Notes to Consolidated Financial Statements
(Table amounts in thousands, except per share data)
1. Nature of Operations
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 solutions in the industry, including point of sale (POS), property management systems (PMS), inventory and procurement, payments, and related applications, to manage the entire guest journey.
Agilysys operates across North America, Europe, Asia-Pacific, and India with headquarters located in Alpharetta, GA. For more information, visit www.agilysys.com.
Reference herein to any particular year or quarter refers to periods within the fiscal year ended March 31. For example, fiscal
2019
refers to the fiscal year ended
March 31, 2019
.
2. Summary of Significant Accounting Policies
Principles of consolidation.
The consolidated financial statements include the accounts of Agilysys, Inc. and subsidiaries. Investments in affiliated companies are accounted for by the equity or cost method, as appropriate. All inter-company accounts have been eliminated.
Use of estimates.
Preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.
Cash and cash equivalents.
We consider all highly liquid investments purchased with an original maturity from date of acquisition of three months or less to be cash equivalents. Other highly liquid investments considered cash equivalents with no established maturity date are fully redeemable on demand (without penalty) with settlement of principal and accrued interest on the following business day after instruction to redeem. Such investments are readily convertible to cash with no penalty and can include certificates of deposit, commercial paper, treasury bills, money market funds and other investments.
Allowance for doubtful accounts.
We maintain allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as historic trends of the entire customer pool. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk we perform periodic credit evaluations of our customers.
Inventories.
Our inventories are comprised of finished goods. Inventories are stated at the lower of cost or net realizable value, net of related reserves. The cost of inventory is computed using a weighted-average method. Our inventory is monitored to ensure appropriate valuation. Adjustments of inventories to the lower of cost or net realizable value, if necessary, are based upon contractual provisions such as turnover and assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional adjustments to inventory valuations may be required. We provide a reserve for obsolescence, which is calculated based on several factors, including an analysis of historical sales of products and the age of the inventory. Actual amounts could be different from those estimated.
Goodwill and Other Indefinite-Lived Intangible Assets.
Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies. The carrying amount of goodwill was
$19.6 million
as of March 31, 2019 and 2018. Goodwill is tested for impairment on an annual basis, or in interim periods if indicators of potential impairment exist. The Company evaluates whether goodwill is impaired by comparing its market capitalization based on its closing stock price (Level 1 input) to the book value of its equity on the annual evaluation date. Based on testing performed, the Company concluded that
no
impairment of its goodwill has occurred for the years ended March 31, 2019, 2018 and 2017.
The Company is also required to compare the fair values of other indefinite-lived intangible assets to their carrying amounts at least annually, or when current events and circumstances require an interim assessment. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized.
Intangible assets.
Purchased intangible assets with finite lives are primarily amortized using the straight-line method over the estimated economic lives of the assets. Our finite-lived intangible assets are amortized over periods between
two
and
eight
years. Customer relationships are amortized over estimated useful lives between
two
and
seven
years; non-competition agreements are amortized over estimated useful lives between
two
and
eight
years; developed technology is amortized over estimated useful lives between
three
and
eight
years; supplier relationships are amortized over estimated useful lives between
two
and
eight
years.
Long-lived assets.
Property and equipment are recorded at cost. Major renewals and improvements are capitalized. Minor replacements, maintenance, repairs, and reengineering costs are expensed as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized.
Depreciation and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under capital leases, which make up less than
one
percent of total assets, over their estimated useful lives using the straight-line method. The estimated useful lives for depreciation and amortization are as follows: buildings and building improvements -
7
to
30
years; furniture -
7
to
10
years; equipment -
3
to
10
years; software -
3
to
10
years; and leasehold improvements over the shorter of the economic life or the lease term. Internal use software costs are expensed or capitalized depending on the project stage. Amounts capitalized are amortized over the estimated useful lives of the software, ranging from
3
to
10
years, beginning with the project's completion. Depreciation for capitalized project expenditures does not begin until the underlying project is completed.
We evaluate the recoverability of our long-lived assets whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the event the carrying value of the assets exceeds the future undiscounted cash flows attributable to such assets.
Foreign currency translation.
The financial statements of our foreign operations are translated into U.S. dollars for financial reporting purposes. The assets and liabilities of foreign operations whose functional currencies are not in U.S. dollars are translated at the period-end exchange rates, while revenue and expenses are translated at weighted-average exchange rates during the fiscal year. The cumulative translation effects are reflected as a component of “Accumulated other comprehensive loss” within shareholders' equity in the Consolidated Balance Sheets. Gains and losses on monetary transactions denominated in other than the functional currency of an operation are reflected within “Other (income) expenses, net” in the Consolidated Statements of Operations. Foreign currency gains and losses from changes in exchange rates have not been material to our consolidated operating results.
Revenue recognition.
We derive revenue from the sale of products (i.e., software, third party hardware and operating systems), support, maintenance and subscription services and professional services. For the fiscal years
2019
,
2018
and
2017
, revenue from international operations was
9%
,
8%
and
6%
, respectively of total revenue. During fiscal 2017 we had one customer representing 10% of consolidated revenue for the year due to a large scale project. Otherwise, our customer base is highly fragmented.
On April 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method applied to those contracts that were not completed as of the adoption date. Results for reporting periods beginning after the adoption date are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under prior guidance.
Revenue recognition under Topic 606
Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master service agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer purchase order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Performance obligations specific to each individual contract are defined within the terms of each purchase order. Each performance obligation is identified based on the goods and services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which we will be entitled and expect to receive in exchange for transferring goods or services to the customer. Typically, our contracts do not provide our customer with any right of return or refund; we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or refund.
Typically our customer contracts contain one or more of the following goods or services which constitute performance obligations.
Our software licenses typically provide for a perpetual right to use our software. Generally, our contracts do not provide significant services of integration and customization and installation services are not required to be purchased directly from us. The software is delivered before related services are provided and is functional without professional services, updates and technical support. We have
concluded that the software license is distinct as the customer can benefit from the software on its own. Software revenue is typically recognized when the software is delivered or made available for download to the customer.
Revenue for hardware sales is recognized when the product is shipped to the customer and when obligations that affect the customer's final acceptance of the arrangement have been fulfilled. A majority of our hardware sales involve shipment directly from its suppliers to the end-user customers. In these transactions, we are the primary obligor as we are responsible for negotiating price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and we bear the credit risk if the customer does not pay for the goods. As the principal contact with the customer, we recognize revenue and cost of goods sold when we are notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination or upon installation at the customer site.
Support and maintenance revenue is derived from providing telephone and on-line technical support services, bug fixes, and unspecified software updates and upgrades to customers on a when-and-if-available basis. Each of these performance obligations provide benefit to the customer on a standalone basis and are distinct in the context of the contract. Each of these distinct performance obligations represent a stand ready obligation to provide service to a customer, which is concurrently delivered and has the same pattern of transfer to the customer, which is why we account for these support services as a single performance obligation, recognized over the term of the maintenance agreement.
Our subscription service revenue is comprised of fees for contracts that provide customers a right to access our software for a subscribed period. We do not provide the customer the contractual right to license the software at any time outside of the subscription period under these contracts. The customer can only benefit from the software and software maintenance when provided the right to access the software. Accordingly, each of the rights to access the software, the maintenance services, and any hosting services is not considered a distinct performance obligation in the context of the contract and should be combined into a single performance obligation to be recognized over the contract period. Typically, we invoice fees monthly and either party has the ability to cancel the agreement at each invoiced period. As a result, the contractual period for revenue recognition purposes is considered to be one month with monthly renewals for the term of the customer agreement.
Professional services revenues primarily consist of fees for consulting, installation, integration and training and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are being performed. Professional services can be provided by internal or external providers, do not significantly affect the customer's ability to access or use other provided goods or services, and provide a measure of benefit beyond that of other promised goods or services in the contract. As a result, professional services are considered distinct in the context of the contract and represent a separate performance obligation. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation. These contracts are reviewed quarterly for loss contract accounting treatment.
