Record Recurring Revenue, Inclusive of 30%
Year Over Year Subscription Revenue Growth
Fiscal 2020 Net Revenue Increases 14% to
Record $160.8 Million, Adjusted EBITDA Rises 27% to $13.0
Million
Cash Balance Increases to $46.7 Million at
March 31, 2020
Agilysys, Inc. (Nasdaq: AGYS), a global provider of
next-generation hospitality software solutions and services, today
reported operating results for its fiscal 2020 fourth quarter and
full year ended March 31, 2020.
Summary of Fiscal 2020 Fourth Quarter Financial
Results
- Total net revenue was $39.7 million, compared to total net
revenue of $36.6 million in the comparable prior-year period.
- Recurring revenues (which are comprised of support, maintenance
and subscription services) were a record $22.3 million, or 56% of
total net revenue, compared to $19.4 million, or 53% of total net
revenue, for the same period in fiscal 2020. Subscription revenues
increased 30% year over year and comprised 39% of total recurring
revenues, compared to 34% of total recurring revenues in the fourth
quarter of fiscal 2019.
- Gross margin was 49.6% in the fiscal 2020 fourth quarter,
compared to 53.5% in the comparable prior-year period.
- Net loss in the fiscal 2020 fourth quarter was $(27.0) million,
or $(1.16) per diluted share, inclusive of one-time capitalized
software related impairment charges, compared to a net loss of
$(3.6) million, or $(0.16) per diluted share, in the comparable
prior-year period.
- Adjusted EBITDA (non-GAAP) was $3.6 million, compared to $2.4
million in the comparable prior-year period (see reconciliation
below).
- Adjusted diluted EPS (non-GAAP) was $0.05 per share compared to
$0.03 per share in the comparable prior-year period.
- Free cash flow (non-GAAP) in the fiscal 2020 fourth quarter was
$4.9 million, compared to free cash flow of $3.9 million in the
fiscal 2019 fourth quarter (see reconciliation below). Ending cash
balance was $46.7 million, compared to ending cash balance of $40.8
million in the comparable prior-year period.
Ramesh Srinivasan, President and CEO of Agilysys, commented, “In
spite of the significant pandemic related business challenges
during the month of March, fiscal year 2020 was a major positive
business momentum shift year for us. Beginning with three
consecutive quarters of record revenue levels, Q4 fiscal 2020 was
on pace to be a very successful sales quarter, and another record
revenue quarter, prior to a disappointing ending shaped by
COVID-19. As a result, we ended fiscal 2020 with full year revenue
growth of 14.1%, compared to our expectation of 16% growth. The
record $160.8 million fiscal 2020 revenue included an $8.2 million
year-over-year increase in full year recurring revenue, which was
the largest single year improvement in annual recurring revenue in
six years signifying a successful year with respect to customer
retention and business expansion. The increase in recurring revenue
included the second consecutive year with a 24% rise in annual
subscription revenue. In addition, the fiscal year-end cash balance
grew to $46.7 million, our best cash balance position at the end of
a quarter since March 2017.
“We continue to be intensely focused on securing the safety and
health of our employees, customers and the communities we serve in.
We expect the current April-June fiscal 2021 first quarter to be
challenging with a possible 35% year-over-year decline in revenue
due to the general anticipated business downturn and as a result of
various one-time recurring revenue related and other concessions we
have given to customers to help them during this time of need.
Providing as much help as possible to customers has been the right
thing to do under the circumstances. Given all the cost reduction
steps currently in place, even with the possible revenue reductions
we face in the first quarter of fiscal 2021, we expect Q1 fiscal
2021 Adjusted EBITDA of approximately break-even for the
quarter.
“Thanks to the major increase in the pace of product innovation
during the past couple of years, powered by an R&D team which
has tripled in resource strength since January calendar 2017, we
are well positioned to serve the increased and changing technology
demands of the hospitality industry. We are seeing good sales
activity during the past few weeks, with an increased need for
technology solutions which will help secure the safety and comfort
of the guests of our customers. We have every reason to believe
that our pace of product innovation coming into the crisis and the
strategic decision to keep up R&D velocity through this time,
will vastly improve our competitive positioning once the industry
begins to recover. We expect many of our newer products to play a
major role in the recovery phase and beyond. We expect our business
levels to improve from a low point in fiscal 2021 Q1, but we are at
this time unable to estimate how steep the recovery will be.
