Thank you, Latif, and good afternoon, everybody. Thank you for joining the Agilysys 2027 second 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 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 increased guidance levels, continue to improve profitability levels, the company's ability to maintain sales momentum, utilize AI to continue to increase competitive advantages, 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 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.

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.

Welcome to the fiscal 2027 second quarter earnings call. Joining Jess and me on the call today at our Atlanta, Alpharetta headquarters is Dave Wood, CFO.

Before we get started, just a quick note that I've been on the road traveling quite a bit during the recent several weeks, visiting customers and for other business purposes, and fell sick a few days ago while in Austin, Texas before I got to Atlanta. Apologies for my very scratchy throat and voice today.

Let me start with sales. We continue to measure sales and selling success in annual contract value terms, and continue to exclude subscription numbers pertaining to the Marriott PMS project from each of the general business update numbers, including sales, backlog, and cumulative value of ARR, annual recurring revenue, implemented during the quarter.

They are included, of course, in all our usual revenue and overall financial results. Fiscal 2027 second quarter was our best-ever Q2, July to September period of sales, following Q1, which was the best-ever Q1, April to June, sales period.

Sales levels during the quarter were good across the various sales verticals, especially in hotels and resorts. This was the best quarter on record by a fair distance for sales in the domestic HRC, hotels, resorts, and cruise ships vertical.

The sales highlight of the quarter was a major seven-figure-on-steroids, multi-property, competitive replacement win in the HRC resorts space, featuring property management system, PMS, inventory procurement for food and beverage, and as many as 15, 1 5, as many as 15 additional software modules. Happy to see our ongoing sales and marketing growth-driving investments in the HRC hotels and resorts area beginning to result in such large-scale wins on a regular basis now, and making this quarter the highest ever for domestic HRC sales, about 23% higher than the previous highest HRC sales quarter recorded a little more than 2 years ago.

Looking at sales levels during the second quarter of fiscal 2027 compared to the second quarter last fiscal year, sales pertaining to the domestic HRC vertical was up 33%. Domestic Foodservice Management, FSM, sales were up 42%.

The modernized and unified POS platform continues to perform well in the field, driving POS sales up across several sales verticals, especially in FSM, which for all practical purposes is a POS-only vertical. Asia-Pacific sales were up 47% year-over-year during the second quarter, showing continued sales momentum in the APAC region following a record Q1.

Fiscal 2027 Q2 property management system, PMS, product sales, including add-on modules, were also an all-time best record. This is, of course, without counting anything from the ongoing large PMS project.

Overall business momentum continues to be impressively good, fueled by increasing sales levels, which are, in turn, being driven by the growing product ecosystem superiority and our steadfast focus on the hospitality industry with no distractions whatsoever. Our product ecosystem competitive advantage continues to widen over time.

The modernized set of interconnected software solutions has now been in the field for a few years, and we continue to grow the number of reference customers who have converted from our older technology solutions or from competitive ones. Several such customers now have excellent return on software investment stories to share with the industry.

Considering we're operating in a total addressable market that is far larger than our current size, the growing competitive superiority of the product ecosystem should continue to drive a long, extensive growth path for us. During Q2 fiscal 2027, July to September, we added 14, 1 4, 14 new customers, excluding Book4Time spa, and 24 including Book4Time, and all of them were subscription-based sales agreements.

These 14 new customer sales wins included an average of 5.6 products per deal. New PMS customers continued to invest in the multi-product ecosystem from day one of their partnership with us.

New customer deals featured an average of 9.3 products per deal when PMS was part of the purchase suite. We also added 83 new sites, which did not have any of our products before, but the parent company was already our customer, not including any of the hundreds of Marriott sites currently installing our PMS product.

Of the 107 new properties added during the quarter across new and current customers, 104 were either partially or fully subscription-based. In addition, there were 119, that is 1 1 9, 119 instances of selling additional products to properties already running at least one of our products.

This is the fourth consecutive quarter of the number of instances of such new product sales to current customer properties exceeding the 100 mark, our longest such streak. These 119 instances of new product sales involved a total of 331 new products sold, just shy of the previous highest quarter numbers.

The average of 2.8 products per new product sales agreement this quarter is the highest on record. All this data continues to confirm the thesis that nothing drives enterprise software revenue performance like true, meaningful, sustained product innovation, which creates real value for customers and their guests.

Our investments in R&D, now further fueled by AI-driven productivity and quality improvements, are continuing to provide great reasons for both current and new customers to partner with us, stick with us, and license an increasing number of software modules. In the ultimate analysis, nothing really wins like product innovation.

