisa SPA, and we are happy to have them both. Integration to POS, PMS, everybody offers. That's not a differentiator, Neha.
Speaker Change: When we looked at the spa market, it looked like MindBody is a really big player in that space, but not necessarily in the hotel spa space. How do you guys view that for a competitor?
Speaker Change: How will your PMS and 20SL competitors likely react to this acquisition as well?
Speaker Change: Good point. We are only competing for the spa market within the market space that we are focused on. Hotels, resorts, cruise ships, that kind of area is all we are focused on. We are not going after the general open to all spa product.
Speaker Change: Hospitality, hotel, resorts, casinos, that kind of ecosystem, these are the two leading products, Book for Time and Angelus Spa.
Speaker Change: and in this kind of a marketplace where we are focused on, the fact that both Core POS, Core PMS and a SPAR product comes from one vendor has its integration advantages, though the other products are also integrated with POS and PMS.
Speaker Change: Our pace of innovation will be much higher just because we own both ends of that functionality space.
Speaker Change: But we are only focused on the hospitality space. We are not going after the general spa business.
Speaker Change: Thank you very much.
Speaker Change: Okay.
Speaker Change: And then Dave, last quarter, you guys lowered your overall revenue guidance due to the shift towards commodity products, not needing the...
Speaker Change: terminals here. Does that continue to be a dynamic that potentially is weighing on total revenue? Because it seems like the Book for Time acquisition should bring more than the $5 million raise that you're raising the overall guidance on.
Speaker Change: Yeah, I mean, the product revenue...
Speaker Change: has and will continue to be a challenge throughout the year. I mean, when we originally gave the guidance, we were expecting to
Speaker Change: be down a little bit in product revenue and we're trending last quarter we said we're trending in the five to ten percent reduction range and you know at the moment it's like last quarter it looks like we're trending closer to ten percent down in products so yeah most of the
Speaker Change: Most of the lower top line revenue numbers directly associated with the product revenue mix.
Speaker Change: Thank you.
Speaker Change: So what's the other portion related to if it's not all product related?
Speaker Change: Yeah, I mean, it's mostly, I mean, if product revenue had stayed consistent with last year, obviously we would have been, you know, above our range at this point.
Speaker Change: Thank you for joining us at this point.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Brian Schwartz of Oppenheimer & Company. Your line is now open.
Brian Schwartz: Yeah, hi. Thanks for taking my questions this afternoon. Ramesh, one question on the acquisition. I'm just trying to understand the go-to-market strategy between the two sales forces. Is it your plan over whatever period of time to unify the two sales forces, or are you planning to keep them both discrete?
Ramesh Srinivasan: Yeah, so I think the short answer to the back end of your question is we will be unifying both the sales forces. At the moment, the go-to-market strategies are a bit different because Book for Time is a smaller single product company for the most part.
Ramesh Srinivasan: So, they have been very successful doing remote selling, even to global customers, but they were selling one single product. So, the approach, the go-to-market strategies have all been very different, but very effective.
Ramesh Srinivasan: While we are sales is a lot more complex sale because we are trying to sell multiple products
Ramesh Srinivasan: Sometimes, it is only one core product, but most of the time, it is multiple products and a lot more complex sales than Book for Time has been used to so far.
Ramesh Srinivasan: But over the next six months or so, before we start the next fiscal year, we will be unifying the two sales forces as best as we can.
Ramesh Srinivasan: because now the combined sales force will have an ecosystem of products they can sell. Now, we are going to do our best, Brian, not to lose the aggressiveness, the advantages of the book for time sales force while we do that unification.
Ramesh Srinivasan: But it is fair to think that over the next six-month period, it will become a unified sales force going into fiscal 2026.
Speaker Change: Go to Beadaholique.com for all of your beading supplies needs!
Speaker Change: Thank you.
Brian Schwartz: Thank you. And Ramesh, I wanted to ask you how you're feeling, your comfort level with your services capacity, because you're giving us a lot of feedback and data points that your backlog is near record levels.
Speaker Change: But then again, there's guidance that the service margin may come down in the second half of the year So how are you feeling about the capacity and the ability to implement that backlog in a timely manner?
