Welcome to the Agilysys’ Fiscal 2013 First Quarter Conference Call. Some statements made on today’s call will be predictive and are intended to be made as forward-looking within the Safe Harbor protections under the Private Securities Litigation Reform Act of 1995. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause results to differ materially. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the company’s reports on Form 10-K and 10-Q and news releases filed with the Securities and Exchange Commission. Today’s live broadcast will be archived and available on Agilysys’ website. At this time, I’d like to introduce your host for today’s call, Agilysys’ President and CEO, James Dennedy. Please go ahead, Mr. Dennedy.

Thank you, Valerie. Good afternoon and thank you for joining today’s call to review our unaudited fiscal 2013 first quarter results. With me today is our Chief Financial Officer, Rob Ellis. Before we get started, I’d like to remind our call participants that, as usual, we are using a slide presentation as the basis for this review. And if they have not already done so, they can access it from the Investor Relations section of our website at www.agilysys.com. We will be discussing some non-GAAP metrics in today’s call, primarily adjusted operating income and adjusted net income as well as adjusted cash flow, which eliminate the effects of restructuring and other items that are either non-cash or non-recurring. Reconciliations to GAAP are provided at the end of this presentation as well as in the press release issued this afternoon. As a reminder, revenue and cost of goods sold are now segmented in 3 categories: products, support, and professional services. Consistent with the company’s sharpened focus on higher value sales opportunities, revenues from the Support and Professional Services segment continued to outpace products revenue while Support and Professional Services combined for a little more than half of first quarter revenue, they accounted for nearly 3/4 of consolidated gross profit during the period. Professional Services revenues led the quarter’s increases, up 27.8% or $2 million versus last year’s first quarter. Revenues from Support, Maintenance, and Subscription Services increased 5.2% and products revenue declined 13.7%. The year-over-year decline in products revenue was the result of significant hardware revenue sales in our retail business which did not repeat in the current year’s first fiscal quarter. On a consolidated basis, revenue from continuing operations for fiscal first quarter was in line with last year coming in at $52 million compared with last year’s $53 million.…

Thanks, Jim, and good afternoon, everyone. Hospitality revenue increased 15% with increases across the board in each revenue category. Reported products revenue increased $900,000 due to growth in revenues from proprietary software licenses across all lines of the business which also influenced the increase in gross profit. The remaining increase from prior year was due to revenue adjustments recorded in the first quarter of 2012 related to periods prior to 2012 that lowered revenue by approximately $1.2 million. Support, Maintenance and Subscription Services increased 7% which reflects our efforts to focus growth on subscription based services and other forms of recurring revenue. Professional Services increased 2% during the quarter. Hospitality bookings increased over 50% quarter-over-quarter. These new bookings continued to reinforce the trend towards increasing our recurring revenue with subscription bookings growing 15% of total bookings in last year’s first fiscal quarter to 25% of total bookings in the current period. This equates to our subscription bookings more than doubling year-over-year. Moving forward, we expect subscription and other recurring revenues to represent an increasingly larger proportion of consolidated revenues. Gross margin expanded 420 basis points to 65.6%, again reflecting our focus on higher margin implementations and development projects as well as the increased sales of proprietary software. Adjusted operating income, which excludes stock-based compensation, amortization of acquisition related intangibles and other one-time items improved to $4.2 million, up $3.3 million from the fiscal 2012 first quarter. Moving to the retail segment. Support, Maintenance and Subscription Services posted a 3% revenue increase versus last year. The increase was negatively impacted by our decision over the past couple of quarters to not renew support contracts that were below our margin expectations. This restricted revenue growth, and as intended, stimulated margin expansion during the period. Professional Service revenues advanced 51%, reflecting the execution…

