Good day, ladies and gentlemen, and welcome to the Agilysys 2025 Fourth Quarter and Full Fiscal Year Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's conference is being recorded. 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, Carmen, and good afternoon, everybody. Thank you for joining the Agilysys' 2025 fourth quarter and full fiscal year 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 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 the impact macroeconomic factors may have on the overall business environment, 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 Commission. As a reminder, any references to record financial or 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. With that, I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and CEO of Agilisys. Ramesh, please go ahead.

Thank you, Jess. Good evening. Welcome to the fiscal 2025 fourth quarter and full year earnings call. Joining Jess and me on the call today at our Alpharetta, Atlanta headquarters is Dave Wood, our CFO. Let me cover sales first before moving to revenue and other details. Please note that all our sales and selling success related values are measured in annual contract value terms. Please also note that all the sales values reported in this narrative, including subscription and services sales, do not include anything from the Marriott Property Management System, PMS project that we continue to make good progress with and remains on the planned trajectory. Further, all the fiscal year 2026 guidance and other future projection numbers and narratives assume no material subscription revenue from this project. Fiscal 2025, the year that ended March 2025 was a record global sales year overall and a record year for practically every sales vertical other than managed food services. It was a record sales year for international regions, gaming casinos, hotels and resorts, and overall North America domestic sales. Across product categories, it was a record sales year by a significant distance for subscription SaaS software and services. Full fiscal year 2025 was also a record sales year for PMS and PMS related add-on modules, excluding Book4Time sales, 58% higher than the previous best year. We continue to make great progress on the PMS side of our business. Overall, the January through March period, fourth quarter of fiscal 2025 was our best sales quarter ever. With respect to point-of-sale, POS sales, fiscal 2025 Q4 was the best quarter of the fiscal year, 27% higher than the sequentially preceding Q3 and 16% higher than the previous highest Q2 quarter. Q4 was also the best sales quarter of the year for sales…

Thank you, Ramesh. Taking a look at our financial results, beginning with the income statement, fourth quarter fiscal 2025 revenue was a quarterly record of $74.3 million, a 19.4% increase from total net revenue of $62.2 million in the comparable prior year period. One-time revenue consisting of product and professional services was up 9.5% over the prior year quarter, while recurring revenue was up 26.3% over the prior year quarter. As a result of the continued momentum in our business, we are pleased to see 16.1% of total revenue growth compared to fiscal year 2024. During fiscal 2025, compared to the previous year, professional services increased by 27.7%, and recurring revenue increased 23.2%. Overall, FY ‘25 came with its share of operational challenges as we continued to implement and transition to the new products. However, sales of these new solutions during the year performed well, especially in Q4, with record sales levels to end the year. It was nice to see our POS sales back to healthy levels during fiscal Q4 FY ‘25, up 23% over the prior year Q4 FY ‘24 and 28% over the sequential prior quarter. We are confident we have now moved past the volatility in POS sales and expect to see continued POS growth moving forward. Professional services and subscription sales exited the year at record levels as well. As such, we are exiting the year with a materially larger backlog, up 26% over fiscal year 2024 exit. Professional services increased 21.7% over the prior year quarter to a record $17.8 million. Despite the record professional services revenue, our services backlog increased and remained at record levels on the back of record services sales during the quarter and fiscal year. Total recurring revenue represented 62.2% of total net revenue for the fiscal fourth quarter and…

Thank you, Dave. In summary, the last few years of this massive business transformation phase have been difficult to state it mildly. All such massive transformations are difficult to accomplish, while keeping the business not just running but also growing with improving profitability levels. Carrying customers along the path of a generational change in how POS and PMS systems are run has worked out well by any reasonable measure, but the process has not been without its challenges. Despite all the difficult challenges managing a couple of revenue J-curves and other quantum leap progress steps, in the three years since fiscal year ended March 2022, we have increased annual revenue by $113 million, or 70% and subscription revenue by $60 million, or 130%. So, let me repeat that. In the last three years, since March 2022, we've increased annual revenue by $113 million or 70% and subscription revenue by $60 million or 130%, and we are only getting started now. For much of the hospitality industry, we are still a story that is hiding in plain sight, especially in international regions, which is unfortunate, but okay. It gives us a solid good growth path ahead. During the recent six months, we have significantly expanded our sales teams, especially in the hotels and resorts vertical, and expanded the services teams, attracting leadership, sales, and other talent from other highly rated hospitality technology providers, had 1,300 plus installations in the field featuring only the modernized solutions, and discount is rapidly expanding, carrying with it the unmistakable message that this is not your grandfathers or fathers Agilysys anymore. And we are now a hospitality technology force that has to be reckoned with. An increasing number of hospitality corporations are now seeing in us the kind of end-to-end ecosystem technology provider with true modern and connected solutions they have always wanted, and we are well-positioned for a bright future. It is tough not to be bullish about our future prospects. With that, Carmen, let's open up the call for questions, please.

