Agilysys, Inc. (AGYS) Q4 2021 Earnings Call Transcript

Agilysys, Inc. (NASDAQ: AGYS) Q4 2021 earnings call dated May. 18, 2021

Corporate Participants:

Jessica Hennessy — Senior Manager, Corporate Strategy and Investor Relations

Ramesh Srinivasan — President & Chief Executive Officer

Dave Wood — Chief Financial Officer

Analysts:

Allen Klee — Maxim Group — Analyst

Matt VanVliet — BTIG — Analyst

George Sutton — Craig-Hallum — Analyst

Nehal Chokshi — Northland Capital — Analyst

Presentation:

Operator

Good day, ladies and gentlemen, and welcome to Agilysys Fiscal 2021 Fourth Quarter and Year End Conference Call. As a reminder, today’s conference may be recorded.

I would now like to turn the conference over to Jessica Hennessy, Senior Manager of Corporate Strategy and Investor Relations at Agilysys. You may begin.

Jessica Hennessy — Senior Manager, Corporate Strategy and Investor Relations

Thank you, Sarah, and good afternoon, everybody. Thank you for joining the Agilysys fiscal 2021 fourth quarter and year end 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 for fiscal 2022. 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 the forward-looking statements include the continued impacts on our business and the hospitality industry from the COVID-19 pandemic, the timing and extent of the COVID-19 recovery period, and the risk factors detailed in the Company’s reports on Form 10-K and 10-Q and other reports filed with the Securities and Exchange Commission.

With that, I’d now like to turn the call over to Mr. Ramesh Srinivasan, President and Chief Executive Officer of Agilysys. Ramesh, please go ahead.

Ramesh Srinivasan — President & Chief Executive Officer

Thank you, Jessica. Good evening, everyone. Welcome to our fiscal 2021 fourth quarter and year end earnings call. Joining Jessica and me on the call today is Dave Wood, our CFO.

Finally, we’ve been able to return to our pre-pandemic routine and conduct this call together from our Atlanta office. We hope all of you and your families are doing well and staying safe and healthy. We would like to dedicate this call to our talented, courageous, committed and determined global teams located in the US, UK, Asia, and in the India Development Center, who have helped us navigate through an extraordinary fiscal 2021, a lot better than we were imagining last April. Among other things, all of them have helped us keep our focus on product innovation and world-class customer service, fighting through all the tough circumstances.

While the US and UK seemed well on their way back to normalcy, many countries in Asia continue to be seriously challenged by the virus, especially India. The last couple of months have been particularly difficult for our 950 India Development Center personnel. Several of them have lost family members and have faced extremely difficult family situations. About 30 of them are themselves currently recovering after testing COVID positive. Through all of this, they have worked incredibly hard to keep our pace of product innovation moving forward, working together with our experienced, talented and hard working US-based R&D personnel. The productivity and quality of execution levels of our worldwide workforce has been inspirational for all of us.

We continue to treat the good health, happiness and well-being of all our Agilysys’ teammates, and customer and partner personnel as our top priority. While most of our employees still remain in a work-from-home mode, which has worked well for us during the past 14 months, we are beginning to slowly trickle back to working from our various office locations as the number of fully vaccinated personnel continues to increase.

January and the first three weeks of February presented continuing difficult challenges and uncertainties for the hospitality industry, resulting in a slight miss of our original revenue expectations for the quarter. Customers remained uncertain about the short-term future during the first couple of months of calendar 2021.

Fiscal 2021 Q4 January through March quarter revenue was slightly less than flat sequentially at $36.3 million, and represented an 8% year-over-year decline, compared to Q4 of fiscal 2020. Product and services revenue decreased sequentially by approximately 3% compared to Q3, and we’re at 78% and 76% of Q4 fiscal 2020 levels, respectively. Recurring revenue grew slightly over Q3 and by 3%, compared to the comparable prior year Q4 to a record $22.9 million.

Within recurring revenue, subscription revenue grew by 11.6% compared to Q4 of last year, and comprised 42% of total recurring revenues. The consistent growth in subscription-based recurring revenue, all through the pandemic affected year, is a big testament to our pace of product innovation and the availability of an increasing number of software modules, which are cloud native compared to a year or two ago.

Quite remarkably, ahead of even our own best expectations, fiscal 2021 was a record sales year with respect to subscription sales, driven particularly by the POS and PMS add-on modules, many of which were created during the past couple of years. However, many of these SaaS projects are yet to be implemented, causing a temporary relatively slower growth phase in subscription recurring revenue.

For the sake of clarity, to reiterate what we have mentioned during previous earnings calls, please note that we used the term sales and revenue as two different things. Revenue refers to recognized revenue per GAAP and other accounting rules, and happen with respect to recurring revenue only after a software module is installed at a customer site and is ready for production use. On the other hand, sales, which we typically measure in annual contract value terms, refers to sale agreements closed and signed by customers. Such sales get converted to revenue over time depending on when licensed products are shipped, the timing of services projects execution and start of software use in production environments.

