Agilysys Inc

NASDAQ:AGYS

Earnings Call Analysis

Solid Q1 Financial Results with Strong Subscription Growth

In Q1 fiscal 2025, revenue rose 13.3% to $63.5M, with subscription revenue soaring 32%, now forming 58.1% of total recurring revenue. Gross profit margin improved to 62.8%. Despite a 22.7% decline in product revenue, professional services rocketed 39.8% to $15.6M. Adjusted EBITDA reached $12.1M, double the prior year, and free cash flow reversed from a $3M loss to a $0.2M gain. The company expects full-year revenue at the lower end of the $275M-$280M range, confident in achieving 27% subscription growth and maintaining profitability above the 16% EBITDA margin guidance.

Quarterly Performance Overview: A Strong Start Despite Challenges

In the first quarter of fiscal 2025, the company achieved record revenue of $63.5 million, marking a 13.3% increase from $56.1 million in the same period last year. Despite this success, product revenue faced challenges, decreasing by 22.7% year-over-year due to a shift in customer preferences towards consumer-grade devices. Nevertheless, strong performance in professional services and subscription revenue, which grew by an impressive 32%, helped offset some of these losses.

Recurring Revenue Trends: A Focus on Subscription Growth

Recurring revenue now represents 59.9% of total revenue, an increase from 57.3% year-over-year. The subscription revenue increase contributed significantly to recurring revenue growth, totaling $38 million with an 18.4% increase compared to the previous year. Subscription revenue, making up 58.1% of total recurring revenue, was driven largely by property management systems (PMS), which saw a 46% increase year-over-year, and point of sale (POS) modules, which grew by 28%.

Profitability and Cost Management: Leaner Operations Yield Better Margins

The company reported a gross profit of $39.9 million, with a gross profit margin of 62.8%, up from 59% a year ago. Overall gross margins for the fiscal year are expected to remain above 60%. Operating income was $5.7 million, and net income reached $14.1 million, reflecting the company's ability to minimize expenses effectively. Total operating expenses declined to 43.8% of revenue, down from 47.8% in the previous year, showing improved cost management.

Outlook and Guidance: Conservative Projections Amid Robust Growth

Looking ahead, the company maintains its revenue guidance for fiscal 2025, estimating total revenue between $275 million and $280 million. Given the current trends, they anticipate being at the lower end of this range, particularly as product revenue continues to be under pressure. However, subscription and professional services revenue are expected to outperform expectations, with subscription growth guidance set to remain at a minimum of 27% for the year.

Sales Momentum and Market Strategy: Expanding Reach and Customer Base

The sales team has expanded by 30% compared to the previous year, particularly in the hotels and resorts vertical. The company signed 16 new customers during the quarter, with most engaging in subscription agreements. They are actively targeting marketing efforts, particularly in competitive areas, which is expected to enhance sales opportunities and promote deeper integration of their software solutions across existing clients.

Implementation Challenges and Future Prospects: Navigating the Transition

While there were implementation challenges related to transitioning from old POS systems to new cloud-native versions, the company believes these issues are largely resolved. Future POS sales are expected to rebound, particularly given the advancements in technology and the recent customer deployments. As customer feedback continues to improve, confidence in the adoption of their offerings is growing, which positions them for sustained market share gains.

Earnings Call Transcript 2025-Q1

[Operator]

Good day, ladies and gentlemen, and welcome to the Agilysys 2025 First Quarter Conference Call. As a reminder, today's conference may be recorded. I would now like to turn the conference over to Jessica Hennessy, Senior Director of Corporate Strategy and Investor Relations at Agilysys. You may begin.

[Jessica Hennessy, executive]

Thank you, Victor, and good afternoon, everybody. Thank you for joining the Agilysys 2025 First 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 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 meet the provided guidance levels, our ability to increase sales and market share our ability to maintain profitability levels 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.

[Ramesh Srinivasan, executive]

Thank you, Jess. Good evening. Welcome to our fiscal 2025 First Quarter Earnings Call. Joining Jess and me on the call today is Dave Wood, CFO, at our Alpharetta, Atlanta headquarters.

Let me cover sales performance first before moving on to revenue, profitability and other business details. All the sales numbers discussed in this call are measured in annual contract value terms. None of the sales numbers mentioned include anything from the Marriott property management system PMS project. including for services. The services and development work we are performing for the Marriott PMS project, which continues to progress according to plan, is reflected in our services revenue levels, but is not counted in any of the sales numbers mentioned. Q1 Fiscal 2025 represented our best ever Q1 sales start to a fiscal year and was in line with the high level of sales success we have had over the past couple of years.

