Q1 2026 Agilysys Inc Earnings Call

Operator: As a reminder, today's conference may be recorded.

Jessica Hennessy: I would now like to turn the conference over to Jessica Hennessy, Senior Director of Corporate Strategy and Investor Relations at Agilysys. You may begin. Thank you, Victor. And good afternoon, everybody. Thank you for joining the Agilysys fiscal 2026 first quarter conference call. We will get started in just a minute with management's comments.

Good day, ladies and gentlemen, and welcome to the Jesus 2026. First quarter conference call. As a reminder, today's conference may be recorded, I would like to turn the conference over to Jessica Hennessey, senior director of corporate strategy and investor relations at a Genesis. You may begin.

Speaker Change: Thank you, Victor and good afternoon everybody. Thank you for joining the agilis, fiscal 2026. First quarter conference call

Jessica Hennessy: But before doing so, let me read the safe harbor language. Some statements made on today's call will be predictive and are intended to be made as forward-looking within the safe harbor protections of the U.S. Private Securities Litigation Reform Act of 1995, including statements regarding our financial guidance. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause results to differ materially. Important factors that could cause actual results to vary materially from these forward-looking statements include our ability to achieve the provided guidance levels, maintaining sales momentum, the company's ability to convert the backlog into revenue, and the risks set forth in the company's reports on Form 10-K and 10-Q and other reports filed with the Securities and Exchange As a reminder, any references to record financial and business levels during this call refer only to the time period after Agilysys made the transformation to an entirely hospitality focused software solutions company in fiscal year 2014.

We will get started in just a minute with Management's comments, but before doing so let me read the Safe Harbor language.

Some statements made on. Today's call will be predictive and are intended to be made as forward-looking within the safe harbor protections of the US private Securities. Litigation Reform, Act of 1995 including statements regarding our financial guidance.

Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause results to differ materially.

Important factors that could cause actual results to vary materially from these forward-looking statements include our ability to achieve the provided guidance levels maintaining sales momentum. The company's ability to convert the backlog into revenue and the risks set forth in the company's reports on form 10K and 10q and other reports filed with the Securities and Exchange Commission.

Ramesh Srinivasan: With that, I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and CEO of Agilysys. Ramesh, please go ahead. Thank you, Jess. Good evening.

As a reminder, any references to record financial and business levels. During this call, refer only to the time period after agility transfer transformation to an entirely Hospitality focused software Solutions company and fiscal year 2014

Speaker Change: With that. I'd now like to turn the call over to Mr. Rini Vossen. President and CEO of vigilus rsh. Please go ahead.

Ramesh Srinivasan: Welcome to our fiscal 2026 first quarter earnings call.

Thank you. Just

Operator: Joining Jess and me on the call today is Dave Wood, CFO, at our Alpharetta Atlanta headquarters.

Good evening. Welcome to our fiscal 2026. First quarter earnings call.

Ramesh Srinivasan: Let me cover sales and selling success first, before moving to revenue, profitability, guidance increase, and other details. We measure sales in annual contract value terms. We continue to exclude from our sales numbers all aspects of the Marriott Property Management System PMS project, including those pertaining to services. Fiscal 2026 Q1 April to June sales was the second best quarter on record, following the preceding fiscal 2025 fourth quarter, which was the highest. Sales during Q1 was 24% higher than the comparable prior year period and was easily the best Q1 April to June period sales level we have seen.

Joining just sent me on the call today is Dave Wood CFO at our Alfreda Atlanta headquarters.

Let me cover sales and selling success first.

Before moving to revenue profitability, guidance, increase and other details.

We measure sales in annual contract value terms.

From our sales numbers, all aspects of the Marriott property management system PMS project including those pertaining to services.

fiscal 2026, q1 April, to June sales was the second best quarter on record

following the preceding fiscal 2025 fourth quarter, which was the highest

Ramesh Srinivasan: Combined overall sales of the last two quarters were 19%, that is one nine, 19% higher than the preceding six-month period. while combined sales of only recurring fee booking. consisting of SAS annual fees and annual maintenance fees were 34% higher than the preceding 6-month period.

sales during q1 was 24% higher than the comparable price period and was easily the best q1 April to June period sales level. We have seen

Combined overall sales of the last 2 quarters, where 19% that is 1 19% higher than the preceding 6 month. Period.

Speaker Change: While combined sales of only recurring sheep. Bookings.

Consisting of fast, Annual fees and annual maintenance fees where 34% higher than the preceding 6 month, period.

Ramesh Srinivasan: Fiscal 2021-April-June was our broadest and widest sales success quarter ever, with several different sales verticals achieving good to excellent sales levels. Q1 was the best sales quarter in food service management, FSM vertical, in the last two and a half years. As reported during our previous calls, we went through a tough period with FSM sales during late Fiscal 2024 and the first half of Fiscal 2025. We are happy to report that we are now back in full form with point-of-sale POS sales in the SSM vertical. Q1 was also the second highest sales quarter for international sales.

Speaker Change: Fiscal 2021 April to June was our broadest and widest sales success quarter ever.

With several different sales. Verticals achieving good, to excellent sales levels.

Speaker Change: Q1 was the best sales quarter in Food Service management, FSM vertical in the last 2 and a half years.

as reported during our previous calls, we went through a tough period with FSM sales during late fiscal 2024 and the first half of fiscal 2025

Speaker Change: We are happy to report that we are now back in full form with point of sale POS sales in the FSM vertical.

Ramesh Srinivasan: while the sequentially preceding quarter was the highest. We have seen good signs of our international business picking up steam during the last two quarters and are continuing to see good momentum, especially with respect to large multiproducts. The casino gaming sales vertical also had its best Q1, April to June period on record. 15%, that is 1.5, 15% higher than the previous best Q1 quarter. There were several large sales wins during the quarter in gaming, including the Void Gaming subscription POS deal we announced in the middle of May. We continue to see strength in the casino gaming sales vertical as customers broaden their portfolio of Agilysys products and expand investments in modern software solutions that help with improving guest experience and operational efficiency.

Q1 was also the second highest sales quarter for international sales.

While the sequentially preceding quarter was the highest.

We have seen good signs of our international business. Picking up steam during the last 2 quarters and our continuing to seek good momentum, especially with respect to large multi-product deals.

Speaker Change: The casino gaming sales vertical also had its best q1 April to June period on record.

15% that is 1 155, 15% higher than the previous best q1 quarter.

Speaker Change: There are several large sales wins during the quarter and gaming, including the boys gaming subscription POS deal. We announced in the middle of May.

We continue to see strength in the casino gaming sales vertically as customers. Broaden their portfolio of angels's products and expand investments in modern software solutions that help with improving guest experience and operational efficiencies.

Ramesh Srinivasan: Most of the sales verticals performed very well in Q1 and across the last two quarters.

Ramesh Srinivasan: The highlights of this recent six-month period have been the impressive turnaround in the food service management, FSM vertical, and international business picking up good momentum. Q1 Fiscal 2026 Professional Services Sales was 20% higher than the comparable prior year quarter. Q4 Fiscal 2025 and Q1 Fiscal 2026. are two best services sales quarters on record and combined 21% higher than the immediately preceding six-month period. Q1 Fiscal 2026 was the best ever quarter for subscription software sales by a wide margin. 25% higher than the previous test quarter, which was the preceding Q4, Fiscal 2025, and 79% higher than the comparable prior year period.

Speaker Change: Most of the same verticals performed very well in q1 and across the last 2 quarters.

Highlights of this recent 6-month period have been the impressive turnaround in the Food, Service management, FSM vertical and international business. Picking up, good momentum.

Q1 fiscal, 2026. Professional Services sales was 20% higher than the comparable prior year quarter.

Speaker Change: Q4 fiscal, 2025 and q1 fiscal 2026.

Are are 2 best Services, sales Quarters on record.

And combined 21% higher than the immediately preceding 61 period.

Q1 fiscal 2026 was the best ever quarter.

For subscription software sales by a wide margin.

25% higher than the previous test quarter, which was the preceding Q4 fiscal 2025.

Ramesh Srinivasan: Q1 was the fourth consecutive record sales quarter for subscription. Subscription software sales specific to POS and POS-related modules. was 61% higher than the sequentially preceding fiscal 2025 Q4 quarter. There is now ample evidence that our modernized set of cloud-native software solutions is gaining serious traction in the hospitality industry, which has never been keener to improve technology solutions running their operations. Our current pace of innovation, following many years of product modernization efforts, does seem to be creating a serious competitive advantage which is becoming wider with each passing month. With respect to sales deals won during Q1 Fiscal 2026, April to June, we added 24 new customers, excluding Book for Time.