Before we move on to revenue, three quick updates regarding the Marriott PMS project, GHS acquisition, and progress with AI initiatives. The Marriott PMS project continues to make good progress and remains on plan.

Just as a quick reminder, this is a huge technology transformation undertaking, one of the biggest ever attempted in the hospitality industry, and such big, challenging technology projects cannot be expected to go completely smooth sailing every step of the way. Far, very good.

The tuck-in GHS acquisition completed during the quarter was minor to our revenue and profitability levels, but crucial in a tactical sense for a portion of casino gaming customers. Gaming Hospitality Solutions, GHS, is a 30-year-old software, 3 0, 30-year-old software company specializing in loyalty and offer management primarily for tribal casinos, with the main purpose of connecting a casino's loyalty program to its gas pumps, enabling their guests to earn and redeem points across the casino floor, hotel, restaurants, and fuel stations.

In addition, GHS offers a loyalty promotions module specifically for Royal Caribbean. The primary developer owner of GHS was planning to retire, and we picked up his company as a way to protect the interest of mutual customers, a list that includes about 40, 4 0, includes about 40 tribal gaming casinos and the Royal Caribbean Cruise Line group.

The overall revenue gain from this acquisition during fiscal 2027 will only be a few hundred thousand dollars of maintenance revenue. We continue to make good progress with AI initiatives and with our objective to be the AI leaders in hospitality.

Earlier this year, during the April customer user conference, we announced 30-plus AI-based features, that is 3 0, 30-plus AI-based features, which were in various stages of development, and the creation of a couple of entirely AI-native software modules to round out our product ecosystem. These 30-plus features are distributed across the four pillars of AI-driven usage: agentic AI, multimodal user experiences, guest hyper-personalization, and revenue optimization.

Several of these new features are now in pilot testing at select customer sites, while several others are already in production use. The initial feedback from customers has been positive, and we expect these features to become deeply embedded in the daily operations of hospitality operators.

We are now into the development of the next wave of AI features that go beyond AI-based guest and operational insights, voice, and chat capabilities, going beyond those features into agentic workflow automation and cascading intelligence, which will use demand signals to automate specific workflows to achieve efficient staff scheduling, product inventory levels, connected guest experience offerings, and optimized pricing. Development of a couple of fully AI-native modules, CRS and revenue intelligence that we have recently renamed as Total Revenue Management System, is progressing on plan.

We expect initial beta implementations of these two new modules to happen at customer sites later this fiscal year. The initial versions of both these modules are designed to work only within the boundaries of our product ecosystem.

Now, beyond all that, the most crucial AI-related development project completed during the quarter was the AI common framework, which provides the control center for AI governance, privacy through tokenization of personal information, security, appropriate LLM model selection, value-based usage for each task, monitoring, and auditing. We believe that the best way to achieve widespread traction with use of AI in the hospitality industry is to deliver rich functionality and feature sets that are also token cost sensitive.

We have focused our initial efforts on building a good control framework and infrastructure. Based on our recent extensive participation in various hospitality industry AI conferences, roundtables, and future-looking committees, it does seem like we are leading the industry in the AI journey for hospitality.

The new and modern codebase of each of our software solutions, and the very presence of a product ecosystem that no competitor matches up with today, have allowed us to make AI-based features a seamless part of the product sets compared to others with older codebases and only individual products. The ecosystem presence is becoming an even bigger differentiator in today's AI-everywhere world.

Now on to revenue, profitability, and raising guidance levels. Fiscal 2027 Q2 revenue was a record $93.4 million, the 19th, 1 9, the 19th consecutive record revenue quarter, 17.7%, that is 1 7, 17.7% higher than the comparable prior year period, and 6.5% higher than the sequentially preceding quarter.

Overall revenue during the first half of fiscal 2027, Q1 plus Q2, was $181 million, 16.1%, that is 1 6, 16.1% higher than revenue during the first half of last fiscal year. Fiscal 2027 Q2 recurring revenue grew 22% year-over-year and 7.7% sequentially quarter-over-quarter to a record $62.2 million.

Q2 recurring revenue year-over-year and quarter-over-quarter increases of $11.2 million and $4.4 million, respectively, are both all-time high levels and were driven by increases in subscription revenue. Subscription revenue increased 32.6% year-over-year and 10% sequentially quarter-over-quarter to a record $44.2 million, and now constitutes 71% of total recurring revenue, the first time subscription revenue has been more than 70% of total recurring revenue.

This is now the 20th consecutive quarter of subscription revenue growth of at least 23%. Growing subscription revenue each quarter year-over-year by between 23% and 45% over a period of 5 long years is a remarkable achievement that any enterprise software unit has a right to be proud of.

