Martin Ellis – President & CEO Ken Kossin – SVP & CFO

Brian Kinstlinger – Sidoti & Co.

Welcome to the Agilysys fiscal 2010 fourth quarter and full-year conference call. 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. 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 differ materially from those in the forward-looking statements are set forth in the company's reports on Form 10-K and 10-Q and news releases filed with the Securities and Exchange Commission. Today's conference is being broadcast live on Agilysys's website and will be available for replay on the site for approximately 30 days. Now I would like to introduce your host for today's call, Agilysys President and CEO, Martin Ellis. Please go ahead, Mr. Ellis.

Thank you, Claudia. Good morning, everyone and thank you for joining us today to review our unaudited fourth-quarter and full-year results. With me today is Ken Kossin, our Senior Vice President and Chief Financial Officer. In addition to the standard Safe Harbor language, we will be using non-GAAP financial information, namely adjusted EBITDA and the reconciliations to GAAP are provided at the end of the presentation, as well as in the press release issued this morning. We also will be using a slide presentation as the basis for today's review. If you have not already done so, we invite you to access the presentation from the Investor Relations section of our website. Turning to our results, despite the difficult market conditions and lower sales reported throughout the fiscal year, we made significant progress in resetting cost structure and making select, but important investments in the company. The revenue improvements we saw in September and December quarters were interrupted in the fourth quarter as we reported a 13% decrease in revenues compared with a year ago. While our Hospitality and Retail segments largely met our expectations, the lower revenue reflected weaker-than-anticipated demand in our Technology Solutions business, particularly as it related to proprietary service. Notwithstanding the lower revenue, gross margin expanded to 26.4% of sales compared with 25.7% in the prior year. The improvement reflected the larger proportion of proprietary services and higher-margin hospitality and retail revenues. The increase in gross margin was partially offset by lower rebates and vendor incentives. As we continued to focus on managing our cost structure, we have quarterly SG&A down about 5 million from last year. Also, we recorded no significant restructuring or goodwill impairment charges during the quarter compared with significant impairment charges in fiscal 2009. As a result of changes to the tax laws in the Recovery and Reinvestment Act, we were able to recognize an income tax benefit for losses that would carry back offsetting prior income. This resulted in the provision for income tax in the quarter decreasing year-over-year by more than $20 million. We also reported improved earnings per share with a loss of $0.02 per share versus the loss of $5.03 per share reported in fiscal 2009. Despite the weaker-than-anticipated sales, our accounts receivable portfolio improved significantly with DSOs declining from 88 days a year ago to 69 days at March 31st. The meaningful improvement in DSOs helped drive the $29 million increase in cash year-over-year. The decline in sales we saw year-over-year was driven largely by the results of our Technology Solutions Group where hardware sales were 22% lower than in last year's comparable quarter. Our Retail Solutions and Hospitality Solutions Groups each reported increases in hardware sales during the quarter. However, these increases were not large enough to compensate for the decline in TSG. Softness in software products, both remarketed and proprietary, resulted in a 25% year-over-year decline in the quarter and services and support were essentially flat, down 3% from a year ago, largely due to lower remarketed services. We have continued to focus on managing costs and excluding depreciation and amortization, SG&A declined by about 1.5 million, or 4%. Notwithstanding the improvement in cost structure, EBITDA decreased year-over-year as the cost savings we realized did not fully offset the lower revenues. As a result, EBITDA for the quarter was a loss of $3.6 million. Other income in FY '10 includes gains recognized on reserve fund distributions and company-owned life insurance policies compared with losses for both of these items in the prior year. Ken will review this in greater detail. The net loss from continuing operations was $500,000 or $0.02 per share compared with the reported loss of 114.6 million, or $5.07 per share last year, which included impairments and restructuring charges totaling $90 million. At this time, let me turn the call over to Ken to review segment results, the balance sheet and cash flow.

