Good day, ladies and gentlemen. And welcome to the Agilysys’ Fiscal 2020 Fourth Quarter Conference Call. As a reminder today’s conference is being recorded. I would now like to turn the conference call over to Dave Wood, Vice President of Corporate Strategy and Investor Relations at Agilysys. Please go ahead.

Thank you, Jonathan, and good afternoon, everybody. Thank you for joining the Agilysys’ fiscal 2020 fourth quarter conference call. 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 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 differ materially from these and the forward-looking statements include the effect of the COVID-19 pandemic on our business and the success of any measures we have taken or may take in the future in response to the COVID-19 pandemic and the risk set forth in the company’s reports on Form 10-K and 10-Q, and other reports filed with the Securities and Exchange Commission. With that, I’d now like to turn the call over to Mr. Ramesh Srinivasan, President and Chief Executive Officer of Agilysys. Ramesh, please go ahead.

Thank you, Dave, and good afternoon, everyone. Welcome to our fiscal 2020 fourth quarter earnings call. Joining Dave and me on the call today is Tony Pritchett, our CFO. I am participating in this call from my home base in Las Vegas while Tony and Dave are in Atlanta. We hope all of you and your families and colleagues are doing well and staying healthy during these incredibly challenging times. Like many other organizations across multiple industries have reported, our fiscal 2020 fourth quarter, the period January through March was very much a tail of two quarters within one. We started the quarter on a high note carrying on the momentum of seven consecutive record revenue quarters before it. It then got even better with our Inspire User Conference during February held at Rosen Hotels and Resorts in Orlando. The conference was highlighted by the highest customer attendance we have seen at a location other than Las Vegas. Attendance of customer users from the hotel and resorts vertical was up 45% year-over-year. The overall number of customer users attending additional training classes and setting up meetings with our technical staff for further product discussions, two crucial user conference customer engagement metrics for us was up 40, 4-0, was up 40% year-over-year. Our increase product innovation velocity during the last couple of years was on full display. Little did we know then that many additional modules like mobile check in, check out, rGuest Service and on-demand which were discussed in packed conference rooms during the conference would move from being nice to have modules to become must have ones just a couple of months later and then everything temporarily changed during March. In spite of the hospitality industry virtually shutting down completely about 32% of sales during the quarter actually happened…

Thank you, Ramesh. To echo Ramesh’s comments, although, the impact of COVID-19 situation has been dramatic to our customers and our short-term progress, we remain confident in the long-term plan we put in place three and a half years ago. To become a profitable, revenue growth company that leads the market with product innovation. This strategy is now paying off with a flurry of customer activity around our new software modules that Ramesh talk through. Taking a look at our financial results, beginning with our income statement. Fourth quarter fiscal 2020 revenue was $39.7 million and 8.3% increase from total net revenue of $36.6 million in the comparable prior year period. The increase in topline largely reflects a 26.3% increase in professional services revenue and a 15.2% increase in recurring revenue offset by a 14.3% drop in our product revenue due to the sudden shutdown our customers were faced with in the last half of March. On an annual basis, we are pleased to see growth across all three of our revenue line items including a record $8.2 million increase in recurring revenue and a $6.5 million increase in professional services revenue. Total recurring revenue represented 56.2% of total net revenues for the fiscal fourth quarter and 52.1% for the full year, compared to 52.9% and 53.6% of total net revenues in the fourth quarter and full year fiscal 2019. We are also pleased with our robust subscription revenue growth, which grew at 29.8% for the fourth quarter of fiscal 2020 and 24.3% for the full fiscal year. Subscription revenues comprised around 39% of total recurring revenues, compared to 34% of total recurring revenues in the fourth quarter of fiscal 2019. With regard to endpoints, we currently service about 274,400 rooms and have approximately 62,100 terminal endpoints or 1% and…

Thank you. [Operator Instructions] Our first question comes from the line of Matt VanVliet from BTG. Your question, please.

Yes. Hi, guys. Thanks for taking my question. Nice job on the coral things considered especially at the beginning of the year, getting the pipeline built out there. I guess digging in on some of the trends that you saw normally through the quarter and into the end, but some of the concessions that you talked about. Can you just dig a little deeper for us here in terms of how much of a delayed fuse are on some of those to that 90-free windows start sort of the day they agreed to it or is that conditional on the when properties reopen, when businesses at least put in motion our plans to reopen. Help us think about what that could look like on a sort of time series basis moving forward?