Ramesh Srinivasan: We are feeling good about our services capacity, though we continue to increase it.
Speaker Change: So our services personnel capacity, you compare this September end to last September end has gone up by 20% and since September we have continued to hire. So we are continuing to expand our services team. But one thing to keep in mind Brian, the services backlog number is going to increase as the business becomes better.
Speaker Change: As the business becomes not better, bigger, right? Bigger businesses have bigger backlogs, that's just the nature of how it works.
Speaker Change: It has been fairly consistent over the last one and a half, two years or so. If you just take the backlog and compare it to services revenue, it's around the same kind of ratio.
Speaker Change: Now, the backlog increasing is not just a matter of services personnel, it also is dependent on customer readiness.
Speaker Change: These are complex multi-product installs. Customers sign for it, sign for a purchase of multiple systems, and then they realize there is more work to do, there is more preparation work to do. So those kinds of things also tend to increase the backlog and postpone implementations.
Speaker Change: Now, the positive aspects are we are increasing services resources. They have gone up by 20% in the last year and will continue to go up in the next quarter or two because our business is expanding.
Speaker Change: The newer versions of the product have now been in the field for a while, the modernized versions, and they are becoming easier to install.
Speaker Change: So we are spending less non-billable time on those implementations. So that also, in a way, is increasing services' personal strength that can focus on products.
Speaker Change: So, all in all...
Speaker Change: Yes, we are watching the backlog increase. We are not extremely worried by it. It is in proportion to the services revenue going up. But we are taking steps to keep that backlog in control as best as we can. But please keep in mind, it's not all dependent on us. It's also dependent on customer readiness for projects.
Speaker Change: Thank you. And last question, one for Dave. Just in terms of the EBITDA guidance raised, does any of that have to do with a book for time? Or maybe another way of asking it is, is book for time, is that EBITDA accretive to the business this fiscal year? Thanks.
Speaker Change: Yeah, their profitability levels post-acquisition are pretty similar to ours. I mean, there's some slight nuances where they spend a little bit more on sales and marketing, a little bit less on product development.
Speaker Change: But, you know, it was break even before the acquisition and now it's, you know, slightly above our adjusted EBITDA even today. And we would have raised guidance on EBITDA with or without the Book for Time acquisition.
Speaker Change: Thank you for taking my questions.
Speaker Change: Thank you, Glenn.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Stephen Sheldon of William Blair. Your line is now open.
Stephen Sheldon: Hey, thanks. So it sounds like you're bringing down the full year organic subscription revenue expectations attached versus the prior guidance, I think it was.
Stephen Sheldon: Over 27% before, now it's closer to 25%. So can you just talk about what's driving that? Is that tied to the slowdown in APAC that you mentioned, or POS trends versus what you'd assumed? Just any color there on what changed versus the prior guidance.
Speaker Change: When you look at the first half subscription results, FY25, of a 28.5% year-over-year increase during the first half.
Speaker Change: was in line with expectations, if not slightly above that. So the first half subscription revenue of 28.5% growth worked out quite well, even not including the book-for-time subscription revenue increase.
Speaker Change: Now, the second half, you are correct, there were some concerns about that and all of that almost is attributable to this POS transformation difficulties that we are going through that affected product revenue.
Speaker Change: and that also affected POS sales during the last few quarters. Now Q2 was a good pickup in POS sales but the effect of the last few quarters of going through this whole POS transformation
Speaker Change: from old to new and a combination of old and new paths, has had an effect, but cannot exactly predict. The second half might still work out quite well, based on our initial fiscal year expectations. But you're right, the concerns have been caused by this POS transformation process.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Got it. That's helpful. And then just in the APAC, I guess, is there anything to call out there in terms of the market backdrop becoming more challenging, any changes in execution, or is that more just timing?
Speaker Change: I wouldn't say just timing. We are having up and down challenges in APAC. The deals are taking a lot more time. The good news is we are working on a lot more sizable opportunities in APAC than we ever have done before.
Speaker Change: Bigger customers are taking a look at our current ecosystem of products, but there are, you know, bridges to cross there before we establish ourselves well. So it's a little bit up and down in APAC and it's all a matter of establishing ourselves as a name.