With respect to sales pertaining to property management systems, PMS, and PMS-related modules. Q1 was the best quarter during my 7.5-year tenure here and the fourth consecutive sequentially increasing quarter. Our ongoing PMS sales success is indicative of the gradual buildup of improving sales momentum, aided by the recently created state-of-the-art cloud-native PMS and related add-on modules. We have mentioned during previous calls, that our extensive R&D investments during the past several years, we are focused on, among other things, 2 major objectives, both of which have now been achieved.

One objective was to completely revamp from the ground up, the core point-of-sale POS, property management systems, PMS, and inventory procurement products. By revamp from the ground up, we mean to completely rewrite them as cloud-native software solutions that can also work on-premise when required by customers. And simultaneously, also unify aspects like staff-facing and guest-facing point-of-sale functions into 1 technology platform base.

The second objective was to create add-on experience enhancers, cloud-native software modules integrated with the core solutions, thereby creating a compelling ecosystem of hospitality software solutions. Completing this objective has given us a distinct competitive advantage. These 20-plus add-on software modules have given us many additional sales opportunities during the past few years. The first quarter of fiscal 2025 was our best sales quarter thus far, for add-on modules and was more than twice as high as Q1 last year. And about 20% higher than the previous best sales quarter for add-on modules, which was the sequentially preceding Q4 of fiscal 2024.

Q1 fiscal 2025 was also the second highest quarter ever for the Americas hotels and resort sales vertical. The previous highest sales quarter for this vertical occurred a little more than a year ago, and featured one particularly large perpetual software license-based sales win. By contrast, sales during this quarter was more broad-based and featured multiple significant sales contracts. Among these, several involved licensing of multiple solutions, including one for 9 properties of Divi Resorts with operations across 5 countries, Aruba, Barbados, Bone, St. Cray and St. Martins.

Given our current modest market share in the Americas, hotels and resource vertical, we have huge potential here as we continue to improve the solutions add more firepower to the sales team and invest more in targeted marketing efforts. The gaming casino sales vertical continues to lead sales levels. among our portfolio of verticals, including during Q1, achieving close to peak levels.

This was the third best quarter for sales in the Asia Pacific APAC region since the pandemic highlighted by the win at Hamilton Island Australia, featuring PMS and multiple add-on modules after a tough, long and thorough competitive selection process that involved about 40 internal stakeholders across the property and 7 competitors. Hamilton Island is the largest integrated Island resort in the Southern Hemisphere offering a range of accommodation options from self-catering holiday homes and apartments, to luxury hotels, 20 casual and fine dining restaurant options, a couple of spas, a 300-plus berth marina and over 65 tours and activities.

Hamilton Island has been a POS customer of Agilysys for several years. Like Inspire Resort Korea, Hamilton Island should become another integrated hospitality solutions ecosystem showcase site for us in the Asia Pacific region.

With respect to sales deals won during Q1 fiscal 2025, April to June, we added 16 new customers, 15 of whom signed subscription license-based agreements. There was an average of 3 products or modules licensed per new customer during the quarter. We also added 72 new properties that did not have any of our solutions before, but the parent company was already our customers. Of the 88 new properties added during the quarter across new and current customers, about 95% were either partially or fully subscription software license based.

In addition, there were 115 instances of selling at least one additional solution to properties, which were already using one or more of our products. In total, these 115 deals accounted for the sale of 257 solutions. This quarter was our best sales quarter thus far with respect to the number of new product sales instances and the number of total new solutions sold across those instances.

Moving on to revenue. Q1 fiscal 2025 was the tenth consecutive record revenue quarter at $63.5 million, 13% higher than the comparable prior year quarter. Onetime product revenue, which consists of perpetual software licenses and hardware revenue was lower than expected at $9.9 million with an increasing customer preference for subscription SaaS-based licenses. Revenue from perpetual software licenses continues to be challenged and was at its lowest level in a couple of years this quarter.

The other part of product revenue, hardware was also lower than our expectations. As we have noted previously, hardware attached to point of sale, POS sales agreements, is now about 20% less because the modernized version of our POS terminal now supports all major operating systems including iOS and Android. This enables customers to use for a portion of their terminal endpoint needs. Consumer-grade mobile devices like iPads and iPad mini that they can purchase off the shelf as well as modern all-in-one devices, they can purchase directly from various payment gateway providers and manufacturers.

This flexibility is a positive for customers and for the industry overall. Both these trends less sales of perpetual software licenses and less hardware in each unit of POS sales are expected and naturally evolving ships caused by an increasing preference for cloud SaaS-based solutions and technology improvements, providing support for consumer-grade devices, which give our POS solutions a competitive edge.

