AGILYSYS INC Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Sales: Fiscal 2025 Q3 was the third highest sales quarter ever, with the best October-December sales quarter. Despite POS sales coming in below expectations, there are significant near-term POS sales opportunities.
• Revenue and Profitability: Q3 revenue was a record $69.6 million, 14.9% higher y-o-y. Product revenue challenged by cloud shift and POS sales. Services revenue up 13.5% y-o-y but affected by project phase. Recurring revenue at record levels.
• Transformation: Successful product modernization with near 100% success rate. POS implementations using modernized versions going well. PMS transformation simpler than POS.
• Pipeline: Demo plus sales pipeline at record level, 20% higher y-o-y as of December end, with PMS pipeline 37% higher y-o-y and POS pipeline 22% higher y-o-y.

Segment Performance

• POS and Related Products: Sales in Q3 were below expectations compared to Q2, better than Q1. Fiscal 2025 sales and revenue fell short due to disappointing POS sales in managed food services. POS sales are expected to return to normal and improve.
• PMS and Related Modules: Excluding Book4Time, sales of PMS and related modules in Q3 2025 were 70% higher than the comparable prior year quarter. Fiscal 2025 is a record sales year for PMS and related modules, 33% higher than the previous best full year.
• Recurring Revenue: Fiscal 2025 Q3 recurring revenue was a record $44.4 million, 26.4% higher than the prior year period. Subscription revenue was a record $28.3 million, 45.1% higher y-o-y, making up 63.8% of total recurring revenue.

Guidance

• Full fiscal 2025 total revenue expected $273 million.
• Subscription growth expected to be at least 38%.
• Product revenue challenges expected to continue in the near term, while services revenue is expected to grow along a more realistic path.
• POS sales expected to return to normal and improve in the coming quarters.

Risks

• POS sales challenges in the managed food services vertical have impacted fiscal 2025 sales and revenue.
• International sales levels remained disappointing, dependent on a few significant sales opportunities.
• The transition from old to new technology was more challenging than expected for POS, causing delays in sales and revenue expectations.

Q: George Sutton asked about the development process of the major project, scope changes, and test/pilot phases.

A: Ramesh Srinivasan responded that the project is going well with no major scope changes, moving into ecosystem and system performance testing, with test properties and pilot sites expected in the second half of 2025.

Q: Sam Salvas inquired about confidence in POS sales improving and details on new subscription logos.

A: Ramesh Srinivasan stated confidence based on current pipeline, with significant POS sales opportunities, and mentioned new subscription logos involved both POS and PMS, averaging 6 products per customer.

Q: Brian Schwartz asked about POS sales weakness and go-to-market focus for new customers.

A: Ramesh Srinivasan said POS weakness was mostly in managed food services, and the focus is on full territory coverage and expanding the sales team for new customer acquisition.

Q: Nehal Chokshi asked about PMS sales growth, pipeline, and TAM expansion.

A: Ramesh Srinivasan noted PMS sales in Q3 2025 were 70% higher y-o-y, pipeline for PMS 37% higher y-o-y, and TAM expansion by including add-on modules.