We use the market estimate approach to drive standalone selling price ("SSP") by maximizing observable data points (in the form of recently executed customer contracts) to determine the price customers are willing to pay for the goods and services transferred. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.
Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold. Revenue is recorded net of any applicable taxes collected and remitted to governmental agencies.
Comprehensive (loss) income.
Comprehensive (loss) income is the total of net (loss) income, as currently reported under GAAP, plus other comprehensive (loss) income. Other comprehensive (loss) income considers the effects of additional transactions and economic events that are not required to be recorded in determining net (loss) income, but rather are reported as a separate statement of comprehensive (loss) income.
Fair value measurements
. We measure the fair value of financial assets and liabilities on a recurring or non-recurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. In determining fair value of financial assets and liabilities, we use various valuation techniques. Additional information regarding fair value measurements is provided in Note 15,
Fair Value Measurements
.
Investments in corporate-owned life insurance policies.
Agilysys invests in corporate-owned life insurance policies, for which some are endorsement split-dollar life insurance arrangements. We entered into non-cancelable agreements with each of the former executives, whereby we must maintain the life insurance policy for a specified amount and split a portion of the policy benefits with
their designated beneficiary. Our investment in these corporate-owned life insurance policies were recorded at their cash surrender value, which approximates fair value at the balance sheet date. During fiscal 2017, we received
$2.2 million
related to the death benefit due to us on redemption of
two
of these policies. In the Consolidated Balance Sheets at the balance sheet date, the cash surrender value of
$0.9 million
for the remaining policies were held in “Other non-current assets,” and the present value of future proceeds owed to those executives' designated beneficiary of
$0.1 million
, which approximates fair value, were recorded within "Other non-current liabilities." Additional information regarding the investments in corporate-owned life insurance policies is provided in Note 11,
Employee Benefit Plans
.
Income Taxes.
Income tax expense includes U.S. and foreign income taxes and is based on reported income before income taxes. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities are determined based on the enacted tax rates expected to apply in the periods in which the deferred tax assets or liabilities are anticipated to be settled or realized.
We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies.
We recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from uncertain tax positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet this threshold. Interest related to uncertain tax positions is recognized as part of the provision for income taxes and is accrued beginning in the period that such interest would be applicable under relevant tax law until such time that the related tax benefits are recognized. Our income taxes are described further in Note 10,
Income Taxes
.
Capitalized Software Development Costs.
The capitalization of software development cost for external use begins when a product’s technological feasibility has been established. Capitalization ends when the resulting product is available for general market release. Amortization of the capitalized software is classified within products cost of goods sold in the Consolidated Statements of Operations. For each capitalized software product, the annual amortization is equal to the greater of: (i) the amount computed using the ratio that the software product’s current fiscal year gross revenue bears to the total current fiscal year and anticipated future gross revenues for that product or (ii) the amount computed based on straight-line method over the remaining estimated economic life of the product, which is a range between
three
and
eight
years. The amount by which unamortized software costs exceeds the net realizable value, if any, is recognized as a charge to income in the period it is determined.
Advertising and Promotion Expense.
We expense advertising and promotion expense as incurred. Advertising and promotion expense was
$2.0 million
,
$2.7 million
and
$2.6 million
in fiscal
2019
,
2018
and
2017
, respectively.
Adopted and Recently Issued Accounting Pronouncements
In April 2019, the Financial Accounting Standards Board ("FASB") issued ASU No. 2019-04,
Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.
ASU 2019-04 provides corrections, updates and clarifications to the previously issued updates ASU 2016-13, ASU 2017-12 and ASU 2016-01. Various areas of the codification were impacted from the update. The standard follows the effective dates of the previously issued ASUs, unless an entity has already early adopted the previous ASUs, in which case the effective date will vary according to each specific ASU adoption. Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13, and the other two ASUs affected by ASU 2019-04 are not applicable to us. We are currently reviewing this standard to assess the impact on our future consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15,
Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
. ASU 2018-15 addresses the treatment of implementation costs incurred in a hosting arrangement that is a service contract. The update does not impact the accounting for the service element of a hosting arrangement that is a service contract. The update is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption (including early adoption in any interim period) permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
. ASU 2018-13 addresses the required disclosures around fair value
measurement. The disclosure requirements of the reasons for transfers between Level 1 and Level 2, the policy for timing transfers between levels, and the valuation process for Level 3 measurements have been removed. Certain modifications were made to required disclosures and additional requirements were established. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02,
Income Statement-Reporting Comprehensive Income (Topic 220)
. ASU 2018-02 addresses the effect of the change in the U.S. federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business, and
ASU No. 2017-04
, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment
. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. We have adopted this standard as of April 1, 2018; the adoption had no impact on our consolidated financial statements. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. While we are still assessing the impact of this standard, we do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new guidance is effective for annual reporting periods beginning after December 15, 2017. The new standard must be adopted using a modified retrospective transition method, with the cumulative effect recognized as of the date of initial adoption. We have adopted this standard as of April 1, 2018; the adoption had no impact to our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
, which provides guidance with the intent of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted, including adoption in an interim period. We have adopted this standard as of April 1, 2018 the adoption had no impact to our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments-Credit Losses (Topic 326)
. This new standard changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans, and other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted. We are currently reviewing this standard to assess the impact on our future consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
, which will require lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Subsequent to this release, the FASB also released ASU No. 2018-11,
Leases (Topic 842): Targeted Improvements,
ASU 2018-10,
Codification Improvements to Topic 842, Leases
and
ASU No. 2019-01,
Leases (Topic 842): Codification Improvements
to provide clarifying guidance. Consistent with current U.S. GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a capital (finance) or operating lease. However, unlike current U.S. GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance will require both types of leases to be recognized on the balance sheet. The most prominent change for lessees is the requirement to recognize both Right of Use (ROU) assets and lease liabilities for leases classified as operating leases under current U.S. GAAP. We have elected to use the transition method of adoption, with certain practical expedients available, to recognize and measure leases existing at, or entered into after, the adoption date of April 1, 2019.
Topic 842 is effective for us beginning April 1, 2019. We have elected to adopt as of the effective date and have elected certain practical expedients as a part of our implementation process. During the preparation for implementation, we have reviewed our current control environment for necessary changes. The standard will have a material impact to our Consolidated Balance Sheets, however will not have a material impact on our Consolidated Income Statements or Statements of Cash Flow. The accounting for our capital leases remains the same while our accounting for operating leases will change significantly as a result of the recognition of ROU
assets and lease liabilities. We expect the impact of the recognition of ROU assets to be approximately $15 million and approximately $17 million of lease liabilities on our Consolidated Balance Sheets as of April 1, 2019.
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
. ASU No. 2014-09 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted ASU 2014-09 as of April 1, 2018 using the modified retrospective transition method. Please refer to Note 3,
Revenue Recognition
for further details.
Management continually evaluates the potential impact, if any, of all recent accounting pronouncements on our consolidated financial statements or related disclosures and, if significant, makes the appropriate disclosures required by such new accounting pronouncements.
3. Revenue Recognition
On April 1, 2018, we adopted ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
, using the modified retrospective method applied to those contracts that were not completed as of the adoption date. Results for reporting periods beginning after the adoption date are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under prior guidance. For in depth discussion regarding our revenue recognition procedures for our revenue streams, see Note 2,
Summary of Significant Accounting Policies
.
Disaggregation of Revenue
We derive and report our revenue from the sale of products (software licenses, third party hardware and operating systems), support, maintenance and subscription services and professional services. Revenue recognized at a point in time (products) totaled
$39.0 million
and over time (support, maintenance and subscription services and professional services) totaled
$101.8 million
for the fiscal period 2019.
Contract Balances
Contract assets are rights to consideration in exchange for goods or services that we have transferred to a customer when that right is conditional on something other than the passage of time. The majority of our contract assets represent unbilled amounts related to professional services. We expect billing and collection of our contract assets to occur within the next twelve months. We receive payments from customers based upon contractual billing schedules and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities represent consideration received or consideration which is unconditionally due from customers prior to transferring goods or services to the customer under the terms of the contract.
