Good morning and welcome to the Agilysys Incorporated Fiscal 2009 Third Quarter Earnings Conference Call. For your information, all participants will be in a listen-only mode and there will be an opportunity for you to ask questions at the end today's presentation. Before we begin, the company would like to remind you that all remarks today may include forward-looking statements based on current expectations that involve risks and uncertainties that could cause the company’s results to differ materially from management’s current expectations. Please refer to the risk factors which can materially affect results outlined in Agilysys's corporate filings with the Securities and Exchange Commission and the company’s earnings release. (Operator Instructions) For your information, today's conference is being recorded and transcribed. At this time, I would like to turn the conference over to Mr. Martin Ellis, President and CEO of Agilysys. Mr. Ellis you may begin.

Thank you and good morning, everyone. Our unaudited results were issued before the market opened and are currently available on our website. With me today is Ken Kossin, Senior Vice President and Chief Financial Officer. Let me start out by saying that I'm very pleased with the significant improvement we made both in EBIDTA and in the cash flow generated during the quarter. The facts that these results came in the face of weakened demand environment is all the more notable. Like most companies, we continue to be affected by the weak macro economic environment. However, notwithstanding that revenue for the quarter decreased to $224 million compared with $248 million a year ago. Our adjusted EBITDA, excluding restructuring charges, increased significantly to $18.1 million for the current quarter compared with $10.8 million last year. Software revenue was $30 million, up 17.4% compared with $25 million a year ago. The increase is primarily due to acquisitions. And services revenue was $39 million, up 10% from revenue of $35 million a year ago. The increase in services is primarily due to acquisitions and strong services sales in our Retail Solutions Group. Third quarter revenue from hardware products was $156 million, down 17% compared with $187 million in last year's third quarter. The decrease is due to the absence of several large transactions reported in the prior year. Gross margin increased to 26.7%, up from 23.1% in the prior year. The increase in gross margin was primarily due to higher mix software and services offset by a 60 basis points decrease in rebates as a percentage of sales. Selling, general and administrative expenses excluding restructuring for the third quarter were $48 million, or 21.6% of revenue, compared with $55 million, or 22% of revenue, a year ago. Decrease in SG&A was largely due…

Thank you, Martin, and good morning, everyone. Before we review the third quarter segment results, let me start by summarizing our third quarter consolidated results. For the third quarter, revenue was $224.1 million compared to $247.9 million a year ago, down 9.6%. Gross margin for the third quarter increased to $59.8 million or 26.7% of revenue from $57.3 million or 23.1% of revenue last year. The increase in gross margin percentage was primarily due to a higher mix of software and services. SG&A decreased $6.2 million for the third quarter to $48.3 million, compared to $54.5 million a year ago. The decreased was primarily due to $5.6 million decrease in compensation in benefits, which included $2.2 million credit primarily related to a change and estimate of stock option forfeitures, in addition to a $900,000 decrease intangible amortization offset partially by a $900,000 increase in professional fees. Restructuring expense for the third quarter of 2009 was $13.9 million primarily comprised of a $7.4 million expense related to termination benefits, $1.3 million expense related to the relocation of our headquarters to Cleveland and a $4.5 million non-cash charge related to the executive defined benefits plan curtailment. Adjusted EBITDA without restructuring for the third quarter was $18.1 million 8.1% of sales compared with $10.8 million 4.4% of sales a year ago. Net interest expense for the third quarter of 2009 included non-cash charges of $1.1 million to establish a reserve for the company’s investment in the reserve fund and $400,000 for the recognition of unamortized bank fees related to the termination of our unsecured credit facility. Now I would like to review the performance of our reporting segments for the quarter. Beginning with the Hospitality Solutions Group, in the third quarter of 2009 HSG recorded revenue of $27.9 million, up 1.8% compared with…

Thanks, Ken. Before we take your questions, let me briefly review our outlook for the remainder of 2009 which ends March 31, 2009. As we discussed in last quarter’s earnings release, current market conditions remain uncertain and with limited visibility into the quarters ahead. As a result, last quarter we suspended revenue guidance until conditions stabilize. However, notwithstanding the weak demand trailing 12 month EBITDA has increased significantly for fiscal 2008. And consolidated EBITDA margin has improved from 0.6% of sales for fiscal 2008 to a reported 2.5% of sales for the trailing 12 month ended December 31, 2008. Pro forma for full year, cost savings executed recently and during the fiscal year, EBITDA margin would be 4.7%. Based on the strong December quarter, we expect to exceed the high-end of our adjusted EBITDA guidance of $22 million announced in the company’s second quarter fiscal earnings release. Fiscal 2009 adjusted EBITDA excluding restructuring and goodwill impairment charges is expected to be in the range of $23 million to $25 million compared with fiscal 2008 adjusted EBITDA of $4.6 million. Our market conditions remain difficult. We are confident the plan we have executed over the past number of months places us in a strong position to weather the uncertain market conditions. We will continue to concentrate on those elements of the business that we control and we’ll focus on growing EBITDA and driving cash flow to generate sustainable increases and value for our shareholders. With that, let me open up for questions.

