Agilysys Grows Third Quarter Revenue 21% to Record $60.6M

Published

Includes Subscription Revenue Growth of 29.9%

Quarter Adjusted EBITDA of $11.8M and Adjusted EPS of $0.35

Increases Full Fiscal Year Adjusted EBITDA Guidance to 15% of Revenue

ALPHARETTA, Ga.--(BUSINESS WIRE)-- Agilysys, Inc. (NASDAQ: AGYS), a leading global provider of hospitality software solutions that deliver High Return Hospitality, today reported operating results for its fiscal 2024 third quarter ending December 31, 2023.

Summary of Fiscal 2024 Third Quarter Financial Results

  • Total net revenue increased 21.3% to a record $60.6 million, compared to total net revenue of $49.9 million in the comparable prior-year period.
  • Recurring revenue (comprising subscription and maintenance charges) was a record $35.1 million, or 58.0% of total net revenue, compared to $30.2 million, or 60.4% of total net revenue, for the same period in fiscal 2023. Subscription revenue increased 29.9% year-over-year and was 55.6% of total recurring revenue compared to 49.8% of total recurring revenue in the third quarter of fiscal 2023.
  • Gross margin was 62.5% compared to 61.7% in the comparable prior-year period.
  • Net income attributable to common shareholders was $76.9 million, or $2.85 per diluted share, compared to $3.4 million, or $0.13 per diluted share, in the comparable prior-year period. Net income for the quarter included discrete tax events including a $65.1 million release of valuation allowances against certain deferred tax assets.
  • Adjusted EBITDA (non-GAAP) was $11.8 million compared to $8.1 million in the comparable prior-year period (reconciliation included in financial tables).
  • Adjusted diluted EPS (non-GAAP) was $0.35 per share compared to $0.26 per share in the comparable prior-year period (reconciliation included in financial tables).
  • Free cash flow (non-GAAP) in the fiscal 2024 third quarter was $11.3 million compared to free cash flow of $11.7 million in the fiscal 2023 third quarter (reconciliation included in financial tables). Ending cash balance was $116.2 million, compared to ending cash balance of $112.8 million as of fiscal 2023 year-end.

Ramesh Srinivasan, President and CEO of Agilysys, commented, “We are pleased with our continuing good business momentum, highlighted by the eighth consecutive record revenue quarter, 21.3% year-over-year revenue growth that includes subscription revenue growth of 29.9% and Adjusted EBITDA of 19.4%.”

Mr. Srinivasan continued, “Improving implementation services efficiency, as our recently re-engineered and newly created state-of-the-art technology-based software solutions continue to establish themselves well across many hospitality corporations and their properties, was the other salient highlight of the quarter. Record high services revenue and significantly improved services margins helped drive increases in gross margin and net income profitability levels.

“We remain confident with the increased full fiscal year revenue guidance range of $235M to $238M and subscription revenue growth of 28% year-over-year provided at the end of the last quarter. We expect fiscal 2024 Adjusted EBITDA to be 15% of revenue, higher than the previous guidance. Several major customers across various geographies continue to implement recently modernized versions of our cloud-native solutions at their properties and are increasingly relying on us to enable new efficiencies for staff and better experiences for guests. Our competitive positioning across all product categories continues to strengthen, giving us the capability to generate significant shareholder value during the short, medium and long term,” he concluded.

Fiscal 2024 Outlook

Agilysys raised Adjusted EBITDA expectations for fiscal 2024 to 15% of revenue and reiterated full-year revenue guidance of $235 to $238 million and subscription revenue growth of 28% year-over-year.

Dave Wood, Chief Financial Officer, commented, “Product implementations continue to show improved efficiencies driving consistent recurring revenue growth. Our backlog remains strong and we remain confident about continued good business growth. Increased profitability this quarter is another testament to our relentless and unwavering focus on disciplined growth across all areas of our business.”

2024 Third Quarter Conference Call and Webcast

Agilysys is hosting a conference call and webcast today, January 22nd, 2024, at 4:30 p.m. ET. Both the call and the webcast are open to the public. Interested parties can register for the call at https://register.vevent.com/register/BI613f55fedd064a359f57d5a7b2de762a. Registrants will receive an email confirmation with further access details and a personalized PIN. Please register 15 minutes prior to the call to receive registration confirmation and access details before the call starts.

Interested parties also can access the conference call live on the Investors Relations page of Agilysys.com under the Events and Presentations heading. An archived version of the webcast will be available for replay at the same location approximately two hours after the call is concluded.

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, subscription revenue and Adjusted EBITDA guidance for the 2024 fiscal year.