Revenue recognized during the fiscal year ending
March 31, 2019
from amounts included in contract liabilities at the beginning of the period was
$33.1 million
. During the fiscal period ending
March 31, 2019
, we transferred
$4.6 million
to accounts receivable from contract assets recognized at April 1, 2018 because the right to the transaction consideration became unconditional.
Our arrangements are for a period of one year or less. As a result, unsatisfied performance obligations as of March 31, 2019 are expected to be satisfied and the allocated transaction price recognized in revenue within a period of 12 months or less.
Assets Recognized from Costs to Obtain a Contract
Sales commission expenses would not have occurred absent the customer contract and are therefore considered incremental. We have elected to take the practical expedient available to expense the incremental costs to obtain a contract as incurred when the expected benefit and amortization period is one year or less. For subscription contracts that are renewed monthly based on an agreement term, we capitalize commission expenses and amortize as we satisfy the underlying performance obligations, generally based on the contract terms and anticipated renewals. Other sales commission expenses have a period of benefit of one year or less, and are therefore expensed as incurred in line with the practical expedient elected.
We have capitalized $
1.9 million
of sales incentive costs in prior periods as part of our opening retained earnings adjustment on April 1, 2018. As of
March 31, 2019
, we had
$3.3 million
of capitalized sales incentive costs. These balances are included in other non-current assets on our Consolidated Balance Sheet. During the fiscal period ending
March 31, 2019
, we expensed
$4.5 million
of sales commissions, including amortization of capitalized amounts of $
1.1 million
which is included in operating expenses - sales and marketing in our Consolidated Statement of Operations. All other costs to obtain a contract are not considered incremental and therefore are expensed as incurred.
Financial Statement Impact of Adoption on Previously Reported Results
We adopted Topic 606 using the modified retrospective method. The cumulative impact of applying the new guidance to all contracts with customers that were not completed as of April 1, 2018 was recorded as an adjustment to retained earnings as of the adoption date. As a result of applying the modified retrospective method to adopt the new standard, the following adjustments were made to noted accounts on the Consolidated Balance Sheet as of April 1, 2018:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
March 31, 2018
|
Adjustment from Topic 606
|
April 1, 2018
|
|
Assets:
|
|
|
|
|
Accounts receivable, net
|
16,389
|
|
3,124
|
|
19,513
|
|
|
Contract assets
|
—
|
|
4,583
|
|
4,583
|
|
|
Prepaid expenses and other current assets
|
5,593
|
|
(496
|
)
|
5,097
|
|
|
Other non-current assets
|
2,484
|
|
2,409
|
|
4,893
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Contract liabilities
|
26,820
|
|
7,006
|
|
33,826
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
Retained earnings
|
103,601
|
|
2,614
|
|
106,215
|
|
The acceleration of revenue that was deferred under prior guidance as of the adoption date was primarily attributable to the requirement of Topic 606 to allocate the transaction price to the performance obligations in the contract on a relative basis using SSP rather than allocating under the residual method, which allocates the entire arrangement discount to the delivered performance obligations.
Due to the Company's full valuation allowance as of the adoption date, there is no tax impact associated with the adoption of Topic 606.
We made certain presentation changes to our Consolidated Balance Sheet on April 1, 2018 to comply with Topic 606. Prior to adoption of the new standard, we offset accounts receivable and contract liabilities (previously presented as deferred revenue on our Consolidated Balance Sheet) for unpaid deferred performance obligations included in contract liabilities. Under the new standard, we record accounts receivable and related contract liabilities for non-cancelable contracts with customers when the right to consideration is unconditional. Upon adoption, the right to consideration in exchange for goods or services that have been transferred to a customer when that right is conditional on something other than the passage of time were reclassified from accounts receivable to contract assets.
Impact of Topic 606 on Financial Statement Line Items
The impact of adoption of Topic 606 on our Consolidated Balance Sheet as of
March 31, 2019
and on our Consolidated Statement of Operations for the fiscal period ending
March 31, 2019
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
|
As reported
|
Balance without adoption of Topic 606
|
Effect of Change Higher (Lower)
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
Accounts receivable, net
|
27,000
|
|
23,046
|
|
3,954
|
|
|
Contract assets
|
2,921
|
|
—
|
|
2,921
|
|
|
Prepaid expenses and other current assets
|
6,272
|
|
6,665
|
|
(393
|
)
|
|
Other non-current assets
|
6,118
|
|
3,152
|
|
2,966
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Contract liabilities
|
38,669
|
|
32,343
|
|
6,326
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
Retained earnings
|
93,051
|
|
89,929
|
|
3,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
|
As reported
|
Balance without adoption of Topic 606
|
Effect of Change Higher (Lower)
|
|
(In thousands)
|
|
Net revenue:
|
|
|
|
|
Products
|
39,003
|
|
37,466
|
|
1,537
|
|
|
Support, maintenance and subscription services
|
75,496
|
|
76,330
|
|
(834
|
)
|
|
Professional services
|
26,343
|
|
27,201
|
|
(858
|
)
|
|
Total net revenue:
|
140,842
|
|
140,997
|
|
(155
|
)
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
Sales and marketing
|
19,646
|
|
20,309
|
|
(663
|
)
|
|
|
|
|
|
|
Net Loss
|
(13,164
|
)
|
(13,672
|
)
|
(508
|
)
|
The adoption of Topic 606 had no material impact to cash used in operating, investing or financing activities on our Consolidated Statement of Cash Flows.
4. Restructuring Charges
We recognize restructuring charges when a plan that materially changes the scope of our business or the manner in which that business is conducted is adopted and communicated to the impacted parties, and the expenses have been incurred or are reasonably estimable. In addition, we assess the property and equipment associated with the related facilities for impairment. The remaining useful lives of property and equipment associated with the related operations are re-evaluated based on the respective restructuring plan, resulting in the acceleration of depreciation and amortization of certain assets.
Fiscal 2018 Restructuring Plan
During fiscal 2018, we continued our ongoing efforts to create more efficient teams across the business, which included certain executive changes during the year. To date, we have recorded
$1.6 million
in restructuring charges related to the fiscal 2018 restructuring plan, comprised of severance and other employee related benefits. There was no remaining liability for the fiscal 2018 restructuring plan as of March 31, 2019.
Following is a reconciliation of the beginning and ending balances of the restructuring liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
Balance at
|
|
|
March 31,
|
|
|
|
|
|
March 31,
|
|
(In thousands)
|
2018
|
|
Provision
|
|
Payments
|
|
2019
|
|
Fiscal 2018 Restructuring Plan:
|
|
|
|
|
|
|
|
|
Severance and employment costs
|
$
|
198
|
|
|
$
|
—
|
|
|
$
|
(198
|
)
|
|
$
|
—
|
|
|
Total restructuring costs
|
198
|
|
|
—
|
|
|
(198
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
Balance at
|
|
|
March 31,
|
|
|
|
|
|
March 31,
|
|
(In thousands)
|
2017
|
|
Provision
|
|
Payments
|
|
2018
|
|
Fiscal 2018 Restructuring Plan:
|
|
|
|
|
|
|
|
|
Severance and employment costs
|
$
|
—
|
|
|
$
|
1,639
|
|
|
$
|
(1,441
|
)
|
|
$
|
198
|
|
|
Total restructuring costs
|
—
|
|
|
1,639
|
|
|
(1,441
|
)
|
|
198
|
|
5. Property and Equipment, Net
Property and equipment at March 31,
2019
and
2018
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
(In thousands)
|
2019
|
2018
|
|
|
|
|
|
Furniture and equipment
|
$
|
11,604
|
|
$
|
10,671
|
|
|
Software
|
16,427
|
|
11,885
|
|
|
Leasehold improvements
|
6,981
|
|
6,819
|
|
|
Project expenditures not yet in use
|
1,014
|
|
4,187
|
|
|
|
36,026
|
|
33,562
|
|
|
Accumulated depreciation and amortization
|
(20,188
|
)
|
(16,050
|
)
|
|
Property and equipment, net
|
$
|
15,838
|
|
$
|
17,512
|
|
Total depreciation expense on property and equipment was
$2.5 million
,
$2.6 million
, and
$2.4 million
during fiscal
2019
,
2018
and
2017
, respectively.