Before we go into some extra color on the increased sales momentum, we have been seeing since the last week of February, a few other details on revenue and gross profit. Despite Q4 revenue levels ending up slightly below our expectations, Q4 GAAP gross profit increased by $3.8 million, or 19% compared to Q4 of fiscal 2020. Consistent with the rest of the fiscal year, $3.1 million of previously capitalized software amortization costs present in fiscal 2020 did not impact the current quarter, resulting in a comparative increase of approximately $700,000 in gross profit on $3.3 million less revenue.

The growth of gross profit percentage is attributable to the continued growth of recurring revenue as a proportion of total revenue. Recurring revenue, especially subscription-based recurring revenue, held up well during fiscal 2021, while product and services revenue suffered declines. Fiscal 2021, the period from April calendar 2020 to March 2021, was obviously a very challenging year for the hospitality industry. And the fact fiscal 2021 was still a record year for recurring revenue speaks to the mission-critical nature of our products, the continued levels of product innovation, where customers are increasingly looking to us to provide solutions, which can meet and exceed the increasing technology and ease of use demands of their guests, and the trust customers have placed in us to help them prepare for a safe and efficient reopening.

Q4 profitability was along expected lines. Adjusted EBITDA was $7.1 million, slightly lower than Q3 fiscal 2021, and 98% higher than Q4 of last fiscal year. We remain focused on maintaining and carrying forward the internal operational efficiencies we were able to achieve last year. We’ve worked hard to ensure our focus areas do not get scattered across too many lofty objectives. We’ve become a lot better at doing more with less, while also never compromising on our world-class customer service goals.

Now turning to recent sales success levels. Sales measured in annual contract value of customer purchase agreements won, signed and closed during the quarter grew to just over 75% of sales levels during the comparable Q4 fiscal 2020. This was an improvement compared to the entire fiscal year, where sales were at approximately two-thirds of the level seen in fiscal 2020. Sales activity and demos continued to be at high levels. We have seen a major pickup in sales closing success during the past 12 weeks, beginning in the last week of February, making this one of our best periods of selling success. In annual contract value terms, global sales during these 12 weeks increased to about 85% of the best 12-week period during the past five years.

Customers are clearly beginning to make long-pending decisions. And the product improvements we have continued to make through the past years are placing us in an excellent competitive position to win a high majority of deals we are currently competing for. An additional contributing factors for our optimism is the increasing average size of sales deals we are currently pulling through. What would have been only a basic InfoGenesis POS sale win a couple of years ago, now often involves a considerably greater number of products, including additional POS software modules like OnDemand and Quick Pay, along with a core PMS product like Stay PMS, plus additional PMS software modules like the Booking Engine, Spa, Golf, Sales & Catering, Express Mobile and Service to name a few.

That selling success momentum currently concentrated mainly in the gaming and resort segments of the US domestic market, and the remaining backlog of already sold software, which have not yet been implemented, other products sold but not yet shipped, and services agreement signed but projects not yet started, all that together gives us solid confidence with respect to how we think fiscal 2022 will shape up.

We expect fiscal 2022 annual revenue to work out to be between $160 million and $170 million — that is 1-6-0 and 1-7-0 — between $160 million and $170 million, making it a record revenue year. We expect the pent-up demand for superior guest-centric hospitality technology solutions to grow throughout this fiscal year, making the second half of the fiscal year, better than the first. We expect the momentum to gradually increase during the year, when more of the sales segments including EMEA, APAC and managed foodservice providers start seeing business improvements to join the current major progress we are seeing in the US domestic gaming and resort segments.

We expect adjusted EBITDA during fiscal 2022 to be slightly better than 15%, 1-5, better than 15% of revenue as we continue to invest in growth, especially in sales and marketing. Fiscal 2022 will be a higher cost year compared to fiscal 2021 in several areas, including increased incentive compensation, travel, higher fiscal 2021 ending run rates in areas like R&D as we were hiring additional resources throughout the past year, increased need for implementation services and customer support personnel, and restoration of a few previously suspended employee benefit items like 401(k) match. Even with such expected cost increases, the additional operational efficiencies we’ve achieved in the business during the past 14 months, should enable us to maintain adjusted EBITDA profitability levels at slightly north of the 15% of revenue mark. With this, we are switching back to our pre-pandemic normal annual guidance cadence, and we’ll stop quarterly guidance we were providing during fiscal 2021.

Now with respect to R&D and product innovation, we are now close to reaching the peak of our R&D resource strength of 1,000 personnel we have been working towards during the past few years. We expect R&D resource strength to remain at that level for the foreseeable future. Our product modernization efforts are now complete in several areas, and is close to completion in others, and we are now well positioned to increase the pace of product innovation with the enormous R&D strength already built up and the modern technology base established across all our product offerings.

As sales and revenue growth resumes and grows during this fiscal year, we will be focused on growing our sales and marketing strengths. Since our last call, we’ve added a couple of personnel to our quota carrying sales teams and are close to finalizing offers for a couple more. We are also in the process of relaunching our marketing messaging. More than all that, we like the increased enthusiasm among our current sales force as they represent our modernized products and new modules with renewed pride and self-confidence. Our sales win loss ratio is an impressive high levels, currently. Now, it is a matter of increasing our participation level in the various hospitality technology selection processes out there.

