[November 01, 2017] |
|
Agilysys Reports Fiscal 2018 Second Quarter Revenue of $30.1 Million
Agilysys, Inc. (Nasdaq: AGYS), a global provider of
next-generation hospitality software solutions and services, today
reported operating results for its fiscal 2018 second quarter ended
September 30, 2017.
Summary of Fiscal 2018 Second Quarter Financial Results
-
Total net revenue was $30.1 million, compared to total net revenue of
$32.7 million in the comparable prior-year period.
-
Recurring revenues (which are comprised of support, maintenance and
subscription services) were $17.1 million, or 57% of total net
revenue, compared to $15.9 million, or 49% of total net revenue, for
the same period in fiscal 2017. SaaS revenues increased 29% year over
year and comprised 29% of total recurring revenues, compared to 24% of
total recurring revenues in the second quarter of fiscal 2017.
-
Gross margin was 51.0% in the fiscal 2018 second quarter, compared to
48.6% in the prior-year period. Gross margin for the second quarter of
fiscal 2018 was impacted by lower gross profit margin for professional
services revenue, which resulted from lower quarterly professional
services revenues on a higher cost structure following a recent
alignment toward enabling the Company to provide more customer-centric
services going forward.
-
Net loss in the fiscal 2018 second quarter was $(3.2) million, or
$(0.14) per diluted share, compared to a net loss of $(2.4) million,
or $(0.11) per diluted share, in the prior-year period.
-
Adjusted EBITDA (non-GAAP) was $2.3 million, compared to Adjusted
EBITDA of $1.3 million in the same period last year (see
reconciliation below).
-
Adjusted earnings from operations (non-GAAP) was $(1.2) million,
compared to Adjusted earnings from operations of $(3.1) million in the
prior-year period (see reconciliation below).
Ramesh Srinivasan, President and CEO of Agilysys, commented,
"Notwithstanding revenue softness in the quarter, primarily due to lower
hardware revenue, we continue to make steady progress with our
profitability initiatives. This progress is reflected in fiscal 2018
second quarter adjusted EBITDA and adjusted earnings from operations
improving 77% and 63%, respectively, over the comparable prior-year
period. We also continue to benefit from growth in our maintenance and
SaaS recurring revenue streams. While making good progress with all the
operational efficiency improvement initiatives we began implementing
earlier this year, we are also prudently investing in various areas of
the business to drive revenue growth. For example, we have increased our
development engineering capacity approximately 50% over the past six
months. We have established and have made good progress with
comprehensive development roadmaps for our new rGuest line of products
and for our various well-established products.
"Even with our reduced full year revenue guidance, as a result of the
progress we have made against our strategic operating plan, we remain
confident that we will achieve positive adjusted earnings from
operations during the fiscal 2018 fourth quarter, in accordance with the
profitability guidance we provided earlier this year. In addition, we
expect to end this fiscal year with a cash balance that is at or
slightly above current levels. Going forward, we expect to benefit from
our ongoing efforts to transform Agilysys into a customer centric and
engineering driven business and from new sales and marketing initiatives
we have recently implemented, to drive profitable revenue growth."
Summary of Fiscal 2018 Six Months Financial Results
-
Total net revenue was $64.0 million, compared to total net revenue of
$63.6 million in the comparable prior-year period.
-
Recurring revenues (which are comprised of support, maintenance and
subscription services) were $33.8 million, or 53% of total net
revenue, compared to $30.9 million, or 48% of total net revenue, in
the first six months of fiscal 2017. SaaS revenues for the first six
months of fiscal 2018 increased 42% year over year and comprised 29%
of total recurring revenues, compared to 22% of total recurring
revenues in the first six months of fiscal 2017.
-
Gross margin was 50.1% in the first six months of fiscal 2018,
compared to 50.4% in the comparable year-ago period. Gross margin for
the first six months of fiscal 2018 reflects the impact of the recent
alignment toward enabling the Company to provide more customer-centric
services going forward, as well as lower second quarter professional
services revenues on a higher cost structure that is a result of the
above noted recent alignment.
-
Net loss in the first six months of fiscal 2018 was $(6.2) million, or
$(0.27) per diluted share, compared to a net loss of $(4.7) million,
or $(0.21) per diluted share, in the first six months of fiscal 2017.
