Agilysys, Inc. (AGYS)
F4Q10 (Qtr End 03/31/10) Earnings Call
June 3, 2010 11:00 am ET
Martin Ellis – President & CEO
Ken Kossin – SVP & CFO
Brian Kinstlinger – Sidoti & Co.
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Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the company's reports on Form 10-K and 10-Q and news releases filed with the Securities and Exchange Commission.
Today's conference is being broadcast live on Agilysys's website and will be available for replay on the site for approximately 30 days. Now I would like to introduce your host for today's call, Agilysys President and CEO, Martin Ellis. Please go ahead, Mr. Ellis.
Thank you, Claudia. Good morning, everyone and thank you for joining us today to review our unaudited fourth-quarter and full-year results. With me today is Ken Kossin, our Senior Vice President and Chief Financial Officer.
In addition to the standard Safe Harbor language, we will be using non-GAAP financial information, namely adjusted EBITDA and the reconciliations to GAAP are provided at the end of the presentation, as well as in the press release issued this morning. We also will be using a slide presentation as the basis for today's review. If you have not already done so, we invite you to access the presentation from the Investor Relations section of our website.
Turning to our results, despite the difficult market conditions and lower sales reported throughout the fiscal year, we made significant progress in resetting cost structure and making select, but important investments in the company. The revenue improvements we saw in September and December quarters were interrupted in the fourth quarter as we reported a 13% decrease in revenues compared with a year ago.
While our Hospitality and Retail segments largely met our expectations, the lower revenue reflected weaker-than-anticipated demand in our Technology Solutions business, particularly as it related to proprietary service.
Notwithstanding the lower revenue, gross margin expanded to 26.4% of sales compared with 25.7% in the prior year. The improvement reflected the larger proportion of proprietary services and higher-margin hospitality and retail revenues. The increase in gross margin was partially offset by lower rebates and vendor incentives. As we continued to focus on managing our cost structure, we have quarterly SG&A down about 5 million from last year. Also, we recorded no significant restructuring or goodwill impairment charges during the quarter compared with significant impairment charges in fiscal 2009.
As a result of changes to the tax laws in the Recovery and Reinvestment Act, we were able to recognize an income tax benefit for losses that would carry back offsetting prior income. This resulted in the provision for income tax in the quarter decreasing year-over-year by more than $20 million.
We also reported improved earnings per share with a loss of $0.02 per share versus the loss of $5.03 per share reported in fiscal 2009.
Despite the weaker-than-anticipated sales, our accounts receivable portfolio improved significantly with DSOs declining from 88 days a year ago to 69 days at March 31st. The meaningful improvement in DSOs helped drive the $29 million increase in cash year-over-year.
The decline in sales we saw year-over-year was driven largely by the results of our Technology Solutions Group where hardware sales were 22% lower than in last year's comparable quarter.
Our Retail Solutions and Hospitality Solutions Groups each reported increases in hardware sales during the quarter. However, these increases were not large enough to compensate for the decline in TSG.
Softness in software products, both remarketed and proprietary, resulted in a 25% year-over-year decline in the quarter and services and support were essentially flat, down 3% from a year ago, largely due to lower remarketed services.
We have continued to focus on managing costs and excluding depreciation and amortization, SG&A declined by about 1.5 million, or 4%. Notwithstanding the improvement in cost structure, EBITDA decreased year-over-year as the cost savings we realized did not fully offset the lower revenues. As a result, EBITDA for the quarter was a loss of $3.6 million.
Other income in FY '10 includes gains recognized on reserve fund distributions and company-owned life insurance policies compared with losses for both of these items in the prior year. Ken will review this in greater detail.
The net loss from continuing operations was $500,000 or $0.02 per share compared with the reported loss of 114.6 million, or $5.07 per share last year, which included impairments and restructuring charges totaling $90 million.
At this time, let me turn the call over to Ken to review segment results, the balance sheet and cash flow.
Thanks, Martin. Sales for the Hospitality Solutions Group declined 9%. The decline in revenue compared to last year was primarily due to continued softness in the commercial gaming market. This was offset by solid performance in food service and other segments.
Overall gross margin for HSG expanded 280 basis points to 62.7% due to the absence of miscellaneous adjustments to cost of goods sold, which negatively impacted HSG's margin last year. SG&A, excluding depreciation and amortization, was essentially flat. Adjusted EBITDA, excluding charges, was $3.5 million compared to $4.4 million last year. The EBITDA margin percentage in the quarter was 16.5%.