Our participation in significant RFPs, especially with respect to the property management system product sets has increased significantly during recent months. We expect such RFP participation invitations to increase gradually over the next few quarters as the word spreads through our increased marketing efforts and word of mouth within the industry, changing our reputation from being a legacy product providers to one of world-class cloud native technology solutions, and the fastest and most broad-based product innovation pace in the industry. That change in reputation will not happen overnight, but will have a flywheel exponential effect once it takes hold. We have now done the hard work to get all the basics right. And now, we are moving to the next phase of this evolution.

Our recent monthly webinars on product progress across POS, PMS, inventory procurement and document management have been well attended by customers with a good level of follow-up activity. Customer intrigue and interest continue to increase, especially regarding Stay PMS, the InfoGenesis POS 12UX version, which now supports devices across all operating systems, iOS, Android, and Windows, the remote ordering application OnDemand, Quick Pay for easier contactless payment options at restaurants, Golf, Spa, Sales and Catering for managing groups of guests in conferences and conventions, Booking Engine, which now enables booking of room — rooms, spa appointments, golf tea times and restaurant table reservations, all from one direct channel website with a one card shopping experience, a comprehensive promotions and loyalty management module engage that a couple of customers have already made sizable investments to license, the modernized DataMagine document management solution, the modernized Eatec and Stratton Warren inventory procurement solutions, the modernized LMS, PMS, which continues to do well supporting some of the biggest hotels in the world, the modernized Visual One PMS solution, which is scheduled to be released end of July, that we are already conducting demos on now, the new seat solution, which enables reservations across all resort amenities not just stable reservations, contactless, mobile and kiosk-based check-in check-out modules, which include digital key options, the service module to optimize management of all areas of past management within a hotel or resort, including two-way guest communication. I could just keep going on for a while describing these, but I will stop here. All these products have been built on an open API architecture, which makes them easy to connect to both within our own comprehensive ecosystem, as well as an external ecosystems customers choose to put together themselves.

During the January through March quarter, we signed sales agreements which added 21 new customers to our family, 41 new properties which did not have any of our products before, but the parent company was already our customer, and there were 81 instances of selling at least one additional product to sites, which already had one or more of our products. While the number of new sites added this quarter was consistent with the rest of fiscal 2021, the number of new customers and new product agreements signed during the quarter increased significantly from Q3.

Included among the sales wins highlights during the quarter were the following listed in no particular order. One, located at the edge of a forest and nearby Seattle, Hotel America Snoqualmie, selected Agilysys Stay PMS and rGuest Book to help provide guests a direct booking experience and improve operational efficiencies. Two, 196 Bishopsgate, a luxury apartment-style hotel located in the heart of London’s financial district, selected Agilysys Stay PMS and Express Mobile check-in check-out to manage their property. Three, Town Hall Hotel in London’s East end elected to install InfoGenesis POS, Stay PMS, Agilysys Sales & Catering, and Express Mobile check-in check-out to provide their guests a superior all-round experience. Number four, Classic Hotels & Resorts, a premier boutique hotel company focused on providing luxury escapes with unique amenities in iconic locations, has chosen Stay PMS, rGuest Book and Agilysys Pay for five of their upscale locations, including two locations in Laguna Beach and their newest property of historic Route 66 in Arizona. Five, an iconic property at the base of the mountain in Vail Colorado, the Manor Vail, recently selected InfoGenesis, OnDemand and Pay to manage their point-of-sale and food and beverage related needs across their property. Six, located among the Redwoods on the Pacific Coast in Northern California and just south of Oregon, Lucky 7 Casino will be using Eatec and InfoGenesis to manage their inventory needs and handle transactions across their property. And seven, last and certainly not the least, as a final note on recent customer wins is MGM. You can pick up a public announcement on this which just came out yesterday by MGM. They have now implemented and are live with OnDemand for poolside ordering, which means pool goers at MGM Resorts’ Las Vegas Strip properties can order their cocktail, beer or burger on a smartphone and have it delivered directly to their lawn chair or daybed at seven of their Vegas properties with six more properties to go live during the next few weeks.

Overall, despite all the challenges faced, fiscal 2021 was a successful year for us. We took the gamble of doubling down on R&D product modernization efforts, despite the extreme uncertainties the pandemic caused for a business like ours, which is focused entirely on hospitality and we are happy that conviction has paid off well. We are just beginning to see the benefits of that tough decision we made about a year ago.

With that, let me hand over the call to Dave for further color on our business and financials. I will be back for a few closing remarks before opening up the call for questions. Dave?

Dave Wood — Chief Financial Officer

Thank you, Ramesh. Taking a look at our financial results, beginning with the income statement, fourth quarter fiscal 2021 revenue was $36.3 million, an 8.4% decrease from total net revenue of $39.7 million in the comparable prior-year period. The expected decrease in topline revenue largely reflects a 21.8% product revenue decline, and a 23.7% decrease in professional services revenue, offset by a 2.8% increase in recurring revenue.