-
Adjusted EBITDA (non-GAAP) was $4.0 million, compared to Adjusted
EBITDA of $1.7 million in the same period last year (see
reconciliation below).
-
Adjusted earnings from operations (non-GAAP) in the first six months
of fiscal 2018 was $(4.6) million, compared to Adjusted earnings from
operations of $(6.3) million in the same period last year (see
reconciliation below).
Fiscal 2018 Outlook Update
Agilysys today updated its guidance for fiscal 2018 full year revenue to
a new range of $130 million to $134 million from the prior range of $136
million to $140 million. Notwithstanding the change in full year revenue
guidance, the Company continues to expect that it will generate positive
Adjusted Earnings from Operations (non-GAAP measure) in the fourth
quarter of fiscal 2018.
The Company defines adjusted earnings from operations as adjusted
EBITDA, less capital expenditures and capitalized software development
costs, which management believes is a meaningful measure of earnings and
provides insight to investors on the Company's overall profitability and
cash generation from core operations. Adjusted earnings from operations
includes costs for capitalized efforts while minimizing the seasonality
of the Company's cash flows due to timing of billing.
Tony Pritchett, Chief Financial Officer, commented, "We are pleased with
the progress we are making to lower overall spend as a percentage of
revenue. Excluding certain one-time restructuring and severance
expenses, despite lower consolidated revenue, overall costs as a
percentage of revenue in the fiscal 2018 second quarter were lower than
comparable costs in the fiscal 2017 fourth quarter when we began to act
on this initiative. While our cost savings initiatives continue to be a
priority as the success of these efforts will be an important driver of
our ability to generate profitable revenue as we begin to implement new
revenue growth initiatives, we are simultaneously strategically
investing in areas of the business to drive sustainable revenue growth.
With our healthy balance sheet that includes nearly $40 million in cash
and cash equivalents and no debt, focus on prudent expense management,
and new go-to-market sales initiatives beginning to be implemented, we
are confident that we are on a path to profitability and revenue growth,
which will unlock value for our shareholders."
2018 Second Quarter Conference Call and Webcast
Agilysys is hosting a conference call and webcast today, November 1,
2017, beginning 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 96275314. 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, statements we make regarding guidance relating to revenue and
adjusted earnings from operations, and expected results of strategic and
operating initiatives, such as revenue growth, cash balances and
improvements in operational efficiency and profitability.
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 adjusted EBITDA and adjusted
earnings from operations. Management believes that such information can
enhance investors' understanding of the company's ongoing operations.
See the accompanying table below for a reconciliation of adjusted EBITDA
and adjusted earnings from operations to the most closely related GAAP
measure.
About Agilysys
Agilysys is a leading technology company that provides innovative
software and services for point-of-sale (POS), property management
(PMS), reservation and table management, inventory and procurement,
workforce management, analytics, document management, and mobile and
wireless solutions exclusively to the hospitality industry. Our products
and services allow operators to streamline operations, improve
efficiency and understand customer needs across their properties to
deliver a superior overall guest experience. The result is improved
guest loyalty, growth in wallet share and increased revenue as operators
connect and transact with their guests based upon a single integrated
view of individual preferences and interactions. We serve four major
market sectors: Gaming, both corporate and tribal; Hotels, Resorts and
Cruise; Corporate Foodservice Management; and Restaurants, Universities,
Stadia and Healthcare.
Agilysys operates across North America, Europe, Asia-Pacific, and India
with corporate services located in Alpharetta, GA. For more information,
visit www.agilysys.com.