Thanks, Martin. Sales for the Hospitality Solutions Group declined 9%. The decline in revenue compared to last year was primarily due to continued softness in the commercial gaming market. This was offset by solid performance in food service and other segments. Overall gross margin for HSG expanded 280 basis points to 62.7% due to the absence of miscellaneous adjustments to cost of goods sold, which negatively impacted HSG's margin last year. SG&A, excluding depreciation and amortization, was essentially flat. Adjusted EBITDA, excluding charges, was $3.5 million compared to $4.4 million last year. The EBITDA margin percentage in the quarter was 16.5%. Turning to our Retail Solutions Group, both revenue and gross profit percentage increased compared to last year. The 26.1% increase in revenue was primarily due to increased hardware sales compared to last year. As previously noted in the past, results of this segment tend to be more variable due to the timing of large customer rollouts. However, in general, we are seeing signs of increasing optimism from our retail customers. Gross margin increased from 21.6% to 23.2% as a result of better pricing on hardware in addition to a more favorable product mix within hardware. SG&A, excluding depreciation and amortization, decreased $400,000, primarily due to a decline in current year bad debt expense. Adjusted EBITDA swung to a $1 million profit from last year's fourth-quarter loss of $900,000, reflecting both the higher revenue and gross profit. EBITDA margin percentage was 4.1% for the quarter compared to a negative EBITDA margin percentage of 4.4% last year. Switching to our Technology Solutions Group, TSG sales were lower than expected. We observed particular softness in high-end proprietary servers. In addition, gross profit percentage declined 220 basis points compared to last year, primarily reflected by lower vendor rebates and changes in vendor pricing programs. While demand in TSG remained somewhat uncertain in the short term, long term, we are optimistic about the opportunities and benefits from broader demand for IT products and services. SG&A expense, excluding depreciation and amortization, decreased $1.4 million, primarily due to the decrease in incentive compensation and lower bad debt expense. Intangible amortization was down $3.2 million due to certain intangible assets associated with the Innovative acquisition being fully amortized as of the first quarter. Adjusted EBITDA, excluding charges, declined by $5.2 million to a loss of $200,000 for the quarter compared to $5 million in the prior year. This was due primarily to lower revenue and margin pressure. In our corporate segment, SG&A, excluding depreciation and amortization, was essentially flat. There was a $300,000 stock compensation credit in the prior year compared to a $300,000 expense in the current year, which was offset by savings generated by previously announced cost-savings actions. Adjusted EBITDA, excluding charges, improved $1.5 million compared to last year. For fiscal 2011, we expect a run rate of approximately $7 million per quarter for corporate adjusted EBITDA, excluding charges. Turning to consolidated results for the year, sales for fiscal 2010 declined 12.4% year-over-year to $640.4 million. The revenue decline in products was $32.6 million, or approximately 6% and the decline in services revenue was $57.7 million, or approximately 33%. Consolidated gross profit declined $34.6 million and as a percentage of sales contracted to 25.2% versus 26.8% in fiscal 2009, primarily due to lower vendor rebates and lower selling margins. Notwithstanding meaningful decreases in sales and gross margin, having aggressively set cost structure – rest cost structure by decreasing SG&A, excluding depreciation and amortization by approximately $22 million, we generated adjusted EBITDA, excluding charges, of $10.1 million for fiscal 2010. Other income for fiscal 2010 included a gain on proceeds received from our investment in the reserve fund of $2.5 million, reversing all but $500,000 of the loss recorded in fiscal 2009. In addition, other income included a gain of $2.3 million from the settlement of CTS litigation and an $800,000 gain on investments held for non-qualified benefit plan obligations compared with a $4.6 million loss in fiscal 2009. Full-year net income from continuing operations was $3.5 million or $0.15 per diluted share, which included a $5.2 million income tax benefit versus a net loss from continuing operations of $282.2 million, or a loss of $12.49 per share a year ago. Switching to cash flow and balance sheet, we continue to remain debt-free and currently have no outstanding balances against our $50 million revolver. Cash and cash equivalents were $65.5 million at March 31, up $29.3 million during fiscal 2010. DSOs declined significantly to 69 days from 88 days at the end of fiscal 2009 and we had no material bad debt write-offs during the quarter. The improvement was due to a focused effort on improving collections and the quality of our receivables, which helped contribute to our increase in cash. Capital expenditures for the fourth quarter totaled $3.6 million and $13.3 million for the full year. Most of our capital expenditures during fiscal 2010 related to the implementation of our new integrated ERP platform – Oracle ERP platform, which went live this April as planned in addition to capitalized costs associated with Guest360, which is scheduled for general release this year. Additional information regarding our fiscal 2010 financial and operational performance is in our annual report on Form 10-K, which we will file next week. With that, I will now turn the call back to Martin for his comments on recent business trends and our outlook for fiscal 2011, after which he will open the call for questions. Martin?