The Company capitalizes internal-use software, including software used exclusively in providing services or that is only made available to customers as a software service, as property and equipment under ASC 350-40, Internal-Use Software. Total amortization expense on capitalized internal-use software was
$2.5 million
,
$1.8 million
and
$1.4 million
during fiscal
2019
,
2018
, and
2017
, respectively.
Assets under capital leases are included in property and equipment categories above. Total assets under capital leases at March 31,
2019
and
2018
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
(In thousands)
|
2019
|
2018
|
|
|
|
|
|
Capital leases
|
$
|
679
|
|
$
|
679
|
|
|
Less accumulated depreciation
|
(625
|
)
|
(509
|
)
|
|
Assets under capital lease, net
|
$
|
54
|
|
$
|
170
|
|
6. Intangible Assets and Software Development Costs
The following table summarizes our intangible assets and software development costs at March 31,
2019
, and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
|
carrying
|
Accumulated
|
carrying
|
|
carrying
|
Accumulated
|
carrying
|
|
(In thousands)
|
amount
|
amortization
|
amount
|
|
amount
|
amortization
|
amount
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
Customer relationships
|
$
|
10,775
|
|
$
|
(10,775
|
)
|
$
|
—
|
|
|
$
|
10,775
|
|
$
|
(10,775
|
)
|
$
|
—
|
|
|
Non-competition agreements
|
2,700
|
|
(2,700
|
)
|
—
|
|
|
2,700
|
|
(2,700
|
)
|
—
|
|
|
Developed technology
|
10,398
|
|
(10,398
|
)
|
—
|
|
|
10,398
|
|
(10,398
|
)
|
—
|
|
|
Trade names
|
230
|
|
(192
|
)
|
38
|
|
|
230
|
|
(146
|
)
|
84
|
|
|
Patented technology
|
80
|
|
(80
|
)
|
—
|
|
|
80
|
|
(80
|
)
|
—
|
|
|
|
24,183
|
|
(24,145
|
)
|
38
|
|
|
24,183
|
|
(24,099
|
)
|
84
|
|
|
Trade names
|
8,400
|
|
N/A
|
|
8,400
|
|
|
8,400
|
|
N/A
|
|
8,400
|
|
|
Total intangible assets
|
$
|
32,583
|
|
$
|
(24,145
|
)
|
$
|
8,438
|
|
|
$
|
32,583
|
|
$
|
(24,099
|
)
|
$
|
8,484
|
|
|
|
|
|
|
|
|
|
|
|
Software development costs
|
$
|
67,541
|
|
$
|
(32,974
|
)
|
$
|
34,567
|
|
|
$
|
53,368
|
|
$
|
(20,372
|
)
|
$
|
32,996
|
|
|
Project expenditures not yet in use
|
—
|
|
—
|
|
—
|
|
|
12,185
|
|
—
|
|
12,185
|
|
|
Total software development costs
|
$
|
67,541
|
|
$
|
(32,974
|
)
|
$
|
34,567
|
|
|
$
|
65,553
|
|
$
|
(20,372
|
)
|
$
|
45,181
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets, comprised of our purchased trade name InfoGenesis™ as of March 31,
2019
and
2018
are tested for impairment upon identification of impairment indicators or at least annually. An impairment loss is recognized if the carrying amount is greater than fair value. The InfoGenesis™ indefinite-lived purchased trade name impairment testing resulted in a fair value exceeding the carrying amount for the years ending March 31,
2019
,
2018
and
2017
.
At each balance sheet date, the unamortized capitalized software development costs for external use is compared to the net realizable value of that product by analyzing critical inputs such as costs necessary to bring the software to market, life of the software, and market capacity. The amount by which unamortized software costs exceeds the net realizable value, if any, is recognized as a charge to income in the period it is determined.
The following table summarizes our remaining estimated amortization expense relating to in service intangible assets and software development costs.
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Amortization
|
|
(In thousands)
|
Expense
|
|
Fiscal year ending March 31,
|
|
|
2020
|
$
|
12,599
|
|
|
2021
|
12,515
|
|
|
2022
|
5,403
|
|
|
2023
|
3,399
|
|
|
2024
|
689
|
|
|
Total
|
$
|
34,605
|
|
Amortization expense related to software development costs related to assets to be sold, leased, or otherwise marketed was
$12.6 million
,
$10.0 million
and
$8.0 million
for the fiscal years ended March 31,
2019
,
2018
and
2017
, respectively. These charges are included as Products cost of goods sold within the Consolidated Statements of Operations. Amortization expense relating to other definite-lived intangible assets was
$46,000
for the fiscal years ended March 31,
2019
,
2018
and
2017
. These charges are classified as operating expenses within the Consolidated Statements of Operations.
Capitalized software development costs are carried on our balance sheets at net realizable value, net of accumulated amortization. We capitalized approximately
$2.0 million
,
$8.2 million
and
$11.9 million
during fiscal
2019
,
2018
and
2017
, respectively.
7. Financing Arrangements
The following is a summary of long-term obligations at March 31,
2019
, and
2018
:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
2018
|
|
Capital lease obligations
|
$
|
57
|
|
$
|
177
|
|
|
Less: current maturities
|
(22
|
)
|
(120
|
)
|
|
Long -term capital lease obligations
|
$
|
35
|
|
$
|
57
|
|
Capital Leases
Agilysys leases certain equipment under capital leases expiring in various years through fiscal 2022. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are depreciated over the shorter of their related lease terms or their estimated productive lives. Assets recorded under capital leases were
$0.7 million
as of March 31,
2019
and
2018
. Accumulated depreciation related to assets recorded under capital leases was
$0.6 million
and
$0.5 million
as of March 31,
2019
and
2018
, respectively. Depreciation of assets under capital leases is included in depreciation expense.
Minimum future lease payments under capital leases as of March 31,
2019
, are as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
Amount
|
|
Fiscal year ending March 31,
|
|
|
2020
|
$
|
27
|
|
|
2021
|
23
|
|
|
2022
|
15
|
|
|
Total minimum lease payments
|
$
|
65
|
|
|
Less: amount representing interest
|
(8
|
)
|
|
Present value of minimum lease payments
|
$
|
57
|
|
Interest rates on capitalized leases of
4.5%
are imputed based on the lower of our incremental borrowing rate at the inception of each lease or the lessor's implicit rate of return.
