Agilysys Inc (AGYS) 2016 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Agilysys FY16 fourth-quarter and full-year conference call.

As a reminder, this conference is being recorded.

Some statements made on today's call will be predictive, and are intended to be made as forward-looking within the Safe Harbor protections of the Private Securities Litigation Reform Act of 1995. Also, the Company believes that its forward-looking statements are based on reasonable assumptions. Such statements are subject to risks and uncertainties that could cause results to differ materially. Important factors that could cause actual results to differ materially from these in the forward-looking statements are set forth in the Company's report on Form 10-K and 10-Q, and news releases filed with the Securities and Exchange Commission.

I would now like to turn the call over to Mr. Jim Dennedy, President and CEO.

Thank you, Liz, and good afternoon, everyone. We appreciate you joining us on the call today to review our FY16 fourth-quarter and full-year results. Joining me on the call today is our Chief Financial Officer, Janine Seebeck.

Before we get started, just a quick reminder that on the call today we will be discussing some non-GAAP metrics, primarily adjusted cash from operations and adjusted EBITDA, which eliminates the effect of restructuring and other items that are either non-cash or non-recurring. Reconciliations to GAAP metrics are provided in the financial section of the press release issued earlier today.

Total net revenue for the fourth quarter increased 11% to $31.9 million. Adjusted EBITDA in our fourth fiscal quarter was $1 million compared to an adjusted EBITDA loss of $600,000 in the same period last year. We reported a net loss for the FY16 fourth quarter of $1.5 million, or a loss of $0.07 per diluted share, which compares favorably to a net loss of $5.4 million, or a loss of $0.24 per diluted share, in the prior-year period.

Full-year net revenue increased 16% to $120.4 million. We are pleased with both the overall result, as well as the fact that we saw growth within each component of reported revenue on a full-year basis.

In addition to our top-line growth for FY16, we also significantly benefited from our fiscal management initiatives, resulting in an increase of more than $9 million year over year and net cash provided by operating activities, and improving our adjusted EBITDA to $4.3 million for FY16 from $1.2 million for FY15. Net loss for FY16 was $3.8 million, or a loss of $0.17 per diluted share, which compares favorably to a net loss of $11.5 million, or a loss of $0.51 per diluted share, in FY15.

Janine will provide a more extensive review of our financial results, including the income statement and balance sheet, as well as our expectations and revised outlook for FY17. As we look at our overall Business, we continue to grow our revenue and improve our financial health through our hospitality-focused business strategy, and bringing new solutions to market that will enable us to retain and grow existing customer relationships, as well as engage new customers.

We continue to experience market share shift from our key competitors to Agilysys, resulting from our focused business strategy. The share shift is attributable to producing solutions uniquely designed to support hospitality-centric business scenarios, servicing and supporting our customers in a way that is responsive to the guest experience on which they focus, and cultivating a partnership-based approach to the business relationship, enabling a stronger connection between our Company and our customers.

The new solutions we introduced, including key enhancements to our iconic products that facilitate migration to the rGuest platform suite of products, demonstrates commitment to our focused business strategy, and contributes significantly to driving our strong bookings and revenue performance in FY16. These product enhancements not only keep our iconic solutions relevant in the market, but also serve as a strong foundation to transition our customers to the new rGuest platform-based solutions. As a result, sales performance of both the rGuest platform-based products, as well as sales of our iconic products, experienced healthy growth in our FY16, and we see that trend continuing in FY17.

An example of solution enhancement to facilitate iconic to rGuest platform migration is the recent introduction of hosted LMS. Until the start of our third fiscal quarter of 2016, LMS was only offered in a licensed arrangement delivered as an on-site deployment. We now offer a subscription service to this best-in-class property management solution, and an above-premise, hosted delivery model. The take rate on this offering exceeded our forecast, and hosting our customers on a single version of LMS facilitates a more seamless transition to rGuest Stay when it reaches feature and scale parity with LMS.

Additionally, we released several new versions of InfoGenesis and InfoGenesis Flex, both of which are fully integrated with rGuest platform-based solutions such as rGuest Pay, rGuest Seat, and rGuest Analyze. Just a few weeks ago, we introduced the InfoGenesis Flex Series 3 tablet, a groundbreaking new mobile point-of-sale solution built specifically for enterprise customers to help them increase revenue, improve wait staff efficiency, and deliver a superior guest experience.