- Financial tables follow -
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AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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(In thousands, except per share data)
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Three Months Ended
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Six Months Ended
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September 30,
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September 30,
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2017
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2016
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2017
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2016
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Net revenue:
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Products
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$
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7,318
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$
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10,731
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$
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17,601
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$
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20,251
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Support, maintenance and subscription services
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17,108
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15,906
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33,775
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30,854
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Professional services
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5,703
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6,039
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12,618
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12,524
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Total net revenue
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30,129
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32,676
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63,994
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63,629
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Cost of goods sold:
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Products (inclusive of developed technology amortization)
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5,419
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8,155
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13,042
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14,687
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Support, maintenance and subscription services
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4,446
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4,394
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8,478
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8,250
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Professional services
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4,894
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4,248
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|
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10,430
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|
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|
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8,622
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Total cost of goods sold
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14,759
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16,797
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31,950
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31,559
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Gross profit
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15,370
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15,879
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32,044
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32,070
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Gross profit margin
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51.0
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%
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48.6
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%
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50.1
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%
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50.4
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%
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Operating expenses:
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Product development
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6,812
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6,946
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|
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13,438
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|
|
|
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13,799
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Sales and marketing
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4,207
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5,113
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|
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9,337
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|
|
|
|
10,748
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General and administrative
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5,561
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5,140
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12,361
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|
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10,014
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Depreciation of fixed assets
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|
700
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|
|
595
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1,312
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|
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1,193
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Amortization of intangibles
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465
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342
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950
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678
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Restructuring, severance and other charges
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826
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-
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863
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89
