Agilysys Inc (AGYS) 2023 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Agilysys Fiscal 2023 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.

Thank you, Justin, and good afternoon, everybody. Thank you for joining the Agilysys fiscal 2023 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 the continued effects of the COVID-19 pandemic and other global economic factors on our business, our ability to continue profitable growth and the risks set forth in the company's reports on Forms 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 Chief Executive Officer of Agilysys. Ramesh, please go ahead.

Thank you, Jess. Good evening. Welcome to the fiscal 2023 first quarter earnings call. Joining Jess and me on the call today at our Atlanta headquarters is Dave Wood, our CFO.

Let's cover sales first before moving to revenue and other details. We've had 5 consecutive quarters of solid good sales results measured in annual contract value terms. We continue to have good success in the gaming, casinos and resort verticals. Business levels from hotel chains and cruise ship verticals are improving.

Sales from the managed food services division, especially within the higher education and healthcare areas of managed food services, are recovering and improving well. Business from Europe, from EMEA, is okay but not growing as much as we would like it to, while the hospitality industry in Asia continues to struggle with various levels of lockdowns and travel restrictions across several countries.

So the short summary would be improving business environment across all areas other than in Asia. Our sales levels have remained solid and consistent at a good level for more than a year now. Our sales win-loss ratios would make any enterprise software business unit proud. We are investing in sales and marketing to get ourselves more opportunities and add backs and we have plenty of reasons to be happy with our progress.

Having said all that, given the several sizable sales opportunities that we are currently working on, we are more than a bit impatient to break through to the next year of growth. With respect to sales deals won during Q1 fiscal 2023 April to June, we added 22 new customers with 3 of them, including a core PMS product, in their list of chosen products. 20 of the 22 new customers shows the SaaS option for at least one of the license products. We also added 66 new properties which did not have any of our products before, but the parent company was already our customer. Of these 66 new properties, more than 80% were either partially or fully subscription fee-based.

In addition, there were 74 instances of selling at least one additional product to properties, which already had one of our other products. The number of new product sales instances, 74, is lower than usual for us, but was well made up by bigger deal sizes and 7 of them involve sales of core PMS products. So no cause for concern there. About 60% of software sales this fiscal year thus far in annual contract value terms has been subscription sales.

Product modernization efforts over the past few years have given us the flexibility to offer most of the software solutions across both cloud and on-premise implementations of the same code base, giving us the ability to provide customers the full benefit of ongoing innovation regardless of their installation preference.

A few highlights among the new customers signed during the quarter. One, Highbullen Hotel UK, this beautiful 125-acre estate property in Southern England selected Stay PMS, rGuest Book and Express mobile check-in check-out to offer their guests a seamless pre-arrival and arrival experience. They also selected InfoGenesis Point-of-Sale, Seat, OnDemand, and the Pay module to manage their food and beverage operations better and provide exceptional experiences for their guests across the property.

The Highbullen Hotel, which will soon be branded and marketed as the Mole is one of the properties in the portfolio of a private real estate and leisure investment firm based in London. This firm is one of the largest privately-held principal investors in Europe, performing private equity style investments in direct property and asset-backed operating businesses. This is an important breakthrough sale for us with this larger firm which controls several properties.

Number 2, The Northern Hotel. This historic hotel in Downtown Billings, Montana, selected Stay PMS and rGuest Book to manage their luxurious recently renovated rooms and InfoGenesis Point of Sale, Sales and Catering and the Pay module to provide their guests next level food and beverage and even experiences. Number three, The Arts Club, London. The iconic Arts Club in the heart of the Mayfair District of London is an exclusive and private members-only club. They selected InfoGenesis POS and Pay for managing their F&B operations, while providing their members the unique experience they have come to expect.

Number four, Tiger Correctional in the managed foodservices vertical. This is an interesting one. Tiger Correctional is an all-inclusive provider for correctional facilities across the US. They selected the Eatec inventory procurement product to manage inventory needs across many of their locations to help manage their foodservice operations efficiently and cost effectively. Five, Southall Farm & Inn, a luxury spa resort in Franklin, Tennessee selected the Eatec inventory procurement product to track and manage their F&B program based on readily available ingredients from vendors and their own 325-acre farm, which supplies many of their needs. These 5 sample wins should give you an idea of the wide breadth of the hospitality market we are capable of covering with the product sets we have today.