Speaker Change: And 79% higher than the comparable prior period.

Q1 was the first fourth consecutive record sales quarter for subscription sales.

Speaker Change: Subscription software sales, specific to POS and POS related modules.

Was 61% higher than the sequentially. Preceding fiscal 2025 Q4 quarter.

There is now ample evidence that are modernized set of cloud. Native software Solutions is gaining serious Traction. In the hospitality industry, which has never been Keener to improve Technology Solutions, running their operations.

Organization efforts.

That seem to be creating a serious competitive Advantage which is becoming wider with each passing month.

Speaker Change: with respect to sales deals 1 during q1, fiscal 2026, April to June,

Ramesh Srinivasan: all of whom signed subscription license-based sales agreements. Q1 was one of our highest quarters with respect to total annual contract value of new customer vendors. These 24 customers purchased an average of 6 products each. New customer deals, which included PMS solutions, involved an average of as high as 14 products per deal. The ability to provide an integrated ecosystem of software solutions that work well together and offer unique functional and feature advantages is becoming a fast-growing differentiator for us. are extensive investment in the development of an integrated product ecosystem. has already become one of the primary reasons for our excellent current sales win ratio.

We added 24, new customers excluding book for time.

Speaker Change: All of whom signed subscription license based sales agreements.

Q1 was 1 of our highest quarters with respect to total annual contract value of new customer wins.

Speaker Change: These 24 customers purchased an average of 6 products each.

Speaker Change: New customer deals, which included PMS Solutions involved an average of as high as 14 products per day.

Speaker Change: The ability to provide an integrated ecosystem of software solutions that work well together.

And often unique functional and feature advantages is becoming a fast growing differentiator for us.

Speaker Change: Our extensive investment in the development of an integrated product ecosystem.

Ramesh Srinivasan: Such an ecosystem also creates enormous amounts of connected data for a multi-amenity resort or a similar customer property, which lends itself well to extracting significant differentiated value through use of AI and other tools. We are lucky to have completed all the required foundation modernization work across the product sets, while also creating an interconnected ecosystem of products. both of which are making the adoption of AI tools easier, more relevant, and effective. Various AI-based product enhancements are now being included in the recent and upcoming version releases, such as Enabling personalized upselling through a dynamic PMS upgrade engine.

Has already become 1 of the primary reasons for our excellent current salesman ratio.

Such an ecosystem also creates enormous amounts of connected data.

For a multi amenity Resort or a similar customer property which lends itself well to extracting significant differentiated value.

Speaker Change: Through use of AI and other tools.

Speaker Change: We are lucky to have completed all the required foundation modernization, work of the product sets.

While also creating an interconnected ecosystem of products.

Both of which are making the adoption of AI tools easier more relevant and effective.

various AI based product enhancements are now being included in the recent and upcoming version releases such as

Ramesh Srinivasan: to suggest appropriate room upgrades and add-on amenities during check-in based on real-time factors like current occupancy, guest loyalty status, past stay behavior, and even staffing levels. AI-assisted concierge service. AI-Powered Natural Language Process AI-enabled booking of a curated set of guest-specific preferred amenities and creation of itineraries. AI-Driven Demand and Availability-Based Pricing Disclaimer AI-based conversational food ordering. AI-enabled mechanisms for fulfillment of various guest-requested tasks. Enhanced data analysis and creation of AI agents that can help with various analysis and execution tasks within a customer property. All such AI-based enhancements currently being added to the product sets should produce tangible value for our customers and additional convenience for the guests they serve, thereby strengthening our growing competitive advantage.

Speaker Change: Enabling personalized upselling through a dynamic PMS, upgrade engine.

To suggest appropriate room upgrades and add-on amenities during check-in.

Speaker Change: based on real-time factors like current occupancy, guest loyalty status past State behavior, and even starting levels

AI assisted conscious services.

Speaker Change: AI powered natural language processing.

AI enabled booking of a curated set of guests specific, preferred amenities and creation of itineraries.

Ai-driven demand and availability based pricing decisions.

AI based conversational food ordering.

AI enable mechanisms for fulfillment of various guests, requested tasks.

Enhance data analysis and creation of AI agents that can help with various analysis and execution tasks within a customer property.

all such AI based enhancements, currently being added to the product sets

Ramesh Srinivasan: In addition, the use of AI tools is permeating across our internal business operations as well, making execution better and more efficient across several departments. Including product development and professional services to improve coding and implementation efficiencies, quality and accuracy. AI agents-driven virtual assistant mechanisms for our customer support personnel and other such improvements across sales, marketing, IT, information security, finance, and leadership. We are also being careful and cautious, though, while using various AI tools to ensure no exposure of our internal data to the outside world.

Should produce tangible value for our customers and additional convenience for the guests, they serve thereby strengthening our growing competitive advantages.

In addition, the use of AI tools is permeating across our internal business operations, as well.

Making execution better and more efficient across several departments, including product development and Professional Services to improve coding and implementation efficiency, quality and accuracy.

AI, agents driven virtual assistant mechanisms for our customer support personnel and other such improvements across sales marketing. It information, security, finance and legal.

We are also being careful and cautious though, while using various AI tools to ensure no exposure of our internal data to the outside world.

Ramesh Srinivasan: getting back to sales success during the quarter. We also added 69 new properties that were not using any of our software solutions before, but the parent company was already a customer. Of the 105 new properties added during the quarter across new and current customers, 104 were either partially or fully subscription software licensed. In addition, there were ninety-three instances... of selling at least one additional software solution to properties which are already using one or more of our other products. In total, these 93 deals involve the sale of 224 products. This was the second-highest quarter with respect to total annual contract value sales of new products to current customer profit.

Speaker Change: Getting back to sales success during the quarter.

We also added 69 new properties that were not using any of our software Solutions before, but the parent company was already a customer.

Of the 105, new properties added during the quarter across new and current customers 104, when either partially or fully subscription software license. Based

Speaker Change: In addition, there were 90 93 instances.

Of selling at least 1 additional software solution.

Speaker Change: To properties which are already using 1 or more of our other products.

Ramesh Srinivasan: The sequentially preceding fiscal 2025 Q4 quarter was the highest.

This was a second highest quarter with respect to total annual contract value sales of new products to current customer properties.

Speaker Change: The sequentially preceding fiscal 2025 Q4 quarter. What's the highest?

Ramesh Srinivasan: Moving on to Revenue. Q1 fiscal 2026 overall revenue was $76.7 million, a record for the 14th consecutive quarter. Overall revenue was close to 21% higher than the comparable prior year quarter, driven by 44% year-over-year growth in subscription revenue. and 16%, that is one six, 16% growth in professional services. Organic subscription revenue grew by 24% year-over-year, which in turn was driven by a 48% increase in subscription revenue pertaining to property management systems, PMS and PMS-related add-on software modules, and a 16% increase in point-of-sale POS and POS-related add-on modules. We expect the year-over-year subscription revenue growth rate pertaining to POS to increase going forward, given the recent turnaround in POS sales levels and the ongoing pace of POS implementation.

Moving on to revenue.

Q1 fiscal 2026. Overall, Revenue was 76.7 million a record for the 14th, configurative quarter.

Speaker Change: Overall Revenue was close to 21% higher than the comparable prior year quarter.

Driven by 44% year-over-year growth in subscription Revenue.

Speaker Change: And 16% that is 1. 16 16% growth in Professional Services Revenue.

Organic, subscription Revenue, grew by 24% year-over-year. Which in turn.

Was driven by a 48% increase in subscription Revenue pertaining to Property Management Systems PMs, and PMs, related add-on, software modules.

Speaker Change: And a 16% 1 6% increase in point of sale PS and PS related add-on modules.

Speaker Change: we expect a year-over-year subscription Revenue growth rate pertaining to POs to increase going forward, given the recent turnaround in POS sales levels and the ongoing pace of POS implementations,

Ramesh Srinivasan: Overall recurring revenue including both subscription and annual maintenance grew to a record $48.6 million in Q1, 28% higher than the comparable prior year period, and 63.4% of total revenue. Subscription revenue was a record 65.6% of total record in that. In absolute dollar terms, Q1 subscription revenue grew by 9.8 million year-over-year, which is the highest level of year-over-year growth we have seen until now. While understandably not surging higher like subscription revenue is currently, annual maintenance recurring revenue was also a record high this quarter, about 5% higher year over year. This is a good indication of the fact that our subscription revenue growth is coming from new and additional projects for the most part and is not based on cannibalization of annual maintenance.

Speaker Change: Revenue.

Including both subscription and annual maintenance.