Speaker Change: as a technology vendor who can be trusted, who truly has.
Speaker Change: the best state-of-the-art products today who truly has an integrated set of system of products.
Speaker Change: We are going through, we are doing a lot of thought leadership work there, we have increased our marketing efforts. We are in the process of establishing ourselves and we are competing against a couple of pretty big companies.
Speaker Change: well-established competitors there who have been well-established for a couple of decades. So it's a process that we are going through. APAC is a bit frustrating, it's a bit up and down, but we are making progress. We like the opportunities we are working on now.
Speaker Change: All right, thank you.
Speaker Change: Thank you, Steven.
Steven: Thank you.
Speaker Change: Thank you. One moment for the next question.
Speaker Change: Again, as a reminder to ask a question, you'll need to press star 11 on your telephone.
Speaker Change: Thank you for watching. I'm your host, Srinivasan. We'll see you next time.
Speaker Change: Our next question comes from the line of George Suntin of Craig Holm. Your line is now open.
George Suntin: Thank you. Ramesh, I wondered if we could get a little more clarity on the Book for Time sales opportunity for your current customers. So, you had mentioned and specifically called out a couple large players like IHG and Accor.
George Suntin: Given that the sales people are selling remotely, is it realistic to think that they might have some permission at the level of some of these larger players or is this really more of a smaller or unit level type of an opportunity?
Speaker Change: The larger players, not only Book for Time George, but also Joe Yusuf, who is joined as the Chief Commercial Officer.
Speaker Change: have a lot of influence, know a lot of people that you couldn't have said about Agilisys before.
Speaker Change: So those, in terms of introduction, opening the doors and all that, there are a lot of opportunities with the bigger players, but the bulk of the opportunity has to do with independent players.
Speaker Change: similar size resorts who are our customers
Speaker Change: and a whole lot of other hotels and all in between and literally hundreds of such properties
Speaker Change: It's not only the sales team, it is also their customer success team that has very close relationships with a whole bunch of customers.
Speaker Change: with whom now introducing our products and talking to them about the POS, PMS and other products we have are definite good opportunities for us that will continue building over the next 3, 6, 12 months.
Speaker Change: It is not just a matter of the bigger chains.
Speaker Change: understand and just one other for me coming off of the G2E show and you obviously had a lot of demos had a lot of meetings with customers potential customers any surprises there any any things that you would want to kind of pass along at this point to us
Speaker Change: No, no negative surprises, if any surprises, they were all positive because as an enterprise software professional.
Speaker Change: You're always ready for tough conversations with customers in those shows and it was completely absent of tough conversations. Virtually all the conversations
Speaker Change: First of all, it was a very busy, positive show for us. We were busy from the beginning till the end. And all the conversations were about helping customers with their operations, about their interest in our ecosystem.
Speaker Change: It was literally night and day from, you know, from three years ago.
Speaker Change: When it is always mixed with some complaints, certain things we can do better and all that, this was almost uniformly positive.
Speaker Change: So, that was a good positive surprise in the show. Busy and positive is a great combination and a lot of follow-up conversations have been happening since the G2E show. And we are feeling very, very positive, you know, any of these customer get-togethers
Speaker Change: where customers get together are surprising even us as to how positive they are. In fact, that's one of the reasons, George, why for our next user conference, not a trade show.
Speaker Change: But for our next user conference, where hundreds of customer users are there, we are going to invite you and all the other analysts who are covering us to come and attend the user conference. We feel confident enough.
Speaker Change: that you will think much better of us, Josh, if you just set in and talk directly to customers as well. So please mark it on your calendar. We look forward to seeing you at the next user conference, Josh.
Speaker Change: Well, having done demos, I definitely see why you're successful. So congratulations. Thank you, Josh.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Ramesh Srinivasan for closing remarks.
Ramesh Srinivasan: Thank you, Marvin. Hey, thank you for participating in this call and for your interest in Agilisys. Please enjoy the holiday season. Merry Christmas and happy holidays. We look forward to talking to you again in about three months from now. Thank you.
Ramesh Srinivasan: Thank you very much.
Ramesh Srinivasan: Thank you.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.