Good morning, ladies and gentlemen, welcome to the Agilysys Fiscal 2015 Second Quarter Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded. 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 Private Securities Litigation Reform Act Of 1995. 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 differ materially from these in the forward-looking statements are set forth in the Company’s report on Form 10-K and 10-Q and news releases filed with the Securities and Exchange Commission. I’d now like to turn the call over to Mr. Jim Dennedy, President and CEO.

Thank you, Teria, and good morning everyone. We appreciate you joining us on the call today to review our fiscal 2015 second quarter results. Joining me today is our Chief Financial Officer, Janine Seebeck. Before we get started, just a quick reminder that on the call today we’ll be discussing some non-GAAP metrics, primarily adjusted operating income from continuing operations and adjusted income from continuing operations, which eliminates the effect of restructuring and other items that are either non-cash or non-recurring. Reconciliations to GAAP metrics are provided in the financial section of the press release issued earlier today. Our second quarter saw continued progress towards our goals of steady growth in our business, highlighted by higher recurring revenues, continued investment in our business to fuel that growth, and strong capital discipline. Our innovative solutions allow operators to establish closer connections throughout the guest lifecycle, offering our customers better opportunities to grow their revenue and operate more efficiently. Our product portfolio continues to evolve in both scope and sophistication. As we evolve our product portfolio, we made and continue to implement changes in our go-to-market strategy to ensure that we’re relying not just with our customers’ goals, but also with our goal of growing our Company, particularly, our higher margin recurring revenue business. Although our preference for recurring revenue business and changes in our go-to-market approach may limit headline revenue growth statistics in the near-term. We look to the growth in our recurring revenue line and use of cash as key indicators in our business. I remain confident that we’re in the right path towards accelerating our recurring revenue growth and add a significant value to our business. Turning to our financial results for the second quarter, total net revenue for the second quarter increased 6% to $26.3 million. It is…

Thanks, Jim, and good morning, everyone. Our second quarter fiscal 2015 revenue of $26.3 million reflects a 6% increase compared to the prior year period. Underlying the overall revenue growth was a 45% increase in our professional services revenue, mainly due to the timing of customer installation, including two large service projects with significant effort in the second quarter that resulted in approximately $1 million of revenue. In addition, we have a healthy 7% revenue increase from our support, maintenance, and subscription business, which represents our recurring revenue. Within this service line, SaaS revenue grew at over 14% in the quarter and a 11% year-to-date, while traditional support in the quarter grew 4% over the same quarter a year-ago. This was offset by a $900,000 decrease or an 11% drop in our product business, primarily of the result of reductions in proprietary product sales in the second quarter of fiscal 2015. Moving down the income statement, while we were able to maintain a healthy overall gross margin of 63% for the second quarter of fiscal 2015, we did see a decrease in gross margin of 400 basis points, compared to 67% in the prior year quarter. This was expected as we’ve the impact of amortization expense as some of our newer products were placed into service. Going forward, we expect gross margins to be inline with the first half of fiscal 2015 and remain in the low 60% range. Operating expenses, which includes product development, selling and marketing, general and administrative and depreciation expense, were flat with the prior year at $16.6 million. Product development expenses decreased $500,000 or 8% in the second quarter of fiscal 2015 compared with the second quarter of fiscal 2014. It is important to note that although we’ve increased our investment in the product development…

Thank you, Janine. The past few months have been a productive time for us, not only on the operational and product development side, but also in our ability to sign agreements with both existing as well as new customers. Taking a look at our largest revenue industry, the commercial and tribal gaming market, while new property supply growth has slowed, operators are increasingly depending on business expansion from non-gaming sources. Apart from Las Vegas and the regional markets, the Native American market is a key market for us. Currently in 28 states this market generated more than $28 billion in gaming revenue in 2013 or about 70% as much as the entire U.S commercial gaming market combined. On the new customer front we were able to continue growing our customer footprint in the gaming industry which currently represents approximately 54% of our total revenues. In mid-August we announced that the Golden Nugget Lake Charles selected a comprehensive software suite including solutions for property management, event ticketing, golf management, self-service check-in and document management. We are also pleased that during the quarter Angel of the Winds Casino in Arlington, Washington selected Visual One to help them run their properties. Moving to the hotel, resort and cruise sector, this market represents approximately 21% of our total revenues and offers a significant growth opportunity for us both in the United States and abroad. Overall this sector remains healthy. In 2013, global lodging industry revenues grew 5% to $163 billion with an average room rate rising approximately 4%. Guests and potential customers are expecting an experience that reflects their unique tastes, preferences and travel habits. We are also pleased that during the quarter the Mandarin Oriental Hotel in Marrakech and Embassy Suites in Louisville, Kentucky both selected our InfoGenesis solution to support their food…

(Operator Instructions) And our first question comes from the line of James Lee of Potrero. Your line is now open.

Thank you. Jim, last quarter you guys talked about sales reorg, and can you give us an update on what's going out there? Is it largely done? When do you expect your sales force to be fully productive?

I think we have the structure in place and we recently hired new VP of Sales, Jim Walker to lead it. In terms of staffing and headcount we probably are two-thirds full strength right now with several open positions. And as we’ve indicated, the sectors that we find more important to us to address where we want to increase our share participation would be in the restaurant segment and the core hotel segment.

I think last quarter you guys talked about how you expect your recurring revenue to accelerate in the second half of this year. Is that still the thinking?

Yes, it is. I’ll let Janine comment a little more on that.