That requires consistent performance across every operational role. It is not a coincidence that it was around that time 5 years ago when we were at the beginning stages of releasing the completely reengineered and modernized product versions and getting started on the formation of a cloud-native set of hospitality-focused software solutions.

Subscription revenue from POS and POS-related add-on modules grew by 18.4%, that is 1 8, 18.4% year-over-year, while subscription revenue pertaining to PMS and PMS-related modules grew by 53.8%. We expect subscription revenue growth in POS and POS-related modules to remain in the high teens, low 20s percentage levels for the foreseeable future.

Add-on modules across both POS and PMS constitute 34% of total subscription revenue. Fiscal 2027 Q2 was the best quarter on record with respect to the sum of annual recurring revenue, ARR, of all subscription products implemented during the quarter, not including the Marriott PMS installs.

Fiscal 2027 Q2 annual maintenance was also a record $17.9 million, that's 1 7, $17.9 million. The current high subscription revenue growth levels are coming, for the most part, from new incremental installations, and are not dependent on us pressuring customers to convert from their current on-premises installations to the cloud.

Virtually all the modernized software solutions across each current and upcoming product versions are designed to be cloud-native, but can also work equally effectively in on-premises installations if that's the customer preference. When the customer preference is for modern solutions and an on-premises install, we are currently almost the only game in town.

Fiscal 2027 Q2 product revenue, consisting of hardware resold and perpetual software licenses, were just shy of $12 million, the highest level in close to 3 years. Excellent POS sales performance during recent quarters has driven higher hardware shipments during the quarter, and has also driven the current quarter-end product backlog to a level that is 90%, 9 0, 90% higher than at the same time last fiscal year, giving us good visibility for the second half of the fiscal year.

Product revenue during the second half of fiscal 2027 should remain close to the first half level. Fiscal 2027 Q2, July to September, services revenue was $19.2 million, that is 1 9, $19.2 million, 5.3% higher year-over-year.

Contributions to professional services revenue from customer-paid development work continues to decrease to very low levels, and are not expected to be a factor going forward. Implementation services efficiencies continue to increase as the modernized solutions are becoming easier to implement, especially with increasing use of AI tools during the implementation process.

We are now selling more software recurring fees for every dollar of services sold compared to previous years, which is a good business trend that makes us more competitive in price-sensitive deals. We expect professional services revenue to remain around current levels during the second half of the fiscal year and grow steadily in the medium and long term along with overall business expansion.

Given the current strong sales momentum, pace of implementations, and near-record backlog levels, our expectations for full-year 2027 financial results have increased further, and we are raising guidance levels again. We started this fiscal year with a full-year revenue range guidance of $365 million to $370 million and subscription revenue growth expectation of at least 30%, 3 0, of at least 30%, before increasing the respective guidance levels to $368 to $373 million and at least 32% at the end of Q1.

At the end of Q2, we now expect for the full year fiscal 2027 revenue range to be $374 million to $378 million and subscription revenue growth to be at least 34%. Fiscal 2027 Q2 adjusted EBITDA was a record $24.1 million and 25.9% of revenue.

Our first-half profitability performance has done better than our original expectations going into the fiscal year, and we now expect full-year adjusted EBITDA to be 25%, ahead of the previous guidance of 24%. We continue to expect to exit the fiscal year with adjusted EBITDA during Q4 being close to 30% of revenue, that is 3 0, being close to 30% of revenue, though we expect that percentage to be only slightly north of 22% during Q3 due to unfavorable timing of certain costs, including professional fees.

With that, let me hand over the call to Dave for further color on our business operations and financial results. Dave?

Thank you, Ramesh. Taking a look at our financial results, beginning with the income statement, second quarter fiscal 2027 revenue was a quarterly record of $93.4 million, a 17.7% increase from total net revenue of $79.3 million in the comparable prior year period.

Q2 marked another quarter of strong momentum in our business. Sales levels were at a second quarter all-time high, with PMS bookings at record levels.

The backlog, excluding the large rollout, remains at record levels, and revenue continues to pace ahead of our fiscal year FY '27 guidance. Professional services increased 5.3% over the prior year quarter to $19.2 million, which is in line with the financial plan, but slightly lower than Q1 FY '27 due to timing of go-lives.

Professional services backlog increased over last quarter, leaving plenty of visibility into the remainder of the fiscal year. We are pleased to see our professional services gross margins remain above the 30% mark for the third consecutive quarter at 30.9%.