The first of these trends involving shift to subscription-based licenses is unlikely to be reversed in the future. Apart from 1 or 2 big on-premise wins involving perpetual software licenses, which could happen now and then. But the second one, affecting hardware sales can be at least partially mitigated by increasing POS sales levels. The additional product revenue-related challenge we have faced during recent quarters, has been caused by less than optimal POS.

Our POS business has been going through a tough phase as it transforms itself from old technology to modernize and unified state-of-the-art cloud-native solutions. We've been working through this POS technology transformation in stages during the past couple of years. The POS system consists of a few distinct parts. The terminal endpoint front end, middle configuration layers and back-end servers. We have modernized them one by one in a phased approach and implementations during the past couple of years have involved complex permutation combinations of old and new technology, making implementations difficult.

We have paid a business price for such difficulties. The good news is all the POS modernization and unification engineering work have now been completed and the quality of recent new implementations involving new product versions have improved by leaps and bounds becoming a lot less complex and much easier to handle. Earlier this month, we successfully installed guest-facing food and beverage kiosks at one of the cafes at Disneyland Paris, making a first-time achievement for that famous theme park. This implementation involved all the recent cloud-native versions of our POS software modules and was carried out under a short high-pressure project time schedule. The initial results with respect to guest adoption of the kiosks have been top class and very encouraging.

We expect the number of such kiosks installed at this park to expand significantly during the next few months. After our initial successes with installing 100% mobility-based modernized POS systems, on a couple of their ships, a major cruise ship company has expanded the use of our POS systems to several additional ships and have in addition, recently adopted the use of integrated Agilysys loyalty and promotions modules to automate widely used crucial processes, which used to be manual before.

Other successful recent POS implementations involving the most recent modernized product versions include those completed for a famous international location in New York City. At a state-of-the-art premium airport launch that was opened recently and had been in the news and at a well-known botanical garden in Philadelphia. Resorts [indiscernible] Las Vegas, which was one of the very few Las Vegas-based properties not using an Agilysis solution recently successfully implemented the most recent versions of InfoGenesis POS, guest-facing kiosks, and a couple of other POS add-on modules at their famous foot court serving multiple food outlets, replacing a competing system. Now that's not an objective. Famous food court is the actual name of that food court.

We'll be implementing the most recent POS product versions at all Marriott properties who signed with us, following our recent selection as one of the approved POS vendors. While on the subject of Marriott, our cloud-native modernized Agilysys Golf solution was recently chosen as the brand standard for Marriott properties and has already been successfully implemented along with membership, book and digital marketing software modules at one property with a couple of more implementations coming up in the next few weeks.

In summary, A lot of good things are happening with our new cloud-native POS product versions in the field now. We should be able to move past the old to new transformation-related business challenges within a reasonable time frame. We expect our POS sales numbers to rebound soon and reach levels higher than ever before in the future, which, among other things, should also help improve hardware product revenue levels.

Recurring revenue during Q1 fiscal 2025 grew to $38 million and 18.4% increase over the comparable prior year quarter, driven by a 32% increase in subscription revenue. In absolute number terms, Q1 recurring revenue and within it subscription revenue grew by $5.9 million and $5.4 million, respectively, year-over-year, both of which are records for year-over-year growth. Subscription revenue constituted 58.1% of total recurring revenue, the highest level yet.

Recurring revenue has now increased sequentially for 16 consecutive quarters. Subscription revenue from add-on experience enhancer software modules constituted 20.4% of total subscription revenue this quarter compared to 17.4% during Q1 last year. Our ability to provide end-to-end solutions continues to be a significant competitive strength, keeping our sales win-loss ratios at impressive levels. The 32% year-over-year increase in total subscription revenue was, in turn, driven by a 46% year-over-year increase in subscription revenue pertaining to property management systems, PMS, and PMS-related software modules and a 28% year-over-year increase in point of sale, POS and POS related modules. Please let me repeat that. The PMS subscription revenue universe grew by 46% year-over-year, and the larger POS one grew by 28%. There are not many vertically focused enterprise software companies with a broad set of solutions, which can claim that kind of growth rates across their 2 primary core solution sets.

With respect to subscription-based implementations, Q1 fiscal 2025 was the sixth consecutive record quarter for combined ARR value of subscription SaaS projects implemented, which obviously augurs well for continued solid good future subscription revenue growth.

With respect to backlog levels, compared to the end of the sequential previous fiscal 2024 Q4, overall combined product services and recurring revenue backlog at the end of fiscal 2025 Q1 improved slightly and was at 89% of previous peak levels. While product and services backlog levels improved, thanks to good sales performance, recurring revenue backlog decreased slightly due to increased implementation velocity. We are retaining all elements of the full fiscal year 2025 guidance that was provided a couple of months back.

