Agilysys' (AGYS) CEO Jim Dennedy on Q4 2016 Results - Earnings Call Transcript

| About: Agilysys, Inc. (AGYS)

Agilysys, Inc. (NASDAQ:AGYS)

Q4 2016 Earnings Conference Call

June 09, 2016, 04:30 PM ET

Executives

Jim Dennedy - President, CEO

Janine Seebeck - CFO

Analysts

Allen Klee - Sidoti

Phil Bernard - Eilers & Krejcik

Operator

Good afternoon ladies and gentlemen, welcome tot the Agilysys Fiscal 2016 Fourth Quarter and Full Year Conference Call. As a reminder, this conference is being recorded.

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

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

Jim Dennedy

Thank you, Liz and good afternoon everyone. We appreciate you joining us on the call today to review our fiscal 2016 fourth quarter and full year results. Joining me on the call today is our Chief Financial Officer, Janine Seebeck.

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

Total net revenue for the fourth quarter increased 11% to $31.9 million. Adjusted EBITDA in our fourth fiscal quarter was $1 million compared to an adjusted EBITDA loss of $600,000 in the same period last year. We reported a net loss for the fiscal 2016 fourth quarter of $1.5 million or a loss of $0.07 per diluted share, which compares favorably to a net loss of $5.4 million or a loss of $0.24 per diluted share in the prior year period.

Full year net revenue increased 16% to $120.4 million. We are pleased with both the overall results as well as the fact that we saw growth within each component of reported revenue on a full-year basis. In addition to our top-line growth for fiscal 2016, we also significantly benefited from our fiscal management initiatives resulting in an increase of more than $9 million year-over-year and net cash provided by operating activities and improving our adjusted EBITDA to $4.3 million for fiscal 2016 from $1.2 million for fiscal 2015.

Net loss for fiscal 2016 was $3.8 million or a loss of $0.17 per diluted share, which compares favorably to a net loss of $11.5 million or a loss of $0.51 per diluted share in fiscal 2015.

Janine will provide a more extensive review of our financial results including the income statement and balance sheet as well as our expectations and revised outlook for fiscal 2017.

As we look at our overall business, we continue to grow our revenue and accrue our financial health through our hospitality focused business strategy and bringing new solutions to market that will enable us to retain and grow existing customer relationships as well as engage new customers. We continued to experience market share shift from our key competitors to Agilysys resulting from our focused business strategy. The share shift is attributable to producing solutions uniquely designed to support hospitality centric business scenarios, servicing and supporting our customers in a way that is responsive to the guest experience on which they focus, and cultivating a partnership based approach to the business relationship enabling a stronger connection between our company and our customers.

The new solutions we introduced, including key enhancements to our iconic products that facilitate migration to be rGuest platform suite of products demonstrates commitment to our focused business strategy and contributes significantly to driving our strong bookings and revenue performance in fiscal 2016. These product enhancements not only keep our iconic solutions relevant in the market but also serve as a strong foundation to transition our customers to the new rGuest platform based solutions.

As a result, sales performance of both the rGuest platform based products as well as sales of our iconic products experienced healthy growth in our fiscal 2016 and we see that trend continuing in fiscal 2017. An example of solution enhancements to facilitate iconic to rGuest platform migration is the recent introduction of hosted LMS. Until the start of our third fiscal quarter of 2016, LMS was only offered in a licensed arrangement delivered as an on-site deployment.

We now offer a subscription service to this best-in-class property management solution in an above premise hosted delivery model. The take-rate on this offering exceeded our forecast, and hosting our customers on a single version of LMS facilitates a more seamless transition to rGuest stay when it reaches feature and skilled parity with LMS.

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

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

Moreover, the open system standards-based design provides publicly addressable interfaces to more easily connect the iconic Agilysys solutions and most third-party solutions to the rGuest hospitality platform. This makes understanding of guest consumption patterns more available to the operator to deliver a more customized guest experience in the moment of enjoyment.

Another key component of the rGuest platform, rGuest Pay continues to grow at a healthy pace with another solid quarter of agreements in the fourth quarter of fiscal 2016, bringing the total to more than 345 agreements this fiscal year alone and nearly 400 deals since the launch of the solution in the latter part of fiscal 2015.

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

I also want to point out that our growth with first-time customers, deployments at many cases displays an incumbent provider continues to accelerate as we secured 28 contracts with new customers in the fourth quarter to bring the fiscal 2016 total new logos to over 140. While this is lower than the approximately 225 new customers with whom we closed contracts in fiscal 2015, the total bookings value for our new customers secured in fiscal 2016 has almost tripled compared to the value last year.

