Agilysys Fourth Quarter Revenue Increases 21% to $63.0 Million; Reports Adjusted and GAAP Earnings Per Diluted Share of $0.15 and $0.01, Respectively

Wed Jun 12, 2013 7:30am EDT

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Agilysys Fourth Quarter Revenue Increases 21% to $63.0 Million; Reports Adjusted and GAAP Earnings Per Diluted Share of $0.15 and $0.01, Respectively

- Fiscal 2013 Revenue Increases 13%; Adjusted Operating Income of $7.6 Million and Adjusted Earnings of $0.32 per Diluted Share Exceed Guidance -

Agilysys, Inc. (Nasdaq: AGYS), a leading developer and provider of innovative information technology, services and solutions for the hospitality industry, today reported operating results for its fiscal 2013 fourth quarter and full year ended March 31, 2013.

On June 3, 2013, the Company announced that it entered into a definitive agreement to divest its Retail Solutions Group (“RSG”) to an affiliate of Clearlake Capital Group, L.P., for total cash consideration of approximately $34.55 million, subject to customary closing conditions. All financial results presented below are inclusive of contributions from RSG, reflecting the timing of the proposed transaction, which is expected to close later this summer. Following the completion of the proposed transaction, and accounting for the acquisition of the assets of TimeManagement Corporation announced earlier this week, Agilysys will have approximately $108 million in cash and cash equivalents, representing approximately $4.80 per common share outstanding, and no debt. Going forward, Agilysys will focus exclusively on providing innovative software enabled solutions to the hospitality industry.

Summary of Fiscal 2013 Fourth Quarter Financial Results

  • Total net revenue increased $11.0 million, or 21%, to $63.0 million from $52.0 million in the prior-year period. Revenues for the Company’s Hospitality segment increased $0.6 million, or 3%, year over year, while revenues for the Company’s Retail segment grew $10.4 million, or 36%, from the prior-year period.
  • Recurring revenues (comprised of support, maintenance and subscription services) for the quarter were $20.5 million, an increase of 8% over the same period in fiscal 2012.
  • Gross margin was 39% in the fiscal 2013 fourth quarter compared to gross margin of 40% in the prior-year period.
  • Adjusted operating income (excluding stock-based compensation, amortization of intangibles and other one-time items) increased $6.9 million year over year to $3.3 million from an adjusted operating loss of $3.6 million in the year-ago period (see reconciliation below).
  • Adjusted net income (non-GAAP) from continuing operations grew to $3.2 million, or $0.15 per diluted share, compared with an adjusted net loss of $3.4 million, or ($0.16) per share, last year (see reconciliation below).
  • Net income for the period was $0.3 million, or $0.01 per diluted share, for the fiscal 2013 fourth quarter, compared to a net loss of $17.0 million, or ($0.78) per share, in the prior-year period. GAAP net loss for the fiscal 2012 fourth quarter includes a net loss of $9.7 million, or ($0.44) per share, related to a one-time asset impairment charge and net income of $1.1 million, or $0.05 per share, from discontinued operations.

Summary of Fiscal 2013 Full Year Financial Results

  • Total net revenue for the period increased $27.3 million, or 13%, to $236.1 million, compared with $208.9 million in the comparable prior-year period. The Hospitality segment grew 14%, or approximately $11.9 million, and the Retail segment revenue increased 13%, or approximately $15.3 million.
  • Recurring revenues (comprised of support, maintenance and subscription services) for the period were $77.1 million, an increase of 6% over fiscal 2012.
  • Gross margin was 38% in both fiscal 2013 and fiscal 2012.
  • Adjusted operating income (excluding stock-based compensation, amortization of intangibles and other one-time items) for fiscal 2013 increased $15.6 million year over year to $7.6 million from an adjusted operating loss of $7.9 million in fiscal 2012 (see reconciliation below).
  • Adjusted net income (non-GAAP) from continuing operations grew to $7.0 million, or $0.32 per diluted share, compared with the adjusted net loss of $8.7 million, or ($0.39) per share, in fiscal 2012 (see reconciliation below).
  • GAAP net loss was $1.3 million, or ($0.06) per share, in fiscal 2013 compared with a GAAP net loss of $22.8 million, or ($1.02) per share, in the year-ago period. GAAP net loss for fiscal 2012 includes a net loss of $9.7 million, or ($0.43) per share, related to a one-time asset impairment charge and net income of $11.5 million, or $0.51 per share, from discontinued operations.

