Agilysys Reports Fiscal 2022 Third Quarter Revenue Of $39.5M

·16 min read

Reports Record Recurring Revenue of $25.1M

Year Over Year Subscription Revenue Growth of 25% To A Record $11.7M

Reports Positive GAAP EPS of $0.04 With Quarterly Free Cash Flow of $9.9M

ALPHARETTA, Ga., January 25, 2022--(BUSINESS WIRE)--Agilysys, Inc. (Nasdaq: AGYS), a leading global provider of next-generation SaaS and on-premise hospitality software solutions and services, today reported operating results for its fiscal 2022 third quarter ended December 31, 2021.

Summary of Fiscal 2022 Third Quarter Financial Results

  • Total net revenue was $39.5 million, compared to net revenue of $36.7 million and $42.0 million in the third quarters of fiscal 2021 and 2020, respectively.

  • Recurring revenues (which are comprised of support, maintenance and subscription services) for the fiscal third quarter were $25.1 million or 63.7% of total net revenue compared to $22.8 million or 62.3% of total net revenue and $21.0 million or 49.9% of total net revenue for the third quarters of fiscal 2021 and 2020, respectively. Subscription revenues increased 24.9% over fiscal 2021 third quarter compared to an increase of 18.1% fiscal 2021 over fiscal 2020 third quarter. Subscription revenues comprised 46.4% of total recurring revenues compared to 40.9% and 37.7% for the third quarters of fiscal 2021 and 2020, respectively.

  • Gross margin was 62.6% compared to 66.0% and 50.2% in the third quarters of fiscal 2021 and 2020, respectively.

  • Net income attributable to common shareholders in the fiscal 2022 third quarter was $1.1 million, or $0.04 per diluted share compared to a net loss of $(2.5) million or $(0.11) per diluted share and $(2.6) million or $(0.11) per diluted share for the third quarters of fiscal 2021 and 2020, respectively.

  • Adjusted diluted EPS (non-GAAP) was $0.19 compared to $0.23 and $0.05 per share in the third quarters of fiscal 2021 and 2020 respectively (see reconciliation below).

  • Adjusted EBITDA (non-GAAP) was $6.6 million, compared to $7.6 million and $3.2 million in the third quarters of fiscal 2021 and 2020 respectively (see reconciliation below).

  • Free cash flow (non-GAAP) in the fiscal 2022 third quarter was $9.9 million compared to $7.8 million and $3.0 million in the fiscal third quarters of 2021 and 2020 respectively (see reconciliation below). Ending cash balance was $115.1 million, compared to ending cash balance of $99.2 million as of fiscal 2021 year-end.

Ramesh Srinivasan, President and CEO of Agilysys, commented, "We are pleased with our continued consistent growth in subscription revenue despite partial to high business environment challenges across Asia, Europe, managed food services, cruise ships and hotel chains. We are happy to have crossed the $100M total annual recurring revenue exit run-rate milestone. With only three quarters completed, this fiscal year is already a record year with respect to sales bookings pertaining to subscription fees measured in Annual Contract Value (ACV) terms. Among other things, that has a lot to do with increasing momentum with property management system (PMS) products and related software modules. The hardware revenue related supply chain situation improved this quarter and should make more progress during Q4. Services revenue continues to be challenged by delayed projects which have further increased services and subscription revenue backlog.

The previously announced acquisition of ResortSuite closed early January as expected. Only a handful of technology providers currently have the experience and expertise to offer robust, comprehensive and end-to-end integrated property management solutions and the merger of two of them – Agilysys and ResortSuite – is progressing well on all fronts, among internal teams, customers and the overall hospitality industry community.

Q3 fiscal 2022 was a record quarter with respect to both subscription and overall recurring revenue. We expect the current business environment pressures on one-time hardware product and services revenue to get better soon. We expect Q4 fiscal 2022 to be a record high for overall total revenue getting us to the low end of fiscal 2022 annual guidance with profitability remaining at Adjusted EBITDA being slightly above 15% of revenue."

Fiscal 2022 Outlook
Agilysys continues to monitor the impact of COVID-19 on the hospitality industry with our primary focus being the safety of our employees and customers as we manage through these unprecedented times. We expect overall revenue during Q4 to be at record levels and total fiscal 2022 annual revenue to be at the low end of the guidance provided with Adjusted EBITDA being slightly better than 15% of revenue as stated before.

Dave Wood, Chief Financial Officer, commented, "We remain encouraged with the results of fiscal year 2022 with profitability and recurring revenue growth continuing as significant strengths. Q3 fiscal 2022 was our highest top line revenue quarter since the pandemic started close to two years ago. Supply chain and labor shortages continue to be a challenge to top line revenue. In addition, a recent accelerating shift from on premise to SaaS based solutions, a welcome trend for our long-term business health, has created a drag on top line revenue sooner than we anticipated. Our investment in building world class SaaS products through the downturn in the markets we serve is driving the record backlog levels we have seen during the last few quarters. As the industry continues to recover and the residual challenges are addressed, we expect our increasing investments in sales and marketing to result in sustained revenue growth and profitability levels."

