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Agilysys Reports Fiscal 2021 Third Quarter Revenue of $36.7M

Reports Record Recurring Revenue of $22.8M Inclusive of Subscription Revenue Growth of 18%

Reports Positive Adjusted EBITDA of $7.6M

Quarterly Free Cash Flow of $7.8M and Cash Balance Increase of $6.9M to $92.6M

ALPHARETTA, Ga.–(BUSINESS WIRE)–Agilysys, Inc. (Nasdaq: AGYS), a global provider of next-generation hospitality software solutions and services, today reported operating results for its fiscal 2021 third quarter and period ended December 31, 2020.

Summary of Fiscal 2021 Third Quarter Financial Results

  • Total net revenue was $36.7 million, compared to total net revenue of $42.0 million in the comparable prior-year period for a 13% decrease in revenue.
  • Recurring revenues (which are comprised of support, maintenance and subscription services) were $22.8 million, or 62.3% of total net revenue, compared to $21.0 million, or 49.9% of total net revenue, for the same period in fiscal 2020. Subscription revenues increased 18.1% year over year and comprised 40.9% of total recurring revenues, compared to 37.7% of total recurring revenues in the third quarter of fiscal 2020.
  • Gross margin was 66.0% in the fiscal 2021 third quarter, compared to 50.2% in the comparable prior-year period.
  • Net (loss) attributable to common shareholders in the fiscal 2021 third quarter was $(2.5) million, or $(0.11) per diluted share compared to a net loss of $(2.6) million, or $(0.11) per diluted share, in the comparable prior-year period.
  • Adjusted EBITDA (non-GAAP) was $7.6 million, compared to $3.2 million in the comparable prior-year period (see reconciliation below).
  • Adjusted diluted EPS (non-GAAP) was $0.23 per share compared to $0.05 per share in the comparable prior-year period.
  • Free cash flow (non-GAAP) in the fiscal 2021 third quarter was $7.8 million, compared to free cash flow of $3.0 million in the fiscal 2020 third quarter (see reconciliation below). Ending cash balance was $92.6 million, compared to ending cash balance of $46.7 million as of fiscal 2020 year-end.

Ramesh Srinivasan, President and CEO of Agilysys, commented, “We are pleased with our continuing good progress in improving various business fundamentals. Simultaneously, we are setting ourselves up well for renewed growth when the hospitality industry shifts to the anticipated re-opening and recovery phase, especially with respect to increasing the pace of product innovation and levels of customer service. Our balance sheet strengthened further during the quarter with strong cash collections.”

“The current hospitality industry business headwinds caused by the pandemic remain challenging. There is still significant uncertainty in the industry about when the expected recovery will become a reality. We expect the business environment to remain unchanged during the immediate future. Q4 fiscal 2021 revenue is expected to remain sequentially flat compared to Q3, with Adjusted EBITDA reducing to $7.0M, mainly due to further increases in R&D resource strength. We should be discontinuing the current sequential quarter guidance cadence we adopted during fiscal 2021 due to the extraordinary business circumstances and return to our annual guidance practice beginning fiscal 2022.”

“During the past 12 months we have significantly increased our range of software products which are cloud native and available to be implemented on a subscription recurring revenue basis. That should help us meet the increased and changing technology demands of the industry on the other side of this pandemic. We remain bullish about the future of the hospitality industry and our improving ability to serve it well.”

Fiscal 2021 Outlook

Agilysys continues to monitor the impact of COVID-19 on the hospitality industry with our primary focus being the safety of our employees and customers as we manage through these unprecedented times. We are expecting Q4 fiscal 2021 revenue to remain sequentially flat over Q3 fiscal 2021 results with an Adjusted EBITDA of approximately $7.0 million for the same period. We expect to see slightly decreased Adjusted EBITDA levels on flat revenue due to continued hiring in R&D, which will bring some additional costs into the business during the fourth quarter.

Dave Wood, Chief Financial Officer, commented, “The markets we serve remain largely unchanged with lingering uncertainty on timing and speed of the recovery in the hospitality industry. Despite the continued challenges, we remain pleased with our sustainable profitability and continued focus on our financial strength and the ability to execute on our long-term strategic plan.”

2021 Third Quarter Conference Call and Webcast

Agilysys is hosting a conference call and webcast today, January 26, 2021, 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 1973419. 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 fourth quarter, and statements we make regarding the timing of the hospitality industry’s recovery after the pandemic, and our ability to meet increased and changing technology demands on the other side of the pandemic.

