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

Brian Kinstlinger – Sidoti & Co. Matt Sheerin – Stifel Nicolaus

Welcome to the Agilysys fiscal 2011 first quarter 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 can 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, Debbie and good morning, everyone and thanks for joining us today to review our unaudited first quarter results. With me today is Ken Kossin, our Senior Vice President and Chief Financial Officer. In our discussion today, we will be using adjusted EBITDA. 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 a quick review of the first quarter highlights. 11% increase in services revenue and 35% increase in software during the fiscal first quarter led the way to 2% higher consolidated revenue. On a segment basis, Hospitality and Retail met expectations while Technology Solutions revenue with some of our larger customers lagged expectations during the quarter. We successfully increased the tax rates, funding more software and services with the hardware. The improvement in software and services continue to validate our strategy of developing higher value solutions with more proprietary software and services. The increased software and services revenue helped expand gross margin 110 basis points from 24.5% last year to 25.6% this year. Largely reflecting lower compensation in acquisition-related intangible amortization expense versus last year, quarterly SG&A also improved, down $4.7 million or approximately 11%. While we reported a pretax loss for the quarter, a one-time non-cash adjustment to the company’s deferred tax valuation allowance taken in 2009 contributed to an income tax expense of $4.5 million, including this one-time tax charge, we reported an improvement of $0.10 per share or a net loss of $0.45 per share compared with a net loss of $0.55 a share a year ago. Excluding the one-time tax adjustment, earnings per share improved $0.30 year-over-year. The increase in consolidated sales year-over-year was largely driven by strengthening demand across the board. We saw improvements in most segments in which we compete. But as we frequently discussed, we are partly impacted by the buying habits of our large customers where purchases were lower this quarter than in the prior year. Our hardware sales were down 7% versus a year ago. Software and services more than offset the decline and we’re up 35% and 11% respectively. The gross margin expansion reflected a higher mix of both software and services margins which were partially offset by lower rebate margins in the quarter. Notwithstanding the improvement in overall gross margin, pricing remains competitive and acute to be so in certain accounts as well as generally for severance-storage related products. Our cost remain in line with the expectations and as a result, adjusted EBIDTA, now to a loss of $2.7 million from last year’s loss of $6.6 million. We’ve made progress in improving profitability by continuing to focus on driving the top line and managing our costs to further improve our overall profitability. At this time, let me turn it over to Ken to review segment results, balance sheet and cash flow.