Onetime product revenue challenges have created some top line pressure. It is possible full fiscal year 2025 revenue will end up closer to the lower end of the $275 million to $280 million revenue range. We expect revenue levels this fiscal year to be tilted more towards the second half of the year compared to recent fiscal years by about a percentage point.

We are off to a good start with respect to subscription revenue growth and are confident in the at least 27% full year year-over-year growth guidance provided, even given comparisons will become tougher during the upcoming quarters of fiscal 2025. Our business is performing well also with respect to profitability levels, and we are confident with respect to the EBITDA by revenue, 16% guidance level provided earlier.

With that, let me hand over the call to Dave for more color on financial and other business details.

[Dave Wood, executive]

Thank you, Ramesh. Taking a look at our financial results, beginning with the income statement. First quarter fiscal 2025 revenue was a quarterly record of $63.5 million, a 13.3% increase from total net revenue of $56.1 million in the comparable prior year period. Onetime revenue consisting of product and professional services was up 6.4% over the prior year quarter, while recurring revenue was up 18.4%.

We continue to see significant positive momentum in the business. However, the product revenue challenges we began seeing in the second half of last fiscal year have continued during the first quarter. During Q1 fiscal 2025 compared to the previous year, product revenue decreased by 22.7%. As we have discussed in the past, customers are choosing more consumer-grade devices, which is driving down hardware-related products revenue.

In addition, Q1 FY '25 had our lowest proprietary software revenue for on-premise deployments in the last 2 fiscal years. The lack of large on-premise deals, slower POS sales and more customers choosing consumer-grade devices led to product revenue that was lower than previously expected. Despite the lower-than-expected product bookings, Q1 sales remained strong and was a record first quarter. Professional services increased 39.8% over the prior year quarter to a record $15.6 million. Services gross margin was 33.9% and in line with the sequentially preceding quarter.

We expect services margins to remain in the high 20% or low 30% during the next few quarters. Professional services backlog once again increased the record levels despite record professional services revenue. Total recurring revenue represented 59.9% of total net revenue for the fiscal quarter compared to 57.3% of revenue in the first quarter of fiscal 2024. Subscription revenue grew at 32% for the first quarter of fiscal 2025. Subscription revenue comprised over 58.1% of total recurring revenue compared to 52.2% of total recurring revenue in the first quarter of fiscal 2024.

Subscription revenue increased sequentially $1.3 million from the fourth quarter of fiscal 2024, which was on the top end of our quarter-over-quarter sequential growth expectations.

Moving down the income statement. Gross profit was $39.9 million compared to $33.1 million in the comparable prior year quarter. Gross profit margin was 62.8% compared to 59% in the first quarter of fiscal 2024. Overall, total gross margin should remain just north of 60% for the full fiscal year. Combined, the 3 main operating expense line items, product development, sales and marketing and general and administrative expenses when excluding stock-based compensation were 43.8% of revenue in fiscal 2025 first quarter compared to 47.8% of revenue in the prior year quarter.

Excluding stock-based compensation, for the Q1 fiscal year 2025 product development decreased to 19% of revenue compared to 20.9% of revenue in the comparable prior fiscal year. General and administrative expenses remained steady at 14.2% compared to 14.3% of revenue last Q1, while sales and marketing decreased from 12.7% of revenue to 10.5% of revenue. Operating income for the first quarter of $5.7 million, net income of $14.1 million and gain per diluted share of $0.50 were each greater than the prior year first quarter gain of $1 million to $1.1 million and $0.04.

Adjusted net income normalizing for certain noncash and nonrecurring charges of $8.3 million compared favorably to adjusted net income of $4.6 million in the prior year first quarter, and adjusted diluted earnings per share of $0.30 compared favorably to $0.18. For the 2025 first quarter, adjusted EBITDA was $12.1 million compared to $6.3 million in the year ago quarter. We are pleased to see our profitability levels being well ahead of our original FY '25 plan with adjusted EBITDA coming in at 19.1% of revenue.

Moving to the balance sheet and cash flow statement. Cash and marketable securities as of June 30, 2024, was $144.1 million compared to $144.9 million as of March 31, 2024. We remain comfortable with our current levels of cash. Free cash flow in the quarter was $0.2 million compared to a loss of $3 million in the comparable prior year quarter. As we have said in the past, adjusted EBITDA and free cash flow continue to be good proxies for the health of the business over the course of the fiscal year.

Due to working capital fluctuations, our free cash flow tends to be significantly better in the second half of the fiscal year compared to the first half. During fiscal year 2025, product revenue will continue to be a challenge to top line revenue. However, professional services and subscription revenue are currently ahead of plan, keeping us at the lower end of the $275 million to $280 million guidance range, assuming Q1 is the floor for product revenue.

