Fourth Consecutive Quarter of Record Revenue
Includes Record Recurring Revenue of $19.4 Million, Inclusive of
23% Growth in Subscription Revenue
Fiscal 2019 Net Revenue Increases 10.6% to
Record $140.8 Million, Adjusted EBITDA Rises 13% to $10.3 Million
and Adjusted Earnings from Operations Improves $10.7 Million to
$4.8 Million
Guides to 11% Revenue Growth and a 25%
Improvement in Adjusted EBITDA for Fiscal 2020
Agilysys, Inc. (Nasdaq: AGYS), a global provider of
next-generation hospitality software solutions and services, today
reported operating results for its fiscal 2019 fourth quarter and
full year ended March 31, 2019.
Summary of Fiscal 2019 Fourth Quarter Financial
Results
- Total net revenue was a record $36.6
million, compared to total net revenue of $32.1 million in the
comparable prior-year period.
- Recurring revenues (which are comprised
of support, maintenance and subscription services) were a record
$19.4 million, or 53% of total net revenue, compared to $18.1
million, or 56% of total net revenue, for the same period in fiscal
2018. Subscription revenues increased 23% year over year and
comprised 34% of total recurring revenues, compared to 30% of total
recurring revenues in the fourth quarter of fiscal 2018.
- Gross margin was 53.5% in the fiscal
2019 fourth quarter, compared to 52.2% in the comparable prior-year
period.
- Net loss in the fiscal 2019 fourth
quarter was $(3.6) million, or $(0.16) per diluted share, compared
to a net loss of $(0.2) million, or $(0.01) per diluted share, in
the comparable prior-year period, which included an income tax
benefit of $1.8 million and a software development costs
capitalization benefit of approximately $1.6 million, which did not
occur in the fiscal 2019 fourth quarter.
- Adjusted EBITDA (non-GAAP) was $2.4
million compared to $3.1 million in the comparable prior-year
period. As described below, due to a change in software development
and deployment practices that went into effect in the fiscal 2019
second quarter, the fiscal 2019 fourth quarter did not have the
benefit of capitalizing software development costs. In the fiscal
2018 fourth quarter, $1.6 million of software development costs
were capitalized. Assuming no software development costs were
capitalized in the fiscal 2018 fourth quarter, Adjusted EBITDA in
the fiscal 2019 fourth quarter of $2.4 million would compare to
$1.4 million in the fiscal 2018 fourth quarter (see reconciliation
below).
- Adjusted earnings from operations
(“AOE”) (non-GAAP) in the fiscal 2019 fourth quarter was $0.7
million, compared to AOE of $0.6 million in the fiscal 2018 fourth
quarter (see reconciliation below). The fiscal 2019 fourth quarter
period included approximately $0.9 million in higher cash spent on
capital items such as for expansion of the Company’s India
Development Center and investments in its SaaS Development
Operations IT Infrastructure compared to the fiscal 2018 fourth
quarter.
As previously reported, earlier in fiscal 2019 the Company
adopted agile development and deployment practices across all of
its products, allowing for significantly reduced time between the
design of new products and their distribution in the market. The
result of this change increased the amount of product development
costs included in operating expenses and as a result there were no
product development costs capitalized in the fiscal 2019 fourth
quarter. A reconciliation table in the back of this release
provides a comparison of the previously reported fiscal 2018 fourth
quarter Adjusted EBITDA to a presentation that incorporates all
software development costs as if they were not capitalized in both
periods.
Ramesh Srinivasan, President and CEO of Agilysys, commented,
“Our sales momentum continues to be strong, with the fiscal 2019
third and fourth quarters representing two of our strongest ever
for overall global sales. Fourth quarter revenue of $36.6
million represented the third consecutive quarter of double-digit
year-over-year revenue growth, the fourth consecutive quarter of
record revenue and the sixth consecutive quarter of sequential
revenue growth.