Thank you so much. [Operator Instructions] And give one moment for our first question. And it comes from Stephen Sheldon with William Blair. Please proceed.

Hey. Thanks for taking my questions. Just first one here on the POS bookings. It sounds like you saw much more success there this quarter, including, I think you noted, a pickup in the managed food service vertical. So, just curious what you attribute that to. How much is being driven by better execution or improvement with specific customers, versus how much is just generally a better backdrop, if at all?

Yeah. Hi, Steven. I would say, the improvement is because, for the last year or so, just short of a year, we've only been installing the newer version. Now the newer version is not only fully modernized, Steve, but is also completely unified, meaning guest facing and staff facing feature sets are now on one unified POS platform. And we are about the only vendor, only major vendor in this industry that provides a unified platform. So, modernized and unified is a lot easier to implement. And those are the only implementations we are doing for the most part for the last year or so. And that is now improving our status as a premium POS provider, and we are now the wanted product. What happened before that was, it got a little bit complicated because we were trying to transform from old to new, and a lot of the implementations became a combination of old and new, and these are two generations of technologies. So, I think we have turned the corner now. The Q4 momentum is not going to be a one-time thing. It is going to continue now. And hands down, these are the best -- this is the best POS platform out in the field now, and we expect this momentum to continue.

Got it. That's good to hear. On the implementation side, can you just update us on the mix of customers using Agilisys implementation teams versus using third-party support from SIs, etc.? Do you expect that mix to evolve at all over time, and is that playing at all into -- I think, Dave, you mentioned, 5% to 10% expected revenue growth for professional services this year, or in fiscal 2026, is that playing into that guidance at all?

I don't think so, Steve. Most of our implementations are done by our teams because these are complex implementations, and you have a 1,500 person R&D team that is driving innovation forward. So, in terms of keeping even our own teams trained and up to speed on the newer versions is not easy. It's very difficult doing it for external SIs. So, our implementations, for the most part are done by our teams. Now, the 5% to 10% growth has to do with the fact that part of our services revenue, we have customer-paid R&D efforts as well. And as we become bigger, these customer paid R&D efforts will be there, based on my experience of three decades in enterprise software, but they can't be predicted quarter-to-quarter. So, this is normal services revenue growth that we are seeing, but we do it with our own resources. In this kind of complex enterprise software business, it is not easy handing things over to external SIs.

Got it. That makes sense. And then just one last one for me. Just curious, with the 2026 guidance, for subscription revenue in particular, what does that imply for organic subscription revenue growth? I think just roughly ballparking it, we're calculating high teens. Is that right? And just any sense on what you baked in for organic growth on the subscription side between POS and PMS solutions? Any additional context there would be helpful.

Yeah. So, we typically don't break out the point-of-sale and property management subscription growth. I meant, I think we're at a point where they're both, as Ramesh has talked a lot about, both products are ready and we're kind of past the point-of-sale challenges. I mean, we certainly expect PMS to be a higher growth percentage because it's coming from a lower base. But point-of-sale is back to growing in line with where it's grown in the past. But to answer your question, I mean, the 25% growth includes about four months of benefit from the Book4Time acquisition. So, we would be in the closer to the 22%, 23% range. We wouldn't be in the teens from an organic standpoint.

Okay. Great. Thank you.

Thank you. Our next question comes from the line of Sam Salvas with Needham and Company. Please proceed.

Hey. Thanks, guys. I'm just jumping on for Mayank tonight. Good to see the nice results here. I wanted to touch on the momentum you're seeing in add-on sales. Could you guys talk about what's driving the improvement here, and also maybe talk about which products you're seeing the strongest adoption rates.