“In order to strengthen our balance sheet and allow us financial
flexibility to execute against our R&D and customer service
focus strategies, we recently announced a $35 million convertible
investment from MAK Capital. Michael Kaufman, the Chairman of our
Board of Directors, is the Chief Executive Officer of MAK Capital.
The confidence one of our main shareholders, who knows our business
well, has placed in us with this recent investment is a good
indicator of the business potential we see in front of us. While
the short term remains uncertain, we remain positive on our medium
and long-term growth prospects.”
Fiscal 2021 Outlook
Agilysys is closely monitoring the impact of COVID-19 on the
hospitality market with our primary focus being the safety of our
employees and customers as we manage through these unprecedented
times. Given the sudden impact of COVID-19 and the rapidly changing
environment, we are not releasing full fiscal year 2021 guidance at
this time. However, we expect the global pandemic to have an impact
on our revenue in the short term. We are expecting Q1 fiscal 2021
revenue to decrease over the prior year by as much as 35% which we
expect would result in Q1 fiscal 2021 Adjusted EBITDA of
approximately break-even for the quarter.
Tony Pritchett, Chief Financial Officer, commented, “While we
came up short of our revenue guidance for the full fiscal year,
annual revenue growth of 14.1%, nearly $20 million, is a metric we
are proud of. This caps two years of double-digit percentage top
line revenue growth, the first time we have accomplished two
sequential years of such growth since we transformed Agilysys into
the company it is today back in July 2013. On top of revenue
growth, full fiscal 2020 Adjusted EBITDA was $13.0 million, an
increase of 27% over fiscal 2019 Adjusted EBITDA of $10.3 million;
or a 61% improvement over prior year if the $2.2 million benefit of
capitalized software costs in fiscal year 2019 is removed.
“The need to take an impairment charge on most of the previously
capitalized software development costs remaining on our balance
sheet was based on current economic conditions which make it
difficult to project future sales and revenue accurately. It does
not reflect a shift in business strategy. It will have no impact on
our continuing product and customer service investment plans.
“Our recurring revenue and the mission critical nature of our
products, combined with the prudent management of our cost
structure, has given us a strong foundation and conviction in our
ability to navigate through these tough times. Although we are in a
period of great uncertainty, we have taken necessary cost actions,
strengthened our balance sheet with additional funding, and remain
focused on our customers and products. We are well positioned
financially, for the short and long-term, and remain optimistic
about our opportunity for long-term success. We are navigating
through this crisis from a position of relative strength and expect
to come out of it even stronger in terms of competitive
differentiation.”
2020 Fourth Quarter Conference Call and Webcast
Agilysys is hosting a conference call and webcast today, May 21,
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 9374537. 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 revenue and
Adjusted EBITDA guidance for the first quarter and statements we
make regarding our ability to improve our competitive positioning,
the role to be played by our newer products in the COVID-19
recovery phase and beyond, and improvement of our business levels
over time once the industry begins to recover.
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, the risk that the $35 million convertible
investment offering may be delayed or may not occur due to the
failure to satisfy customary closing conditions related to the
offering; the effect of the COVID-19 pandemic on our business and
the success of any measures we have taken or may take in the future
in response thereto; 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 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 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, and one-time charges
including restructuring, severance and other charges, impairments
and legal settlements, less the related income tax effect of these
adjustments, as 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, sports and entertainment, and healthcare. 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, drive revenue growth, increase operational
efficiencies and support social distancing. Agilysys operates
across North America, Europe, Asia-Pacific, and India with
headquarters located in Alpharetta, GA. For more information visit
Agilysys.com.