8. Supplemental Disclosures of Cash Flow Information
Additional information related to the Consolidated Statements of Cash Flows is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
(In thousands)
|
2019
|
2018
|
2017
|
|
Cash (receipts) for interest, net
|
(329
|
)
|
(88
|
)
|
(147
|
)
|
|
Cash payments (receipts) for income tax, net
|
409
|
|
(227
|
)
|
19
|
|
|
Acquisition of property and equipment under lease obligations
|
—
|
|
64
|
|
21
|
|
|
Accrued capital expenditures
|
56
|
|
83
|
|
411
|
|
|
Accrued capitalized software development costs
|
—
|
|
201
|
|
922
|
|
|
Leasehold improvements acquired under operating lease arrangement
|
62
|
|
95
|
|
35
|
|
9. Additional Balance Sheet Information
Additional information related to the Consolidated Balance Sheets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
(In thousands)
|
2019
|
|
2018
|
|
Accrued liabilities:
|
|
|
|
|
Salaries, wages, and related benefits
|
$
|
12,929
|
|
|
$
|
6,793
|
|
|
Other taxes payable
|
1,041
|
|
|
769
|
|
|
Accrued legal settlements
|
15
|
|
|
—
|
|
|
Restructuring liabilities
|
—
|
|
|
198
|
|
|
Severance liabilities
|
46
|
|
|
—
|
|
|
Professional fees
|
67
|
|
|
288
|
|
|
Deferred rent
|
273
|
|
|
407
|
|
|
Other
|
521
|
|
|
786
|
|
|
Total
|
$
|
14,892
|
|
|
$
|
9,241
|
|
|
|
|
|
|
|
Other non-current liabilities:
|
|
|
|
|
Uncertain tax positions
|
$
|
1,083
|
|
|
$
|
1,519
|
|
|
Deferred rent
|
2,613
|
|
|
2,313
|
|
|
Other
|
76
|
|
|
79
|
|
|
Total
|
$
|
3,772
|
|
|
$
|
3,911
|
|
10. Income Taxes
For the year ended March 31, loss before income taxes consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
2017
|
|
(Loss) income before income taxes
|
|
|
|
|
|
|
United States
|
$
|
(13,621
|
)
|
|
$
|
(11,926
|
)
|
|
$
|
(10,967
|
)
|
|
Foreign
|
678
|
|
|
325
|
|
|
(518
|
)
|
|
Total loss before income taxes
|
$
|
(12,943
|
)
|
|
$
|
(11,601
|
)
|
|
$
|
(11,485
|
)
|
For the year ended March 31, income tax expense (benefit) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
2017
|
|
Income tax expense (benefit)
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Federal
|
$
|
54
|
|
|
$
|
66
|
|
|
$
|
10
|
|
|
State and local
|
(383
|
)
|
|
(446
|
)
|
|
5
|
|
|
Foreign
|
514
|
|
|
73
|
|
|
107
|
|
|
Deferred:
|
|
|
|
|
|
|
Federal
|
79
|
|
|
(2,985
|
)
|
|
96
|
|
|
State and local
|
277
|
|
|
41
|
|
|
10
|
|
|
Foreign
|
(320
|
)
|
|
—
|
|
|
8
|
|
|
Total income tax expense (benefit)
|
$
|
221
|
|
|
$
|
(3,251
|
)
|
|
$
|
236
|
|
The following table presents the principal components of the difference between the effective tax rate to the U.S. federal statutory income tax rate for the years ended March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
2017
|
|
Income tax benefit at the US Federal statutory rate
|
$
|
(2,718
|
)
|
|
$
|
(3,654
|
)
|
|
$
|
(4,019
|
)
|
|
Benefit for state taxes
|
(304
|
)
|
|
(642
|
)
|
|
(142
|
)
|
|
Impact of foreign operations
|
(310
|
)
|
|
38
|
|
|
158
|
|
|
Indefinite life assets
|
130
|
|
|
335
|
|
|
102
|
|
|
Officer life insurance
|
3
|
|
|
(5
|
)
|
|
(6
|
)
|
|
Change in valuation allowance
|
3,302
|
|
|
3,328
|
|
|
4,007
|
|
|
Change in liability for unrecognized tax benefits
|
(400
|
)
|
|
40
|
|
|
9
|
|
|
Impact of Tax Act, net
|
226
|
|
|
(3,287
|
)
|
|
—
|
|
|
Meals and entertainment
|
60
|
|
|
81
|
|
|
163
|
|
|
Equity
|
2
|
|
|
476
|
|
|
—
|
|
|
Global intangible low-taxed income
|
94
|
|
|
—
|
|
|
—
|
|
|
Other
|
136
|
|
|
39
|
|
|
(36
|
)
|
|
Total income tax expense (benefit)
|
$
|
221
|
|
|
$
|
(3,251
|
)
|
|
$
|
236
|
|
During fiscal 2018, we recorded a provisional tax benefit of approximately
$3.3 million
as a result of the enactment of the Tax Cuts and Jobs Act ("Tax Act") on December 22, 2017.
We completed the accounting for the Tax Act during Q3 fiscal 2019 and recorded an adjustment on December 31, 2018 of
$0.2 million
to increase our deferred tax liability associated with certain indefinite lived intangibles. We have elected to account for global intangible low-taxed income (GILTI) inclusions in the period in which they are incurred.
Our tax provision includes a provision for income taxes in certain foreign jurisdictions where subsidiaries are profitable, but only a minimal benefit is reflected related to U.S. and certain foreign tax losses due to the uncertainty of the ultimate realization of future benefits from these losses. The 2019 tax provision results primarily from foreign tax expense, the reversal of reserves for uncertain tax positions and the completion of our accounting for the Tax Act. The 2019 tax provision differs from the statutory rate primarily due to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, state taxes and other U.S. permanent book to tax differences.
The
2018
tax provision primarily results from a reduction in the deferred rate and the ability to offset indefinite lived deferred tax liabilities with certain deferred tax assets due to passage of the Tax Act. The
2018
effective rate differs from the statutory rate primarily due to the impact of the Tax Act, recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state tax effects including a benefit of
$0.4 million
related to a settlement with the California Franchise Tax Board and other U.S. permanent book to tax differences.
The 2017 tax provision primarily results from state taxes, taxes withheld in foreign jurisdictions and foreign tax expense. The 2017 tax provision differs from the statutory rate primarily due to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, state taxes and other U.S. permanent book to tax differences.
Deferred tax assets and liabilities as of March 31, are as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
2018
|
|
Deferred tax assets:
|
|
|
|
Accrued liabilities
|
$
|
3,944
|
|
$
|
2,720
|
|
|
Allowance for doubtful accounts
|
120
|
|
143
|
|
|
Inventory valuation reserve
|
41
|
|
20
|
|
|
Federal losses and credit carryforwards
|
45,227
|
|
42,713
|
|
|
Foreign net operating losses
|
730
|
|
623
|
|
|
State losses and credit carryforwards
|
9,886
|
|
9,592
|
|
|
Deferred revenue
|
488
|
|
652
|
|
|
Goodwill and other intangible assets
|
—
|
|
286
|
|
|
Other
|
65
|
|
96
|
|
|
|
60,501
|
|
56,845
|
|
|
Less: valuation allowance
|
(57,852
|
)
|
(54,260
|
)
|
|
Total
|
2,649
|
|
2,585
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Property and equipment & software amortization
|
(361
|
)
|
(412
|
)
|
|
Goodwill and other intangible assets
|
(2,706
|
)
|
(2,277
|
)
|
|
Total
|
(3,067
|
)
|
(2,689
|
)
|
|
Total deferred tax liabilities
|
$
|
(418
|
)
|
$
|
(104
|
)
|
At
March 31, 2019
, we had
$199.1 million
of a federal net operating loss carryforwards that expire, if unused, in fiscal years 2031 to 2038, and $11.5 million of federal net operating loss carryforwards that can be carried forward indefinitely. Our Hong Kong, Malaysia, and Singapore subsidiaries have
$0.4 million
,
$0.1 million
, and
$0.2 million
of net operating loss carryforwards respectively. The losses for Hong Kong, Malaysia and Singapore can be carried forward indefinitely. At
March 31, 2019
our India subsidiary had
$0.4 million
of minimum alternative tax credits reported as other noncurrent assets on our Consolidated Balance Sheet. Our India subsidiary operates in a “Special Economic Zone (“SEZ”)”. One of the benefits associated with the SEZ is that the India subsidiary is not subject to regular India income taxes during its first 5 years of operations. The aggregate value of the benefit of the SEZ during the current fiscal year is
$0.5 million
.
At
March 31, 2019
we also had
$127.5 million
of state net operating loss carryforwards that expire, if unused, in fiscal years 2020 through 2039.
We recorded valuation allowances related to certain deferred income tax assets due to the uncertainty of the ultimate realization of the future benefits from those assets. At
March 31, 2019
, the total valuation allowance against deferred tax assets of
$57.9 million
was comprised of
$57.0 million
for federal and state deferred tax assets, and
$0.9 million
associated with deferred tax assets in Hong Kong, Malaysia, Singapore and the Philippines. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. We have recorded a valuation allowance offsetting substantially all of our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax assets, we will need to generate future taxable income before the expiration of the deferred tax assets governed by the tax code. Because of our losses in current and prior periods, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences. The amount of the valuation allowance, however, could be reduced in the near term. The exact timing will be based on the level of profitability that we are able to achieve and our visibility into future results. Our recorded tax rate may increase in subsequent periods following a valuation release. Any valuation allowance release will not affect the amount of cash paid for income taxes.