On an annual basis, we saw a slowdown in projects with large upfront capital expenditures, resulting in lower product and professional services revenue. Product revenue declined $17.5 million, or 39.6%, while professional services revenue declined $11 million or 33.3%. Product and professional services revenue finished the year a combined 44% higher in Q4 fiscal 2021, compared to Q1 fiscal 2021. While Q4 revenue was still impacted by the pandemic, we are pleased with the continuing signs of recovery exiting the fiscal fourth quarter. Throughout the year, total sales continued in the 60% to 70% range of fiscal 2020 sales, with subscription sales at record levels. We currently have a backlog of hardware, software and services that continue to remain at healthy levels to achieve our fiscal year 2022 plan. The improved sales activity, we have seen during Q1 of fiscal 2022, should continue to grow that backlog and help return our professional services and product revenue to normal solid levels.

We are pleased to see growth on an annual basis in recurring revenue. Recurring revenue during fiscal 2021 was $4.9 million higher than fiscal year 2020. Recurring revenue, despite the headwinds created early in the year by the pandemic and various one-time credits, given to customers to do our best toward helping them get through these challenging times. Total recurring revenue represented 63.1% of total net revenues for the fiscal fourth quarter and 64.6% for the full year, compared to 56.2% and 52.1% of total net revenue in the fourth quarter and full year fiscal 2020, respectively.

We are pleased with our continued subscription revenue growth, which grew at 11.6% for the fourth quarter of fiscal 2021 and 15.5% for the full fiscal year, despite the tough industry circumstances. Subscription revenue comprised around 42% of total recurring revenue, compared to 39% of total recurring revenue in the fourth quarter of fiscal 2020. The highlight of the year was our continued annual subscription revenue growth of 15% compared to fiscal 2020 with add-on software modules growing at 325% compared to the prior fiscal year. Add-on software modules in fiscal year 2021 comprised 5% of total subscription revenue, compared to 1% in the prior fiscal year.

Moving down the income statement. Gross profit was $23.5 million, compared to $19.7 million in the fourth quarter of fiscal 2020. Gross profit margin increased to 64.6% compared to 49.6% in the fourth quarter of fiscal 2020. Gross profit margin increase in Q4 FY ’20 was 57.5%, if you remove the impact of capitalized software amortization that concluded at the end of fiscal year 2020. The gross profit margin increase was primarily due to the increase in higher margin recurring revenue, and the reduction in product and professional services revenue compared to the prior year.

Moving down to operating expenses. For fiscal Q4, we had a one-time vesting event related to stock-based compensation. Quarterly stock-based compensation was $28.7 million higher than Q4 fiscal 2020 as we pulled forward several quarters of expense in the fiscal fourth quarter of 2021. Stock-based compensation will return to more customary levels, and remain in the 8% to 12% of revenue range for fiscal year 2022.

Looking at operating expenses, excluding charges for legal settlements, impairment and severance and other charges, the fourth quarter saw an increase in operating expense to $48.3 million, compared to $22.7 million [Phonetic] in the prior year period. This increase in operating expense is mainly due to the stock-based compensation vesting mentioned above. Removing the increase in stock-based compensation, operating expense would have decreased by $3.1 million, compared to Q4 of fiscal 2020. Combined, the three main operating line items, product development, sales & marketing and general & administrative expenses, excluding stock-based compensation were 46% of revenue this year, which was the lowest in the past five years. This continues to be a good reflection of the steady progress we are making with our operating leverage.

Our operating loss for the fourth quarter of $24.8 million, net loss of $24.7 million and loss per diluted share of $1.05, all compare favorably to the prior year fourth quarter losses of $26.9 million, $27 million and $1.16, respectively. Adjusted net income, normalizing for certain non-cash and non-recurring charges of $5.2 million, compares favorably to adjusted net income of $1.3 million in the prior year fourth quarter, and adjusted diluted earnings per share of $0.21 compares favorably to $0.05.

For the 2021 fourth quarter, adjusted EBITDA was $7.1 million compared to $3.6 million in the year-ago quarter. And for the full year, fiscal 2021 adjusted EBITDA was $26.7 million, compared to $13 million. The growth in adjusted EBITDA for the full fiscal year represents 105.4% growth. We are pleased with our profitability levels with adjusted EBITDA coming in at 19.4% of revenue for fiscal 2021.

Moving down to the balance sheet and cash flow statement. Cash and marketable securities as of March 31, 2021 was $99.2 million compared to $46.7 million on March 31, 2020. We are pleased with our ability to manage and improve our liquidity throughout the last 12 months as we move past these challenging times. For the year, we collected 93% of the cash collected in the prior years, despite a reduction in revenue. We feel this speaks to the strength of our customer relationships and the quality and nature of the products we provide.

As it relates to free cash flow, I am pleased to see an increase for both the quarter and full fiscal year. Free cash flow in the quarter was $12 million, compared to $4.9 million in the prior year quarter, and $27 million for the full fiscal year compared to $7.2 million in the prior year, which is driving our cash balance increase.

