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| 8-K - 8-K - AGILYSYS INC | a8-k_q3fy14earningsrelease.htm |
EXHIBIT 99.1
AGILYSYS REPORTS THIRD QUARTER REVENUE OF $26.0 MILLION INCLUSIVE OF 11% GROWTH IN RECURRING REVENUE TO $13.6 MILLION
Third Quarter Adjusted Operating Income from Continuing Operations Rises $0.8 Million to $0.3 Million; Reports Adjusted and GAAP Earnings per Diluted Share from Continuing Operations of $0.01 and a Loss of $(0.09), Respectively
Alpharetta, GA - January 30, 2014 - Agilysys, Inc. (Nasdaq: AGYS), a leading developer and provider of innovative software enabled solutions for the hospitality industry, today reported operating results for its fiscal 2014 third quarter.
All financial results presented below reflect the classification of the Company’s former Retail Solutions Group (“RSG”) as a discontinued operation following the sale of this business on July 1, 2013.
Summary of Fiscal 2014 Third Quarter Financial Results
• | Total net revenue of $26.0 million compares to total net revenue of $28.2 million in the comparable prior-year period, a decrease of 8%, driven primarily by a decrease in sales of lower margin remarketed products. |
• | Recurring revenues (which are comprised of support, maintenance and subscription services) for the quarter were $13.6 million, an increase of 11% over the same period in fiscal 2013. |
• | Gross margin was 60% in the fiscal 2014 third quarter, compared to 55% in the prior-year period. |
• | Adjusted operating income (non-GAAP) from continuing operations (excluding stock-based compensation, amortization of intangibles and other one-time items) increased $0.8 million year over year to $0.3 million from an adjusted operating loss from continuing operations of $(0.5) million in the year-ago period (see reconciliation below). |
• | Adjusted income (non-GAAP) from continuing operations grew $1.0 million to $0.2 million, or $0.01 per diluted share, compared with an adjusted net loss of $0.8 million, or $(0.03) per share, last year (see reconciliation below). |
• | Net loss in the period was $(2.7) million, or $(0.12) per diluted share, compared to net income of $0.5 million, or $0.02, in the prior-year period. |
James Dennedy, President and CEO of Agilysys, commented, “Our fiscal 2014 third quarter and year-to-date results demonstrate Agilysys’ continued ability to grow higher-margin recurring revenue as we focus on providing innovative solutions and exceptional customer support to clients across the hospitality industry. Our current products, including several recently introduced mobile products, continue to change the way the hospitality industry engages with guests, enabling our customers to deliver higher quality customer experiences and to operate their businesses more efficiently.
“In addition, we continue to see solid commercial success from our capital investments and we have delivered several important new innovations in this fiscal year. Our ongoing investments in current products and in our next generation products will help accelerate our revenue growth, drive improvements in operating leverage, and provide higher operating and net income, resulting in enhanced shareholder value.”
1
Summary of Fiscal 2014 Nine Months Financial Results
• | Total net revenue for the period increased $2.3 million, or 3%, to $77.1 million, compared with $74.8 million in the comparable prior-year period. Product growth was impacted by the above noted lower margin remarketed product sales which occurred in the third fiscal quarter of the prior year and did not repeat in the current period. |
• | Recurring revenues (which are comprised of support, maintenance and subscription services) for the period were $39.9 million, an increase of 8% over the first nine months of fiscal 2013. |
• | Gross margin of 64% compares to gross margin of 59% in the prior-year period. |
• | Adjusted operating income (non-GAAP) from continuing operations (excluding stock-based compensation, amortization of intangibles and other one-time items) for the first nine months of fiscal 2014 increased year over year by $4.1 million to $2.6 million, from an adjusted operating loss of $(1.5) million in the comparable year-ago period (see reconciliation below). |
• | Adjusted income (non-GAAP) from continuing operations grew to $2.4 million, or $0.11 per diluted share, compared with an adjusted net loss of $(2.0) million, or $(0.09) per share, in the first nine months of fiscal 2013 (see reconciliation below). |
• | Net income was $19.1 million, or $0.86 per share, in the first nine months of fiscal 2014 compared with a net loss of $1.6 million, or $(0.07) per share, in the year-ago period. |
Janine Seebeck, Chief Financial Officer, added, “Our performance so far in fiscal 2014 reflects our success in addressing the needs of the hospitality industry with higher-margin solutions as well as our prudent fiscal discipline. Through the first nine months of fiscal 2014 we have improved gross margin by 470 basis points and generated positive adjusted operating income in all three quarters, leading to a $4.1 million improvement in adjusted operating income from continuing operations. We have achieved these improvements even as we continue to invest above historical levels as a percentage of revenue in our current and future products. Our healthy balance sheet with nearly $100 million in cash and no debt, provides us with the financial flexibility to continue investing in long-term growth through the development of our next generation platform as well as through potential acquisitions that would help grow our addressable markets.”