Turning next to review the health and current state of each of our business verticals, let me begin with commercial and travel gaming, which represents 53% of total revenue. This vertical remains a primary focus for us as it continues to show healthy growth. Casinos have become increasingly integrated to include their casinos, resorts, spas, dining destination, retail, event menus et cetera, thus necessitating the need to find ways to drill into guest spend across the entire resort and to use this data to better segment and market to their most valuable guests. It's one of the industry's biggest challenges. Many casinos have all of this rich data from multiple sources, but cannot understand the totality of it in one clear picture in order to properly leverage it to grow their business.

The growth in this sector for us is evidenced in our key customer wins including Magnolia Bluffs Casino which selected LMS, Odawa Casino resort, Petoskey, Michigan which selected a suite of products including Visual One Property Management System and for Genesis point-of-sale and rGuest Pay, Saratoga Casino in Raceway in Saratoga Springs, New York which selected a comprehensive Agilysys solutions suite including Visual One Property Management System, InfoGenesis point-of-sale, InfoGenesis Flex and rGuest Pay and Grand Sierra Resort Casino in Reno, Nevada which selected the rGuest Seat and rGuest Pay solutions to enhance efficiency and guest service at the 2000 room property. Grand Sierra is a long-time user of LMS Property Management System and InfoGenesis point-of-sale.

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

The Grant Casino, Mille Lacs and Grand Casino Hinckley both new customers located in East Central Minnesota has selected a suite of Agilysys solutions including InfoGenesis point-of-sale, InfoGenesis Flex and rGuest Pay, the streamline operations and enhanced guest service, the property is our long-time users of the LMS property management system.

In the hotel resorts and cruise vertical which represents almost 23% of our revenue, we continue to make progress in bringing to market solutions that deliver improved guest recruitment, increased wallet share opportunities and enhanced operational efficiencies while strengthening guest connections with more personalized service.

A new customer Wild Dunes Resort in Isle of Palms recently chose InfoGenesis point-of-sale; InfoGenesis Flex and rGuest Pay to manage its award-winning 1600 acre oceanfront resort at this Barrier Island of South Carolina. While Flamingo Motel and Suites, a new client in Dells Wisconsin choose rGuest Stay and rGuest Pay as part of its property-wide upgrade.

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

We remain confident our efforts will enable us to continue to gain share across all of our various lines of business. And as imagined on our previous calls in the second quarter of fiscal 2016, we won a significant engagement with a Midwestern chain hotel for rGuest Stay. The system is now lies with this customer as they recently began their implementation rollout which will encompass their enterprise over 125 properties and more than 15,000 rooms providing us with a solid pipeline for fiscal 2017.

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

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

With respect to the install base, we ended fiscal 2016 with more than 35,000 point-of-sale endpoints installed up 29% from fiscal 2015 year end. Additionally, the number of hotel rooms our properties management solutions manage increased 3% in fiscal 2016 to approximately 236,000 rooms. Our goal is to continue to grow both the total number of terminal endpoints and hotel rooms under management.

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

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

Janine Seebeck

Thank you, Jim, and good afternoon everyone.

Our fourth quarter fiscal 2016 revenue was $31.9 million and 11% increase from total net revenues of $28.7 million in the comparable prior year period. Revenue for the full year grew 16% over fiscal 2015.

Looking at revenue in greater detail, products revenue decreased by 1% to $10.8 million a 34% of total revenue during the quarter due to the difficult comp on the back of a large hardware driven project that took place in the fourth quarter of fiscal 2015 which did not repeat in the current quarter.

On a full year basis products revenue increased 30% to $41.4 million versus $31.8 million in fiscal 2015 with a significant portion of the growth coming from increased sales related to our existing on-premise proprietary offerings including hardware replacement sales. It is important to note that a portion of the full year growth in hardware sales is the result of the growth that we are seeing across subscription-based sales. Subscription-based sales yield initial revenues of lower margin hardware with the higher-margin subscription revenue being realized in future periods. Total revenue related to our rGuest platform comprised 5% of total fiscal 2016 revenue.

Support maintenance and subscription revenue or recurring revenue increased 8% to $15.6 million compared to the fourth quarter of fiscal 2015, down by 7% to $60.1 million on a full-year basis. Driving that growth was a 33% increase in subscription revenues for the fourth quarter and a 29% increase on a full year basis representing 18% and 17% of total recurring revenues respectively.