As we have mentioned on previous calls and Ramesh mentioned earlier, we are going back to providing only annual guidance. For our fiscal year 2022, we expect revenue to be in the $160 million to $170 million range, with adjusted EBITDA slightly above 15% of total revenue.

In closing, we are pleased with our 2021 financial results, and the proven financial stability to navigate through one of the most trying times for the hospitality industry. We are fortunate enough to have a good recurring revenue base built on a foundation of mission-critical products. While revenue levels suffered in fiscal 2021 due the impact of the pandemic on our customers, our profitability levels allowed us to continue the product innovation necessary for the future of Agilysys.

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

Ramesh Srinivasan — President & Chief Executive Officer

Thank you, Dave. One quick personal note that possibly does not have a place in an earnings call like this, but let me go ahead and say it anyway for the sake of greater clarity. As everyone already knows, I’m a big believer in the future of Agilysys and have been a buyer of our stock during the past years. The original set of stock options granted to me when I joined Agilysys January calendar 2017 are set to expire at the end of June, and I have no choice but to exercise those options and convert them to shares during the next few weeks. While processing that net transaction, a bunch of shares are going to be sold to pay for the taxes. When you pick that news up across various outlets, please do not interpret that as me selling Agilysys shares. It’s just a standard practice and part of the options exercise, which I have no choice but to get done so.

Okay, back to our business. All things considered, we like our position now. We worked through an extremely difficult fiscal year and have good reasons to believe that we have come out of it much stronger. We are now better set for profitable growth than we have ever been. The hospitality industry is showing every sign of being in the early stages of a solid recovery, and meet the kind of technology and solutions we have painstakingly built over the past few years. We have started fiscal 2022 on a great note with increasing sales levels and are bullish about our short-term and long-term prospects. It does seem like a perfect positive storm is brewing, where a recovering industry eager to provide great service to guests who are demanding better and easier to use contactless technology. When such a recording industry meets and starts to like the hospitality-focused world-class technology provider like Agilysys, which has invested heavily during the past few years to create just that kind of guest-centric, cloud native software solutions, the result of that should be a big win-win for all concern. We cannot wait to see how the next few months and years unfold.

With that, let me open up the call for Q&A. Sarah?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Allen Klee with Maxim Group. Your line is now open.

Allen Klee — Maxim Group — Analyst

Good afternoon. I’m sorry to hear about the challenges of your employees in India. How do you feel about what impact that’s going to have on productivity there, and all your goals related to that?

Ramesh Srinivasan — President & Chief Executive Officer

Hi, Allen. Thanks for the concern. Appreciate it. So far, it had only minimal impact because everyone has been working from home anyway. A couple of product releases did get delayed by a couple of weeks. So, for example, the spa and golf module, there were certain releases planned that had to be delayed by two, three weeks. But other than that, no major impact to our business or our progress with product innovation, Allen. And we are being very supportive. Many of them, their family members have been affected badly, and we as a company are helping them out as much as we can. So there are some slight impacts here and there, some product releases get delayed by a week or two, but nothing to be concerned about. We don’t see our product innovation pace letting up at all. So we should be progressing as well as we have in the past year or two.

Allen Klee — Maxim Group — Analyst

That’s good to hear. My other question is, I thought I heard you here that the interest in your property management system solutions has been picking up. Could you just talk about that a little bit?

Ramesh Srinivasan — President & Chief Executive Officer

Yes, Allen. The interest in PMS has been picking up especially in the last, say, four months to six months or so. For example, the Stay PMS, our cloud native property management system platforms, we have had more wins with that product in the last, say, four months or six months or so than the previous couple of years combined. So there has definitely been a significant pickup in PMS interest. We’ve also won a couple of crucial deals with our LMS, PMS product. And Visual One, completely modernized, is about to be released end of July, and there was a lot of interest in that product as well. And the number of RFPs that we are participating with our Stay PMS product has also increased, so there could be some good news coming on that during the next few months. So overall, yes, our core PMS product interest has definitely picked up, and we already built all the supporting modules, like mobile check-in check-out and service and all those and the booking engine, the booking website, the direct channel booking website, all that were already built up over the last couple of years. So now, we have reached a stage with our PMS product set, Allen, where all we need is a shot to do a demo. And if a customer takes the trouble to look at our guest journey, the PMS guest journey that that they can use in their resort, we have a 70%, 80% chance of winning the deal. That’s the level of confidence with which we are going into PMS RFPs now, and our participation levels have increased during the last four months to six months.

Allen Klee — Maxim Group — Analyst

That’s great. Thank you so much.

Ramesh Srinivasan — President & Chief Executive Officer

Thanks, Allen.

Operator

Thank you. Our next question comes from the line of Matt VanVliet with BTIG. Your line is now open.

