Good day, ladies and gentlemen, and welcome to the Agilitas' 2026 Third Quarter Conference Call. As a reminder, today's conference may be recorded. I would now like to turn the conference over to Jessica Hennessey, Vice President of Investment Relations and Operations at Agilitas. You may begin.

Thank you, Lisa, and good afternoon, everybody. Thank you for joining the Agilitas' Fiscal 2026 Third 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 U.S. Private Securities Litigation Reform Act of 1995, including statements regarding our financial guidance. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause results to differ materially. Important factors that could cause actual results to vary materially from these forward-looking statements include our ability to achieve the provided guidance levels, increased implementation efficiencies, the company's ability to convert the backlog into revenue, and the risks set forth in the company's reports on Form 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. As a reminder, any references to record financial and business levels during this call refer only to the time period after Agilisys made the transformation to an entirely hospitality-focused software solutions company in fiscal year 2014. With that, I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and CEO of Agilisys. Ramesh, please go ahead.

Thank you, Jess. Welcome to the Fiscal 2026 Third Quarter Earnings Call. Joining Jess and me on the call today at our Atlanta headquarters is Dave Wood, CFO. Hope all of you are staying warm and safe. As is our usual practice on these calls, let me cover sales and selling success first before discussing revenue, profitability, guidance increase, and other business updates. We measure sales in annual contract value, ACV terms. Q3 fiscal 2026 was the second best Q3 October to December period sales quarter. This was the best Q3 sales quarter on record for the Hotels, Resorts and Cruise Ships HRC sales vertical, highlighted by several significant new customer wins, including Bolt Farm Treehouse in Tennessee, a five-star luxury nature-immersive wellness retreat property, who selected Agilis' property management system, PMS, Agilis' web booking engine, SPA, and five other Agilis' software solutions to provide their guests the seamless exceed expectations experience they are looking for. And Sands Resort in northern Myrtle Beach, South Carolina, who also selected various software solutions from our ecosystem of products, including PMS, to help improve guest experiences at their oceanfront gateway property. Two-three sales also included a couple of big brand property switching from a competing system to the Agilisys POS platform ecosystem. Casino gaming, our strongest sales vertical for several years now, witnessed a relative sales slowdown during the months of October and November, pulling down global sales levels during those two months, but recovered well during the month of December. With respect to overall global sales, this was the best December month in our history. On a year-to-date basis, food service management, FSM sales, over the first three quarters of fiscal 2026 is already higher than full year sales during each of the previous two years. Full fiscal 2026 may possibly end up being the best ever sales year or come close to it for FSM, which relies mostly on selling the point of sale POS family of products. While cumulative international sales over the first three quarters is already close to making fiscal 2026 the second best international sales year, with one full quarter remaining, Q3 international sales were somewhat lackluster. International sales will continue to experience this sort of up and down trajectory as we continue to establish our reputation across the globe and steadily exchange our current reliance in international regions on hit or miss big deals to a more consistent mix of small, medium and big wins like we see in the domestic markets. during the first three quarters of fiscal 2026 is already at 95% of previous best full-year sales, which happened to be last fiscal year. Fiscal 2026 year-to-date subscription sales is up 37% year-over-year. Calendar 2025 was the best calendar sales year in our history. Our win-loss ratio in competitive deals remains impressively high and far ahead of normal established enterprise software norms during fiscal 2026 q3 october to december we added 1616 16 new customers excluding book all of them were fully subscription based and involved an average of about five products per a deal. Nine of these new customers included purchase of PMS. In addition, 13 new customers signed up for Book4Dime Spa. We also added 91 new properties, which did not have any of our products before, but the parent company was already our customer. Of the 120 new properties added during the quarter across new customers, new properties of current parent customers and book for time. 118 meaning all but two were either partially or fully subscription based. Respect to new product sales, there were 109 instances of sales to properties which have at least one of our other products already in use. These 109 instances involve sales of a total of 248 new products. Before moving on to revenue details, a quick word on the Marriott PMS project. We are happy to report that this project is being expertly managed by customer personnel and is making good progress. PMS pilot property implementations have been completed successfully across the US and Canada. We are now in the exciting process of getting going on the implementation waves which are expected to keep increasing in size and scope during coming months we continue to exclude the Marriott PMS project from all our sales