AGILYSYS INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - June 9, 2016

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AGILYSYS’ FISCAL 2016 FOURTH QUARTER REVENUE INCREASES 11% TO QUARTERLY RECORD $31.9 MILLION, INCLUSIVE OF 33% RISE IN SUBSCRIPTION REVENUE

Fiscal 2016 Revenue Rises 16% to $120.4 Million; Recurring Revenue for the Full Year Rises to $60.1 Million, or 50% of Total Revenue

Fiscal 2017 Revenue Outlook of $132 Million - $136 Million;
Fiscal 2017 Adjusted EBITDA Expected to Double

Alpharetta, GA - June 9, 2016 - Agilysys, Inc. (Nasdaq: AGYS), a global provider of next-generation hospitality software solutions and services, today reported operating results for its fiscal 2016 fourth quarter and full year ended March 31, 2016.

Summary of Fiscal 2016 Fourth Quarter Financial Results

•
Total net revenue was $31.9 million, compared to total net revenue of $28.7 million in the comparable prior-year period.

•
Recurring revenues (which are comprised of support, maintenance and subscription services) were $15.6 million, or 49% of total net revenue, compared to $14.5 million, or 51% of total net revenue, for the same period in fiscal 2015. SaaS revenues for the fourth quarter increased 33% year over year and comprised 18% of total recurring revenues, compared to 14% of total recurring revenues in the fourth quarter of fiscal 2015.

•
Gross margin was 55% in the fiscal 2016 fourth quarter, compared to 51% in the prior-year period.

•
Net loss in the fiscal 2016 fourth quarter was $(1.5) million, or $(0.07) per diluted share, compared to a net loss of $(5.4) million, or $(0.24) per diluted share, in the prior-year period. The prior-year period included a total of $2.4 million, or $0.11 per share, in asset write-offs and other fair value adjustments and restructuring and severance charges.

•
Adjusted EBITDA (non-GAAP) was $1.0 million, compared to an Adjusted EBITDA loss of $(0.6) million in the same period last year (see reconciliation below).

Jim Dennedy, President and CEO of Agilysys, commented, “In the fiscal 2016 fourth quarter we generated 11% revenue growth, including a 33% year-over-year increase in subscription-based revenues. The solid fourth quarter results concluded a year of significant growth for Agilysys in which total net revenue increased 16% for the year. More impressively, the total contract value of bookings of subscription-based business increased more than 150% year over year.

“We grew our installed point of sale end points approximately 30% to over 35,000 end points at fiscal 2016 year end, while the number of hotel rooms managed by our property management systems increased approximately 3% to more than 236,000 rooms. Revenue from rGuest platform based solutions represented approximately 5% of total revenue in fiscal 2016, and momentum for this new hospitality platform is growing. We expect more success in fiscal 2017 as we recently announced the general availability of rGuest Stay for limited service hotels and expect that rGuest Buy, which is demonstrating success in multiple trials, will become generally available in the first half of fiscal 2017.

“Our business is benefiting today from our success in addressing market demand through our new platform products and key enhancements for our iconic solutions. We believe our rGuest and iconic solutions provide significant value to a growing list of customers that will lead to another year of positive momentum in our operating results for fiscal 2017.”






Summary of Fiscal 2016 Full Year Financial Results

•
Total net revenue was $120.4 million, compared to total net revenue of $103.5 million in the comparable prior year period.

•
Recurring revenues (which are comprised of support, maintenance and subscription services) were $60.1 million, or 50% of total net revenue, compared to $56.0 million, or 54% of total net revenue, in fiscal 2015. SaaS revenues increased 29% year over year and comprised 17% of total recurring revenues, compared to 14% of total recurring revenues in fiscal 2015.

•
Gross margin was 57% in fiscal 2016, compared to 58% in fiscal 2015.

•
Net loss for fiscal 2016 was $(3.8) million, or $(0.17) per diluted share, compared to a net loss of $(11.5) million, or $(0.51) per diluted share, in fiscal 2015. The prior-year period included a total of $3.3 million, or $0.15 per diluted share, in asset write-offs and other fair value adjustments and restructuring and severance charges.

