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Agilysys Fiscal 2023 Second Quarter Revenue Rises 26.0% to Record $47.7M

Includes Recurring Revenue of $29.0M and Subscription Revenue Growth of 28.6%

Quarter Positive Adjusted EBITDA of $7.4M and GAAP EPS of $0.12 Per Share

Fiscal 2023 Annual Guidance Reiterated at $190M to $195M Revenue and Greater Than 15% Adjusted EBITDA

Agilysys, Inc. (NASDAQ: AGYS), a leading global provider of hospitality software solutions that deliver High Return Hospitality, today reported operating results for its fiscal 2023 second quarter and period ended September 30, 2022.

Summary of Fiscal 2023 Second Quarter Financial Results

  • Total net revenue increased 26.0% to a record $47.7 million, compared to total net revenue of $37.9 million in the comparable prior-year period.
  • Recurring revenue (which comprised of subscription and maintenance charges) were a record $29.0 million, or 60.8% of total net revenue compared to $24.0 million, or 63.4% of total net revenue for the same period in fiscal 2022. Subscription revenue increased 28.6% year over year and comprised 48.9% of total recurring revenues compared to 46.0% of total recurring revenues in the second quarter of fiscal 2022.
  • Gross margin was 61.5% in the fiscal 2023 second quarter compared to 64.0% in the comparable prior-year period.
  • Net income attributable to common shareholders in the fiscal 2023 second quarter was $3.1 million, or $0.12 per diluted share compared to $0.5 million, or $0.02 per diluted share in the comparable prior-year period.
  • Adjusted EBITDA (non-GAAP) was $7.4 million compared to $6.3 million in the comparable prior-year period (please see reconciliation below).
  • Adjusted diluted EPS (non-GAAP) was $0.24 per share in the fiscal 2023 second quarter compared to $0.18 per share in the comparable prior-year period (please see reconciliation below).
  • Free cash flow (non-GAAP) in the fiscal 2023 second quarter was $2.3 million compared to free cash flow of $3.2 million in the fiscal 2022 second quarter (please see reconciliation below). Ending cash balance was $96.2 million, compared to ending cash balance of $97.0 million as of fiscal 2022 year-end.

Ramesh Srinivasan, President and CEO of Agilysys, commented, “We are pleased to announce our third consecutive record revenue quarter, driven by subscription revenue growth of 28.6% year over year to now constitute nearly half of total recurring revenue. The growth in subscription revenue highlights the shifting demands and imperative technology needs in the hospitality marketplace, which are growing despite the various macroeconomic challenges. Hospitality customers need now, more than ever before, world class software solutions to make operational management easier for their teams and create memorable experiences for their guests even when they are short of staff. We are now well placed to fulfill those needs in this huge total addressable market and see a clear growth path ahead of us even if the economic headlines are not great.

One-time revenue, consisting of product and services revenue, were below the previous sequential quarter but were 35% higher than the same quarter last fiscal year. Adjusted EBITDA improved compared to the previous quarter to just over 15% of revenue.

Virtually all our recently developed state-of-the-art cloud-native technology based software solutions have now been implemented in at least a handful of customer sites. Customers are seeing high value in our end-to-end innovative product suite offering. A strong surge in selling success during the months of August and September drove the combined product, services and recurring revenue backlog back close to record levels. We expect our business results during the second half of fiscal 2023 to be better than the first and remain well on target to achieve the guidance expectations provided at the beginning of the year."

Fiscal 2023 Outlook

We are reiterating full year fiscal 2023 guidance of revenue to be $190 to $195 million, inclusive of approximately 30% subscription revenue growth year over year, and Adjusted EBITDA of greater than 15% of revenue.

Dave Wood, Chief Financial Officer, commented, “We continue to make good progress towards our FY23 full year expectations and are pleased to report another record revenue and substantial subscription revenue growth quarter. The hospitality industry is making investments in technology and we have positioned ourselves to be a leading choice among operators. Profitability and free cash flow remain a priority as we make strategic investments in sales and marketing with a focus on medium and long term revenue and subscription growth.”

2023 Second Quarter Conference Call and Webcast

Agilysys is hosting a conference call and webcast today, October 25, 2022, at 4:30 p.m. ET. Both the call and the webcast are open to the public. Interested parties may register for the call at https://register.vevent.com/register/BIc5caabb8028c469696a4afbc87dc28da. After registration, an email confirmation with a personalized PIN will be provided with further access details. Please plan to register fifteen minutes prior to the presentation to ensure that you receive the confirmation and further instruction in a timely manner.

