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01/10 16:50
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong subscription revenue growth, a positive outlook for EBITDA, and successful sales across multiple verticals, despite a temporary free cash flow loss. The Q&A reveals ongoing improvements in sales capacity and product integration, with AI enhancing offerings. Although management was vague on some productivity details, the overall sentiment is positive, driven by strong subscription sales and optimistic guidance. The market cap suggests a moderate reaction, resulting in a 'Positive' sentiment prediction for stock price movement.
Sales Fiscal 2026 Q1 sales were 24% higher than the comparable prior year period. Combined sales of the last 2 quarters were 19% higher than the preceding 6-month period, and recurring fee bookings were 34% higher than the preceding 6-month period. Reasons include broad sales success across verticals, a turnaround in the food service management vertical, and increased international business momentum.
Professional Services Sales Q1 fiscal 2026 professional services sales were 20% higher than the comparable prior year quarter. Combined Q4 fiscal 2025 and Q1 fiscal 2026 services sales were 21% higher than the immediately preceding 6-month period. This growth was driven by increased project implementation levels.
Subscription Software Sales Q1 fiscal 2026 was the best ever quarter for subscription software sales, 25% higher than the preceding Q4 fiscal 2025 and 79% higher than the comparable prior year period. Subscription software sales specific to POS and related modules were 61% higher than the preceding quarter. Growth was driven by the adoption of modernized cloud-native software solutions.
Revenue Q1 fiscal 2026 overall revenue was $76.7 million, 21% higher than the comparable prior year quarter. Subscription revenue grew by 44% year-over-year, driven by a 48% increase in PMS-related modules and a 16% increase in POS-related modules. Recurring revenue grew to $48.6 million, 28% higher than the prior year period.
Gross Profit Gross profit was $47.3 million compared to $39.9 million in the first quarter of fiscal 2025. Gross profit margin was 61.7%, slightly down from 62.8% in the prior year due to lower margins associated with onetime revenue and ramping up professional services team members.
Operating Income Operating income for Q1 fiscal 2026 was $4.5 million, lower than the prior year’s $5.7 million. This decrease was attributed to higher sales and marketing expenses, including the cost of the user conference.
Adjusted EBITDA Adjusted EBITDA for Q1 fiscal 2026 was $12.5 million, slightly higher than $12.1 million in the prior year quarter. The increase was due to strong subscription sales and revenue growth.
Free Cash Flow Free cash flow for Q1 fiscal 2026 was a loss of $5 million compared to an increase of $0.2 million in the prior year quarter. This was due to timing of working capital events and repayment of credit revolver debt.
Subscription software sales: Q1 fiscal 2026 was the best ever quarter for subscription software sales, 25% higher than the previous quarter and 79% higher than the comparable prior year period. Subscription software sales specific to POS and POS related modules were 61% higher than the preceding quarter.
AI-based product enhancements: Various AI-based product enhancements are being included in recent and upcoming version releases, such as personalized upselling, AI-assisted concierge services, AI-driven pricing decisions, and AI-based conversational food ordering.
Integrated product ecosystem: The company has developed an integrated ecosystem of software solutions, which is a growing differentiator and enables the use of AI tools for enhanced guest experiences and operational efficiencies.
International sales: Q1 fiscal 2026 was the second highest sales quarter for international sales, with good momentum in large multiproduct deals.
Casino gaming sales: The casino gaming sales vertical had its best Q1 on record, 15% higher than the previous best Q1 quarter.
Food service management (FSM) vertical: Q1 fiscal 2026 was the best sales quarter in the FSM vertical in the last 2.5 years, marking a turnaround from previous challenges.
Revenue growth: Q1 fiscal 2026 overall revenue was $76.7 million, a record for the 14th consecutive quarter, driven by 44% year-over-year growth in subscription revenue and 16% growth in professional services revenue.
Recurring revenue: Recurring revenue grew to $48.6 million in Q1, 28% higher than the prior year period, with subscription revenue making up 65.6% of total recurring revenue.
Professional services revenue: Professional services revenue increased 16% year-over-year to a record $18.1 million.