and backlog numbers with respect to revenue and profitability fiscal 2026 Q3 revenue was a record 80.4 million 80.4 million dollars the 16th consecutive, that is 1.6, the 16th consecutive record revenue quarter, 15.6%, that is again 1.5, 15.6% higher than the comparable prior year quarter. Product revenue was $10.7 million, which was about the same as Q3 last fiscal year, slightly ahead of our expectations. Product backlog at the end of Q3 was at about 85% of the previous Q2 quarter exit value and almost double the level it was at the end of Q3 last year, giving us good visibility for the rest of the fiscal year. Fiscal 2026 Q3 October to December services revenue was $17.7 million, dollars, 22% higher than the comparable prior year quarter, and in line with our expectations for this quarter. This quarter was a record high for normal projects implementation services revenue. The sequential quarter-to-quarter decline was mostly due to the Q3 holiday period quarter being typically more challenging than Q2. We saw significant improvement in the management of projects during this period compared to the holiday season last fiscal year. We continue to make good headway in improving software implementation efficiencies and finding ways to reduce customer implementation delays. Services revenue backlog at the end of Q3 was less than at the end of the previous quarter, which is a good indicator of improving implementation efficiencies. The quicker we implement the project signed up by sales, of course, the better off we are. C2623's recurring revenue was a record $52 million, 17.2% higher than the comparable prior year period. Recurring revenue was 64.7% of total revenue this quarter. Within recurring revenue, subscription revenue was a record $34.9 million, 23.1% higher than the comparable prior year quarter. This was the 17th consecutive quarter of subscription revenue year-over-year growth of at least 23%. Subscription revenue quarter run rate has doubled in the last two and a half years and has increased from 63.8% of total recurring revenue Q3 last year to 67% of total recurring revenue this quarter, the highest percentage level reached so far. Annual maintenance revenue was also 6.8% higher than Q3 last year. The current subscription growth levels are coming for the most part from new incremental projects and are not dependent on cannibalization of annual maintenance generating on-premises installations. Subscription revenue pertaining to point-of-sale POS and POS related modules grew by 20% year-over-year, from the mid to high teen growth levels reported during the past few quarters. We are hitting normal growth sites again with our POS business, with the modernized versions making an increasingly greater positive impact in the field. Subscription revenue pertaining to PMS and PMS related modules grew by 30%, 3-0, grew by 30% year over year. Add-on modules across both PMS and POS, including Book for Time, constituted 37% of total subscription revenue. All the challenges associated with the holidays filled October to December Q3 period, Fiscal 2026 Q3 was the best quarter on record with respect to the sum of annual recurring revenue ARR of all subscription projects implemented. ARR installed during fiscal 2026 Q3 was 40%, that is 4-0, 40% higher than during the comparable period last year. Increased velocity of project implementations has a lot to do with the modernized products becoming exponentially easier to implement over time, greater use of AI tools to improve implementation services efficiencies, and far higher staffing levels compared to the same time last year. While we continue to expand team sizes as business levels improve in areas like sales and services, we are currently well-staffed for the most part to fuel continued business expansion during the short and medium term. In general, the use of AI tools continues to improve various business areas, including product development and quality assurance initiatives, AI-driven product enhancements, implementation services efficiencies, marketing, sales initiatives, finance, customer support, and legal. One other quick reminder, virtually all our software licensing is based on number of rooms for PMS and related modules, number of terminal endpoints for POS, and number of sites or locations or profit centers within sites for inventory procurement for food and beverage products. Virtually all our software license structures are not based on number of users. As customers increase their operational efficiencies using AI and we ourselves continue to embrace AI tools more and more, all of that is great for us. Excellent Services Implementation Quarter has pushed down combined product recurring and services revenue backlog levels excluding the Marriott PMS project to about 90% that is 9-0, 90% of previous record levels leaving us with considerable room to achieve our ongoing revenue and profitability growth goals. We started fiscal year 2026 with a full year revenue range expectation of $308 million to $312 million, then raised it to $315 to $318, that is $315 million to $318 million, and we now expect Fiscal 2026 full year revenue to be $318 million at the top end of the recent guidance range. Similarly, we started the year expecting subscription revenue year-over-year growth of 25%, then increased it to 27%, then again to 29%, and we are currently expecting the year-over-year growth to be 29% as stated previously, not including any significant subscription revenue contribution from the Marriott PMS project. No change in the 20% adjusted EBITDA by revenue expectation we started the year with. With that, let me hand over the call to Dave for further color on the business and financial details.

