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Home Business Wire Agilysys Fiscal 2023 Third Quarter Revenue Rises 26.5% to Record $49.9M

Agilysys Fiscal 2023 Third Quarter Revenue Rises 26.5% to Record $49.9M

Includes Recurring Revenue of $30.2M and Subscription Revenue Growth of 28.8%

Quarter Positive Adjusted EBITDA of $8.1M and GAAP EPS of $0.13 Per Share

Raises Fiscal 2023 Annual Revenue Guidance to $195M to $198M; Reiterates Greater Than 15% Adjusted EBITDA

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 2023 third quarter and period ended December 31, 2022.

Summary of Fiscal 2023 Third Quarter Financial Results

  • Total net revenue increased 26.5% to a record $49.9 million, compared to total net revenue of $39.5 million in the comparable prior-year period.
  • Recurring revenue (comprised of subscription and maintenance charges) was a record $30.2 million, or 60.4% of total net revenue compared to $25.1 million, or 63.7% of total net revenue for the same period in fiscal 2022. Subscription revenue increased 28.8% year over year and was 49.8% of total recurring revenue compared to 46.4% of total recurring revenue in the third quarter of fiscal 2022.
  • Gross margin was 61.7% in the fiscal 2023 third quarter compared to 62.6% in the comparable prior-year period.
  • Net income attributable to common shareholders in the fiscal 2023 third quarter was $3.4 million, or $0.13 per diluted share compared to $1.1 million, or $0.04 per diluted share in the comparable prior-year period.
  • Adjusted EBITDA (non-GAAP) was $8.1 million compared to $6.6 million in the comparable prior-year period (reconciliation included in financial tables).
  • Adjusted diluted EPS (non-GAAP) was $0.26 per share in the fiscal 2023 third quarter compared to $0.19 per share in the comparable prior-year period (reconciliation included in financial tables).
  • Free cash flow (non-GAAP) in the fiscal 2023 third quarter was $11.7 million compared to free cash flow of $9.9 million in the fiscal 2022 third quarter (reconciliation included in financial tables). Ending cash balance was $105.8 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 another record revenue quarter. The positive momentum in our selling success, which started around August of calendar year 2022, has continued at a healthy pace. Our extraordinary investments in product innovation to create state-of-the-art cloud-native hospitality industry focused end-to-end software solutions over the past five plus years, combined with the current increasing focus on sales and marketing, continue to yield good results. In our opinion, this industry has been underserved for decades with respect to software innovations which are essential to better serve increasingly technology savvy guests and internal staff. We expect the current escalating demand for such solutions in the hospitality industry to overcome any macro-economic challenges during the short and medium term.

Subscription revenue grew 28.8% while one-time revenue, consisting of product and services revenue, was 38% higher than the comparable quarter last fiscal year. Adjusted EBITDA improved to 16.1% of revenue.

Even excluding the recent Marriott PMS selection announcement from both sales and backlog, this October to December Q3 fiscal 2023 was our best selling success quarter since the current management team took charge about six years ago. The continued selling success has driven the combined product, services and recurring revenue backlog back to record levels. We are well positioned to beat the full-year revenue guidance provided at the start of our fiscal 2023 year. We now expect fiscal 2023 full-year revenue to be in the range of $195 to $198 million and adjusted EBITDA levels to be slightly higher than 15% of revenue, in line with prior guidance.”

Fiscal 2023 Outlook

The Company announced it is raising full-year fiscal 2023 revenue guidance to be $195 to $198 million, inclusive of close to 30% subscription revenue growth year over year and is reiterating its Adjusted EBITDA guidance of greater than 15% of revenue.

Dave Wood, Chief Financial Officer, commented, “We are making excellent progress across all aspects of our business. Our recent investments in sales and marketing along with the value propositions of our cloud native solutions are putting us in a strong position to win a good portion of sales opportunities. We continue to grow subscription revenue at a consistent pace. Our focus remains on managing a profitable business while executing well on our strategies for organic, consistent revenue growth over the medium and long term.”