We also recently announced that general availability of rGuest Stay, our cloud-based property management system that optimizes operational efficiency, increases revenue and enhances guest service. The solution will initially be available to limited and select service hotels and chains, a large and growing hospitality segment, and we expect future releases to support the needs of full-service hotels, resorts, and casino properties. rGuest Stay is a major advancement in traditional property management systems. The solution is more guest-centric and goes well beyond traditional reservation, check-in and check-out, and housekeeping functions. rGuest Stay helps to improve operators' ability to manage and grow their business through an easily addressable architecture, and to truly know their guests and create deeper and lasting connections.

Moreover, the open-system, standards-based design provides publicly addressable interfaces to more easily connect the iconic Agilysys solutions and most third-party solutions to the rGuest hospitality platform. This makes understanding of guest consumption patterns more available to the operator to deliver a more customized guest experience in the moment of enjoyment. Another key component of the rGuest platform, rGuest Pay, continues to grow at a healthy pace, with another solid quarter of agreements in the fourth quarter of FY16, bringing the total to more than 345 agreements this fiscal year alone, and nearly 400 deals since the launch of the solution in the latter part of FY15.

rGuest Buy, our self-service, guest-facing kiosk solution, is also gaining traction. As we mentioned on our last call, Compass Group North America began live trials of this innovative solution with two large multi-national organizations, one in the financial services sector and one in the life sciences sector. These trials are progressing, and we now expect that rGuest Buy will become generally available for select food service operators later this year.

I also want to point out that our growth with first-time customers, deployments that in many cases displace an incumbent provider, continues to accelerate, as we secured 28 contracts with new customers in the fourth quarter to bring the FY16 total new logos to over 140. While this is lower than the approximately 225 new customers with whom we closed contracts in FY15, the total bookings value for our new customers secured in FY16 has almost tripled compared to the value last year.

Turning next to review the health and current state of each of our business verticals, let me begin with commercial and travel gaming, which represents 53% of total revenue. This vertical remains a primary focus for us, as it continues to show healthy growth.

Casinos have become increasingly integrated to include their casinos, resorts, spas, dining destination, retail, event menus, et cetera, thus necessitating the need to find ways to drill into guest spend across the entire resort, and use this data to better segment and market to their most valuable guests. It is one of the industry's biggest challenges. Many casinos have all of this rich data from multiple sources, but cannot understand the totality of it in one clear picture in order to properly leverage it to grow their business.

The growth in this sector for us is evidenced in our key customer wins, including Magnolia Bluffs Casino, which selected LMS; Odawa Casino Resort in Petoskey, Michigan, which selected a suite of products including Visual One property management system, InfoGenesis Point-of-Sale, and rGuest Pay; Saratoga Casino and Raceway in Saratoga Springs, New York, which selected a comprehensive Agilysys solutions suite including Visual One property management system, InfoGenesis Point-of-Sale, InfoGenesis Flex, and rGuest Pay; and Grand Sierra Resort and Casino in Reno, Nevada, which selected the rGuest Seat and rGuest Pay solutions to enhance efficiency and guest service at the 2,000 room property. Grand Sierra is a long-time user of the LMS property management system and InfoGenesis Point-of-Sale.

Engagements in which we showcase our success in creating a transition path from our iconic solutions to rGuest platform, or which serve as an example of new logos, continue to grow in number. Lucky Dragon Hotel and Casino in Las Vegas represents a new logo who recently selected LMS, Stratton Warren, InfoGenesis Point-of-Sale, and rGuest Pay, and a subscription hosted version to help manage its soon-to-be-open 204 room digitally dramatic casino property, which includes five restaurants, four lounges, a pool, spa, and retail stores.

The Grand Casino Mille Lacs and Grand Casino Hinckley, both new customers located in east-central Minnesota, have selected a suite of Agilysys solutions, including InfoGenesis Point-of-Sale, InfoGenesis Flex, and rGuest Pay, to streamline operations and enhance guest service. The properties are long-time users of the LMS property management system.