Speaker Change: Grew to a record 48.6 million in q1, 28% higher than the comparable prior year period and 63.4% of total revenue.

Subscription Revenue was a record. 65.6% of total recording Revenue.

Speaker Change: In absolute dollar terms, q1, subscription Revenue grew by 9.8 million year over year, which is the highest level of year-over-year growth. We have seen until now

while understandably not surging higher, like subscription revenue is currently annual maintenance, recurring Revenue was also a record high this quarter about 5% higher year-over-year.

Ramesh Srinivasan: We continue to allow our customers to make their own decisions regarding their timing of moving to the cloud. Customer centricity is a big part of our organization culture. We exist to help our customers achieve their goals without any unnecessary pressure from their technology partners. along with being record high quarters for subscription software sales. Q4 FY2025 and Q1 FY2026 were also the best two quarters for subscription project implementation. measured at the sum of annual recurring revenue, ARR, of all subscription projects implemented during the period. The extent of subscription ERR installed in the field. during the recent six months.

Speaker Change: Is a good indication of the fact that our subscriptions Revenue growth is coming from new and additional projects. For the most part and is not based on cannibalization of annual maintenance.

We continue to allow our customers to make their own decisions regarding their timing of moving to the cloud.

Speaker Change: Customer centricity is a big part of our organization culture. We exist to help our customers achieve their goals without any unnecessary pressure from their technology partner

Speaker Change: Along with being record, high quarters for subscription software sales.

Speaker Change: Q4 fiscal 2025.

And q1 fiscal 2026 where also the best 2 quarters for subscription project implementations.

Speaker Change: Measured as the sum of annual recurring Revenue eras of all subscription projects implemented During the period.

Speaker Change: The extent of subscription ARR installed in the field.

Ramesh Srinivasan: was 47% higher than the immediately preceding 6-month period. Both subscription sales and implementations in the field have been off to a faster start this fiscal year than we anticipated going in. We are, therefore, increasing the subscription growth guidance for full fiscal year 2020. from the originally stated 25% One-time product revenue consisting of perpetual software licenses and hardware revenue was just shy of 10 million, a bit less than our already low ongoing expectations of this revenue line. Q1 was the lowest quarter in about four years with respect to perpetual software licenses in the one-time product revenue bucket.

Speaker Change: During the recent 6 months.

Was 47% higher.

Than the immediately preceding 6 month, period.

Both subscriptions sales and implementations in the field have been off to a faster. Start the fiscal year than we anticipated going in.

We are therefore increasing the subscription growth guidance for full fiscal year 2026.

From the originally stated 25%.

Speaker Change: To 27%.

Speaker Change: 1 time product Revenue, consisting of Perpetual software licenses and Hardware Revenue was just shy of 10 million, a bit less than are already low. Ongoing expectations for this Revenue line.

Ramesh Srinivasan: An overwhelming number of customers are choosing the cloud option, which is reflected in the subscription revenue growth level. The current versions of the POS products have a reduced hardware attach rate since they also work well on consumer grade hardware devices like the iOS operating system based iPads. We expect the one-time product revenue line to remain around this level for the foreseeable future. We also expect services revenue to remain around the levels of this quarter during the remainder of the fiscal year. as services revenue related to product development work on a couple of major projects has tapered off and is being replaced by growing normal implementations related professional services work.

Q1 was the lowest quarter in about 4 years with respect to Perpetual software licenses in the 1-time, product Revenue bucket.

Speaker Change: and overwhelming number of customers are choosing the cloud option, which is reflected in the subscription Revenue growth levels

The current versions of the PS products have a reduced Hardware attached rate since we also work well on consumer, grade Hardware devices, like the IOS operating system based iPads.

Speaker Change: We expect the 1 time product Revenue line to remain around this level for the foreseeable future.

Revenue to remain around the levels of this quarter during the remainder of the fiscal year.

As Services Revenue related to product development work on a couple of major projects as tapered off.

Speaker Change: And is being replaced by growing normal, implementations related, Professional Services work.

Ramesh Srinivasan: Despite excellent improvements in project implementation levels and record services revenue, strong sales drove the recurring and services revenue backlog to record levels. Fiscal 2026-Q1 profitability was below annual expectations, mainly due to several once-a-year cost items falling in this quarter, including the high-cost use account. We remain confident that adjusted EBITDA will be 20% of revenue for the full fiscal year in line with the original expectation.

despite excellent improvements in Project implementation levels and record Services Revenue,

Strong sales, drove the recording and services Revenue, backlog to record levels.

Speaker Change: Fiscal 2026 q1 profitability.

Was below, annual expectations, mainly due to several once a year cost items falling in this quarter.

Speaker Change: Including the high cost user conference.

Ramesh Srinivasan: We also remain comfortable with the already provided annual revenue guidance of $308 million to $312 million for fiscal 2021. The Marriott PMS project continues to progress well and is proceeding according to plan. The testing of all integrations and connectivity across platforms in the lab test property is close to being completed, marking the completion of one of several rollout milestones. We expect implementation at a handful of test properties to start in a few months, which will be the next step in the project. All guidance details provided continue to exclude any significant subscription revenue from this project during fiscal 2021.

We remain confident that adjusted evida will be 20% of revenue for the full fiscal year in line with the original expectation.

Speaker Change: We also remain comfortable with the already provided annual revenue, guidance of 308 million.

To 312 million for fiscal 2026.

Speaker Change: The marott PMS project continues to progress, well.

Speaker Change: And is proceeding according to plan.

The testing of all Integrations and connectivity across platforms in the lab test properties close to being completed.

Speaker Change: Marking the completion of 1 of several rollout. Milestones

Speaker Change: we expect implementation at a handful of tests properties to start in a few months.

Which will be the next step in the project.

Speaker Change: all guidance details provided

Dave Wood: With that, let me hand over the call to Dave for more color on financial and other business. Thank you, Ramesh. Taking a look at our financial results, beginning with the income. First quarter fiscal 2026 revenue was a quarterly record of $76.7 million, a 20.7% increase from total net revenue of $63.5 million in the comparable prior year period. One-time revenue consisting of product and professional services was up 10.1% over the prior year quarter and in line with our expected 5-10% increase in one-time revenue. Professional services revenue is running slightly ahead of plan through the first quarter.

Continue to exclude any significant subscriptions revenue from this project during fiscal 2026.

Speaker Change: With that, let me hand over the call today, for more color on financial and other business details.

Speaker Change: Thank you very much.

Taking a look at our financial results beginning with the income statement first quarter fiscal 2026 Revenue was a quarterly record of 76.7 million a 20.7% increase from total net revenue of 63.5 million and the comparable prior year period,

1 time Revenue, consisting of products, and Professional Services was up 10.1% over the prior year quarter. And in line with our expected 5 to 10% increase in 1 time Revenue

Dave Wood: However, despite point-of-sale bookings being up 29% over the prior fiscal year, product sales, which include proprietary software and third-party products, which are mainly hardware, were low, causing product revenue for Q1 to be below expectation. Recurring revenue was up 27.8% over the first quarter of the prior year and comfortably ahead of plan. Sales momentum was strong through Q1, leaving total backlog at record levels, despite implementation velocity continuing to grow. Many of the operational challenges seen in our fiscal year 2025 with point of sales and backlog deployment seem to be behind us. Subscription sales were up a staggering 79% over the prior fiscal year quarter, giving us a major head start to the current year.

Professional Services, revenue is running slightly ahead of plan through the first quarter. However, despite point of sale bookings being up, 29% over the prior fiscal year, product sales, which include proprietary software and third-party products, which are mainly Hardware, were low causing product revenue for q1 to be below. Expectations.

Speaker Change: Recurring Revenue was up 27.8% over the first quarter of the prior year and comfortably ahead of plan.

Sales momentum was strong, through q1, leaving total, backlog at record levels, despite implementation velocity continuing to grow.

Speaker Change: many of the operational challenges seen in our fiscal year 2025 with point of sale sales sales and backlog, deployments seem to be behind us

Dave Wood: While we still have plenty of work left to do with sales, visibility into our business and fiscal year remain at all-time high. Professional services revenue increased 16% over the prior year quarter to a record $18.1 Despite record professional services revenue, our services backlog remained at record levels. As a reminder, professional services revenue remains a good leading indicator for future subscription revenue. Total recurring revenue represented 63.4% of total net revenue for the fiscal first quarter compared to 59.9% of total net revenue in the first quarter of fiscal 2020. Subscription revenue grew 44.3% for the first quarter of fiscal 2020.

Subscription sales were up a staggering 79% over the prior fiscal year quarter, giving us a major Head Start to the current year.