James Dennedy, President and CEO of Agilysys, commented, “Our operating results for the fiscal 2013 fourth quarter and full year outperformed our plan and highlight the Company’s successful execution of our strategy. This success is evident in the continued growth of our Hospitality segment where total revenue, recurring revenue and gross margin increased year over year, and where our growth continues to outpace the overall market rate of growth. In addition, we expect the solid growth in hospitality product sales achieved in fiscal 2013 to help drive additional growth in fiscal 2014. We expect this growth to be fueled by continued and substantial investment in our product development initiatives, supplemented by select acquisitions. Our strategy and investment activity remains focused on advancing our product roadmap, capturing new market opportunities, increasing the value proposition to our customers and promoting an innovative professional environment to recruit, grow and retain the brightest minds and most customer-focused professionals in our industry.

“Earlier this month, we announced an agreement to divest our RSG business in order to further focus on growing our market share and expanding our higher-margin recurring revenue opportunities in the hospitality industry. Over the last two years, Agilysys’ hospitality industry customer base has steadily increased. We have the financial strength, clear strategy, product development initiatives and team-wide commitment to drive consistent market share growth through further improvements in our solutions and industry-leading customer service. Our focus on delivering value-creating technology solutions and services that enable hospitality operators to improve their guests’ on-site experience, grow retention rates and increase wallet share continues to resonate with current and potential customers and will result in our ability to grow the business faster than the market rate of growth in our industry and deliver increased value for our shareholders.”

Robb Ellis, Chief Operating Officer and Chief Financial Officer, added, “Our fiscal 2013 fourth quarter and full year financial results reflect both the continued growth in our business as well as our ongoing investments in new product development that we expect will position Agilysys for consistent, long-term growth. Following the completion of the proposed transaction to divest Retail, and accounting for the acquisition of the assets of TimeManagement Corporation announced earlier this week, Agilysys will have approximately $108 million in cash, or approximately $4.80 per share, and no debt. With this healthy financial position and our disciplined focus on capital allocation, we are confident Agilysys can successfully execute on our goals of generating profitable revenue growth while strategically investing in the future of our business.”

Mr. Ellis continued, “For fiscal 2014, we expect to again achieve above market revenue growth and to generate positive adjusted operating income for the full year, while continuing our strategic initiatives in product and corporate development.”

2013 Fourth Quarter and Full Year Conference Call and Webcast

Agilysys is hosting a conference call and webcast today, June 12, 2013, beginning at 8:30 A.M. ET. Both the call and the webcast are open to the general public. The conference call number is 224-357-2393 (domestic or international). Please call five minutes prior to the presentation to ensure that you are connected. A slide deck, which will be the basis for the review, will accompany the conference call and can be accessed at http://agilysys.com/home/InvestorRelations/EventPresentation.htm.

Interested parties may also access the conference call live on the Internet at http://agilysys.com/home/InvestorRelations/EventPresentation.htm. Approximately two hours after the call has concluded, an archived version of the webcast will be available for replay at the same location at http://agilysys.com/home/InvestorRelations/EventPresentation.htm.

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 industry. The Company specializes in the development of market-leading point-of-sale, property management, inventory & procurement and mobile & wireless solutions that are designed to streamline operations, improve efficiency and enhance the guest experience. In addition, Agilysys provides support, maintenance, resold hardware products and software hosting or subscription services. Agilysys customers include casinos, resorts, hotels, foodservice venues, stadiums and cruise lines. Agilysys operates extensively throughout North America, Europe and Asia, with corporate services located in Atlanta, GA, EMEA headquarters in Cheshire, UK and APAC offices in both Singapore and Hong Kong. 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,
  2013       2012     2013       2012  
 