Thank you, Ramesh. Taking a look at our financial results, beginning with the income statement, third quarter fiscal 2026 revenue was a quarterly record of $80.4 million, a 15.6% increase from total net revenue of $69.6 million in the comparable prior year period. One-time revenue consisting of product and professional services was up 12.7% over the prior year quarter and in line with our expected 5-10% increase in one-time revenue for the fiscal year. Recurring revenue was up 17.2% on the back of strong subscription revenue growth. FY26 year-to-date revenue is $236.4 million, up 17.4% over the prior year-to-date period. Q3 sales kept us on pace toward reaching the higher end of our annual revenue targets. Through the first three quarters of FY26, subscription bookings have increased by 37% compared to the same period last year. Despite increasing subscription revenue growth guidance from the original 25% to 29%, the subscription backlog is still about 88% of its all-time high. Thanks to a robust backlog and strong sales momentum, we continue to have considerable insight into our business for the final quarter of fiscal year 2026 and into fiscal year 2027. Professional services revenue increased 22% over the prior year quarter to $17.7 million as we continue to see year-over-year improvements in backlog deployment compared to the low point during Q3 fiscal year 25. Professional services revenue remains a good leading indicator for future subscription revenue growth, as the vast majority of services revenue is contributed from normal implementation type projects and activities. services performed much better than expected in Q3 fiscal year 2026. We expect Q4 FY26 professional services revenue levels to return to the $18 million range like prior quarters. Recurring revenue represented 64.7 percent of total net revenue for the fiscal third quarter compared to 63.8 percent of total net revenue in the third quarter of fiscal 2025. Subscription revenue grew 23.1% for the third quarter of fiscal 2026. Subscription sales and backlog remain at healthy levels, rising by 14% over the elevated FY25 exit rates. Subscription revenue is trending comfortably towards our 29% subscription growth guidance, with organic growth trending near 25%. Moving down the income statement, gross profit was $50.2 million compared to $43.9 in the third quarter of 2025. Gross profit margin was 62.5% compared to 63% in the third quarter of fiscal 2025. Gross margin was down slightly due to margins associated with one-time revenue while we continue to ramp up our newly hired professional services team members. Combined, the three main operating expense line items, product development, sales and marketing, and general and administrative expenses, excluding stock-based compensation, were 41.2% of revenue in the fiscal 2026 third quarter, compared to 42.1% of revenue in the prior year quarter. Excluding stock-based compensation for the third quarter fiscal 2026, product development increased slightly to 19.3% compared to 18.2% of revenue in the prior year third quarter. General and administrative expenses reduced for the quarter year-over-year from 11.7 to 11.2% of revenue, and sales and marketing decreased from 12.2% to 10.6% of revenue. Operating income for the second quarter of $11.7 million, net income of $9.9 million, and gain per diluted share of $0.35 were all well above prior year third quarter income of $7.4 million, $3.8 million, and a gain of $0.14. Adjusted net income, normalizing for certain non-cash and non-recurring charges of $12.2 million compares favorably to adjusted income of $10.7 million in the prior year third quarter, and adjusted diluted earnings per share of $0.42 increased compared to the prior year quarter of $0.38. The 2026 third quarter adjusted EBITDA was $17.3 million compared to $14.7 million in the year-ago quarter. FY26 adjusted EBITDA continues to pace with our annual guidance of 20% of revenue. Through the first three quarters of the fiscal year, adjusted EBITDA is 19.5% of revenue and trending just north of 20% full-year profitability guidance. Moving to the balance sheet and cash flow statement, cash and marketable securities as of December 31, 2025 was $81.5 million compared to $73 million on March 31, 2025. As a reminder, we paid down our credit revolver by $24 million in the first half of the fiscal year, leaving us debt-free now. Free cash flow in the quarter was $22.7 million compared to $19.7 million in the prior year quarter. As we've said in the past, adjusted EBITDA and free cash flow over a full fiscal year, after normalizing the impact of CapEx, continue to be good proxies for the financial health of the business. For our fiscal year 2026, we are maintaining guidance for subscription revenue growth at 29% based on our current backlog and sales momentum. This quarter, we are also raising our top-line revenue guidance to $318 million. Adjusted EBITDA of 20% remains the same for fiscal year 2026 as we continue to evaluate various strategic growth initiatives. In closing, we are extremely pleased with how our business has performed during the first three quarters of fiscal year 2026 and how it's shaping up going into our last fiscal quarter. With that, I will now turn the call back over to Ramesh.