Professional services revenue grew 67% to $5.5 million compared to the fourth quarter of fiscal year 2015 and by 20% on a full year basis reflecting the positive impact of our increased booking volume and enhanced throughput from our customer facing implementation and installation team. We are pleased to see this level of growth in particular we are pleased to see continued growth in our recurring revenues, which accounted for 49% of total net revenues for the fourth quarter and 50% of total net revenues for fiscal 2016.

Moving down the income statement, cost of goods sold increased approximately 2% or $14.3 million versus the prior-year period. At 20% increase, we had in cost of goods sold on a full-year basis was largely due to the increase in overall third-party product revenues as well as labor costs associated with the overall growth and professional services revenue. Total gross profit rose 21% or $3 million for the first quarter of fiscal 2016 and increased 13% on a full year basis, which reflects an improvement in gross profit margin of 430 basis points, a 55% for the full quarter and 150 basis point decline for the full year to 57%.

Looking at operating expenses which included product development, selling and marketing, general and administrative and depreciation expense, the fourth quarter saw 7% increase to $18.5 million compared to the prior year period. And as a percentage of net revenue they represented 58% versus 60% in the prior year period and 59% for fiscal 2016 versus 67% for fiscal 2015.

As expected product development expenses remained at similar levels to fiscal 2015 increasing by 1% to $6.7 million in the fourth quarter of fiscal 2016 and by 5% to $26.7 million on a full year basis. And as a percentage of total revenue product development expense represents 21% versus 23% in the fourth quarter of fiscal 2015. This increase is primarily driven by our continued investments in resources related to both our rGuest and iconic product enhancements to expand the customer experience across our installed base as well as our future offerings with existing and new customers.

Sales and marketing costs increased 7.9% year-over-year in the fourth quarter of fiscal 2016 and by 21% on a full year basis primarily reflecting an increasing commission expense in line with revenue achievements.

General and administrative expense increased 12% on a quarterly basis and 1% on a full year basis primarily due to favorable reductions of approximately $900,000 reflecting the benefit of initiatives to continue to reduce overhead costs in line with our company strategy offset by an increase in incentive compensation of approximately $1.3 million associated with overall improved financial results.

And we saw $2.2 million full year decline in amortization of intangibles primarily due to a reduction expense related to assets becoming fully amortized and assets being replaced to repair during fiscal 2015 including our internal ERP replacement projects. As a result, we reported an operating loss of $2 million for the fourth quarter of fiscal 2016 compared to an operating loss of $5.6 million in the prior year period.

Net loss for the fourth quarter was $1.5 million or a $0.07 loss per diluted share compared to a net loss of $5.4 million or $0.24 loss per diluted share in the fourth quarter of fiscal 2015. Net loss for fiscal 2016 was $3.8 million or a loss of $0.17 per diluted share compared to a net loss of $11.5 million or $0.51 per diluted share in fiscal 2015.

Adjusted EBITDA increased approximately $1.6 million in the fourth quarter to $1 million versus a loss of $600,000 in the fourth quarter of fiscal 2015. And on a full year basis fiscal 2016 adjusted EBITDA increased $3.1 million to $4.3 million versus $1.2 million in fiscal 2015.

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

Cash from operations [$39 million] [ph] increase for the year as we swung from a net cash used in operations of $2.2 million for fiscal 2015 to $7.2 million in net cash provided by operations for fiscal 2016. Adjusted for non-recurring items, net adjusted cash provided by operations for fiscal 2016 with $7.9 million compared to a net adjusted cash provided by operations of $900,000 in the prior year period.

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

Looking to fiscal 2017, we forecasted greater than the market rate of growth for the full-year revenue and expect our bookings will continue to favor subscription type contracts in fiscal 2017. Allowing us to take the hardware revenue upfront and spreading the software license revenue over the term. As such, we currently expect fiscal 2017 full year revenue will be approximately $132 million to $136 million reflecting an estimated 10% to 13% growth over fiscal 2016.

And as it relates to margins, it is important to remember that we have been reflecting the development costs of our solution such as rGuest Stay as software development costs on the balance sheet. However, as these solutions reach general availability, we will be advertising these development costs in a linear fashion on to our income statement. As such, with a general availability of rGuest Stay announced earlier in the quarter, we expect gross margin below 50% range due to the non-cash development technology expense coming off the balance sheet.