2022 Third Quarter Conference Call and Webcast
Agilysys is hosting a conference call and webcast today, January 25, 2022, at 4:30 p.m. ET. Both the call and the webcast are open to the public. The conference call number is 224-357-2393 (domestic or international); and the conference ID number is 1964765. Please call five minutes prior to the presentation to ensure that you are connected.

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 and adjusted EBITDA guidance for the 2022 fourth quarter and fiscal year, statements we make regarding the integration of the ResortSuite acquisition, the timing of improvements to the current business environment pressures on one-time hardware product and services revenue, and expectations of future revenue growth and profitability resulting from increased investments in sales and marketing.

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; 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 EBITDA, adjusted net income, adjusted basic earnings per share, adjusted diluted earnings per share, and free cash flow. 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. Free cash flow is defined as net cash provided by operating activities, less capital expenditures.

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 has been a leader in hospitality software for more than 40 years, delivering innovative cloud-native SaaS and on-premise guest-centric technology solutions for gaming, hotels, resorts and cruise, corporate foodservice management, restaurants, universities, stadia and healthcare. Agilysys offers the most comprehensive software solutions in the hospitality industry, including point-of-sale (POS), property management (PMS), inventory and procurement, payments, and related applications, to manage the entire guest journey. Agilysys is also known for its world class customer-centric service. During recent years, Agilysys has made major investments in R&D and has successfully modernized virtually all its longstanding trusted software solutions. Some of the largest hospitality companies around the world use Agilysys solutions to help improve guest loyalty, drive revenue growth and increase operational efficiencies. Agilysys operates across North America, Europe, the Middle East, Asia-Pacific and India with headquarters located in Alpharetta, GA. For more information visit Agilysys.com.

- Financial tables follow -

AGILYSYS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

Three Months Ended

December 31,

Nine Months Ended

December 31,

(In thousands, except share data)

2021

2020

2021

2020

Net revenue:

Products

$

8,101

$

7,599

$

24,244

$

19,396

Support, maintenance and subscription services

25,136

22,846

72,371

65,647

Professional services

6,223

6,230

19,463

15,797

Total net revenue

39,460

36,675

116,078

100,840

Cost of goods sold:

Products

4,400

3,660

12,420

9,625

Support, maintenance and subscription services

5,421

4,655

15,184

13,515

Professional services

4,923

4,164

14,634

11,802

Total cost of goods sold

14,744

12,479

42,238

34,942

Gross profit

24,716

24,196

73,840

65,898

Gross profit margin

62.6

%

66.0

%

63.6

%

65.3

%

Operating expenses:

Product development

11,210

12,376

34,074

28,900

Sales and marketing

3,943

3,327

10,418

8,278

General and administrative

6,804

7,509

20,330

18,446

Depreciation of fixed assets

495

722

1,609

2,160

Amortization of internal-use software

267

521

1,077

1,490

Severance and other charges

381

1,552

1,187

2,762

Legal settlements, net

4

-

371

50

Total operating expense

23,104

26,007

69,066

62,086

Operating income (loss)

1,612

(1,811

)

4,774

3,812

Other (income) expense:

Interest income

(10

)

(27

)

(45

)

(76

)

Interest expense

4

9

5

13

Other expense, net

52

95

53

284

Income (loss) before taxes

1,566

(1,888

)

4,761

3,591

Income tax expense

24

182

265

311

Net income (loss)

$

1,542

$

(2,070

)

$

4,496

$

3,280

Series A convertible preferred stock issuance costs

-

-

-

(1,031

)

Series A convertible preferred stock dividends

(459

)

(459

)

(1,377

)

(1,117

)

Net income (loss) attributable to common shareholders

$

1,083

$

(2,529

)

$

3,119

$

1,132

Weighted average shares outstanding - basic

24,477

23,429

24,315

23,419

Net income (loss) per share - basic:

$

0.04

$

(0.11

)

$

0.13

$

0.05

Weighted average shares outstanding - diluted

25,392

23,429

25,327

23,903

Net income (loss) per share - diluted:

$

0.04

$

(0.11

)

$

0.12

$

0.05

AGILYSYS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(In thousands, except share data)

December 31, 2021

(Unaudited)

March 31,

2021

ASSETS

Current assets:

Cash and cash equivalents

$

115,122

$

99,180

Accounts receivable, net of allowance for expected credit losses of $717 and $1,220, respectively

