Business Wire | Jan 26, 2021 04:05PM EST

Agilysys Reports Fiscal 2021 Third Quarter Revenue of $36.7M

Jan. 26, 2021

ALPHARETTA, Ga.--(BUSINESS WIRE)--Jan. 26, 2021--Agilysys, Inc. (Nasdaq: AGYS), a global provider of next-generation hospitality software solutions and services, today reported operating results for its fiscal 2021 third quarter and period ended December 31, 2020.

Summary of Fiscal 2021 Third Quarter Financial Results

* Total net revenue was $36.7 million, compared to total net revenue of $42.0 million in the comparable prior-year period for a 13% decrease in revenue. * Recurring revenues (which are comprised of support, maintenance and subscription services) were $22.8 million, or 62.3% of total net revenue, compared to $21.0 million, or 49.9% of total net revenue, for the same period in fiscal 2020. Subscription revenues increased 18.1% year over year and comprised 40.9% of total recurring revenues, compared to 37.7% of total recurring revenues in the third quarter of fiscal 2020. * Gross margin was 66.0% in the fiscal 2021 third quarter, compared to 50.2% in the comparable prior-year period. * Net (loss) attributable to common shareholders in the fiscal 2021 third quarter was $(2.5) million, or $(0.11) per diluted share compared to a net loss of $(2.6) million, or $(0.11) per diluted share, in the comparable prior-year period. * Adjusted EBITDA (non-GAAP) was $7.6 million, compared to $3.2 million in the comparable prior-year period (see reconciliation below). * Adjusted diluted EPS (non-GAAP) was $0.23 per share compared to $0.05 per share in the comparable prior-year period. * Free cash flow (non-GAAP) in the fiscal 2021 third quarter was $7.8 million, compared to free cash flow of $3.0 million in the fiscal 2020 third quarter (see reconciliation below). Ending cash balance was $92.6 million, compared to ending cash balance of $46.7 million as of fiscal 2020 year-end.

Ramesh Srinivasan, President and CEO of Agilysys, commented, "We are pleased with our continuing good progress in improving various business fundamentals. Simultaneously, we are setting ourselves up well for renewed growth when the hospitality industry shifts to the anticipated re-opening and recovery phase, especially with respect to increasing the pace of product innovation and levels of customer service. Our balance sheet strengthened further during the quarter with strong cash collections."

"The current hospitality industry business headwinds caused by the pandemic remain challenging. There is still significant uncertainty in the industry about when the expected recovery will become a reality. We expect the business environment to remain unchanged during the immediate future. Q4 fiscal 2021 revenue is expected to remain sequentially flat compared to Q3, with Adjusted EBITDA reducing to $7.0M, mainly due to further increases in R&D resource strength. We should be discontinuing the current sequential quarter guidance cadence we adopted during fiscal 2021 due to the extraordinary business circumstances and return to our annual guidance practice beginning fiscal 2022."

"During the past 12 months we have significantly increased our range of software products which are cloud native and available to be implemented on a subscription recurring revenue basis. That should help us meet the increased and changing technology demands of the industry on the other side of this pandemic. We remain bullish about the future of the hospitality industry and our improving ability to serve it well."

Fiscal 2021 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 are expecting Q4 fiscal 2021 revenue to remain sequentially flat over Q3 fiscal 2021 results with an Adjusted EBITDA of approximately $7.0 million for the same period. We expect to see slightly decreased Adjusted EBITDA levels on flat revenue due to continued hiring in R&D, which will bring some additional costs into the business during the fourth quarter.

Dave Wood, Chief Financial Officer, commented, "The markets we serve remain largely unchanged with lingering uncertainty on timing and speed of the recovery in the hospitality industry. Despite the continued challenges, we remain pleased with our sustainable profitability and continued focus on our financial strength and the ability to execute on our long-term strategic plan."

2021 Third Quarter Conference Call and Webcast

Agilysys is hosting a conference call and webcast today, January 26, 2021, 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 1973419. 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 fourth quarter, and statements we make regarding the timing of the hospitality industry's recovery after the pandemic, and our ability to meet increased and changing technology demands on the other side of the pandemic.

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.