Thank you, Dave. In summary, the business continues to march along the revenue and profitability growth paths we have created for ourselves like a relentless well-oiled machine. The modernized cloud-native product ecosystem and our top-notch sales leadership teams are opening up many exciting hospitality industry doors for us that were inconceivable a few years ago. The multiple growth paths ahead of us are based on a solid foundation of a world-class product set and an ecosystem of hospitality software solutions that, taken together, has virtually no match in the industry. We only need some of these growth paths to work out well to feed our increasing revenue and profitability growth ambitions. What gives us our current growing competitive advantages has taken us several years of sustained high quality product development work to build and will be very tough to duplicate anytime soon. We are not seeing any signs of anyone else even trying to create such an ecosystem. And our pace of innovation is only getting faster with the availability of AI-based tools that are increasing development speed and providing us with product enhancement possibilities which did not exist before. And there is absolutely no question about the fact that the total addressable market remains huge relative to our size and growing. There are several PMS competitors whose install base is currently many, many times our size. The extent of growth possibilities ahead of us in the coming years, especially on the PMS side of the business, which is completely software-based, is staggering. I could sit here and bore you with details of various sales successes accomplished during this quarter, including a global POS hunting license master sales agreement signed with one of the largest hospitality corporations in the world, major PMS and multi-product ecosystem deals signed with several casino gaming corporations, including for a big water park project, expansion of business with several Ivy League universities in the FSM vertical, and I could go on. But for me, personally, the most heartening and promising highlight of the quarter was a couple of our best and biggest customers willingly taking reference calls with a couple of other big prospective customers, talking about our development velocity, pace of innovation, willingness and ability to bring the product enhancement dreams of customers into reality in a matter of weeks and months, world-class levels of consistent customer service, thereby providing prospective customers the reasoning of why we are increasing the best technology provider partner any hospitality corporation can hope for. One other significant highlight during recent months has been two of our major customers currently using multiple Agilisis products, including POS and PMS, are in the process of taking on a couple of major brand flags, but have turned down and refused to take on the brand's mandated PMS product, insisting that they will need to stick with Agilis' PMS even after the brand flag changes to be able to maintain the kind of experience their guests have become accustomed to in the recent past. News nuggets like this, which may appear minor details for now, are significant indicators of a promising future that is just beginning to take shape. The competing PMS products have been entrenched in the field for decades, but we are well and truly climbing the charts now. We remain confident in the current state of our business and our ability to continue driving top-line growth while simultaneously improving profitability levels. It is highly likely that the next couple of fiscal years will turn out to be the most exciting ones in our history, with increased top and bottom line growth expectations. We are excited and cannot wait to share fiscal 2027 guidance levels with you during the next earnings call, likely around the middle of May. With that, Lisa, let's open up the call for questions.

Thank you. If you would like to ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. We also ask that if you would please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. And our first question for the day will be coming from the line of Mayik Tandem of Needham. Your line is open.

Good evening, Ramesh, Dave, and Jess. Good quarter. Ramesh, I wanted to start with your comments around some weakness that you saw in the gaming and casino space during the months of October, November. I wonder if that coincides with the government shutdown. And if that is the case, just given maybe some of the talk right now of a potential government shutdown in the next few weeks, could that be something that might cause some of that December momentum to maybe slow down again? Just curious on some of your thoughts around that, what were the reasons, and if that is the reason, then something that we should be at least aware of as we go into the next few weeks and months.

