Agilysys’ First Quarter Revenue Increases 9% to $24.5 Million; Reports Adjusted and GAAP Earnings Per Diluted Share of $0.06 and $0.02, Respectively

Agilysys, Inc. (Nasdaq: AGYS), a leading developer and provider of innovative information technology, services and solutions for the hospitality industry, reported operating results for its fiscal 2014 first 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. Agilysys’ business is now focused exclusively on providing innovative software enabled solutions to the hospitality industry.

• Total net revenue increased $2.1 million, or 9%, to $24.5 million, from $22.4 million in the prior-year period.
• Recurring revenues (comprised of support, maintenance and subscription services) for the quarter were $13.2 million, an increase of 8% over the prior-year period.
• Gross margin was 66% in the quarter compared to 62% in the prior-year period.
• Adjusted operating income (excluding stock-based compensation, amortization of intangibles and other one-time items) from continuing operations increased $1.9 million year over year to $1.5 million from an adjusted operating loss from continuing operations of $0.4 million in the year-ago period (see reconciliation below).
• Adjusted net income (non-GAAP) from continuing operations grew to $1.4 million, or $0.06 per diluted share, compared with an adjusted net loss from continuing operations of $0.9 million, or ($0.04) per share, last year (see reconciliation below).
• Income from continuing operations for the period was $0.4 million, or $0.02 per diluted share, compared to a loss from continuing operations of $2.7 million, or ($0.12) per share, in the prior-year period. Inclusive of discontinued operations, net income for the quarter was $1.3 million, or $0.06 per diluted share, compared to a net loss of $1.8 million, or ($0.08) per share, in the prior-year period.

James Dennedy, president and CEO of Agilysys, said, “Our first quarter financial results reflect the success of the business strategies we have implemented, primarily our emphasis on the pursuit of the highest margin markets we can address with the highest value solutions in the industry. This strategy continues to deliver year-over-year growth in total revenue, recurring revenue and gross margin. Further, our revenue growth continues to outpace the overall market rate of growth?another key proof point of our strategy. Equally importantly we have generated these improvements with a lower overall expense structure in the business. Capital efficiency is the key metric we rely on to assess the quality of the business and financial objectives we have accomplished. In this regard, our business and our personnel have performed at an exceptional level.”

“Looking ahead, we expect further improvements in our team members’ performance and the business,” Dennedy said. Our strong balance sheet enables Agilysys to invest in growing our people, expanding the markets we serve, adding more value to the solutions we deliver and accelerating our growth in these areas through select M&A opportunities. We believe our focus on capital efficiency will deliver above market revenue growth and create greater value for our team, customers and investors.”

Robb Ellis, chief operating officer and chief financial officer, said, “Agilysys’ successful first quarter provides strong support that our business model is primed to deliver positive operating results. During the quarter, we generated above market revenue growth which we believe will be sustainable throughout fiscal 2014. This growth and the margin expansion that we experienced resulted in adjusted operating income of $1.5 million.”

“In addition, we have a strong balance sheet with over $100 million of cash including the net proceeds received from the sale of our Retail business unit on July 1st,” continued Ellis. “With this solid financial foundation and our operational discipline, we anticipate investing the operating income generated throughout fiscal 2014 and a portion of our cash back into the business. These investments will include addressing growth opportunities; such as the largely untapped international market and upsell opportunities into our existing customer base, as well as pursuing strategic acquisitions that complement our product capabilities and help grow our customer base. These investments will help drive consistent organic growth that will exceed the hospitality industry’s rate of growth.”

Ellis said, “We believe that our focus on achieving high returns on capital deployed will result in the growth of our installed base and improve and expand our product offerings so that we can achieve consistent profitable revenue growth.”

2014 First Quarter Conference Call and Webcast

Agilysys is hosting a conference call and webcast today, July 25, 2013, beginning at 4:30 P.M. ET. Both the call and the webcast are open to the general 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 at http://agilysys.com/home/InvestorRelations/EventPresentation.htm.

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. 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.