Seventh Consecutive Quarter of Record
Revenue Includes Record Recurring Revenue of $21.0 Million,
Inclusive of 28% Growth in Subscription Revenue
Raises Fiscal 2020 Revenue Guidance to an
Expectation of Approximately 16% Year-Over-Year Growth
Agilysys, Inc. (Nasdaq: AGYS), a global provider of
next-generation hospitality software solutions and services, today
reported operating results for its fiscal 2020 third quarter ended
December 31, 2019.
Summary of Fiscal 2020 Third Quarter Financial
Results
- Total net revenue increased 16.6% to a record $42.0 million,
compared to total net revenue of $36.0 million in the comparable
prior-year period.
- Recurring revenues (which are comprised of support, maintenance
and subscription services) were a record $21.0 million, or 49.9% of
total net revenue, compared to $19.3 million, or 53.7% of total net
revenue, for the same period in fiscal 2019. Subscription revenues
increased 28% year-over-year and comprised 37.7% of total recurring
revenues, compared to 32.0% of total recurring revenues in the
third quarter of fiscal 2019.
- Gross margin was 50.2% in the fiscal 2020 third quarter,
compared to 51.8% in the comparable prior-year period.
- Net loss in the fiscal 2020 third quarter was $(2.6) million,
or $(0.11) per diluted share, compared to a net loss of $(4.0)
million, or $(0.18) per diluted share, in the comparable prior-year
period.
- Adjusted EBITDA (non-GAAP) was $3.2 million, compared to $2.1
million in the comparable prior-year period (see reconciliation
below).
- Free cash flow (non-GAAP) in the fiscal 2020 third quarter was
$3.0 million, compared to free cash flow of $4.2 million in the
fiscal 2019 third quarter (see reconciliation below).
Ramesh Srinivasan, President and CEO of Agilysys, commented, “We
are pleased to announce yet another solid revenue growth and
profitability improvement quarter. Quarterly revenue of $42.0
million represents our sixth consecutive quarter of double-digit
year-over- year quarterly revenue growth and the seventh
consecutive record revenue quarter. Recurring revenue for the
quarter reached a record $21.0 million, including a 28%
year-over-year increase in subscription revenue.
“This was also one of our best quarters in terms of selling
success. The last five quarters have been five of our six most
successful selling quarters. The fact this was our best services
revenue quarter is a good indication of how busy we were and
continue to be with software implementations all over the world.
Our continuing good selling momentum coupled with the shifting
customer preference for subscription-based arrangements drove our
significant year-over-year growth in subscription revenue.
“Our R&D resource strength continues to grow in a
cost-effective manner. We continue to execute well and innovate at
an increasing pace across all our product sets allowing us to stay
ahead of ever-changing customer demands. Our customer centric work
culture and passionate focus on the hospitality software solutions
space continue to evolve well. All things considered, we like our
current business momentum and strengthening competitive advantage.
We are well poised to continue growing shareholder value.”
Raises Fiscal 2020 Revenue Outlook
Agilysys today raised its forecast for fiscal 2020 full year
revenue growth as the Company now expects an approximate 16%
year-over-year increase compared to fiscal 2019 revenue of
approximately $141 million. The Company’s prior expectation was for
an approximate 14% year-over-year increase. The Company reiterated
its forecast for 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 continues to
expect fiscal 2020 free cash flow will be significantly more than
the $1.7 million of free cash flow generated in fiscal 2019.
Tony Pritchett, Chief Financial Officer, commented, “We are
pleased with our continued business momentum, including the strong
financial results in the third fiscal quarter of 2020. Our
customers continue to place a lot of trust in our ability to
deliver reliable and innovative products as evidenced by another
record revenue quarter. All three of our reported revenue
categories were a record in the third quarter and on a year to date
basis, demonstrating the consistency of our revenue growth. We
remain committed to our customers and to delivering profitable
revenue growth which continues to reflect in our results, including
strong Adjusted EBITDA and free cash flows for the quarter and year
to date periods. We provided for a slight upward revision to our
forecast for full year revenue growth, which we now expect to
further improve to 16%. We continue to push the Company forward and
are confident about our future.”
2020 Third Quarter Conference Call and Webcast
Agilysys is hosting a conference call and webcast today, January
28, 2020, 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 9998734. 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 recurring revenue and subscription
revenue growth, 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, adjusted
net income, adjusted basic earnings per share, adjusted diluted
earnings per share and free cash flow. Management believes that
such information can enhance investors’ understanding of the
company’s ongoing operations.
The Company has also included the following non-GAAP financial
measures in this press release: adjusted net income, adjusted basic
earnings per share and adjusted diluted earnings per share. The
Company believes these non-GAAP financial measures provide valuable
insight into the Company’s overall profitability from core
operations before certain non-cash and non-recurring charges. The
Company defines adjusted net income as net income before
amortization expense (including amortization of developed
technology), share-based compensation, restructuring, severance and
other charges, legal settlements, net of the related income tax
effect of these items, if applicable and defines adjusted earnings
per share as adjusted net income divided by basic and diluted
weighted average shares outstanding.