Yeah, I wouldn't speculate, Mayank, about what, it was only for a couple of months, I guess it was due to happen, and casino gaming sales has had such a good run across so many years, and then it came back, it came roaring back in December, so I mean, there may be various different reasons, Mayank, that could have caused this, but we are not going to speculate. We can't put our finger on it. So I'm just going to assume this was just a temporary slowdown. Sometimes the holiday period can be a little bit iffy for us. But it was back in December, and we are back to normal levels now. So I don't think I would speculate on any particular

reason, Maya. Understood. Okay. I thought I would just ask just to get any insights into it. For my follow-up question, I wanted to just see how much you could share in terms of your expectation on the Marriott PMS mass rollout expectations? Do you have a sense of timing? I know it's underway in some capacity. And then also maybe if you could comment on, should we expect any impact on margins in the short term as you begin the mass rollout or

has that already been absorbed into your expectations? Yeah. So Mike, as far as Marriott is concerned, you know, we are a little shy about sharing too many details because all that should come from the customer, not from us. But I think what we can tell you is the pilot phase went off very successfully. Our products worked very well. And once again, I will never get tired of reiterating how well it is being managed. I've been in, like you know, Mayank, I've been in enterprise software for close to three decades now. And this is one of the best, most collaborative projects that I've seen managed by a customer. So excellent job by Marriott personnel, so the pilot phase was successfully completed, so now we are into the process of implementation waves, and these waves, meaning number of properties that go live each time, will steadily increase over the coming months, so this is an exciting phase. So, you know, the rollout is going to get going now, and we are very excited what this calendar year or the coming fiscal year is going to bring for us. Most of the costs and other elements are well provided for, Mayank. So all I will tell you, I don't want to get ahead of ourselves and give you profitability guidance for FY27 yet, we are not in that stage, but it is fair to believe that if this year is going to be 20% registered EBITDA by revenue, next year is going to be better. That much I will assure you, but I won't go that far to tell you exactly how much more it'll be better. But we do expect our profitability levels to continue increasing on a fiscal year basis. Here and there, there could be a quarter up or down, Mayank, when we are forced to invest in some infrastructure more than the other quarters. But if you take profitability of FI27 as a full fiscal year compared to this fiscal year, it should definitely be higher. And this project will only be one of the contributing sides. That's very helpful. Thank you so much,

information. Thank you, Mike. Thank you. One moment for the next question. The next question is coming from the line of Matt Van Vellet of Cantor. Your line is open. Yeah, good afternoon.

Thanks for taking the question. I wanted to narrow in a little bit on the international performance this quarter. You mentioned maybe it was a little lackluster. Curious if there was anything specific there. Did the holiday season maybe just put more of an impact on selling than it historically has in the U.S., or are there more sort of selling capacity additions that you expect to make on the team, maybe in local markets where you're seeing traction that could help revive the performance in the fourth quarter and into next fiscal year?

Yeah, hi, Matt. So let me address the sales capacity, Frank. We have no sales capacity issues in any of our verticals, Matt. We have done a lot of sales hiring during last year. And sales capacity-wise, we are in good shape. We are focused more on sales productivity increases. And in any of the verticals, including international, if we find that sales capacity reason, we will quickly hire. So we are ready to hire. We did a lot of hiring last year. But at the moment, there is no sales capacity issue, not only in international, but in any of our other verticals. So that's not an issue. Now, as far as international, I wouldn't assign any particular reason to it, like holidays or anything. We are now working on more bigger size deals internationally than we've ever done before. We've never had this kind of a big customer in terms of multi-product ecosystem. It's definitely working very well internationally. There are multiple bigger opportunities we are working on now. But it is going to be a little bit up and down quarter-wise internationally. we've had a great year so far. Like we told you, just in three quarters, this is already almost our second best fiscal sales year. We are doing well. But you should expect some of these quarter by quarter ups and downs because currently international sales is still dependent on the bigger ecosystem deals where we have a significant competitive advantage, not enough singles and doubles, if you will, to even it out. So these kinds of ups and downs could happen Matt but overall international sales this is going to be a very good

year for us helpful and then as we get into the end of the year and you finalize all of the fiscal 27 outlook you know curious on how you're doing at the very top of the funnel how much of an impact of Joe and Terry had since they've been in their roles now for a little bit in terms of generating that initial demand, generating the brand awareness that maybe was lacking in certain markets in