And on an adjusted EBITDA basis, we are forecasting to end fiscal 2017 with more than double to fiscal 2016 adjusted EBITDA of $4.3 million.

I also wanted to highlight that given the encouraging progress around the rGuest platform, that we will be modestly accelerating our product development investment plan to bring to market additional features and functions on a number of rGuest solutions that will enable us to address a growing number of market sooner. As such we anticipate total product development investments including both operating and capital expenses will be materially lower than fiscal 2016 levels. However, based up on opportunities we see, the roadmap to this acceleration may lead to modestly negative free cash flow in fiscal 2017 with the projected end of your cash balance of approximately $55 million.

Secondly, we are pursuing several larger than average size engagements that may require us to further accelerate the product roadmap and invest ahead of recognized revenue in fiscal 2017.

To sum up, we continue to make progress on turning Agilysys to balance top and bottom-line growth and profitability as we continue to make progress in our transformation by offering a world-class product lineup of hospitality specific solutions sustaining strong cost savings and operating leverage.

And while we're pleased with the progress that we're making, we understand we have more to do and we are working diligently to deliver our commitment through fiscal 2017.

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

Jim Dennedy

Thank you, Janine.

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

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

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Allen Klee with Sidoti. Your line is now open. Please go ahead.

Allen Klee

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

Jim Dennedy

Well, here is what is happening, from our prior guidance to today, we talked about it in our third quarter call. Customers came to us with opportunities for both rGuest Stay and rGuest Buy. We made a decision in the last three months to pull forward some roadmap items that we had planned to address anyhow. That would require us to use or be a slight user of cash in fiscal 2017.

In addition, over the past three months, we’ve developed opportunities with some larger hospitality operators that if those opportunities materialize into awarded contracts, it may require us to invest in product and services ahead of the subscription-based revenue relationship that we would develop with these folks that would require a slightly additional use of cash ahead of realizing the revenue in our P&L.

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

Janine Seebeck

And Allen, I would add to that I think just from a financial perspective, it's more of a capital spend that Jim was talking about than the operating. So the operating we still think should remain in my list prior levels, it's really that capital investments looking a little bit more there than we had originally anticipated.

Allen Klee

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

Janine Seebeck

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

Allen Klee

Okay, great. And then, I know you had a user conference in Las Vegas recently, and I was just kind of curious if, kind of if you had any like takeaways of customer feedback and how that went?

Jim Dennedy

Sure, we did. Our user conference is called Inspire, and I think there is probably three key takeaways. We hold an executive summit at that where we had almost 100 senior executives. There were over 400 participants, but we had 100 senior executives from our client base or our customer base attend that executive session, and they gave us strong feedback on our roadmap and on our investments. And what we learned, principally from them was that the investments that we have made in the rGuest platform or the hospitality centric technology platform and having evidence of success of that platform and market gives them increased confidence in buying our current iconic solutions that we have like LMS, Visual One, InfoGenesis, Stratton Warren, Eatec, et cetera. Because they believe in the migration path and there is actually an articulated vision with bits in market that are working. So that's the first take away.

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

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

Allen Klee

That's very helpful. Thank you. If you look at your major verticals, how would you sort of rank them just in terms of where you would prioritize them in terms of how you see growth coming from over the next year or two?

Jim Dennedy

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

The industry or the vertical in which we have a lower level of overall share participation today and where we see greater numeric and percentage growth opportunities is in the core hotel market. While we have been quite successful with the integrated resorts and luxury properties, we haven't really had the tools necessarily to effectively compete in the core chain hotel market. The advancements in investments we have made in both our iconic and our rGuest products allow us to compete effectively or more effectively in those markets and you see that when I mentioned the Waldorf references, both in Cleveland and Bonnet Creek and Waldorf, Orlando where we are seeing more opportunities in the core hotel market that will drive growth.

So, I think if I were to model it on a forward-looking basis, continuing to grow share and casinos and driving greater growth as a core hotel market the two areas in which I would tend to focus our business. Now, that said closely behind the hotel business is a smaller market but the contract food service or managed food service industry is an area where we have a quite specialized service offering that allows us to compete and win business with our friends at Compass and help our friends at Aramark and Sodexo, Guggenheim, Delaware, North et cetera continue to win contract for food service business in their vertical. Although it's a smaller market, I think we have a unique toolset to help those folks compete in that segment of the business.