“Fiscal 2019 revenue growth of 10.6% slightly exceeded our
expectations. The $6.4 million year-over-year increase in full year
recurring revenue, which included a 24% rise in subscription
revenue, was the largest single year improvement in annual
recurring revenue in five years. In addition, our year-end cash
balance grew slightly for the first time since fiscal 2014 when we
made the transformation to an entirely hospitality focused software
solutions company. The full year cash balance growth significantly
exceeded our original expectation. We also generated positive AOE
during each quarter of fiscal 2019, with full year AOE increasing
$10.7 million compared to the prior year. Fiscal 2019 Adjusted
EBITDA rose approximately 13% to $10.3 million.
“We remain confident that our rapidly improving products,
processes, people talent levels and our steadfast attention to
world class service and support for a steadily growing hospitality
marketplace that is demonstrating an increasing need for greater
technology and innovative software solutions, will help drive
continued business momentum and produce increasing shareholder
value. Reflecting this momentum, we expect revenue growth in fiscal
2020 of approximately 11%, with an increasing level of
profitability, as Adjusted EBITDA is expected to increase
approximately 25% driving higher positive free cash flow. As
demonstrated by our financial results, fiscal 2019 was a good year
for Agilysys and given the increasing demand for our products, we
expect fiscal 2020 to be even better.”
Fiscal 2020 Outlook
Agilysys today provided an initial forecast for fiscal 2020 full
year revenue growth of approximately 11%, compared to fiscal 2019
revenue of approximately $141 million. In addition, the Company
expects to record an approximate 25%, improvement in Adjusted
EBITDA (non-GAAP measure) in fiscal 2020, compared to fiscal 2019
Adjusted EBITDA of approximately $10 million. Agilysys also expects
fiscal 2020 free cash flow will be significantly more than the $1.7
million of free cash flow generated in fiscal 2019.
The Company defines free cash flow as net cash provided by
operating activities, less capital expenditures, less capitalized
software development costs. Management believes free cash flow is
another meaningful measure of the Company’s operating
performance.
Tony Pritchett, Chief Financial Officer, commented, “Our
recurring revenue and highly predictable professional services
revenue, combined with our focus on prudent management of our cost
structure, has given us a strong foundation and conviction in our
ability to achieve further top line growth at increasing
profitability levels. Revenue growth is expected to continue in
fiscal 2020 as our guidance contemplates approximately 11% revenue
growth this year; and we continue to expect the increase in
subscription revenue will outpace the rate of total recurring
revenue growth. In addition, the operational leverage in our
business will become evident as we expect Adjusted EBITDA to
improve to approximately $13 million. We also expect to continue
our improvement in our cash position with a focus on free cash
flow, which should exceed the amount generated in fiscal 2019.
Overall, Agilysys is favorably positioned to leverage our improving
product portfolio, refined operating processes, and the focus and
commitment of our talented team members to deliver accelerating
profitable revenue and to grow shareholder value in fiscal 2020 and
beyond.”
New Revenue Recognition Standard
On April 1, 2018, Agilysys adopted accounting standard update
No. 2014-09 (“ASC 606”), the Financial Accounting Standards Board’s
new revenue recognition standard. Financial results for the three
month and twelve month periods ended March 31, 2019 reflect this
accounting standard. Financial results for the three month and
twelve month periods ended March 31, 2018 have not been restated
and are reported under the accounting standards in effect during
that period. The impact on revenue, net loss, Adjusted EBITDA, and
Adjusted Earnings from Operations (“AOE”) from the adoption of ASC
606 was immaterial.
2019 Fourth Quarter Conference Call and Webcast
Agilysys is hosting a conference call and webcast today, May 16,
2019, at 4:30 p.m. ET. Both the call and the webcast are open
to the public. The conference call number is 224-357-2393 (domestic
or international); and the conference ID number is 2766558. Please
call five minutes prior to the presentation to ensure that you are
connected.
Interested parties may also access the conference call live on
the Internet at Agilysys Events & Presentations. Approximately
two hours after the call has concluded, an archived version of the
webcast will be available for replay at the same location.