Yes. Hi, Sam. So, in terms of add-on modules, they add a lot of value to the core product. So, no one else has really invested this much in hospitality software to create an ecosystem of products. And in general, the add-on modules add a lot of value on the PMS side, more value on the PMS side than the POS side, just because of the sheer number of add-on modules that are there, about four, five times more add-on modules on PMS than POS. So, together, it has created now an ecosystem that customers can put to good use. So, a customer can either buy it from seven or eight different vendors or they can buy it from one vendor. You buy it from one vendor, it comes with a lot of advantages. Like, there have been some implementations recently, Sam, where the customer needed a quick change to be done but it involved three different products. And we could get the changes done in all the three different products. One of them is core PMS, and two of them are add-on modules of PMS. We could get all of that done in the next couple of months. Those all bring huge value to customers. So, more and more customers are buying this ecosystem, connected modules. And these add-on modules get us good margins and together, are even more valuable than the core products for us. So, to answer your question, most of the PMS add-on modules are adding great value to our bookings. And on the POS side, the add-on modules make it a unified architecture. So, it is now a unified POS platform, and that by itself has great value. So, yes, the add-on modules are big contributors to our bookings momentum now.

Okay. That's helpful. And then just a quick one, Dave, I was wondering, just on the '26 guide, you gave some good commentary across the revenue streams. And I know you guys are excluding the big PMS rollout, but is there anything you could give us in terms of the quarterly cadence and anything we should be mindful of outside of the acquisition, of course, in terms of either the revenue cadence or margins?

Yes. So, on the revenue cadence, I mean, everything will be pretty similar to what you've seen in the past. I mean, products and professional services could nominally go up or down on a given quarter, like you would expect with one-time revenue. And then on the recurring revenue, it's kind of similar to what you would expect. I mean, the numbers are just obviously getting a little bit bigger, and so there's likely a $1.3 million to $1.6 million sequential increase a quarter, is pretty much how the revenue is laying out. And then on the profitability side, I mean, I think we're still in a bit of a transition year, so there's not going to be a ton of operating leverage in OpEx. You'll see some in -- G&A will probably show a little bit of operating leverage, but that'll likely be offset by sales and marketing just due to timing of some events that fell this calendar year -- or fiscal year versus last calendar year. So, pretty much I mean similar to what you've seen in the past with recurring being the biggest driver, and one-time revenue will tick up and down on a quarterly basis.

Yes. Okay. All right. Thanks, guys.

Thank you, Sam.

Thank you. Our next question comes from Brian Schwartz with Oppenheimer. Please proceed.

Thank you for taking my questions this afternoon. Ramesh, in terms of the POS business and kind of the modernizing of the install base, is there anything that you can do internally to accelerate the migrations of maybe your larger legacy POS customers to the newer cloud model? And then I have a follow-up.

Yes. So -- hi, Brian. So, in terms of the conversions, Brian, please keep in mind, many of the older customers are also on a subscription revenue basis. They are also in SaaS. So, just because they're in an older platform doesn't necessarily mean they are on-premises. And many of them who are on-premises, even when they move to our modern solutions, might choose to be on the on-premises again. So, this is not so much in our hands. All of them are now aware that this is a modernized unified platform. All of them are keen to move towards the new platform, but it will be in their timelines. And many of those customers, when they move to the new platform, might use that as an event to move from on-premises to cloud. All those are possible. But the customers control the timelines, Brian. Beyond a point, we cannot force them into the new POS platforms. But one good thing we are doing is when a customer comes with a request of some major enhancement request that they have on the older platform, we are telling them, sorry customer, to get that enhancement, you have to move to the newer platforms. So, that is beginning to happen. So, we are doing less and less changes on the older versions. And that, by the way, helps our R&D be more effective as well because we are reducing our investments on the older platforms and increasing it on the newer ones. So, we are doing a lot of things that push customers along this curve, and newer installs are only done on the newer ones. So, all that is going on. But beyond a point, we can't push customers, Brian. We are, by nature, a customer-centric organization. So, we have to let customers work out their pace. But they are now accelerating. More and more customers are converting, and more and more of them are converting to cloud as well. All that is happening, but we can't force a greater pace, Brian, I don't think so.

Thank you. And then the follow-up question, Ramesh, I wanted to just ask you on maybe what the early readings are with the beta testing with Marriott. Realizing we don't have any financial guidance there, but what are you seeing among these early beta testers? Is the value that's being created, is it achieving goals? Is there anything else that you can just share with us, qualitatively, on how the beta testing program is going on over at that large PMS opportunity? Thanks.