Speaker Change: While we still have plenty of work left to do with sales, visibility into our business and fiscal year. Remain at all-time highs

Professional Services, Revenue increased 16% over the prior year quarter to a record. 18.1 million

Speaker Change: Despite record Professional Services, Revenue our services backlog remained at record levels.

As a reminder, Professional Services Revenue remains a good leading indicator for future subscription Revenue growth.

Total recurring Revenue represented, 63.4% of total. Net revenue for the fiscal first quarter compared to 59.9% of total, net revenue, and the first quarter of fiscal 2025

Dave Wood: Subscription sales and backlog were, again, both at record levels in Q1 and well ahead of our FY20 goals. Despite subscription revenue coming in well above our 25% guidance. the backlog still increased by 23% over FY25 exits. We continue to be pleased with subscription sales and revenue growth. Moving down the income statement, gross profit was $47.3 million compared to $39.9 million in the first quarter of fiscal 2025. Gross profit margin was 61.7% compared to 62.8% in the first quarter of fiscal 2025. Gross margin was down slightly due to margins associated with one-time revenue while we continue to ramp up the newly hired professional services team members and continue to see a downward trend in on-premise proprietary license revenue.

Speaker Change: Subscription Revenue grew 44.3% for the first quarter of this fiscal 2026.

Subscription sales and backlog were again, both at record levels and q1 and well ahead of our FY. 26 plan,

Speaker Change: Despite subscription Revenue coming in well, above our 25% guidance.

Speaker Change: The backlog still increased by 23% over fi25. Exit rates.

We continue to be pleased with subscription sales and revenue growth levels.

Compared to 39.9 million in the first quarter of fiscal 2025.

Gross profit margin was 61.7% compared to 62.8% in the first quarter of fiscal 2025.

Dave Wood: Combined, the three main operating expense line items, product development, sales and marketing, and general and administrative expenses excluding stock-based compensation were 45.6% of revenue in the fiscal 2026 first quarter, compared to 43.8% of revenue in the prior year. excluding stock based compensation. For the first quarter fiscal 2026, product development decreased slightly to 18.8% compared to 19% of revenue in the prior fiscal year. General and administrative expenses reduced for the quarter from 14.2% to 12% of revenue. Sales and marketing increased substantially from 10.5% of revenue to 14.7% of revenue, mostly due to timing of events with the user conference happening in fiscal Q1, along with the ramp up of the sales team throughout fiscal year 2025.

Gross margin was down slightly due to margins associated with 1-time Revenue while we continue to ramp up the newly hired, Professional Services team members and continue to see a downward Trend. And on premise, proprietary license Revenue.

Combined, the 3, main operating expense line, items product, development, sales and marketing, and general and administrative expenses. Excluding stock-based, compensation or 45.6% of Revenue in the fiscal 2026. First quarter compared to 43.8% of Revenue in the prior year quarter.

Speaker Change: Excluding stock-based compensation.

For the fiscal, for the first quarter of fiscal 2026 product development, decreased slightly to 18.8% compared to 19% of Revenue and the prior fiscal year.

Speaker Change: General and administrative expenses reduced for the quarter, from 14.2% to 12% of Revenue.

Dave Wood: As one would expect, the User Conference is our most expensive event during the year. Sales and marketing as a percentage of revenue should return to the normal levels for the fiscal year despite Q1 being higher than usual.

Sales and marketing, increased substantially from 10.5% of Revenue to 14.7% of Revenue, mostly due to timing of events with the user conference happening. In fiscal q1 along with the ramp up of the sales team throughout fiscal year 2025.

Speaker Change: As 1 would expect the user conference is our most expensive event during the year.

Dave Wood: Operating income for the first quarter of $4.5 million, net income of $4.9 million, and gain per diluted share of $0.17 are lower than the prior year first quarter income of $5.7 million, $14.1 million, and a gain of $3.5 million. Adjusted net income, normalizing for certain non-cash and non-recurring charges, of $9.3 million compares favorably to adjusted net income of $8.3 million in the prior year first quarter and adjusted diluted earnings per share of $0.33 increased slightly over the prior year at $0.35. For the 2026 first quarter adjusted EBITDA was $12.5 million compared to $12.1 million in the year ago.

Sales and marketing as a percentage of Revenue should return to the normal levels for the fiscal year despite q1 being higher than usual.

Operating income for the first quarter of 4.5 million net, income of 4.9 million and gained per diluted. Share of 17 cents our lower than the prior year. First quarter, income of 5.7 million, 14.1 million, and a gain of 50 cents.

Adjusted net income normalizing for certain non-cash and non-recurring charges of 9.3, million compares favorably to adjusted net. Income of 8.3 million in the prior year. First quarter and adjusted diluted earnings per share of 33 cents. Increased slightly over the prior year at 30 cents.

Dave Wood: As expected, Q1 FY26 Adjusted EBITDA was lower than the annual guidance due to the previously planned one-time events associated with the sales and marketing expense line. We are still on track for a 20% adjusted EBITDA for the full...

For the 2026, first quarter adjusted ibido was 12.5 million compared to 12.1 million. In a year ago, quarter as expected q1 FY 26. Adjusted Evo was lower than the annual guidance. Due to the previously planned 1-time, events associated with the sales and marketing expense lines.

Dave Wood: Moving to the balance sheet and cash flow. Cash in marketable securities as of June 30, 2025 was $55.6 million, compared to $73 million on March 31, 2025. As a reminder, Q1 is typically the lowest cash quarter due to timing of working capital events in the first half of the fiscal year. In addition to working capital adjustments, we paid down our credit revolver by $12 million prior to June 30th, and have since paid off the final $12 million, leaving us debt-free as of July. Free cash flow in the quarter was a loss of $5 million compared to an increase of .2 million in the prior year.

We are still on track for 20%, adjusted Eva for the full fiscal year.

Moving to the balance sheet and cash flow statement, cash and marketable securities as of June 30th, 2025 was 55.6 Million compared to 73 million on March. 31st 2025

Speaker Change: as a reminder, q1 is typically the lowest cash quarter due to timing of working capital events in the first half of the fiscal year.

in addition to working capital adjustments, we pay down our credit, Revolver by 12 million prior to June 30th and have since paid off the final 12 million leaving us debt-free as of July,

Dave Wood: As we've said in the past, adjusted EBITDA and free cash flow over a full fiscal year after normalizing the impact of CAPEX continue to be good proxies for health of the public. Full fiscal year 2026 free cash flow will normalize in the second half of the For our fiscal year 2026, we are raising guidance for subscription revenue growth from 25 to 27% based on our current backlog and sales momentum. Guidance of top-line revenue of $308 to $312 million, along with adjusted EBITDA of 20%, remains the same for FY2020.

Free cash flow in the quarter was a loss of 5 million dollars compared to an increase of 0.2 million in the prior year quarter.

As we've said in the past, adjusted Ava and free cash flow over a full fiscal year, after normalizing, the impact of capex.

Speaker Change: Continue to be good proxies for health of the business.

Full, fiscal year, 2026 free cash flow will normalize in the second half of the fiscal year.

For our fiscal year 2026, we are raising guidance for subscription Revenue, growth from 25 to 27% based on our current backlog and sales momentum.

Ramesh Srinivasan: In closing, we are extremely pleased with the start of fiscal year 2020.

Guidance of Topline revenue of 308 to 312 million along with adjusted debit of 20% Remains the Same for fiscal year 2026.

Ramesh Srinivasan: With that, I will now turn the call back over to Ramesh. Thank you, Dave. In summary, we are pleased with the fiscal 2026 Q1 April-June period results. Our overall sales and business momentum... The continuing surge in subscription software sales and the pace of projecting. The challenges with one-time product revenue remain positive indicators.

In closing, we are extremely pleased with the start of fiscal year 2026.

With that, I will now turn the call back over to rsh.

rsh: Thank you, Dave.

rsh: In summary, we are pleased with the fiscal 2026 q1 April to June period results.

rsh: Our overall sales and business momentum.

the continuing surge in subscription software sales and the face of project installation,

Ramesh Srinivasan: of the successful transition of the business into a cloud subscription-based software unit involving lesser levels of perpetual software licenses and hardware. Continuing increase in implementation-related professional services revenue is a good indicator of the increased levels of project installations happening in the field now, which in turn augurs very well for future recurring revenue. Almost all our current implementations involve only the new state-of-the-art modernized product version. which are becoming increasingly smoother and enabling us to steadily reduce the need to maintain and enhance two different product sets spanning different generations of technology and instead increase resource levels focused on the use of next generation technologies to enhance product offerings including through smart use of AI.

rsh: Involving lesser levels of Perpetual software licenses and Hardware reselling.