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 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 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, convertible preferred stock issuance costs, and one-time charges including 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 cloud-native SaaS and on-premise guest-centric technology solutions for gaming, hotels, resorts and cruise, corporate foodservice management, restaurants, universities, healthcare, and sports and entertainment. Agilysys offers the most comprehensive software solutions in the industry, including point-of-sale (POS), property management (PMS), inventory and procurement, payments, and related applications, to manage the entire guest journey. Agilysys is known for its leadership in hospitality, its broad product offerings and its customer-centric service. Some of the largest hospitality companies around the world use Agilysys solutions to help improve guest loyalty, drive revenue growth and increase operational efficiencies. Agilysys operates across the Americas, Europe, the Middle East, Africa, 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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

7,599

 

 

$

12,126

 

 

$

19,396

 

 

$

34,868

 

Support, maintenance and subscription services

 

 

22,846

 

 

 

20,965

 

 

 

65,647

 

 

 

61,377

 

Professional services

 

 

6,230

 

 

 

8,896

 

 

 

15,797

 

 

 

24,854

 

Total net revenue

 

 

36,675

 

 

 

41,987

 

 

 

100,840

 

 

 

121,099

 

Cost of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products (inclusive of developed technology amortization)

 

 

3,660

 

 

 

9,639

 

 

 

9,625

 

 

 

28,056

 

Support, maintenance and subscription services

 

 

4,655

 

 

 

4,841

 

 

 

13,515

 

 

 

13,676

 

Professional services

 

 

4,164

 

 

 

6,443

 

 

 

11,802

 

 

 

18,071

 

Total cost of goods sold

 

 

12,479

 

 

 

20,923

 

 

 

34,942

 

 

 

59,803

 

Gross profit

 

 

24,196

 

 

 

21,064

 

 

 

65,898

 

 

 

61,296

 

Gross profit margin

 

 

66.0

%

 

 

50.2

%

 

 

65.3

%

 

 

50.6

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product development

 

 

12,376

 

 

 

11,285

 

 

 

28,900

 

 

 

32,127

 

Sales and marketing

 

 

3,327

 

 

 

4,918

 

 

 

8,278

 

 

 

14,307

 

General and administrative

 

 

7,509

 

 

 

6,084

 

 

 

18,446

 

 

 

17,998

 

Depreciation of fixed assets

 

 

722

 

 

 

854

 

 

 

2,160

 

 

 

1,774

 

Amortization of intangibles

 

 

521

 

 

 

608

 

 

 

1,490

 

 

 

1,900

 

Severance and other charges

 

 

1,552

 

 

 

11

 

 

 

2,762

 

 

 

438

 

Legal settlements, net

 

 

 

 

 

 

 

 

50

 

 

 

(125

)

Total operating expense

 

 

26,007

 

 

 

23,760

 

 

 

62,086

 

 

 

68,419

 

Operating income (loss)

 

 

(1,811

)

 

 

(2,696

)

 

 

3,812

 

 

 

(7,123

)

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(27

)

 

 

(92

)

 

 

(76

)

 

 

(287

)

Interest expense

 

 

9

 

 

 

25

 

 

 

13

 

 

 

28

 

Other expense (income), net

 

 

95

 

 

 

(142

)

 

 

284

 

 

 

50

 

(Loss) Income before taxes

 

 

(1,888

)

 

 

(2,487

)

 

 

3,591

 

 

 

(6,914

)

Income tax expense

 

 

182

 

 

 

95

 

 

 

311

 

 

 

161

 

Net (loss) income

 

$

(2,070

)

 

$

(2,582

)

 

$

3,280

 

 

$

(7,075

)

Series A convertible preferred stock issuance costs

 

 

 

 

 

 

 

 

(1,031

)

 

 

 

Series A convertible preferred stock dividends

 

 

(459

)

 

 

 

 

 

(1,117

)

 

 

 

Net (loss) income attributable to common shareholders

 

$

(2,529

)

 

$

(2,582

)

 

$

1,132

 

 

$

(7,075

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

23,429

 

 

 

23,240

 

 

 

23,419

 

 

 

23,230

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share – basic:

 

$

(0.11

)

 

$

(0.11

)

 

$

0.05

 

 

$

(0.30

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – diluted

 

 

23,429

 

 

 

23,240

 

 

 

23,903

 

 

 

23,230

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share – diluted:

 

$

(0.11

)

 

$

(0.11

)

 

$

0.05

 

 

$

(0.30

)

 

 

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In thousands, except share data)