Matt VanVliet — BTIG — Analyst

Yeah, thanks. Good afternoon. Thanks for taking my question. I guess, first you mentioned that the majority of maybe capex-related projects, especially those with a lot of product and/or services revenue have been sort of the most impacted, or the slowest to come back. Dave, you also mentioned that you felt like those are going to come back to normalized levels. So I wanted to dig in a little bit there in terms of your level of confidence, and sort of what the discussions with customers have been that would give you that confidence that they’re going to want to return to something that is a product-based rather than moving to more of just the cloud-native products?

Ramesh Srinivasan — President & Chief Executive Officer

Yeah. So — hi, Matt. So just to break up that answer into a couple of pieces. Even when a customer chooses our cloud only, cloud native solutions, Matt, it does involve services as well. So, all our projects, whether they are on-prem projects or SaaS cloud-based projects does involve services. So in terms of services revenue coming back to normal levels, it’s just a matter of an increase in the number of implementation projects. And that is bound to pick up because it has to keep in line with the level of sales activity that is going on now and customers are signing up our products and then finding themselves dealing with multiple priorities that they have to work through. And so some of these projects are getting pushed back as far as implementation is concerned. So the first point I would make is, services revenue does not have anything to do with whether customer choose cloud SaaS products or on-prem products, both of those require our implementation services, personal help, that is one. But the product revenue part of it has not picked up as yet because the hardware refresh portion of the product revenue has not picked up so far. So customers are buying software modules and they really needed software modules for now. And I think the hardware refresh kind of purchases will follow in a few months from now once everything picks up. The last point, I will make, Matt, is in terms of coming back to a normalized state. The real pickup we have seen since about the end of February and has been week after week consistent throughout the last 12 weeks have mostly been in US domestic gaming and resort sectors, which have really started doing well. APAC, EMEA and managed foodservice providers, because employee cafeterias and all that have really not made a come back as yet, once those segments of the market also make a come back, we should see even better sales progress than what we are doing now, so which is why we are very optimistic about the fiscal year as it goes along. It is bound to continue to improve because currently it is mainly gaming and resorts pulling the wagon through. Once APAC, EMEA and managed foodservice providers also make that kind of momentum increase, we should be in good shape throughout this fiscal year.

Matt VanVliet — BTIG — Analyst

And maybe a follow-up on that. Just curious on how the new EMEA leadership is sort of building out the team there? What kind of progress they’re making? I presume it’s more from a pipeline standpoint at this point given your commentary around that region. But just curious what they’ve been able to do so far after joining sort of right beginning of the year?

Ramesh Srinivasan — President & Chief Executive Officer

Yes. So, good question, Matt. They’re making excellent progress. They’re really making excellent progress. We are very, very happy that they joined us. And also remember, it is — EMEA is now managed by Don DeMarinis, who also heads sales in the Americas as well. So Don is leading that team as well and they are making excellent progress. In fact, in my list of major customer wins, you would have noticed, there were couple of them from EMEA, where Stay PMS was being sold for the first time there. So PMS is also making good progress in EMEA. And overall, we are very happy with how EMEA has progressed from the start of this calendar year.

Matt VanVliet — BTIG — Analyst

All right. Great. Thank you for taking my questions.

Ramesh Srinivasan — President & Chief Executive Officer

Thank you, Matt.

Operator

Thank you. Our next question comes from the line of George Sutton with Craig-Hallum. Your line is now open.

George Sutton — Craig-Hallum — Analyst

Thank you very much. One of the statements you made on this call and also in your press release was that we currently go in every product sale discussion with a high degree of confidence. And Ramesh, I’m just curious if you can compare today in making that statement versus even a year ago? I’m not sure you’d make that statement unequivocally across your product platform. Is that reasonable?

Ramesh Srinivasan — President & Chief Executive Officer

Yeah. Now we can make that statement clearly across all our product platforms, George, no question about that. Now we are surprised, if a customer looks at our product demo and especially across the entire guest journey, right, how they can manage that entire guest journey with the comprehensive set of products we have on the POS side, on the PMS side, and now the inventory procurement products and DataMagine have also been modernized, we do go in with a good degree of confidence. And the recent win loss ratio that we measured, George, internally for the last four months starting from December or so, when we look at the percentage of wins in the deals that we participate in and we have closed as either a win or a loss, a big majority of them we are winning now. So, yes, George, we do go into sales demos and all that with a high degree of confidence and the customer feedback also is extremely encouraging, because they are not seeing this kind of a modern technology-based comprehensive set of products that serves the entire set of needs they have. They don’t see this from others as well. So, yes, and no comparison between 12 months from now — 12 months before and now, George, there is absolutely no comparison. Our confidence is much, much higher than what it was even 12 months ago.

George Sutton — Craig-Hallum — Analyst

So we were very impressed with the new PMS, LMS that you came out with in the last couple of months. I’m curious if you’ve started to do demos for some of the larger players in the market, or when would you anticipate that to start?

Ramesh Srinivasan — President & Chief Executive Officer

A lot of the larger players in the market are also looking at Stay PMS now. LMS has a major presence mostly in the gaming sector. So most of the customers currently looking at the modernized LMS, PMS — I would say, our current customers, who are planning to upgrade to that modernized version and also take advantage of all the other add-on modules we have. A couple of bigger customers and corporations are currently looking at Stay PMS and they’re extremely impressed.