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
Three Months Ended
Twelve Months Ended
March 31,
March 31,
2020
2019
2020
2019
Net revenue:
Products
$
9,362
$
10,922
$
44,230
$
39,003
Support, maintenance and subscription
services
22,303
19,366
83,680
75,496
Professional services
7,994
6,330
32,847
26,343
Total net revenue
39,659
36,618
160,757
140,842
Cost of goods sold:
Products (inclusive of developed
technology amortization)
8,371
8,608
36,427
31,811
Support, maintenance and subscription
services
5,572
3,935
19,248
15,895
Professional services
6,059
4,480
24,130
19,256
Total cost of goods sold
20,002
17,023
79,805
66,962
Gross profit
19,657
19,595
80,952
73,880
Gross profit margin
49.6
%
53.5
%
50.4
%
52.5
%
Operating expenses:
Product development
9,332
10,525
41,463
37,817
Sales and marketing
5,555
5,282
19,864
19,646
General and administrative
6,376
6,061
24,374
23,118
Depreciation of fixed assets
801
571
2,574
2,504
Amortization of intangibles
641
675
2,541
2,567
Impairments
23,740
—
23,740
—
Restructuring, severance and other
charges
150
222
582
1,168
Legal settlements, net
—
15
(125
)
141
Total operating expense
46,595
23,351
115,013
86,961
Operating loss
(26,938
)
(3,756
)
(34,061
)
(13,081
)
Other (income) expense:
Interest income
(93
)
(104
)
(380
)
(339
)
Interest expense
5
2
9
10
Other expense (income), net
102
(100
)
176
191
Loss before taxes
(26,952
)
(3,554
)
(33,866
)
(12,943
)
Income tax expense
40
35
201
221
Net loss
$
(26,992
)
$
(3,589
)
$
(34,067
)
$
(13,164
)
Weighted average shares
outstanding
23,241
23,055
23,233
23,037
Loss per share - basic and
diluted:
Loss per share
$
(1.16
)
$
(0.16
)
$
(1.47
)
$
(0.57
)
AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
(In thousands, except share data)
March 31,
March 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
46,653
$
40,771
Accounts receivable, net of allowance for
doubtful accounts of $1,634
and $788, respectively
35,869
27,000
Contract assets
2,125
2,921
Inventories
3,887
2,044
Prepaid expenses and other current
assets
4,874
6,272
Total current assets
93,408
79,008
Property and equipment, net
12,230
15,838
Operating lease right-of-use assets
13,829
—
Goodwill
19,622
19,622
Intangible assets, net
8,400
8,438
Software development costs, net
—
34,567
Deferred income taxes, non-current
764
443
Other non-current assets
6,309
5,675
Total assets
$
154,562
$
163,591
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
13,403
$
4,718
Contract liabilities
42,244
38,669
Accrued liabilities
9,033
14,406
Operating lease liabilities, current
4,719
—
Finance lease obligations, current
24
22
Total current liabilities
69,423
57,815
Deferred income taxes, non-current
880
861
Operating lease liabilities,
non-current
10,617
—
Finance lease obligations, non-current
25
35
Other non-current liabilities
1,860
4,258
Shareholders' equity:
Common shares, without par value, at $0.30
stated value; 80,000,000
shares authorized; 31,606,831 shares
issued; and 23,609,398
and 23,501,193 shares outstanding at March
31, 2020
and March 31, 2019, respectively
9,482
9,482
Treasury shares, 7,997,433 and 8,105,638
at March 31, 2020
and March 31, 2019, respectively
(2,401
)
(2,433
)
Capital in excess of stated value
5,491
781
Retained earnings
58,984
93,051
Accumulated other comprehensive income
(loss)
201
(259
)
Total shareholders' equity
71,757
100,622
Total liabilities and shareholders'
equity
$
154,562
$
163,591
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(UNAUDITED)
Year Ended
(In thousands)
March 31,
2020
2019
Operating activities
Net loss
$
(34,067
)
$
(13,164
)
Adjustments to reconcile net loss to
net cash provided by operating activities
Impairments
23,740
—
(Gain) loss on disposal of property &
equipment
(5
)
17
Depreciation
2,574
2,504
Amortization of intangibles
2,541
2,567
Amortization of developed technology
12,561
12,602
Deferred income taxes
(356
)
309
Share-based compensation
5,205
4,376
Changes in operating assets and
liabilities:
Accounts receivable
(8,974
)
(7,536
)
Contract assets
794
1,662
Inventory
(1,830
)
(50
)
Prepaids and other current assets
1,545
(1,158
)
Accounts payable
8,585
(3,512
)
Contract liabilities
3,563
4,845
Accrued liabilities
(4,227
)
5,029
Income taxes payable, net
(153
)
(564
)
Other changes, net
(921
)
(686
)
Net cash provided by operating
activities
10,575
7,241
Investing activities
Capital expenditures
(3,420
)
(3,318
)
Capitalized software development costs
—
(2,189
)
Investments in corporate-owned life
insurance policies
(27
)
(27
)
Net cash used in investing activities
(3,447
)
(5,534
)
Financing activities
Repurchase of common shares to satisfy
employee tax withholding
(1,092
)
(647
)
Principal payments under long-term
obligations
(24
)
(120
)
Net cash used in financing activities
(1,116
)
(767
)
Effect of exchange rate changes on
cash
(130
)
(112
)
Net increase in cash and cash
equivalents
5,882
828
Cash and cash equivalents at beginning of
period
40,771
39,943
Cash and cash equivalents at end of
period
$
46,653
$
40,771
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING ACTIVITIES:
Accrued capital expenditures
187
56
Leasehold improvements acquired under
operating lease arrangement
—
62
AGILYSYS, INC.