24,957

25,732

Contract assets

1,628

2,364

Inventories

3,256

1,177

Prepaid expenses and other current assets

4,651

4,797

Total current assets

149,614

133,250

Property and equipment, net

6,788

8,789

Operating lease right-of-use assets

9,681

12,210

Goodwill

19,622

19,622

Intangible assets, net

8,400

8,400

Deferred income taxes, non-current

2,281

1,802

Other non-current assets

5,952

5,800

Total assets

$

202,338

$

189,873

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

8,035

$

6,346

Contract liabilities

43,193

38,394

Accrued liabilities

8,385

11,233

Operating lease liabilities, current

4,531

5,009

Finance lease obligations, current

7

19

Total current liabilities

64,151

61,001

Deferred income taxes, non-current

937

923

Operating lease liabilities, non-current

6,187

8,597

Finance lease obligations, non-current

3

6

Other non-current liabilities

3,647

4,011

Commitments and contingencies

Series A convertible preferred stock, no par value

35,000

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 24,712,343 and 24,010,727 shares outstanding at December 31, 2021 and March 31, 2021, respectively

9,482

9,482

Treasury shares, 6,894,488 and 7,596,104 at December 31, 2021 and March 31, 2021, respectively

(2,068

)

(2,278

)

Capital in excess of stated value

46,436

37,257

Retained earnings

38,495

35,376

Accumulated other comprehensive income

68

39

Total shareholders' equity

92,413

79,876

Total liabilities and shareholders' equity

$

202,338

$

189,873

AGILYSYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

Nine Months Ended

December 31,

(In thousands)

2021

2020

Operating activities

Net income

$

4,496

$

3,280

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

Loss on disposal of property & equipment

123

Depreciation

1,609

2,160

Amortization of internal-use software

1,077

1,490

Deferred income taxes

(491

)

(499

)

Share-based compensation

10,802

9,312

Changes in operating assets and liabilities

4,199

(659

)

Net cash provided by operating activities

21,815

15,084

Investing activities

Capital expenditures

(1,078

)

(1,076

)

Additional investments in corporate-owned life insurance policies

(3

)

(2

)

Net cash used in investing activities

(1,081

)

(1,078

)

Financing activities

Repurchase of common shares to satisfy employee tax withholding

(2,902

)

(1,069

)

Series A convertible preferred stock issuance proceeds, net of issuance costs

33,969

Payment of preferred stock dividends

(1,836

)

(1,117

)

Principal payments under long-term obligations

(16

)

(18

)

Net cash (used in) provided by financing activities

(4,754

)

31,765

Effect of exchange rate changes on cash

(38

)

184

Net increase in cash and cash equivalents

15,942

45,955

Cash and cash equivalents at beginning of period

99,180

46,653

Cash and cash equivalents at end of period

$

115,122

$

92,608

AGILYSYS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA
(UNAUDITED)

Three months ended

Nine months ended

(In thousands)

December 31,

December 31,

2021

2020

2021

2020

Net income (loss)

$

1,542

$

(2,070

)

$

4,496

$

3,280

Income tax expense

24

182

265

311

Income before taxes

1,566

(1,888

)

4,761

3,591

Depreciation of fixed assets

495

722

1,609

2,160

Amortization of internal-use software

267

521

1,077

1,490

Interest (income), net

(6

)

(18

)

(40

)

(63

)

EBITDA (a)

2,322

(663

)

7,407

7,178

Share-based compensation

3,839

6,630

10,802

9,312

Severance and other charges

381

1,552

1,187

2,762

Other non-operating expense

52

95

53

284

Legal settlements, net

4

371

50

Adjusted EBITDA (b)

$

6,598

$

7,614

$

19,820

$

19,586

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

AGILYSYS, INC.
RECONCILIATION OF NET INCOME (LOSS) 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,

2021

2020

2021

2020

Net income (loss) attributable to common shareholders

$

1,083

$

(2,529

)

$

3,119

$

1,132

Amortization of internal-use software

267

521

1,077

1,490

Share-based compensation

3,839

6,630

10,802

9,312

Series A convertible preferred stock issuance costs

1,031

Severance and other charges, net

381

1,552

1,187

2,762

Legal settlements, net

4

371

50

Income tax adjustments

(657

)

(640

)

(1,868

)

(1,522

)

Adjusted net income (a)

$

4,917

$

5,534

$

14,688

$

14,255

Basic weighted average shares outstanding

24,477

23,429

24,315

23,419

Diluted weighted average shares outstanding

25,392

23,966

25,327

23,903

Adjusted basic earnings per share (b)

$

0.20

$

0.24

$

0.60

$

0.61

Adjusted diluted earnings per share (b)

$

0.19

$

0.23

$

0.58

$

0.60

(a) Adjusted net income, a non-GAAP financial measure, is defined as net income (loss) attributable to common shareholders before amortization expense, share-based compensation, and one-time charges including severance and 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

Nine months ended

(In thousands)

December 31,

December 31,

2021

2020

2021

2020

Net cash provided by operating activities

$

10,142

$

8,442

$

21,815

$

15,084

Capital expenditures

(292

)

(605

)

(1,078

)

(1,076

)

Free cash flow (a)

$

9,850

$

7,837

$

20,737

$

14,008

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20220125006094/en/

Contacts

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

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