See the accompanying tables below for the definitions 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 casinos, hotels, resorts, cruise ships, managed foodservice
providers, stadiums and arenas. Agilysys offers the most
comprehensive software solutions in the industry, including
point-of-sale (POS), property management (PMS), inventory and
procurement, payment solutions, and related hospitality
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, generate more revenue 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
Nine Months Ended
December 31,
December 31,
2019
2018
2019
2018
Net revenue:
Products
$
12,126
$
10,232
$
34,868
$
28,081
Support, maintenance and subscription
services
20,965
19,345
61,377
56,130
Professional services
8,896
6,437
24,854
20,013
Total net revenue
41,987
36,014
121,099
104,224
Cost of goods sold:
Products (inclusive of developed
technology amortization)
9,639
8,371
28,056
23,204
Support, maintenance and subscription
services
4,841
3,909
13,676
11,960
Professional services
6,443
5,087
18,071
14,775
Total cost of goods sold
20,923
17,367
59,803
49,939
Gross profit
21,064
18,647
61,296
54,285
Gross profit margin
50.2
%
51.8
%
50.6
%
52.1
%
Operating expenses:
Product development
11,285
10,059
32,127
27,299
Sales and marketing
4,918
5,217
14,307
14,363
General and administrative
6,084
5,865
17,998
17,047
Depreciation of fixed assets
854
651
1,774
1,933
Amortization of intangibles
608
675
1,900
1,892
Restructuring, severance and other
charges
11
58
438
948
Legal settlements, net
-
-
(125
)
126
Total operating expense
23,760
22,525
68,419
63,608
Operating loss
(2,696
)
(3,878
)
(7,123
)
(9,323
)
Other (income) expense:
Interest income
(92
)
(83
)
(287
)
(235
)
Interest expense
25
3
28
8
Other (income) expense, net
(142
)
68
50
293
Loss before taxes
(2,487
)
(3,866
)
(6,914
)
(9,389
)
Income tax expense
95
182
161
186
Net loss
$
(2,582
)
$
(4,048
)
$
(7,075
)
$
(9,575
)
Weighted average shares
outstanding
23,240
23,048
23,230
23,030
Loss per share - basic and
diluted:
Loss per share
$
(0.11
)
$
(0.18
)
$
(0.30
)
$
(0.42
)
AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
(In thousands, except share data)
December 31,
March 31,
2019
2019
ASSETS
Current assets:
Cash and cash equivalents
$
41,905
$
40,771
Accounts receivable, net of allowance for
doubtful accounts of $593 and $788, respectively
29,794
27,000
Contract assets
3,962
2,921
Inventories
1,856
2,044
Prepaid expenses and other current
assets
6,796
6,272
Total current assets
84,313
79,008
Property and equipment, net
14,849
15,838
Operating lease right-of-use assets
12,044
—
Goodwill
19,622
19,622
Intangible assets, net
8,404
8,438
Software development costs, net
25,135
34,567
Deferred income taxes, non-current
753
443
Other non-current assets
6,708
5,675
Total assets
$
171,828
$
163,591
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
10,454
$
4,718
Contract liabilities
35,374
38,669
Accrued liabilities
12,482
14,718
Operating lease liabilities, current
4,235
—
Finance lease obligations, current
24
22
Total current liabilities
62,569
58,127
Deferred income taxes, non-current
875
861
Operating lease liabilities,
non-current
9,800
—
Finance lease obligations, non-current
31
35
Other non-current liabilities
1,617
3,946
Shareholders' equity:
Common shares, without par value, at $0.30
stated value; 80,000,000 shares authorized; 31,606,831 shares
issued; and 23,656,891 and 23,501,450 shares outstanding at
December 31, 2019 and March 31, 2019, respectively
9,482
9,482
Treasury shares, 7,949,940 and 8,105,381
at December 31, 2019 and March 31, 2019, respectively
(2,387
)
(2,433
)
Capital in excess of stated value
4,094
781
Retained earnings
85,976
93,051
Accumulated other comprehensive loss
(229
)
(259
)
Total shareholders' equity
96,936
100,622
Total liabilities and shareholders'
equity
$
171,828
$
163,591
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
(In thousands)
December 31,
2019
2018
Operating activities
Net loss
$
(7,075
)
$
(9,575
)
Adjustments to reconcile net loss to
net cash provided by operating activities
Net restructuring, severance and other
charges
40
(268
)
Net legal settlements
(15
)
-
Loss on disposal of property &
equipment
(5
)
-
Depreciation
1,774
1,933
Amortization of intangibles
1,900
1,892
Amortization of developed technology
9,432
9,357
Deferred income taxes
(313
)
44
Share-based compensation
3,156
2,956
Change in cash surrender value of company
owned life insurance policies
11
12
Changes in operating assets and
liabilities
(3,632
)
(4,632
)
Net cash provided by operating
activities
5,273
1,719
Investing activities
Capital expenditures
(3,009
)
(1,610
)
Capitalized software development costs
—
(2,189
)
Investments in corporate-owned life
insurance policies
(26
)
(27
)
Net cash used in investing activities
(3,035
)
(3,826
)
Financing activities
Repurchase of common shares to satisfy
employee tax withholding
(1,053
)
(612
)
Principal payments under long-term
obligations
(18
)
(90
)
Net cash used in financing activities
(1,071
)
(702
)
Effect of exchange rate changes on
cash
(33
)
(139
)
Net increase (decrease) in cash and cash
equivalents
1,134
(2,948
)
Cash and cash equivalents at beginning of
period
40,771
39,943
Cash and cash equivalents at end of
period
$
41,905
$
36,995
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING ACTIVITIES:
Accrued capital expenditures
$
48
$
31
AGILYSYS, INC.