Okay. And as you start rolling out these new products, when do you expect your total revenues to start to accelerate?

When you say total revenues, the headline other than just the recurring (multiple speakers), yes. As we increase new sales it’s pretty evident in this particular quarter, well you saw compression in the product sale component, that’s primarily where we recorded our traditional sales. The product sale component suffered some compression about the same size as the SaaS component, the recurring revenue component grew. But with the SaaS component being a smaller participant really just slightly less than 10% of our total revenues, it may be a few quarters before the growth and the size of the growth, the magnitude, the quantum, not the percentage but the quantum of growth in the SaaS line will begin to displace or more than cover any compression seen of the product line component of our total revenues.

Actually we just started seeing it first half both next for three years, is that overcoming …?

Yes. Janine Seebeck Yes

I’d say by the end of the -- yes, so I’d say by the end of the first half, so approximately this time next year you should start seeing that total revenues would then be growing at or slightly better than the market rate of growth and with acceleration beyond.

And then on cash flow, what's your expectation for a free cash flow this year. How much more cash do you guys expect to burn before you start breakeven on a free cash flow basis?

So when I think about the rest of the year, James, I think what's probably and in that kind of right where we are, $77 million to $80 million. So you know how we have the first quarters -- first half of the year is usually user of cash from a key free cash flow perspective. Second half will kind of generate from operating but obviously continue to spend, we probably have another this year. We’re pretty much running at about $4 million a quarter on capital investment. I think that will continue through this year, and then there will be a decline a little bit into next year. But I think from a free cash flow perspective we’ll still be a user this year -- net user, and I think we’ll still be a slight user in fiscal ’16, but you’ll see that number come down from where it is today and then you’ll really start to see cash flow generation, a free cash flow pop in our fiscal ’17 as we’ll continue to invest next year in kind of finishing out that rGuest platform.

So did you say the cash in this year is expected to be $70 million to $80 million?

$77 million to $80 million. Yes.

Okay, so that means you -- and you ended the quarter at about $60 million cash. So it’s likely to collect about $17 million to $20 million, in the second half?

So, cash and marketable securities. So we exited this quarter at about $77 million for cash and marketable securities. At this point I anticipate based upon the cash generation just from the timing of invoices that, that positive that we see in the next two quarters will be offset by the spend basically that’s going out the door for CapEx investment, for product investment and so the net will keep us pretty much where we are today from a free cash flow perspective.

Okay. You’re correct. I looked at the wrong number. Sorry. Thank you.

Yes, it’s all right. Yes.

Thank you. And our next question comes from the line of Phil Bernard of Eilers Research. Your line is now open.

Good morning, guys. Thanks for taking my question.

Good morning, Phil.

Hi, Phil.

Good morning. How are you doing?

Great.

Good, good. First question is about your professional services. Congratulations on a big jump there and you already mentioned that it’s related to the implementation of two large product offerings -- two large properties. How do you expect this to grow moving forward? How should we view that moving forward?

Yes, on the professional services there’s many companies that transition into a SaaS business. They also evolve their professional services. We continue to see the core professional services support looking like we currently have them today. We currently target large projects. We still target large projects with some in the pipeline. So we still see professional services being a key component. But we expect for the second half of ’15 and going into ’16, to grow the offerings of professional services more around business consulting to our customers trying to help them understand the data and use of the data that our systems co-act to not only go out and get more customers, improve the wallet share from the customers who visit, but continue to optimize their own, their business from an expense front. So we see the product offering or the solution offering around services evolving. But we will continue to have those core implementation configuration and go live support services for our customers.

Just to confirm, I think the million dollars that we called out and discussed, that was very specific to a couple of big deals. I don’t think those are going to continue to recur on an even basis, they may pop from time-to-time. But when I think about run rate business, for the rest of the year it’s probably more at the normalized level. And then as Jim, said as we transition to this next -- to the more of the consulting, we still have that core business and we may see some of these. But I wouldn’t anticipate that, that type of pop this quarter would continue in Q3, and Q4.

Perfect. Thank you for the clarification there. Another question, this is about your deal. So, I’m curious as your relationship with the operator network that some of these properties belong to, specifically, the Golden Nugget -- I think your deal with Golden Nugget in Lake Charles. Do you guys currently have relationship with Landry's? If not, do you intend to extend your products to other properties within that group?

We do have a relationship with Landry’s. We’ve had one for some time and we do look to expand with them as they launch new properties.

Are you able to speak on how many properties you may or what that -- I think there is about six Golden Nuggets? How many properties do you currently offer?

So, I will have to get that. We’re in a majority, but I would have to get the data. I don’t have that on top of my head.

Got it. So the majority. Perfect, perfect. And I think that will do it for me. Thank you, guys.

Thank you.

Thank you.

Thank you. And at this time I’m showing there are no additional questions in the queue. I would like to turn the call back over to Mr. Jim Dennedy, President and CEO.

Thank you, Teria. Thank you for joining us on the call this morning. We believe Agilysys continues to improve our business. We will continue to focus our resources on the highest available opportunities and our chosen end markets and manage the business for the longer term to deliver sustainable value to our customers and shareholders. In closing, I want to take this opportunity to thank the very talented and dedicated team at Agilysys. Their work drives our success. I also want to thank our many customers and partners who entrust us with their business. Thank you for joining us today.

Ladies and gentlemen, thank you for your participation on today’s conference. This concludes the program. You may now disconnect. Everyone have a great day.