2023 Third Quarter Conference Call and Webcast

Agilysys is hosting a conference call and webcast today, January 24, 2023, 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/BI92e7fb3f342349caafb48725c1a83416. After registration, an email confirmation with a personalized PIN will be provided along with further access details. Please plan to register fifteen minutes prior to the presentation to receive confirmation and further instruction in a timely manner.

Interested parties can also access the conference call live on the Events and Presentations page of Agilysys.com. 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

December 31,

 

 

Nine months ended

December 31,

 

 

 

 

 

 

 

 

(In thousands, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

10,697

 

 

$

8,101

 

 

$

32,291

 

 

$

24,244

 

Subscription and maintenance

 

 

30,154

 

 

 

25,136

 

 

 

86,917

 

 

 

72,371

 

Professional services

 

 

9,069

 

 

 

6,223

 

 

 

25,960

 

 

 

19,463

 

Total net revenue

 

 

49,920

 

 

 

39,460

 

 

 

145,168

 

 

 

116,078

 

Cost of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

5,368

 

 

 

4,400

 

 

 

16,682

 

 

 

12,420

 

Subscription and maintenance

 

 

6,767

 

 

 

5,421

 

 

 

19,223

 

 

 

15,184

 

Professional services

 

 

7,009

 

 

 

4,923

 

 

 

20,627

 

 

 

14,634

 

Total cost of goods sold

 

 

19,144

 

 

 

14,744

 

 

 

56,532

 

 

 

42,238

 

Gross profit

 

 

30,776

 

 

 

24,716

 

 

 

88,636

 

 

 

73,840

 

Gross profit margin

 

 

61.7

%

 

 

62.6

%

 

 

61.1

%

 

 

63.6

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Product development

 

 

12,416

 

 

 

11,210

 

 

 

36,550

 

 

 

34,074

 

Sales and marketing

 

 

5,886

 

 

 

3,943

 

 

 

16,619

 

 

 

10,418

 

General and administrative

 

 

7,928

 

 

 

6,804

 

 

 

22,850

 

 

 

20,330

 

Depreciation of fixed assets

 

 

437

 

 

 

495

 

 

 

1,371

 

 

 

1,609

 

Amortization of internal-use software and intangibles

 

 

430

 

 

 

267

 

 

 

1,326

 

 

 

1,077

 

Other charges

 

 

93

 

 

 

381

 

 

 

374

 

 

 

1,187

 

Legal settlements

 

 

104

 

 

 

4

 

 

 

104

 

 

 

371

 

Total operating expense

 

 

27,294

 

 

 

23,104

 

 

 

79,194

 

 

 

69,066

 

Operating income

 

 

3,482

 

 

 

1,612

 

 

 

9,442

 

 

 

4,774

 

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(704

)

 

 

(10

)

 

 

(1,186

)

 

 

(45

)

Interest expense

 

 

 

 

 

4

 

 

 

 

 

 

5

 

Other (income) expense, net

 

 

(384

)

 

 

52

 

 

 

(799

)

 

 

53

 

Income before taxes

 

 

4,570

 

 

 

1,566

 

 

 

11,427

 

 

 

4,761

 

Income tax expense

 

 

678

 

 

 

24

 

 

 

920

 

 

 

265

 

Net income

 

$

3,892

 

 

$

1,542

 

 

$

10,507

 

 

$

4,496

 

Series A convertible preferred stock dividends

 

 

(459

)

 

 

(459

)

 

 

(1,377

)

 

 

(1,377

)

Net income attributable to common shareholders

 

$

3,433

 

 

$

1,083

 

 

$

9,130

 

 

$

3,119

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

24,703

 

 

 

24,477

 

 

 

24,651

 

 

 

24,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share – basic:

 

$

0.14

 

 

$

0.04

 

 

$

0.37

 

 

$

0.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – diluted

 

 

26,070

 

 

 

25,392

 

 

 

25,780

 

 

 

25,327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share – diluted:

 

$

0.13

 

 