We may see fluctuations on a quarterly basis, but we should be finishing the year over 30% gross margins for professional services. Total recurring revenue represented 66.6% of total net revenue for the fiscal second quarter, compared to 64.3% of total net revenue in the second quarter of fiscal 2026.

As anticipated, recurring revenue is growing as a percentage of total revenue, which will continue to drive up gross margin and profitability levels. Subscription revenue growth was better than expected at 32.6% for the second quarter of fiscal 2027.

Subscription sales and backlog levels, while maintaining low customer churn, have us trending ahead of the FY '27 plan. Moving down the income statement, gross profit was $60.3 million compared to $49 million in the second quarter of fiscal 2026.

Gross profit margin was 64.6% compared to 61.7% in the second quarter of fiscal 2026. Product mix will continue to drive gross margin levels up to the mid-to-high 60% range over the next several years.

Combined, the three main operating expense line items—product development, sales and marketing, and general and administrative expenses, excluding stock-based compensation—were 38.9% of revenue in the fiscal 2027 second quarter, compared to 41.3% of revenue in the prior year quarter. Operating income for Q2 FY '27 of $15.2 million, net income of $13.2 million, and gain per diluted share of 46 cents compares favorably to the prior year gain of $14.1 million, $11.7 million, and 41 cents.

Adjusted net income, normalizing for certain non-cash and non-recurring charges, of $19.1 million is well above adjusted net income of $11.4 million in the prior year, and adjusted diluted earnings per share of 67 cents is well above 40 cents in the prior year period. For the 2027 second quarter, adjusted EBITDA was $24.1 million compared to $16.4 million in the year-ago quarter.

We are pleased to see our profitability levels end up well ahead of the original FY '27 plan, with adjusted EBITDA coming in at 25.9% of revenue for the quarter. Moving to the balance sheet and cash flow statements, cash and marketable securities as of September 30th, 2026, was $137.6 million compared to $116.9 million on March 31st, 2026.

We remain comfortable with our current levels of cash. As it relates to free cash flow, we are pleased to see an increase for the first half of the fiscal year.

Free cash flow in the quarter was $14.8 million compared to $15 million in the prior year quarter. Free cash flow for the first 6 months of FY '27 was $22.1 million compared to $10 million in the first 6 months of FY '26.

Like in previous years, we expect free cash flow to be higher in the second half of fiscal year 2027. Full-year adjusted EBITDA and free cash flow, after normalizing the impact of CapEx, continue to be good proxies for health of the business.

For our fiscal year 2027, we are raising our revenue guidance to be in the $374 to $378 million range. We expect product revenue to remain in the $20 to $22 million range for the second half of the fiscal year.

Professional services started strong and should still grow in the 5% to 10% range. We are again raising our subscription revenue guidance from at least 32% growth to at least 34% growth for the year due to faster deployment of our backlog than anticipated in the previous guidance.

We are also raising our adjusted EBITDA expectations from 24% to 25% of revenue with the strong start to the year in revenue. We still expect to exit FY '27 close to 30% of revenue.

Adjusted EBITDA excludes stock-based compensation, which will continue in the 6% to 7% range for the fiscal year. In closing, Q2 continued the strong start to the fiscal year, leaving us with plenty of visibility into the remainder of the year.

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

Thank you, Dave. The Agilysys success story continues to get better.

This is a story of disciplined growth across both revenue and profitability, driven by sustainable, extensive, and difficult-to-duplicate product innovation. This success story has used no shortcuts, but has been built on top of the tough-to-get-done foundation of a modernized set of software solutions that are based on a combination of modern technology and decades of domain knowledge gathered from thousands of prior implementations, all focused from one industry.

This is a story which only gets further strengthened when technology breakthroughs like AI come along, which helps add another layer of excellence on top of the structure already built on solid, good bedrocks of modern products, deep domain knowledge, an employee and customer-centric culture, and financial discipline. This is a story of organic growth, for the most part, with inorganic growth being used only sparingly to add additional breadth and strength with an opportunistic, conservative, and patient mindset, and only as an addition to strong organic growth.

We are pleased with the fiscal Q2, July to September results, and how well the high performance of sales, product development, and implementation this quarter and during the first half of the year have set us up to achieve our fiscal 2027 full-year goals. To repeat one of our old phrases, our barrier to excellence in hospitality-focused technology is increasing significantly with time.

We are lucky to be operating in a total addressable market that is about 50, 5 0, about 50 times larger than our current size, and we intend to drive home that advantage with complete focus on hospitality and no distractions. This industry is hungry for superior and better interconnected modern technology solutions, and we expect to continue building on our pace of product innovation to be the primary technology partner who satisfies that need.