George Sutton — Craig-Hallum — Analyst

Super. Thanks, Ramesh.

Ramesh Srinivasan — President & Chief Executive Officer

Thank you. Thanks, George.

Operator

Thank you. Our last question comes from the line of Nehal Chokshi with Northland Capital. Your line is now open.

Nehal Chokshi — Northland Capital — Analyst

All right. Thank you. Solid results. You have some very encouraging set of metrics that you shared here saying that now 85% of the best 12-week period of the past five years. So let’s say, now at 85%, you’re talking about the past 12-week period, meaning from February 23 and May 18. Is that correct?

Ramesh Srinivasan — President & Chief Executive Officer

Yeah. So I’m sorry, Nehal, I confused you a little bit, not you, I confused everyone a little bit with that stat. So, basically, we have seen a major pickup since the last week of February up to this past weekend. So that’s a set of 12 weeks. So what we did was, we added up our global sales that we measure in annual contract ACV terms. We added up our global sales, that number, we had that total number of these past 12 weeks, and we compared it with the best 12-week stretch we have had in the last five years. So in the last five years, we went and analyzed the numbers and looked at what is the best 12-week stretch we ever had in sales, and this current 12 weeks was about close to 85% of that peak 12-week number.

Nehal Chokshi — Northland Capital — Analyst

Got it. When was that best 12-week period over the past five years?

Ramesh Srinivasan — President & Chief Executive Officer

Dave, did we note that on? Somewhere in 2018?

Dave Wood — Chief Financial Officer

Yeah, it was 2017.

Ramesh Srinivasan — President & Chief Executive Officer

It was — we can — when we talk to you later, Nehal, we will share with you the exact time period, but it was somewhere in that range, about three years ago or so.

Nehal Chokshi — Northland Capital — Analyst

Okay. And so you also made another statement here during the conference call that, I think, sales were at 75% of comparable fiscal 4Q ’20 levels. I believe you were just talking about sales or ACV bookings in this most recent March quarter, is that 75% of comparable fiscal 4Q ’20 levels. Is that correct?

Dave Wood — Chief Financial Officer

Yeah, that’s correct. So for the year, we were in the — we were about 65%, 67%. And for Q4, we had an uptick to around 75% of previous year bookings levels. But that was on the sales bookings, not the revenue side.

Nehal Chokshi — Northland Capital — Analyst

Yeah, understood. And so the fiscal 4Q ’20 levels, how does that compare to that best 12-week period that you’re referencing that now at 85% of?

Ramesh Srinivasan — President & Chief Executive Officer

So, this 85% was compared to the best 12-week period we have ever had, and that was sometime in the 2017, 2018 time frame, right. So we just wanted to express to you, Nehal, that this last 12 weeks have gone well for us. So we are noticing a big uptick in gaming and resort space in the US domestic market, and we just compared to the best peak period we ever had. We didn’t compare it to every other 12-week period we have had, Nehal.

Nehal Chokshi — Northland Capital — Analyst

Yes. Yes. I guess, what I’m trying to get at here is that, it sounds like that the ACV bookings that you’ve been experiencing over the past 12 weeks is at least 20%, maybe 30% or 40% better than what you saw for the March quarter. Is that a correct interpretation here?

Ramesh Srinivasan — President & Chief Executive Officer

Yeah. I mean it is tough to compare — see, this 12 weeks falls across both Q4 and this current Q1, right. So it is tough to make that comparison, because part of these 12 weeks did fall in Q4 as well. So let’s not complicate it further by comparing it with that, right. So this 12-week, one, about five weeks of that was in Q4, the remaining seven weeks of that or six weeks of that was in Q1. So it kind of startled across both those quarters. But I will tell you that the current pace of sales is a definite pickup, right, over what we have had in the last 12 weeks to 14 weeks.

Nehal Chokshi — Northland Capital — Analyst

Okay, very good. And then Dave, you characterized that overall backlog was healthy. Does this mean that overall backlog has increased Q-to-Q, or is it — are you now able to implement faster than what you’re booking at this point in time?

Dave Wood — Chief Financial Officer

No, we’re still seeing an increase in the backlog, especially in professional services, and our subscription backlog waiting for products to go live. The hardware — the product backlog has leveled off a bit. It’s still definitely at healthy levels. But as more customers are choosing subscription, that backlog is increasing faster than the product backlog. But all three are at very, very healthy levels.

Nehal Chokshi — Northland Capital — Analyst

Okay, great. And then let’s move to the full year guidance here, 16% to 24% year-over-year growth, is it fair to say that the level of outperformance that you’ve been seeing for subscription relative to overall revenue will continue at about the — I think, around 2,000 basis point premium relative to overall revenue?

Dave Wood — Chief Financial Officer

Yeah. We expect subscription revenue to continue to grow in the 20% range.

Nehal Chokshi — Northland Capital — Analyst

Okay. So not necessarily faster than overall revenue then?

