Agilysys Reports Unaudited Fiscal 2013 Second-Quarter Results

Thu Oct 25, 2012 7:30am EDT

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Agilysys Reports Unaudited Fiscal 2013 Second-Quarter Results

Continued execution of the strategy results in second-quarter adjusted net income of $0.06 per diluted share and a GAAP loss of $0.02 per share

Agilysys, Inc. (Nasdaq: AGYS), a leading developer and marketer of proprietary enterprise software, services and solutions to the hospitality and retail industries, today announced unaudited financial results for the fiscal 2013 second quarter ended September 30, 2012.

Summary Fiscal 2013 Second-Quarter Unaudited Financial Results From Continuing Operations

  • Total net revenue increased 3% to $54.2 million, compared with $52.7 million in last year’s second quarter. This increase was led by the Hospitality segment, which was up 9% year over year, while the Retail segment was down 1%.
  • Gross margin improved to 40.7% from 39.9% in the same prior-year period.
  • Adjusted operating income (excluding stock-based compensation, amortization of acquisition-related intangibles and other one-time items) increased to $1.2 million, reversing the prior-year adjusted operating loss of $0.7 million. (See reconciliation below.)
  • Adjusted net income (non-GAAP) from continuing operations grew to $1.3 million, or $0.06 per diluted share, compared with the adjusted net loss of $1.6 million, or ($0.07) per share, last year. (See reconciliation below.)
  • GAAP net loss narrowed to $0.4 million, or ($0.02) per share, from the loss of $3.6 million, or ($0.16) per share, for the same period in the prior fiscal year.
  • Operating results from the former Technology Solutions Group (TSG), including the gain on sale, as well as its assets and liabilities, are reported as components of discontinued operations during fiscal 2012.

“Our teams, customers and markets have responded extremely well to the business strategy we began implementing more than a year ago. The strategy of focusing on higher-margin products and emphasizing recurring revenue contracts continues to result in positive operational results,” commented President and CEO James Dennedy. “Equally important is that we have continued to make significant investments in product development while effectively managing our operating expense to drive improving profitability.”

Summary Fiscal 2013 First-Half Unaudited Financial Results From Continuing Operations

  • Total net revenue increased modestly to $105.9 million, compared with $105.3 million in last year’s first half. The Hospitality segment grew 11% year over year, while the Retail segment declined 7%.
  • Gross profit increased 9% to $42.5 million, compared with $39.1 million, due to gross margin expansion of 300 basis points to 40.1%, from 37.1% in the first half of the prior fiscal year.
  • Adjusted operating income (excluding stock-based compensation, amortization of acquisition-related intangibles and other one-time items) increased sharply to $2.2 million, reversing the prior-year adjusted operating loss of $3.2 million. (See reconciliation below.)
  • Adjusted net income (non-GAAP) from continuing operations grew to $2.0 million, or $0.09 per diluted share, compared with the adjusted net loss of $4.4 million, or ($0.19) per share, in fiscal 2012’s first half. (See reconciliation below.)
  • GAAP net loss narrowed to $2.1 million, or ($0.10) per share, from the loss of $10.4 million, or ($0.46) per share, for the same period in the prior fiscal year.

Chief Financial Officer Robb Ellis added, “We are very pleased with our first-half results and the momentum the Company is gaining in the markets we serve. Early last year, we initiated a strategy to re-focus our business, and our financial results validate the pursuit of this strategy. Our confidence and visibility in meeting previously disclosed guidance continues to increase and, as such, we are reaffirming our previously stated guidance.”

Outlook

The Company is reaffirming previous guidance for fiscal 2013 as follows:

Full-year consolidated revenue is expected to be between $208 million and $211 million. Adjusted operating income is anticipated to be in a range of $3.5 million to $4.5 million, reversing the $7.9 million adjusted operating loss in fiscal 2012. Full-year adjusted net income per share is anticipated to improve from the $0.39 loss reported for fiscal 2012 to positive adjusted net income per diluted share of between $0.16 and $0.21 in the current year.

Conference Call Information

A conference call will be held today, Oct. 25, 2012, at 8:30 a.m. ET to review unaudited second-quarter fiscal 2013 results. To participate in the live call, dial 877-317-6789 (International: 412-317-6789) 10 minutes before the call begins, or 8:20 a.m. ET. The conference ID is 10019256. A slide deck will be the basis for the review. Both the slide deck and the conference call can be accessed via the Investor Relations section of www.agilysys.com. In addition, a replay of the call will be archived on the website for approximately 30 days.