We continue to see an increase in the number of customer properties seeing tangible, operational, and guest experience improvements directly attributable to our products and services. Our balance sheet remains clean with no debt, giving us the room to remain flexible and agile with future growth opportunities.

We have good reasons to remain bullish about our future business prospects and our ability to bring to bear sustained good increases in shareholder value. With that, Latif, can we please open up the call for questions?

Thank you. Good evening, Ramesh and Dave.

I wanted to start by just asking you a question on the Marriott progress. Ramesh, you shared some thoughts on that, but could you give us a little bit more detail in terms of, is there a way to maybe talk about in terms of how many properties have rolled out, what percentage of rooms have you been able to go live?

Any details that can give us some sense of sort of where you are in that implementation of the Marriott rollout?

Yes, hi, Mayank. The project is going well, Mayank, and we cannot get too much into the details because this is a Marriott project, this is not ours, and it involves multiple vendors.

I think Marriott is going to be coming up with their earnings release pretty soon in a week or so, and it's best to rely on them for the results. We can tell you that well more than 2,000 properties are live, and the project has gone well so far.

Virtually all of the select service properties' implementations have been completed. This major project is going to go through a number of transitions, and now it is going through a transition from pretty much completing the select service properties and then moving on to the full service properties.

Now, in terms of percentage of completion, Mayank, it varies, right, depending on whether you're looking at properties and or rooms or revenue, right? There are different numbers there.

I think we can tell you that we have not yet reached the halfway mark with any of that, whether with properties or with rooms or with revenue, we are not close to the halfway mark.

Got it. That's helpful color.

Thank you for that. Just as a quick follow-up, I'll stay on the Marriott theme.

I was just curious, is it too early to maybe see any progress on their ability to buy add-on modules? Are you there yet, or is that something that you'll see later in the lifecycle of this rollout?

Is there any way to quantify the potential opportunity from the add-on modules that you may be able to sell into Marriott over and above the core PMS, any way to size the opportunity over time?

It's going to be difficult to quantify that, Mayank, but in terms of add-on modules, please keep in mind that that has progressed quite well in the last few years. Even before we acquired Book4Time spa, for instance, the Book4Time spa product was the standard at literally thousands of Marriott properties, so that was already there.

Since this PMS implementation has started, we have made good progress with POS at Marriott properties, and that has continuously increased in pace over the last year or 2 years. That's a huge opportunity ahead of us.

We have not even scratched the surface of implementing POS in Marriott properties, and so that is true of a couple of other big brands as well. Can't put a number on it, but that's a huge opportunity.

We are already the gold standard at Marriott properties, but there are only so many such properties with golf courses. We continue to make progress.

Digital marketing, we have made progress. There are various modules we continue to make progress with that.

Whether with Marriott or with other big brand opportunities, the opportunities are huge in front of us, but can't put a more helpful number for you on that, Mayank.

Great. Understood.

Thank you for that, and congrats on the quarter.

Thank you, Mayank.

Hey, thanks for taking my questions. First one just, maybe for Dave, in the full-year guidance, just curious what you're assuming in terms of sequential subscription revenue growth in 3Q and 4Q.

I guess can you provide any ballpark on what year-over-year exit growth you'd assume in 4Q specifically for subscription revenue? Seems like you guys have a line of sight to a very notable acceleration.

Any detail there would be helpful.

I think Q1, we were about $3.3 million in sequential growth. In Q2, we were about $4 million.

Like we said, it was a good quarter in go-lives. We're expecting a little bit less than the $4 million in go-lives.

For the remainder of the year, call it $3.5 to $3.7 million in go-lives, and that would kind of get you to the at least 34% growth. That would put the exit rate in the kind of 38% to 39% growth rate for subscription.

Again, we could do better than that, but that's kind of how we're thinking about it.

Perfect, that's helpful. Then just as a follow-up on the central reservation system progression, it sounds like that's still on track for beta testing later this fiscal year.

I guess any updates on interest levels you're seeing from hospitality operators and thinking about your CRS, and associated to that, what's your view on Agilysys' opportunity to potentially help hospitality brands support more direct bookings over time as consumer agentic AI functionality, Meta's Muse, etc., continues to expand? Should we be thinking about that as a potential opportunity?

Stephen, I wouldn't get too far ahead of ourselves, but we do have those medium, long-term vision aspects in mind when we started developing the CRS. I don't want to get too ahead of ourselves.

Does it set us up well to handle those kinds of inevitable future possibilities in hospitality? Absolutely yes, having our own CRS, that too, entirely AI-native module, sort of built, I wouldn't call it necessarily the right way, implying the other ones are not the right way, but built with the benefit of hindsight, built during the AI age.