Unaudited pro forma condensed consolidated statements of operations for the three month periods ended June 30, 2012, September 30, 2012, December 31, 2012 and March 31, 2013, as well as for the fiscal year ended March 31, 2013, are provided at the end of this press release. These statements of operations give effect to the sale of the Company’s Retail Solutions Group and adjustments as if they had occurred on April 1, 2012, and carried forward through the latest period. The unaudited pro forma condensed consolidated statements of operations should be read in conjunction with the historical audited consolidated financial statements and notes thereto included in the Company’s 2013 Annual Report.
2014 Third Quarter Conference Call and Webcast
Agilysys is hosting a conference call and webcast today, January 30, 2014, beginning 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). 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 http://agilysys.com/home/InvestorRelations/EventPresentation.htm. 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 and other publicly available documents, including the documents incorporated herein and therein by reference, contain, and our officers and representatives may from time to time make, "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, such as the statements
made in the second paragraph following the bullets under the heading “Summary of Fiscal 2014 Third Quarter Financial Results” above and the last sentence in the first paragraph following the bullets under the heading “Summary of Fiscal 2014 Nine Months Financial Results” above. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in Item 1A of the company’s Annual Report for the fiscal year ended March 31, 2013. Copies are available from the SEC or the Agilysys website. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events or otherwise.
Use of Non-GAAP Financial Information
To supplement the unaudited condensed 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 adjusted operating income (loss) from continuing operations, adjusted net income (loss), adjusted net income (loss) per share from continuing operations and adjusted cash flow from continuing operations. Management believes that such information can enhance investors' understanding of the company's ongoing operations. See the accompanying tables below for reconciliations of adjusted operating income (loss) from continuing operations and adjusted net income (loss) from continuing operations, and adjusted cash flow from continuing operations to the comparable GAAP measures.
About Agilysys
Agilysys is a leading developer and marketer of proprietary enterprise software, services and solutions to the hospitality industry. The company specializes in market-leading point-of-sale, property management, inventory & procurement and mobile & wireless solutions that are designed to streamline operations, improve efficiency and enhance the guest experience. Agilysys serves casinos, resorts, hotels, foodservice venues, stadiums and cruise lines. Agilysys operates extensively throughout North America, Europe and Asia, with corporate services located in Alpharetta, GA, EMEA headquarters in Cheshire, UK, and APAC offices in Singapore, Hong Kong and Malaysia. For more information, visit www.agilysys.com.
# # #
Investor Contact:
Janine Seebeck
Chief Financial Officer
Agilysys, Inc.
770-810-7800 or investorrelations@agilysys.com
Richard Land, Norberto Aja, Jim Leahy
JCIR
212-835-8500 or agys@jcir.com
- Financial tables follow -
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except share data) | December 31, | March 31, | |||||
2013 | 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 96,357 | $ | 82,931 | |||
Accounts receivable, net of allowance of $971 and $786, respectively | 24,459 | 17,892 | |||||
Inventories | 2,408 | 1,709 | |||||
Prepaid expenses | 3,103 | 3,167 | |||||
Other current assets | 1,649 | 671 | |||||
Current assets - discontinued operations | — | 40,007 | |||||
Total current assets | 127,976 | 146,377 | |||||
Property and equipment, net | 13,850 | 13,855 | |||||
Goodwill | 17,747 | 14,128 | |||||
Intangible assets, net | 10,947 | 11,283 | |||||
Capitalized software development, net | 13,613 | 5,596 | |||||
Other non-current assets | 3,626 | 4,179 | |||||
