Good afternoon ladies and gentlemen, welcome tot the Agilysys Fiscal 2016 Fourth Quarter and Full Year Conference Call. As a reminder, this conference 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. Also the company believes that its forward-looking statements are based on reasonable assumptions. Such statements are subject to risks and uncertainties that would cause results to differ materially. Important factors that could cause actual results to differ materially from these 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'd now like to turn the call over to Mr. Jim Dennedy, President and CEO.

Thank you, Liz and good afternoon everyone. We appreciate you joining us on the call today to review our fiscal 2016 fourth quarter and full year results. Joining me on the call today is our Chief Financial Officer, Janine Seebeck. Before we get started, just a quick reminder that on the call today we will be discussing some non-GAAP metrics, primarily adjusted cash from operations and adjusted EBITDA 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 financial section of the press release issued earlier today. Total net revenue for the fourth quarter increased 11% to $31.9 million. Adjusted EBITDA in our fourth fiscal quarter was $1 million compared to an adjusted EBITDA loss of $600,000 in the same period last year. We reported a net loss for the fiscal 2016 fourth quarter of $1.5 million or a loss of $0.07 per diluted share, which compares favorably to a net loss of $5.4 million or a loss of $0.24 per diluted share in the prior year period. Full year net revenue increased 16% to $120.4 million. We are pleased with both the overall results as well as the fact that we saw growth within each component of reported revenue on a full-year basis. In addition to our top-line growth for fiscal 2016, we also significantly benefited from our fiscal management initiatives resulting in an increase of more than $9 million year-over-year and net cash provided by operating activities and improving our adjusted EBITDA to $4.3 million for fiscal 2016 from $1.2 million for fiscal 2015. Net loss for fiscal 2016 was $3.8 million or a loss of $0.17 per diluted share, which compares favorably to a net loss of $11.5 million or a loss of $0.51…

Thank you, Jim, and good afternoon everyone. Our fourth quarter fiscal 2016 revenue was $31.9 million and 11% increase from total net revenues of $28.7 million in the comparable prior year period. Revenue for the full year grew 16% over fiscal 2015. Looking at revenue in greater detail, products revenue decreased by 1% to $10.8 million a 34% of total revenue during the quarter due to the difficult comp on the back of a large hardware driven project that took place in the fourth quarter of fiscal 2015 which did not repeat in the current quarter. On a full year basis products revenue increased 30% to $41.4 million versus $31.8 million in fiscal 2015 with a significant portion of the growth coming from increased sales related to our existing on-premise proprietary offerings including hardware replacement sales. It is important to note that a portion of the full year growth in hardware sales is the result of the growth that we are seeing across subscription-based sales. Subscription-based sales yield initial revenues of lower margin hardware with the higher-margin subscription revenue being realized in future periods. Total revenue related to our rGuest platform comprised 5% of total fiscal 2016 revenue. Support maintenance and subscription revenue or recurring revenue increased 8% to $15.6 million compared to the fourth quarter of fiscal 2015, down by 7% to $60.1 million on a full-year basis. Driving that growth was a 33% increase in subscription revenues for the fourth quarter and a 29% increase on a full year basis representing 18% and 17% of total recurring revenues respectively. Professional services revenue grew 67% to $5.5 million compared to the fourth quarter of fiscal year 2015 and by 20% on a full year basis reflecting the positive impact of our increased booking volume and enhanced throughput from our…

Thank you, Janine. Before we turn to your questions, I would like to take this opportunity to thank the very talented and very dedicated team at Agilysys. Their work truly drives our success. And I want to thank our many customers and partners who entrust us with their business. With that, let's turn the call over to Liz for questions. Liz?

[Operator Instructions] Our first question comes from the line of Allen Klee with Sidoti. Your line is now open. Please go ahead.

Yes. Hi. Congratulations on the great results. If you could just -- what you just said in terms of -- you might moderately accelerate product development plans for rGuest? How is that going to impact product development expenses?