Dave Wood — Chief Financial Officer

Well, for fiscal ’22, it will be a little bit faster because, keep in mind, there was the one-time credits that created a little bit of a drag on the subscription revenue.

Nehal Chokshi — Northland Capital — Analyst

Got you. Okay. Okay. And then there was another statement during the prepared remarks you guys said that you expect momentum to increase through the year, does that mean year-over-year growth will continue to increase through the year? Or do you just simply mean that Q-to-Q revenue trajectory will continue to improve? And are you talking about revenue, or are you talking about new sales or what I would call ACV bookings?

Ramesh Srinivasan — President & Chief Executive Officer

Yeah. So that statement was more about revenue, though it is related to sales as well, because sales is what drives at least a portion of the revenue. So what we meant to say was, when you take our guidance of $160 million to $170 million, Nehal, we expect a higher proportion of that to happen in the second year than in the — in the second part of the year than in the first part of the year. So that we have given an annual guidance, but we expect it to be sequentially increasing revenue quarters as we go along. We expect second half to be better than the first half, and that was a statement about the revenue statement that we made. Now that is going to be driven by the fact that we expect sales bookings to continue to increase throughout the year.

Nehal Chokshi — Northland Capital — Analyst

Got it. Okay. And then the free cash flow, exceptionally strong this quarter. Does that take from free cash flow generation capability for fiscal year ’22?

Dave Wood — Chief Financial Officer

No, it doesn’t. I mean, the way we’ve always talked about free cash flow is, there’s some seasonality with billings and contract liabilities. But if you look over a 12-month period, it’s a pretty — it’s usually pretty close to our adjusted EBITDA levels. So what you’re seeing is, you’ll see the same cycle next year where in the first half of the year we have bonus payments, and then second half of the year, you’ll see more billings with our annual recurring revenue. So, no, it’s not taking from the next fiscal 2022, it just kind of averaged out over a 12-month period.

Nehal Chokshi — Northland Capital — Analyst

Okay, great. And then my final question is that, last quarter you talked about, you’re starting to look at some acquisitions, presumably that would be to potentially enter some adjacent markets. But what’s your ability to enter adjacent markets without acquisitions? And what are the adjacent markets you would look at?

Ramesh Srinivasan — President & Chief Executive Officer

Yeah. So, Nehal, in terms of adjacent — the two ways, adjacent products as well, there are certain adjacent products that we can look at through acquisitions. And we know, we are remaining conservative and we are listening to opportunities as they come along, and we are taking a look at them, and we’ll make the right decision when we come to it. In terms of your question about going to adjacent markets, we do have the ability to get there even without acquisitions in calendar 2022. Because when you think about our 1,000 strong R&D resource strength now, we are now completing all the modernization projects and virtually all of them should get done by the September-October timeframe. Many of them are already done. So when we say that, what we mean is, all the R&D resources who were focused on modernization, meaning re-engineering current products are all going to be freed up to now carry the products forward. And also these modern products are a lot easier to enhance and change than our old products were. So towards the end of this calendar year, it is almost like we are adding to our R&D strength without adding any resources, because they now get freed up to actually carry the ball forward. So we expect to be able to enter adjacent markets starting calendar 2022 without doing any acquisitions. But if a good acquisition comes along that we feel will be accretive quickly, and will add to the shareholder value we are creating now, absolutely, we will look at that as well. But starting calendar 2022, we have the ability to enter adjacent markets without needing acquisitions to do that.

Nehal Chokshi — Northland Capital — Analyst

And just quickly, how do you define accretive?

Ramesh Srinivasan — President & Chief Executive Officer

Accretive is that our EBITDA levels will go up within a short period of time.

Nehal Chokshi — Northland Capital — Analyst

Okay, very good. Thank you.

Ramesh Srinivasan — President & Chief Executive Officer

Even after the acquisitions [Phonetic] done. So, maybe a 12 months to 18 months period of time.

Nehal Chokshi — Northland Capital — Analyst

All right. Okay. Thank you.

Ramesh Srinivasan — President & Chief Executive Officer

Meaning, acquisitions with sufficient cost synergies and good revenue synergies. That’s what we mean there.

Nehal Chokshi — Northland Capital — Analyst

Okay. Understood. Very good. Thank you. That’s it from me, which was a lot of questions. Sorry about that.

Ramesh Srinivasan — President & Chief Executive Officer

No worries, Nehal, anytime. Thank you. Yeah.

Operator

Thank you. There are no further questions. I will now turn the call back over to Ramesh for closing remarks.

Ramesh Srinivasan — President & Chief Executive Officer

Thank you, Sarah. Thank you for all your continued interest in Agilysys and all your support and guidance. On behalf of our Board, management team and close to 1,400 team members, I’m very grateful for your attendance today and your continued investments in Agilysys. We look forward to talking to you, again, in a couple of months from now, when we will be reporting on our Q1 fiscal 2022 results. Till then, please take great care of yourself and everyone around you. Thank you.

Operator

[Operator Closing Remarks]