Thanks, Rob. Our unwavering commitment to increasing operating efficiency and optimizing the guest experience for our hospitality and retail customers continues to produce new standards of innovation in our business. Our new feature-rich mobile application, which builds on the award winning Agilysys InfoGenesis point-of-sale system is a case in point. Recently introduced at HITEC, the hospitality industry’s largest technology-focused tradeshow, our InfoGenesis Mobile Solution is state-of-the-art in hospitality point-of-sale solutions, combining a broad range of capabilities with exceptional flexibility and reliability, so that servers can work smarter and more efficiently. It also enables hospitality venues to deliver a more satisfying experience for the customer by freeing staff to focus on the guest rather than the technology. This technology continues to evolve and we look forward to introducing the next generation of hospitality solutions in the very near future. Additionally, Agilysys continues to grow its higher education business, adding several distinguished universities to the Agilysys’ community this month. Two I would like to mention specifically are State University New York at Genesco and Vanderbilt University. State University New York selected both Agilysys InfoGenesis point-of-sale and Agilysys Eatec for its campus auxiliary services. Found in 1871, Genesco is located on 220 acres in the upstate Finger Lakes region of New York. The university is the most selective of the SUNY institutions and is highly ranked in national publications for academic quality and value. Vanderbilt University chose Agilysys Eatec to manage inventory and procurement for its dining operations. Founded in 1873, Vanderbilt spans more than 300 acres in Central Tennessee and is the second largest private employer in the state. The private research university comprises 10 schools, a distinguished medical center, a public policy center, and the Freedom Forum First Amendment Center. Agilysys continues to make excellent progress in the healthcare market and we are very proud of 2 extraordinary new InfoGenesis point-of-sale customers, Palomar Health in Southern California and Carroll Hospital Center in Maryland. Our strength in the casino and resort segments continues to build with new customers and with existing customers as they expand their reach. For example, Las Vegas-based Tropicana Entertainment recently added our Stratton Warren System inventory and procurement solution to the portfolio of solutions acquired from Agilysys. Together with its affiliates, Tropicana Entertainment owns or operates 9 casinos and resorts in Indiana, Louisiana, Mississippi, Nevada, New Jersey, and Aruba currently comprising 5,750 rooms, 8,300 slot positions, and 240 gaming tables. These types of customers are extremely valuable for their potential to create add-on wins for both parties. With that, let’s open to the call for questions. Valerie?

[Operator Instructions] The first question comes from Brian Kinstlinger of Sidoti & Company.

Rob, could you just take us through the cash one more time, I’m unclear what the $6.3 million usage was? And then after the one-time payments you mentioned, can you talk about what was going on with working capital that it’s moved so drastically even so?

Sure, Brian. So, the cash once again dropped about $18 million, about $9 million of that is about one-time items, so you got the BEP and SERP final settlement payments, which will not reoccur. We had the restructuring payments, a majority of that was done this quarter. We have some more of that to be done next quarter. We had some legal settlements and then the annual bonus payments as well. So, all that in is about $10 million and then the…

The annual bonuses, I mean, isn’t that happening annually?

It will, but we will start accruing for it now in Q2, Q3, and Q4; we won’t pay those out until Q1 of next year. So, it will not affect the cash flow from operations going forward. It will actually increase the accruals.

And maybe I know, maybe I forgot: what is the $6.3 million payment for? What is the payment for?

For the BEP and SERP payments?

Yes, what is that?

This was the life insurance payments for our previous employees. We had a benefits program, Brian, a defined benefits program and we had discontinued that upon the sale of the TSG business.

I see, okay. And so you had it was under, under -- underfunded, is that what it was and you had to pay for it-- had to spend $6 million, is that what happened?

We -- it was accrued. We discontinued the program. We had to pay those payments out to these personnel for whom we accrued the benefit.

I see, okay. And then, but outside of all that working capital moved so much, I mean, what was going on with, especially on the payable size, it seems like there was some drastic move, is there anything in particular that caused that to happen?

A lot of it is timing and our DSO, our days sales outstanding in AR went up about 4 days and that equated to about $4.5 million to $5 million of cash used in operations. We have since changed out of lot of our accounts receivable staff and we will see improvements in that area going forward. We were down in the mid 50s, most of last year. We intend to bring that back down to that level. That’s why I feel that we are going to catch up on the cash on that area.

And then $10 million, is that free cash flow or operating cash you are talking for the year, and is that really conceivable after this kind of quarter?

Yes, it’s adjusted operating cash. So, it excludes those one-time payments like the BEP and SERP and the restructuring, so -- but we do still see adjusted operating income being or adjusted cash flow from operations still being around that $10 million or above mark. Now, granted, we will start utilizing some of that cash for our product development initiatives and then so it will hit capitalized software, but it won’t affect our cash flow from operations.

Are there any other one-time payments, because last quarter, I don’t remember talking about some of these things, are there any other one-time payments you expect to happen in the remainder of the fiscal year that will hit cash that is not included in your $10 million of adjusted free cash flow guidance?

Yes. We still have some restructuring payments that need to go out, approximately $3 million dollars. Be the only one item left, though.

Okay. And then with the uncertainty in the economy, are you experiencing delays at all in decision-making for either retail or hospitality customers?