(Operator Instructions) Our first question comes from Brian Kinstlinger from Sidoti. Please go ahead with your question or comments. Brian Kinstlinger – Sidoti & Company: Thanks. First, I wanted to talk a little bit about the three different segments. Obviously we've seen a decline with certain retails and the retail environment; as everyone knows here no surprise is pretty weak. So maybe talk about what you are seeing at least today. Of course we can't see in a year what's going to happen today in terms of retail spend and what your clients are saying. Is there is much less expansion which could cause further deterioration?

Good morning, Brian. Now let me start out with just a general comment about retail and then more specifically about our retail business. Clearly the overall retail environment is weak at the moment. However, our Retail Solutions Group is fairly heavily concentrated in grocers, chain drug and discount in retail stores and as a result have continued to perform reasonably well even in this weak market environment. There have obviously been retailers that have either softened or have entered into chapter 11 and we continue to monitor the retail space. But to date our retail business has performed quite well with a significant increase in services. We will continue to evaluate our Retail Solutions Group, but as for now our customer base has remained fairly stable and continues to perform reasonably well given the nature of that business. Brian Kinstlinger – Sidoti & Company: Now you said there was one large transaction that didn't repeat itself. Is there some -- I mean, I didn't realize there was that big of a recurring component in your business. What kind of transaction are we talking about? And does that generally hit once a year? Give us a sense for what you're talking about there.

Well generally we have a fairly stable customer base. But from time to time we may pick up transactions with a customer that are of some size. In the December quarter of prior fiscal year we had a large hardware transaction that was with a customer that we don't have ongoing business relationships with. And as a result in December of 2007 revenues in that quarter reflected that large hardware transaction. We look year-over-year that's one of the largest changes in performance it was really the recognition of that sale in the prior fiscal year. And going forward we can certainly have opportunities where we have sales like that again. But that's generally not a regular outcome in every quarter. Brian Kinstlinger – Sidoti & Company: Okay and let's turn to hospitality. We're reading in the press every day about the difficulties, that for example, the Vegas casinos are having and then on down of about capital budgets being cut. Obviously December was as strong quarter for you but when you think about without giving specific numbers going forward. Is there going to be some real pressure do you think they are based on those capital budgets?

Well I think when you look at certainly some of the casino hotels and some of the lodging establishments there has been reported weakness and in many instances quite a bit of difficulty for some of those businesses. However, if you go back and look at our acquisitions over the last 12 months to 18 months, those acquisitions have significantly diversified our customer and revenue base. And while historically we may have been more heavily linked to casino gaming and resorts, we are now fairly heavily diversified into other markets like food service, stadiums and the arenas entering K-12 service providers and we're actually seeing some reasonable growth in some of those other segments particularly on the food service side. So while the overall hospitality market is certainly quite a bit weaker than it was three and six months ago, we have also diversified our revenue base. Having said that, sales are not as robust as we'd expected 12 months ago and we continue to monitor the Hospitality Solutions market place but as I say, our customer base is quite a bit more diversified than it used to be. Brian Kinstlinger – Sidoti & Company: And should I take that as, there will be weakness maybe but not as much as someone might think, from the point you are today because of those new market. I mean I suspect that you still have a lot of your business tied to some of those other places where there's weakness, right?

I think depending on how close someone is to the individual markets that we have serve, if their reference point was that it was purely in the resort and casino hotel space then that be certainly missing a large part of our other customers in the Hospitality Solutions business. And some of those customers and market segments continue to perform reasonably well. Brian Kinstlinger – Sidoti & Company: Knowing what you know about -- clearly you had some strong EBITDA in the quarter but knowing what you know about the future, at least what you think about demand overall for hardware purchases right now. Is there intentions by you guys to further restructure to lower your cost in case, was that are you waiting to see how demand plays out of the next six months?