The undistributed earnings of our foreign subsidiaries are not subject to U.S. federal and state income taxes unless such earnings are distributed in the form of dividends or otherwise to the extent of current and accumulated earnings and profits. The undistributed earnings of foreign subsidiaries are permanently reinvested and totaled
$3.1 million
and
$1.7 million
as of
March 31, 2019
and
2018
, respectively. We made the determination of permanent reinvestment on the basis of sufficient evidence that demonstrates we will invest the undistributed earnings overseas indefinitely for use in working capital, as well as foreign acquisitions and expansion. The determination of the amount of the unrecognized deferred U.S. income tax liability related to the undistributed earnings is not practicable.
Prior to the adoption of ASU 2016-09 in the first quarter of fiscal 2018, we used the with-and-without approach for ordering tax benefits derived from the share-based payment awards. Using the with-and-without approach, actual income taxes payable for the period were compared to the amount of tax payable that would have been incurred absent the deduction for employee share-based payments in excess of the amount of compensation cost recognized for financial reporting. As a result of this approach, tax net operating loss carryforwards not generated from share-based payments in excess of cost recognized for financial reporting were considered utilized before the current period's share-based deduction.
We recorded a liability for unrecognized tax positions. The aggregate changes in the balance of our gross unrecognized tax benefits were as follows for the years ended March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
2017
|
|
Balance at April 1
|
$
|
687
|
|
|
$
|
988
|
|
|
$
|
1,617
|
|
|
Reductions:
|
|
|
|
|
|
|
Relating to positions taken during prior year
|
—
|
|
|
(300
|
)
|
|
(604
|
)
|
|
Relating to lapse in statute
|
(107
|
)
|
|
(1
|
)
|
|
(25
|
)
|
|
Balance at March 31
|
$
|
580
|
|
|
$
|
687
|
|
|
$
|
988
|
|
As of
March 31, 2019
, we had a liability of
$0.6 million
related to uncertain tax positions, the recognition of which would affect our effective income tax rate.
Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months an immaterial reduction in unrecognized tax benefits may occur as a result of the expiration of various statutes of limitations. We are routinely audited and the outcome of tax examinations could also result in a reduction in unrecognized tax benefits. Other changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time.
We recognize interest accrued on any unrecognized tax benefits as a component of income tax expense. Penalties are recognized as a component of general and administrative expenses. We recognized interest and penalty expense of less than
$0.1 million
for the years ended
March 31, 2019
,
2018
and 2017. As of
March 31, 2019
and
2018
, we had approximately
$0.5 million
and
$0.8 million
of interest and penalties accrued.
In the U.S. we file consolidated federal and state income tax returns where statutes of limitations generally range from three to five years. Although we have resolved examinations with the IRS through tax year ended March 31, 2010, U.S. federal tax years are open from 2006 forward due to attribute carryforwards. The statute of limitations is open from fiscal year 2012 forward in certain state jurisdictions. We also file income tax returns in international jurisdictions where statutes of limitations generally range from three to seven years. Years beginning after 2008 are open for examination by certain foreign taxing authorities.
11. Employee Benefit Plans
401(k) Plan
We maintain 401(k) plans for employees meeting certain service requirements. Generally, the plans allow eligible employees to contribute a portion of their compensation, and we match 100% of the first 1% of the employee's pre-tax contributions and
50%
of the next 5% of the employee's pre-tax contributions. We may also make discretionary contributions each year for the benefit of all eligible employees under the plans. Agilysys matching contributions were
$1.6 million
,
$1.7 million
, and
$1.4 million
in fiscal
2019
,
2018
, and
2017
, respectively.
Endorsement Split-Dollar Life Insurance
Agilysys provides certain former executives with life insurance benefits through endorsement split-dollar life insurance arrangements. We entered into non-cancelable agreements with each of the former executives, whereby we must maintain the life insurance policy
for a specified amount and split a portion of the policy benefits with their designated beneficiary. During fiscal 2017, we received
$2.2 million
related to the death benefit due to us on redemption of
two
of these policies.
Our investment in these corporate-owned life insurance policies were recorded at their cash surrender value, which approximates fair value at the balance sheet date. In the consolidated balance sheets as of
March 31, 2019
and 2018, the cash surrender value of
$0.9 million
for the remaining policies were held in “Other non-current assets,” and the present value of future proceeds owed to those executives' designated beneficiaries of
$0.1 million
, which approximates fair value, were recorded within "Other non-current liabilities."
Changes in the cash surrender value of these policies related to gains and losses incurred on these investments are classified within “Other (income) expenses, net” in the accompanying Consolidated Statements of Operations. We recorded a gain of $15,000 dollars in fiscal 2019, a gain of $17,000 in fiscal 2018 and a gain of $18,000 in fiscal 2017 related to the corporate-owned life insurance policies.
12. Commitments and Contingencies
Operating Leases
We lease certain facilities and equipment under non-cancelable operating leases which expire at various dates through fiscal 2024 and require us to pay a portion of the related operating expenses such as maintenance, property taxes, and insurance. Certain facilities and equipment leases contain renewal options for periods up to
ten
years. In most cases, management expects that in the normal course of business, leases will be renewed or replaced by other leases. Certain facilities leases have free or escalating rent payment provisions. Rent expense under such leases is recognized on a straight-line basis over the lease term.
The following is a schedule by year of future minimum rental payments required under operating leases, excluding the related operating expenses, which have initial or remaining non-cancelable lease terms in excess of a year as of
March 31, 2019
:
|
|
|
|
|
|
|
|
(In thousands)
|
Amount
|
|
Fiscal year ending March 31,
|
|
|
2020
|
$
|
4,143
|
|
|
2021
|
3,945
|
|
|
2022
|
3,166
|
|
|
2023
|
1,916
|
|
|
2024
|
1,770
|
|
|
Thereafter
|
4,497
|
|
|
Total minimum lease payments
|
$
|
19,437
|
|
Rental expense for all non-cancelable operating leases amounted to
$3.9 million
,
$3.2 million
, and
$2.8 million
for fiscal
2019
,
2018
, and
2017
, respectively.
Legal Contingencies
Agilysys is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. We provide for costs related to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on our future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount or timing of the resolution of such matters. While it is not possible to predict with certainty, management believes that the ultimate resolution of such individual or aggregated matters will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.
On April 6, 2012, Ameranth, Inc. filed a complaint against us in the U.S. District Court for the Southern District of California alleging that certain of our products infringe patents owned by Ameranth directed to configuring and transmitting hospitality menus (e.g. restaurant menus) for display on electronic devices, and synchronizing the menu content between the devices. The case against us was
consolidated with similar cases brought by Ameranth against more than 30 other defendants. Most of the patents at issue in the case were invalidated by the U.S. Court of Appeals for the Federal Circuit in 2016. Cases against us and our co-defendants remained pending in the District Court with respect to one surviving Ameranth patent. In September 2018, the District Court found that patent invalid, and granted summary judgment in favor of the movant co-defendants. In early 2019, Ameranth appealed the District Court's summary judgment ruling to the U.S. Court of Appeals for the Federal Circuit. We are not a party to the appeal, and it is currently unclear what impact the summary judgment ruling or appeal may have on our case. Ameranth seeks monetary damages, injunctive relief, costs and attorneys' fees from us. At this time, we are not able to predict the outcome of this lawsuit. However, we dispute the allegations of wrongdoing and are vigorously defending ourselves in this matter.