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, our revenue, subscription revenue and Adjusted EBITDA guidance for the 2023 fiscal year and statements we make regarding the hospitality industry's need for and investment in technology and our ability to continue profitable growth.

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 effect of the COVID-19 pandemic on our business and the success of any measures we have taken or may take in the future in response thereto; the impact other macroeconomic factors may have on the overall business environment 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 before amortization expense (including amortization of developed technology), share-based compensation, convertible preferred stock issuance costs, and one-time charges including severance and other charges, impairments and legal settlements, less the related income tax effect of these adjustments, as applicable, and 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 is well known for its long heritage of hospitality-focused technology innovation. The Company delivers modular and integrated software solutions and expertise to businesses seeking to maximize Return on Experience (ROE) through hospitality encounters that are both personal and profitable. Over time, customers achieve High Return Hospitality by consistently delighting guests, retaining staff and growing margins. Customers around the world include: branded and independent hotels; multi-amenity resort properties; 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. The Agilysys Hospitality Cloud™ combines core operational systems for property management (PMS), point-of-sale (POS) and Inventory and Procurement (I&P) with Experience Enhancers™ that meaningfully improve interactions for guests and for employees across dimensions such as digital access, mobile convenience, self-service control, personal choice, payment options, service coverage and real-time insights to improve decisions. Core solutions and Experience Enhancers are selectively combined in Hospitality Solution Studios™ tailored to specific hospitality settings and business needs. 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.

 

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three months ended

September 30,

 

Six months ended

September 30,

 

 

 

 

 

(In thousands, except per share data)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net revenue:

 

 

 

 

 

 

 

 

Products

 

$

10,548

 

 

$

7,299

 

 

$

21,594

 

 

$

16,143

 

Subscription and maintenance

 

 

29,036

 

 

 

24,027

 

 

 

56,763

 

 

 

47,234

 

Professional services

 

 

8,158

 

 

 

6,566

 

 

 

16,891

 

 

 

13,240

 

Total net revenue

 

 

47,742

 

 

 

37,892

 

 

 

95,248

 

 

 

76,617

 

Cost of goods sold:

 

 

 

 

 

 

 

 

Products

 

 

5,434

 

 

 

3,660

 

 

 

11,314

 

 

 

8,020

 

Subscription and maintenance

 

 

6,170

 

 

 

5,019

 

 

 

12,456

 

 

 

9,763

 

Professional services

 

 

6,773

 

 

 

4,958

 

 

 

13,618

 

 

 

9,711

 

Total cost of goods sold

 

 

18,377

 

 

 

13,637

 

 

 

37,388

 

 

 

27,494

 

Gross profit

 

 

29,365

 

 

 

24,255

 

 

 

57,860

 

 

 

49,123

 

Gross profit margin

 

 

61.5

%

 

 

64.0

%

 

 

60.7

%

 

 

64.1

%

Operating expenses:

 

 

 

 

 

 

 

 

Product development

 

 

12,577

 

 

 

11,379

 

 

 

24,134

 

 

 

22,864

 

Sales and marketing

 

 

5,320

 

 

 

3,423

 

 

 

10,733

 

 

 

6,475

 

General and administrative

 

 

7,570

 

 

 

6,523

 

 

 

14,922

 

 

 

13,526

 

Depreciation of fixed assets

 

 

461

 

 

 

548

 

 

 

934

 

 

 

1,114

 

Amortization of internal-use software and intangibles

 

 

443

 

 

 

345

 

 

 

896

 

 

 

810

 

Other charges

 

 

67

 

 

 

580

 

 

 

281

 

 

 

805

 

Legal settlements

 

 

 

 

 

337

 

 

 

 

 

 

367

 

Total operating expense

 

 

26,438

 

 

 

23,135

 

 

 

51,900

 

 

 

45,961

 

Operating income

 

 

2,927

 

 

 

1,120

 

 

 

5,960

 

 

 

3,162

 

Other (income) expense:

 

 

 

 

 

 

 

 

Interest income

 

 

(380

)

 

 

(14

)

 

 

(482

)

 

 

(35

)

Interest expense

 

 

1

 

 

 

1

 

 

 

1

 

 

 

2

 

Other (income) expense, net

 

 

(112

)

 

 

103

 

 

 

(414

)

 

 

 

Income before taxes

 

 

3,418

 

 

 

1,030

 

 

 

6,855

 

 

 

3,195

 

Income tax (benefit) expense

 

 

(158

)

 

 

48

 

 

 

240

 

 

 

241

 

Net income

 

$

3,576

 

 

$

982

 

 

$

6,615

 

 

$

2,954

 

Series A convertible preferred stock dividends

 

 

(459

)

 

 

(459

)

 