Thanks, Martin. Sales for the Hospitality Solutions Group were $23 million for the first quarter of fiscal 2011, 44% higher than a year ago. This was in line with our expectations. We continue to see solid demand in both the Cruise and food service segments while both the Casino and Resort segments of the market remains soft. Overall, gross margin declined compared to last year as a result of a higher mix of hardware sales in the current year. SG&A including depreciation and amortization decreased approximately 6% for the quarter primarily as a result of reduced benefit costs. In June, we announced the general availability of our Guest360 property management system. Capitalized costs for Guest360 were $1 million for the first quarter same as last year. Going forward, these development costs will be expensed resulting in SG&A increasing by approximately $1 million for the quarter and the remainder of fiscal 2011. Adjusted EBITDA was $3.3 million compared to $1 million loss last year and EBITDA margin was 14.4%. Turning to our Retail Solutions group, as we have discussed in the past, our SG&A results tend to be more volatile due to the timing of large customer roll-outs. Despite the 3% decline in revenue, gross profit increased $300,000 for the first quarter compared to last year. Gross margin percentage increased from 22% to 23.8% as a result of improved hardware and software pricing in addition to a higher proportion of services as a percentage of total revenue. SG&A excluding depreciation and amortization was essentially flat. As a result of higher gross margins, adjusted EBITDA increased $300,000 to $1.8 million from $1.5 million reported in Q1 last year. In addition, EBITDA margin improved from 6% last year to 7.7% for the first quarter this year. Switching to our Technology Solutions Group. TSG sales were lower than expected as we saw weak demand in the quarter from some of our large TSG customers. In addition, gross profit percentage declined 240 basis points compared to last year as a result of lower bundle rebates and continued competitive pricing pressure on hardware. Demand across our TSG customer portfolio was broader than in the past several quarters. We saw an increase in IT infrastructure demand in both the financial services and manufactured industries. In addition, we successfully increase the tax rates, bundling more software and services with hardware sales. SG&A excluding depreciation and amortization decreased by $800,000 for the quarter, primarily as a result of reduced benefit costs. Adjusted EBITDA declined $2 million to a loss of $1 million for the quarter compared with $1 million in the prior year. This was primarily due to lower revenue and gross margin pressure from hardware. In our corporate segment, SG&A excluding depreciation and amortization declined $1.1 million primarily due to lower benefit cost compared to prior year. In addition, a $400,000 restructuring charge was taken in the quarter related to a benefit thing. For fiscal 2011, we’re maintaining our run rate of approximately $7 million per quarter or corporate-adjusted EBIDTA excluding the restructuring charge. The tax calculation are referenced early in the presentation. It was related to the improper netting (ph) of deferred tax assets and deferred tax liabilities resulting in an understatement of the tax valuation allowance reported in fiscal 2009. The impact of this one-time non-cash adjustment reported in Q1 fiscal 2011 is approximately $0.20 per share. Switching to the cash flow in the balance sheet. We continue to remain debt-free and currently have no outstanding balances against our $50 million revolver. Cash and cash equivalents were $50 million at June 30, 2010, a decrease of $1 million from June 30 of 2009 and a decrease of $15.5 million by March 31, 2010. The decrease in cash for the quarter was primarily related to $17.3 million increase in accounts receivable and then $11.4 million temporary increase in inventory, which was more than offset by $17.7 million increase in accounts payable. As a result of the increase in accounts receivable, DSOs increased to 83 days at June 30, 2010 from 69 days at March 31, 2010. The increase was primarily related to the transition of invoicing into the company’s new Oracle ARP implementation. The transition has been largely completed and we expect DSO to return to a more normalized level over future quarters. Capital expenditures for the first quarter totally $1.8 million, the majority of which related to the capitalization of Guest360 and the implementation of our integrated Oracle ARP platform. Additional information regarding our fiscal 2011 first quarter, financial and operational performance is in our quarterly report on Form 10-Q, which we expect to file by Monday, August 9. I will now turn the call back over to Martin for his comments on recent business trends and our outlook for the balance of the year after which we will open the call for questions.

Since the lows experienced early in 2010, that was fiscal 2010, market conditions have improved and the demand environment has improved. As mentioned this morning, we are beginning to see increased activity but pricing is competitive, which continues to pressure gross margins. However our strategy of developing higher value solutions with more propriety software and services is contributing to improved margins. Our investments in people, infrastructure and product developments are starting to make the contributions that we expected. The improving demand environment bodes well for the future and our integrated Oracle ARP platform will over time contribute to improve financial reporting, internal controls and operating efficiencies as well as enhanced customer service. Finally the outlook for cash flow generation remains good and we expect to generate $10 million to $15 million in cash flow in fiscal 2011. With that we will open the call up for questions.

(Operator Instructions) Our first question comes from the line of Brian Kinstlinger with Sidoti & Company. Brian Kinstlinger – Sidoti & Co.: Question on the cash flow, when you give that guidance of $10 million to $15 million, is that before CapEx or is that including CapEx $10 million to $15 million?

That includes CapEx, Brian. Brian Kinstlinger – Sidoti & Co.: Can you maybe comment on the proprietary server market? Last quarter you talked about it being a major cause for some depressed profitability. What happened this quarter in the proprietary server market and what does your pipeline look for when that might return if it hasn’t yet?

First, from an overall market statement or standpoint, our proprietary service have been mediocre when you compare demand to Intel architecture products. From an Agilysys standpoint, we actually had reasonably good quarter in proprietary service. Obviously, we are partly driven by the buying habits of our customers but from a proprietary service standpoint, our performance was reasonably good. We expect that to continue in the quarters going forward but certainly growth rates for proprietary service have not been anywhere close to what you have seen in Intel architecture products. Brian Kinstlinger – Sidoti & Co.: I guess reconcile that with the much lower gross margin compared with the fourth quarter when high-margin proprietary servers weren’t so good.

I think part of it is customer mix. In addition to that, you have got a rebate changes that have taken place here in the last quarter or so that have also impacted the margin. And so I would probably put it in three buckets, customer mix and associated with that is also product mix and then changes in rebates programs with our primary vendors. Brian Kinstlinger – Sidoti & Co.: Will those rebate programs continue to impact you in the foreseeable future?