Now, on to revenue. Fiscal 2023 Q1 revenue was a record $47.5 million, the second consecutive record revenue quarter and close to 23% higher than the comparable prior-year quarter. We have started this fiscal year well and have given ourselves a good start towards the fiscal 2023 revenue targets.

Recurring revenue during Q1 fiscal 2023 grew to $27.7 million, driven by a close to 30% year-over-year subscription revenue increase over the comparable prior-year quarter. Subscription revenue was 47.4% of total recurring revenue. Subscription revenue from add-on software modules, most of which were developed ground up during the past few years, constituted about 15% of total subscription revenue this quarter compared to 11% during the full previous year fiscal 2022.

These innovative software modules, which are well integrated with the core point of sale, hotel property management and inventory procurement systems continue to make operations simpler for hospitality staff, reducing the need for working through complex integrations across multiple technology providers, which they have struggled with for a long time. These add-on modules also greatly help in creating wonderful experiences for their guests.

Overall recurring revenue was about 4% sequentially higher than the previous quarter and close to 20% higher than the comparable prior year quarter. This is the first time in our history as a solely hospitality-focused software solutions technology provider that we have had 3 consecutive quarters where quarterly recurring revenue has increased sequentially by more than $1 million each time. Quarter recurring revenue has increased by about $3.7 million over the last 3 quarters. To place this in context, during the 3 quarters before the pandemic set in, between April calendar 2019 and December calendar 2019, when our business was improving each passing quarter, the increase in quarter recurring revenue was only $1.6 million over those 3 quarters, well less than half of the recent 3 quarters.

We've increased our annual recurring revenue run rate by about 25% since the onset of the pandemic, despite all the challenges in the past 2 years have created for the only industry we are focused on. I cannot help but take a moment to be proud of the extraordinary work our supremely talented and tirelessly hard-working teams have achieved under very difficult circumstances.

We placed a bet on increasing the pace of product innovation even during these challenging times to create a competitive gap, and that crucial decision and our steadfast focus on world-class customer service have worked out well for us. Customer retention continuing to be at excellent levels is one of the contributing factors in increasing the pace of recurring revenue growth we've seen in the recent past. The previous fiscal year 2022, as you know, was a record year with respect to customer retention, which we measure as a simple metric of annual recurring revenue lost as a percentage of current total annual recurring revenue. We do not take into account additional recurring revenue won from current customers, which we've been a lot of, obviously, we do not take that into account, like most software companies do, to pad up their retention ratios and report numbers above 100%.

We also consider all ARR lost as churn, even if such loss is due to reduction of the number of endpoints, while the site or outlet continues using our products. And we count it as a loss even if the site is closed and not lost to a competitor. We remain ultra conservative in how we measure churn and, of course, the reverse of it, customer retention. ARR lost divided by total ARR by mathematical definition cannot be more than 100% for us. Last year, fiscal 2022 was our best customer retention year ever, well north of 95%. We have further improved from last year's level this fiscal year, and that helps to grow recurring revenue at a faster rate.

Similar to the sequentially preceding Q4 fiscal 2022 quarter, product and services revenue added up to close to $20 million, about 28% higher than the comparable prior year period. Our best ever quarter of product and services revenue taken together was a little more than $21 million during one of the calendar '19 quarters.

Another reference point. During the full 2022 fiscal year, which was an overall record revenue year at close to $163 million, the product and services revenue total was a little less than $64 million, an average of close to $16 million per quarter. Compared to that, we've made a good start this fiscal year with close to $20 million between product and services revenue in the first quarter. That's another good point to improving business momentum and supports our confidence level in the annual revenue guidance range provided.

Fiscal 2023 Q1 gross margin was 60%, at the same level as last quarter. We expect overall gross margin percentages to remain in the high 50s, low 60s range for the foreseeable future. Our finance and operations teams continue to handle supply chain management well. After ending fiscal 2022 with about 6x the inventory we had at the end of fiscal 2021, inventory levels remained flat at the same level at the end of Q1 fiscal 2023. We plan on streamlining our purchase levels into a more regular rhythm going forward and keep inventory at close to the current high levels for the foreseeable future.

As evidenced by the 9 quarter run of sequential increasing quarters we reported pre-pandemic, most aspects of our business are not cyclical. The one exception to this is cash balance changes. Due to the timing of annual maintenance invoices, trade shows, incentive bonus payments and various other reasons, Q1 and Q2 quarters in each fiscal year tend to be challenging for cash balance improvement and it tends to get balanced out during Q3 and Q4. Q1 fiscal '23 free cash flow was affected by these normal operating items as well as payments for the investments made to increase inventory levels previously mentioned.

