Good morning, ladies and gentlemen, welcome to the Agilysys Fiscal 2015 First Quarter Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today’s call is being recorded. 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 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 actually results to differ materially from these in the forward-looking statements are set forth in the company’s report on Form 10-K and 10-Q and news releases filed with the Securities and Exchange Commission. I would now like to turn the call over to your host, Mr. Jim Dennedy, President and CEO.

Thank you, Teria, and good morning everyone. We appreciate you joining us on the call today to review our fiscal 2015 first quarter results. Joining me today is our Chief Financial Officer, Janine Seebeck. Before we get started, however, just a quick reminder that we’ll be discussing some non-GAAP metrics, primarily adjusted operating income from continuing operations and adjusted income from continuing operations, which eliminates the effect of restructuring and other items that are either non-cash or non-recurring. Reconciliations to GAAP metrics are provided in the financials of the press release issued earlier today. A few years ago, we implemented a strategy to align our business and putting our product roadmap and our internal resource allocation with what we saw would be the evolving trends and needs of our clients across the hospitality industry. Our strategic initiatives reflect a commitment to strong capital and operating discipline, and development of new services and solutions to deliver more efficient ways for our customers to maximize and leverage their relationships with their guests, grow revenue, and operate their business in a more efficient and effective way. Over the last three years, we have made consistent progress towards our goals, relying on these key principles as we have simplified our business, evolved our offering, and delivered against the milestones of our next generation platform. The progress is evident in the 14 major releases and four new titles since early 2012, as well as improvements in our financial and operating metrics. The reorganization of our sales force, which began late in our fiscal 2014, was a topic we had discussed on prior calls. The reorganization of this team will help us expand it to new market sectors, for example, fine dining, table service and quick cash restaurant sectors, develop opportunities with new logos across all…

Thanks Jim. Our first quarter fiscal 2015 revenue of $23.7 million is comparable to the prior year period. Underlying the comparable revenue was a decrease of 19% in our products revenues, mainly due to the decline in proprietary product sales, principally driven by the reorganization of our sales force, which is expected to keep revenue from this business line separate until later this fiscal year. This was offset by 7% growth across our support, maintenance and subscription business, or recurring revenues, with SaaS revenue growing at over 8%, and traditional support growing by 6% over the same quarter a year ago. As well, as a healthy growth in our professional services business, which saw a 17% increase over the same quarter a year ago related to revenue from a large deal that closed late in our last fiscal year. It is important to note that we expect revenue from professional services to return to its historical levels for the remainder of 2015. Moving down the income statement, while we were able to maintain a healthy overall gross margin of 62% for the first quarter of fiscal 2015, we did see a decrease in gross margins of 420 basis points, compared to 66% in the prior year quarter. This was expected as we have the impact of amortization expense as some of our newest products were placed into service. Going forward, we expect gross margins to be inline with the first quarter, and remain in the low 60% consistent with what we have said in prior releases. Looking at operating expenses, including product development, selling and marketing, general and administrative and depreciation expenses we saw an increase of 8% from $14.3 million to $15.5 million. Product development expense decreased $400,000 or 6% in the first quarter of fiscal 2015 compared with…

Highlights include Prairie Band Casino & Resort in Kansas adopting a comprehensive software suite of our products, including solutions for property management, point of sale and inventory procurement for their 297 room resort, and Croc's Casino Resort, a 152 room and 44 private residence property in Costa Rica that will be using our Visual One Property Management System and InfoGenesis point of sale system. Moving to the hotels, resorts and cruise market we are very pleased with our continued growth and progress in this market, which currently represents approximately 22% of our total revenue and which offers a significant growth opportunity for us both in the United States as well as internationally. Recent highlights include Camelback Lodge & Indoor Waterpark in Pennsylvania, providing a comprehensive software suite to streamline operation and enhance guest service at the new $163 million resort. HotelWorks Development selected InfoGenesis point of sale to streamline operations and enhance guest service across its new Malana Hotel. The 271 room Washington Duke Inn & Golf Club located at Duke University choosing our InfoGenesis point of sale system, and more recently the Kalahari Resort and Convention choosing our InfoGenesis point of sale system. And in the highly competitive cruise sector, we continue to develop and foster both old and new relationships and remain confident in our ability to expand key customer relationships, such as Royal Caribbean Cruise line, where we currently have 35 vessels that use Agilysys software solutions. Looking at the food service management market, a market that represents approximately 15% of our business, just a few weeks ago we announced an expansion of our technology partnership with Compass Group North America, a leader in food service management and support services to roll out the Elevate point of sale solution to additional customer sites nationwide, including schools, healthcare…

(Operator instructions) Our first question comes from the line of [Indiscernible]. Your line is now open.

How are you doing guys? Good morning. Thanks for taking my call.

Good morning.

Some work in the gaming space, and lately we have seen some weakness, so I was wondering whether you guys are seeing that in your end as well, and how that is affected your business, and how you see that affecting your business moving forward?

So, this is Jim, we haven’t seen the weakness that we have seen in your reports, and that you all reported on the gaming industry. We haven’t seen that in the order demand or flow from our customers. But one thing I would note is that in talking with many of the CIOs from the properties we serve, they do tell us that they are seeing an increased reliance or importance from non-gaming related revenue, which would include lodging, rooms, events, F&B retail. So those other businesses of the casinos outside of the strict gaming related business activities are increasing in their importance, and I think that is another reason for why we don’t see let us say a drag in demand that you might have reported on based on the overall dampening of the gaming industry revenues.