To be added to Agilysys’ email distribution list, please click on the link below:

http://www.agilysys.com/home/InvestorRelations/

Forward-Looking Language

This press release and other publicly available documents, including the documents incorporated herein and therein by reference, contain, and our officers and representatives may from time to time make, "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. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in Item 1A of the company’s Annual Report for the fiscal year ended March 31, 2012. Copies are available from the SEC or the Agilysys website. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events 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 operating income (loss) from continuing operations, adjusted net income (loss), adjusted net income (loss) per share and adjusted cash flow from operations. Management believes that such information can enhance investors' understanding of the company's ongoing operations. See the accompanying tables below for reconciliations of adjusted operating income (loss) from continuing operations and adjusted net income (loss), and adjusted cash flow from operations to the comparable GAAP measures.

Guidance

Guidance figures are based on the company’s current estimates and are subject to change by factors outside the company’s control. While this guidance is provided to give investors insight into expectations for the period, actual results may vary.

About Agilysys

Agilysys is a leading developer and marketer of proprietary enterprise software, services and solutions to the hospitality and retail industries. The company specializes in market-leading point-of-sale, property management, inventory and procurement, and mobile and wireless solutions that are designed to streamline operations, improve efficiency and enhance the consumer’s experience. Agilysys serves casinos, resorts, hotels, foodservice venues, stadiums, cruise lines, grocery stores, convenience stores, general and specialty retail businesses and partners. Agilysys operates extensively throughout North America, with additional sales and support offices in the United Kingdom, Singapore and Hong Kong. For more information, visit www.agilysys.com.

       
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
(In thousands, except per share data) Three Months Ended Six Months Ended
September 30, September 30,
2012 2011 2012 2011
 
Net revenue:
Products $ 24,934 $ 26,708 $ 49,052 $ 54,662
Support, maintenance and subscription services 19,506 17,904 37,942 35,429
Professional services   9,806     8,073     18,898     15,185  
Total net revenue 54,246 52,685 105,892 105,276
Cost of goods sold:
Products 19,024 20,297 37,883 43,605
Support, maintenance and subscription services 7,069 6,579 13,868 13,047
Professional services   6,072     4,810     11,682     9,537  
Total cost of goods sold   32,165     31,686     63,433     66,189  
Gross profit 22,081 20,999 42,459 39,087
Operating expenses:
Product development 9,372 7,711 15,657 15,656
Sales and marketing 4,693 5,897 10,614 11,460
General and administrative 6,592 7,494 13,401 16,147
Depreciation of fixed assets 691 1,102 1,391 2,114
Amortization of intangibles 842 937 1,722 1,868
Asset impairment and related charges - - 208 -
Restructuring and one-time charges   430     3,688     1,555     6,034  
Operating loss (539 ) (5,830 ) (2,089 ) (14,192 )
Other (income) expenses :
Interest income (4 ) (17 ) (8 ) (50 )
Interest expense 18 539 169 877
Other expenses (income), net   (161 )   308     (18 )   271  
Loss before income taxes (392 ) (6,660 ) (2,232 ) (15,290 )
Income tax benefit   (41 )   (3,106 )   (88 )   (4,857 )
Loss from continuing operations (351 ) (3,554 ) (2,144 ) (10,433 )
Income from discontinued operations, net of taxes   -     10,487       11,138  
Net (loss) income $ (351 ) $ 6,933   $ (2,144 ) $ 705  
 
Net (loss) income per share – basic and diluted:
Loss from continuing operations $ (0.02 ) $ (0.16 ) $ (0.10 ) $ (0.46 )
Income from discontinued operations   -     0.46     -     0.49  
Net (loss) income per share $ (0.02 ) $ 0.30   $ (0.10 ) $ 0.03  
 
Weighted average shares outstanding:        
Basic and diluted   21,883     22,853     21,860     22,903  
 
               
AGILYSYS, INC.
BUSINESS SEGMENT INFORMATION (UNAUDITED)
 
Three Months Ended September 30, 2012 Three Months Ended September 30, 2011
Reportable Segments Corporate/ Reportable Segments Corporate/
(In thousands) HSG   RSG   Other   Consolidated HSG   RSG   Other   Consolidated
 