Well, here is what is happening, from our prior guidance to today, we talked about it in our third quarter call. Customers came to us with opportunities for both rGuest Stay and rGuest Buy. We made a decision in the last three months to pull forward some roadmap items that we had planned to address anyhow. That would require us to use or be a slight user of cash in fiscal 2017. In addition, over the past three months, we’ve developed opportunities with some larger hospitality operators that if those opportunities materialize into awarded contracts, it may require us to invest in product and services ahead of the subscription-based revenue relationship that we would develop with these folks that would require a slightly additional use of cash ahead of realizing the revenue in our P&L. There are already planned enhancements and planned roadmap activities, it is just that the opportunities before us may cause us to pull those forward rather than get to those enhancements over the planned horizon we had originally contemplated.

And Allen, I would add to that I think just from a financial perspective, it's more of a capital spend that Jim was talking about than the operating. So the operating we still think should remain in my list prior levels, it's really that capital investments looking a little bit more there than we had originally anticipated.

Do you have an idea of where capital expenditures will be for next year?

I think it will be slightly lower than this year, but it will be in that probably 10 to 15 range. It will be lower than this year though.

Okay, great. And then, I know you had a user conference in Las Vegas recently, and I was just kind of curious if, kind of if you had any like takeaways of customer feedback and how that went?

Sure, we did. Our user conference is called Inspire, and I think there is probably three key takeaways. We hold an executive summit at that where we had almost 100 senior executives. There were over 400 participants, but we had 100 senior executives from our client base or our customer base attend that executive session, and they gave us strong feedback on our roadmap and on our investments. And what we learned, principally from them was that the investments that we have made in the rGuest platform or the hospitality centric technology platform and having evidence of success of that platform and market gives them increased confidence in buying our current iconic solutions that we have like LMS, Visual One, InfoGenesis, Stratton Warren, Eatec, et cetera. Because they believe in the migration path and there is actually an articulated vision with bits in market that are working. So that's the first take away. The second takeaway was that our fundamental understanding of the silos of information about guest consumption patterns across the property and our desire to integrate these silos of information about guest consumption across the property to give them a better view of guests profitability, not just yielding the hotel or yielding the casino, we are trying to yield the actual guest so that we understand which demographic to recruit and which kind of demographic we are going to fill that bed with a head so that the right profit kind of guest we understand it, we are trying to integrate that data given that visibility. I think the third takeaway, basically just receiving feedback, it wasn't really around the technology; it was not around the vision; it was not around the platform; it was more about our people. Their engagements with our people, whether on services, support, corporate services, and doing fulfillment and just helping the business to business relationship, that we are more responsive to their business needs than our competitors, and we have a fundamental understanding that we are there to support their business, not just sell them something that they value that style of relationship. Those are probably the three key takeaways.

That's very helpful. Thank you. If you look at your major verticals, how would you sort of rank them just in terms of where you would prioritize them in terms of how you see growth coming from over the next year or two?

Yes. Great question, Allen. So, when I look at gaming both travel and corporate, that is our bread and butter, it's over 50% of our revenues; and while that seem to be a rather finite market in terms of let's say property or room count growth, the opportunity there or competitive displacements, and where you see a property come up out of the ground like a Lucky Dragon or some of the others that we see on our horizon, although they are not numerous, we are uniquely situated to serve them, they are size wise relevant to us; they are important to us, they matter. And winning the competitive take outs of the current operators, again, size wise, they are really relevant to us and we think we can continue to gain share. The industry or the vertical in which we have a lower level of overall share participation today and where we see greater numeric and percentage growth opportunities is in the core hotel market. While we have been quite successful with the integrated resorts and luxury properties, we haven't really had the tools necessarily to effectively compete in the core chain hotel market. The advancements in investments we have made in both our iconic and our rGuest products allow us to compete effectively or more effectively in those markets and you see that when I mentioned the Waldorf references, both in Cleveland and Bonnet Creek and Waldorf, Orlando where we are seeing more opportunities in the core hotel market that will drive growth. So, I think if I were to model it on a forward-looking basis, continuing to grow share and casinos and driving greater growth as a core hotel market the two areas in which I would tend to focus our business. Now, that said closely behind the hotel business is a smaller market but the contract food service or managed food service industry is an area where we have a quite specialized service offering that allows us to compete and win business with our friends at Compass and help our friends at Aramark and Sodexo, Guggenheim, Delaware, North et cetera continue to win contract for food service business in their vertical. Although it's a smaller market, I think we have a unique toolset to help those folks compete in that segment of the business.