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 impact macroeconomic factors may have on the overall business environment, our ability to achieve our fiscal 2024 guidance, future revenue growth, the company's ability to convert the backlog into revenue, 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. Additionally, references to "record" financial and business levels in this document refer only to the time period after Agilysys made the transformation to an entirely hospitality focused software solutions company in FY2014.

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 attributable to common shareholders before amortization expense (including amortization of developed technology), share-based compensation, other (gains) and charges, net, 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, and tax events which are defined as excess tax benefits or expense related to share-based compensation, release of valuation allowances against deferred income taxes, and changes in uncertain tax positions. The Company 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 exclusively delivers state-of-the-art software solutions and services that help organizations achieve High Return Hospitality™ by maximizing Return on Experience (ROE) through interactions that make ‘personal’ profitable. Customers around the world use Agilysys Property Management Systems (PMS), Point-of-Sale (POS) and F&B Inventory and Procurement (I&P) solutions to consistently delight guests, retain staff and grow margins. Agilysys’ 100% hospitality customer base includes branded and independent hotels; multi-amenity resorts; casinos; property, hotel and resort management companies; cruise lines; corporate dining providers; higher education campus dining providers; food service management companies; hospitals; lifestyle communities; senior living facilities; stadiums; and theme parks. 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)

 

 

 

Three months ended December 31,

 

 

Nine months ended December 31,

 

 

 

 

 

 

 

 

(In thousands, except per share data)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

12,678

 

 

$

10,697

 

 

$

38,100

 

 

$

32,291

 

Subscription and maintenance

 

 

35,107

 

 

 

30,154

 

 

 

101,481

 

 

 

86,917

 

Professional services

 

 

12,781

 

 

 

9,069

 

 

 

35,662

 

 

 

25,960

 

Total net revenue

 

 

60,566

 

 

 

49,920

 

 

 

175,243

 

 

 

145,168

 

Cost of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

6,707

 

 

 

5,368

 

 

 

20,023

 

 

 

16,682

 

Subscription and maintenance

 

 

7,371

 

 

 

6,767

 

 

 

22,812

 

 

 

19,223

 

Professional services

 

 

8,664

 

 

 

7,009

 

 

 

26,428

 

 

 

20,627

 

Total cost of goods sold

 

 

22,742

 

 

 

19,144

 

 

 

69,263

 

 

 

56,532

 

Gross profit

 

 

37,824

 

 

 

30,776

 

 

 

105,980

 

 

 

88,636

 

Gross profit margin

 

 

62.5

%

 

 

61.7

%

 

 

60.5

%

 

 

61.1

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Product development

 

 

14,551

 

 

 

12,416

 

 

 

42,455

 

 

 

36,550

 

Sales and marketing

 

 

6,137

 

 

 

5,886

 

 

 

19,838

 

 

 

16,619

 

General and administrative

 

 

9,057

 

 

 

7,928

 

 

 

27,207

 

 

 

22,850

 

Depreciation of fixed assets

 

 

909

 

 

 

437

 

 

 

3,042

 

 

 

1,371

 

Amortization of internal-use software and intangibles

 

 

343

 

 

 

430

 

 

 

1,120

 

 

 

1,326

 

Other (gains) and charges, net

 

 

(924

)

 

 

93

 

 

 

45

 

 

 

374

 

Legal settlements

 

 

 

 

 

104

 

 

 

 

 

 

104

 

Total operating expense

 

 

30,073

 

 

 

27,294

 

 

 

93,707

 

 

 

79,194

 

Operating income

 

 

7,751

 

 

 

3,482

 

 

 

12,273

 

 

 

9,442

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,252

 

 

 

704

 

 

 

3,580

 

 

 

1,186

 

Other income (expense), net

 

 

95

 

 

 

384

 

 

 

(15

)

 

 

799

 

Income before taxes

 

 

9,098

 

 

 

4,570

 

 

 

15,838

 

 

 

11,427

 

Income tax (benefit) provision

 

 

(68,043

)

 

 

678

 

 

 

(67,396

)

 

 

920

 

Net income

 

$

77,141

 

 

$

3,892

 

 

$

83,234

 

 

$

10,507

 

Series A convertible preferred stock dividends

 

 

(286

)

 

 

(459

)

 

 

(1,204

)

 

 

(1,377

)

Net income attributable to common shareholders

 

$

76,855

 

 

$

3,433

 

 

$

82,030

 

 

$

9,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

25,808

 

 

 

24,703

 

 

 

25,256

 

 

 

24,651

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - basic:

 

$

2.98

 

 

$

0.14

 

 

$

3.25

 

 

$

0.37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted

 

 

26,979

 

 

 

26,070

 

 