Despite the pressure on top line revenue, our profitability levels are coming in comfortably above our plan and trending north of the 16% full year guidance given last quarter. In closing, we are pleased with our Q1 fiscal year 2025 financial results and the solid business fundamentals for future revenue growth.

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

[Ramesh Srinivasan, executive]

In summary, looking back, it is gratifying that we have successfully conquered such a broad and deep technology transformation that has now positioned us to serve the hospitality industry meaningfully better than our competitors. Such a massive transformation of the business and underlying solution offerings is not without its challenges. Current and upcoming implementations, involving only the new state-of-the-art product versions will become increasingly smoother and steadily reduce the need to enhance and support 2 distinct sets of products based on vastly different technologies.

We are encouraged by the success we are seeing in our recent POS implementations and expect to see a rebound in POS sales levels during the second half of this fiscal year. One quick note of interest about our POS solutions and how they performed during the global system outages that made recent headlines. We obviously wish system outages like this never happen. However, we could not help but feel some pride about the quality and robustness of our technology when we heard from several customers that the run offline until system connections come back feature of our InfoGenesis POS system serve them well to preventing frontline business disruptions.

Even with respect to the back-end service, which were down, we were among the first vendors to be back up and running. Ultimately, better product, service and support will always shine. And we are happy to be in a great position now with respect to both technology and support levels. Our PMS universe continues to make rapid progress forward even while competing against well-entrenched major competitors. The superiority of our solution ecosystem, the ability to support multiple operating systems of one core base, the value of integrated systems that minimize the need to bring together multiple vendors, the advantages of each system being best of breed, whether operating alone or as part of our tightly integrated ecosystem and the speed of innovation possible with such integrated systems will continue to accelerate our growth.

One final note. Our current global quota carrying sales personnel strength is about 30%, higher than last year around the same time. Our current global sales pipeline is significantly higher than it was at the same time last year, signaling increasing market awareness of Agilysys as a top hospitality solutions provider and of the value the solution ecosystem delivers. Our overall business remains in excellent shape, and we are positioned well for continued disciplined and profitable growth.

With that, Victor, let's open up the call for questions.

[Operator]

[Operator Instructions] Our first question will come from line of Mayank Tandon from Needham.

[Mayank Tandon, analyst]

Ramesh, Dave and Jess. Ramesh, I wanted to -- maybe for Dave as well. I just wanted to understand the outlook a little bit. So you had a very strong performance on subscription revenue in the first quarter. As you said, 32% growth and also very strong EBITDA margins that would imply obviously a deceleration in growth in the rest of the year and also in terms of profitability. So could you just kind of walk through what the drivers are? Is it just being conservative at the beginning of the year? Or is there something else going on that might also be driving the deceleration both in terms of growth and margin expansion.

[Dave Wood, executive]

Yes, I think we certainly got out to a strong start in the year. The 32% subscription growth is really strong. The product mix of what we sold, there was a little bit, like Ramesh talked about in the script, there's a little bit less point of sale and a little bit more property management than expected, which put a lot of pressure on the top line revenue and the product number. But yes, we got out a lot faster than we would have expected on the subscription line. For us, I mean, I think we're trending north of the 27%, but we're kind of -- we're holding the guidance where it is today. And in professional services, we're trending ahead of kind of the 30% guidance we gave last quarter, we're trending closer to the 35% growth.

[Ramesh Srinivasan, executive]

And profitability.

[Dave Wood, executive]

And profitability, where like we said in the script, we're certainly trending ahead of the profitability guidance. It's likely in the second half of the year as product revenue comes back, the gross margin could decelerate a point or 2, which pulls us back closer to the 16% than the 19% we're at today.

[Mayank Tandon, analyst]

Got it. Okay. I understand. Makes sense. And then I just wanted to also ask you, maybe, Ramesh, globally, as you go after deals in Asia and other parts of the market, what are the gating factors to driving the same type of adoption that you've seen in the Americas in terms of making sure your win rates are strong and you're able to land some of these big opportunities, both on the PMS and on the POS side.

[Ramesh Srinivasan, executive]

Yes. So Mayank, it is -- especially in international regions and in some other regions as well, it truly is a matter of settling down and establishing the new state-of-the-art versions of our products. Like these products are young. And like internationally, we have quite a few showcase sites now, Disneyland Paris, Inspire Korea, Hamilton Island. So we are building them up one by one by one. And there are some other big customer names that I'm not allowed to mention here. So it is a matter of establishing our products. The newer versions are quite young, and customers know that these products are quite young. So we have to get through that phase, right, where more and more reference customers come up, it will get adopted faster and faster.