Non-current assets - discontinued operations | — | 2,162 | |||||
Total assets | $ | 187,759 | $ | 197,580 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 11,341 | $ | 10,427 | |||
Deferred revenue | 19,958 | 20,461 | |||||
Accrued and other current liabilities | 12,180 | 12,938 | |||||
Capital lease obligations – current | 43 | 58 | |||||
Current liabilities - discontinued operations | — | 30,372 | |||||
Total current liabilities | 43,522 | 74,256 | |||||
Deferred income taxes – non-current | 3,904 | 4,002 | |||||
Capital lease obligations – non-current | 38 | 28 | |||||
Other non-current liabilities | 6,204 | 4,640 | |||||
Non-current liabilities - discontinued operations | — | 798 | |||||
Shareholders’ equity: | |||||||
Common shares, without par value, at $0.30 stated value; authorized 80,000,000 shares; 31,606,831 issued; and 22,426,958 and 22,145,915 shares outstanding at December 31, 2013 and March 31, 2013 , respectively | 9,482 | 9,482 | |||||
Treasury shares (9,179,873 and 9,460,916 shares at December 31, 2013 and March 31, 2013, respectively) | (2,756 | ) | (2,838 | ) | |||
Capital in excess of stated value | (13,452 | ) | (14,267 | ) | |||
Retained earnings | 141,684 | 122,578 | |||||
Accumulated other comprehensive loss | (867 | ) | (1,099 | ) | |||
Total shareholders’ equity | 134,091 | 113,856 | |||||
Total liabilities and shareholders’ equity | $ | 187,759 | $ | 197,580 | |||
AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except per share data) | Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net revenue: | |||||||||||||||
Products | $ | 8,693 | $ | 12,467 | $ | 26,294 | $ | 26,757 | |||||||
Support, maintenance and subscription services | 13,607 | 12,245 | 39,945 | 37,147 | |||||||||||
Professional services | 3,707 | 3,478 | 10,847 | 10,907 | |||||||||||
Total net revenue | 26,007 | 28,190 | 77,086 | 74,811 | |||||||||||
Cost of goods sold: | |||||||||||||||
Products | 4,663 | 8,135 | 12,443 | 15,555 | |||||||||||
Support, maintenance and subscription services | 3,129 | 2,561 | 8,061 | 7,987 | |||||||||||
Professional services | 2,508 | 2,144 | 7,320 | 7,002 | |||||||||||
Total cost of goods sold | 10,300 | 12,840 | 27,824 | 30,544 | |||||||||||
Gross profit | 15,707 | 15,350 | 49,262 | 44,267 | |||||||||||
Operating expenses: | |||||||||||||||
Product development | 6,074 | 6,260 | 19,555 | 17,965 | |||||||||||
Sales and marketing | 3,400 | 3,667 | 11,014 | 10,798 | |||||||||||
General and administrative | 5,981 | 5,852 | 16,051 | 16,379 | |||||||||||
Depreciation of fixed assets | 584 | 508 | 1,592 | 1,639 | |||||||||||
Amortization of intangibles | 2,365 | 806 | 3,953 | 2,478 | |||||||||||
Asset impairment and related charges | 309 | — | 327 | 208 | |||||||||||
Restructuring, severance and other charges | 206 | (31 | ) | 822 | 1,524 | ||||||||||
Operating loss | (3,212 | ) | (1,712 | ) | (4,052 | ) | (6,724 | ) | |||||||
Other (income) expenses : | |||||||||||||||
Interest income | (19 | ) | — | (52 | ) | (8 | ) | ||||||||
Interest expense | 44 | (13 | ) | 150 | 231 | ||||||||||
Other (income) expense, net | (5 | ) | 217 | (45 | ) | 201 | |||||||||
Loss before income taxes | (3,232 | ) | (1,916 | ) | (4,105 | ) | (7,148 | ) | |||||||
Income tax benefit | (1,154 | ) | (813 | ) | (1,760 | ) | (1,975 | ) | |||||||
Loss from continuing operations | (2,078 | ) | (1,103 | ) | (2,345 | ) | (5,173 | ) | |||||||
(Loss) income from discontinued operations, net of taxes | (584 | ) | 1,619 | 21,451 | 3,545 | ||||||||||
Net (loss) income | $ | (2,662 | ) | $ | 516 | $ | 19,106 | $ | (1,628 | ) | |||||
Basic and diluted weighted average shares outstanding | 22,150 | 21,900 | 22,100 | 21,873 | |||||||||||
Net (loss) income per share – basic and diluted: | |||||||||||||||
Loss from continuing operations | $ (0.09) | $ (0.05) | $ (0.11) | $ (0.24) | |||||||||||
(Loss) income from discontinued operations | (0.03) | 0.07 | 0.97 | 0.17 | |||||||||||
Net (loss) income per share | $ (0.12) | $ 0.02 | $ 0.86 | $ (0.07) | |||||||||||
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended | ||||||
(In thousands) | December 31, | |||||
2013 | 2012 | |||||
Operating activities: | ||||||
Net income (loss) | $ 19,106 | $ | (1,628 | ) | ||
Less: Income from discontinued operations | 21,451 | 3,545 | ||||
Loss from continuing operations | (2,345) | (5,173) | ||||