Net revenue:
Products $ 33,866 $ 25,214 $ 123,798 $ 105,601
Support, maintenance and subscription services 20,468 19,007 77,145 72,711
Professional services   8,703     7,810     35,197     30,577  
Total net revenue 63,037 52,031 236,140 208,889
Cost of goods sold:
Products 26,510 19,817 96,618 83,550
Support, maintenance and subscription services 6,981 6,435 27,760 25,706
Professional services   5,284     4,962     21,592     19,797  
Total cost of goods sold   38,775     31,214     145,970     129,053  
Gross profit 24,262 20,817 90,170 79,836
Operating expenses:
Product development 8,439 6,931 32,680 30,309
Sales and marketing 5,625 7,138 21,664 24,006
General and administrative 7,005 9,424 27,601 32,889
Depreciation of fixed assets 650 1,426 2,674 4,602
Amortization of intangibles 828 904 3,382 3,686
Asset impairment and related charges (88 ) 9,681 120 9,681
Legal settlements 1,664 - 1,664 -
Restructuring, severance and other charges   (28 )   5,262     1,496     15,853  
Operating income (loss) 167 (19,949 ) (1,111 ) (41,190 )
Other (income) expenses :
Interest income (6 ) (50 ) (14 ) (103 )
Interest expense 121 41 346 978
Other (income) expenses, net   (63 )   (112 )   139     181  
Income (loss) before income taxes 115 (19,828 ) (1,582 ) (42,246 )
Income tax benefit   (215 )   (1,797 )   (284 )   (8,007 )
Income (loss) from continuing operations 330 (18,031 ) (1,298 ) (34,239 )
Income from discontinued operations, net of taxes   -     1,053     -     11,456  
Net income (loss) $ 330   $ (16,978 ) $ (1,298 ) $ (22,783 )
 
Basic weighted average shares outstanding   21,901     21,773     21,880     22,432  
 
Net income (loss) per share – basic:
Income (loss) from continuing operations $ 0.02 $ (0.83 ) $ (0.06 ) $ (1.53 )
Income from discontinued operations   -     0.05     -     0.51  
Net income (loss) per share $ 0.02   $ (0.78 ) $ (0.06 ) $ (1.02 )
 
Diluted weighted average shares outstanding   22,160     21,773     21,880     22,432  
 
Net income (loss) per share – diluted:
Income (loss) from continuing operations $ 0.01 $ (0.83 ) $ (0.06 ) $ (1.53 )
Income from discontinued operations   -     0.05     -     0.51  
Net income (loss) per share $ 0.01   $ (0.78 ) $ (0.06 ) $ (1.02 )
 
         
AGILYSYS, INC.
BUSINESS SEGMENT INFORMATION
(UNAUDITED)
 
Three Months Ended March 31, 2013 Three Months Ended March 31, 2012
Reportable Segments   Corporate/ Reportable Segments   Corporate/
(In thousands) HSG   RSG   Other   Consolidated HSG   RSG   Other   Consolidated
       
Net revenue:
Products $ 6,760 $ 27,106 $ - $ 33,866 $ 7,210 $ 18,004 $ - $ 25,214
Support, maintenance and subscription services 13,064 7,404 - 20,468 12,320 6,687 - 19,007
Professional services   3,703       5,000       -       8,703     3,355       4,455       -       7,810  
Total net revenue $ 23,527 $ 39,510 $ - $ 63,037 $ 22,885 $ 29,146 $ - $ 52,031
 
Gross profit $ 16,570 $ 7,692 $ - $ 24,262 $ 15,167 $ 5,650 $ - $ 20,817
Gross profit margin 70.4 % 19.5 % 38.5 % 66.3 % 19.4 % 40.0 %
 
Operating income (loss) $ 4,174 $ 3,978 $ (7,985 ) $ 167 $ (8,628 ) $ 312 $ (11,633 ) $ (19,949 )
Interest expense, net - - 115 115 - - (9 ) (9 )
Other income, net   -       -       (63 )     (63 )   -       -       (112 )     (112 )
Income (loss) from continuing operations before
income taxes $ 4,174     $ 3,978     $ (8,037 )   $ 115   $ (8,628 )   $ 312     $ (11,512 )   $ (19,828 )
 