We are building towards all that, Stephen, but we are nowhere close to giving you any kind of an idea on that. Currently, our CRS is only focused to work with our ecosystem, especially our PMS products.

It is created in the AI age, it has taken all that into account, and there is reasonable customer interest. We just finished our customer advisory board meetings, and they're all curious and interested, and there is no shortage of customers of putting up their hand and saying we'd like to be the beta site.

We have all that lined up both for the CRS and for the other total revenue management system we're developing. The beta site interests are there.

We are strictly focused only within our product ecosystem, and then over the next year or two, it is going to be one of the strong products in our product suite.

Great to hear. Thank you.

Thank you, Stephen.

Great. Thank you for taking the question.

Good afternoon. I guess when you look at the momentum you're seeing in the HRC group, curious how much of this you feel like is just getting more shots on goal from the investments you've made around marketing and from the leadership there and the go-to-market team and sort of the additions you made to the team there versus the market just being maybe a little bit more willing to spend these days.

Curious on how you'd sort of stack rank some of the improvements you've seen in the results and what you're attributing that to.

Yes, Matt, to start with both in HRC and FSM, the starting point is our market share was very low. The market share did not do justice to where we were, so that is to start with.

Now we are getting good shots on goal. Not only are we getting shots on goal, but they're pretty good shots on goal because of extended marketing efforts.

Our marketing team is doing a lot better job of unearthing new opportunities. We have expanded the sales team not only in terms of quantity, but also in terms of quality of leadership.

There's one more senior HRC leader who just joined us last month. The team quality and quantity, the number of sales reps have also increased.

Now we have products and we have ecosystem, which is very crucial for hotels and resorts, because they're mostly multi-amenity. They typically have a golf course, they have spa facilities, they deal with group bookings, they've never really had a great loyalty promotions module before, and they want check-in, check-out and processes like that to be through the mobile, a lot more automated.

The needs are there, our product ecosystem is there. We have very low market share in those verticals, and we've increased the sales and marketing investments as well.

All together, I think the shots on goals are increasing now, and they're good, high-quality shots on goal.

All right, very helpful. Then when we look at the customers that you have and sort of what their initiatives are around implementing AI, both internally for sort of their operational side and anything customer-facing, how much is the context and the business-specific data that you're providing on your platform helping you sell some of your AI modules versus customers looking to build some of their own with various coding tools and things of that nature?

Curious on how your ability to monetize what you've developed so far internally is looking like, and ultimately what do you think that looks like over the next 12, 18 months?

I think it continues to help us push our sales levels higher with all the new AI features. Just to break down your question, though, a lot of our customer-driven AI initiatives that they're doing internally have to do with their internal workflows, like even for us, example, we are using AI internally now to improve our workflows within our company that till now we were managing with Excel spreadsheets and manual processes.

AI is coming in very handy to automate those internal processes. That's what a lot of our customers are focused on as far as their AI initiatives are concerned.

Now, as far as core systems, execution systems like ours, like our systems that they're using, they are expecting these systems to contain a lot more AI features to make things easier for their staff and to improve guest experiences, and we are now providing them at a steady pace. We are basically enhancing our products with more AI features that makes it more and more easier for them to improve operational efficiencies and provide a lot better guest experiences.

It falls into two different categories. They do their own internal workflow improvements and improvements in data lakes and all that.

They are looking for technology providers like us to use AI features to improve the products so that it further helps them in terms of improving such operational efficiencies. You've got to put that into two different buckets.

All right, wonderful. Thank you.

Thank you, Matt.

Thank you. Ramesh, you mentioned that you've been to a number of roundtables and conferences and the like, and you're seeing that your AI advantages are increasingly significant.

I wondered if you can just go into a few more details there, what you're seeing competitively, and what has been the customer response. Is this part of why you're seeing the increased shots on goal?

That is one of the reasons, George. Just to be transparent with you, George, I have only attended here and there.

Most of these AI roundtables and future-looking committees and all that, the main participation comes from our Chief Marketing Officer, Frank Pitsikalis, and also supported by our strategy heads, Rohit Kore and Sudarshan Chary. They are the ones representing us in most of these, and they have done a great job so far.

A lot of the keynote speeches and a lot of the keynote presentations, the top 100 CIOs committees that we are participating in all. During that participation, I have to accept the fact, George, we are a little prejudiced, we are obviously prejudiced with the way we are interpreting it, but even beyond that, it seems very clear to us that they are looking to us more and more about what kind of AI-related leadership, AI-related products are we going to be providing to the industry.