In the hotel, resorts and cruise vertical, which represents almost 23% of our revenue, we continue to make progress in bringing to market solutions that deliver improved guest recruitment, increased wallet-share opportunities, and enhanced operational efficiencies while strengthening guest connections with more personalized service. A new customer, Wild Dunes Resort in Isle of Palms, recently chose InfoGenesis Point-of-Sale, InfoGenesis Flex, and rGuest Pay to manage its award-winning 1,600 acre oceanfront resort at this barrier island off South Carolina, while Flamingo Motel and Suites, a new client in Dells, Wisconsin, chose rGuest Stay and rGuest Pay as part of its property-wide upgrade.

In addition to the success we are seeing around the rGuest platform and the progress we are making in transitioning these new solutions, we continue to see strong reception for our iconic solutions. As an example, the Waldorf-Astoria, a new client, recently installed InfoGenesis Point-of-Sale at its Hilton Cleveland Downtown, Hilton Orlando Bonnet Creek, and Waldorf-Astoria Orlando properties. These examples and others we recently announced showcase our continued ability to expand market share through competitive displacements, as well as new logos, and doing so while advancing and promoting both our iconic and rGuest solutions.

We remain confident our efforts will enable us to continue to gain share across all our various lines of business. As mentioned on our previous calls, in the second quarter of FY16 we won a significant engagement with a Midwestern chain hotel for rGuest Stay. The system is now live with this customer as they recently began their implementation rollout, which will encompass their enterprise of over 125 properties and more than 15,000 rooms, providing us with a solid pipeline for FY17.

In the resort, university, stadia, healthcare and food service management verticals, which together represent approximately 24% of our total revenues, we see continued opportunity to increase our market share and deliver an array of best-of-breed solutions to these industries. These verticals continue to evolve at a rapid pace with new openings to meet growing customer demand for more sophisticated and healthy dining experiences. Operators of all sizes are looking for point-of-sale solutions that will handle loyalty programs, online ordering platforms, and timely and useful analytics capabilities.

Turning back to the business environment, we are pleased to see an increasing number of customers across the hospitality industry recognizing us as the leader in cloud-enabled solutions. We are encouraged by the importance that operators across the industry continue to place on subscription-based, cloud-enabled solutions. This is reflected in the growth across our subscription bookings, which we tripled on a total contract value basis year over year.

With respect to the install base, we ended FY16 with more than 35,000 point-of-sale endpoints installed, up 29% from FY15 year end. Additionally, the number of hotel rooms our property management solutions manage increased 3% in FY16 to approximately 236,000 rooms. Our goal is to continue to grow both the total number of terminal endpoints and hotel rooms under management.

As we look forward, we are committed to remaining nimble and efficient operators, disciplined capital allocators, and market focused. Our commitment to these principles has been, and will continue to be, the basis for our performance over time.

With that, I would now like to turn the call over to our CFO, Janine Seebeck, who will review our financial results before we open the line to questions. Janine?

Thanks, Jim, and good afternoon, everyone.

Our fourth-quarter FY16 revenue was $31.9 million, an 11% increase from total net revenues of $28.7 million in the comparable prior-year period. Revenues for the full year grew 16% over FY15.

Looking at revenue in greater detail, products revenue decreased by 1% to $10.8 million, or 34% of total revenue during the quarter, due to the difficult comp on the back of a large hardware-driven project that took place in the fourth quarter of FY15, which did not repeat in the current quarter. On a full-year basis, products revenue increased 30% to $41.4 million versus $31.8 million in FY15, with a significant portion of the growth coming from increased sales related to our existing on-premise proprietary offerings, including hardware replacement sales.

It is important to note that a portion of the full-year growth in hardware sales is the result of the growth we are seeing across subscription-based sales. Subscription-based sales yield initial revenues of lower-margin hardware with the higher-margin subscription revenue being realized in future periods. Total revenue related to our rGuest platform comprised 5% of total FY16 revenue.

Support, maintenance and subscription revenue, or recurring revenue, increased 8% to $15.6 million compared to the fourth quarter of FY15, and by 7% to $60.1 million on a full-year basis. Driving that growth was a 33% increase in subscription revenues for the fourth quarter and a 29% increase on a full-year basis, representing 18% and 17% of total recurring revenues, respectively.