Thanks, Ken. Since the lows experienced early in 2010, market conditions have improved. While we are unhappy with our revenue performance this year, we expect to see improvements in the demand environments over the next number of quarters. We are emerging from fiscal 2010 with a significantly improved financial condition. With the $65 million in cash, no debt and an undrawn credit facility of $50 million, we are well-positioned to advance our growth strategy, which is focused on increasing the proportion of higher-margin solutions, including proprietary software and services. With an improved cost structure, we are leaner and more focused. Our investments in infrastructure and product development were sustained throughout the downturn and are expected to make important contributions to the future success. Subsequent to the end of the fiscal year, we went live on our new integrated Oracle ERP platform, which, over time, will further improve financial reporting, our internal controls and operating efficiencies, as well as enhance customer service. While the short term remains somewhat uncertain, we expect to benefit from the broader growing demand for IT products and services. We intend to provide more comprehensive guidance as the demand environment becomes clearer. The outlook for cash flow generation remains strong and the company expects to generate 10 to $15 million in cash flow in fiscal 2011. The company also expects to incur capital expenditures of approximately $10 million and depreciation and amortization of $12.5 million. We are optimistic about the future and look forward to reporting our progress as we move through this new fiscal year. With that, we will open up the call for questions. Claudia?

(Operator Instructions) Our first question is coming from Brian Kinstlinger with Sidoti & Co. Brian Kinstlinger – Sidoti & Co.: Great, thank you. Martin, what percentage of your revenue is proprietary servers, at least in this segment, TSG segment?

Brian, we don't disclose the total percentage, but of servers, it is a significant portion of total servers and of total revenue, it is in the region of 50%. Brian Kinstlinger – Sidoti & Co.: Okay, and maybe then, since we don't have exact numbers since you are not providing them, give us a sense for what the revenue trends were for proprietary servers year-over-year and the last couple of quarters. Where they – have they been getting increasingly worse, increasingly – are they flat, increasingly better? Maybe take us through the last couple of quarters, what the trends were like.

Well, I think if you look at trends, year-over-year, we obviously reported revenues down in fiscal 2010 and so with that was softness in all infrastructure products. Late last year, we did see some strength in storage. From a proprietary server standpoint, if you look at the March quarter, high-end servers were soft for Agilysys, or softer than expected. But I think if you look more broadly at the marketplace that is consistent with what you see at either other competitors in the marketplace or with a number of the OEMs or distributors. The strength that was seen generally speaking in the marketplace related more to Intel architecture products. Brian Kinstlinger – Sidoti & Co.: Right, so I guess I am trying to figure out, in Q4, your proprietary ratio was down 20% and maybe they were down only 10% in Q3 and Q2? I am just trying to get a sense, are we getting worse or are we getting better and are we going to see more weakness?