Yes, I think each of the vendors have their own particular rebate programs. Against the programs we execute pretty well but as they change their programs, the impact everybody in the channel including us. And so, I would expect current levels of rebates to probably be the trend going forward. Brian Kinstlinger – Sidoti & Co.: I guess the next question I have is if you can reconcile Arrow, your biggest supplier, growing 20% sequentially and fairly, if not as strong, if not better year-over-year on their enterprise business, and you guys posting the declines that you are would you say you’re losing market share and if so, can you point to why you are?

I think you got to go a level deeper on products and ultimately end user customers. From product standpoint, Arrow, as do the other distributors sell a lot of Intel architecture products. IBM was up about 30% and Intel architecture and HP back when they last reported were up about 40%. And if you look at Intel’s result, there was significant strength in the Intel architecture space. We certainly sell Intel architecture products and a reasonable amount of it, but not as much as we do proprietary service. And so, I think partly behind Arrow’s numbers is the strength of the Intel architecture product. And then depending on individual resellers that have tiered to Arrow and their customer purchases, that would influence Arrow’s performance too. Brian Kinstlinger – Sidoti & Co.: I guess if you could also then talk about the Sun and Oracle relationship, is that coming closer to being resolved? Do you think Sun is going to sell directly a little bit more into your markets and maybe you will lose share there as well.

From the overall channel programs, I think a lot of progress has been made over the last 90 days as Oracle has started transferring customers from what was the Sun partner network to Oracle’s partner network. Programs are becoming defined and we are learning the new Oracle Partner network particularly as it relates to hardware products, quickly and the implications that has for business going forward. The clarity is certainly a lot better now than it was 90 days ago and we are actually starting to gain traction. From an overall go to market strategy standpoint, I think as we discussed our relationship with Oracle and (inaudible), what they communicated in the marketplace, the objective of the channel with Oracle is to add value and then we writing value to the customers, we will continue to participate. I think there are certain customers where there may be a direct relationship and an Agilysys relationship but at this point, I think Oracle’s focus is more broadly on expanding their footprint in the marketplace than necessarily squeezing the channel, except for comments that they have made where partners are purely providing fulfillment services to customers and that historically has not been our go-to-market strategy. Brian Kinstlinger – Sidoti & Co.: Is there a timeline where they expect to announce who their relationships or vendors are going forward, resellers? Is there a date you expect to hear a consolidation from how many ever resellers they have for Sun right now and to a much smaller number?

I think that that question is probably better addressed to Oracle but I think Oracle’s view is that they are happy with the partners, the objective is for the partners to create value in the channel. But, Brian, I’d suggest the conversation with Oracle, because I don’t – I don’t know if any announcement that says a change in their – in their list of partners. Brian Kinstlinger – Sidoti & Co.: Okay. Was there a gain in the quarter on your insurance – self insurance program, because I saw in the cash flow that flow through the income statement?

Yes, we did. We did see. If you recall last year’s quarter, we had a significant increase in medical and benefits. This year that actually did not repeat itself when we saw a slight pickup that flowed through the income statement for the quarter. Brian Kinstlinger – Sidoti & Co.: A gain?

It was. Compared to last year, yes, there was a reduction, but it wasn’t a gain in the – on the P&L. Brian Kinstlinger – Sidoti & Co.: Okay.

There was reduction in medical claims. Brian Kinstlinger – Sidoti & Co.: And then, I may have missed it when you had mentioned it. It seems that given where the EBITDA and profitability of the company are versus the revenue trends, your cost once again like a 1.5 years ago or 2 years were a little bit out of the line from where the demand is. What are your plans for getting it back to into the appropriate levels, so you can start generating more profits? Or is that not the case right now and you’re not planning to be cutting costs?

Well, we’ve – as we’ve mentioned in the past Brian, we continue to look at cost structure and profitability as well as the overall pipeline and demand environment. From a retail and hospitality standpoint, I think as I had opened my comments with this morning, both retail and hospitality are largely on track. TSG broadly speaking on the – in the marketplace is on track. What we had was – as I’ve commented some of our larger customers that didn’t procure as much in this quarter that have had in the past. And so as we look at our overall cost and cost structure and profitability, part of it relates to pipeline, part of it remains to quarterly issues, and then part of it relates to overall profitability. And we go through that process on a regular basis and continue to evaluate the overall profitability. But at this point, we don’t have anything to announce or discuss around changes in cost structure. Brian Kinstlinger – Sidoti & Co.: Okay, I guess the last question, and then I’m going to get back in the queue in case someone else is in the queue to ask questions. You’re talking about your top customers being one of the problems in this quarter. Talk about your top customers disclosed as Verizon. Can you talk about their trends and maybe the pipeline with them over the next year, so we can gauge whether profits are going to improve or not?