the past? Yes, Matt. So when you think of our sales pipeline, Matt, you divide it into two broad categories. One is the singles, doubles, and triples, right? That's what generally gets counted in the pipeline. That pipeline remains steady and continues to move forward. Now, on the other hand, what we don't know how to include in the pipeline are some of these big doors that people like Joe Yusuf have been so effective in opening for us. Those are all opportunities that are taking shape, that are moving along the sales process. We don't include those in the pipeline because we just don't know what value to assign to them. These are the super big deals that we are working on. We announced one of those in the last quarter. So those doors, those bigger doors are really opening up well, you know, thanks to Joe and his team and the sales team really opening them up. Now, outside of those bigger opportunities, which is higher than we have ever seen in our company's history, the normal singles, doubles, triples pipeline continues to steadily move along and increase. All right, very helpful. Thank you. Thank you. One moment for the

next question. And the next question is coming from the line of Alan Verkofsky of BTIG. Your line

is open. Hey there, thanks for taking the questions. Could you discuss how AI capabilities across the platform are resonating with customers, what shifts you're seeing in the competition as a result, and maybe how that's potentially impacting sales cycles? And then I've got a

quick follow-up. AI is permeating all through the business, Alan. I wouldn't say that, first of all, we are not seeing anything from the competition that is related to AI, nothing significant at least. But given that we modernized our products, and now these modernized products are anywhere from two to four years old, it gives us a good scope to permeate AI all the way through. So you divide AI into a couple of areas. One, improving our own operations, where all across the company, we now have a dedicated team on AI, and we have a dedicated couple of leaders who wake up every day to AI-ize the company, if you will, more and more. So that's our internal operations. But as far as our products are concerned, there are various different ways in which we're implementing AI. There is natural language processing in our data analysis tool. There's automatic voice recognition in a lot of our tools which lends itself to that, like when you go to book a spa reservation or you go to a kiosk and order F&B items or You go to our web booking engine where we have enabled guests to book multiple amenities at the same time. So there is a lot of ways in which we are beginning to use AI in our new product releases. They are there. We can help with intelligent room upgrades when you do it on your phone or you do it in a kiosk, and image recognition in our kiosk. So there's a lot of different areas now where we are using AI, and we recently won an innovation award whereby when When a resort does complex packages, instead of the guests calling the call desk and going through the process of what spa appointment they need, what golf appointment they need, how many rooms, nights they need to stay in, an AI tool can manage all that. So these are all things that we are working on. Some of these have been released. Some of these have not yet been released. In general, they are increasing our competitive advantage. So I wouldn't assign things directly to AI as yet, but it is permeating all our products and it is making our competitive advantage a lot stronger.

That's a helpful caller. And then as my follow-up, the reiterated guide for 29% subscription revenue growth for the fiscal year suggests about 20% growth in Q4. Can you just talk through what's driving that implied deceleration for Q4? And then as we think about growth for next year, excluding potential contribution from the Marriott, what would you highlight as we consider extrapolating that Q4 implied growth for next year?

Hey, thanks, Alan. Yeah, the implied growth would be a little bit north of 20% for Q4, and a lot of that is just related to the book for time acquisition. The core business is still growing at north of 25% or 25%, but the book for time year-over-year comps are kind of pulling that down into the lower 20% range. And really, you know, going into next year, I mean, no change to how we've talked about the story in the past. I mean, we'll stay in the 20% range with obviously some of our larger projects on top of that.

That's all for me. Thank you, guys.

Thank you. One moment for the next question. And the next question will come in from the line. Well, Brian Schwartz of Oppenheimer, your line is open.

Yeah, hi. Thanks for taking my questions this afternoon. Ramesh, I wanted to switch over to the POS business. You know, that business seems to be improving here in the numbers that you're showing. And I know it's not like there's a lot of new opportunities that come up every year in POS because those are longer duration contracts. So it sounds like your win rates are going up there. My question for you, if maybe you parse what's driving that, is there something changing in the go-to-market you're doing? Is it the maturity of the POS, the modern product now, or is it the referenceability like winning the Boyd Gaming that's having an impact on the win rates in POS? And then I have a follow-up.