 

December 31,

 

 

March 31,

 

 

 

2020 Unaudited

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

92,608

 

 

$

46,653

 

Accounts receivable, net of allowance for expected credit losses

 

 

 

 

 

 

 

 

of $1,334 and for doubtful accounts of $1,634, respectively

30,940

35,869

Contract assets

 

 

2,744

 

 

 

2,125

 

Inventories

 

 

1,322

 

 

 

3,887

 

Prepaid expenses and other current assets

 

 

4,338

 

 

 

4,874

 

Total current assets

 

 

131,952

 

 

 

93,408

 

Property and equipment, net

 

 

9,519

 

 

 

12,230

 

Operating lease right-of-use assets

 

 

12,600

 

 

 

13,829

 

Goodwill

 

 

19,622

 

 

 

19,622

 

Intangible assets, net

 

 

8,400

 

 

 

8,400

 

Deferred income taxes, non-current

 

 

1,234

 

 

 

764

 

Other non-current assets

 

 

5,874

 

 

 

6,309

 

Total assets

 

$

189,201

 

 

$

154,562

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

5,435

 

 

$

13,403

 

Contract liabilities

 

 

39,360

 

 

 

42,244

 

Accrued liabilities

 

 

8,853

 

 

 

9,033

 

Operating lease liabilities, current

 

 

4,755

 

 

 

4,719

 

Finance lease obligations, current

 

 

22

 

 

 

24

 

Total current liabilities

 

 

58,425

 

 

 

69,423

 

Deferred income taxes, non-current

 

 

894

 

 

 

880

 

Operating lease liabilities, non-current

 

 

9,353

 

 

 

10,617

 

Finance lease obligations, non-current

 

 

10

 

 

 

25

 

Other non-current liabilities

 

 

3,740

 

 

 

1,860

 

Series A convertible preferred stock, no par value

 

 

35,000

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common shares, without par value, at $0.30 stated value; 80,000,000

 

 

 

 

 

 

 

 

shares authorized; 31,606,831 shares issued; and 23,637,552

and 23,609,398 shares outstanding at December 31, 2020

and March 31, 2020, respectively

9,482

9,482

Treasury shares, 7,969,279 and 7,997,433 at December 31, 2020

and March 31, 2020, respectively

 

 

(2,391

)

 

 

(2,401

)

Capital in excess of stated value

 

 

14,584

 

 

 

5,491

 

Retained earnings

 

 

60,116

 

 

 

58,984

 

Accumulated other comprehensive income

 

 

(12

)

 

 

201

 

Total shareholders’ equity

 

 

81,779

 

 

 

71,757

 

Total liabilities and shareholders’ equity

 

$

189,201

 

 

$

154,562

 

 

 

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Nine Months Ended

 

(In thousands)

 

December 31,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

3,280

 

 

$

(7,075

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation

 

 

2,160

 

 

 

1,774

 

Amortization of intangibles

 

 

1,490

 

 

 

1,900

 

Amortization of developed technology

 

 

 

 

 

9,432

 

Deferred income taxes

 

 

(499

)

 

 

(313

)

Share-based compensation

 

 

9,312

 

 

 

3,156

 

Changes in operating assets and liabilities

 

 

(659

)

 

 

(3,601

)

Net cash provided by operating activities

 

 

15,084

 

 

 

5,273

 

Investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,076

)

 

 

(3,009

)

Additional investments in corporate-owned life insurance policies

 

 

(2

)

 

 

(26

)

Net cash used in investing activities

 

 

(1,078

)

 

 

(3,035

)

Financing activities

 

 

 

 

 

 

 

 

Repurchase of common shares to satisfy employee tax withholding

 

 

(1,069

)

 

 

(1,053

)

Series A convertible preferred stock issuance proceeds, net of issuance costs

 

 

33,969

 

 

 

 

Payment of preferred stock dividends

 

 

(1,117

)

 

 

 

Principal payments under long-term obligations

 

 

(18

)

 

 

(18

)

Net cash provided by (used in) financing activities

 

 

31,765

 

 

 

(1,071

)

Effect of exchange rate changes on cash

 

 

184

 

 

 

(33

)

Net increase in cash and cash equivalents

 

 

45,955

 

 

 

1,134

 

Cash and cash equivalents at beginning of period

 

 

46,653

 

 

 

40,771

 

Cash and cash equivalents at end of period

 

$

92,608

 

 

$

41,905

 

 

 

AGILYSYS, INC.