Yeah. Hi, Matt. Thanks for attending the call. So we are hospitality too, Matt, so we were also -- we are also badly affected by this and so there are limits to how much we could help out our customer though we tried our best. And I don’t want to get into all the specifics, Matt, but this much I can tell you. We break it up into two separate things, as far as the product concession goes. It is like giving a 90-day free trial if they sign up for a much longer period of time. So customers -- and it was for one particular product like we mentioned for on demand. So if they sign up for a longer period of time, which is how customers normally sign up. The first 90 days there is no charge on the SaaS fees and it starts on the day they go live. And so, obviously, the only customers, signing up for that our customers who are just about opening now or have definite plans to open. And the trial period in terms of when they have to sign up -- is only for a certain period of time. It is only for a couple of months kind of thing. So that is on the product concession which is basically for use of a product but they get the first say three months free after they go live with it. Now in terms of the other concessions it takes various forms with each customer, it just depends on the customer. It depends on what kind of preference they have and what we could afford and so you just took various shapes and forms with each customer which will affect for the most part about two-thirds of it will affect Q1 and the remainder of it will get spread over Q2, Q3 and Q4. So that is how much clarity I can give on that for you Matt. I am sorry I can’t get into the specifics because it involves you know confidential details with various customers.

Totally understand. Thank you. That’s great detail to help us here. And then I guess looking at your overall customer portfolio. I am curious of what you have looked at in terms of geographic dispersion and types of industry that you are covering specifically and made some assumptions around what might come back sooner or later. You mentioned gaming might be sort of pushing the envelope to open a little sooner verses something like some of the cruise lines that you have been in I think you are going to at least from my opinion would be longer term to sort of reopen. But what’s the risk in terms of some of the smaller operators that you might deal with or some locations that may not open again or maybe extremely delayed and in terms of reopening. Have you had conversations with customers? Is there any kind of expectation of sort of permanent churn that you could have or is it still currently operating where it’s more of a when and not if, that the majority of your customers in particular will look to be reopening?

Yeah. It’s a good question Matt. So, yes, we are -- obviously, we are in touch with all our customer base and we are constantly talking to them and not just in terms of when they will reopen also helping them with their reopening, right? So I will come to that in a second. So the one thing about our customer portfolio, the customer profile Matt is that gently all our customers are of the bigger size, right? We don’t have much of a play in the smaller retail restaurants so that is not the space we play-in at all. So virtually all our customer base is in the bigger customer segment, we are an enterprise software company. We don’t compete much in the smaller restaurant space at all, in fact we don’t compete there at all. So to a certain extent a lot of our customers have much more concrete plans of the reopening compared to what you might find in the small restaurant space. So that is one aspect to remember about our customer portfolio. Virtually our entire customer but we have got all the customers have plans to be open it is only a matter of when they will be open not if they will be open because he’s got all the customers who have videos access -- access to capital and they all have different plans to re open. So that’s one thing to keep in mind. The second thing to keep in mind is, we had a fairly small player like they always say about portal addressable market runs into billions. I mean depending on which study you believe you call it $3.5 billion or $4.5 billion it runs into billions in terms of the recurring revenue of the industry while our recurring revenue is…

Great. Thank you for taking my question. I really appreciate it.

Thank you, Matt. Appreciate it.

Thank you. Our next question comes from the line of George Sutton from Craig-Hallum. Your question, please.

Thank you, Ramesh. I appreciate you are going thoroughly for module additions I thought that was helpful. So as you think about the mobility part of the equation, when you are talking to existing customers and they decide to move forward with that and I am speaking mobility and more broadly the safe distancing applications that you have. What does that do to the TAM opportunity with that specific account or the ARPU opportunity with that account? And then how much influence is that having on the deals you are working on right now. I assume it’s relatively significant?

Yeah. Hi, George. Good to talk to you it’s been a while. Yeah. Now as far as the software modules are concerned, it’s not just mobility, but a lot of it is mobility. I understand what you are saying this is what it does as far as how we analyze Agilysys, right? We have so far we have focused a lot on the number of rooms and the number of terminal endpoints. Those are still important right. Those are still reasonable indicators of how we are growing the business. But now what is becoming of even more importance is the fact that the rooms that we have and the terminal points that we support. There is a lot more products to feed into that. So that is definitely increasing the revenue per unit of room and of terminal points because we have a lot more products to feed into that and it’s not just products, these are all software products that are going to drive recurring revenue and all these products are designed to work both on-prem SaaS and of course more and more of the industry now prefer SaaS over on-prem, but some customers want it on-prem the products are designed to support that as well. So at the moment what we are seeing in the month of April and May is basically feeding into the customer base, we already have for the most part. There are also instances we are seeing, like, we are the number of new logo or new customers, we are talking to has increased more than we thought it would in April and May, because these additional modules now become drivers of the core product as well. Well I mean, we need these additional modules to enable social distancing and everything else we need…