Forward-Looking Language
This press release contains “forward-looking statements” within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as: “anticipate,”
“intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,”
“expect,” “strategy,” “future,” “likely,” “may,” “should,” “will”
and similar references to future periods. Examples of
forward-looking statements include, among others, our guidance
relating to revenue, Adjusted EBITDA and free cash flow, and
statements we make regarding continuing business momentum and
improvements in financial results and shareholder value.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
our current beliefs, expectations and assumptions regarding the
future of our business, future plans and strategies, projections,
anticipated events and trends, the economy and other future
conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of our control. Our actual results and financial
condition may differ materially from those indicated in the
forward-looking statements. Therefore, you should not rely on any
of these forward-looking statements. Important factors that could
cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, among others, our ability to achieve operational
efficiencies and meet customer demand for products and services and
the risks described in the Company’s filings with the Securities
and Exchange Commission, including the Company’s reports on Form
10-K and Form 10-Q.
Any forward-looking statement made by us in this press release
is based only on information currently available to us and speaks
only as of the date on which it is made. We undertake no obligation
to publicly update any forward-looking statement that may be made
from time to time, whether written or oral, whether as a result of
new information, future developments or otherwise.
Use of Non-GAAP Financial Information
To supplement the unaudited condensed consolidated financial
statements presented in accordance with U.S. GAAP in this press
release, certain non-GAAP financial measures as defined by the SEC
rules are used. These non-GAAP financial measures include EBITDA,
Adjusted EBITDA, Adjusted EBITDA less capitalized software
development costs, Adjusted Earnings from Operations, product
development plus capitalized software development costs, and free
cash flow. Management believes that such information can enhance
investors’ understanding of the company’s ongoing operations. See
the accompanying table below for a definition and reconciliation of
these non-GAAP measures to the most closely related GAAP
measures.
About Agilysys
Agilysys has been a leader in hospitality software for more than
40 years, delivering innovative guest-centric technology solutions
for gaming, hotels, resorts and cruise, corporate foodservice
management, restaurants, universities, stadia and healthcare.
Agilysys offers the most comprehensive software solutions in the
industry, including point-of-sale (POS), property management (PMS),
inventory and procurement, payments, and related applications, to
manage the entire guest journey. Agilysys is known for its
leadership in hospitality, its broad product offerings and its
customer-centric service. Some of the largest hospitality companies
around the world use Agilysys solutions to help improve guest
loyalty, drive revenue growth and increase operational
efficiencies. Agilysys operates across North America, Europe,
Asia-Pacific, and India with headquarters located in Alpharetta,
GA. For more information visit Agilysys.com.
- Financial tables follow -
AGILYSYS, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED) (In thousands, except per
share data) Three Months Ended Twelve Months Ended March 31, March
31,
2019 2018
2019
2018
Net revenue: Products
$ 10,922 $ 7,942
$ 39,003 $ 33,699
Support, maintenance and subscription services
19,366 18,078
75,496 69,068 Professional services
6,330
6,036
26,343
24,593 Total net revenue
36,618 32,056
140,842
127,360
Cost of goods sold: Products (inclusive of developed
technology amortization)
8,608 6,515
31,811 26,381
Support, maintenance and subscription services
3,935 4,078
15,895 16,688 Professional services
4,480
4,714
19,256
19,874 Total cost of goods sold
17,023
15,307
66,962 62,943
Gross profit 19,595 16,749
73,880
64,417
Gross profit margin 53.5 % 52.2 %
52.5 % 50.6 %
Operating expenses: Product
development
10,525 7,233
37,817 27,936 Sales and