You know, Brian, part of the cost initiatives that we've executed on are yet to be reflected in numbers going forward. And so I think as we look at it, part of it is the expectation that we will still see some improvements in cost structure as we report these cost savings over a full trailing 12 months period. Having said that, the overall demand for IT product as we and pretty much most others in the industry have discussed remains weak. And so as we go through our planning for the next fiscal year, we will certainly take that into account, but right now we don’t have anything else to discuss or disclose as it relates to addressing cost structure. But like everybody else we are cognizant of what’s going on in the broader macroeconomic environment. Brian Kinstlinger – Sidoti & Company: The last couple of questions I want to talk about is balance sheet and cash flows. First of all, how much cash do you have today? I know you’ve before the year end, but I guess things moved so quickly for financing and cash maybe I am interested to see what it looks like today, if you have a rough number?

Day-to-day, Brian, it can move fairly materially depending on when we make payments to our suppliers which are scheduled to take place at regular intervals. So, if you pick one day versus another you could see material movement. But in the months following the end of a quarter we could range from where we close out at slightly above 70 to the high 70s down to mid 50s depending on the timing of payments to suppliers, and so a daily estimate of cash is probably not as good as in outlook for the rest of the year. Right now, I think we are in the high 50s. Brian Kinstlinger – Sidoti & Company: Right, that makes sense. And I asked that because it seems like you ended on a favorable day -- not that you can't have a bad day or a good day on a given quarter. And I guess I am curious to really understand better the floor financing because, I mean the way your cash flow statement build it out looks like you burn $34 million in the quarter and I know floor financing is below the line of free cash flow, but I guess I am confused because payables obviously has coming down as quickly as receivables are going up. And it seems like it almost a credit facility that IBM has for you and I had some other questions on that, so it's almost like the short for long-term debt kind of instruments. So just take me through it to understand it better, please?

We have got some -- generally speaking two alternatives for funding the procurement of product. The one is we can buy directly from our distributor Arrow and the other is that we can put in place as we did a flow plan financing agreement where effectively we have payment terms under the flow plan financing agreement. What we did over this last nine months or so was transitioned most of our purchases from Arrow. The payments of our purchases -- we still make our purchases from Arrow but the payment would then go to a floor plan financing agreement with IBM global finance who then settles up with Arrow. And so what you've seen it is decline in payables which is affectively a decline in the line directly with Arrow being built up under floor plan financing and then IBM global finance settles up with Arrow. And given the nature of the floor plan financing agreement it's reported at the financing versus payables. The benefit for us using the floor plan financing is that we have slightly improved payment terms. And as a result have used it. There are instances where we still buy from other distributors or suppliers so we would have a payables line with those suppliers. If you reversed what we did, what you'd end up seeing as payables would go up again and floor plan financing would go down, effectively you're just substituting one for the other. Brian Kinstlinger – Sidoti & Company: So in effect you think -- the way you guys look at it is almost like putting floor plan financing and operating cash flow and that's the real number of how you are looking at it, is that accurate?

Yes. Brian Kinstlinger – Sidoti & Company: Okay. And then help us understand -- I note you guys have put out your Q already and it talks about IBM dropping I think there line from 150 to 100 and it looks like you already about a 150 so talk about. So talk about what you can do. You talk about having liquidity and talking with other parities about borrowing but talk about what all that means and how you change that going forward, what you need to do?

First as far as our seasonal drawing either on the floor plan financing or in terms of payables is concerned. It’s obviously largest in December so we have the peak at the end of December. That income is back down to a lower level in most other quarters. End it spikes slightly at the end of each quarter. So, you will see it come down during the quarter and then as you end up with intraquarter seasonality it spikes a little at the end of the quarter. As far as IGF is concerned, one of the participants in floor plan financing agreement, one of the other credit providers had withdrawn given what's going on in credit markets. And so we've addressed the overall facility limit under the floor plan financing agreement with that partner having withdrawn. Given the fact that we've also terminated our credit facility back in January, we're looking at capital structure issues right now and addressing not just the floor plan financing with IGF but also what other credit facility we would want to put in place. We're in discussions right now with a number of financial institutions to put in place a new credit facility and address the floor plan financing. What it really means is that right now the limit is down to $100 million. It was $150 million at the end of the quarter. But we paid down a good portion of that anyway, post quarter end. Brian Kinstlinger – Sidoti & Company: And so any amount above that you're trying to get financing so you can lower it below 100, is that basically what I should assume?

No, because we would go back to payables. It would depend on the timing of purchases during the quarter. So, we don’t see anything above that being needed to be financed in the traditional sense of credit facility. That that could be just be financed through normal at payables terms with our suppliers. Brian Kinstlinger – Sidoti & Company: I guess the last question I have is in terms of rates, when you were in the discussions obviously it looks like IBM has some favorable terms by the start, no financing fees, I think you said this for the first 75 days. These new agreements you are talking with, I take it in today's credit market it's, less favorable financing, or is that not fair to sort of characterizing like that?