Yeah. To add to that just a bit, expansion of the market or expansion of RPU. The way to think about these module is any individual module can add somewhere in the 20% to 50% range of the core product. So for example if the core product is worth $1 or cost a $1, these additional modules individually could add somewhere in the $0.20 to $0.50 range. So if we sell somewhere from two to five of these additional modules, depending on the module you are talking about. We could have double the revenue from that particular unit.

That’s perfect. One other question relative to the concessions you are making as you look at your competitors do you find that they are making similar type concessions. I would have to imagine the hardest call in the world is to call Larry Ellison and to ask for a concession, any perspective?

Yeah. I mean, we only know it through customers and some of the friends we have even in our computing companies. I think to be honest with you George, everyone is making an honest attempt, our peer, our competitors and everyone else is doing the best to help. So we got to give them credit for that. I think each company is doing its best to help, because the hospitality industry is badly affected. And we all owe it to our customers to do the best we can. And there are limits to how much we can do as well. We have not that big companies, but I think George, I think each of the competitor is trying to help in their own way. I think the concessions are similar, but not the same, but I think everyone is trying to help, George.

Perfect. Thank you.

Thanks, George.

Thank you. Our next question comes from the line of Tyler Wood from Northland Securities. Your question, please.

Thank you. I will just build off of George’s last question kind of on the competitive environment, when you think about the longer term impact on kind of the competitive dynamics -- in all these changes that are happening in the last few months. How are you guys kind of positioning yourself there and what do you expect some of the lasting changes to be competitively from all this? Thank you.

Yeah. So, hi, Tyler. Good to talk to you. So, basically, Tyler, following up on George’s question the one-time concessions it’s just the right thing to do right. That is not about building competitive positioning or anything like that. It is just the right thing to do for customers and all of us hospitality vendors are trying to do the best. But in terms of where we feel we are gaining in terms of competitive positioning is our continuing investments in product innovation and in customer service and also I think where the greatest advantage is building up for us is in the fact in terms of an end-to-end provider. So you take the POS, PMS and inventory procurement products and then all the additional modules we are adding to it. So in terms of helping a customer manage the entire guest journey from the time they do the reservations in a direct channel zero commission website. All the way through the check-in process where they can check in without going to the reception desk, all the way through how they manage themselves within a room where there is easy communication or what they require in the room, all the way through when they go to a restaurant. So every which way end-to-end, we are enabling the guest journey with modern technology products. So when you think of us as an end-to-end hospitality technology software solutions. That is where the competitive positioning is building because we have some competitors who are pretty strong in POS, PMS, but are not doing the additional modules, like we are doing. They are just pointing to third-party vendors to do it. Then we have another big competitor who is very strong in one of the two areas PMS, POS, but not so much in the other. Then we have a bunch of smaller size competitors who are pretty good in each of the products they do, but don’t have end-to-end solutions. So when you think of where our competitive advantage we feel is increasing and will really be -- will shine once the crisis is over. Is in the fact end-to-end software solutions enabling the entire guest journey, I have a feeling our lead is now increasing Tyler. That’s what I see.

All right. Thanks. That’s helpful. I will get back in the queue.

Thank you, Tyler.

Thank you. [Operator Instructions] Our next question comes from the line of Allen Klee from National Securities. Your question, please.

Yeah. Hi. And any insight on your plans of growing -- of what rate do you plan to grow your or cut your operating expenses for the year?

Allen, hi. This is Tony. How you are doing Allen good to talk to you. As we made commentary on the call, we are not giving full year guidance for any aspect of the P&L. The one thing that you can keep in mind though is that we have indicated. We could have revenue in the first quarter, that’s down as much as 35% from last Q1. And at the same time, if we do realize that type of revenue our adjusted EBITDA for the first quarter would be about breakeven and then from that point forward. We expect revenue to go up and adjusted EBITDA would go up from there as well. So while we are not giving specific guidance on operating expense, line items or any other aspects of the P&L, you can make some assumptions. And that’s how -- I would build the model.

Okay. Thank you.

Absolutely. Thank you, Allen.

Thanks Allen.

Thank you. Our next question comes from the line of Ishfaque Faruk from Sidoti & Company. Your question, please.