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: | ||||||
Restructuring, severance and other charges | 822 | 1,524 | ||||
Payments for restructuring, severance and other charges | (1,530 | ) | (6,306 | ) | ||
Payments for legal settlements | (87 | ) | — | |||
Asset impairments and related charges | 327 | 208 | ||||
Depreciation | 1,592 | 1,639 | ||||
Amortization of intangibles | 4,053 | 3,223 | ||||
Share-based compensation | 1,543 | 1,006 | ||||
Excess tax benefit from equity awards | (209 | ) | — | |||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (6,158 | ) | (4,300 | ) | ||
Inventories | (598 | ) | (111 | ) | ||
Prepaids | (747 | ) | 3 | |||
Accounts payable | 577 | 4,687 | ||||
Deferred revenue | (1,379 | ) | (6,105 | ) | ||
Accrued and other liabilities | (1,451 | ) | (6,208 | ) | ||
Income taxes payable | (2,118 | ) | (319 | ) | ||
Other changes, net | 205 | (29 | ) | |||
Net cash used in operating activities from continuing operations | (7,503 | ) | (16,261 | ) | ||
Net cash used in operating activities from discontinued operations | (1,018 | ) | (1,127 | ) | ||
Net cash used in operating activities | (8,521 | ) | (17,388 | ) | ||
Investing activities: | ||||||
Proceeds from sale of RSG | 36,024 | — | ||||
Cash paid for acquisitions, net | (1,801 | ) | — | |||
Capital expenditures | (3,235 | ) | (1,530 | ) | ||
Capitalized software development costs | (8,247 | ) | (1,767 | ) | ||
(Investments in) proceeds from company owned life insurance policies, net and marketable securities | (87 | ) | 4,262 | |||
Net cash provided by investing activities from continuing operations | 22,654 | 965 | ||||
Net cash used in investing activities from discontinued operations | (117 | ) | (754 | ) | ||
Net cash provided by investing activities | 22,537 | 211 | ||||
Financing activities: | ||||||
Repurchases of shares to satisfy employee tax withholding and option price | (729 | ) | (148 | ) | ||
Exercise of employee stock options | 64 | 67 | ||||
Excess tax benefit from equity awards | 209 | — | ||||
Principal payment under long-term obligations | (53 | ) | (257 | ) | ||
Net cash used in financing activities from continuing operations | (509 | ) | (338 | ) | ||
Net cash used in financing activities from discontinued operations | (80 | ) | (288 | ) | ||
Net cash used in financing activities | (589 | ) | (626 | ) | ||
Effect of exchange rate changes on cash | (1 | ) | 54 | |||
Cash flows provided by (used in) continuing operations | 14,641 | (15,580 | ) | |||
Cash flows used in discontinued operations: | (1,215 | ) | (2,169 | ) | ||
Net increase (decrease) in cash | 13,426 | (17,749 | ) | |||
Cash and cash equivalents at beginning of period | 82,931 | 97,587 | ||||
Cash and cash equivalents at end of period | $ 96,357 | $ 79,838 | ||||
AGILYSYS, INC.
RECONCILIATION OF OPERATING LOSS FROM CONTINUING OPERATIONS TO ADJUSTED INCOME (LOSS) FROM CONTINUING OPERATIONS
(UNAUDITED)
(In thousands, except per share data) | Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Operating loss | $ | (3,212 | ) | $ | (1,712 | ) | $ | (4,052 | ) | $ | (6,724 | ) | |||
Share-based compensation expense | 651 | 439 | 1,543 | 1,006 | |||||||||||
Amortization of intangibles | 2,365 | 806 | 3,953 | 2,478 | |||||||||||
Asset impairments and related charges | 309 | — | 327 | 208 | |||||||||||
Restructuring, severance and other charges | 206 | (31 | ) | 822 | 1,524 | ||||||||||
Adjusted operating income (loss) from continuing operations (a) | 319 | (498 | ) | 2,593 | (1,508 | ) | |||||||||
Other expenses, net | 20 | 204 | 53 | 424 | |||||||||||
Cash income tax expense (b) | 51 | 50 | 110 | 113 | |||||||||||
Adjusted income (loss) from continuing operations (a) | $ | 248 | $ | (752 | ) | $ | 2,430 | $ | (2,045 | ) | |||||
Weighted average shares outstanding: | |||||||||||||||
Basic and diluted | 22,150 | 21,900 | 22,100 | 21,873 | |||||||||||
Adjusted income (loss) per share from continuing operations (a): | |||||||||||||||
Basic and diluted | $ | 0.01 | $ | (0.03 | ) | $ | 0.11 | $ | (0.09 | ) | |||||
(a) Non-GAAP financial measure | |||||||||||||||
(b) Taxes calculated based upon our estimated cash tax payments, exclusive of payments related to AMT, for the three and nine months ended December 31, 2013 and 2012. | |||||||||||||||
AGILYSYS, INC.