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 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, healthcare, and sports and entertainment. Agilysys offers the most comprehensive software solutions in the industry, including point-of-sale (POS), property management (PMS), inventory and procurement, payments, and related applications, to manage the entire guest journey. Agilysys is known for its leadership in hospitality, its broad product offerings and its customer-centric service. 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 the Americas, Europe, the Middle East, Africa, Asia-Pacific, and India with headquarters located in Alpharetta, GA. For more information visit Agilysys.com.

- Financial tables follow -

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands, except per Three Months Ended Nine Months Ended share data)

December 31, December 31,

2020 2019 2020 2019

Net revenue:

Products $ 7,599 $ 12,126 $ 19,396 $ 34,868

Support, maintenance and 22,846 20,965 65,647 61,377 subscription services

Professional services 6,230 8,896 15,797 24,854

Total net revenue 36,675 41,987 100,840 121,099

Cost of goods sold:

Products (inclusive ofdeveloped technology 3,660 9,639 9,625 28,056 amortization)

Support, maintenance and 4,655 4,841 13,515 13,676 subscription services

Professional services 4,164 6,443 11,802 18,071

Total cost of goods sold 12,479 20,923 34,942 59,803

Gross profit 24,196 21,064 65,898 61,296

Gross profit margin 66.0 % 50.2 % 65.3 % 50.6 %

Operating expenses:

Product development 12,376 11,285 28,900 32,127

Sales and marketing 3,327 4,918 8,278 14,307

General and 7,509 6,084 18,446 17,998 administrative

Depreciation of fixed 722 854 2,160 1,774 assets

Amortization of 521 608 1,490 1,900 intangibles

Severance and other 1,552 11 2,762 438 charges

Legal settlements, net - - 50 (125 )

Total operating expense 26,007 23,760 62,086 68,419

Operating income (loss) (1,811 ) (2,696 ) 3,812 (7,123 )

Other (income) expense:

Interest income (27 ) (92 ) (76 ) (287 )

Interest expense 9 25 13 28

Other expense (income), 95 (142 ) 284 50 net

(Loss) Income before (1,888 ) (2,487 ) 3,591 (6,914 )taxes

Income tax expense 182 95 311 161

Net (loss) income $ (2,070 ) $ (2,582 ) $ 3,280 $ (7,075 )

Series A convertiblepreferred stock issuance - - (1,031 ) - costs

Series A convertible (459 ) - (1,117 ) - preferred stock dividends

Net (loss) incomeattributable to common $ (2,529 ) $ (2,582 ) $ 1,132 $ (7,075 )shareholders



Weighted average shares 23,429 23,240 23,419 23,230 outstanding - basic



Net (loss) income per $ (0.11 ) $ (0.11 ) $ 0.05 $ (0.30 )share - basic:



Weighted average shares 23,429 23,240 23,903 23,230 outstanding - diluted



Net (loss) income per $ (0.11 ) $ (0.11 ) $ 0.05 $ (0.30 )share - diluted:

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data) December March 31, 31,

2020 2020 Unaudited

ASSETS

Current assets:

Cash and cash equivalents $ 92,608 $ 46,653

Accounts receivable, net of allowance for expected credit losses

of $1,334 and for doubtful accounts of $1,634, 30,940 35,869respectively

Contract assets 2,744 2,125

Inventories 1,322 3,887

Prepaid expenses and other current assets 4,338 4,874

Total current assets 131,952 93,408

Property and equipment, net 9,519 12,230

Operating lease right-of-use assets 12,600 13,829

Goodwill 19,622 19,622

Intangible assets, net 8,400 8,400

Deferred income taxes, non-current 1,234 764

Other non-current assets 5,874 6,309

Total assets $ 189,201 $ 154,562

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable 5,435 $ 13,403

Contract liabilities 39,360 42,244

Accrued liabilities 8,853 9,033

Operating lease liabilities, current 4,755 4,719

Finance lease obligations, current 22 24

Total current liabilities 58,425 69,423

Deferred income taxes, non-current 894 880

Operating lease liabilities, non-current 9,353 10,617

Finance lease obligations, non-current 10 25

Other non-current liabilities 3,740 1,860

Series A convertible preferred stock, no par value 35,000 -

Shareholders' equity:

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

shares authorized; 31,606,831 shares issued; and23,637,552

and 23,609,398 shares outstanding at December 31,2020

and March 31, 2020, respectively 9,482 9,482

Treasury shares, 7,969,279 and 7,997,433 atDecember 31, 2020 (2,391 ) (2,401 )

and March 31, 2020, respectively

Capital in excess of stated value 14,584 5,491

Retained earnings 60,116 58,984

Accumulated other comprehensive income (12 ) 201

Total shareholders' equity 81,779 71,757

Total liabilities and shareholders' equity $ 189,201 $ 154,562

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months Ended

(In thousands) December 31,

2020 2019

Operating activities

Net income (loss) $ 3,280 $ (7,075 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Depreciation 2,160 1,774

Amortization of intangibles 1,490 1,900

Amortization of developed technology - 9,432

Deferred income taxes (499 ) (313 )

Share-based compensation 9,312 3,156

Changes in operating assets and liabilities (659 ) (3,601 )

Net cash provided by operating activities 15,084 5,273

Investing activities

Capital expenditures (1,076 ) (3,009 )

Additional investments in corporate-owned life (2 ) (26 )insurance policies

Net cash used in investing activities (1,078 ) (3,035 )

Financing activities

Repurchase of common shares to satisfy employee tax (1,069 ) (1,053 )withholding

Series A convertible preferred stock issuance 33,969 - proceeds, net of issuance costs

Payment of preferred stock dividends (1,117 ) -

Principal payments under long-term obligations (18 ) (18 )

Net cash provided by (used in) financing activities 31,765 (1,071 )

Effect of exchange rate changes on cash 184 (33 )

Net increase in cash and cash equivalents 45,955 1,134

Cash and cash equivalents at beginning of period 46,653 40,771

Cash and cash equivalents at end of period $ 92,608 $ 41,905

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,

2020 2019 2020 2019

Net (loss) income $ (2,070 ) $ (2,582 ) $ 3,280 $ (7,075 )

Income tax expense 182 95 311 161

(Loss) Income before taxes (1,888 ) (2,487 ) 3,591 (6,914 )

Depreciation of fixed assets 722 854 2,160 1,774

Amortization of intangibles 521 608 1,490 1,900

Amortization of developed - 3,129 - 9,432 technology

Interest (income), net (18 ) (67 ) (63 ) (259 )

EBITDA (a) (663 ) 2,037 7,178 5,933

Share-based compensation 6,630 1,329 9,312 3,156

Severance and other charges 1,552 11 2,762 438

Other non-operating expense 95 (142 ) 284 50

Legal settlements - - 50 (125 )

Adjusted EBITDA (b) $ 7,614 $ 3,235 $ 19,586 $ 9,452

(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 (including amortization of developed technology), and excluding charges relating to i) legal settlements, ii) severance and other charges, iii) impairments, iv) share-based compensation, and v) other non-operating (income) expense

AGILYSYS, INC.

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME FOR ADJUSTEDEARNINGS PER SHARE

(UNAUDITED)

Three Months Ended Nine Months Ended

(In thousands, except per December 31, December 31, share data)

2020 2019 2020 2019

Net (loss) incomeattributable to common $ (2,529 ) $ (2,582 ) $ 1,132 $ (7,075 )shareholders

Amortization of intangibles 521 608 1,490 1,900

Amortization of developed - 3,129 - 9,432 technology

Share-based compensation 6,630 1,329 9,312 3,156

Series A convertiblepreferred stock issuance - - 1,031 - costs

Severance and other charges 1,552 11 2,762 438

Legal settlements, net - - 50 (125 )

Income tax adjustments (640 ) (1,223 ) (1,522 ) (3,499 )

Adjusted net income (a) $ 5,534 $ 1,272 $ 14,255 $ 4,227



Basic weighted average 23,429 23,240 23,419 23,230 shares outstanding

Diluted weighted average 23,966 23,839 23,903 23,776 shares outstanding



Adjusted basic earnings per $ 0.24 $ 0.05 $ 0.61 $ 0.18 share (b)

Adjusted diluted earnings $ 0.23 $ 0.05 $ 0.60 $ 0.18 per share (b)

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

2020 2019 2020 2019

Net cash provided by operating $ 8,442 $ 4,039 $ 15,084 $ 5,273 activities

Capital expenditures (605 ) (1,069 ) (1,076 ) (3,009 )

Free cash flow (a) $ 7,837 $ 2,970 $ 14,008 $ 2,264

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

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