Well, from a customer standpoint, let me talk generally first. Out in the marketplace, we’ve seen improvements in the demand environment across most of the segments in which we compete. From a customer standpoint, we have a number of large customers, some of whom procure with us on most quarters or every quarter, and some that procure with us some quarters during a year, and that would certainly influence total revenues. From an overall Verizon standpoint, without getting into pipeline related issues, our relationship with Verizon continues to be very strong. We’ve grown the account and continued to diversify the overall solution – production solution that we offer to Verizon. So the relationship is good. The product solution has diversified and we’ve grown it. Outside of that, I’m not in a position to talk about our pipeline with specific customers. Brian Kinstlinger – Sidoti & Co.: All right, I’m going to give – I’ve got a handful more questions. I’ll get back in the queue just in case someone else is in there.

Thank you. Our next question comes from the line of Matt Sheerin with Stifel Nicolaus. Please proceed with your question. Matt Sheerin – Stifel Nicolaus: Yes, good morning. Hi Martin, how are you?

Good. How are you doing, Matt? Matt Sheerin – Stifel Nicolaus: Doing well, thanks. Yes, most of the questions, my questions were already asked and answered. So just looking at the proprietary server business versus the Intel architecture, do you have a percentage breakdown? And in the open architecture business, have you seen the kind of growth rates than other companies have in terms of either sequentially or year-over-year?

We’ve seen similar growth rates in the Intel architecture space that other companies have seen, Matt. But, in terms of total mix, Intel architecture for us is a smaller component of total sales. We’re certainly doing a far greater proportion of total revenue in proprietary and storage products than in Intel architecture, but we saw similar trends. Matt Sheerin – Stifel Nicolaus: And was – did you state who your top or 10% suppliers are?

Well, the top – the top four or five would be IBM, HP, Sun, EMC, NetApps, Hitachi. And we also include in the 10-K or if you look at the front of the annual reports, our primary suppliers. But in terms of top five or six, those customers would be in the top – those suppliers will be in the top five or six. And then have meaningful relationships with Cisco, Brocade and Oracle, I would include on the software side, we have a meaningful relationship with Oracle. Symantec around security is a sizable relationship. Matt Sheerin – Stifel Nicolaus: Okay. I know that in your fiscal year report you talked about Sun accounting for I think 32% of revenue and that was for the full year. I don’t know what it was in the March quarter, but is that a number that is significantly below that right now?

I don’t know that we had some broken out. I think we had Verizon broken out. But in terms of overall mix, Sun for us is – has been reasonably stable the last few quarters. I don’t have the mix for you in this specific quarter, Matt. I can – we can certainly get back to that and we’ll see if we’ve disclosed it in the 10-K. Matt Sheerin – Stifel Nicolaus: Okay. I am just trying to figure out the trends there. And then, just lastly, having followed Agilysys for a few years, I know you’ve gone through lots of different changes and transformations, if you will. Just help us understand kind of what your vision for the company is over the next two to three years.

Over the last nine months or so, we’ve spent a good deal of time in each of our businesses, developing a three strategic plan and roadmap for the businesses. And, without getting into specific details, each of our segments, retail and hospitality and technology solutions, have been focused around increasing the value that we offer to customers through driving higher proprietary content. And across the board, that’s a primary objective. And proprietary content is our own professional services and proprietary software. Depending on which of the segments you’re looking at, we obviously have different mixes of proprietary software and services. But each of retail, hospitality, and technology solutions have that as a primary objective. Supporting that are then business-specific initiatives. In addition to growing proprietary content, we’ve had a look at the geographic footprint and where we can expand the overall geographic footprint both in North America and from a hospitality standpoint internationally. And then, the third component would be around diversifying our customer base more broadly and that could be applicable across all three segments. From a three-year standpoint Matt, we have not put out any communication as to what we have in the way of objectives from both revenue or a bottom-line or a cash flow perspective. But those primary components are the underlying foundations for our three-year plans, which is proprietary content, geographic growth and then broadening the customer base and then under each of the business units we have specific initiatives to achieve those goals.