And also, I should tell you, Mayank, as far as the competitor world is concerned, they fight very hard business battles. We don't see any product innovation related challenges in the marketplace. It is quite obvious that our product ecosystem is superior. But there are business challenges when competitors fight you with very low pricing and provide special renewal deals that are extremely low price. So those kinds of business competition challenges we have to get past. But fundamentally, it is a matter of establishing our new product versions and getting more and more reference customers under our belt.

[Mayank Tandon, analyst]

One housekeeping item. What is global sales today as a percentage of total or in terms of revenue, any metric you can share around that?

[Ramesh Srinivasan, executive]

Our global sales, this was our -- we don't share it as a percentage of revenue, Mayank, but this was our best ever Q1. We've never had an April through June quarter better than this. So a very good start to the fiscal year. And it is sort of in line with the level of sales success we've had for the last few quarters.

[Operator]

Our next question will come from Matt VanVliet from BTIG.

[Matthew VanVliet, analyst]

I guess, Ramesh, wanted to dive in a little deeper on some of the slower progress of the POS business that you mentioned. Just wanted to maybe get a little time frame around when you saw maybe the biggest areas of struggles lately. And then it sounded like later in your prepared comments, you indicated that it seems to be turning around and that the newer products are showing better performance. So just curious if you could put a little bit more both timing parameters and then maybe any inflection point that you're seeing in more of like a bookings type mix?

[Ramesh Srinivasan, executive]

Yes, Matt. So basically, the POS business has gone through a massive transformation from old to new. And unlike PMS, where you take a product and you replace it entirely with the new one, the POS transformation has gone through in stages because the POS systems are huge systems and they consist of multiple distinct parts, the terminal front end, the configuration server-related layers in the middle and then the back end.

And the only way you completely transform the technology of that kind of business is to do it stage by stage. So you first do the terminal front end and then you do the middle layer, the back-end server and sometimes in a reverse order. So many of the implementations we've been doing in the last few quarters have involved a mix of both because customers want part of the new and the other part of the new is not yet ready, so they go with the old and that has caused us some implementation challenges. And that gives pause to certain customers before they invest in our new products.

Now that phase has now ended. We have gone through that for the last few quarters. That is ended because like if you are a new customer now, Matt, and you sign with us, you're only going live with all the modern versions of all the 3, the front end, the middle layer and the back-end server are all new. So it's a lot simpler for us to handle. So the new customers signing up now, and I gave you a few examples during my initial script where many big customers are adopting all the new ones to excel [into sales]. So going forward, all the new customers will only be on the new modern versions, which makes it a lot easier, but we have to undergo a transformation of our current customers to carry them to the new. And once the current customer's implementation start going well, it is simpler starts producing great results, we will turn around with POS sales. In terms of timing, I think it is the second half of this fiscal year, we are a few months away. It is not too far away.

[Matthew VanVliet, analyst]

Okay. Very helpful. And then on some of the successes you've had on the PMS side, any breakdown that you can help us with in terms of the 3 PMS products that are out there? And how much additional attention has been brought to the state product as Marriott has selected that.

[Ramesh Srinivasan, executive]

In general, we don't break it down by PMS product. In general, our PMS successes have been quite broad-based. It is just not based on, of course, the Marriott PMS agreement is not counted in anything so far. It's not counted in sales or anything else. So the sales have been broad-based, many small and big customers signing up for the PMS products, and a lot of the progress has been with our cloud-native solutions now. And so across PMS, as customers look at the guest journey, the demos across multiple products, the adoption has been very encouraging and broad-based. It is just not based on one big deal we have done with PMS. And it's very encouraging. And our PMS pipeline also is the best that it's ever been now. So we continue to be very encouraged by how much progress we are making in the marketplace with PMS.

[Operator]

One moment for our next question. Our next question will come from the line of Stephen Sheldon from William Blair.

[Stephen Sheldon, analyst]

First one here, I wanted to ask about the goal to get to 900,000 rooms operating under your property management software over the coming years. I think the last [indiscernible] point one we had was 300,000 rooms live at Marriott, I think you've talked about adding another $450,000 as that goes live. So I just wanted to get updated thoughts on where that other 150,000 kind of get or take rooms could come from, especially as we think about new customer wins, expansions with existing customers, et cetera. And how confident are you about meeting or exceeding that now given the strong sales momentum that you're seeing in the PMS category?