I don't think, Brian that you should read into the quarterly performance a longer-term trend. Pricing ultimately impacts customers' buying decisions. Changes in product and new product release drives customers' buying decisions. And as the OEMs bring out their new product releases, so you see changes in demand for proprietary servers. I think the longer-term trend is still very strong for proprietary servers, notwithstanding the weak quarter. Brian Kinstlinger – Sidoti & Co.: So Q4 was the weakest –.

(inaudible) has come out with their new P7 box, which is very competitive in the marketplace and so I wouldn't – I wouldn't read into one quarter a longer-term trend. Brian Kinstlinger – Sidoti & Co.: I am not trying to. I just wanted to know if Q4 the weakest quarter you had of the comps for that year-over-year.

Yes. Brian Kinstlinger – Sidoti & Co.: And then maybe give us a sense for did it get increasingly worse during the quarter? Was January and February okay and then March was particularly poor or were they all poor across the board?

I would say the back end of the quarter was a little bit softer than the front end. Brian Kinstlinger – Sidoti & Co.: And then we have had two-thirds for the quarter done. Has that trend at all reversed itself or are we seeing the same weakness so far in the June quarter?

Well, I don't want to get into specifics of this quarter until we release more comprehensive financial information. And as you know, the largest month of the quarter – the largest sales in the quarter are the last month of the quarter and it is probably a little premature now to comment other than to say that – overall pipeline is improving however, uncertainty in the short run remains. So as we look at pipeline, pipeline is growing. Ultimately you have got to close the pipeline to turn it into revenue and right now, there still remains little bit of uncertainty. Brian Kinstlinger – Sidoti & Co.: Okay. HSG's operating costs were the highest point of the year, even though revenues weren't distinctly higher. They were almost 10% higher in this quarter versus the previous two quarters. Was there anything different in this quarter that happened that would cause those costs to be a little bit higher?

Nothing out of the ordinary, Brian. As we look at the hospitality business, we have added one or two people, but there isn't any meaningful change in cost structure in that business. Brian Kinstlinger – Sidoti & Co.: Okay, the – maybe give us a sense for where demand is coming from in HSG. Is it still the – obviously it is not the gaming and hotel, so give us a sense for what is keeping demand level to slightly up.

Sure. Well, as you indicated, gaming obviously is not strong. There is a little bit of activity going on in gaming, probably two parts that are worthwhile just touching on. The first is international growth in demand for gaming is there, but it is not large enough to offset weakness in North America. In North America, there is some activity in gaming as it relates to the restructuring of property portfolios, but new construction is pretty much halted for now and probably will be for a period of time. As it relates to the broader hospitality industry, there continues to be growth in cruise lines with new cruise ships planned to come to market over the next couple of years. Food service is growing, stadiums and arenas are growing. And then if you have a look at geographic trends, international remains reasonably positive with respect to growth. North America maybe a little bit softer. Brian Kinstlinger – Sidoti & Co.: Okay. And touch on Guest360 if you will. You mentioned some back end of the year revenue opportunities. Are those signed business opportunities that are in backlog for example that are expected to start turning in to revenue in the second half of the year or is the sale process just beginning that you expect to get some acceptance in the marketplace?

We do not have signed opportunities. That's an expectation that, as we come to market, we will continue to identify new opportunities and close them when the product becomes generally available. Brian Kinstlinger – Sidoti & Co.: Is that coming more from upgrades of existing clients or brand new customers?

It is probably largely new customers. Brian Kinstlinger – Sidoti & Co.: Okay. And then I am just going to ask a bunch of questions because I am not sure anyone else – well, you know what, I will get in the queue and see if someone else has some other questions. And then I have got a bunch more after.

I am showing we have no further questions. (Operator Instructions) We do have follow-up question coming from Brian Kinstlinger with Sidoti & Co. Brian Kinstlinger – Sidoti & Co.: Great. So on retail capital spending, you mentioned there is some promise there. So talk about – is it more coming from store expansion that you are expecting to pick up or is that more on refreshes? Is there a difference in economics of the two for you?