marketing
5,282 4,459
19,646 18,075 General and
administrative
6,061 5,553
23,118 24,028 Depreciation
of fixed assets
571 739
2,504 2,631 Amortization of
intangibles
675 457
2,567 1,879 Restructuring,
severance and other charges
222 557
1,168 1,798 Legal
settlements
15 -
141 150 Total operating expense
23,351 18,998
86,961
76,497
Operating loss (3,756
) (2,249 )
(13,081 ) (12,080 )
Other
(income) expense: Interest (income)
(104 ) (33 )
(339 ) (98 ) Interest expense
2 3
10 10
Other (income) expense, net
(100 ) (197
)
191 (391 )
Loss before taxes
(3,554 ) (2,022 )
(12,943 ) (11,601 )
Income tax expense (benefit)
35 (1,812
)
221 (3,251 )
Net loss $
(3,589 ) $ (210 )
$ (13,164 ) $
(8,350 )
Weighted average shares
outstanding 23,055 22,872
23,037 22,801
Loss per share
- basic and diluted: Loss per share
$ (0.16 ) $ (0.01 )
$ (0.57
) $ (0.37 )
AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share data)
March
31, March 31, 2019
2018 ASSETS Current assets: Cash and cash
equivalents
$ 40,771 $ 39,943 Accounts
receivable, net of allowance for doubtful accounts of $788 and
$900, respectively
27,000 16,389 Contract assets
2,921 - Inventories
2,044 1,999 Prepaid
expenses and other current assets
6,272
5,593 Total current assets
79,008
63,924 Property and equipment, net
15,838
17,512 Goodwill
19,622 19,622 Intangible
assets, net
8,438 8,484 Software development costs,
net
34,567 45,181 Other non-current assets
6,118 2,484 Total assets
$ 163,591 $ 157,207
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable
$ 4,718 $
8,400 Contract liabilities
38,669 26,820
Accrued liabilities
14,892 9,241 Capital lease
obligations, current
22 120
Total current liabilities
58,301 44,581
Deferred income taxes, non-current
861 227 Capital
lease obligations, non-current
35 57 Other
non-current liabilities
3,772 3,911 Shareholders'
equity:
Common shares, without par value, at $0.30
stated value; 80,000,000 shares authorized; 31,606,831 shares
issued; and 23,501,193 and 23,324,679 shares outstanding at March
31, 2019 and March 31, 2018, respectively
9,482 9,482 Treasury shares, 8,105,638 and 8,282,152
at March 31, 2019 and March 31, 2018, respectively
(2,433
) (2,486 ) Capital in excess of stated value
781 (1,911 ) Retained earnings
93,051
103,601 Accumulated other comprehensive loss
(259 ) (255 ) Total
shareholders' equity
100,622
108,431 Total liabilities and shareholders' equity
$ 163,591 $ 157,207
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(UNAUDITED)
Twelve Months Ended (In thousands) March 31,
2019 2018
Operating activities Net loss
$ (13,164
) $ (8,350 )
Adjustments to reconcile net loss to net
cash provided by operating activities Net restructuring,
severance and other charges
(156 ) 227 Net legal
settlements
15 - Loss on disposal of property &
equipment
17 - Depreciation
2,504 2,631 Amortization
2,567 1,879 Amortization of developed technology
12,602 10,016 Deferred income taxes
309 (3,085 )
Share-based compensation
4,376 4,688 Change in cash
surrender value of company owned life insurance policies
(15
) (17 ) Changes in operating assets and liabilities:
Accounts receivable
(7,536 ) (719 ) Contract assets
1,662 - Inventories
(50 ) 229 Prepaid expense
and other current assets
(1,158 ) 1,485 Accounts
payable
(3,512 ) 130 Contract liabilities
4,845 (2,448 ) Accrued liabilities
5,029 653 Income
taxes payable, net
(564 ) (19 ) Other changes, net
(530 ) (426 ) Net cash provided by
operating activities
7,241 6,874
Investing activities Capital expenditures
(3,318 ) (6,140 ) Capitalized software development
costs
(2,189 ) (8,918 ) Investments in
corporate-owned life insurance policies
(27 )
(27 ) Net cash used in investing activities
(5,534 ) (15,085 )
Financing
activities Repurchase of common shares to satisfy employee tax
withholding
(647 ) (1,171 ) Principal payments under
long-term obligations
(120 ) (124 ) Net
cash used in financing activities
(767 )
(1,295 ) Effect of exchange rate changes on cash
(112 ) 194 Net increase (decrease) in
cash and cash equivalents
828 (9,312 ) Cash and cash
equivalents at beginning of period
39,943
49,255 Cash and cash equivalents at end of period
$ 40,771 $ 39,943
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Accrued capital expenditures
$ 56 $ 83 Accrued
capitalized software development costs
- 201 Leasehold
improvements acquired under operating lease arrangement
62
95
AGILYSYS, INC.