More and more, they seem to be looking towards us, is how it feels, and that definitely is one of the reasons why we are seeing increased sales levels, especially in the HRC and FSM verticals. That's how it seems like, because we are looking at the number of conversations we are leading.

We are looking at the number of conferences where they're looking at us to provide the leadership role and to give them context as to what is going on with AI in the industry. That's how it definitely feels to us, George, based on the feedback we are getting from our marketing and strategy leaders who are attending these conferences.

Great. A big surprise number for us was on the product revenue side.

We've been sort of underwhelmed, I'd say, in the recent past given what you've talked about being open systems and open platforms, enabling your customers to use whatever they need on the hardware side. What has driven the strength, in your opinion?

Have you really improved the product leadership, or is it really just the results of a handful of deals? Just curious what's changed there.

Good question, George. Let us be clear on that.

The hardware attach rate to POS sales continues to remain low. What you stated, we have made the POS terminals in our modernized solutions more open in the sense that they support all the operating systems out there.

They support Windows, iOS, and Android. Customers can go buy their own iPads and don't need to buy hardware resold by us.

That fact is still true. Per unit of POS sales, the hardware attach rate is lower than it was a year or 2 ago.

If there is a F&B outlet that used to require 10 terminals, six of them can be bought from us, four of them, they can use iPads. That state is still true.

What has improved our product revenue now is just the expansion in POS sales. Even though the hardware multiplying factor is low, the overall POS sales has increased so impressively in the last two, three quarters since, 1.5 years ago, we released the unified version, the modernized POS version, we went through our bumps in the road with POS and got past that.

Overall POS sales has increased so much that even with the reduced hardware attach rate, the related product revenue has also increased for us, beyond our expectations, yeah.

Understand. Thank you.

Thank you, George.

Thank you. Congrats on an amazing quarter.

Hey, subscription revenue growth accelerated from 26.2% in the June quarter to 32% for, 32.4% for the September quarter. Is it fair to say that the principal driver of this acceleration isering in revenue from Marriott?

Really, it's everything. Obviously, we're having record sales levels.

Everything's going well. I would say it's kind of across the board.

Marriott's going as planned, and everything else is kind of doing a little bit better, but there's really been no material change to the Marriott rollout. It's really broad-based.

It's non-Marriott and Marriott alike.

Just to be clear, you're saying acceleration in subscription revenue from both Marriott and non-Marriott properties?

That's correct.

Fantastic. Then, given that you're raising subscription revenue guidance, recognizing the comment that the deployment from backlog has been fast, faster than expected, that's driving that raise, how how should we think about how bookings has proceeded year-to-date, fiscal year-to-date?

Has that been ahead of expectations as well, or is it just merely that you're deploying faster from backlog? The

sales bookings have also done better than we expected going in to the fiscal year, Nehal, and the best proof of that is the fact our current backlog, despite the high subscription revenue we are reporting and despite the increased implementations and delivery, at the end of the quarter, at the end of Q2, our backlog levels are very close to record high levels, very close, within a tick of record levels, which happened at the end of Q1. While the implementation, execution, delivery has increased, driving revenue up, the backlog remains at a very close to just a little bit less of the record level.

That means that the sales bookings have also gone better than expected.

Then finally, the number of Marriott properties expected to deploy for this existing set of properties is around 6,000, right? You deployed around 2,000 so far.

You're about 33% the way through. Is that an appropriate characterization?

The number is well more than 2,000, and I don't want to get into the percentage of completion and all that, Nehal. I'd rather let our customer do that.

I can tell you we are not close to the halfway point yet. The numbers varies widely, Nehal.

If you look at properties, it's one percentage number. If you look at rooms, it is different, because the full service properties coming up have a much higher number of rooms per property.

Then you look at in revenue, it is different. I would say that all together, we have not yet reached the halfway point.

We're not close to it.

Great. Thank you very much.

Thank you, Nehal.

Thanks for taking the question, Ramesh and Dave. I know there have been a couple questions on Marriott already.

From me, for Marriott, can you just frame how the select service SKU is ramping versus the full service SKU, maybe relative to your expectations, maybe a couple details on where we are in the rollout of each of those things, because I know historically in quarters past that the select one has been ramping faster?

Just to be clear, Billy, I want to be careful not to get too much details on this. It is best to get the details from the customer.

I can tell you it is not as if both started at the same time, Billy, if that's what you're imagining in your head. The initial portion of the project, the initial set of implementations, were targeted to be select service.

That was the first phase of the project, and that has gone as well as expected. That has gone well.