What you should really compare Brian is the pricing on a credit facility for general corporate purposes. So let's set aside the purchase of product. And if you talk about a credit facility for general corporate purposes, pricing has clearly changed from what it was 18 months, two years ago. The other part as it relates to our procurements of product, the floor plan financing agreements has free financing periods, and with some with any other supplier, our distributor, Arrow, there are effectively payments terms, fee payments terms from any suppliers we give our customers. And so I wouldn't characterize the putting in place of a credit facility and pricing there was impacting pricing in terms of normal payments terms with our suppliers and our distributor, Arrow. Brian Kinstlinger – Sidoti & Company: Okay, thank you very much.

Our next question comes from the line of Brian Alexander from Raymond James. Please go ahead with your question. Brian Peterson – Raymond James: Hi this is Brian Peterson in from Brian. Did you guys talk about the linearity in the quarters? It sounds like December was pretty strong, I was just trying to see if the budget came in as expected particularly in TSG where it looks like sales growth year-over-year actually accelerated.

Good morning, Brian. I would say on the linearity, it was fairly consistent with what we typically see in the December quarter and there are probably two ways of looking at that. The one is sequentially growth from September to December, and the other part is within the quarter, what do the relevant term our months look like in terms of total sales. From Q2 to Q3, the sequential increase was fairly close to what we typically see, maybe it just had softer than some of the other Decembers where we've had meaningful increases over September. And then within the quarter, the intra-quarter seasonality from October through to December was reasonably consistent with what we typically see if you look at percentages of sales in the first month, second month and third month. So it was clearly a little bit softer than prior year, but in terms of linearity it was fairly consistent with what we have seen in prior quarters and prior years. Brian Peterson – Raymond James: And have we seen any big changes thus far in the March quarter?

It's too early to say. From a linearity standpoint, couldn't comment at this point from an overall demand standpoint, it's too early to comment. Brian Peterson – Raymond James: Okay, also on the cost saving initiatives, and I appreciate the details you guys have given there. But you said that one-third of the cost savings have been recognized, is there any timing where we should see the benefit of that other $17 million or so in the P&L?

Yeah, you should see it now coming ratably in each quarter, so if I separate out those three buckets, there was 14, 8 and 3. The 14 was executed at the end of June so and into July, so what you will see is in our September quarter the initial benefit of some of that cost saving in December you would have a full quarter's benefit of the $14 million, and if you just divided that by four, you would have a quarterly impact from that cost savings. The $8 million which was executed in the October, at the end of October and in to November, you will get a partial quarter benefit of that. And then from the March quarter including the March quarter going forward. You will have your quarterly benefit of approximately $2 million. And then the $3 million which was the third component was executed late in the year and so you are going to see effectively very little in December on that. And then in the March quarter you should see effectively full benefit and then in each quarter going forward. So the comment was through December about a third of those benefits are recorded in trailing 12 months performance, two-thirds still to come. So if you want to use that as a pro forma, you would be able to get to what pro forma profitability would look like based on the cost savings. And what we have recognized to-date. Brian Peterson – Raymond James: Thank you that's helpful. I guess just lastly can you guy talk about how at least from a financial perspective, your compliance with the debt covenants.

The debt covenants had a technical compliance, which related to filing and completing audited financials and then we got performance covenants. The technical compliance requirements we did reach last year with the late filing of our 10-K, and we obviously have a requirement to provide audited financials. And given that we did not file audited financials until the middle of December for our prior fiscal year. We were in technical reach of our covenants. From the performance standpoint, we are in compliance currently with our coverage ratios in the leverage ratios, and particularly leverage ratios since we have no debt. Brian Peterson – Raymond James: Do you see any risk to those going forward?

No, and the other part is right now Brian, we are looking at a new credit facility and the capital structure that would have new covenants when the covenants would address what's going on in the business today, both in terms of performance and profitability. By the end of this quarter, we hope to have a new credit facility in place. And given that the previous one is terminated, those covenants are no longer relevant. Brian Peterson – Raymond James: Thank you.

(Operator Instructions) And Mr. Ellis this time I am showing no additional questions. Would you like to make any final comments?

Thank you. Thanks for joining us today everyone, and we look forward to following up after the end of our fiscal year.

That does conclude today's conference call. Thank you for attending today's presentation. You may now disconnect your lines.