Cloud transition: The company is transitioning to a cloud subscription-based software model, reducing reliance on perpetual software licenses and hardware resell.
AI integration: AI tools are being integrated across internal operations and product offerings, enhancing efficiencies and customer experiences.
Sales and implementation capacity: Global quota-carrying sales personnel and professional services personnel strength increased by 45% and 38%, respectively, compared to the previous year.
Sales Momentum: Challenges with onetime product revenue remain, as Q1 was the lowest quarter in about 4 years for perpetual software licenses. This indicates a shift in customer preference towards cloud options, but also highlights a decline in traditional revenue streams.
Profitability: Fiscal 2026 Q1 profitability was below annual expectations due to several once-a-year cost items, including a high-cost user conference. This could impact the company's ability to meet profitability targets if such costs are not managed effectively.
Cash Flow: Free cash flow in Q1 was a loss of $5 million compared to an increase of $0.2 million in the prior year quarter. This is attributed to timing of working capital events and could pose a risk if cash flow does not normalize as expected in the second half of the fiscal year.
Operational Challenges: While many operational challenges from fiscal 2025 seem to be resolved, there is still significant work required to maintain sales momentum and visibility into the business.
AI Integration: The company is integrating AI tools cautiously to avoid exposure of internal data to the outside world. This cautious approach, while necessary, could slow down the pace of AI-driven innovation and operational efficiency improvements.
Debt Management: The company paid down its credit revolver by $12 million and is now debt-free. However, this has contributed to a reduction in cash reserves, which could limit financial flexibility in the short term.
Subscription Revenue Growth: Guidance for subscription revenue growth for fiscal year 2026 has been raised from 25% to 27% due to strong sales momentum and backlog.
Total Revenue Guidance: Annual revenue guidance for fiscal year 2026 remains at $308 million to $312 million.
Adjusted EBITDA: The company expects adjusted EBITDA to be 20% of revenue for the full fiscal year 2026, in line with original expectations.
Onetime Product Revenue: Onetime product revenue is expected to remain at current low levels for the foreseeable future due to the shift towards cloud subscription options.
Services Revenue: Services revenue is expected to remain at current levels for the remainder of fiscal year 2026.
Marriott PMS Project: The project is progressing as planned, with testing nearing completion and implementation at test properties expected to start in a few months. No significant subscription revenue from this project is expected during fiscal year 2026.
The selected topic was not discussed during the call.
The earnings call summary presents a positive outlook with strong financial performance, particularly in subscription revenue and free cash flow. The Q&A section highlights strong sales momentum, margin improvements, and international growth, with no major negative concerns raised. The guidance increase and positive sentiment from analysts further support a positive stock price movement. Given the company's market cap of $2.8 billion, a positive reaction of 2% to 8% is expected over the next two weeks.
The earnings call highlights strong subscription revenue growth, a positive outlook for EBITDA, and successful sales across multiple verticals, despite a temporary free cash flow loss. The Q&A reveals ongoing improvements in sales capacity and product integration, with AI enhancing offerings. Although management was vague on some productivity details, the overall sentiment is positive, driven by strong subscription sales and optimistic guidance. The market cap suggests a moderate reaction, resulting in a 'Positive' sentiment prediction for stock price movement.
The earnings report shows strong financial performance with significant revenue growth and improved margins, despite minor declines in product revenue and gross profit margin. The Q&A reveals positive sentiment towards the company's strategic moves, such as the Book4Time acquisition and POS platform improvements. However, cautious guidance and uncertainties around the Marriott project and customer transitions slightly temper the outlook. Given the company's market cap, these factors suggest a moderate positive stock price movement, likely in the 2% to 8% range over the next two weeks.
The company's financial performance is strong, with significant revenue growth, particularly in subscription services, and improved profitability metrics. Despite some uncertainties with the Marriott PMS project, the overall sentiment remains positive due to strong organic growth, successful acquisitions, and international expansion potential. The lack of a shareholder return plan is a minor negative, but the market cap suggests a moderate reaction to positive news. Given these factors, a positive stock price movement of 2% to 8% is expected over the next two weeks.
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