 

26,463

 

 

 

25,780

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - diluted:

 

$

2.85

 

 

$

0.13

 

 

$

3.10

 

 

$

0.35

 

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In thousands, except share data)

 

December 31,

2023

(Unaudited)

 

 

March 31, 2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

116,200

 

 

$

112,842

 

Accounts receivable, net of allowance for expected credit losses of $763 and $610, respectively

 

 

49,366

 

 

 

22,378

 

Contract assets

 

 

1,971

 

 

 

2,242

 

Inventories

 

 

6,772

 

 

 

9,774

 

Prepaid expenses and other current assets

 

 

9,385

 

 

 

7,422

 

Total current assets

 

 

183,694

 

 

 

154,658

 

Property and equipment, net

 

 

18,074

 

 

 

14,576

 

Operating lease right-of-use assets

 

 

18,734

 

 

 

12,708

 

Goodwill

 

 

33,082

 

 

 

32,638

 

Intangible assets, net

 

 

17,223

 

 

 

18,140

 

Deferred income taxes, non-current

 

 

67,999

 

 

 

2,790

 

Other non-current assets

 

 

7,852

 

 

 

7,526

 

Total assets

 

$

346,658

 

 

$

243,036

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

9,012

 

 

$

9,418

 

Contract liabilities

 

 

62,938

 

 

 

52,124

 

Accrued liabilities

 

 

15,310

 

 

 

13,708

 

Operating lease liabilities, current

 

 

3,947

 

 

 

3,263

 

Finance lease obligations, current

 

 

 

 

 

2

 

Total current liabilities

 

 

91,207

 

 

 

78,515

 

Deferred income taxes, non-current

 

 

1,035

 

 

 

2,257

 

Operating lease liabilities, non-current

 

 

20,200

 

 

 

13,477

 

Other non-current liabilities

 

 

3,943

 

 

 

4,018

 

Commitments and contingencies

 

 

 

 

 

 

Series A convertible preferred stock, no par value

 

 

 

 

 

35,459

 

Shareholders' equity:

 

 

 

 

 

 

Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 33,342,288 shares issued; and 27,349,322 and 25,326,626 shares outstanding at December 31, 2023 and March 31, 2023, respectively

 

 

10,003

 

 

 

9,482

 

Treasury shares, 5,992,966 and 6,280,205 at December 31, 2023 and March 31, 2023, respectively

 

 

(1,798

)

 

 

(1,884

)

Capital in excess of stated value

 

 

91,173

 

 

 

52,978

 

Retained earnings

 

 

134,794

 

 

 

52,764

 

Accumulated other comprehensive loss

 

 

(3,899

)

 

 

(4,030

)

Total shareholders' equity

 

 

230,273

 

 

 

109,310

 

Total liabilities and shareholders' equity

 

$

346,658

 

 

$

243,036

 

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Nine Months Ended

 

 

 

December 31,

 

(In thousands)

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

Net income

 

$

83,234

 

 

$

10,507

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Gain on asset disposals

 

 

(1,145

)

 

 

 

Depreciation of fixed assets

 

 

3,042

 

 

 

1,371

 

Amortization of internal-use software and intangibles

 

 

1,120

 

 

 

1,326

 

Deferred income taxes

 

 

(66,506

)

 

 

(378

)

Share-based compensation

 

 

9,489

 

 

 

9,410

 

Changes in operating assets and liabilities

 

 

(10,855

)

 

 

(4,556

)

Net cash provided by operating activities

 

 

18,379

 

 

 

17,680

 

Investing activities

 

 

 

 

 

 

Capital expenditures

 

 

(7,658

)

 

 

(3,616

)

Additional investments in corporate-owned life insurance policies

 

 

(2

)

 

 

(27

)

Net cash used in investing activities

 

 

(7,660

)

 

 

(3,643

)

Financing activities

 

 

 

 

 

 

Payment of preferred stock dividends

 

 

(1,663

)

 

 

(1,836

)

Repurchase of common shares to satisfy employee tax withholding

 

 

(5,734

)

 

 

(2,924

)

Principal payments under long-term obligations

 

 

(2

)

 

 

(3

)

Net cash used in financing activities

 

 

(7,399

)

 

 

(4,763

)

Effect of exchange rate changes on cash

 

 

38

 

 

 

(427

)

Net increase in cash and cash equivalents

 

 

3,358

 

 

 

8,847

 

Cash and cash equivalents at beginning of period

 

 

112,842

 

 

 

96,971

 

Cash and cash equivalents at end of period

 

$

116,200

 

 

$

105,818

 

AGILYSYS, INC.

RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA

(UNAUDITED)

 

 

 

Three months ended

 

 

Nine months ended

 

(In thousands)

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

77,141

 

 

$

3,892

 

 

$

83,234

 

 

$

10,507

 

Income tax (benefit) provision

 

 

(68,043

)

 

 

678

 

 

 

(67,396

)

 

 

920

 

Income before taxes

 

 

9,098

 

 

 

4,570

 

 

 

15,838

 

 

 

11,427

 

Depreciation of fixed assets

 

 

909

 

 

 

437

 

 

 

3,042

 

 

 

1,371

 

Amortization of internal-use software and intangibles

 

 

343

 

 

 

430

 

 

 

1,120

 

 

 

1,326

 

Amortization of developed technology acquired

 

 

39

 

 

 

39

 

 

 

119

 

 

 

120

 

Interest income, net

 

 

(1,252

)

 

 

(704

)

 

 

(3,580

)

 

 

(1,186

)

EBITDA (a)

 

 

9,137

 

 

 

4,772

 

 

 

16,539

 

 

 

13,058

 

Share-based compensation

 

 

3,638

 

 

 

3,466

 

 

 

9,489

 

 

 

9,410

 

Other (gains) and charges, net

 

 

(924

)

 

 

93

 

 

 

45

 

 

 

374

 

Other non-operating expense (income)

 

 

(95

)

 

 

(384

)

 

 

15

 

 

 

(799

)

Legal settlements

 

 

 

 

 

104

 

 

 

 

 

 

104

 

Adjusted EBITDA (b)

 

$

11,756

 

 

$

8,051

 

 

$

26,088

 

 

$

22,147

 

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

 

(b) Adjusted EBITDA, a non-GAAP financial measure, is defined as net income before income taxes, interest income (net of interest expense), depreciation and amortization (including amortization of developed technology), and excluding charges relating to i) legal settlements, ii) other (gains) and charges, net, iii) share-based compensation, and iv) other non-operating (income) expense

AGILYSYS, INC.

RECONCILIATION OF NET INCOME 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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income attributable to common shareholders

 

$

76,855

 

 

$

3,433

 

 

$

82,030

 

 

$

9,130

 

Amortization of developed technology acquired

 

 

39

 

 

 

39

 

 

 

119

 

 

 

120

 

Amortization of internal-use software and intangibles

 

 

343

 

 

 

430

 

 

 

1,120

 

 

 

1,326

 

Share-based compensation

 

 

3,638

 

 

 

3,466

 

 

 

9,489

 

 

 

9,410

 

Other (gains) and charges, net

 

 

(924

)

 

 

93

 

 

 

45

 

 

 

374

 

Legal settlements

 

 

 

 

 

104

 

 

 

 

 

 

104

 

Tax events (a)

 

 

(69,644

)

 

 

 

 

 

(69,644

)

 

 

 

Income tax adjustments

 

 

(978

)

 

 

(913

)

 

 

(2,610

)

 

 

(2,280

)

Adjusted net income (b)

 

$

9,329

 

 

$

6,652

 

 

$

20,549

 

 

$

18,184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

25,808

 

 

 

24,703

 

 

 

25,256

 

 

 

24,651

 

Diluted weighted average shares outstanding

 

 

26,979

 

 

 

26,070

 

 

 

26,463

 

 

 

25,780

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted basic earnings per share (c)

 

$

0.36

 

 

$

0.27

 

 

$

0.81

 

 

$

0.74

 

Adjusted diluted earnings per share (c)

 

$

0.35

 

 

$

0.26

 

 

$

0.78

 

 

$

0.71

 

(a) Tax events include excess tax benefits or expense related to share-based compensation, release of valuation allowances against deferred income taxes, and changes in uncertain tax positions

 

(b) Adjusted net income, a non-GAAP financial measure, is defined as net income attributable to common shareholders before amortization expense (including amortization of developed technology), share-based compensation, other (gains) and charges, net, 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 and, as defined under (a) above, tax events

 

(c) Adjusted earnings per share, a non-GAAP financial measure, is defined as adjusted net income 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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net cash provided by operating activities

 

$

12,909

 

 

$

14,563

 

 

$

18,379

 

 

$

17,680

 

Capital expenditures

 

 

(1,656

)

 

 

(2,819

)

 

 

(7,658

)

 

 

(3,616

)

Free cash flow (a)

 

$

11,253

 

 

$

11,744

 

 

$

10,721

 

 

$

14,064

 

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

 

Investor Contact: Jessica Hennessy Senior Director Corporate Strategy & Investor Relations Agilysys, Inc. 770-810-6116 or investorrelations@agilysys.com

Source: Agilysys, Inc.

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