What I would say, Brian, so about delays, we saw a couple of projects that were sizable Q1 deals in hospitality that were pushed out. And in retail, the projects that we experienced last year where there were these large hardware refreshes and installations, we aren’t seeing those larger deals in the pipeline. So, the pipeline right now is composed of a bunch of smaller deals. So, I don’t know that things are being pushed out, they are just smaller and we have to go get more smaller deals.

Okay. And then I guess I am slightly surprised by the revenue line that you’re starting to breakout. There is - the maintenance and subscription revenue only had modest growth year-over-year, it sounds like that’s where all the bookings are going and so while I recognize it -- the revenue is recognized over time and takes a while, I still would have expected of to the lower numbers to be going a little bit faster, is it because the bookings have only been so strong for our quarter 2 or why is the growth not necessarily close to what the booking sound like?

Yes, hospitality is growing at 7%, we are still, I mean -- if you look at the subscription bookings, we were still pretty low on the first quarter of last year, so we’re starting to see some increases there on the revenue side. But hospitality was 7%, retail was down - was about 2.5% or so, but it was definitely negative and more negative because of the fact of getting rid of the support contracts that were lower margin and not meeting our margin requirements.

I see, so that was not on the subscription side, that was more the support services side and the maintenance side?

That’s correct. We are seeing our subscription services side double-digit increasing. It’s the support and maintenance contracts. If you think about support and maintenance contracts, there is some CPI increases each year, which -- CPI is pretty low right now. So, you are only looking for a couple of point increases just because of CPI. So you are seeing that 7% increase in hospitality mostly because of the fact that we are seeing double-digit increases in subscription.

Now that your business has changed without our TSG, take us through the seasonality. You talked about this quarter being the weakest generally in terms of revenue. Will that play out this year? And take us through why it is seasonally weak.

We do think it will play out, we still have a fairly sizable business in the retail business that has reasonably large component that’s hardware related. And we are aligned to one of our great partner, IBM, and they do experience seasonal highs and lows. Their seasonal highs are typically their second and fourth quarter, which are aligned to our first and third. But our hospitality business also has a seasonality effect to it and it's higher in our third quarter or fourth calendar quarter. So while retail can typically see some uptake, because of the missing March deals that didn’t repeat, this quarter, if you look at it year-over-year, it has typically been a lower quarter, and it’s principally driven by the hospitality business being a slower period at this point. And it picks up in our second and third fiscal quarters.

Okay, 2 more questions. The first one, you mentioned a bunch of new customers, and I may have missed it, but I am interested in the retail mobile pointed solution that you’ve got and is there any more progress on your couple of named customers I think that you have? Has there been any more progress on that side of the business?

We have pipeline progress. We don’t have any new closed deals to announce, but we expect to have some closed deals to announce as we enter the holiday shopping season. And those need to begin implementation relatively soon but as most of that needs to be installed, tested and stable before the end of October.

Okay, and the last question is, again, you mentioned a bunch of customer wins, but maybe the HSG growth, what actually is behind it? Is it gaming, is it traditional hotel or is it stadiums whereas -- maybe prioritize where that growth is coming from and is that continuing to stay strong in this quarter that we are in right now?

It’s been reasonably across the board, Brian. We see a lot of add-ons this quarter in particular was, we saw some more add-on and current customer reorders than net new customers in the period. But it was pretty uniformly across all of the segments. I would say it’s still largely led by gaming. And then the folks in food service, particularly the higher ed and the healthcare segment had added more on a percentage basis in this period than our other segments within food service management.

One last question. Is that sort of what you’ve been talking about how your customers generally own one title and you are trying to get them to own more? Is that what’s happening because you are saying lot of customer reorders or --?

We are, that’s exactly right. So, as we talked about the size of the installed base and the percent of the installed base that uses more than one product from that company, it's introducing them to more solutions that we can offer that solves more of their problems from one vendor.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to James Dennedy for any closing remarks.

Thanks, Valerie. We are very excited by the many opportunities afforded by our new strategic direction and look forward to reporting continued improvement in our operating results as the year progresses. I want to thank our personnel for their continued dedication to our customers, our business and to each other. We are seeing consistent improvement in the business both operationally and financially. Your work is greatly appreciated and the financial results reflect the quality and care you are putting into the job you do every day. I also want to thank the customers who trust us to deliver solutions and support their businesses. Our customers have been partners in the truest sense of the word, not only have they trusted us through the award of significant systems projects, but they have been instrumental in helping us identify areas to improve our products, services and the administration of our company. The performance of our personnel and the partnership with our customers gives me great confidence in the future of the business and the company. Thank you for joining us today.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.