RECONCILIATION OF NET LOSS TO ADJUSTED
EBITDA AND ADJUSTED EARNINGS FROM OPERATIONS
(UNAUDITED)
Three Months Ended Twelve Months
Ended (In thousands) March 31, March 31,
2019
2018
2019
2018
Net loss $
(3,589 ) $ (210 )
$ (13,164 ) $
(8,350 ) Income tax expense (benefit)
35
(1,812 )
221 (3,251 )
Loss
before taxes (3,554 ) (2,022 )
(12,943
) (11,601 ) Depreciation of fixed assets
571 739
2,504 2,631 Amortization of intangibles
675 457
2,567 1,879 Amortization of developed technology
3,245 2,645
12,602 10,016 Interest (income)
(102 ) (30 )
(329 )
(88 )
EBITDA (a) 835 1,789
4,401 2,837
Share-based compensation
1,420 912
4,376 4,688
Restructuring, severance and other charges
222 557
1,168 1,798 Other non-operating (income) expense
(100
) (197 )
191 (391 ) Legal settlements
15 -
141
150
Adjusted EBITDA (b) 2,392 3,061
10,277 9,082 Capitalized software development costs
- (1,646 )
(2,189 )
(8,918 )
Adjusted EBITDA less capitalized software
development costs (c) 2,392 1,415
8,088 164
Capital expenditures
(1,708 ) (851 )
(3,318 ) (6,140 )
Adjusted Earnings
from Operations (d) $ 684 $ 564
$ 4,770 $ (5,976 ) Product
development (operating expenses)
$ 10,525 $ 7,233
$ 37,817 $ 27,936 Capitalized software development
costs
- 1,646
2,189 8,918
Product development plus
capitalized software development costs (e) $
10,525 $ 8,879
$ 40,006 $
36,854 (a) EBITDA, a non-GAAP financial measure, is
defined as net income before income taxes, interest expense,
depreciation and amortization
(b) Adjusted EBITDA, a non-GAAP financial
measure, is defined as income before income taxes, interest expense
(net of interest income), depreciation and amortization (including
amortization of developed technology), and excluding charges
relating to i) legal settlements, ii) restructuring, severance, and
other charges, iii) asset write-offs and other fair value
adjustments, iv) share-based compensation, and v) other
non-operating (income) expense
(c) Adjusted EBITDA less capitalized
software development costs, a non-GAAP financial measure, is
defined as Adjusted EBITDA, less capitalized software development
costs
(d) Adjusted Earnings from Operations, a
non-GAAP financial measure, is defined as Adjusted EBITDA less
capitalized software development costs, less capital
expenditures
(e) Product development plus capitalized
software development costs, a non-GAAP financial measure, is
defined as total product development costs plus capitalized
software development costs
AGILYSYS, INC.
RECONCILIATION OF NET CASH PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW
(UNAUDITED)
Three Months Ended Twelve Months
Ended (In thousands) March 31, March 31,
2019
2018
2019
2018
Net cash provided by
operating activities $ 5,583 $ 4,776
$
7,241 $ 6,874 Capital expenditures
(1,708 )
(851 )
(3,318 ) (6,140 ) Capitalized software
development costs
- (1,646 )
(2,189 ) (8,918 )
Free cash flow (a)
$ 3,875 $ 2,279
$ 1,734
$ (8,184 )
(a) Free cash flow, a non-GAAP financial
measure, is defined as net cash provided by operating activities,
less capital expenditures, less capitalized software development
costs
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190516005952/en/
Investors:Tony PritchettChief Financial OfficerAgilysys,
Inc.770-810-7941 or investorrelations@agilysys.comRichard Land,
Norberto Aja, Jim LeahyJCIR212-835-8500 or agys@jcir.com
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