Continuing increase in implementation related, Professional Services revenue is a good indicator of the increased levels of projects installations happening in the field now, which in turn August, very well for future. Recurring Revenue growth.

Almost all our current implementations involve. Only the new state-of-the-art modernized product versions.

Ramesh Srinivasan: One final note, compared to the same time last year, our current global... Quota Carrying Sales Personnel and Global Professional Services Personal Strength are about 45% and 38% higher, respectively. Armed with a strong, superior set of products which are easier to sell and implement, we are well positioned for continued, solid, disciplined and profitable revenue growth, especially with respect to cloud subscription revenue.

Which are becoming increasingly smaller and enabling us to steadily, reduce the need to maintain and enhance 2. Different product sets spanning different generations of technology. And instead increase the source levels focus on the use of Next Generation Technologies to enhance product offerings including through smart use of AI tools.

rsh: 1 final note.

rsh: Compared to the same time last year.

Our current global.

Kota carrying sales personnel.

rsh: And Global Professional Services personal strengths.

rsh: Are about 45% and 38% higher respectively.

Operator: With that, Victor, let's open up the call for questions. And as a reminder to ask a question you need to press star 1 1 on your telephone and wait for name to be announced to Withdraw your question, please. Press star 1 1 again, please.

rsh: On with a strong superior, set of products, which are easier to sell and implement. We are, well, positioned for continued solid disciplined and profitable Revenue growth. Especially with respect to Cloud subscription Revenue,

With that Victor. Let's open up the call for questions.

Stephen Sheldon: Stand by we'll compile the Q&A roster One moment for our first question Our first question will come from Stephen Sheldon from William Blair. Your line is open. Hey, thanks. Appreciate you taking my questions. First, just on the sales capacity, I think Ramesh, you just said that sales capacity, if I heard correctly, up 45% year over year.

Yeah, as a reminder, to ask a question, you need to press star 1. 1 on your telephone and wait for a name to be announced to withdraw your question. Please press star 1 1. Again please stand by we compile the Q&A roster. 1 moment for our first question.

Speaker Change: Our first question will come flying of Stephen. Sheldon from William Blair. Your line is open.

Ramesh Srinivasan: Can you give more detail about where you're adding that capacity and how productivity has been trending for new additions? And is there still a ways to go before the data capacity is a full production? I mean, obviously, you just had another really good sales quarter. But is that still, I guess, on the come as the new, new hires kind of ramp their production?

Hey thanks. Uh appreciate you taking my questions first. Just on the sales capacity. I think Rashi just said that sales capacity, if I heard correctly up, 45% year-over-year, can you get more detail about where you're at in that capacity and and how productivity has been training for new additions?

Ramesh Srinivasan: Hi Stephen. Number one, we can do more. I'll expand your question to answer services as well. Both with respect to sales and services, we can do more productivity improvement. That is the current sales team can do more and the current services team can do more. So the bulk big increases that we wanted to do, we have gotten them done. Hereafter, there will be normal increases to both sales and services capacity as we go along. Since it's a growing business and as business expands, we expect to hire more and more.

And is there still a way to go before the static capacity? Is it full production? I mean, obviously, you just had another really good sales quarter but is that still I guess on the comments, these new uh, new hires kind of ramp uh, their production.

Ramesh Srinivasan: Now the recent sales expansion has been mostly in the area of hotel resorts in that sales vertical and also an inside sales vertical. We have created an inside sales team. We never had a dedicated inside sales team before. We have one now, which is very handy to create more opportunities. And a lot of our expansion has been in the hotel and resorts vertical. Now, it is already showing good results for us, because number one, we are knocking on more doors, and number two, we are opening more doors for us, which is crucial for us. Because our success rate, once customers take a detailed look at our company and our products, is very high, even more than what I can believe.

Yeah. So hi Stephen number 1, we can do more both with this, I'll explain to you a question to uh to answer Services as well. Both with respect to sales and services, we can do more productivity improvements. That is the current sales team can do more in the current Services team can do more. So the bulk big increases that we wanted to do, we have gotten them done here. After there will be normal increases to both sales and uh Services capacity as we go along. Since it's a growing business and as business expands we expect to hire more and more

Speaker Change: Now, the recent sales expansion has been mostly in the area of hotel resorts, in that sales vertical and also an inside sales team. We have created an inside sales team. We never had a dedicated Insight sales team before we have 1 now, which is very handy, to create more opportunities and a lot of our expansion has been in the Hotel and Resorts vertically.

Ramesh Srinivasan: So it's a matter of opening more doors for us, and that's happening successfully. A lot of the sales success we have had in the recent six months has to do with the newer hires who are knocking on more doors and opening more doors. And the biggest thing we have achieved with the hiring of the sales team, Stephen, is that we are covering the entire territory now, which we didn't do a great job of before. So a lot more discipline in territory coverage, we are knocking on more doors, we are opening more doors. So the recent sales expansion has really worked out well for us.

Now it it is already showing good results for us because number 1 we are knocking on more doors. And number 2, we are opening more doors for us, which is crucial for us because our success rate. Once customers. Take a detailed, look at our company and our products is is uh, is very high even more than what I can believe. So it's a matter of opening, do more doors for us, and that's happening successfully.

Speaker Change: A lot of the sales success, we have had in the recent 6 months has to do with the newer hires who are knocking on more doors and opening more doors.

Speaker Change: Biggest thing we have achieved with the hiring of the sales team. Stephen is that we are covering the entire territory now, which we didn't do a great job of before.

Stephen Sheldon: But we have ways to go with respect to sales productivity. In terms of further expansion, that will happen as the business continues to grow. Got it. I really appreciate that detail.

Speaker Change: So lot more discipline and territory coverage, we are knocking on more doors. We are opening more doors. So the recent sales expansion is really worked out well for us but we have ways to go with respect to sales productivity in terms of further expansion that will happen as the business continues to grow.

Stephen Sheldon: And then on the international side, I mean, it sounds like you're seeing momentum there pick up. You know, as we think about what you need to do to keep that going, I guess, is it more about marketing and adding sales capacity, or is there still a lot of work to do in terms of the product, in terms of integration and localization needed on the product side? I guess, what are kind of the holdups for that to become a bigger part of the revenue mix over time? Product-wise, there is not much more work to get done.

Got it, I really appreciate that detail. Um and then on the international side I mean it sounds like you're you're you're seeing momentum there, pick up. You know as we think about what you need to do to keep that going I guess. Is it, is it more about? Um,

What to do in terms of the product in terms of integration and localization needed on, on the product side, it gets what, what are kind of the holdups for that to become a bigger part of the revenue mix over time?

Ramesh Srinivasan: Our products are in a good state now. Now, both domestic and international, Stephen, if I'm asked to... provide you one big, the biggest advantage that we have, it is our ecosystem. It's the fact that we have invested and created an ecosystem of hospitality products, which is going to be very difficult to duplicate by our competition. You just can't go create a modernized ecosystem of hospitality solutions just like that. It doesn't happen overnight. So, that's our single biggest advantage now wherever we are selling, and that is resonating in international regions now because our international business momentum is now happening in two areas.

Uh, yeah, product wise. There is not much more work to get done. Uh, our products are in a good State. Now now both domestic and international Steen if you if if I'm asked to

Provide you 1 big, the biggest advantage that we have. It is our ecosystem.

Ramesh Srinivasan: One, our current customers are spending a lot more with us because they see the product sets we have. And two, with the bigger deals that involve multiple products, both those are going well. The one negative about international momentum is that it is still dependent on bigger home runs. And we are focused on the singles and doubles now, in winning more medium and smaller sized deals as well, where the competition is higher. But our success currently is with larger customers who are buying multiple products from us, because there is virtually no competition to us now.

It's the fact that we have invested and created an ecosystem of hospitality products, which is going to be very difficult to do duplicate You by our competition. You just can't go create a modernized ecosystem of hospitality Solutions just like that. It doesn't happen overnight. So that's our single biggest Advantage, now, wherever we are selling and that is resonating in international regions now, because our international business momentum is now happening in 2 areas 1, our current customers are spending a lot more with us because they see the product sets we have and 2 with the bigger deals, that involve multiple products both, those are going well.

Dr. 1 negative about International momentum. We still dependent on bigger home runs and we are focused on the singles and doubles. Now, in winning more medium and smaller sized deals as well where the competition is higher, but our success currently is with larger customers.

Ramesh Srinivasan: Now what do we need to do to maintain that momentum? We need to install these new projects that we have done well, create more reference customers, and that's going to create more business. And as the business improves, we will expand sales and marketing. Great.