Cash collections continue to be at record levels with the last 3 quarters being our top quarters for cash collections. Free cash flow will get back to normal levels and approximately be equivalent to EBITDA less capital expenditures on an annual basis. Adjusted EBITDA for the quarter was $6.7 million and 14.1% of revenue, in line with expectations provided for the first half of fiscal 2023.

GAAP net income was $3 million, about $0.10 per diluted share, our best quarter in a while, with the exception of the July-September calendar 2020 quarter, which was helped by artificial onetime salary cuts, staff reductions and other temporary cost-cutting measures to manage through the early pandemic days.

Share-based compensation was 5.2% of revenue this quarter, lower than during recent quarters due to the timing of annual shares allotment. We expect share-based compensation to increase slightly as we move through the rest of the fiscal year due to the timing of share awards. The ResortSuite merger is moving forward on plan. We continue to make good progress with filling some of the product gaps in the Agilysys product set and we'll be in a good position to speed up customer conversion efforts to the equivalent cloud native Agilysys products a few quarters from now.

Overall, we are pleased with the Q1 April to June quarter results. Fiscal 2023 is progressing on plan. The combined product recurring revenue and services backlogs have come down slightly as customers make progress catching up with pending implementations. The total backlog is now at about 85% of peak level and more than 10% higher than at the end of the comparable prior-year quarter. Product implementations are having a better more natural flow to them now. And the current backlog is at a good healthy level, not too high as it was in the recent past with many delayed deliveries and projects and not too low either. This is a good backlog level, higher than during the pre-pandemic era.

In line with previous guidance provided, we expect fiscal 2023 annual revenue to be in the range of $190 million to $195 million, driven by year-over-year subscription revenue growth of around 30%. We also continue to expect EBITDA levels for the full year to be better than 15% of revenue despite Q1 and Q2 being challenging for profitability as discussed during the last earnings call.

With that, let me hand the call over to Dave. Dave?

Thank you, Ramesh. Taking a look at our financial results, beginning with the income statement. First quarter fiscal 2023 revenue was a quarterly record of $47.5 million, a 22.7% increase from total net revenue of $38.7 million in the comparable prior year period. All 3 product lines increased compared to the prior year period with product revenue up 25% and professional services revenue up 30.9% over the prior year as we continue to return to a more normal implementation schedule. Recurring revenue was also up 19.5% with subscription up 29.5% over the prior year period.

Fiscal 2023 first quarter total sales have remained at consistent levels with FY '22. We expect to see momentum from our sales and marketing investments start to pick up throughout the year as our new marketing efforts take hold and our recently hired additional sales team members continue to ramp and add incremental bookings. Subscription sales remain well above pre-pandemic levels and we expect that current subscription sales level will become the new baseline moving forward.

Total recurring revenue represented 58.3% of total net revenue for the fiscal first quarter compared to 59.9% of total net revenue in the first quarter of fiscal 2022. Increased revenue from professional service implementations, and product revenue coming back into the business, drove the change in revenue mix and the drop in recurring as a percentage of total revenue compared to the prior fiscal year.

We are also happy with our continued subscription revenue growth, which grew 29.5% during the first quarter of fiscal 2023. Subscription revenue comprised around 47% of total quarter recurring revenue compared to about 48% of total recurring revenue in the fourth quarter of fiscal 2022. Add-on software modules comprised 15% of subscription revenue in Q1 fiscal year 2023 compared to 10% in the comparative prior year quarter and they continue to be a meaningful contributor to subscription revenue.

Moving down the income statement. Gross profit was $28.5 million compared to $24.9 million in the first quarter of fiscal 2022. Gross profit margin decreased to 60% compared to 64.2% in the first quarter of fiscal 2022. The gross profit margin decrease was primarily due to product and professional service revenue coming back into the business. Combined, the 3 main operating expense line items, product development, sales and marketing, and general and administrative expenses, excluding stock-based compensation, were 46% of revenue and in line with our FY '23 plan.

Operating income for the first quarter of $3 million and gain per diluted share of $0.10 compares favorably to the prior year's first quarter gain of 2 and $0.06 per diluted share. Adjusted net income normalizing for certain non-cash and non-recurring charges of $5.2 million and adjusted diluted earnings per share of $0.21 is consistent with adjusted net income of $5.2 million and diluted earnings per share of $0.21 in the prior year first quarter.

