A subtle shift in Agilysys' latest earnings transcript reveals a potentially game-changing trend that's flown under the radar of most analysts. While the company boasts record revenue, strong sales momentum, and impressive profitability, a deeper dive into the numbers unveils a burgeoning PMS (Property Management System) business that could be poised to explode.

Agilysys, historically known for its robust POS (Point-of-Sale) solutions, has quietly been building a comprehensive PMS ecosystem, a move fueled by strategic acquisitions, relentless innovation, and a hospitality industry hungry for modern, integrated solutions. While the company’s Q3 revenue was a record $60.6 million, up 21.3% year-over-year, this growth has been predominantly driven by its strong POS business. However, the winds of change are blowing, whispering tales of a potential PMS revolution brewing within Agilysys.

The transcript reveals a remarkable surge in PMS sales wins, with 11 new core PMS wins during Q3 across new customers, new sites, and new products. Although still relatively small in absolute numbers, this represents one of the company's best quarters in history for PMS wins, indicating a growing appetite for their modernized, cloud-native solutions.

Adding fuel to this fire, Agilysys’ new customer PMS deals closed this quarter involved an average of seven products each, demonstrating the robust nature of their ecosystem. This is in stark contrast to their POS deals, which averaged 3.4 products, underlining the greater potential for bundling and upselling within the PMS segment.

This trend towards multi-product PMS implementations speaks volumes about Agilysys' strategic vision. They've recognized that hotels, resorts, and other hospitality businesses are seeking to streamline their operations by consolidating vendors and embracing integrated solutions. Agilysys, with its comprehensive PMS ecosystem, is perfectly positioned to capitalize on this trend.

Further solidifying their position in the PMS market is the game-changing agreement with Marriott, a mandate that solidified Agilysys' credibility as a major PMS player. While this agreement itself hasn't yet translated into quantifiable sales figures, it has undoubtedly opened doors to opportunities that previously remained closed.

This Marriott win, coupled with the organic growth in PMS sales, paints a picture of a sleeping giant starting to stir. Agilysys, having successfully filled the innovation void in the hospitality tech industry with its modernized, cloud-native solutions, is ready to translate this technological prowess into market dominance.

But the intrigue doesn't stop there. The transcript hints at an even more compelling hypothesis: Agilysys' PMS success is paving the way for exponential growth in sales of their add-on modules. With PMS boasting four times as many add-on modules as POS, the company has an unprecedented opportunity to leverage their core PMS wins into a cascade of additional sales.

Imagine this: a hotel chain adopts Agilysys' PMS solution. This initial win opens the door for a flood of add-on module sales, encompassing everything from spa and golf management to sales and catering, loyalty programs, and even guest apps. Each module, bringing significant value and operational efficiencies, adds to Agilysys’ recurring revenue stream, solidifying their long-term growth trajectory.

This hypothesis is further supported by the transcript's revelation that the average deal size sold to new customers during the first three quarters of 2024 was 30% higher than the previous fiscal year. This surge in deal size can likely be attributed, at least in part, to the success of bundling core PMS solutions with these high-value add-on modules.

Revenue Growth by Segment

The following chart illustrates the breakdown of Agilysys' revenue growth in Fiscal Year 2024, highlighting the significant contributions of subscription and professional services.

So, what does this all mean? Agilysys, with its comprehensive, cloud-native PMS ecosystem and a rapidly growing list of reference customers, could be on the cusp of a major breakthrough. While their POS business continues to be a strong revenue driver, the burgeoning PMS segment, coupled with the immense potential for add-on module sales, could propel Agilysys into a position of dominance within the hospitality tech world.

While it's still early days, the signs are undeniable. The sleeping giant is stirring, and the hospitality tech industry may soon be reshaped by its awakening.

"Fun Fact: Did you know Agilysys systems are used at the iconic Churchill Downs, home of the Kentucky Derby? That's right, when you're enjoying a mint julep and cheering on your favorite horse, you're experiencing the efficiency and innovation of Agilysys technology firsthand."