Who are buying multiple products from us? Because there there is virtually no competition to us now. Now, what do we need to do to maintain that, momentum? We need to install these new projects that we have done, well, create more reference customers and that's going to create more business. And as the business improves, we will expand sales and marketing as well.

Dave Wood: And then just one quick follow-up, and maybe for Dave, I think he called out the Inspired User Conference this year falling in one queue. I think it was four queue in March of last year. Any sense on how much of a cost that was? think about year-over-year trend and profit margins this quarter. Yeah, it was, I mean, it was most of the difference between the kind of normal percentage of sales and marketing as a percentage of revenue. We still look at that line, you know, around 13% of revenue for the year. So and sales and marketing was about 15% of revenue this quarter.

Speaker Change: Great. Um,

and then just 1 quick follow-up. Um and maybe for Dave I think he called out the inspired user conference, this year falling in 1 Q, I think is 4 q and March of last year. Any any sense on how? Uh,

Speaker Change: How much of a cost that was? This is we think about the year-over-year trend and profit margins, this quarter,

Speaker Change: yeah, it was

between the

Speaker Change: the normal.

Dave Wood: So most of that was the user conference. So for the year, we'll normalize back to similar percentages of what you saw last year. So almost all of the sales and marketing. So we'd be right in thinking maybe roughly 3 million. Yeah, a little bit higher than that, but that's pretty close. Think of it as 12 to 14%. He's talking about only the user content. Oh yeah, the user content. But overall, for the year, the guidance provided, EBITDA, 20% of revenue, we are comfortable. Sounds good. All right. Thank you.

Speaker Change: Marketing, as a percentage of Revenue, we still look at that line, you know, around 13% of revenue for the year. So, um, and sales and marketing was about 15% of Revenue this quarter. So most of that was the, the user conference. So, for the year, we'll normalize back to to similar percentages of what you you saw last year. So almost all of those sales, marketing increase was, was associated with that.

Speaker Change: The rut we'd be right in thinking, maybe roughly 3 million.

Yeah, a little bit higher than that but that's pretty close. Think of it as as 12 to 14% of Revenue.

Speaker Change: Okay.

Speaker Change: He's talking about only the user conference. Oh yeah. The user conference will be less than 3 months.

Speaker Change: Yeah, it will be less than 3. Yeah. Sorry. But overall for the year, the guidance provided even the 20% of Revenue. We are comfortable with that.

Operator: One moment for our next question.

Speaker Change: Sounds good. All right. Thank you.

1 moment for our next question.

Matt VanVliet: Our next question will come from the line of Matt VanVliet from Cantor Fitzgerald. Your line is open. Yeah, good afternoon. Thanks for taking the questions.

Speaker Change: Our next question will come from the line of Matt then via from cancer. If it's Gerald, your line is open.

Ramesh Srinivasan: Maybe another follow-up on sort of the the improvement in the overall sales organization and the growth there, but as you think about what Joe and even Terry joining on the marketing side, in terms of what their multi-year plan is to up-level the entire go-to-market team and sort of drive more top of the funnel as well, where do you feel like we are in terms of, you know, them rolling out their respective plans that you've come up with? You know, is there still more to be done in terms of programmatic improvements, or do we have most of the plan in place and this is the beginnings of the execution on that showing better results?

Ramesh Srinivasan: Yeah, I would say, Matt, as far as sales is concerned... I think we have a good plan in place and we have implemented what we wanted to do this year and the structure, the territory coverage and the fundamental structure is there and that is beginning to yield good results for us but we are only in the beginning stages of seeing the benefits of that structure of better territory coverage, better organization of sales, more discipline around that, you know, in terms of how we knock on doors, all that is improving now. I think that sales structure is in a good place now.

Matt: Yeah, good afternoon, thanks for taking the questions. Um, maybe another follow-up on sort of the, the Improvement in the overall sales organization and the growth there. But as you think about what Joe and and even Terry joining on the, the marketing side, um, in terms of what their multi-year plan is, to uplevel the entire go to market team and and sort of drive more uh top of the funnel as well. Where where do you feel like we are in terms of, you know, them rolling out, their respective plans, that that you've come up with, um, you know, is there still more to be done in terms of programmatic improvements or do we have? Most of the plan in place and, and this is the beginning of the execution on that showing better results.

yeah, I would say uh Matt as far as sales is concerned

I think we we have a good plan in place and we have implemented what we wanted to do this year and the structure the territory coverage.

Matt: And the fundamental structure is there and that is beginning to yield good results for us.

Ramesh Srinivasan: Now we will continue building on top of that foundation, sales will continue to expand but I think the structure is there. Marketing we are, it's a matter of putting more investments into marketing, we have expanded our presence which is the main thing we have to do in this B2B vertical business, we have to show more presence and we are doing that, we are attending a lot more trade shows than we ever have. There is a lot more thought leadership presence now where you see, you see Agilysys now and that will continue to improve as we make more investments in marketing as well.

But I think the structure is their marketing. We are it's a matter of putting more investments into marketing. We have expanded our presence, which is the main thing we have to do in this.

Ramesh Srinivasan: Our content has improved a lot. over the last year or so. So marketing, I think there are more investments to come to expand that. I think the sales structure is in a pretty good place, though we will continue expanding.

Matt: Uh, in this B2B vertical business, we have to show more presence and we are doing that. We are attending a lot more trade shows than we ever have. There's a lot more thought Leadership Lessons now where, where you see? You see as a list now, and that will continue to improve as we make more investments in marketing as well. Uh, our content is improved a lot.

Operator: All right.

Ramesh Srinivasan: And then as you get Book for Time more fully integrated, I guess, how are you seeing that as a potential entry into customers that don't have any Agilysys products today? Is it helping win deals, whether they were from existing customers or just new to Book for Time that are then discovering more offerings from Agilysys and sort of winning deals that way? Or is it just another kind of tool in the toolkit here? It is a conduit to winning more deals because there are hundreds of customers who use Book for Time and don't use any of the other Agilysys products.

Over the last year or so, so marketing. I think there are more Investments to come to expand that. I think the sales structure is in a pretty good place though, we will continue expanding that further.

Matt: all right, and then as you get booked for time, uh, more fully integrated

Speaker Change: How I guess how are you seeing that as a potential entry into customers that don't have, uh, any of those products today is it um, is it helping wind deals whether they were from existing customers or just new new to book for time that are then, uh, discovering more offerings from agility and and sort of winning deals that way or um, is it just another kind of tool in the toolkit here?

Ramesh Srinivasan: That is still in the beginning stages, right? It has turned out to be a bit more difficult than we thought because selling one product versus selling multiple products, it takes a little bit more training and adjustment time. In fact, recently we won one significant sales agreement that involved multiple Agilysys products, which was a Book for Time customer. So all that is beginning to happen now, but we are still in the beginning stages of that. In terms of tapping into the Book for Time customer base and selling more products to those customers, we are still in the early stages of that.

Matt VanVliet: And then just one quick follow up on the EBITDA expectations for the year, just profitability in general. What would you see in the business over the next couple months maybe that you might look and say, we're going to hit the gas pedal and invest a little bit more in long-term growth? Is there a scenario that we could see that 20% level maybe getting pressed a little bit lower because you have such good opportunities? Or are we far enough along in the year now that even if top line performance was strong enough, those costs would be more realized in fiscal 27?

Um, it is, it is a conduit to winning more deals because there are hundreds of customers who use book for time and don't use any of the other agencies products that is still in the beginning stages, right? It is turned out to be a bit more difficult than we thought because selling 1 product versus selling multiple products. It takes a little bit more training and adjustment time. In fact, recently we won 1 significant sales agreement, that involve multiple agencies products, which is a book for time customer, so all that is beginning to happen now, but we are still in the beginning stages of that. In terms of tapping into the book for time, customer base and selling more products to those customers, we are still in the early stages of that game.

Ramesh Srinivasan: We don't see a risk of going below 20% if that is your question, Matt. We are making significant investments. We continue to make significant investments. We will not sacrifice our long-term growth possibilities for short-term profitability. But having said that, we are comfortable. We are a growing company. We are generating more revenue, and that is feeding into... you know, increasing resources where we need to increase. So we are comfortable with the 20% level. The other way I would answer your question is, we are comfortable feeding the area we need to feed to continue our growth without sacrificing on the 20%.

And then just 1 quick follow up on the the IBA expectations for the year or just profitability in general. What what would you see in the business over the next couple months? Maybe that um, that you might look and say we're going to hit the the gas pedal and invest a little bit more in in long term growth. Um, is there a, you know, a scenario that that we could see that 20% level um maybe getting pressed a little bit lower because you have such good opportunities um or are we far enough along in the year now that even, if if Topline, uh, performance was was strong enough, those those costs would be more realized than fiscal 27.