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Legal settlements
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-
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|
85
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-
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85
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Operating loss
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(3,201
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)
|
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|
|
(2,342
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)
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|
(6,217
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)
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(4,536
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)
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Other (income) expense:
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Interest income
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(23
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)
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(16
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)
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|
|
(51
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)
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|
(49
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)
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Interest expense
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2
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|
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4
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4
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8
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Other expense, net
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(37
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)
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|
(12
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)
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(147
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)
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|
78
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Loss before taxes
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(3,143
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)
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(2,318
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)
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(6,023
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)
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|
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(4,573
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)
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Income tax expense (benefit)
|
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|
|
105
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|
|
|
|
82
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|
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|
|
183
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|
|
|
124
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Net loss
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$
|
(3,248
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)
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$
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(2,400
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)
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$
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(6,206
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)
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$
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(4,697
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)
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Weighted average shares outstanding
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22,760
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22,606
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|
22,740
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|
|
|
22,603
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Loss per share - basic and diluted:
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Loss per share
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$
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(0.14
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)
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|
$
|
(0.11
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)
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$
|
(0.27
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)
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|
|
$
|
(0.21
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)
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Weighted average shares outstanding - diluted
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|
|
22,760
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|
|
|
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22,606
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|
|
|
|
22,740
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|
|
|
|
22,603
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Net income (loss) per share - diluted:
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Net income (loss) per share
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|
$
|
(0.14
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)
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|
|
$
|
(0.11
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)
|
|
|
$
|
(0.27
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)
|
|
|
$
|
(0.21
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)
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AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
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(In thousands, except share data)
|
|
|
|
September 30,
|
|
|
March 31,
|
|
|
|
|
2017
|
|
|
2017
|
ASSETS
|
|
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Current assets:
|
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Cash and cash equivalents
|
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|
$
|
38,532
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|
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$
|
49,255
|
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Accounts receivable, net of allowance for doubtful accounts of $698
and $509, respectively
|
|
|
|
|
14,742
|
|
|
|
|
15,598
|
|
Inventories
|
|
|
|
|
2,299
|
|
|
|
|
2,211
|
|
Prepaid expenses and other current assets
|
|
|
|
|
5,428
|
|
|
|
|
6,456
|
|
Total current assets
|
|
|
|
|
61,001
|
|
|
|
|
73,520
|
|