For the 2023 first quarter, adjusted EBITDA was $6.7 million compared to $6.9 million in the year ago quarter. As we discussed on the last call, we expected adjusted EBITDA will be lower in the first half of the year with the first quarter coming in around 14%. Adjusted EBITDA this quarter was 14.1% of revenue.

Moving to the balance sheet and cash flow statements. Cash and marketable securities as of June 30, 2022, was $94.9 million compared to $97 million on March 31, 2022. The primary reason for the cash balance decreased despite our profitability were due to timing of payments in Q1 related to bonus, dividends and inventory payments, which came due during the April to June timeframe.

Free cash flow in the quarter was $0 compared to $7.7 million in the prior year quarter. As we've stated in the past, free cash flow in the first half of the year is significantly impacted by working capital fluctuations, mainly due to amortization of annual maintenance invoices, timing of bonus payments and accounts payable.

In closing, we are pleased with our first quarter financial results and remain on track to meet our FY '23 plan.

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

Thank you, Dave. In summary, as evidenced by our second consecutive record revenue quarter, we are now solidifying our business at a higher revenue level than before the pandemic. We've added more to recurring revenue during the last 3 quarters than during any other 3-quarter stretch in our history. The combination of product and services revenue had close to $20 million this quarter, is close to the previous record level of $21 million during one of the calendar 2019 quarters.

Despite lingering pandemic-related industry challenges in a few business verticals, sales levels have been at solid good levels during the past 5 quarters.

We have witnessed a few prolonged and delayed technology purchase decisions during the past few months, but nothing that would cause much anxiety. If anything, the current macroeconomic circumstances have created a greater need for technology solutions, which help in improving operational efficiencies, enhance guest experiences and provide hospitality industry operators the tools necessary to compete better for attract and retain guests as consumers become more careful and calculated about their spend and the value they get for it.

We continue to invest in sales and marketing efforts to move sales levels to the next higher gear. We are managing through the current cost pressures of increased sales, marketing and professional services spend with good balanced decision making, optimizing between being disciplined on the one hand and not missing out on driving future revenue growth on the other.

Product development spend this quarter was roughly the same level as it was pre-COVID close to 3 years ago. While we are facing demands to increase our R&D resource strength to meet the additional innovation requirements of several sizable new growth opportunities, we remain confident no major increase in product development spend will be required like during previous years. Some measured increases may be required during the short-term, but we do expect product development as a percentage of revenue to continue declining over the medium and long-term.

So, in conclusion, we are pleased with our overall business progress. We have every reason to be bullish about our future.

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

(Operator Instructions) And our first question comes from Matt VanVliet from BTIG.

I guess, first, Ramesh, curious what you're hearing from customers as they look toward the back half of the calendar year here with sort of the cross-currents we're seeing in the economy. Obviously, business travel is starting to come back a little bit, but it seems like maybe leisure travel might be under pressure both from inflation, but also people's concern about the economy slowing. So, curious what you're hearing from customers, what they're thinking about on sort of multi-year plans and some of the bigger projects as they balance the return of some travel but concerns that things might slow?

See, one thing to keep in mind, Matt, as I work through my answer is, we only work with medium and higher level hotel properties and resorts and chains and managed foodservice providers and so on. So, the customers who we deal with are seeing very good visibility and they have good clarity on bookings going into the summer months and beyond. So they seem quite confident to us, but then again, our customer base does not represent the entire hospitality customer base. We are dealing with the medium to the higher level customers and they are not feeling any -- there is no anxiety in them, they are continuing to make good decisions.

And according to what we are hearing, all travel is coming back quite well. And the headlines about inflation and possible recession and all that don't seem to be affecting them much so far, as far as we can tell. They are continuing to make big multi-year technology change -- multi-year relevant technology changes. There are some pretty big opportunities we are working on now where customers now are under pressure that they need better technology now, because their guests have higher expectations of technology and for driving operational efficiencies, working through staff shortages, they just need better products. They cannot survive with the products they have had for the last 10, 20 years.

But our main challenge in terms of driving greater revenue growth is how quickly can we facilitate the transfer from the old to the new. Because even though the newer technology has a lot of additional features and additional help for them, there are still some particulars of the old products that they have used that have to be built into the new products, and each of their requirements are different.