RECONCILIATION OF NET LOSS TO
ADJUSTED EBITDA AND ADJUSTED EARNINGS FROM OPERATIONS
(UNAUDITED)
Three Months Ended
Year Ended
(In thousands)
March 31,
March 31,
2020
2019
2020
2019
Net loss
$
(26,992
)
$
(3,589
)
$
(34,067
)
$
(13,164
)
Income tax expense
40
35
201
221
Loss before taxes
(26,952
)
(3,554
)
(33,866
)
(12,943
)
Depreciation of fixed assets
801
571
2,574
2,504
Amortization of intangibles
641
675
2,541
2,567
Amortization of developed technology
3,129
3,245
12,561
12,602
Interest (income), net
(88
)
(102
)
(371
)
(329
)
EBITDA (a)
(22,469
)
835
(16,561
)
4,401
Share-based compensation
2,049
1,420
5,205
4,376
Restructuring, severance and other
charges
150
222
582
1,168
Impairments
23,740
—
23,740
—
Other non-operating expense (income)
102
(100
)
176
191
Legal settlements, net
—
15
(125
)
141
Adjusted EBITDA (b)
3,572
2,392
13,017
10,277
Capitalized software development costs
—
—
—
(2,189
)
Adjusted EBITDA less capitalized
software development costs (c)
3,572
2,392
13,017
8,088
Capital expenditures
(411
)
(1,708
)
(3,420
)
(3,318
)
Adjusted Earnings from Operations
(d)
$
3,161
$
684
$
9,597
$
4,770
Product development (operating
expenses)
$
9,332
$
10,525
$
41,463
$
37,817
Capitalized software development costs
—
—
—
2,189
Product development plus capitalized
software development costs (e)
$
9,332
$
10,525
$
41,463
$
40,006
(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) impairments, 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
Year Ended
(In thousands, except per share data)
March 31,
March 31,
2020
2019
2020
2019
Net loss
$
(26,992
)
$
(3,589
)
$
(34,067
)
$
(13,164
)
Amortization of intangibles
641
675
2,541
2,567
Amortization of developed technology
3,129
3,245
12,561
12,602
Share-based compensation
2,049
1,420
5,205
4,376
Restructuring, severance and other
charges
150
222
582
1,168
Impairments
23,740
—
23,740
—
Legal settlements, net
—
15
(125
)
141
Income tax adjustments
(1,405
)
(1,290
)
(4,904
)
(4,720
)
Adjusted net income (a)
$
1,312
$
698
$
5,533
$
2,970
Basic weighted average shares
outstanding
23,241
23,055
23,233
23,037
Diluted weighted average shares
outstanding
23,927
23,619
23,821
23,462
Adjusted basic earnings per share
(b)
$
0.06
$
0.03
$
0.24
$
0.13
Adjusted diluted earnings per share
(b)
$
0.05
$
0.03
$
0.23
$
0.13
(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, and one-time charges including
restructuring, severance and other charges, impairments and legal
settlements, less the related income tax effect of these
adjustments, as applicable, at a 24% tax rate, the Company’s
current combined federal and state income statutory tax rate. No
income tax effect applies to one-time charges when a valuation
allowance offsets their related deferred tax assets
(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
Year Ended
(In thousands)
March 31,
March 31,
2020
2019
2020
2019
Net cash provided by operating
activities
$
5,302
$
5,583
$
10,575
$
7,241
Capital expenditures
(411
)
(1,708
)
(3,420
)
(3,318
)
Capitalized software development costs
—
—
—
(2,189
)
Free cash flow (a)
$
4,891
$
3,875
$
7,155
$
1,734
(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/20200521005723/en/
Dave Wood VP, Corporate Strategy and Investor Relations
Agilysys, Inc. 770-810-7920 or investorrelations@agilysys.com
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