 
Twelve Months Ended March 31, 2013 Twelve Months Ended March 31, 2012
Reportable Segments Corporate/ Reportable Segments Corporate/
HSG   RSG   Other   Consolidated HSG   RSG   Other   Consolidated
 
Net revenue:
Products $ 33,517 $ 90,281 $ - $ 123,798 $ 25,608 $ 79,993 $ - $ 105,601
Support, maintenance and subscription services 50,206 26,939 - 77,145 47,612 25,099 - 72,711
Professional services   14,585       20,612       -       35,197     13,155       17,422       -       30,577  
Total net revenue $ 98,308 $ 137,832 $ - $ 236,140 $ 86,375 $ 122,514 $ - $ 208,889
 
Gross profit $ 63,260 $ 26,910 $ - $ 90,170 $ 55,354 $ 24,482 $ - $ 79,836
Gross profit margin 64.3 % 19.5 % 38.2 % 64.1 % 20.0 % 38.2 %
 
Operating income (loss) $ 14,428 $ 10,840 $ (26,379 ) $ (1,111 ) $ (6,552 ) $ 5,481 $ (40,119 ) $ (41,190 )
Interest expense, net - - 332 332 - - 875 875
Other expenses, net   -       -       139       139     -       -       181       181  
Income (loss) from continuing operations before
income taxes $ 14,428     $ 10,840     $ (26,850 )   $ (1,582 ) $ (6,552 )   $ 5,481     $ (41,175 )   $ (42,246 )
 
     
AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
(In thousands, except share data) As of March 31,
  2013       2012  
ASSETS
Current assets:
Cash and cash equivalents $ 82,931 $ 97,587
Accounts receivable, net of allowance of $887 and $632, respectively 45,626 32,531
Inventories 12,239 15,710
Prepaid expenses 4,081 2,975
Other current assets   884     5,492  
Total current assets 145,761 154,295
Property and equipment, net 15,543 16,504
Goodwill 14,128 15,198
Intangible assets, net 17,288 14,135
Other non-current assets   4,244     4,007  
Total assets $ 196,964   $ 204,139  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 30,177 $ 24,938
Deferred revenue 25,676 28,441
Accrued and other current liabilities 17,481 23,983
Capital lease obligations – current   306     647  
Total current liabilities 73,640 78,009
Deferred income taxes – non-current 4,002 5,135
Capital lease obligations – non-current 381 347
Other non-current liabilities 5,085 6,210
Shareholders’ equity:

Common shares, without par value, at $0.30 stated value; authorized 80,000,000 shares; 31,606,831
issued; and 22,145,915 and 21,875,850 shares outstanding at March 31, 2013 and 2012, respectively

9,482 9,482
 
Treasury shares (9,460,916 and 9,730,981 shares at March 31, 2013 and 2012, respectively) (2,838 ) (2,919 )
Capital in excess of stated value (14,267 ) (16,032 )
Retained earnings 122,578 123,876
Accumulated other comprehensive (loss) income   (1,099 )   31  
Total shareholders’ equity   113,856     114,438  
Total liabilities and shareholders’ equity $ 196,964   $ 204,139  
 
     
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Twelve Months Ended
(In thousands) March 31,
  2013       2012  
Operating activities:
Net loss $ (1,298 ) $ (22,783 )
Income from discontinued operations   -     11,456  
Loss from continuing operations (1,298 ) (34,239 )
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Restructuring, severance and other charges 1,496 15,853
Payments for restructuring charges (6,924 ) (5,896 )
Legal settlements 1,664 -
Asset impairments and related charges 120 9,681
Depreciation 2,674 4,602
Amortization 4,207 5,910
Share-based compensation 2,057 2,896
Changes in operating assets and liabilities:
Accounts receivable (13,252 ) (621 )
Inventories 3,462 (4,789 )
Prepaids (1,175 ) (121 )
Accounts payable 4,333 5,994
Deferred revenue (2,617 ) 4,418
Accrued and other liabilities (4,019 ) (24 )
Income taxes payable (303 ) 1,464
Other changes, net   (1,130 )   173  
Net cash (used in) provided by operating activities from continuing operations (10,705 ) 5,301
Net cash used in operating activities from discontinued operations   -     (26,999 )
Net cash used in operating activities (10,705 ) (21,698 )
 