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(In thousands)

 

December 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net (loss) income

 

$

(2,070

)

 

$

(2,582

)

 

$

3,280

 

 

$

(7,075

)

Income tax expense

 

 

182

 

 

 

95

 

 

 

311

 

 

 

161

 

(Loss) Income before taxes

 

 

(1,888

)

 

 

(2,487

)

 

 

3,591

 

 

 

(6,914

)

Depreciation of fixed assets

 

 

722

 

 

 

854

 

 

 

2,160

 

 

 

1,774

 

Amortization of intangibles

 

 

521

 

 

 

608

 

 

 

1,490

 

 

 

1,900

 

Amortization of developed technology

 

 

 

 

 

3,129

 

 

 

 

 

 

9,432

 

Interest (income), net

 

 

(18

)

 

 

(67

)

 

 

(63

)

 

 

(259

)

EBITDA (a)

 

 

(663

)

 

 

2,037

 

 

 

7,178

 

 

 

5,933

 

Share-based compensation

 

 

6,630

 

 

 

1,329

 

 

 

9,312

 

 

 

3,156

 

Severance and other charges

 

 

1,552

 

 

 

11

 

 

 

2,762

 

 

 

438

 

Other non-operating expense

 

 

95

 

 

 

(142

)

 

 

284

 

 

 

50

 

Legal settlements

 

 

 

 

 

 

 

 

50

 

 

 

(125

)

Adjusted EBITDA (b)

 

$

7,614

 

 

$

3,235

 

 

$

19,586

 

 

$

9,452

 

(a) EBITDA, a non-GAAP financial measure, is defined as net income (loss) before income taxes, interest expense (net of interest income), depreciation and amortization

(b) Adjusted EBITDA, a non-GAAP financial measure, is defined as net income (loss) 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) severance and other charges, iii) impairments, iv) share-based compensation, and v) other non-operating (income) expense

 

AGILYSYS, INC.

RECONCILIATION OF NET INCOME (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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net (loss) income attributable to common shareholders

 

$

(2,529

)

 

$

(2,582

)

 

$

1,132

 

 

$

(7,075

)

Amortization of intangibles

 

 

521

 

 

 

608

 

 

 

1,490

 

 

 

1,900

 

Amortization of developed technology

 

 

 

 

 

3,129

 

 

 

 

 

 

9,432

 

Share-based compensation

 

 

6,630

 

 

 

1,329

 

 

 

9,312

 

 

 

3,156

 

Series A convertible preferred stock issuance costs

 

 

 

 

 

 

 

 

1,031

 

 

 

 

Severance and other charges

 

 

1,552

 

 

 

11

 

 

 

2,762

 

 

 

438

 

Legal settlements, net

 

 

 

 

 

 

 

 

50

 

 

 

(125

)

Income tax adjustments

 

 

(640

)

 

 

(1,223

)

 

 

(1,522

)

 

 

(3,499

)

Adjusted net income (a)

 

$

5,534

 

 

$

1,272

 

 

$

14,255

 

 

$

4,227

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

23,429

 

 

 

23,240

 

 

 

23,419

 

 

 

23,230

 

Diluted weighted average shares outstanding

 

 

23,966

 

 

 

23,839

 

 

 

23,903

 

 

 

23,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted basic earnings per share (b)

 

$

0.24

 

 

$

0.05

 

 

$

0.61

 

 

$

0.18

 

Adjusted diluted earnings per share (b)

 

$

0.23

 

 

$

0.05

 

 

$

0.60

 

 

$

0.18

 

(a) Adjusted net income, a non-GAAP financial measure, is defined as net income (loss) attributable to common shareholders before amortization expense (including amortization of developed technology), share-based compensation, and one-time charges including severance and other charges, impairments and legal settlements, less the related income tax effect of these adjustments, as applicable, at 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 (loss) 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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net cash provided by operating activities

 

$

8,442

 

 

$

4,039

 

 

$

15,084

 

 

$

5,273

 

Capital expenditures

 

 

(605

)

 

 

(1,069

)

 

 

(1,076

)

 

 

(3,009

)

Free cash flow (a)

 

$

7,837

 

 

$

2,970

 

 

$

14,008

 

 

$

2,264

 

(a) Free cash flow, a non-GAAP financial measure, is defined as net cash provided by operating activities, less capital expenditures

Contacts

Investor Contact:
Jessica Hennessy

Sr Manager Corporate Strategy & Investor Relations

Agilysys, Inc.

770-810-6116 or investorrelations@agilysys.com

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