Yes. So -- yes, so no change from our previous updates, Brian. The testing is going well. This is a transformational project, Brian. This is a difficult project for the customer. It involves multiple vendors, and they are transforming the entire face of what their users in their hotels use, and it's gone remarkably well so far. The deep testing, they are now deep into testing, and the testing is going well, but the test properties have not yet started. We are getting close to a few test properties getting installed. But one thing I will tell you, there was a recent conference that involved a lot of their property personnel, senior personnel from their properties, and all these products, including our PMS product, were shown there, and the feedback was remarkably good. So, there is excitement among their properties. They have waited for this technology transformation for quite a long time. So, all signals are good so far. The ecosystem testing, the end-to-end testing involving products across multiple vendors, all that is going well, and now their testing is moving to the beta testing that you are talking about of test properties. So, so far, so good, Brian. We should feel positive about this project. Always keep in mind, it's a very complex transformational technology project, so it is always good to be cautiously optimistic about it, but so far, so good, Brian.

And then the one question I have for Dave is, in terms of the line item guidance, specifically with the product line items, is there any way of how -- to share how you're thinking about that say over a multi-year period? Clearly the comps are going to be easier on that line this year, but do you think that that business has stabilized and sustaining, just growth in general is achievable for the products line? Thanks.

Yes. No, we think -- I mean, I think we talk about it a lot during fiscal year '25 where that was kind of resetting with the less -- the lesser attach rate on the new modernized solution, so we feel like that line is stabilized, and it's probably not going to grow with top-line in the out years, but we do look at it as kind of a, in the call it medium term, a single-digit type grower.

Thank you for taking my questions.

Thank you, Brian.

Thank you. [Operator Instructions] The last question I see is from Nehal Chokshi with Northland Capital Markets. Please proceed.

Yes. Thank you, and good to hear that point of sales has turned a pipe -- has turned a corner here. Ramesh, you talked about the demo plus pipeline, I think second quarter in a row. I think in the December quarter, you said it was up 22% year-over-year, and I believe you said it was up 18% year-over-year for the March quarter. So, is this a 20% or so growth rate at which demo plus pipeline -- is that the right rate to be thinking about that -- how that pipeline should be growing going forward?

At the moment, Nehal, yes. In the -- as things stand now, assuming a 20% steady growth in the pipeline is a good thing to assume, but I'm optimistic that it will improve. One of the reasons is, things are improving internationally for us, especially among the multi-amenity, higher-end resorts. There is less and less competition because we have invested and created an ecosystem of products that our competition just hasn't. They -- I mean, they -- it is not much more complicated than that because when you want a fully connected system and you are running a multi-amenity resort, there are not that many players out there. So, that's one reason why I'm offering sales pipeline will increase. And also in the all-important hotels and resorts sales vertical, Nehal, we have significantly expanded the sales team size in two ways. Number one, a lot of recent hiring in the last five, six months and also now the Book4Time sales team is selling all the Agilysys products as well. So, that process has also started. So, you add those two together, a majority, right, more than half of the hotel resorts sales team now has started selling the product only in the last three to six months, all the Agilysys products. So, that should contribute to increasing pipeline in the hotels and resorts sector which is our biggest sector, biggest sales vertical now. And also we are turning the corner with FSM, right, Managed Food Service Providers or Food Service Management is really turning the corner since we have turned the corner with POS. Now they are taking a serious look at our POS as well. So, all these things together, Nehal, the current expectation would be 20% growth in sales pipeline, but I'm optimistic that will start improving soon.

Okay. And then I believe that you guys have a target model for subscription growth of 25% to 30%. So, A, is that target model still applicable? And then B, how does pipeline plus growth of 20%, flip with subscription growth of 25% to 30% on an organic basis, presumably?

Yes. The sales pipeline 20% is all across the board, right? But that is just sales opportunities that we are working on, Nehal. Within that, the win ratio continues to improve. So, the sales pipeline being 20% is no indication that the subscription revenue growth will only be that much. Subscription revenue growth could be more than that. So, I wouldn't equate the two exactly, but I understand your point. But for FY ‘26, our guidance is, the subscription revenue growth we expect to be 25%.

Okay. And then if I may speak one more, a couple more actually, sorry. So, I understand, and it's actually consistent with my thinking that Marriott is excluded from fiscal year '26. But given commentary that the development phase appeared to have largely finished back in the September quarter, which would be fiscal third quarter, can you just walk us through the rationale on why exclude that from the fiscal year '26 guidance?