I wouldn't say that the waiting time or the sales process time is any higher for POS. If anything, it's actually a bit faster than POS than PMS. But our POS business, like we explained to you like a year or a year and a half ago, went through a tough phase when we were going through the modernization process, when we had an old system and we completely modernized it and we had to do it part by part. But that is all done. Now the modernized solution has been in the field for now pretty close to two years, probably a quarter short of two years. It has settled down well, and we are one of the very few vendors, Brian, maybe a couple of vendors, who are capable of providing guest-facing and staff-facing feature sets, where normally POS is a staff-facing system, but now more and more guest-facing, like you can order for food on your phone, you can go to a kiosk and all that. for us, they are combined into one system. And when a waiter is carrying an iPad in the hand, so we support iOS, Windows, and Android all in one code base, there are no competing systems to that. Now, this did not show up as an advantage until recently because the modernized system had to settle down. Now that it has settled down, it gives us a massive technology advantage over competing POS systems. So we do expect our POS business to continue to do well. The fact it has improved from subscription revenue growth rate used to be in the 15 to 19 percent for a year or so is now back to 20 percent is a good sign. Especially in FSM, we are expanding the business to higher education and health care as well and not just depending on business and industry. So the POS opportunities are growing as much as our PMS opportunities are growing. The only difference is PMS carries with it a much larger ecosystem. There are about 20-25 additional modules around PMS, while POS has a smaller ecosystem. There are about five or six products around it. That's the main difference you're seeing in terms of PMS growing faster. Otherwise, there's a lot of promise in our POS business. We have turned the corner like Boyd Gaming, like in FSM. We are winning a lot of competitive deals now, There is a lot of market share we still have to take from our competition in POS as well. So I wouldn't understate the promise of our POS business in any way.

Thank you, Ramesh. The one follow-up I had is maybe following up on Mayank's question in the beginning, just kind of understanding the gaming segment for the business. Is it your expectation that maybe the slower demand that happened in the beginning of the quarter that got caught up in the month of December do you feel like all that demand got caught up in that December or you know is there opportunities that there still could be some catch-up demand in the gaming segment as we enter here the first half of the calendar year thanks for taking my questions there is

there is a lot of catch-up still left all of it was not caught up in December December was back to normalcy December is a good sales month for gaming and I I wouldn't read too much into this October-November slowdown, you know, don't know the exact reasons behind it, and there is really no point wasting energy speculating with it. Gaming still remains a very strong sales vertical for us. It's done well for several years. Maybe it was due for a slowdown October-November. We couldn't really pinpoint. We have some guesses, but there is no point spending time on those speculations. But to answer your question, December came back to normalcy, but no, all of it was not made up. And just to be clear about one thing, Brian, it was not lost deals. We did not look, I mean, we do lose deals here and there in all our verticals, especially in the lower end. But in general, there was no major losses or anything like that. Just a lot of deals got postponed, part of which we made up in December, part of which we will make up during coming months. All of it was not caught up

in December. Thank you. Thank you, Ben. One moment for the next question. And our next question will be coming from the line of George Sutton of Craig Hallam. Your line is open.

Thank you. Ramesh, there was a good amount of discussion in your script on the implementations, and it sounds like that has started to improve. I know one of your challenges had been if you're out selling new business and you're behind on implementations, you have to push out the schedule of rollout. Now that you've done a better job on implementations, I'm curious, is that making its way into your ability to pitch new business?

Yeah, to a certain extent, yes, George, but it was never coming in the way of sales, right? Our implementation efficiencies, we've always wanted to improve it. Now AI is helping it a lot, a lot of the configurations, product-to-product integrations and all that can be done much faster using AI tools and we are beginning to get all that into the field. Now, to answer your question, what I would say is implementation efficiency is getting better is helping us with converting bookings to revenue faster. Normally, it's a one or two quarter gap between selling and implementing, which is what creates revenue. So that is becoming a bit faster because implementation efficiencies have increased. Now one other way it actually helps increase sales is when your implementation efficiencies increase and you can implement using lesser hours, our services codes decrease and we become even more competitive because we are not the lowest price vendor. So that way it is contributing to improve sales. So just to summarize, implementation efficiencies is increasing does help increase sales because our services codes reduce. That is on the one hand. On the other hand, the fact we can implement faster reduces the time it takes between booking and conversion to revenue.

Gotcha. Thank you for that. So you did discuss and I know in past calls you've talked about reference challenges. You had relatively new products out in the market, therefore didn't have reference customers. You specifically referenced that some of your largest customers were now taking reference calls. Can you just give us a little bit more of a picture of that process?