[Ramesh Srinivasan, executive]

Yes. Welcome to Agilysis Stephen. It's great to have you cover us. Yes. so basically, Stephen, for the last, say, couple of years or so, we've stopped putting too much accent on the number of rooms and the number of endpoints kind of thing because we have so many products to sell. So we've started measuring sales more in annual contract value terms, and we don't spend too much time with exactly spending our time on the number of rooms and all that. But I do understand it is of interest to you. So the way I would describe it is our current PMS universe is less than 300,000 rooms is what we have said before as well. And if you look up -- and we've always said publicly that the Marriott PMS opportunities for a majority of the U.S. and Canada properties, you add up the U.S. and Canada properties, it adds up to about 950,000 rooms. So you assume a majority of that is 450,000 or 500,000 rooms. So you add up the 500 to the less than 300,000 numbers we have, that gets you close to that. And of course, we have tremendous momentum with our PMS sales now.

But our products are still new to the market. They are still young in the sense, the modernized state-of-the-art solutions are young. But I think, Stephen, if we put too much emphasis on the number of rooms, we are sort of missing the point, at least partially because of the number of other products and modules we can sell with it. The price we get for per room per month, which is the typical metric they use in this industry is quite high for us because the customer doesn't buy just the PMS, but they buy a few modules along with it, which are all very lucrative for our software modules. So the short answer is, I wouldn't think of it all in terms of number of rooms.

Having said that, you're not far off with your calculation because the Marriott PMS itself, if all goes well, should be 450,000 to 500,000 rooms. And there are a lot of new customers signing up with us now. So you're not far off with your calculation, but there's a lot more to that because every room is a lot more value to us than it would be to a typical PMS provider because we have many modules that we can sell along with it.

[Stephen Sheldon, analyst]

Got it. That's really helpful. And that kind of ties into my follow-up, which is just -- as you think about the product portfolio you have now beyond kind of core PMS, are there specific products that you're more optimistic than others about potential traction that could push monetization per room higher? And I guess asked another way, where are you the most optimistic about your product portfolio from an add-on module perspective when you think about medium-term incremental monetization.

[Ramesh Srinivasan, executive]

Yes, Stephen. So to start on the POS side, which has lesser add-on modules on the PMS side, the remote ordering tool on demand, and we count the guest-facing kiosk as a core product, not as an add-on, but that product also has tremendous demand now and has been doing very well. And there are other products along with PMS as well that we sell that are smaller. But the big opportunity is on the PMS side of it. And each of these add-on modules have tremendous potential, but some have a bigger market than the others.

I wouldn't go into a list of all the products, but we'll do it privately for you, Stephen. But one thing to realize is there are hospitality technology providers now whose business involves only a couple of these add-on modules and their business is almost half our size and in some cases, almost our entire size. Like if you think of us as a $275 million annual revenue kind of hospitality technology providers, there are providers who are tens of millions of dollars, and in some case, even $100 million who are just based on 1 or 2 of the add-on modules. So all these add-on modules have enormous potential. Some have a bigger market than the others.

[Operator]

Our next question will come from the line of George Sutton from Craig Hallum.

[George Sutton, analyst]

Ramesh, I wonder if we can clarify something relative to your implementation challenges that you've had on the point-of-sale side given the plethora of options on the hardware. You mentioned that's getting better now, and you are saying that your point-of-sale business you expect to rebound soon. So just I wanted to put all that together and make sure that's -- that's exactly how you're kind of layering it out going forward.

[Ramesh Srinivasan, executive]

Yes, George. That is close, but only thing is I wouldn't put it on hardware, though -- and in terms of the complications, it affects hardware revenue. I get that. But the complications were more pertaining to the software pieces of it, there are 3 distinct pieces to the software. One of them involves hardware as well, which is the front-end terminal endpoints that you typically see in restaurants. But the back end of it is all software and contains of various major pieces of software. And for the last year or so, we had to mix and match various pieces of that software, some that are completely modernized and state-of-the-art new and some that are old because the corresponding piece is the new ones are not ready. But we have past all that now.

So now if you own a major enterprise, major restaurant and a major enterprise, you will only go live, you sign up with us, you will only go live with the modern version. So you won't even be aware of the old versions. So those complications are behind us. But we did go through that complicated process of transforming the business for the past few quarters. And that has caused a little bit of pause among customers before they invest in us, but that is now getting into our past. We should get over that phase very soon now.

[George Sutton, analyst]

Got you. And you mentioned adding firepower to your sales system and also increasing your marketing efforts, and this was sort of early in your script. I want to make sure I had some sense of quantification of that plan.

[Ramesh Srinivasan, executive]

Yes. So sometimes the sales and marketing numbers that you see in the P&L could involve onetime thing. So don't get too caught up in the comparisons between Q1 and Q1. There was a certain timing of certain shows and certain consultants forms that we held in the last Q1 that was not there in this Q1. So let's leave that aside.