Allen Klee

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

Janine Seebeck

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

Jim Dennedy

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

So when you look at that contract it was about 18 months of negotiation cycle contract award in let's say July, we did work associated with statement of work, associated with that contract and then a go live first operational property in May. So when you think about that sequence and there let's say 15,000 rooms are in 25 properties, we are talking about opportunities that are potentially 10x that size that we might be able to successfully win at least bookings or a contract within fiscal 2017, work to be done in fiscal 2018 with rollout to be in the mid to latter part of fiscal 2018.

So that's the way we think about the case, but that would be transformational growth opportunities and we had more than one that we are pursuing.

Allen Klee

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

Jim Dennedy

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

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

So our approach to that would be a module-based pricing approach where we would price at least initially specific services and limited package like check-in, checkout housekeeping things of that nature and charge a comparable but yet small premium to market value. But any additional value you want to add on to the rGuest platform, we would increase through connection licenses or additional PMS services. So that's the approach that we're taking because we know competing products in the market today cannot scale to what we have in terms of the technology platform and cannot provide open and addressable enough services in a technology platform where they could be more flexibly used in the future like rGuest Stay. So that's how we are approaching the product and pricing.

Allen Klee

And I assume that when you gave guidance for fiscal 2017, you're not including any of these transformational type of wins?

Jim Dennedy

No, sir. What we're doing is, we are looking at our pipe -- we're looking at our pipe that we know exist today and just like we did last year. When we go to the line, we are looking down field for uncovered receivers, and we see one, we are calling lawn bowls, we are going to take it. And that's what led to opportunities in 2016 for outside growth than what was forecasted. And we think the same thing is going to continue to happen. We have a plan and we have a plan that we can grow the company at 10% to 13% but we are not doing it with blinders on, we're going to the line and we're looking downfield and if we see another uncovered receiver, we're going to continue to throw some lawn bowls. But, we are not betting the business on throwing lawn bowls every time we go to the line.

Allen Klee

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

Janine Seebeck

So, we are currently sitting in the low 30s from a quota carrying sales rep perspective as the business scales then there is an equation that they are looking at nominal increase this year as we continue to see the revenue plan achieved but nothing substantial at this time that fills into the point.

Allen Klee

Okay. And then, just maybe finally, could you just remind me and everyone of the kind of longer 3 to 5 year plan if anything has changed on that of what we are -- you see the company could be?

Jim Dennedy

Outside of some of these transformational growth opportunities, I don't see that we see a tremendous, I don't know, let's say a step function change in the business plan, we still think looking out let's say to 2020, we are going to be just under let's say, $190 million to $200 million size company and generating somewhere and let's say that, call it low teens percent in terms of EBITDA, so let's say like around $25 million to $30 million of EBITDA.

Now that said, these transformation opportunities that we are pursuing today, which you are like to take them, win them and try to make, let's say, 2019 look like 2020 or make 2018 look like 2020. And that's the type of change that we think is available to us. It's a matter of winning the contract, securing with contract the development expense against the future opportunity and then executing. So, that's still the same trajectory but we're not going to try to sell today that we're going to win all of these and we are going to turn 2018 into 2020. We still got to win them all.

Allen Klee

Okay. Great. Thank you so much. And congratulations.

Jim Dennedy

Yes. Thanks.

Operator

[Operator Instructions] Our next question comes from the line of Phil Bernard with Eilers & Krejcik. Your line is now open. Please go ahead.

Phil Bernard

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

Jim Dennedy

Thanks.

Phil Bernard

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

Janine Seebeck

So, Phil in general, we are still as a customer account perspective we are still seeing most new opportunities having more than one product with it within the existing base. I think we are kind of getting to where we can kind of max that out. But, we will still see some crossover revenue I think in 2017, but I don't it will be a huge contributor. But I still think it is adding value. And I think our number is less than 33% of our customers who have more than one product. So there's definitely opportunity but there's also segment where like food service where they really put focus on InfoGenesis, right where we can expand. So, there is still opportunity there. There is some assumptions for that in the plan. But, it's not a huge component, if you will.

Phil Bernard

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

Jim Dennedy

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

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

Phil Bernard

Got it. Okay, great. Thank you, guys.

Operator

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

Jim Dennedy

Thank you, Liz. And thank you all for your interest in our company. We believe Agilysys continue to make progress as we focus our resources on the highest value opportunities in our chosen end markets and manage the business for the longer-term to deliver sustainable value to our customers and our shareholders. We look forward to updating you on our progress during our fiscal 2017 first quarter results call. Thank you.

Operator

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

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