 

(918

)

 

 

(918

)

Net income attributable to common shareholders

 

$

3,117

 

 

$

523

 

 

$

5,697

 

 

$

2,036

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

24,652

 

 

 

24,451

 

 

 

24,625

 

 

 

24,233

 

 

 

 

 

 

 

 

 

 

Net income per share - basic:

 

$

0.13

 

 

$

0.02

 

 

$

0.23

 

 

$

0.08

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted

 

 

25,783

 

 

 

25,409

 

 

 

25,591

 

 

 

25,296

 

 

 

 

 

 

 

 

 

 

Net income per share - diluted:

 

$

0.12

 

 

$

0.02

 

 

$

0.22

 

 

$

0.08

 

 

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

(In thousands, except share data)

 

September 30, 2022

(Unaudited)

 

March 31,

2022

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

96,196

 

 

$

96,971

 

Accounts receivable, net of allowance for expected credit losses

of $452 and $318, respectively

 

 

21,030

 

 

 

25,175

 

Contract assets

 

 

3,712

 

 

 

1,669

 

Inventories

 

 

9,659

 

 

 

6,940

 

Prepaid expenses and other current assets

 

 

5,830

 

 

 

5,418

 

Total current assets

 

 

136,427

 

 

 

136,173

 

Property and equipment, net

 

 

6,288

 

 

 

6,345

 

Operating lease right-of-use assets

 

 

15,715

 

 

 

9,889

 

Goodwill

 

 

32,759

 

 

 

32,759

 

Intangible assets, net

 

 

19,492

 

 

 

20,178

 

Deferred income taxes, non-current

 

 

2,789

 

 

 

2,664

 

Other non-current assets

 

 

7,296

 

 

 

6,154

 

Total assets

 

$

220,766

 

 

$

214,162

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

10,428

 

 

$

9,766

 

Contract liabilities

 

 

37,560

 

 

 

46,095

 

Accrued liabilities

 

 

9,959

 

 

 

10,552

 

Operating lease liabilities, current

 

 

4,104

 

 

 

5,049

 

Finance lease obligations, current

 

 

3

 

 

 

4

 

Total current liabilities

 

 

62,054

 

 

 

71,466

 

Deferred income taxes, non-current

 

 

948

 

 

 

938

 

Operating lease liabilities, non-current

 

 

11,882

 

 

 

5,649

 

Finance lease obligations, non-current

 

 

 

 

 

2

 

Other non-current liabilities

 

 

3,829

 

 

 

3,304

 

Commitments and contingencies

 

 

 

 

Series A convertible preferred stock, no par value

 

 

35,459

 

 

 

35,459

 

Shareholders' equity:

 

 

 

 

Common shares, without par value, at $0.30 stated value; 80,000,000

shares authorized; 31,606,831 shares issued; and 25,058,198

and 24,728,532 shares outstanding at September 30, 2022

and March 31, 2022, respectively

 

 

9,482

 

 

 

9,482

 

Treasury shares, 6,548,633 and 6,878,299 at September 30, 2022

and March 31, 2022, respectively

 

 

(1,965

)

 

 

(2,063

)

Capital in excess of stated value

 

 

54,072

 

 

 

49,963

 

Retained earnings

 

 

45,715

 

 

 

40,018

 

Accumulated other comprehensive loss

 

 

(710

)

 

 

(56

)

Total shareholders' equity

 

 

106,594

 

 

 

97,344

 

Total liabilities and shareholders' equity

$

220,766

 

 

$

214,162

 

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Six Months Ended

 

 

September 30,

(In thousands)

 

 

2022

 

 

 

2021

 

 

 

 

 

 

Operating activities

 

 

 

 

Net income

 

$

6,615

 

 

$

2,954

 

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

 

 

 

 

Loss on disposal of property & equipment

 

 

 

 

 

123

 

Depreciation of fixed assets

 

 

934

 

 

 

1,114

 

Amortization of internal-use software and intangibles

 

 

896

 

 

 

810

 

Deferred income taxes

 

 

(306

)

 

 

(303

)

Share-based compensation

 

 

5,944

 

 

 

6,963

 

Changes in operating assets and liabilities

 

 

(10,966

)

 

 

12

 

Net cash provided by operating activities

 

 

3,117

 

 

 

11,673

 

Investing activities

 

 

 

 

Capital expenditures

 

 

(797

)

 

 

(786

)

Additional investments in corporate-owned life insurance policies

 

 

(2

)

 

 

(2

)

Net cash used in investing activities

 

 

(799

)

 

 

(788

)

Financing activities

 

 

 

 

Payment of preferred stock dividends

 