Professional services revenue grew 67% to $5.5 million compared to the fourth quarter of FY15, and by 20% on a full-year basis, reflecting the positive impact of our increased booking volume and enhanced throughput from our customer-facing implementation and installation fees. We are pleased to see this level of growth. In particular, we are pleased to see continued growth in our recurring revenues, which accounted for 49% of total net revenues for the fourth quarter and 50% of total net revenues for FY16.

Moving down the income statement, cost of goods sold increased approximately 2%, or $14.3 million versus the prior-year period. The 20% increase we had in cost of goods sold on a full-year basis was largely due to the increase in overall third-party product revenues, as well as labor costs associated with the overall growth in professional services revenue. Total gross profit rose 21%, or $3 million, for the fourth quarter of FY16, and increased 13% on a full-year basis, which reflects an improvement in gross profit margin of 430 basis points to 55% for the full quarter and a 150-basis-point decline for the full year to 57%.

Looking at operating expenses, which includes product development, selling and marketing, general and administrative, and depreciation expense, the fourth quarter saw a 7% increase to $18.5 million compared to the prior-year period. As a percentage of net revenues, they represented 58% versus 60% in the prior-year period, and 59% for FY16 versus 67% for FY15.

As expected, product development expenses remained at similar levels to FY15, increasing by 1% to $6.7 million in the fourth quarter of FY16, and by 5% to $26.7 million on a full-year basis. As a percentage of total revenue, product development expense represents 21% versus 23% in the fourth quarter of FY15. This increase is primarily driven by our continued investments in resources related to both our rGuest and iconic product enhancements to expand the customer experience across our install base, as well as our future offerings with existing and new customers.

Sales and marketing costs increased 7.9% year over year in the fourth quarter of FY16 and by 21% on a full-year basis, primarily reflecting an increase in commission expense in line with revenue achievements. General and administrative expense increased 12% on a quarterly basis and 1% on a full-year basis, primarily due to favorable reductions of approximately $900,000, reflecting the benefit of initiatives to continue to reduce overhead costs in line with our Company strategy, offset by an increase in incentive compensation of approximately $1.3 million associated with overall improved financial results. We saw a $2.2 million full-year decline in amortization of intangibles, primarily due to a reduction in expense related to assets becoming fully amortized, and assets being replaced or repaired during FY15, including our internal ERP replacement projects.

As a result, we reported an operating loss of $2 million for the fourth quarter of FY16, compared to an operating loss of $5.6 million in the prior-year period. Net loss for the fourth quarter was $1.5 million, or a $0.07 loss per diluted share, compared to a net loss of $5.4 million, or $0.24 loss per diluted share, in the fourth quarter of FY15. Net loss for FY16 was $3.8 million, or a loss of $0.17 per diluted share, compared to a net loss of $11.5 million, or $0.51 per diluted share, in FY15.

Adjusted EBITDA increased approximately $1.6 million in the fourth quarter to $1 million versus a loss of $600,000 in the fourth quarter of FY15. On a full-year basis, FY16 adjusted EBITDA increased $3.1 million to $4.3 million versus $1.2 million in FY15.

Moving to the balance sheet and cash flow statement, cash and marketable securities as of March 31, 2016, was $60.6 million compared to $75.1 million at March 31, 2015. The decrease in cash reflects approximately $13.3 million in spend for our ongoing product development investment. This is, in part, offset by slightly higher-than-normal collection levels for our annual support and maintenance contracts, and overall working capital improvements, which resulted in our year-end cash and cash equivalents balance being above our target of $55 million.

Cash from operations saw a $9 million increase for the year, as we swung from a net cash used in operations of $2.2 million for FY15 to $7.2 million in net cash provided by operations for FY16. Adjusted for non-recurring items, net adjusted cash provided by operations for FY16 was $7.9 million, compared to a net adjusted cash provided by operations of $900,000 in the prior-year period.

In terms of our NOLs, we continue to have approximately $173 million on our books, for which we can attribute a full valuation allowance, and will help us remain liable for only taxes paid in foreign jurisdictions, along with minimal state taxes for the foreseeable future.