We don't see a risk of going below. 20%, if that is your question, Matt, we are making significant Investments. We continue to make significant Investments, we will not sacrifice our long-term growth possibilities for short-term profitability, but having said that, we are comfortable, we are a growing company. We are generating more Revenue.

Speaker Change: And that is feeding into.

Matt VanVliet: All right, very helpful, thank you.

You know, increasing resources where we need to increase. So we are comfortable with the 20% level that the way the other way I would answer your question is we are comfortable feeding the areas. We need to feed to continue our growth without sacrificing on the 20% mark.

Operator: One moment for our next question.

Very helpful. Thank you.

1 moment for our next question.

Brian Schwartz: And our next question will come from Brian Schwartz from Oppenheimer. Your line is open. Hi, thanks for taking my questions this afternoon. Ramesh, in terms of the success that you're having with the bookings, is it possible to maybe look a little bit under the covers between your core verticals, the HRC, the food and management, and then obviously the smaller cruise segment? But does the performance vary at all between new logos, expansion, and ARPU gains with the bookings among those three different segments? Overall...

And our next question will come from the line of Brian Schwarz from Oppenheimer. Your line is open.

Hi. Thanks for taking my questions, this afternoon um raash in terms of uh the success that you're having with the bookings, is it possible to maybe look a little bit under the covers between your your core verticals, the HRC the food and management and then obviously the smaller, um, Cruise segment, but does the performance vary at all between new logos expansion and our poo gains with the bookings.

Speaker Change: Those 3 different segments.

Ramesh Srinivasan: The big news about this quarter is we made a great comeback with FSN. We really are beginning to see momentum with international sales. Having said that, hotel resorts, casino gaming, and the verticals that we are normally strong at continue to do well. Khrushchev's again had a good quarter in Q1 as well. So this was the broadest-based... Sales success that we have seen, in our history in fact, in terms of this many verticals doing well at the same time in the same quarter was very encouraging. Now on the other hand, this was also a good quarter for sales from new customers.

Overall.

news about this quarter is

we made a great comeback with FSM.

Speaker Change: We really are beginning to see momentum with International sales.

Having said that hotel Resorts Casino gaming, and the verticals that we are normally strong at continue to do well.

Speaker Change: Cruise ships again. Had a good quarter in q1 as well. So this was the broadest.

Speaker Change: Based.

Is doing well at the same time in the same quarter was very encouraging to us.

Speaker Change: Now, on the other hand, this was also a good quarter.

Ramesh Srinivasan: and sales from current customers who continue to buy more products from us continues to be at record level.

Speaker Change: For sales from new customers.

Ramesh Srinivasan: So the only one where we can say we could improve further that, you know, that was not a great quarter, it was a good quarter, was for new sites. And for that, as we sign more multi-property big customers, that will also make a comeback during the subsequent quarter. So now, in terms of new customers in each vertical, a lot of new customers are signing up with us in HotelsResort. in gaming is more skewed towards current customers buying a lot more from us and we are beginning to sign a lot of new customers in FSM and international as well.

And sales from current customers who continue to buy more products from us, continues to be at record levels.

So the only 1 where we can say we could improve further that you know, that was not a great quarter, it was a good quarter was for new sites.

And for that, as we sign more multi-property, big customers that will also make a comeback during the subsequent quarters.

Speaker Change: So now in terms of new customer in each vertical, a lot of new customers are signing up with us in hotel results.

In gaming is more skewed towards current customers. Buying a lot more from us, and we are beginning to sign a lot of new customers in FSM and international as well.

Dave Wood: Thank you. And then one follow-up for Dave. The subscription revenue growth in the quarter, it accelerated very slightly. And I was just wondering, was that reflective that maybe you had faster goal lives, you recognized revenue a little bit faster, or you had a stronger start to the quarter? I'm just wondering what drove a little bit of the faster growth in the subscription revenue in the quarter. Thank you. I mean, it was really both. I mean, we gave a lot of commentary. Obviously, the subscription bookings did a lot better than we expected. So sales, it obviously always starts with sales, and that was really strong for the quarter.

Thank you. And then 1 follow up for Dave the um, the subscription Revenue growth in the quarter. It accelerated very slightly and I was just wondering, was that reflective that? That maybe a faster, go lives. You recognize Revenue a little bit faster or or you had a stronger start to the quarter. I'm just wondering what? What drove a little bit of the faster growth in the subscription Revenue in the quarter. Thank you.

Dave Wood: And then we always look at the professional services line as a good leading indicator. So I would say professional services being north of $18 million gave us a very strong start to the quarter, too, with SAS Go Live. So it was really both. I mean, it was a tremendously strong sales quarter, and it was kind of six months of some of the operational hiccups we had in our 2025 fiscal year kind of being behind us. And I would also point out that it's also good, even despite those numbers being really strong, our subscription bookings. Our subscription backlog still went up 23% over our March 31st exit.

Dave: Yeah. I mean it was really both. I mean we gave a lot of commentary. Obviously, the the subscription bookings did a lot better than we expected so sales. It obviously always starts with sales and that was really strong for the quarter and um and then we, you know, we always look at the Professional Services, line is a good leading indicator. So I would say, Professional Services being north of 18 million was a was a was gave us a very strong start to the quarter too with with sasco live. So it was really, it was really both. I mean, it was a tremendously, strong sales quarter and it was kind of 6 months of some of the operational hiccups. We had in our 2025 fiscal year kind of being behind us and and you know I would also point out that it's also good. Even, despite those numbers being really strong, our subscription bookings,

Dave Wood: So, you know, sales were really good.

still are our subscription backlog. Still went up. 23% over our March 31st, exit. So

Operator: Thank you for taking my question. Thank you, Brian. Thank you. And as a reminder, that's star 11 for questions, star 11. One moment for our next question.

Dave: Yeah, sales were really good this week.

Speaker Change: Thank you for taking my questions.

Dave: Thank you. Bye.

Thank you as a reminder that star 101 for questions star 1, 1 1.

Logan Lilijog: Our next question will come from the line of Logan Lilijog from Craighalem Capital Group. Your line is open. Hey guys, this is Logan. Hopped on for George this afternoon. Um, Ramesh, you talked about some interesting ways that you guys are leveraging AI, kind of, for end customers.

Dave: 1 1 moment for our next question.

Speaker Change: Our next question will come from the line of Logan Lily hog from Craig halum Capital group your line is open.

Ramesh Srinivasan: through the product set, can you maybe just give us a sense for where you think that road map goes in the next year and sort of what kind of differentiator you think that can be for you? Yeah, hi, Logan. Yeah, so before we talk about AI, the lucky part is and the good part is that we did the modernization over the last few years, and also created an ecosystem of products. Both of them have placed us in a very good position where you can now infuse AI into our products in a very, you know, in a very effective way that gives us competitive advantages that are going to be difficult to duplicate for the competition.

Logan: Hey guys, this is Logan hopping out for Georgia this afternoon. Um, rematch. You, you talked about some interesting ways that you guys are leveraging, AI, kind of friend customers. Um,

Through the product set. Can you maybe just give us a sense for where you think that road map goes in the next year, and sort of what kind of different here. You think that can be for you?

Logan: Yeah. Hi Logan. Um yeah so before we talk about AI

Ramesh Srinivasan: So we are now, so you think of AI in sort of two different ways. One, what are we doing with our products? So there are a lot of enhancements in almost each of our in every one of our products that we're introducing now, that are AI based, and they are adding tremendous advantages to the product. They're enhancing the product significantly. And there are various different things that we are doing, you know, an ability to do intelligent revenue upsell for customers, a way to do voice recognition when you do F&B ordering, invoice recognition and approval processing in our inventory procurement products, a natural language processing in our data, data analysis product.

Speaker Change: The lucky part is and the good part is that we did the modernization over the last few years and also created an ecosystem of products. Both of them have placed such in a very good position where you can now Infuse AI into our products in a very, uh, you know, in a very effective way that gives us a that gives us competitive advantages that are going to be difficult to do duplicate for the competition. So we are now. So you think of AI in in sort of 2 different ways 1, what are we doing with our products? So there are a lot of enhancements in almost each of our, in every 1 of our products that we are introducing now that are AI based and they are adding tremendous.

Ramesh Srinivasan: So there are and conversational ordering in our booking engine and while doing spa and golf bookings. So there are various different ways in which we are able to infuse AI into our products now. And thankfully, the products are modernized and it is easy for us to do that. In our internal operations, also various departments are using AI and we are able to get a lot more done now with the current resource strength we have. Our products already have a competitive advantage and now this use of AI, infusion of AI-related tools is going to make that even better.