Yeah, the reference in general, the volume of customers willing to take reference calls, especially on our modernized solutions, because we sort of lost hundreds of customers who would take reference calls on our older versions because we don't sell those older versions anymore for the last couple of years, and we sort of had to rebuild that world of reference customers, which is now expanded in size. And it is expanding exponentially every month and every quarter. There are more and more customers who are willing to talk about our modernized solutions. So that is one aspect of it. The other aspect, George, is there are customers who are getting real value from the ecosystem. They used to be dealing with seven or eight vendors. Now they are dealing with one vendor. and a lot of the things we've automated, the modernized solutions are producing real business results and customers are more willing to talk about it. That is the second aspect to it. The third aspect to it is the kind of customers who are now willing to take reference calls is becoming more and more prestigious. More and more the prestigious big names are willing to take calls and talk about how good a partner we are and how easy it is to work with us. So in all those aspects, the need for reference customers is becoming more and more fulfilled. So our reference customer situation is improving dramatically every month now.

Perfect. Good to hear. Thanks. One moment for the next question. And our next question will be coming from the line of Nehal Koshy of Northland Capital Markets. Your line is open.

Yeah. Thank you for the question. And just following up on that prior questioning here, as you know, your best and biggest customer's willingness to take prospective customer calls as similar as this past quarter was one of your biggest takeaways. you is this because it's a newfound willingness from these customers or is it because you now have these new big type of prospective customers are in your pipeline that necessitate getting these large reference customers to take

those calls I don't think it necessitates it Nehal but it is just a better situation we are in now because a lot of the successes we've had Nehal in the recent past let's say the last few quarters have involved ecosystem multiple products working together has produced great value and by nature they tend to be the bigger customers who have used our ecosystem products and they are willing to take calls and tell them how much value they have created so both the quality of the reference calls in terms of real value that they have got and also the prestige level of the customer the bigger size customer taking the calls are both being very helpful for us now and is there anything to do with the

the information that you now have a lot more uh grand slam type of customers in the pipeline too

yeah generally i mean our our pipeline involves both customers there are some i wouldn't call it grand slam there are some bigger size customers nehal in the pipeline and there are also the singles doubles and triples in the pipeline so our pipeline continues to to have a good mix of both. And the reference customer availability has increased now for our modernized solutions.

Okay, thank you. One moment for the next question. And our next question will be coming from the line of Stephen Sheldon of William Blair. Your line is open.

Hey, everyone. You have Matt Filick on for Stephen Sheldon. Thank you for taking my questions. It looks like professional services gross margins came in around the mid-20s this quarter, which was just a bit lower than we had expected. Curious if that was related to the use of more costly third-party labor to support product implementations or if there were other factors at play driving that compression.

No, it was really here. We still have plenty of ramp and plenty of capacity utilization.

Okay, perfect, Dave. Thank you for clarifying that. And then just one more, if I may. In the past, I think you have talked about product development spend declining from the low 20s to a mid-teens as a percentage of revenue over time and given you're now seeing a boost in product development speed from leveraging AI could that operational leverage materialize sooner than initially expected just curious on when exactly we may start to see that play out especially in light of the AI efficiency benefits yeah as Matt as the AI efficiency

benefits are increasing, so is the pressure, the innovation pressure from customers. So in general, a lot of the customers are using our modernized solutions are also coming up with a lot of new ideas, enhancement ideas, and we are able to get a lot more of them done that we have ever been able to do before because of AI tools. But the operating leverage in terms of using lesser R&D for the products is still a little bit of a moving target for us because the demand from customers, because there are not many technology vendors innovating in this space, so that demand for innovation continues to be high. We're getting a lot more done than we've ever done before, and our products are two to four years in the field now, so they're fairly young. So that pressure continues to increase. So we think we will, in FY27 and the year beyond that, we'll start increasing their operating leverage, but the pressure on us to continue innovating at a faster rate is reasonably high.

Got it, and that makes sense. Thank you both for the time.

Thank you, Matt.

Thank you. And this does conclude today's Q&A session. I would like to turn the call back over to Ramish for closing remarks. Please go ahead.

Thank you, Lisa. Thank you all for your interest in agilisist and support. Best wishes to all of you for a very happy, healthy, safe, and successful 2026. Look forward to catching up again around the middle of May when we will be reporting Q4 and full fiscal year 2026 results and providing guidance for fiscal year 2027. Thank you.

Thank you all for joining today's conference call. As those conclude today's meeting, you may now disconnect.