Looking to FY17, we forecast greater than the market rate of growth for the full-year revenue, and expect our bookings will continue to favor subscription-type contracts in FY17, allowing us to take the hardware revenue up front and spreading the software license revenue over the term. As such, we currently expect FY17 full-year revenue will be approximately $132 million to $136 million, reflecting an estimated 10% to 13% growth over FY16.

As it relates to margins, it is important to remember that we have been reflecting the development costs of our solutions such as rGuest Stay as software development costs on the balance sheet. However, as these solutions reach general availability, we will be amortizing these development costs in a linear fashion onto our income statement. As such, with the general availability of rGuest Say announced earlier in the quarter, we expect gross margin in the low 50% range due to the non-cash development technology expense coming off the balance sheet. On an adjusted EBITDA basis, we are forecasting to end FY17 with more than double the FY16 adjusted EBITDA of $4.3 million.

I also wanted to highlight that given the encouraging progress around the rGuest platform, that we will be modestly accelerating our product development investment plan to bring to market additional features and functions on a number of rGuest solutions that will enable us to address a growing number of markets sooner. As such, we anticipate total product development investment, including both operating and capital expenses, will be materially lower than FY16 levels. However, based upon opportunities we see, road map acceleration may lead to modestly negative free cash flow in FY17, with a projected end-of-year cash balance of approximately $55 million. Secondly, we are pursuing several larger-than-average-size engagements that may require us to further accelerate the product road map and invest ahead of recognized revenue in FY17.

To sum up, we continue to make progress on returning Agilysys to balanced top- and bottom-line growth and profitability as we continue to make progress in our transformation by offering a world-class product lineup of hospitality-specific solutions, sustaining strong cost savings, and operating leverage. While we are pleased with the progress that we're making, we understand we have more to do and we are working diligently to deliver our commitments for FY17.

With that, let me turn the call back to Jim for some quick comments before we open the call for your questions. Jim?

Thank you, Janine.

Before we turn to your questions, I would like to take this opportunity to thank the very talented and dedicated team at Agilysys. Their work truly drives our success. I want to thank our many customers and partners who entrust us with their business.

With that, let's turn the call over to Liz for questions. Liz?

(Operator Instructions)

Our first question comes from the line of Allen Klee with Sidoti.

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

Here is what is happening. From our prior guidance to today, when we talked about it in our third-quarter call, customers came to us with opportunities for both rGuest Stay and rGuest Buy. We made a decision in the last three months to pull forward some road map items that we had planned to address anyhow that would require us to use -- be a slight user of cash in FY17. In addition, over the past three months we've developed opportunities with some larger hospitality operators that if those opportunities materialize into awarded contracts it may require us to invest in product and services ahead of the subscription-based revenue relationship that we would develop with these folks that would require a slightly additional use of cash ahead of realizing the revenue in our P&L.

There are already planned enhancements and planned road map activities. It is just that the opportunities before us may cause us to pull those forward rather than get to those enhancements over the planned horizon we had originally contemplated.

Allan, I would add to that I think just from a financial perspective it's more of a capital spend that Jim's talking than operating. The operating we still think should remain in line with prior levels. It's really that capital investment, switching a little bit more there than we had originally anticipated.

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

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

Okay, great.

Then I know you had a user conference in Las Vegas recently. I was curious if you had any takeaways of customer feedback and how that went?

Sure, we did. Our users conference is called Inspire and there was probably three key takeaways. We hold an executive summit at that where we had almost 100 senior executives. There were over 400 participants but we had 100 senior executives from our client base or our customer base attend that executive session and they give us strong feedback on our road map and our investments.

What we learned, principally from them, was that the investments that we have made in the rGuest platform as the hospitality-centric technology platform and having evidence of success of that platform in market gives them increased confidence in buying our current iconic solutions that we have like LMS, Visual One, InfoGenesis, Stratton Warren, Eatec, et cetera, because they believe in the migration path and there is actually an articulated vision with bits in market that are working. That is the first takeaway.

The second takeaway was that our fundamental understanding of these silos of information about guest consumption patterns across the property and our desire to integrate these silos of information about guest consumption across the property will give them a better view of guests profitability, not just yield in the hotel or yield in the casino. We're trying to yield the actual guest so that we understand which demographic to recruit and which demographic would fill that bed with a head so that it's the right profitable kind of guest. We understand it. We're trying to integrate that data and give them that visibility.