Advantages to the product. They're enhancing the product significantly. And there are various different things that we are doing, you know, an ability to do, uh, intelligent Revenue upsell for customers. A way to do voice recognition when you do FNB ordering, invoice, recognition, and approval, processing in our inventory. Procurement products, a natural language processing in our data and data analysis product. So there are and conversational ordering in our booking engine and while doing spa and golf booking. So there are various different ways in which we are able to infuse AI into our products. Now and thankfully, the products are modernized and it is easy for us to do that.

in our internal operations, also various departments are using Ai and we are able to get a lot more done now with the current resource strengths we have

Speaker Change: so, we

Our products already have a competitive advantage and now this use of AI infusion of AI related. Tools is going to make that even better.

Logan Lilijog: Got it.

Operator: Appreciate the color. That's all for me. I'll hop back. Thank you, Logan. One moment for next question. Our next question will come from Mayank Tandon from Needham. Your line is open. Thank you, good evening, Ramesh. Great to hear about the sales momentum coming into this year and continuing into this quarter. I was just wondering, is it safe to say that your subscription revenue is all under contract or is there a business that you still have to win to hit your guidance? And just to extend the question further, I would ask you, if there is upside to the growth acceleration on the subscription side, where would that upside potentially come from?

Got it. Appreciate the color. That's all for me. I'll hop back in the queue.

Operator: Thank you, Logan.

1 moment for next question.

Speaker Change: Our next question will come from line of mayang. Tendon from numb. Your line is open.

Mayank Tandon: Is it from new logos going live faster than expected? Is it from better cross-sales success? If you could just expand on that, thank you. Yeah, so the start is great, Mayank. We have started the year very well. As a general rule... We are happy to have this kind of visibility, right? In enterprise software, you can't ask for much more. So we have excellent visibility in terms of our subscription revenue backlog of projects that we have, and also we have increased our services teams now, and they are in a good position to increase their level of implementations as well.

Thank you, uh, good evening, remsha. Great to hear about the sales momentum coming into, um, uh, this year. And, uh, continuing into this quarter, I was just wondering, is it safe to say that your, uh, subscription revenue is all under contract? Or is there a business that you still have to win to hit your guidance? And just to extend the question further I would ask you if there is upside to the growth acceleration on the subscription side. Where would that upside potentially come from? Is it from new logos going live faster than expected? Is it from better cross sales success? If you could just expand on that, thank you.

Remsha: Um, yeah, so the start is great, Mike. We've started the year very well as a general rule.

Ramesh Srinivasan: So we saw an inflection point about a couple of quarters ago, when both subscription sales and the level of implementation of subscription projects took a clear inflection upwards from what it was for the previous many quarters. So that inflection is really helping us now and is helping us get this year started off very well. But in terms of achieving the annual revenue and other targets, it depends on both. It depends on the starting backlog. It depends on continuing good sales levels. And for us, we are lucky and happy that both of them are going very well.

Enterprise software and you can't ask for much more. So we have excellent visibility in terms of our subscription Revenue, backlog of projects that we have. And also we have increased our services teams now, and they are in a good position to increase their level of implementation as well. So we saw an inflection point about a couple of quarters ago when both subscriptions sales and the level of implement

Ramesh Srinivasan: Our current sales momentum, especially with respect to subscription software sales, is going very well, and our rate of implementations of subscription products has also increased very well because the products are easier to implement now. They have been in the field for two, three years, and they are becoming easy to implement. So, as long as we continue the current rate of improvement and what we have been doing for the last six months or so, I think we will do well, and the rate of growth will continue to increase. Got it.

Remsha: Presentation of subscription projects took a clear inflection upwards from what it was for the previous, many quarters. So that inflection is really helping us now, and is helping us get this year off, uh, started off very well, but in terms of achieving the annual revenue and other targets, it depends on both. It depends on the starting backlog. It depends on continuing good, sales levels. And for us, we are, we are lucky and happy that both of them are going very well. Our current sales momentum is especially with respect to subscription software. Sales is going very well.

Ramesh Srinivasan: Very helpful. And then I wanted to ask you also about the M&A strategy going forward, given that you've had some early success with Book for Time. Good to hear. So just curious, is this maybe, you know, a reason to pursue further M&A? Are you being opportunistic? And if you were to do more M&A, what would be potentially, you know, your focus area? Would it be around expanding your geographic reach? Would it be expanding your capability set? If you could just provide any color around that, that would be helpful. Thank you. Yes Mayank, there are more opportunities that are coming our way than usual in M&A but we remain patient.

And our rate of implementations of subscription products is also increased very well because the products are easier to implement. Now, they've been in the field for 2, 3 years and they are becoming easy to implement. So as long as we continue the current rate of improvement and what we have been doing for the last 6 months or so, I think we will do well and, and the rate of growth will continue to increase

Speaker Change: Got it very helpful and then I wanted to ask you also about the m&a strategy going forward, given that you've had some early success with book for time. Good to hear. So just curious, is this maybe, you know, a reason to pursue for their m&a, are you being opportunistic? And if you were to do more m&a, what would be potentially you know, your focus area, would it be around? Expanding your Geographic reach? Would it be expanding your capability set? If you could just uh, provide any color around that that would be helpful. Thank you.

Ramesh Srinivasan: We've always said we remain patient, we remain conservative, we remain opportunistic. This is an organic growth company. We have done all the product investments. We have done all the investments to expand sales and services, and our products are in a great state now. The ecosystem is a big advantage for us, so there is enough organic growth ahead of us, and the organic growth ahead of us is huge. We are just beginning to scratch the PMS area, and we are a long, long way to go as far as our growth is concerned. So we can comfortably grow well organically.

Speaker Change: Um yes my there are more opportunities that are coming our way than usual in m&a, but we remain patient.

Speaker Change: We've always said, we remain patient, we remain conservative, we remain opportunistic. So

Speaker Change: this is an organic Growth Company. We have done all the product Investments

We've done all the Investments to expand sales and services.

Ramesh Srinivasan: There is no reason for us to do anything desperate as far as M&A is concerned. But there are lots of opportunities coming our way. We look at them frequently, patiently, conservatively. We are not going to do anything dramatic. Now, to answer your question of what kind of M&A, they fall into two broad categories. One could be complementary to our product set. That fills a couple of gaps that we have in the ecosystem if a good opportunity comes along. On the other hand, it could also be for market share gain. There could be companies that could take advantage of the fact we have modernized our system and give their customers an upgrade path that helps us build on our market share.

Ramesh Srinivasan: So it could fall into one of those two broad categories, and we look at each opportunity with a very patient and conservative lens.

Speaker Change: And our products are in a great state. Now, the ecosystem is a bigger Advantage for us, so there is enough organic growth, ahead of that. And the organic growth ahead of us is huge. We are just beginning to scratch the, the PMS area and uh, the long long way to go as far as our growth is concerned, so we can comfortably grow. Well, organically there is no reason for us to do anything desperate as far as m&a is concerned but there are lots of opportunities coming our way. We look at them frequently patiently conservatively we are not going to do anything dramatic. Now to answer your question of what kind of m&a they fall into 2 broad categories, 1 could be complimentary to our product set. That's that fills a couple of gaps that we have in the ecosystem. If a good opportunity comes along on the other hand, it could also be also be for market share gain. There could be companies that could take advantage of the fact we have modernized our system and give their customers an upgrade path that helps us build on our Market.

Speaker Change: So it could fall into 1 of those 2 broad categories.

Mayank Tandon: Great. Thank you so much for answering my questions. Congrats on the quarter. Thank you, Mayank. I appreciate it. Thank you. I'm not sure we have any further questions in the queue at this moment.

And we look at each opportunity with a very patient and conservative lens mind.

Speaker Change: Great, thank you so much for answering my questions, congrats on the quarter.

Thank you, may I appreciate it.

Ramesh Srinivasan: I will now like to call back over to Ramesh, CEO, for closer remarks. Thank you, Victor. Thank you all for your continued guidance and support.

romesh: Thank you. And I'm not sure any further questions in the queue at this moment. Oh, and I like just going to call back over to romesh CEO for closing remarks.

Ramesh Srinivasan: Please take great care, enjoy the rest of the summer, and we'll catch up with you all again soon. Thank you.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

romesh: Thank you.

Operator: Everyone have a great day. Thank you for watching!

Thank you for your participation. In today's conference, this does conclude the program. You may now disconnect everyone have a great day.