 

(918

)

 

 

(918

)

Repurchase of common shares to satisfy employee tax withholding

 

 

(1,455

)

 

 

(2,709

)

Principal payments under long-term obligations

 

 

(2

)

 

 

(11

)

Net cash used in financing activities

 

 

(2,375

)

 

 

(3,638

)

Effect of exchange rate changes on cash

 

 

(718

)

 

 

(38

)

Net (decrease) increase in cash and cash equivalents

 

 

(775

)

 

 

7,209

 

Cash and cash equivalents at beginning of period

 

 

96,971

 

 

 

99,180

 

Cash and cash equivalents at end of period

$

96,196

$

106,389

 

 

AGILYSYS, INC.

RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA

(UNAUDITED)

 

 

 

Three months ended

 

Six months ended

(In thousands)

 

September 30,

 

September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income

 

$

3,576

 

 

$

982

 

 

$

6,615

 

 

$

2,954

 

Income tax (benefit) expense

 

 

(158

)

 

 

48

 

 

 

240

 

 

 

241

 

Income before taxes

 

 

3,418

 

 

 

1,030

 

 

 

6,855

 

 

 

3,195

 

Depreciation of fixed assets

 

 

461

 

 

 

548

 

 

 

934

 

 

 

1,114

 

Amortization of internal-use software and intangibles

 

 

443

 

 

 

345

 

 

 

896

 

 

 

810

 

Amortization of developed technology acquired

 

 

40

 

 

 

 

 

 

81

 

 

 

 

Interest income, net

 

 

(379

)

 

 

(13

)

 

 

(481

)

 

 

(33

)

EBITDA (a)

 

 

3,983

 

 

 

1,910

 

 

 

8,285

 

 

 

5,086

 

Share-based compensation

 

 

3,456

 

 

 

3,342

 

 

 

5,944

 

 

 

6,963

 

Other charges

 

 

67

 

 

 

580

 

 

 

281

 

 

 

805

 

Other non-operating (income) expense

 

 

(112

)

 

 

103

 

 

 

(414

)

 

 

 

Legal settlements

 

 

 

 

 

337

 

 

 

 

 

 

367

 

Adjusted EBITDA (b)

 

$

7,394

 

 

$

6,272

 

 

$

14,096

 

 

$

13,221

 

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

(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 charges, 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

 

Six months ended

(In thousands, except per share data)

 

September 30,

 

September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income attributable to common shareholders

 

$

3,117

 

 

$

523

 

 

$

5,697

 

 

$

2,036

 

Amortization of developed technology acquired

 

 

40

 

 

 

 

 

 

81

 

 

 

 

Amortization of internal-use software and intangibles

 

 

443

 

 

 

345

 

 

 

896

 

 

 

810

 

Share-based compensation

 

 

3,456

 

 

 

3,342

 

 

 

5,944

 

 

 

6,963

 

Other charges

 

 

67

 

 

 

580

 

 

 

281

 

 

 

805

 

Legal settlements

 

 

 

 

 

337

 

 

 

 

 

 

367

 

Income tax adjustments

 

 

(841

)

 

 

(555

)

 

 

(1,367

)

 

 

(1,211

)

Adjusted net income (a)

 

$

6,282

 

 

$

4,572

 

 

$

11,532

 

 

$

9,770

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

24,652

 

 

 

24,451

 

 

 

24,625

 

 

 

24,233

 

Diluted weighted average shares outstanding

 

 

25,783

 

 

 

25,409

 

 

 

25,591

 

 

 

25,296

 

 

 

 

 

 

 

 

 

 

Adjusted basic earnings per share (b)

 

$

0.25

 

 

$

0.19

 

 

$

0.47

 

 

$

0.40

 

Adjusted diluted earnings per share (b)

 

$

0.24

 

 

$

0.18

 

 

$

0.45

 

 

$

0.39

 

(a) 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, and one-time charges including other charges 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. No income tax effect applies to one-time charges when a valuation allowance offsets their related deferred tax assets

(b) 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

 

Six months ended

(In thousands)

 

September 30,

 

September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net cash provided by operating activities

 

$

3,016

 

 

$

3,678

 

 

$

3,117

 

 

$

11,673

 

Capital expenditures

 

 

(699

)

 

 

(512

)

 

 

(797

)

 

 

(786

)

Free cash flow (a)

 

$

2,317

 

 

$

3,166

 

 

$

2,320

 

 

$

10,887

 

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

Contacts

Investor Contact:

Jessica Hennessy

Senior Director Corporate Strategy & Investor Relations

Agilysys, Inc.

770-810-6116 or investorrelations@agilysys.com

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