13. Loss per Share
The following data shows the amounts used in computing loss per share and the effect on earnings and the weighted average number of shares of dilutive potential common shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
(In thousands, except per share data)
|
2019
|
|
2018
|
|
2017
|
|
Numerator:
|
|
|
|
|
|
|
Net loss
|
$
|
(13,164
|
)
|
|
$
|
(8,350
|
)
|
|
$
|
(11,721
|
)
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
23,037
|
|
|
22,801
|
|
|
22,615
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted:
|
|
|
|
|
|
|
Net loss per share-basic and diluted
|
$
|
(0.57
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.52
|
)
|
|
|
|
|
|
|
|
|
Anti-dilutive stock options, SSARs, restricted shares and performance shares
|
1,433
|
|
|
756
|
|
1,004
|
Basic earnings (loss) per share is computed as net income available to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes
300,437
,
334,817
and
490,355
of restricted shares and performance shares at
March 31, 2019
,
2018
and
2017
, respectively, as these shares were issued but were not vested and, therefore, not considered outstanding for purposes of computing basic earnings per share at the balance sheet dates.
Diluted earnings (loss) per share includes the effect of all potentially dilutive securities on earnings per share. We have stock options, stock-settled appreciation rights ("SSARs"), unvested restricted shares and unvested performance shares that are potentially dilutive securities. When a loss is reported, the denominator of diluted earnings per share cannot be adjusted for the dilutive impact of share-based compensation awards because doing so would be anti-dilutive. In addition, when a net loss is reported, adjusting the denominator of diluted earnings per share would also be anti-dilutive to the loss per share, even if the entity has net income after adjusting for a discontinued operation. Therefore, for all periods presented, basic weighted-average shares outstanding were used in calculating the diluted net loss per share.
14. Share-based Compensation
We may grant non-qualified stock options, incentive stock options, SSARs, restricted shares, and restricted share units under our shareholder-approved 2016 Stock Incentive Plan (the 2016 Plan) for up to
2.0 million
common shares, plus
957,575
common shares, the number of shares that were remaining for grant under the 2011 Stock Incentive Plan (the 2011 Plan) as of the effective date of the 2016 Plan, plus the number of shares remaining for grant under the 2011 Plan that are forfeited, settled in cash, canceled or expired. The maximum aggregate number of restricted shares or restricted share units that may be granted under the 2016 Plan is
1.25 million
.
We may distribute authorized but unissued shares or treasury shares to satisfy share option and appreciation right exercises or restricted share and performance share awards.
For stock options and SSARs, the exercise price must be set at least equal to the closing market price of our common shares on the date of grant. The maximum term of stock option and SSAR awards is
seven
years from the date of grant. Stock option and SSARs awards vest over a period established by the Compensation Committee of the Board of Directors. SSARs may be granted in conjunction with, or independently from, stock option grants. SSARs granted in connection with a stock option are exercisable only to the extent that the stock option to which it relates is exercisable and the SSARs terminate upon the termination or exercise of the related stock option grants.
Restricted shares and restricted share units, whether time-vested or performance-based, may be issued at no cost or at a purchase price that may be below their fair market value, but are subject to forfeiture and restrictions on their sale or other transfer. Performance-based awards may be conditioned upon the attainment of specified performance objectives and other conditions, restrictions, and contingencies. Restricted shares and restricted share units have the right to receive dividends, or dividend equivalents in the case of restricted share units, if any, upon vesting, subject to the same forfeiture provisions that apply to the underlying awards. Subject to certain exceptions set forth in the 2016 Plan, for awards to employees, no performance-based restricted shares or restricted share units shall be based on a restriction period of less than
one
year, and any time-based restricted shares or restricted share units shall have a minimum restriction period of
three
years.
We record compensation expense related to stock options, stock-settled stock appreciation rights, restricted shares, and performance shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date. The fair value of restricted share and performance share awards is based on the closing price of our common shares on the grant date. The fair value of stock option and stock-settled appreciation right awards is estimated on the grant date using the Black-Scholes-Merton option pricing model, which includes assumptions regarding the risk-free interest rate, dividend yield, life of the award, and the volatility of our common shares.
The following table summarizes the share-based compensation expense for options, SSARs, restricted and performance awards included in the Consolidated Statements of Operations for fiscal
2019
,
2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
(In thousands)
|
2019
|
|
2018
|
|
2017
|
|
Product development
|
$
|
1,478
|
|
|
$
|
1,306
|
|
|
$
|
1,545
|
|
|
Sales and marketing
|
469
|
|
|
371
|
|
|
360
|
|
|
General and administrative
|
2,429
|
|
|
3,011
|
|
|
522
|
|
|
Total share-based compensation expense
|
$
|
4,376
|
|
|
$
|
4,688
|
|
|
$
|
2,427
|
|
Stock-Settled Stock Appreciation Rights
Stock-Settled Appreciation Rights (“SSARs”) are rights granted to an employee to receive value equal to the difference in the price of our common shares on the date of the grant and on the date of exercise. This value is settled only in common shares of Agilysys.
We use a Black-Scholes-Merton option pricing model to estimate the fair value of SSARs. The following table summarizes the principal assumptions utilized in valuing SSARs granted in fiscal
2019
,
2018
and
2017
:
|
|
|
|
|
|
|
|
|
2019
|
2018
|
2017
|
|
Risk-free interest rate
|
2.68%
|
1.74%-1.94%
|
0.94%-2.14%
|
|
Expected life (in years)
|
5
|
5
|
5
|
|
Expected volatility
|
32.42%
|
32.42% - 32.84%
|
35.25%-40.22%
|
|
Weighted average grant date fair value
|
$4.72
|
$3.36
|
$3.69
|
The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury bond whose maturity period approximates the expected life of the SSARs. The expected life is estimated using historical data representing the period of time the awards are expected to be outstanding. The estimated fair value of the SSARs granted is recognized over the vesting period of the awards utilizing the graded vesting method. Under this method, the compensation cost related to unvested amounts begins to be recognized as of the grant date.
The following table summarizes the activity during fiscal
2019
for SSARs awarded under the 2016 and 2011 Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share and per share data)
|
Number
of Rights
|
|
Weighted-
Average
Exercise
Price
|
|
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
(per right)
|
|
(in years)
|
|
|
|
Outstanding at April 1, 2018
|
1,103,160
|
|
|
$
|
10.60
|
|
|
|
|
|
|
Granted
|
158,244
|
|
|
14.22
|
|
|
|
|
|
|
Exercised
|
(193,819
|
)
|
|
10.20
|
|
|
|
|
|
|
Forfeited
|
(44,804
|
)
|
|
10.91
|
|
|
|
|
|
|
Cancelled/expired
|
(6,138
|
)
|
|
10.62
|
|
|
|
|
|
|
Outstanding at March 31, 2019
|
1,016,643
|
|
|
$
|
11.22
|
|
|
4.8
|
|
$
|
7,251
|
|
|
Exercisable at March 31, 2019
|
707,950
|
|
|
$
|
10.93
|
|
|
4.5
|
|
$
|
7,251
|
|
|
Vested and expected to vest at March 31, 2019
|
1,016,643
|
|
|
$
|
11.22
|
|
|
4.5
|
|
$
|
10,111
|
|
The following table presents additional information related to SSARs activity during fiscal
2019
,
2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
2018
|
2017
|
|
Compensation expense
|
$
|
943
|
|
$
|
1,869
|
|
$
|
621
|
|
|
Total intrinsic value of SSARs exercised
|
$
|
907
|
|
$
|
88
|
|
$
|
360
|
|
|
Total fair value of SSARs vesting
|
$
|
1,165
|
|
$
|
1,325
|
|
$
|
497
|
|
As of
March 31, 2019
, total unrecognized stock based compensation expense related to non-vested SSARs was
$0.4 million
, which is expected to be recognized over the weighted-average vesting period of
2.8
years.
A total of
44,331
shares, net of
15,698
shares withheld to cover the employee’s minimum applicable income taxes, were issued from treasury shares to settle SSARs exercised during the
twelve months ended
March 31, 2019
. The shares withheld were returned to treasury shares.