So if anything, that is the challenge. So a quick summary. Yes, we are looking, we are working with customers who are looking at long-term technology decisions to provide themselves the kind of technology they need for the next 5, 10 years. We are working with those opportunities, and we are seeing plenty of them out there. And most of the customers we are talking to have good visibility clarity on bookings for the months to come and for the rest of the calendar year.

All right. That's very helpful. And then, with the fairly recent launch of the cloud-based PMS products widely available, you highlighted a couple of new wins for both Stay PMS and InfoGenesis. Just curious in terms of what the feedback early on from some of those customers have been and how is that helping with new sales cycles as other companies maybe didn't want to be the earliest adopters but are willing to jump on that product as they see it scale and work effectively at some larger deployments?

Yes. So, they are going well is the short answer for you, especially if you are referring to the recently modernized Visual One, the product we call V1 product. It's now live in about 6 installs or so, and all of them have settled down quite well. They did go through a few months of settling down process, but they have all settled down well and they are beginning to work well now. And with that, we have plans to expand the sales of V1, while Stay continues to do well as well.

Our Stay is in the front end of many big opportunities we are working on now. So, the PMS and additional modules, if you add the core PMS and the additional modules into one bucket, Q1 FY '23 is the best quarter we've had. But that number is still not big enough for us. We still have to grow it a lot more, and so far so good. We are making good progress. The new modules, modernized V1, Stay is settling down well, Stay continues to improve. So we are placing ourselves in a good position to keep pushing this PMS. I think every quarter now will be a new record with respect to both PMS sales and PMS revenue. It's progressing well, but it is going to reach that flywheel effect, which is what we are impatient for when it really drives growth into the next year, right? That is the stage that has not come, but steady progress is definitely happening well.

(Operator Instructions) And our next question comes from George Sutton from Craig-Hallum.

Ramesh, my questions are all around the pipeline. So, there is some impatience relative to breaking through to some of the pipeline opportunities. I wondered if you could give some additional perspective there. I think it relates to the prolonged and delayed purchase decision you mentioned some have made. But can you give us a little bit more of a picture into that?

Yes, sure. So it all comes down to George, if I can just summarize it down to one thing. It is the time it takes to move from the old to the new, right? If you look at cost pressures on our business, the main cost pressure we face in this business is, we have to maintain and continue improving all the old versions of the products and also continue to improve the newer versions of the products. It's almost like maintaining 2 sets of products till the customers move to the newer products.

Now what happens is, and what we refer to as a little bit of impatience is that the customers love the new products. They like the fact it is for the first time a hospitality vendor is actually providing end-to-end technology. We're starting from a direct channel booking engine all the way to the end of the restaurant. Now you can meet most of your needs through one vendor, they love that. But when you have to replace old products, and even when we replace our own products or, for example, we go to ResortSuite customers and they want to move to the cloud native products, in all these well-established products that have been there for a long time, there are always a set of nuances and each one is different.

There will always be a set of 10 things that they want it done exactly the way they are used to for many years, while they also want the benefit of the 100 new things that the product gets them and they want to move to the cloud as well. So getting those 10 things done causes delays, weather it is replacing a competitive product, whether it is replacing our own old product with a new one, whether it is replacing ResortSuite products with our new one, it all comes down to the same thing, that's transferring. We are now moving this industry from the old to the new. There are many well established vendors like, you know that I've been doing the same product for a decade, 2 decades. Customers want to replace those products. They are talking to us in bigger and bigger numbers, but there are a few things to get done before they are willing to make the switch. So that is the impatience I'm referring to.

Now, is that process going well? It is going well. Many customers are making the switch, our products are improving, it's happening well, but we would like it to be faster. That's what I mean by that impatience.

So one other follow-up question there. You mentioned that you have several sizable new growth opportunities that could cause some increased R&D spend. And I think separately you said that each of your customer requirements are different. How much customization are you required to be doing right now to win some of these deals? And once you're doing any sort of customization, can that be added in to the broader platform and offered to other customers as well?

Yes. George, no customization. What I mean is, each customer has a slightly different set of requirements to be added to the base product. So I'm sorry if I didn't say it correctly. There is no customization. There is no customization issue in this business. We are a product company and we are going to be improving our products. But the next set of product improvements that are required, there are different ideas that come from different customers and they are slightly different. There is a new report. There's a new screen. There is a new integration point, all of which needs to be done to the product. It is not as such we are going to do it custom only for them.