Property and equipment, net
|
|
|
|
|
16,858
|
|
|
|
|
16,000
|
|
Goodwill
|
|
|
|
|
19,622
|
|
|
|
|
19,622
|
|
Intangible assets, net
|
|
|
|
|
8,507
|
|
|
|
|
8,530
|
|
Software development costs, net
|
|
|
|
|
47,185
|
|
|
|
|
46,999
|
|
Other non-current assets
|
|
|
|
|
2,524
|
|
|
|
|
2,634
|
|
Total assets
|
|
|
|
$
|
155,697
|
|
|
|
$
|
167,305
|
|
|
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|
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LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
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Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
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Accounts payable
|
|
|
|
$
|
8,860
|
|
|
|
$
|
8,702
|
|
Deferred revenue
|
|
|
|
|
22,172
|
|
|
|
|
29,183
|
|
Accrued liabilities
|
|
|
|
|
7,770
|
|
|
|
|
8,331
|
|
Capital lease obligations, current
|
|
|
|
|
116
|
|
|
|
|
121
|
|
Total current liabilities
|
|
|
|
|
38,918
|
|
|
|
|
46,337
|
|
Deferred income taxes, non-current
|
|
|
|
|
3,349
|
|
|
|
|
3,181
|
|
Capital lease obligations, non-current
|
|
|
|
|
77
|
|
|
|
|
116
|
|
Other non-current liabilities
|
|
|
|
|
3,925
|
|
|
|
|
4,002
|
|
Shareholders' equity:
|
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|
|
|
|
|
|
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Common shares, without par value, at $0.30 stated value;
80,000,000 shares authorized; 31,606,831 shares issued; and
23,318,471 and 23,210,682 shares outstanding at September 30,
2017 and March 31, 2017, respectively
|
|
|
|
9,482
|
|
|
|
|
9,482
|
|
Treasury shares, 8,288,360 and 8,396,149 at September 30, 2017 and
March 31, 2017, respectively
|
|
|
|
(2,488
|
)
|
|
|
|
(2,519
|
)
|
Capital in excess of stated value
|
|
|
|
|
(3,129
|
)
|
|
|
|
(5,782
|
)
|
Retained earnings
|
|
|
|
|
105,745
|
|
|
|
|
112,692
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(182
|
)
|
|
|
|
(204
|
)
|
Total shareholders' equity
|
|
|
|
|
109,428
|
|
|
|
|
113,669
|
|
Total liabilities and shareholders' equity
|
|
|
|
$
|
155,697
|
|
|
|
$
|
167,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
(In thousands)
|
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
2016
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(6,206
|
)
|
|
|
$
|
(4,697
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
Net restructuring, severance and other charges
|
|
|
|
|
19
|
|
|
|
|
(286
|
)
|
Net legal settlements
|
|
|
|
|
-
|
|
|
|
|
(15
|
)
|
Depreciation
|
|
|
|
|
1,312
|
|
|
|
|
1,193
|
|
Amortization
|
|
|
|
|
950
|
|
|
|
|
678
|
|
Amortization of developed technology
|
|
|
|
|
4,727
|
|
|
|
|
3,399
|
|
Deferred income taxes
|
|
|
|
|
87
|
|
|
|
|
110
|
|
Share-based compensation
|
|
|
|
|
2,318
|
|
|
|
|
841
|
|
Change in cash surrender value of company owned life insurance
policies
|
|
|
|
|
(6
|
)
|
|
|
|
(10
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
887
|
|
|
|
|
5,862
|
|
Inventories
|
|
|
|
|
(83
|
)
|
|
|
|
371
|
|
Prepaid expense
|
|
|
|
|
1,308
|
|
|
|
|
534
|
|
Accounts payable
|
|
|
|
|
286
|
|
|
|
|
1,284
|
|
Deferred revenue
|
|
|
|
|
(7,036
|
)
|
|
|
|
(6,765
|
)
|
Accrued liabilities
|
|
|
|
|
(25
|
)
|
|
|
|
(2,525
|
)
|
Income taxes payable
|
|
|
|
|
(46
|
)
|
|
|
|
(33
|
)
|
Other changes, net
|
|
|
|
|
(140
|
)
|
|
|
|
(125
|
)
|
Net cash provided by operating activities
|
|
|
|
|
(1,648
|
)
|
|
|
|
(184
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
(3,106
|
)
|
|
|
|
(2,272
|
)
|
Capitalized software development costs
|
|
|
|
|
(5,477
|
)
|
|
|
|
(5,824
|
)
|
Investments in corporate-owned life insurance policies
|
|
|
|
|
(2
|
)
|
|
|
|
(1
|
)
|
Net cash used in investing activities
|
|
|
|
|
(8,585
|
)
|
|
|
|
(8,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
Payments to settle contingent consideration arising from business
acquisition
|
|
|
|
|
-
|
|
|
|
|
(197
|
)
|
Repurchase of common shares to satisfy employee tax withholding
|
|
|
|
|
(519
|
)
|
|
|
|
(404
|
)
|
Principal payments under long-term obligations
|
|
|
|
|
(61
|
)
|
|
|
|
(56
|
)
|
Net cash used in financing activities
|
|
|
|
|
(580
|
)
|
|
|
|
(657
|
)
|
Effect of exchange rate changes on cash
|
|
|
|
|
90
|
|
|
|
|
(41
|
)
|
Net decrease in cash and cash equivalents
|
|
|
|
|
(10,723
|
)
|
|
|
|
(8,979
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
49,255
|
|
|
|
|
60,608
|
|
Cash and cash equivalents at end of period
|
|
|
|
$
|
38,532
|
|
|
|
$
|
51,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Accrued capital expenditures
|
|
|
|
$
|
385
|
|
|
|
$
|
223
|
|
Accrued capitalized software development costs
|
|
|
|
|
357
|
|
|
|
|
1,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AGILYSYS, INC.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA AND ADJUSTED
EARNINGS FROM OPERATIONS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
(In thousands)
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(3,248
|
)
|
|
|
$
|
(2,400
|
)
|
|
|
$
|
(6,206
|
)
|
|
|
$
|
(4,697
|
)
|
Income tax expense (benefit)
|
|
|
|
|
105
|
|
|
|
|
82
|
|
|
|
|
183
|
|
|
|
|
124
|
|
Loss before taxes
|
|
|
|
|
(3,143
|
)
|
|
|
|
(2,318
|
)
|
|
|
|
(6,023
|
)
|
|
|
|
(4,573
|
)
|
Depreciation of fixed assets
|
|
|
|
|
700
|
|
|
|
|
595
|
|
|
|
|
1,312
|
|
|
|
|
1,193
|
|
Amortization of intangibles
|
|
|
|
|
465
|
|
|
|
|
342
|
|
|
|
|
950
|
|
|
|
|
678
|
|
Amortization of developed technology
|
|
|
|
|
2,420
|
|
|
|
|
2,133
|
|
|
|
|
4,727
|
|
|
|
|
3,399
|
|
Interest (income) expense
|
|
|
|
|
(21
|
)
|
|
|
|
(12
|
)
|
|
|
|
(47
|
)
|
|
|
|
(41
|
)
|
EBITDA (b)
|
|
|
|
|
421
|
|
|
|
|
740
|
|
|
|
|
918
|
|
|
|
|
656
|
|
Share-based compensation
|
|
|
|
|
1,099
|
|
|
|
|
495
|
|
|
|
|
2,318
|
|
|
|
|
841
|
|
Restructuring, severance and other charges
|
|
|
|
|
826
|
|
|
|
|
-
|
|
|
|
|
863
|
|
|
|
|
89
|
|
Other non-operating (income) expense
|
|
|
|
|
(37
|
)
|
|
|
|
(12
|
)
|
|
|
|
(147
|
)
|
|
|
|
78
|
|
Legal settlements
|
|
|
|
|
-
|
|
|
|
|
85
|
|
|
|
|
-
|
|
|
|
|
85
|
|
Adjusted EBITDA (a)
|
|
|
|
$
|
2,310
|
|
|
|
$
|
1,308
|
|
|
|
$
|
3,953
|
|
|
|
$
|
1,749
|
|
Capital expenditures
|
|
|
|
|
(981
|
)
|
|
|
|
(1,454
|
)
|
|
|
|
(3,106
|
)
|
|
|
|
(2,272
|
)
|
Capitalized software development costs
|
|
|
|
|
(2,487
|
)
|
|
|
|
(2,954
|
)
|
|
|
|
(5,477
|
)
|
|
|
|
(5,824
|
)
|
Adjusted Earnings from Operations (c)
|
|
|
|
$
|
(1,158
|
)
|
|
|
$
|
(3,100
|
)
|
|
|
$
|
(4,630
|
)
|
|
|
$
|
(6,347
|
)
|
|
(a) 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
|
|
(b) EBITDA is defined as net income before income taxes, interest
expense, depreciation and amortization
|
|
(c) Adjusted Earnings from Operations, a non-GAAP financial
measure, is defined as Adjusted EBITDA, less capital expenditures
and capitalized software development costs
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171101006557/en/
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