Investing activities:
Proceeds from marketable securities and company owned life insurance policies 4,239 9,419
Proceeds from the sale of TSG - 55,840
Capital expenditures (2,940 ) (2,335 )
Capitalized software development costs   (4,352 )   (2,585 )
Net cash (used in) provided by investing activities from continuing operations (3,053 ) 60,339
Net cash used in investing activities from discontinued operations   -     -  
Net cash (used in) provided by investing activities (3,053 ) 60,339
 
Financing activities:
Exercise of employee stock options 67 210
Repurchases of shares to satisfy employee tax withholding and option price (278 ) (1,449 )
Principal payment under long-term obligations (666 ) (1,001 )
Repurchase of common stock   -     (13,173 )
Net cash used in financing activities from continuing operations (877 ) (15,413 )
Net cash used in financing activities from discontinued operations   -     -  
Net cash used in financing activities (877 ) (15,413 )
 
Effect of exchange rate changes on cash   (21 )   5  
Cash flows (used in) provided by continuing operations (14,656 ) 50,232
Cash flows used in discontinued operations:   -     (26,999 )
Net (decrease) increase in cash (14,656 ) 23,233
Cash and cash equivalents at beginning of period   97,587     74,354  
Cash and cash equivalents at end of period $ 82,931   $ 97,587  
 
       
AGILYSYS, INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
(UNAUDITED)
 
(In thousands, except per share data) Three Months Ended Twelve Months Ended
March 31 March 31
  2013       2012     2013       2012  
 
Operating income (loss) $ 167 $ (19,949 ) $ (1,111 ) $ (41,190 )
Share-based compensation expense 783 546 2,057 2,896
Amortization of intangibles 828 904 3,382 3,686
Asset impairments and related charges (88 ) 9,681 120 9,681
Impact from revision to prior period financial statements - - - 1,127
Legal settlements 1,664 - 1,664 -
Restructuring, severance and other charges   (28 )   5,262     1,496     15,853  
Adjusted operating income (loss) from continuing operations (a) 3,326 (3,556 ) 7,608 (7,947 )
 
Other expenses (income), net 52 (121 ) 471 1,056
Cash income tax expense (benefit) (b)   35     (23 )   148     (264 )
Adjusted net income (loss) (a) $ 3,239   $ (3,412 ) $ 6,989   $ (8,739 )
 
Weighted average shares outstanding:
Basic 21,901 21,773 21,880 22,432
Diluted 22,160 21,773 21,880 22,432
 
Adjusted net income (loss) per share (a):
Basic $ 0.15 $ (0.16 ) $ 0.32 $ (0.39 )
Diluted $ 0.15 $ (0.16 ) $ 0.32 $ (0.39 )
 

(a)

 

Non-GAAP financial measure

 

(b)

Taxes calculated based upon our cash tax rate for the three and twelve months ended March 31, 2013 and 2012.

     
AGILYSYS, INC.

RECONCILIATION OF OPERATING CASH FLOWS FROM CONTINUING OPERATIONS TO ADJUSTED CASH FLOWS

FROM CONTINUING OPERATIONS

(UNAUDITED)
 
Twelve Months Ended
(In thousands) March 31
  2013       2012
Operating activities:
Net cash (used in) provided by continuing operations $ (10,705 ) $ 5,301
Non-recurring cash items:
Restructuring, severance and other payments 6,924 5,896
BEP/SERP payments   6,271     5,017
Adjusted cash provided by continuing operations $ 2,490   $ 16,214
 

Investor:
Agilysys, Inc.
Robb Ellis, 770-810-7800
Chief Operating Officer and Chief Financial Officer
investorrelations@agilysys.com
or
JCIR
Richard Land, Norberto Aja, Jim Leahy, 212-835-8500
agys@jcir.com