Okay, great. That is helpful. Thank you. Also I’m sure you guys are well aware that Oracle recently acquired MICROS, and I was wondering if I could get your thoughts on how that affects your market segment, as well as your competitive position?

We don’t really necessarily want to want to comment on another competitor’s strategic moves, but we think that the activity generally in the market, all the corporate development activity in the market over the past really two years, has increased the level of attention and awareness both from customers and investors in alternatives or other competitors to maybe what be seen as the market leaders and that has increased the awareness and profile of Agilysys on their radar for both customers and investors.

Okay, great. Thank you. That is it for us.

Thank you.

Thank you. (Operator instructions) Our next question comes from the line of James Lee of Potrero. Your line is now open.

Okay. On the maintenance revenue, could you talk about why it was down slightly quarter-over-quarter, is that just due to seasonality, it looks like that happened fast?

Yes. So James, it is Janine, good morning. A lot of that actually has to do in the last quarter, we had some of our remarketed support that hit, and so some of that is seasonal since that is upfront revenue, and that causes a little bit of [trough], and so that is really the only reason. Our proprietary and our SaaS continue to grow at the levels with a small pickup.

[Indiscernible] continue to grow sequentially going forward?

Yes, definitely.

Then on the – a question on some products or sales force transition impacting your products growth, I was under the impression in the last quarter that you guys were merely augmenting your sales force, adding more people and it sounds like from [Indiscernible] today there was disruption from that, could you talk a little more about why, what exactly is going on with workforce transition and whether it is impacting your sales?

While we have added capacity in sales, we did indicate that, but in the past calls going back to even I guess the third quarter of our fiscal 2013, we indicated that we need from our sales force more new logo business, and more multiple product customers to selling products into the installed base, of which 3000 customers, about a third or a little bit less than a third, are multiple product customers. So we changed some of the incentives associated with obtaining new logos versus just selling continuing run rate business, and secondly, we emphasized this year more than ever selling subscription based solutions versus [non-perm] solution. The effect this has on near-term revenue is that if you are pursuing new logo businesses, the sales cycle is a little bit longer, even if it is in markets we currently serve, and if it is a SaaS–based relationship versus a license in maintenance or traditional relationship, you are going to have delayed rev reg on that total contract value that might be sold. So both of those will have somewhat of a dampening effect on top line rev growth, but where you are going to see it is in the recurring revenue line, particularly in the SaaS element, which we don’t necessarily break out, but we can talk to on our recurring revenue line. Janine do you have any other comments?

No, I think that covers it. James, obviously there is also a ramp up, right. There definitely was within the reorg some transition [Indiscernible], just an augmentation, so the ramp up of that team and the change in some of the staff themselves is part of what is driving that lag.

So when do you expect the sales reorg to be complete and when will we start seeing your product revenue growth and what gives you confidence that it will grow say in the year?

The transition is nominally complete and use a hockey term, work full strength, so we are back on the ice and skating. Everybody has their positions and accounts and territories specified, and that was something that we took care of, let us say, April sales conference we had and I think that kicked everything off. In terms of full strength operational efficiencies, we think that our second quarter is going to be a normal quarter for us. We think the growth levels that we previously experienced, particularly in recurring revenue line, will be evidenced in our third and fourth quarter results and for the full year. But you are not going to necessarily see it in top line because we are going to continue to emphasize SaaS–based engagements.

[Indiscernible] you are expecting product revenue growth to be actually negative, again –

No, I didn’t say negative. While we are expecting product revenue growth to be negative, we are emphasizing more the SaaS–based contracts. So we are trying to persuade our customers, our markets and our sales teams, motivate everybody to pursue sales based – SaaS–based engagements. That will have an overall dampening effect on overall revenues, but we still expect a pretty significant chunk of our installed base will continue to consume in a traditional-based methodology. I don’t think that you are going to see a complete wholesale change in bookings from traditional to SaaS. I think right now our as a percentage of our quarterly or monthly bookings, we are seeing something just south of 30% being SaaS–based engagements, and we are pushing for that to be in the mid-30s to just under 40%. So we are not seeing a complete light switching effect, where all of a sudden tomorrow we are going to be selling 50% plus of our booking in subscription-based sales. But we are emphasizing that and that emphasis will have a modest drag on rev reg.

And [Indiscernible] full year to grow inline with the industry for your core revenue, so what is the industry growth that you are expecting this year?

Well, the industry as we talked about at it in the recent past and there has been some recent press out from either the National Restaurant Association or the Hotel Management Segments, it is nominally in the 5% to 7% annual rate of growth.

Okay, thank you.

Yes, sir.

Thank you, and at this time I’m showing no further participants in the queue. I would like to turn the call over to Mr. Jim Dennedy, President and CEO for any closing remarks.

Thank you to everyone for joining us this morning. In closing, I want to take this opportunity to thank the talented and dedicated team at Agilysys, who are responsible for our success and express my thanks to our customers who entrust us with their business. I also look forward to seeing many of you on our September 7 – on September 17, when we plan to hold our second investor day and analyst day in New York. Please contact our investor relations firm, JCIR at 212-835-8500212-835-8500 if you would like to join us. We will be sending out formal invitation shortly. Thanks again for joining us today.

Ladies and gentlemen, thank you for your participation on today’s conference. This concludes the program. You may now disconnect. Everyone have a good day.