That is about at its end stage, and now the next phase of the project starts, which is mostly about full service properties. It's not as if both started at the same time and one went better than the other.

That's not the way it was. Initially, all the focus was only on select service.

That's almost completed, went well. Now we're getting focus started on the full service properties.

Crystal clear. Then my other question would be, you've launched 30 AI features at Agilysys Inspire.

What are the early indications of customers' willingness to pay for these capabilities? Because it seems like a material part of your opportunity is cross-selling into the existing base.

It was mentioned in the prepared remarks today, 14 new customers had adopted an average of 5.6 products, and we know that that's kind of above your exit rate for products per customer last year. How do we think about the opportunity to get your existing base to where you're landing with these new customers?

Thank you. Yeah.

Yes, Billy. Let's answer that question without talking about AI, just as a normal process of our business growing.

As you can see from our record new product sales, which is basically selling new products to current customer properties, these are at a record level now. We have a long growth path ahead of selling our modernized solutions, with or without AI, to current customer properties.

Now, if you look at that number, and if you look at, conservatively, each of our customer properties can use say somewhere between five and eight products per property, and we are only in the twos now, right? If you don't include our major, big brand customers, that number is probably at 2.8 now.

We have a long growth path ahead of selling our current modernized solutions to our current customer base. We've got a long growth path ahead in that.

Now let's talk about the AI-based features. The initial AI-based features that are in production use are in beta properties, and we are not charging customers for that.

Customers are using those, giving us feedback, and so far the feedback has been very positive. Now, when it comes to the monetization stage of all these features, they will fall into various buckets, Billy.

Some of these features will just be normal enhancements we do to our products, because customers pay us hundreds of thousands, millions of dollars of recurring fees expecting that we will invest in R&D and continue enhancing those products. AI will be part of those features.

Some of the AI features will fall in that bucket. Some of the AI features will fall in the monetizable bucket, and they will fall into various ways of monetizing it.

There could be an increase in the SaaS fees for certain bulk usage. It could be transactional-based on the level of usage.

That falls into various categories. It is too early to comment on that now.

The current beta properties are at no charge, and the customers are giving us feedback as to how it is improving their operations and guest experience. That's the stage we are in now.

Super helpful. Thanks, Ramesh.

I appreciate it.

Thank you, Billy.

Hi, thanks for taking my questions this afternoon. Ramesh, I just wanted to ask you about the broader opportunity with new logos, and we talked before about a potential halo effect because of the Marriott relationship.

Are you seeing that happen yet with other hotel groups, or do you still have to have other things happen in terms of implementation success to translate into greater commercial wins and opportunities? Is that still on the come for the business, or are you starting to see that happen already?

Big hotel brands and those big decisions will happen when the time is right for those hotel brands. It is just not going to happen just based on the fact that certain other implementations have gone well.

Each of these big companies have their own cycles of technology renewal, if you will, and at that time, there will be RFPs, and I'm very confident that we will be a significant participant in the RFP. Nobody is going to come directly to us, and nobody is just going to come just because we've had successful implementations, right?

All these companies have their own cycles and their own budgetary processes where different technology initiatives come up, they're done. The next time it comes up for any of the big brands, I'm pretty confident that we will be one of the major players competing for it.

As more and more of these implementations happen, and as more and more of these implementations become more successful, the talk in the hospitality industry will increase, and it'll increase our chances. That's the way we look at it.

At the moment, we're not dependent on just the big brands. We have a large growth path ahead of us just based on our current customers and a whole lot of other customers who are investing more and more in us, especially in international regions.

The growth paths are there, and this is one of the growth paths that will open up when the time is right.

Thank you. The follow-up for Dave, just wanted to ask, you talked about a record sales performance in Q2.

How much is that coming from higher productivity among the existing reps versus adding more capacity, having bigger deals, or shorter cycle durations? Then maybe the follow-up would be, how much further can productivity improve without materially having to increase head count for the business?

Thanks.

No, it's a good question. I think the answer is both.

Obviously, especially in our hotels and resorts segment, we increased our quota-carrying sales reps. We almost doubled them a couple years ago.

There was a lot of ramp left on the team. This is the first year where we're really starting to see them carry full quotas, and obviously they're filling up the buckets.

I think there's still ramp left to go on the team. I don't think we have any kind of big hiring coming up, and we can continue to grow the business.

It is nice, because this year we're really seeing pretty close to a ramped team.

Thank you.

Thank you, Latif. Thank you, all, for your guidance and support.

Our best wishes for a great and safe holiday season. Merry Christmas and Happy Holidays to you all.

We look forward to talking to you again in about 3 months from now. Thank you.