Okay. And how do you envision for the rGuest platform, how do you kind of envision that in terms of its growth and percent of the total amount of business as you evolve over the next couple of years?

Allen, this is Janine. I would say that as rGuest is predominately a fact-based product what you will see is lower rates of growth as we ramp and start to go those items up because you will get the hardware upfront. So, as it was 5% of revenue this year, I think you will see a slight increase, but then you will really start to see that take-off as variables really get that backlog in and start to get the full recognition of the volume of the deals that are coming through. So not a huge impact in 2017, but it will continue to grow and then really start to escalate as we get past that.

Now that said, some of the larger deals that we made reference to when Janine's commentary around the potential accelerated roadmap investments to secure those large deals, that some of the opportunities that we are pursuing for the rGuest Stay product do have transformational growth opportunities to them. It is something that we're going to be very careful with that we are applying investment dollars against the product in proportion to the likelihood of win or like we did in our contract with our friends in St. Louis where we organize the contract in some statement of work opportunities where the investment in the product was associated with an overall statement of work that when completed demonstrated success in a pilot that rollout would then fall thereafter. So when you look at that contract it was about 18 months of negotiation cycle contract award in let's say July, we did work associated with statement of work, associated with that contract and then a go live first operational property in May. So when you think about that sequence and there let's say 15,000 rooms are in 25 properties, we are talking about opportunities that are potentially 10x that size that we might be able to successfully win at least bookings or a contract within fiscal 2017, work to be done in fiscal 2018 with rollout to be in the mid to latter part of fiscal 2018. So that's the way we think about the case, but that would be transformational growth opportunities and we had more than one that we are pursuing.

That sounds great. And how much does price play a role when you are winning contracts, would you say that is not the key issue or do you have to -- does it have an impact?

Well, on the initial evaluation, yes, Allen, price is always an important parameter out front and we have a lot of competitors that will sell value and so price. And our proposals on initial offering, we are not selling price, we know our technology is superior we have been told that in many, many engagements. What we want to express is that the technology solution we have has a long dated investment value. And as a result, the price that we would charge for it on a comparable basis should be higher because it is going to persist and be -- have a longer useful life. Now, ultimately the operators that we deal with today need to secure a solution that while they believe in the longer term vision of the platform and they believe in its platform value for them as an operator, they are trying to solve an acute problem right now, check-in, checkout, housekeeping that kind of stuff. So our approach to that would be a module-based pricing approach where we would price at least initially specific services and limited package like check-in, checkout housekeeping things of that nature and charge a comparable but yet small premium to market value. But any additional value you want to add on to the rGuest platform, we would increase through connection licenses or additional PMS services. So that's the approach that we're taking because we know competing products in the market today cannot scale to what we have in terms of the technology platform and cannot provide open and addressable enough services in a technology platform where they could be more flexibly used in the future like rGuest Stay. So that's how we are approaching the product and pricing.

And I assume that when you gave guidance for fiscal 2017, you're not including any of these transformational type of wins?

No, sir. What we're doing is, we are looking at our pipe -- we're looking at our pipe that we know exist today and just like we did last year. When we go to the line, we are looking down field for uncovered receivers, and we see one, we are calling lawn bowls, we are going to take it. And that's what led to opportunities in 2016 for outside growth than what was forecasted. And we think the same thing is going to continue to happen. We have a plan and we have a plan that we can grow the company at 10% to 13% but we are not doing it with blinders on, we're going to the line and we're looking downfield and if we see another uncovered receiver, we're going to continue to throw some lawn bowls. But, we are not betting the business on throwing lawn bowls every time we go to the line.