The third takeaway just basically just receiving feedback. It wasn't really around the technology, it was not around the vision, it was not around the platform. It was more about our people. Their engagements with our people, whether on services, support, corporate services, and doing fulfillment and helping the business-to-business relationship, that we are more responsive to their business needs than our competitors and we have a fundamental understanding that we are there to support their business, not just sell them something, that they value that style of relationship. Those are probably the three key takeaways.

That is very helpful. Thank you.

How would you -- if you look at your major verticals, how would you rank them in terms of where you would prioritize them in terms of how you see growth coming from over the next year or two?

Great question, Allan.

When I look at gaming, both travel and corporate, that is our bread and butter. It's over 50% of our revenues. While that might seem to be a rather finite market in terms of, let's say, property or room count growth, the opportunity there are competitive displacements. And where you see a property come out of the ground like a Lucky Dragon are some of the others that we see on our horizon, although they are not numerous, we are uniquely situated to serve them. They are size-wise relevant to us. They are important to us. They matter, and winning competitive takeouts of the current operators, again we are size-wise, they are really relevant to us and we think we can continue to gain share.

The industry, or the vertical in which we have a lower level of overall share participation today and where we see greater numeric and percentage growth opportunities is in the core hotel market. While we have been quite successful with the integrated resorts and luxury properties, we have not really had the tools necessary to effectively compete in the core chain hotel markets.

The advancements and investments we have made in both our iconic and our rGuest products allow us to compete effectively, or more effectively, in those markets and you see that when I mentioned the Waldorf references, both in Cleveland and Bonnet Creek and Waldorf, Orlando, that we are seeing more opportunities in the core hotel market that will drive growth. I think if I were to model it on a forward-looking basis, continuing to grow share in casinos and driving greater growth out of the core hotel market, those are the two areas I would tend to focus a business.

That said, closely behind the hotel business, it's a smaller market, but the contract food service or managed food service industry is an area we have a specialized service offering that allows us to compete and win business with our forensic compass and help our friends at Aramark and Sodexo, Guggenheim, Delaware North, et cetera continue to win contract food service business in their vertical. Although it is a smaller market, I think we have a unique tool set to help those folks compete in that segment of the business.

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

Allan, this is Janine.

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

Now, that said, some of the larger deals that we made reference to in Janine's commentary around the potential accelerated road map investments to secure those large deals, that some of the opportunities that we are pursuing for the rGuest Stay product do have transformational growth opportunities to them. It is something we're going to be very careful with that we are applying investment dollars against the product in proportion to the likelihood of when, or like we did in our contract with our friends in St. Louis, where we organize the contract in some statement of work opportunities where the investment in the product was associated with an overall statement of work that when completed and demonstrated success in a pilot, that rollout would then fall thereafter.

When you look at that contract, it was about 18 months negotiation cycle contract award in, let's say, July. We did work associated with statement of work associated with that contract and then a go live first operational property in May. When you think about that sequence and they're at, let's say, 15,000 rooms in 125 properties, we're talking about opportunities that are potentially 10 times that size that we might be able to successfully win at least a bookings or a contract within FY17, work to be done in FY18, with rollout to be in the mid to latter part of FY18.

That is the way we think about the case. But that would be transformational growth opportunities and we had more than one that we are pursuing.

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

Well, on the initial evaluation, yes, Allan, price is always an important parameter up front and we have a lot of competitors that will sell value and sell price. Our proposals on initial offering, we are not selling price. We know our technology is superior. We have been told that in many, many engagements.

What we want to express is that the technology solution we have has a long-dated investment value. As a result, the price that we would charge for it on a comparable basis should be higher because it is going to persist and be a more -- has a longer useful life. Ultimately, the operators that we deal with today need to secure a solution that while they believe in the longer term vision of the platform, and they believe in its platform value for them as an operator, they are trying to solve an acute problem right now, checkin, checkout, housekeeping, that kind of stuff.