And also all I was trying to say is with respect to R&D, there could be some minor increases. There is no major R&D expansion like we had to do a couple of years ago before the pandemic. There is no such requirement, but there are some pressures to do a little bit more so that we finish this process of helping customers to move to the newer products. But all the requirements are product requirements. There are no -- it's not customization I'm talking about, George. Each of them require a slightly different set of requirements that have to be done and we are working through all of them pretty quickly. They are all progressing well. Many customers are making the switch as you see, right? Record revenue comes from all of that, but we can -- it is going to reach a stage where it is going to become much faster and most of the requirements are already going to be built into the product. No major R&D increase. We are not expecting anything spectacular, but some slight increases could be possible here and there.

(Operator Instructions) And our next question comes from Nehal Chokshi from Northland Capital.

Yes. Congrats on (inaudible) results. I heard the data point on a strong 95-plus percent customer retention rate and the strict definition around that. I think that is a new metric you guys are, is that correct?

No. That's a metric we've given in the past. It's consistent. We've always taken the definition that Ramesh gave of 95% or greater.

Okay. And then, are you able to provide some visibility to the breakout of just 30% subscription growth between new customers versus upsell?

I don't think we break it down that way, Nehal. The 30% subscription growth is just a direct math of the subscription value that was there. The total subscription revenue we had last Q1 versus this Q1, we've not broken that down into subscription from new customers versus current customers. It's a combination of the 2, but I don't think we have an exact break up of that between the 2, both the factors contribute to that, right? So, new customers, most of them are choosing cloud-based products anyway, so that absolutely helps the number. And current customers buy new products, so that definitely helps the number as well.

And many of the hotel chains and foodservice providers kind of big customers you have when they go to a new site, when they take our product to a new site, we don't count it as a new customer, but for all practical purposes it is, they generally tend to be subscription based. And there are many customers who are moving from our old products to our newer products, which are more cloud-based. It's a combination of all of them together that our subscription revenue is 30% higher. We've never broken it down into each of those categories.

Okay. Understood. And for multiple quarters, you've been talking about strong momentum you're seeing in the property management market. Is that translating to increased win rates just resulting in increased FX? And does have anything to do with the add-on module work as well?

Absolutely. PMS is definitely contributing to increased win rates. And when we talk about win-loss ratios, we talk about it across all our products. That is PMS, Point of Sale, Inventory & Procurement, all our products, and it's at very impressive high levels. I've been in enterprise software for 3-plus decades now, and I've not seen win-loss ratios like this. So now, really it is a challenge of marketing and getting more add backs and getting more visibility.

So to answer your PMS question, absolutely, PMS is also contributing to those wins and PMS is playing a greater and greater role for us. Now that modernized V1 -- Visual One has settled down, that also helped us. So now we have 3 world-class PMS products in our kitty. So all that is definitely helping our momentum.

Okay. Great. And then, you guys have talked about in the past that you're addressing a $5 billion ARR. Is that inclusive of the value of the add-on modules or does that not include the add-on modules? If it doesn't (inaudible) what that might be worth?

Yes. It does include the add-on modules. And of course, in your previous question, you had also asked about add-on modules that I missed, I'm sorry. So, the PMS and, to a large extent, the Point of Sale momentum has a lot to do with the add-on modules, like for example, with our InfoGenesis Point of Sale system, the fact we have the remote ordering OnDemand product is a big strength for us. The fact we have the Buy Kiosk that helps with guest facing functionality as well is a big strength. All that together helps InfoGenesis sales as well. So, similarly on the PMS side, all the additional products that we have built around it, the mobile check-in check-out and the rGuest Service and all these products make our PMS a more compelling proposition. So it definitely helps.

Now, as far as the total addressable market question, we think it is somewhere between $3 billion, $4 billion, $5 billion, Nehal. We always struggle with putting an exact number on it. All we know is, we are only $100 million ARR company -- ARR unit. So we have a long way to go. And the add-on modules during the last 3 years have definitely expanded our total addressable market, no question about it. And we have not even started selling them stand-alone, Nehal.

At the moment, most of our sales is along with our core product. The process of selling some of these add-on modules standalone connected to other core products, we have not even started the processes yet. So definitely the $5 billion total addressable market you're talking about includes our add-on modules as well, and it is becoming bigger as we go along.

Thank you. And I am showing no further questions. I would now like to turn the call back to Ramesh, CEO, for closing remarks.

Thank you, Justin. 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 fiscal 2023 second quarter results.

This concludes today's conference call. Thank you for participating. You may now disconnect.