•
Adjusted EBITDA (non-GAAP) was $4.3 million, compared to Adjusted EBITDA of $1.2 million in fiscal 2015 (see reconciliation below).

Fiscal 2017 Outlook
Agilysys today provided a forecast for several financial metrics for fiscal 2017 including revenue, gross margin and Adjusted EBITDA (non-GAAP). The Company’s outlook for fiscal 2017 contemplates:

•
Full year revenue of approximately $132 - $136 million compared to fiscal 2016 revenue of $120 million.
•
Gross margin for fiscal 2017 is expected to be in the low-50% range, which reflects the impact of higher cost of goods sold related to the recently announced general availability of rGuest Stay for limited and select service hotels and chains and a continued mix shift in revenue towards more subscription based sales.

•
Adjusted EBITDA is expected to double in fiscal 2017, compared to fiscal 2016 Adjusted EBITDA of $4.3 million.


Janine Seebeck, Chief Financial Officer, commented, “In addition to our impressive 16% top line growth for fiscal 2016, we also significantly benefited from our fiscal management policies as reflected in the over $9 million year-over-year increase in net cash provided by operating activities and the more than 250% improvement in Adjusted EBITDA. We enter fiscal 2017 with a lot of momentum based on the ongoing growth of our customer base, consistent additional product placements with existing customers, and the expansion of our total addressable market through the introduction of our rGuest platform solutions. We expect this momentum to continue in fiscal 2017 as we forecast greater than the market rate of growth for full year revenue and a doubling of Adjusted EBITDA.

“In addition, we are very encouraged by the growing industry appreciation for our rGuest platform. As a result we are modestly accelerating our product development investment plan for certain rGuest solutions in order to add features and functionality that will enable us to address a growing number of markets sooner. With over $60 million in cash and cash equivalents at the end of fiscal 2016, we have a healthy balance sheet and the financial flexibility to support and grow our business.”

2016 Fourth Quarter Conference Call and Webcast
Agilysys is hosting a conference call and webcast today, June 9, 2016, beginning at 4:30p.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 9295894. 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 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, and include (i) the statements in the last sentences of the second and third paragraphs under the heading “Summary of Fiscal 2016 Fourth Quarter Financial Results” and (ii) the statements under the heading “Fiscal 2017 Outlook.” 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, 2015. 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 cash flow from operations and adjusted EBITDA. Management believes that such information can enhance investors' understanding of the company's ongoing operations. See the accompanying tables below for reconciliations of adjusted cash flow from operations and adjusted EBITDA to the comparable GAAP measures.

About Agilysys
Agilysys is a leading technology company that provides innovative point-of-sale, property management, inventory and procurement, workforce management, analytics, document management and mobile and wireless solutions and services to the hospitality industry. The company's solutions and services allow property managers to better connect, interact and transact with their customers by streamlining operations, improving efficiency, increasing guest recruitment and wallet share, and enhancing the guest experience. Agilysys serves four major market sectors: Gaming, both corporate and tribal; Hotels, Resorts and Cruise; Foodservice Management; and Restaurants, Universities, Stadia and Healthcare. A significant portion of the company's consolidated revenue is derived from contract support, maintenance and subscription services. Agilysys operates throughout North America, Europe and Asia, with corporate services located in Alpharetta, GA, and offices in Singapore, Hong Kong, Malaysia and the Philippines. 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 per share data)
Three Months Ended
March 31,
 
Twelve Months Ended
March 31,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net revenue:
 
 
 
 
 
 
 
Products
$
10,767

 
$
10,898

 
$
41,445

 
$
31,846

Support, maintenance and subscription services
15,644

 
14,499

 
60,104

 
56,013

Professional services
5,513

 
3,311

 
18,817

 
15,655

Total net revenue
31,924

 
28,708

 
120,366

 
103,514

Cost of goods sold:
 
 
 
 
 
 
 
Products
6,292

 
7,318

 
23,326

 
18,732

Support, maintenance and subscription services
3,981

 
3,363

 
15,394

 
12,461

Professional services
4,044

 
3,417

 
13,540

 
12,240

Total cost of goods sold
14,317

 
14,098

 
52,260

 
43,433

Gross profit
17,607

 
14,610

 
68,106

 
60,081

Gross profit margin
55.2
%
 
50.9
%
 
56.6
%
 
58
%
Operating expenses:
 