Yes. I mean, most of it is -- I mean, we'll enter the rollout phase, but it won't be overly material to the P&L as we work through pilots. And so, once we hit the mass rollout, it probably makes more sense to update the guidance or give the guidance in next year's results. But it's mostly just because it's not overly material because we'll be -- even though we'll get into the rollout, we'll still be in the pilot phase of the rollout.

And it's a big transformation project, Nehal. So, plus or minus a few months -- I mean, this well, these kinds of big technology transformation projects, plus or minus a few months, it is just tough to predict, right? But the good news is it's going well now. We are close to getting the test properties, and then we'll see how it goes, right? We will see how it goes. But it's not -- I mean, we provide our guidance based on what we see and what is reasonably predictable. We just cannot include this now, and plus or minus a few months, it could go either way, right? We just don't know yet.

Yes. Understood. And then my final question is that, given projecting EBITDA margin being flattish fiscal year '25 to fiscal year '26, that implies OpEx will grow about 14% year-over-year. So, is that enough to ensure that even your pipeline, your demo plus pipeline, grows about 20% per year here?

Yes. I mean, we think of it on a percentage of revenue basis. And pretty much, I mean, sales and marketing will go up just a tick in fiscal year '26, mostly just due to timing of events. We had a user conference in May instead of March. And like you've seen the last couple of years, we'll continue to see operating leverage in the G&A line on a percentage of revenue basis. And then R&D, it'll stay reasonably flat this year because, I mean, as we talked a lot about, we're still carrying multiple R&D teams as we continue through the transformation of old products to new products and until we start the large PMS rollout. So, it's really on a percentage of revenue. It's going to be kind of similar to what you've seen in the past with maybe sales and marketing going up a little bit.

And Nehal, when you're thinking of the 14% and the revenue growth and all that, keep in mind, a lot of the expansion has happened. R&D over the years, we have expanded it quite a bit. We recently went through a big expansion of services and sales. So, we have sort of set ourselves up for future growth now.

Got it. Okay. Thank you very much. Great job.

Thank you, Nehal.

Thank you. And we have a question from the line of George Sutton with Craig-Hallum. Please proceed.

Thank you. Ramesh, you talked a lot about international and the opportunity there. I'm wondering if you could just talk about what your white space is. How significant do you think international could be for you?

As these -- Hi, George. As these newer modernized versions settle down, George, international is a huge growth area for us. We are seeing more sales opportunities than ever before, but still not great, right? It is at the moment progressing well, but not great. And we are still dependent on big home run kind of wins. The one very positive sign with international is that current customers are spending a lot more with us now because now they have new products they can invest on than ever before. So, the current customers are spending more with us. We have more reference customers that we are building up now. So, it's progressing well, but that exponential curve has not yet taken off, George. But I think your first question is a massive growth area for us. And the products are now there. Now it is a matter of spreading ourselves there.

Thank you. And then just lastly on Book4Time, because a lot of the presentations you gave were ex-Book4Time. Can you just give us a sense of how that acquisition has gone?

That acquisition has gone very well, George. Thank you for asking. We are very happy with the acquisition. The best way I would express it is given a chance we would do it again without a doubt. Great people added tremendous talent value to the team, good product, a very respected, well-regarded brand name, global reach. So, every aspect of the Book4Time business, the sales and implementations of the Book4Time product, the spa product is going very well. That continues to do very well. And the cross-selling piece is beginning to take shape now. We always thought it would make a difference in FY ‘26. And I think it is going to make a reasonable difference in FY ’26, which was the plan all along. So, we have expanded the hotel resort sales team by a significant number in the last five, six months. Now the Book4Time sales team is also part of the hotel resort sales team. So, all that adds considerable strength to selling there. So, all around, the Book4Time itself is an excellent acquisition. We are very happy with it. Now, Book4Time sales team contributing to selling all the Agilysys product, that process is just getting started now. And we think we'll do well in fiscal '26.

Perfect. Thank you very much.

Thank you, George. Appreciate it.

And as I see no further questions in queue, I will conclude the Q&A session and turn it back to Ramesh Srinivasan for closing remarks.

Thank you, Carmen. Thank you all for participating and for your interest and support. We look forward to talking to you again in a couple of months from now, towards the end of July, when we will be reporting on fiscal 2026 Q1 results. Thank you.

And thank you all for participating in today's conference. You may now disconnect.