Net revenue:
Products $ 7,281 $ 17,653 $ - $ 24,934 $ 7,235 $ 19,473 $ - $ 26,708
Support, maintenance and subscription services 12,958 6,548 - 19,506 11,411 6,493 - 17,904
Professional services   3,994       5,812       -       9,806     3,630       4,443       -       8,073  
Total net revenue $ 24,233 $ 30,013 $ - $ 54,246 $ 22,276 $ 30,409 $ - $ 52,685
 
Gross profit $ 15,857 $ 6,224 $ - $ 22,081 $ 14,233 $ 6,766 $ - $ 20,999
Gross profit margin 65.4 % 20.7 % 40.7 % 63.9 % 22.2 % 39.9 %
 
Operating income (loss) $ 3,212 $ 2,124 $ (5,875 ) $ (539 ) $ 1,189 $ 1,921 $ (8,940 ) $ (5,830 )
Interest expense, net - - 14 14 - - 522 522
Other (income) expense, net   -       -       (161 )     (161 )   -       -       308       308  
Income (loss) from continuing operations before
income taxes $ 3,212     $ 2,124     $ (5,728 )   $ (392 ) $ 1,189     $ 1,921     $ (9,770 )   $ (6,660 )
 
 
 
Six Months Ended September 30, 2012 Six Months Ended September 30, 2011
Reportable Segments Corporate/ Reportable Segments Corporate/
HSG   RSG   Other   Consolidated HSG   RSG   Other   Consolidated
 
Net revenue:
Products $ 13,836 $ 35,216 $ - $ 49,052 $ 11,781 $ 42,881 $ - $ 54,662

Support, maintenance and subscription services

25,351 12,591 - 37,942 23,048 12,381 - 35,429
Professional services   7,404       11,494       -       18,898     6,981       8,204       -       15,185  
Total net revenue $ 46,591 $ 59,301 $ - $ 105,892 $ 41,810 $ 63,466 $ - $ 105,276
 
Gross profit $ 30,522 $ 11,937 $ - $ 42,459 $ 26,230 $ 12,857 $ - $ 39,087
Gross profit margin 65.5 % 20.1 % 40.1 % 62.7 % 20.3 % 37.1 %
 
Operating income (loss) $ 6,256 $ 3,842 $ (12,187 ) $ (2,089 ) $ 211 $ 3,730 $ (18,133 ) $ (14,192 )
Interest expense, net - - 161 161 - - 827 827
Other (income) expenses, net   -       -       (18 )     (18 )   -       -       271       271  
Income (loss) from continuing
operations before income taxes $ 6,256     $ 3,842     $ (12,330 )   $ (2,232 ) $ 211     $ 3,730     $ (19,231 )   $ (15,290 )
 
   
AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
September 30, March 31,
(In thousands, except share data) 2012 2012
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 77,327 $ 97,587
Accounts receivable, net of allowance of $638 and $632, respectively 33,710 32,531
Inventories 12,164 15,710
Prepaid expenses 2,937 2,975
Other current assets   1,856     5,492  
Total current assets 127,994 154,295
Property and equipment, net 15,396 16,504
Goodwill 15,223 15,198
Intangible assets, net of accumulated amortization of $22,638 and $21,560, respectively 14,951 14,135
Other non-current assets   4,132     4,007  
Total assets $ 177,696   $ 204,139  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 21,048 $ 24,938
Deferred revenue 20,128 28,441
Accrued and other current liabilities 11,515 23,983
Capital lease obligations – current   429     647  
Total current liabilities 53,120 78,009
Deferred income taxes – non-current 5,170 5,135
Capital lease obligations – non-current 501 347
Other non-current liabilities 5,802 6,210
Shareholders’ equity:
Common shares, without par value, at $0.30 stated value; authorized 80,000,000 shares; 31,606,831 issued; and 22,141,539 and 21,875,850 shares outstanding at September 30, 2012 and March 31, 2012, respectively 9,482 9,482
Treasury shares (9,465,292 shares at September 30, 2012 and 9,730,981 shares at March 31, 2012 ) (2,839 ) (2,919 )
Capital in excess of stated value (15,348 ) (16,032 )
Retained earnings 121,732 123,876
Accumulated other comprehensive income   76     31  
Total shareholders’ equity   113,103     114,438  
Total liabilities and shareholders’ equity $ 177,696   $ 204,139  
 