Hi. Good afternoon, guys. A couple of questions from me. First of all, Ramesh, you said you are seeing a lot more deals still closing in April and May. And also you also briefly touched on some of your social distancing products. Are you seeing, like much more interest in some of your products that cater to that like rGuest Seat, rGuest Express is that’s what’s happening now in this new environment?

Yeah. Hi Ishfaque. Good to talk to you. So just to be clear Ishfaque about my comments earlier the sales activity in terms of number of demos and all that during April and May has surprised even us. It is almost double what we did in January, February, and we didn’t expect this much sales activity in April/ May. I mean given the circumstances, the sales activity has increased however, the closure of agreements reaching a decision those are definitely delayed. So a lot of customers are kicking the tires, but the rate at which sales is closing is definitely fallen and March, April and May is much lower, which is why we are projecting Q1 will be a 35% decline on all that one-time concessions is part of the reason. But the part of the reason, also is the fact that the business and sales levels are declining. The activity is there, everyone is intrigued -- everyone like we held two webinars to explain the products and hundreds of customer users attended them one on the 14 and one earlier today. So there is a lot of interest, but the rate at which deals are getting closed. It’s still quite slow because everybody is making plans to reopen and they are being very circumspect with how they sign deals. So I want to be clear about that distinction that is number one.

Yes.

And the interest is definitely in the products that enable them to provide their guests with safety and comfort. So yes rGuest Express is definitely part of it, the mobile both the rGuest Express Mobile and the kiosk are definitely part of it. But probably the biggest ones, we are seeing is an on-demand of which is an extension of our POS product set, which enables you to remote order and either pick up or it connects to a delivery mechanism or delivery company that can deliver it to you. There is great interest in that. Then we recently introduced the Authorize product basically, when you get an F&B receipt you can scan a QR code that’s on the receipt and pretty much pay for it through your mobile phone itself, which is the best form of paying table we can provide. There’s a lot of interest in that and there is a lot of interest in seat like you mentioned because that helps you plan out when you want to book like when you -- for example if you want to keep every alternate cabana occupied. You have a way of managing that and not just cabana even a lounge chair, you can create a reservation system thereby which you make sure every alternate a lounge chair is occupied there are a lots of different things you can do with seat. The current interest is definitely in those kinds of products. You are right, but it is having a drag on effect on our core product as well. There is a reflected effect on the core products as well, because we are so well integrated with all.

Got it. Got it. That’s very helpful, Ramesh. And also on the professional services segment, Tony, you briefly touched on that that you know and around the end of March, professional services, sort of came to -- activity declined significantly. But are you seeing some pickup in maybe mid-May or any other color on professional services segment for your first fiscal quarter?

Yeah. The slowdown in March was quite significant because of travel restrictions and obviously -- almost all the sites are getting closed. So there was a lot of cancellations. So there where we had our personnel ready to go to customer sites and we were amazed that some of the go lives even the implementations even happen there was one towards the end of March in Memphis, which was even surprising to us. So but more or less everything did slowed down in March and that did affect services revenue in March, no question about it and April was quite bad where April we didn’t have too many implementations going on, we had the implementations, but much, much reduced level and what we have noticed in the last three weeks is things are picking up. Every week, the amount of services bookings has increased over the prior week in the last three weeks or so. So we are seeing definite signs of picking up, but in our Q1 results, you should expect a significant decline in services revenue, because we were working at record levels before and services. The number of implementations we were doing was at record levels. So Q1 is definitely going to be a slowdown. So the 35% decrease in revenue we talked about, you should expect a lot of that right to be in services. But in the last three weeks or so we are seeing every sign of it picking up, and our services personnel are getting booked and in fact June is pretty much getting close to getting fully booked now. We are seeing improvements there, but unfortunately for Q1 Ishfaque it’s too late it is going to…

Yeah. Absolutely. That’s very, very helpful, Ramesh. Thank you so much.

Thank you, Ishfaque.

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Ramesh Srinivasan for any further remarks.

Thank you, Jonathan. Thank you all for joining us on the call today and for your continued interest and support. Agilysys continues to be well positioned to increase shareholder value. This is a great value creation opportunity. We are determined to make good on for our employees, customers and shareholders. I also want to take this opportunity to give a special thanks to all our team members all across the globe who have been working very hard, who have been very brave through all these circumstances and we are working hard every day to make Agilysys a world-class company. And of course, to our customers and all our investors who trust us with their investments, more now than ever before. Thank you.

Thank you, ladies and gentlemen for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.