So the quota carrying sales personnel are about 30% higher now, today than it was a year ago, 30% higher. And a lot of this has been in increases in the Hotels and Resorts Americas vertical and in international locations. In Europe and Asia, we have expanded our sales teams -- and in APAC, we are going through one more expansion of the sales team in the next coming months. And a lot of the expansion internally here -- sorry, in the U.S. have been in the U.S. hotels and resorts verticals. So we continue to expand our sales teams and the marketing efforts are a lot more targeted now. And as we get more successes, we are getting ready to invest more money in it.

[George Sutton, analyst]

Got you. Just one other thing. You mentioned that you were named the Golf brand standard for Marriott, we haven't talked a lot about add-on module opportunities for Marriott, but could you just kind of put those 2 pieces together? Are we talking about that Golf being added to a number of the Marriott properties ultimately?

[Ramesh Srinivasan, executive]

Yes. That is true of Marriott and other customers as well, George. So Marriott did make Agilysys Golf, the brand standard for their properties. And many of their managed properties should be adopting golf during the short term. And then, of course, the franchise owners and all will make their own decisions as they go forward. But Agilysis Golf has been declared as the brand standard for that. And that is true for many of our other bigger customers as well. They initially sign up for a couple of products and then they see the benefits of the ecosystem and they continue signing up for newer products.

Like if you notice in our results, what we mentioned, the number of new product instances of 115 sales in this quarter was a record, but it tied with the previous quarter, about 1.5 years ago. But the number of product solutions that these 115 instances involved, 257 is an all-time record for us. So more and more of the current customers that are adopting additional products that we have and the Marriott Golf piece is just one such example, Josh.

[Operator]

[Operator Instructions] Our next question comes from the line of Brian Schwartz from Oppenheimer.

[Brian Schwartz, analyst]

Ramesh, I wanted to ask you about the linearity on the business this quarter. I know it got off to a fast start I'm just wondering how the deal activity trended in the latter part of fiscal 1Q compared to the earlier part.

[Dave Wood, executive]

Yes. I mean the deal flow remained strong throughout the quarter. I mean, it was a record quarter, record Q1 for us. So we felt good about where the sales bookings where the sales booking -- independent of the point-of-sale sales that we've talked about throughout the call. But overall, it was a good quarter. It was a record Q1. I mean, in the results, I think you can see where it sets us up nicely for the rest of the year as well.

And the backlogs remain at record levels or near record levels for services and subscription.

[Brian Schwartz, analyst]

And then a follow-up question just on the sales [indiscernible]. I know this was the start of the new fiscal year in commentary here on your best sales to you did talk about the sales capacity being up [indiscernible] year-over-year. But are you also making any change to go-to-market that is have impact on your sales, too.

[Ramesh Srinivasan, executive]

Our approach has not changed that much, Brian. Our sales personnel, some of them are more oriented towards farming and some of them more oriented towards hunting. And that mix now, I would say that a lot of the new sales personnel added especially in international and in the hotels and resorts vertical in Americas, are more oriented towards hunting than farming. So many of the newer sales personnel who have been added are proportionally more hunting than farming. But the way our sales teams are designed, they do both depending on what is required and what comes their way. But I think the more important fact, Brian, there is our marketing efforts are a lot more targeted, right? There are a lot of targeted efforts in terms of our PMS competitors, our POS competitors and management companies.

And for example, Marriott POS, we now have a hunting license, targeted marketing efforts there. So our marketing efforts have become more -- while they have become more wide-ranging -- they are also a lot more focused on certain areas where we feel we can get immediate benefit with our products.

[Brian Schwartz, analyst]

Last question for me, just on the POS business. Are you seeing any changes in terms of the buying behavior buying? Is it varying at all the gaming segment or the food segment or lodgings, et cetera?

[Ramesh Srinivasan, executive]

Thank you, Brian. I wouldn't say the buying behavior is changing that much, but our competitor behavior seems to be changing a bit where it's a lot more aggressive with respect to pricing and giving low-priced renewals so that they've walled off the competition from Agilysys for a bit longer. Those kinds of short-term measures we are seeing more because as our product superiority gets higher, now sometimes the only way you compete against us is by lowering the price. So that is there. But I'm not seeing any major buying behavior decisions. But like we've said before, in international regions, the decision-making process still remains a bit slow compared to many of the segments in the U.S.

[Operator]

I'm not showing any further questions. I would now like to turn the call back over to Ramesh Srinivasan for any closing remarks.

[Ramesh Srinivasan, executive]

Thank you, Victor. Thank you all for your interest and attention. Please enjoy the rest of the summer. We look forward to talking to you again in about 3 months from now when we will report on the fiscal 2025 second quarter results towards the end of October. Thank you.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.