Okay. Could you comment on the size of your sales force and any plans of changing that during the year?

So, we are currently sitting in the low 30s from a quota carrying sales rep perspective as the business scales then there is an equation that they are looking at nominal increase this year as we continue to see the revenue plan achieved but nothing substantial at this time that fills into the point.

Okay. And then, just maybe finally, could you just remind me and everyone of the kind of longer 3 to 5 year plan if anything has changed on that of what we are -- you see the company could be?

Outside of some of these transformational growth opportunities, I don't see that we see a tremendous, I don't know, let's say a step function change in the business plan, we still think looking out let's say to 2020, we are going to be just under let's say, $190 million to $200 million size company and generating somewhere and let's say that, call it low teens percent in terms of EBITDA, so let's say like around $25 million to $30 million of EBITDA. Now that said, these transformation opportunities that we are pursuing today, which you are like to take them, win them and try to make, let's say, 2019 look like 2020 or make 2018 look like 2020. And that's the type of change that we think is available to us. It's a matter of winning the contract, securing with contract the development expense against the future opportunity and then executing. So, that's still the same trajectory but we're not going to try to sell today that we're going to win all of these and we are going to turn 2018 into 2020. We still got to win them all.

Okay. Great. Thank you so much. And congratulations.

Yes. Thanks.

[Operator Instructions] Our next question comes from the line of Phil Bernard with Eilers & Krejcik. Your line is now open. Please go ahead.

Hi, guys. Thanks for taking my call and congratulations as well as on finishing on a strong year.

Thanks.

I know a lot of basis were just covered, so I will try and keep this short. Looks like there were some decent crossover sales within the quarter, how do you guys see that moving forward? What's the potential there?

So, Phil in general, we are still as a customer account perspective we are still seeing most new opportunities having more than one product with it within the existing base. I think we are kind of getting to where we can kind of max that out. But, we will still see some crossover revenue I think in 2017, but I don't it will be a huge contributor. But I still think it is adding value. And I think our number is less than 33% of our customers who have more than one product. So there's definitely opportunity but there's also segment where like food service where they really put focus on InfoGenesis, right where we can expand. So, there is still opportunity there. There is some assumptions for that in the plan. But, it's not a huge component, if you will.

Okay. Beautiful. Last question, are you guys looking at investing in maybe some M&A and tacking on some technologies to help grow the business?

I will give you a standard answer for most publicly traded companies, M&A is always an element or component of our overall business strategy. We are active in the market and evaluating technology that complement our core. We don't see need today to invest in -- through M&A or otherwise let's say around the POS or the PMS. We don't believe we need to acquire something whether it's a marketed technology. The way we've always looked at it has been people products and then markets. So, great people that make amazing products and help us penetrate more deeply into either the markets we are in or conjuncture markets that we want to be in. So when we look at M&A opportunities available to us today it's largely component technology that when we deliver a property management or point-of-sale service, we can seamlessly sell to approximately the same buyer, additional services or technology on top of or around those core technologies that will add value to the overall deal while giving us operating leverage in its delivery. So that's the way we think of it. We're not thinking of cash expenditures necessarily the buying of the POS, or the buying of the PMS.

Got it. Okay, great. Thank you, guys.

That concludes today's question-and-answer session. I would like to turn the call back to Mr. Dennedy for closing remarks.

Thank you, Liz. And thank you all for your interest in our company. We believe Agilysys continue to make progress as we focus our resources on the highest value opportunities in our chosen end markets and manage the business for the longer-term to deliver sustainable value to our customers and our shareholders. We look forward to updating you on our progress during our fiscal 2017 first quarter results call. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.