Thanks Smith.

Thank you. (Operator Instructions) We have a follow-up question from the line of Brian Kinstlinger with Sidoti & Company. Please proceed with your question. Brian Kinstlinger – Sidoti & Co.: Great, just a follow through with the question on the larger clients. As a percentage of your TSG business, what are the top 10 customers make up of that revenue?

The top 10 customer Brian on annual basis because quarterly it can move around from, probably going to be in excess well in excess of 50% but changes are in normally that will influence that from quarter-to-quarter and annually. We obviously disclosed the (inaudible) that there are other large customers that depending on their buying habits may influence top 10 mix in any one quarter or fiscal year. Brian Kinstlinger – Sidoti & Co.: I guess, I’m confused 50% because you only disclosed one-tenth percent clients, how it gets to be that large, it should maybe go through that?

Well you asked of TSG. Brian Kinstlinger – Sidoti & Co.: But it’s still very, I mean 50% I mean that’s 80% of your business to begin with, so you think it will be more than one customer there unless Verizon makes the huge portion of that 50%?

Well Verizon makes up 30% to 40% of TSG. Brian Kinstlinger – Sidoti & Co.: I see, so basically when you’re talking about bigger customers, Verizon currently would have been very weak this quarter and hopefully that will rebound, can I infer that I mean because otherwise you have such a broad set of customers and the market is improving it doesn’t make a lot of sense.

Yes, Verizon is a large customer, there are other large customers that bought in the prior year but Verizon is obviously an important contributor to overall revenue. Brian Kinstlinger – Sidoti & Co.: Okay and in terms of taxes maybe for this year and next, how should we think about what you’re tax look like going forward?

Yes, Brian I would say excluding the onetime non-cash charge that we took this quarter, I would say a good estimate for FY11 effective tax rate is probably between 5% and 10%. And then probably in FY12 going back up to above 35% because we’ll still be utilizing in FY11 our NOLs. Brian Kinstlinger – Sidoti & Co.: Okay, so even if you have losses then you’ll have – you won’t be, charges won’t be zero, you’ll actually have the benefit?

Yes. Brian Kinstlinger – Sidoti & Co.: Should be thinking about 5% to 10%.

Yes. Brian Kinstlinger – Sidoti & Co.: Okay, in terms of the hospitality business, I have two questions there, first of all, the margins were one of the weakest in two years, I think you said that was a mix more hardware and less software. What does the pipeline look like going forward there. Do you expect it to be a lot more hardware related or is it going to return to some normalized mix that you’ve traditionally had in the last year or two?

I think mix although remained largely consistent with what we’ve seen the hardware wasn’t significantly greater than it is in terms of normal mix compared to prior year, it certainly was higher than the June quarter in the prior year, but in terms of historical and recent mix, it’s largely consistent. Going forward we would expect that mix to remain largely stable. Brian Kinstlinger – Sidoti & Co.: And maybe talk about is there any signs in the gaming market whether it be Vegas, Atlantic City or even Asia that there is going to be return in that market in the near future or is capital spending there too weak to think about upgrades in technology.

Well in Asia, you’ve got growth in gaming and some construction of new hotels and so we’d expect some growth in Asia. In North America, lesser, there is a little bit of portfolio restructuring taking place with owners of various casino hotels looking at their portfolio of assets that doesn’t necessarily result in obviously in a new footprint but it does lead to potentially upgrades at certain customers. So I think if you bifurcate markets, North America is weak and probably for the remainder of our fiscal year continues to be weak. Asia has some growth with new properties being built. Brian Kinstlinger – Sidoti & Co.: Okay and then the last question on the DSO, you mentioned it would take some time to over time you get back to normalized DSO levels, give us a timeframe, is that next quarter when you report we should expect to correct itself or it could take a couple of quarters?

I think and certainly we’ve discussed the couple of quarters, we’d like to get there by the end of this quarter but a realistically a couple of quarters. Brian Kinstlinger – Sidoti & Co.: Okay, great. Thank you.

Thanks Brian.

We have no further questions at this time. I’d like to turn the floor back over to management for closing comments.

Thank you, Devin. With that, we would like to thank you for joining us today and look forward to reporting our second quarter results in November.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.