Restricted Shares
We granted shares to certain of our Directors, executives and key employees under the 2016 and 2011 Plans, the vesting of which is service-based. The following table summarizes the activity during the
twelve months ended
March 31, 2019
for restricted shares awarded under the 2016 and 2011 Plans:
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
Weighted-
Average
Grant-
Date Fair
Value
|
|
|
|
|
(per share)
|
|
Outstanding at April 1, 2018
|
243,354
|
|
|
$
|
10.78
|
|
|
Granted
|
265,452
|
|
|
14.66
|
|
Vested
|
(197,917
|
)
|
|
12.74
|
|
Forfeited
|
(73,743
|
)
|
|
11.3
|
|
Outstanding at March 31, 2019
|
237,146
|
|
|
$
|
13.46
|
|
The weighted-average grant date fair value of the restricted shares is determined based upon the closing price of our common shares on the grant date. During fiscal
2019
, a total of
197,917
shares, net of
47,146
shares withheld from the vested restricted shares to cover the employee's minimum applicable income taxes, were issued from treasury. The shares withheld were returned to treasury shares.
The following table presents additional information related to restricted stock activity during fiscal years
2019
,
2018
, and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
2018
|
2017
|
|
Compensation expense
|
$
|
2,803
|
|
$
|
2,594
|
|
$
|
1,770
|
|
|
Total fair value of restricted share vesting
|
$
|
4,383
|
|
$
|
4,315
|
|
$
|
1,182
|
|
As of
March 31, 2019
, total unrecognized stock based compensation expense related to non-vested restricted stock was
$1.0 million
, which is expected to be recognized over a weighted-average vesting period of
3.5
years. We do not include restricted stock in the calculation of earnings per share until the shares are vested.
Performance Shares
The following table summarizes the activity during fiscal
2019
for performance shares awarded under the 2016 Plan:
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
|
Weighted-
Average
Grant-
Date Fair
Value
|
|
|
|
|
(per share)
|
|
Outstanding at April 1, 2018
|
91,463
|
|
|
$
|
9.84
|
|
|
Granted
|
63,291
|
|
|
14.22
|
|
|
Vested
|
(15,822
|
)
|
|
$
|
9.84
|
|
|
Forfeited
|
(75,641
|
)
|
|
$
|
9.84
|
|
|
Outstanding at March 31, 2019
|
63,291
|
|
|
$
|
14.22
|
|
Based on the performance goals, management estimates a liability of
$630,000
to be settled through the vesting of a variable number of the performance shares subsequent to
March 31, 2019
. As of
March 31, 2019
, total stock based compensation expense related to performance shares has been fully recognized.
The following table presents additional information related to performance share activity during the fiscal
2019
,
2018
, and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
2018
|
2017
|
|
Compensation expense
|
$
|
630
|
|
$
|
225
|
|
$
|
36
|
|
|
Total fair value of performance share vesting
|
$
|
243
|
|
$
|
—
|
|
83
|
|
Once attainment of the performance goals becomes probable, compensation expense related to performance share awards is recognized ratably over the vesting period based upon the closing market price of our common shares on the grant date.
15. Fair Value Measurements
We estimate the fair value of financial instruments using available market information and generally accepted valuation methodologies. We assess the inputs used to measure fair value using a three-tier hierarchy. The hierarchy indicates the extent to which pricing inputs used in measuring fair value are observable in the market. Level 1 inputs include unadjusted quoted prices for identical assets or liabilities and are the most observable. Level 2 inputs include unadjusted quoted prices for similar assets and liabilities that are either directly or indirectly observable, or other observable inputs such as interest rates, foreign currency exchange rates, commodity rates, and yield curves. Level 3 inputs are not observable in the market and include our own judgments about the assumptions market participants would use in pricing the asset or liability. The use of observable and unobservable inputs is reflected in the hierarchy assessment disclosed in the tables below.
There were no significant transfers between Levels 1, 2, and 3 during the
twelve months ended
March 31, 2019
.
The following tables present information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement used
|
|
|
Recorded
value
as of
|
|
Active
markets
for
identical
assets or
liabilities
|
|
Quoted
prices in
similar
instruments
and
observable
inputs
|
|
Active
markets for
unobservable
inputs
|
|
(In thousands)
|
March 31, 2019
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
Corporate-owned life insurance — non-current
|
$
|
895
|
|
|
—
|
|
|
—
|
|
|
$
|
895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement used
|
|
|
Recorded
value
as of
|
|
Active
markets
for
identical
assets or
liabilities
|
|
Quoted
prices in
similar
instruments
and
observable
inputs
|
|
Active
markets for
unobservable
inputs
|
|
(In thousands)
|
March 31, 2018
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
Corporate-owned life insurance — non-current
|
$
|
853
|
|
|
—
|
|
|
—
|
|
|
$
|
853
|
|
The recorded value of the corporate-owned life insurance policies is adjusted to the cash surrender value of the policies obtained from the third party life insurance providers, which are not observable in the market, and therefore, are classified within Level 3 of the fair value hierarchy. Changes in the cash surrender value of these policies are recorded within “Other expenses (income), net” in the Consolidated Statements of Operations.
The following table presents a summary of changes in the fair value of the corporate-owned life insurance Level 3 asset for the fiscal years ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 assets and
liabilities
|
|
(In thousands)
|
2019
|
|
2018
|
|
Corporate-owned life insurance:
|
|
|
|
|
Balance on April 1
|
$
|
853
|
|
|
$
|
809
|
|
|
Realized Gains
|
15
|
|
|
17
|
|
|
Unrealized (loss) gain relating to instruments held at reporting date
|
27
|
|
|
27
|
|
|
Balance on March 31
|
$
|
895
|
|
|
$
|
853
|
|
16. Quarterly Results (Unaudited)
Because quarterly reporting of per share data is used independently for each reporting period, the sum of per share amounts for the four quarters in the fiscal year will not necessarily equal annual per share amounts. GAAP
prohibits retroactive adjustment of quarterly per share amounts so that the sum of those amounts equals amounts for the full year.
Occasionally, the timing of large one-time orders, such as those associated with significant remarketed product sales around large customer refresh cycles or significant volume rollouts, creates variability in our quarterly results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2019
|
|
|
First
|
Second
|
Third
|
Fourth
|
Year
|
|
(In thousands except per share data)
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|
Net revenue
|
$
|
34,007
|
|
$
|
34,203
|
|
$
|
36,014
|
|
$
|
36,618
|
|
$
|
140,842
|
|
|
Gross profit
|
17,889
|
|
17,749
|
|
18,647
|
|
19,595
|
|
73,880
|
|
|
Restructuring, severance and other charges
|
440
|
|
448
|
|
58
|
|
222
|
|
1,168
|
|
|
Legal settlements
|
91
|
|
35
|
|
—
|
|
15
|
|
141
|
|
|
Net loss
|
$
|
(1,736
|
)
|
$
|
(3,791
|
)
|
$
|
(4,048
|
)
|
$
|
(3,589
|
)
|
$
|
(13,164
|
)
|
|
|
|
|
|
|
|
|
Net loss Per share data-basic and diluted
|
$
|
(0.08
|
)
|
$
|
(0.16
|
)
|
$
|
(0.18
|
)
|
$
|
(0.15
|
)
|
$
|
(0.57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2018
|
|
|
First
|
Second
|
Third
|
Fourth
|
Year
|
|
(In thousands except per share data)
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|
Net revenue
|
$
|
33,865
|
|
$
|
30,129
|
|
$
|
31,310
|
|
$
|
32,056
|
|
$
|
127,360
|
|
|
Gross profit
|
16,670
|
|
15,370
|
|
15,628
|
|
16,749
|
|
64,417
|
|
|
Restructuring, severance and other charges
|
37
|
|
826
|
|
378
|
|
557
|
|
1,798
|
|
|
Legal settlements
|
—
|
|
—
|
|
150
|
|
—
|
|
150
|
|
|
Net loss
|
$
|
(2,958
|
)
|
$
|
(3,248
|
)
|
$
|
(1,934
|
)
|
$
|
(210
|
)
|
$
|
(8,350
|
)
|
|
|
|
|
|
|
|
|
Net loss Per share data-basic and diluted
|
$
|
(0.13
|
)
|
$
|
(0.14
|
)
|
$
|
(0.08
|
)
|
$
|
(0.01
|
)
|
$
|
(0.37
|
)
|
17. Subsequent Events
None.
18. Related Party Transaction
None.