RECONCILIATION OF NET LOSS TO
ADJUSTED EBITDA AND ADJUSTED EARNINGS FROM OPERATIONS
(UNAUDITED)
Three Months Ended
Nine Months Ended
(In thousands)
December 31,
December 31,
2019
2018
2019
2018
Net loss
$
(2,582
)
$
(4,048
)
$
(7,075
)
$
(9,575
)
Income tax expense
95
182
161
186
Loss before taxes
(2,487
)
(3,866
)
(6,914
)
(9,389
)
Depreciation of fixed assets
854
651
1,774
1,933
Amortization of intangibles
608
675
1,900
1,892
Amortization of developed technology
3,129
3,347
9,432
9,357
Interest (income), net
(67
)
(80
)
(259
)
(227
)
EBITDA (a)
2,037
727
5,933
3,566
Share-based compensation
1,329
1,282
3,156
2,956
Restructuring, severance and other
charges
11
58
438
948
Other non-operating (income) expense
(142
)
68
50
293
Legal settlements, net
—
—
(125
)
126
Adjusted EBITDA (b)
3,235
2,135
9,452
7,889
Capitalized software development costs
—
—
—
(2,189
)
Adjusted EBITDA less capitalized
software development costs (c)
3,235
2,135
9,452
5,700
Capital expenditures
(1,069
)
(277
)
(3,009
)
(1,610
)
Adjusted Earnings from Operations
(d)
$
2,166
$
1,858
$
6,443
$
4,090
Product development (operating
expenses)
$
11,285
$
10,059
$
32,127
$
27,299
Capitalized software development costs
—
—
—
2,189
Product development plus capitalized
software development costs (e)
$
11,285
$
10,059
$
32,127
$
29,488
(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 LOSS TO
ADJUSTED NET INCOME FOR ADJUSTED EARNINGS PER SHARE
(UNAUDITED)
Three Months Ended
Nine Months Ended
(In thousands, except per share data)
December 31,
December 31,
2019
2018
2019
2018
Net loss
$
(2,582
)
$
(4,048
)
$
(7,075
)
$
(9,575
)
Amortization of intangibles
608
675
1,900
1,892
Amortization of developed technology
3,129
3,347
9,432
9,357
Share-based compensation
1,329
1,282
3,156
2,956
Restructuring, severance and other
charges
11
58
438
948
Legal settlements, net
-
-
(125
)
126
Income tax adjustments
(1,226
)
(1,294
)
(3,573
)
(3,688
)
Adjusted net income (a)
$
1,269
$
20
$
4,153
$
2,016
Basic weighted average shares
outstanding
23,240
23,048
23,230
23,030
Diluted weighted average shares
outstanding
23,910
23,508
23,834
23,418
Adjusted basic earnings per share
(b)
$
0.05
$
0.00
$
0.18
$
0.09
Adjusted diluted earnings per share
(b)
$
0.05
$
0.00
$
0.17
$
0.09
(a) Adjusted net income, a non-GAAP
financial measure, is defined as net income before amortization
expense (including amortization of developed technology),
share-based compensation, restructuring, severance and other
charges, and legal settlements, less the related income tax effect
of these adjustments as a 24.14% tax rate, the Company’s current
combined federal and state income statutory tax rate.
(b) Adjusted earnings per share, a
non-GAAP financial measure, is defined as Adjusted net income
divided by basic and diluted weighted average shares
outstanding.
AGILYSYS, INC.
RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(UNAUDITED)
Three Months Ended
Nine Months Ended
(In thousands)
December 31,
December 31,
2019
2018
2019
2018
Net cash provided by operating
activities
$
4,039
$
4,467
$
5,273
$
1,719
Capital expenditures
(1,069
)
(277
)
(3,009
)
(1,610
)
Capitalized software development costs
—
—
—
(2,189
)
Free cash flow (a)
$
2,970
$
4,190
$
2,264
$
(2,080
)
(a) Free cash flow, a non-GAAP financial
measure, is defined as net cash provided by (used in) operating
activities, less capital expenditures, less capitalized software
development costs
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200128005780/en/
Dave Wood VP, Corporate Strategy and Investor Relations
Agilysys, Inc. 770-810-7920 or investorrelations@agilysys.com
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