Our approach to that would be a module-based pricing approach where we would price, at least initially, specific services and limited package like checkin, checkout, housekeeping, things of that nature and charge a comparably, yet small premium to market value. But any additional value you want to add on for the rGuest platform, we would increase through connection licenses or additional PMS services.

That is the approach that we're taking because we know competing products in the market today cannot scale to what we have in terms of a technology platform and cannot provide open and addressable enough services in a technology platform where they could be more flexibly used in the future like rGuest Stay. That is how we are approaching the product and the pricing.

I assume when you gave guidance for FY17 you're not including any of these transformational type of wins?

No, sir.

What we're doing is we're looking at our pipe. We're looking at our pipe that know exists today and just like we did last year, when we go to the line, we are looking downfield for uncovered receivers. When we see one, we're calling an audible and we're going to take it. That is what led to opportunities in FY16 for outsized growth than what was forecasted.

We think the same thing is going to continue to happen. We have a plan. We have a plan that we can grow the Company at 10% to 13%, but we are not doing it with blinders on. We're doing it where we're going to the line and we're looking downfield and if we see another uncovered receiver we're going to continue to throw some long balls. But we're not betting the business on throwing long balls every time we go to the line.

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

We are currently sitting in the low 30s from a quota-carrying sales rep perspective. As the business scales, there is equations. I would say we are looking at for nominal increase this year as we continue to see the revenue plan achieved, but nothing substantial at this time that's built into the plan.

Okay. Finally, could you just remind me and everyone of the kind of longer three- to five-year plan, if anything has changed on that of where you see the Company could be?

Outside of some of these transformational growth opportunities, I don't see that -- we see a tremendous, I don't know, let's say step function change in the business plan. We still think looking out let's say to 2020, we are going to be just under, let's say, $190 million, $200 million-size company generating somewhere in let's say that, call it, low teens percent in terms of EBITDA the so let's say around $25 million, $30 million of EBITDA. Now that said, these transformation opportunities that we're pursuing today, we would sure like to take them, win them and try to make, let's say, 2019 look like 2020, or make 2018 look like 2020.

That is the type of change that we think is available to us. It's a matter of winning the contract, securing with contracts the development expense against the future opportunity and then executing. That is still the same trajectory but we're not going to try to sell today that we're going to win all of these and we're going to turn 2018 into 2020. We've still got to win them all.

Okay, great. Thank you so much. Congratulations.

Thanks.

(Operator Instructions)

Our next question comes from the line of Phil Bernard with Eilers & Krejcik.

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

Thanks.

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

In general, we are still -- as a customer count perspective, we are still seeing most new opportunities having more than one product with it. Within the existing base, I think we are getting to where we can max that out. We will still see some crossover revenue, I think, in FY17.

I don't think it will be a huge contributor, but I still think it is adding value, right? I think our number is less than 33% of our customers have more than one product. So there's definitely opportunity but there's also a segment where -- like food service, where they've really just been focused on InfoGenesis, right, to where we can expand. There is still opportunity there. There's some assumption for that in the plan. But it is not a huge component, if you will.

Okay, beautiful.

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

I will give you the standard answer of most publicly traded companies. M&A is always an element or component of our overall business strategy. We are active in the market in evaluating technologies that complement our core. We don't see a need today to invest in -- through M&A or otherwise, let's say, around the POS or the PMS. We don't believe we need to acquire something whether it is for market or technology. The way we have always looked at it has been people, products and then markets, great people that make amazing products and help us penetrate more deeply into either the markets we are in, or tangential markets that we want to be in.

So when we look at M&A opportunities available to us today, it is largely component technologies that when we deliver property management or point-of-sale service, we can seamlessly sell, to approximately the same buyer, additional services or technology on top of or around those core technologies that will add value to the overall deal while giving us operating leverage in its delivery. That is the way we think of it. We're not thinking of cash expenditures necessarily, the buying of the POS or the buying of the PMS.

Got it. Okay, great. Thank you.

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

Thank you, Liz, and thank you all for your interest in our Company. We believe Agilysys continues to make progress as we focus our resources on the highest-value opportunities in our chosen end markets and manage the business for the longer-term to deliver sustainable value to our customers and our shareholders. We look forward to updating you on our progress during our FY17 first-quarter results call. Thank you.

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