 
 
 
 
 
 
Product development
6,667

 
6,590

 
26,688

 
25,316

Sales and marketing
5,344

 
4,951

 
19,740

 
16,357

General and administrative
5,921

 
5,299

 
21,818

 
21,668

Depreciation of fixed assets
572

 
523

 
2,199

 
2,225

Amortization of intangibles
306

 
467

 
1,243

 
3,461

Restructuring, severance and other charges
337

 
569

 
283

 
1,482

Asset write-offs and other fair value adjustments
355

 
1,836

 
180

 
1,836

Legal settlements
83

 
—

 
268

 
203

Operating loss
(1,978
)
 
(5,625
)
 
(4,313
)
 
(12,467
)
Other (income) expense:
 
 
 
 
 
 
 
Interest income
(23
)
 
(12
)
 
(92
)
 
(110
)
Interest expense
8

 
13

 
29

 
48

Other (income) expense, net
(531
)
 
78

 
(491
)
 
146

Loss before taxes
(1,432
)
 
(5,704
)
 
(3,759
)
 
(12,551
)
Income tax expense (benefit)
106

 
(277
)
 
6

 
(1,054
)
Net loss
$
(1,538
)
 
$
(5,427
)
 
$
(3,765
)
 
$
(11,497
)
 
 
 
 
 
 
 
 
Weighted average shares outstanding
22,493

 
22,343

 
22,483

 
22,338

 
 
 
 
 
 
 
 
Loss per share - basic and diluted:
 
 
 
 
 
 
 
Loss per share
$
(0.07
)
 
$
(0.24
)
 
$
(0.17
)
 
$
(0.51
)





AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share data)
March 31,
2016
 
March 31,
2015
 
 
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
60,608

 
$
75,067

Accounts receivable, net of allowance for doubtful accounts of $617 and $888, respectively
22,017

 
25,481

Inventories
2,692

 
641

Prepaid expenses and other current assets
10,184

 
3,828

Total current assets
95,501

 
105,017

Property and equipment, net
14,197

 
11,929

Goodwill
19,622

 
19,622

Intangible assets, net
8,576

 
9,006

Software development costs, net
44,215

 
31,818

Other non-current assets
3,046

 
4,133

Total assets
$
185,157

 
$
181,525

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
7,761

 
$
16,586

Deferred revenue
33,241

 
23,881

Accrued liabilities
12,980

 
10,001

Capital lease obligations, current
118

 
142

Total current liabilities
54,100

 
50,610

Deferred income taxes, non-current
3,075

 
3,053

Capital lease obligations, non-current
215

 
47

Other non-current liabilities
4,294

 
3,627

Shareholders' equity:
 
 
 
Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 31,606,831 shares issued; and 22,942,586 and 22,789,355 shares outstanding at March 31, 2016 and March 31, 2015, respectively
9,482

 
9,482

Treasury shares, 8,664,245 and 8,817,477 at March 31, 2016 and March 31, 2015, respectively
(2,600
)
 
(2,646
)
Capital in excess of stated value
(7,645
)
 
(10,675
)
Retained earnings
124,413

 
128,178

Accumulated other comprehensive loss
(177
)
 
(151
)
Total shareholders' equity
123,473

 
124,188

Total liabilities and shareholders' equity
$
185,157

 
$
181,525






AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Twelve Months Ended
(In thousands)
March 31,
 
2016
 
2015
 
 
 
 
Operating activities
 
 
 
Net (loss) income
$
(3,765
)
 
$
(11,497
)
Adjustments to reconcile loss from operations to net cash provided by (used in) operating activities
 
 
 
Net restructuring, severance and other charges
(333
)
 
134

Net legal settlements
185

 
(1,511
)
Asset write-offs and other fair value adjustments
87

 
3,454

Loss on disposal of property & equipment
381

 
—

Depreciation
2,199

 
2,225

Amortization
2,265

 
4,755

Deferred income taxes
23

 
(371
)
Contingent consideration adjustment
93

 
(1,619
)
Share-based compensation
3,405

 
3,140

Change in cash surrender value of company owned life insurance policies
(564
)
 