$

0.04

 

 

$

0.35

 

 

$

0.12

 

 

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

(In thousands, except share data)

 

December 31, 2022

(Unaudited)

 

 

March 31,

2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

105,818

 

 

$

96,971

 

Accounts receivable, net of allowance for expected credit losses

of $655 and $318, respectively

 

 

31,953

 

 

 

25,175

 

Contract assets

 

 

2,531

 

 

 

1,669

 

Inventories

 

 

10,349

 

 

 

6,940

 

Prepaid expenses and other current assets

 

 

8,432

 

 

 

5,418

 

Total current assets

 

 

159,083

 

 

 

136,173

 

Property and equipment, net

 

 

9,696

 

 

 

6,345

 

Operating lease right-of-use assets

 

 

14,823

 

 

 

9,889

 

Goodwill

 

 

33,569

 

 

 

32,759

 

Intangible assets, net

 

 

19,165

 

 

 

20,178

 

Deferred income taxes, non-current

 

 

2,380

 

 

 

2,664

 

Other non-current assets

 

 

7,445

 

 

 

6,154

 

Total assets

 

$

246,161

 

 

$

214,162

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

9,752

 

 

$

9,766

 

Contract liabilities

 

 

55,915

 

 

 

46,095

 

Accrued liabilities

 

 

11,728

 

 

 

10,552

 

Operating lease liabilities, current

 

 

3,734

 

 

 

5,049

 

Finance lease obligations, current

 

 

3

 

 

 

4

 

Total current liabilities

 

 

81,132

 

 

 

71,466

 

Deferred income taxes, non-current

 

 

1,679

 

 

 

938

 

Operating lease liabilities, non-current

 

 

12,509

 

 

 

5,649

 

Finance lease obligations, non-current

 

 

 

 

 

2

 

Other non-current liabilities

 

 

3,929

 

 

 

3,304

 

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 25,184,727

and 24,728,532 shares outstanding at December 31, 2022

and March 31, 2022, respectively

 

 

9,482

 

 

 

9,482

 

Treasury shares, 6,422,104 and 6,878,299 at December 31, 2022

and March 31, 2022, respectively

 

 

(1,926

)

 

 

(2,063

)

Capital in excess of stated value

 

 

56,166

 

 

 

49,963

 

Retained earnings

 

 

49,148

 

 

 

40,018

 

Accumulated other comprehensive loss

 

 

(958

)

 

 

(56

)

Total shareholders’ equity

 

 

111,912

 

 

 

97,344

 

Total liabilities and shareholders’ equity

 

$

246,161

 

 

$

214,162

 

 

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Nine Months Ended

 

 

 

December 31,

 

(In thousands)

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

Net income

 

$

10,507

 

 

$

4,496

 

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

 

 

 

 

 

 

Loss on disposal of property & equipment

 

 

 

 

 

123

 

Depreciation of fixed assets

 

 

1,371

 

 

 

1,609

 

Amortization of internal-use software and intangibles

 

 

1,326

 

 

 

1,077

 

Deferred income taxes

 

 

(378

)

 

 

(491

)

Share-based compensation

 

 

9,410

 

 

 

10,802

 

Changes in operating assets and liabilities

 

 

(4,556

)

 

 

4,199

 

Net cash provided by operating activities

 

 

17,680

 

 

 

21,815

 

Investing activities

 

 

 

 

 

 

Capital expenditures

 

 

(3,616

)

 

 

(1,078

)

Additional investments in corporate-owned life insurance policies

 

 

(27

)

 

 

(3

)

Net cash used in investing activities

 

 

(3,643

)

 

 

(1,081

)

Financing activities

 

 

 

 

 

 

Payment of preferred stock dividends

 

 

(1,836

)

 

 

(1,836

)

Repurchase of common shares to satisfy employee tax withholding

 

 

(2,924

)

 

 

(2,902

)

Principal payments under long-term obligations

 

 

(3

)

 

 

(16

)

Net cash used in financing activities

 

 

(4,763

)

 

 

(4,754

)

Effect of exchange rate changes on cash

 

 

(427

)

 

 

(38

)

Net increase in cash and cash equivalents

 

 

8,847

 

 

 

15,942

 

Cash and cash equivalents at beginning of period

 

 

96,971

 

 

 

99,180

 

Cash and cash equivalents at end of period

 

$

105,818

 

 

$

115,122

 

 

AGILYSYS, INC.

RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA

(UNAUDITED)

 

 

 

Three months ended

 

 

Nine months ended

 

(In thousands)

 

December 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

3,892

 

 

$

1,542

 

 

$

10,507

 

 

$

4,496

 

Income tax expense

 

 

678

 

 

 

24

 

 

 

920

 

 

 

265

 

Income before taxes

 

 

4,570

 

 

 

1,566

 

 

 

11,427

 

 

 

4,761

 

Depreciation of fixed assets

 

 

437

 

 

 

495

 

 

 

1,371

 

 

 

1,609

 

Amortization of internal-use software and intangibles

 

 

430

 

 

 

267

 

 

 

1,326

 

 

 

1,077

 

Amortization of developed technology acquired

 

 

39

 

 

 

 

 

 

120

 

 

 

 

Interest income, net

 

 

(704

)

 

 

(6

)

 

 

(1,186

)

 

 

(40

)

EBITDA (a)

 

 

4,772

 

 

 

2,322

 

 

 

13,058

 

 

 

7,407

 

Share-based compensation

 

 

3,466

 

 

 

3,839

 

 

 

9,410

 

 

 

10,802

 

Other charges

 

 

93

 

 

 

381

 

 

 

374

 

 

 

1,187

 

Other non-operating (income) expense

 

 

(384

)

 

 

52

 

 

 

(799

)

 

 

53

 

Legal settlements

 

 

104

 

 

 

4

 

 

 

104

 

 

 

371

 

Adjusted EBITDA (b)

 

$

8,051

 

 

$

6,598

 

 

$

22,147

 

 

$

19,820

 

 

(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 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

 

 

Nine months ended

 

(In thousands, except per share data)

 

December 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income attributable to common shareholders

 

$

3,433

 

 

$

1,083

 

 

$

9,130

 

 

$

3,119

 

Amortization of developed technology acquired

 

 

39

 

 

 

 

 

 

120

 

 

 

 

Amortization of internal-use software and intangibles

 

 

430

 

 

 

267

 

 

 

1,326

 

 

 

1,077

 

Share-based compensation

 

 

3,466

 

 

 

3,839

 

 

 

9,410

 

 

 

10,802

 

Other charges

 

 

93

 

 

 

381

 

 

 

374

 

 

 

1,187

 

Legal settlements

 

 

104

 

 

 

4

 

 

 

104

 

 

 

371

 

Income tax adjustments

 

 

(913

)

 

 

(657

)

 

 

(2,280

)

 

 

(1,868

)

Adjusted net income (a)

 

$

6,652

 

 

$

4,917

 

 

$

18,184

 

 

$

14,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

24,703

 

 

 

24,477

 

 

 

24,651

 

 

 

24,315

 

Diluted weighted average shares outstanding

 

 

26,070

 

 

 

25,409

 

 

 

25,780

 

 

 

25,296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted basic earnings per share (b)

 

$

0.27

 

 

$

0.20

 

 

$

0.74

 

 

$

0.60

 

Adjusted diluted earnings per share (b)

 

$

0.26

 

 

$

0.19

 

 

$

0.71

 

 

$

0.58

 

 

(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

 

 

Nine months ended

 

(In thousands)

 

December 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net cash provided by operating activities

 

$

14,563

 

 

$

10,142

 

 

$

17,680

 

 

$

21,815

 

Capital expenditures

 

 

(2,819

)

 

 

(292

)

 

 

(3,616

)

 

 

(1,078

)

Free cash flow (a)

 

$

11,744

 

 

$

9,850

 

 

$

14,064

 

 

$

20,737

 

 

(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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