   
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
Six Months Ended
(In thousands) September 30,
2012 2011
Operating activities:
Net (loss) income $ (2,144 ) $ 705
Income from discontinued operations   -     11,138  
Loss from continuing operations (2,144 ) (10,433 )
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Restructuring and one-time charges 1,555 6,034
Payments for restructuring charges (5,938 ) (998 )
Asset impairments and related charges 208 -
Depreciation 1,391 2,114
Amortization 2,220 3,376
Stock based compensation 831 1,989
Changes in operating assets and liabilities:
Accounts receivable (1,171 ) 3,510
Inventories 2,773 (3,039 )
Accounts payable (4,101 ) (1,935 )
Deferred revenue (8,242 ) (8,881 )
Accrued and other liabilities (8,892 ) 4,239
Income taxes payable (274 ) (763 )
Other changes, net   14     (378 )
Net cash used in operating activities from continuing operations (21,770 ) (5,165 )
Net cash used in operating activities from discontinued operations   -     (27,132 )
Net cash used in operating activities (21,770 ) (32,297 )
 
Investing activities:
Proceeds from the sale of TSG - 59,470
Proceeds from the sale of marketable securities 4,347 2,036
Capital expenditures (2,405 ) (1,464 )
Investments in Company-owned life insurance policies and marketable securities   (42 )   (68 )
Net cash provided by investing activities from continuing operations 1,900 59,974
Net cash provided by investing activities from discontinued operations   -     -  
Net cash provided by investing activities 1,900 59,974
 
Financing activities:
Exercise of employee stock options 67 210
Repurchases of shares to satisfy employee tax withholding and option price (134 ) (1,182 )
Repurchase of common stock - (6,617 )
Principal payment under long-term obligations   (399 )   (551 )
Net cash used in financing activities from continuing operations (466 ) (8,140 )
Net cash used in financing activities from discontinued operations   -     (78 )
Net cash used in financing activities (466 ) (8,218 )
 
Effect of exchange rate changes on cash   78     (151 )
Cash flows (used in) provided by continuing operations (20,258 ) 46,518
Cash flows used in discontinued operations:   -     (27,210 )
Net (decrease) increase in cash (20,258 ) 19,308
Cash and cash equivalents at beginning of period   97,587     74,354  
Cash and cash equivalents at end of period $ 77,329   $ 93,662  
 
AGILYSYS, INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS) (UNAUDITED)

       
(In thousands, except per share data) Three Months Ended Six Months Ended
September 30, September 30,
2012 2011 2012 2011
 
Operating loss $ (539 ) $ (5,830 ) $ (2,089 ) $ (14,192 )
Stock-based compensation expense 477 510 831 1,989
Amortization of intangibles 842 937 1,722 1,868
Asset impairments and related charges - - 208 -
Impact from revision to prior period financial statements - - - 1,127
Restructuring and one-time charges   430     3,688     1,555     6,034  
Adjusted operating income (loss) from continuing operations (a) 1,210 (695 ) 2,227 (3,174 )
 
Other (income) expense, net (147 ) 830 143 1,098
Cash income tax expense (b)   27     35     63     159  
Adjusted net income (loss) (a) $ 1,330   $ (1,560 ) $ 2,021   $ (4,431 )
 
Weighted average shares outstanding:
Basic and diluted 21,883 22,853 21,860 22,903
 
Adjusted net income (loss) per share (a):

Basic and diluted

$ 0.06 $ (0.07 ) $ 0.09 $ (0.19 )
 
(a) Non-GAAP financial measure
 
(b) Taxes calculated based upon our cash tax rate for the three and six months ended September 30, 2012 and 2011.
 
   
AGILYSYS, INC.

RECONCILIATION OF OPERATING CASH FLOWS FROM CONTINUING OPERATIONS TO ADJUSTED CASH FLOWS FROM CONTINUING OPERATIONS
(UNAUDITED)

 
Six Months Ended
(In thousands) September 30,
2012 2011
Operating activities:
Net cash used in continuing operations

$

(21,772

)

$ (5,165 )
Non-recurring cash items:
Restructuring payments 5,938 998
BEP/SERP payments   6,271     1,844  
Adjusted cash used in continuing operations

$

(9,563

)

$ (2,323 )
 

Agilysys, Inc.
Robb Ellis, Chief Financial Officer, 770-810-7800
Robb.Ellis@agilysys.com

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