(57
)
Excess tax benefit from equity awards
—

 
(14
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
3,237

 
(1,935
)
Inventories
(2,051
)
 
(171
)
Prepaid expense
(4,532
)
 
(526
)
Accounts payable
(7,896
)
 
5,528

Deferred revenue
9,364

 
1,146

Accrued liabilities
5,330

 
(3,868
)
Income taxes payable
16

 
(823
)
Other changes, net
(226
)
 
(176
)
Net cash provided by (used in) operating activities
7,218

 
(2,186
)
 
 
 
 
Investing activities
 
 
 
Proceeds from sale of business units
—

 
809

Cash paid for acquisition, net
—

 
(3,750
)
Proceeds from sale and maturity of marketable securities
—

 
10,107

Investments in marketable securities
—

 
(10,240
)
Capital expenditures
(4,845
)
 
(4,650
)
Capitalized software development costs
(16,103
)
 
(15,813
)
Additional (investments in) proceeds from corporate-owned life insurance policies
(65
)
 
1,905

Net cash used in investing activities
(21,013
)
 
(21,632
)
 
 
 
 
Financing activities
 
 
 
Repurchase of common shares to satisfy employee tax withholding
(435
)
 
(373
)
Exercise of employee stock options
—

 
102

Excess tax benefit from equity awards
—

 
14

Principal payments under long-term obligations
(143
)
 
(144
)
Net cash used in financing activities
(578
)
 
(401
)
Effect of exchange rate changes on cash
(87
)
 
(280
)
Net (decrease) increase in cash and cash equivalents
(14,459
)
 
(24,499
)
Cash and cash equivalents at beginning of period
75,067

 
99,566

Cash and cash equivalents at end of period
$
60,608

 
$
75,067

 
 
 
 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
 
 
 
Accrued capital expenditures
$
59

 
$
148

Accrued capitalized software development costs
959

 
3,764

Leasehold improvements acquired under operating lease arrangement
997

 
—











AGILYSYS, INC.
RECONCILIATION OF ADJUSTED EBITDA TO NET LOSS
(UNAUDITED)
(In thousands)
Three Months Ended
 
Twelve Months Ended
 
March 31,
 
March 31,
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
Net loss
$
(1,538
)
 
$
(5,427
)
 
$
(3,765
)
 
$
(11,497
)
 
Income tax expense (benefit)
106

 
(277
)
 
6

 
(1,054
)
 
Loss before taxes
(1,432
)
 
(5,704
)
 
(3,759
)
 
(12,551
)
 
Depreciation of fixed assets
572

 
523

 
2,199

 
2,225

 
Amortization of intangibles
306

 
467

 
1,243

 
3,461

 
Amortization of developed technology
255

 
349

 
1,022

 
1,294

 
Interest (income) expense
(15
)
 
1

 
(63
)
 
(62
)
 
EBITDA (b)
(314
)
 
(4,364
)
 
642

 
(5,633
)
 
Share-based compensation
1,087

 
1,312

 
3,405

 
3,140

 
Restructuring, severance and other charges
337

 
569

 
283

 
1,482

 
Asset write-offs and other fair value adjustments
355

 
1,836

 
180

 
1,836

 
Other non-operating (income) expense
(531
)
 
78

 
(491
)
 
146

 
Legal settlements
83

 
—

 
268

 
203

 
Adjusted EBITDA (a)
$
1,017

 
$
(569
)
 
$
4,287

 
$
1,174

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



AGILYSYS, INC.
RECONCILIATION OF OPERATING CASH FLOWS TO
ADJUSTED CASH FLOWS FROM OPERATIONS
(UNAUDITED)





 
Twelve Months Ended
(In thousands)
March 31,
 
2016
 
2015
Operating activities:
 
 
 
Net cash provided by (used in) operating activities
$
7,218

 
$
(2,186
)
Non-recurring cash items:
 
 
 
Payments for restructuring, severance and other charges
616

 
1,348

Payments for legal settlements
83

 
1,714

Adjusted cash provided by operating activities (a)
$
7,917

 
$
876

 
 
 
 
 
 
 
 
(a) Non-GAAP financial measure
 
 
 



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