Well, let's first talk about the trends – go back a year ago and obviously the retail industry was very soft at the time with some significant concern around the prospect for store closings. I think where we are right now is that the overall retail industry has stabilized. There certainly have been storefront closings, maybe not quite as bad as people had expected. And you are starting to see improvements in retail sales. As it relates specifically to product, refresh or upgrade depends on what the nature of the upgrade is. If it is purely an upgrade of hardware with limited integration work, that is not as good as new store rollouts that have proprietary services and proprietary software offerings, as well as other resold products that are part of the overall solution. So it ultimately depends on what the customer is doing. Trends for us are a combination of existing customers opening up new stores, as well as new customers, as well as upgrades for existing customers and so there is some traction in the retail industry. Prospects right now are brighter than they were 12 months ago. Brian Kinstlinger – Sidoti & Co.: Can you comment on – the profitability on proprietary servers, is that much higher than other pieces of hardware and related services that you sell?

Well, on proprietary servers, if you look at proprietary servers versus Intel architecture servers, the margins are certainly quite a bit higher and the complexity is greater too. And it relates to – the actual pricing, you need to take into account the customer, what it is that is ultimately being developed and configured and then what other components are added onto the overall solution. So if you have got a software component in TSG that is going to be a remarketed software component. If there is a services component, it could be both remarketed services, as well as proprietary services. And the hardware is then a function of servers and storage and potentially some networking. The ultimate solution for the customer that is being developed will be – will largely drive margin and we can have the same products be at two different customers but with different margins depending on the complexity of the solution and what it is that we are doing and the attach rates of proprietary services. But generally speaking, proprietary servers are – have a meaningfully higher margin than Intel architecture servers. Brian Kinstlinger – Sidoti & Co.: Okay. And why would Capex not be coming down much more since you completed the ERP implementation with Oracle? What does that represent of the total CapEx?

Well, for the year, there is incremental investments into the Oracle platform, both as it relates to rolling out international operations and some of the financial reporting tools that ultimately wrap around the underlying ERP system. And so we have ongoing investments into the Oracle platform, most of which will come to an end by the end of this year. The reporting components, referred to as business intelligence and then the HR platform is certainly an important component that we are looking at. In terms of total Capex, Oracle is probably about half of that and then other Capex in the business accounts for the other half including ongoing capitalization of Guest360. Brian Kinstlinger – Sidoti & Co.: And how much was Oracle last year then? Or are you saying half of it was last year? When you said half, you meant for this expected year. What was it last year –?

Yes, the half is for this year. Last year, it was about 7 million. Brian Kinstlinger – Sidoti & Co.: Okay. And then I guess the last question I have, going back to one that – maybe if you can amuse me here. You said it wasn't appropriate to comment on what has happened so far in two quarters. It's not forward-looking, it's backward-looking in a public call. I'm confused why you wouldn’t want to comment since we saw weakness at the end of the quarter on what is happening in TSG in the first quarter, why is it not an appropriate time to do that?

Well, because we don't generally release monthly sales. The other part is, as I've mentioned, the last month of the quarter in TSG is certainly, from an overall intra-quarter seasonality standpoint, is our largest revenue month and ranges somewhere between high 40s and mid-50s in terms of percentage of total revenue for the quarter. And in some quarters, it has been up in the mid-50s and in other quarters, it has been in the mid-40s. And so at this point, I don't want to get into guidance for the quarter without us working through ultimately what closes in the pipeline. The one comment I would make is that, at this point, we don't see significant changes in trends, but I would like to see the third month of the quarter, which is the most important before we comment. Brian Kinstlinger – Sidoti & Co.: Okay, thank you.

(Operator Instructions) Gentlemen, it appears we have no further questions at this time. I will now turn the floor back over to management for any closing remarks.

Thank you, Claudia. With that, we would like to thank you for joining us today and we look forward to reporting on our first-quarter results in August.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and we thank you for your participation.