RECONCILIATION OF OPERATING CASH FLOWS FROM CONTINUING OPERATIONS TO ADJUSTED CASH FLOWS FROM CONTINUING OPERATIONS
(UNAUDITED)
Nine Months Ended | |||||||
(In thousands) | December 31, | ||||||
2013 | 2012 | ||||||
Operating activities: | |||||||
Net cash used in continuing operations | $ | (7,503 | ) | $ | (16,261 | ) | |
Non-recurring cash items: | |||||||
Restructuring, severance and other payments | 1,530 | 6,306 | |||||
Payments for legal settlements | 87 | — | |||||
BEP/SERP payments | — | 4,468 | |||||
Adjusted cash used in continuing operations (a) | $ | (5,886 | ) | $ | (5,487 | ) | |
(a) Non-GAAP financial measure | |||||||
AGILYSYS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data) | ||||||||||||||
Fiscal 2013 | ||||||||||||||
Three months ended | Twelve months ended | |||||||||||||
June 30 | September 30 | December 31 | March 31 | March 31, 2013 | ||||||||||
Net revenue: | ||||||||||||||
Products | $ 6,778 | $ 7,512 | $ 12,467 | $ 6,760 | $ 33,517 | |||||||||
Support, maintenance and subscription services | 12,169 | 12,733 | 12,245 | 13,089 | 50,236 | |||||||||
Professional services | 3,442 | 3,987 | 3,478 | 3,702 | 14,609 | |||||||||
Total net revenue | 22,389 | 24,232 | 28,190 | 23,551 | 98,362 | |||||||||
Cost of goods sold: | ||||||||||||||
Products | 3,581 | 3,839 | 8,135 | 3,092 | 18,647 | |||||||||
Support, maintenance and subscription services | 2,624 | 2,802 | 2,561 | 2,516 | 10,503 | |||||||||
Professional services | 2,291 | 2,567 | 2,144 | 2,291 | 9,293 | |||||||||
Total cost of goods sold | 8,496 | 9,208 | 12,840 | 7,899 | 38,443 | |||||||||
Gross profit | 13,893 | 15,024 | 15,350 | 15,652 | 59,919 | |||||||||
Operating expenses: | ||||||||||||||
Product development | 4,420 | 7,285 | 6,260 | 6,727 | 24,692 | |||||||||
Sales and marketing | 4,201 | 2,930 | 3,667 | 3,948 | 14,746 | |||||||||
General and administrative | 5,279 | 5,248 | 5,852 | 5,481 | 21,860 | |||||||||
Depreciation of fixed assets | 585 | 546 | 508 | 517 | 2,156 | |||||||||
Amortization of intangibles | 855 | 817 | 806 | 806 | 3,284 | |||||||||
Asset impairment and related charges | 208 | — | — | (88 | ) | 120 | ||||||||
Legal settlements | — | — | — | 1,664 | 1,664 | |||||||||
Restructuring, severance and other charges | 1,125 | 430 | (31 | ) | (29 | ) | 1,495 | |||||||
Operating loss | (2,780 | ) | (2,232 | ) | (1,712 | ) | (3,374 | ) | (10,098 | ) | ||||
Other (income) expenses : | ||||||||||||||
Interest income | (4 | ) | (4 | ) | — | (4 | ) | (12 | ) | |||||
Interest expense | 264 | (20 | ) | (13 | ) | 35 | 266 | |||||||
Other expense (income), net | 144 | (160 | ) | 217 | (64 | ) | 137 | |||||||
Loss before income taxes | (3,184 | ) | (2,048 | ) | (1,916 | ) | (3,341 | ) | (10,489 | ) | ||||
Income tax benefit | (529 | ) | (633 | ) | (813 | ) | (1,468 | ) | (3,443 | ) | ||||
Loss from continuing operations | $ (2,655) | $ (1,415) | $ (1,103) | $ (1,873) | $ (7,046) | |||||||||
Basic and diluted weighted average shares outstanding | 21,836 | 21,883 | 21,900 | 21,901 | 21,880 | |||||||||
Net (loss) income per share – basic and diluted: | ||||||||||||||
Loss per share from continuing operations | $ (0.12) | $ (0.06) | $ (0.05) | $ (0.09) | $ (0.32) | |||||||||