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 percent, 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 percent over the same period in fiscal 2013.
- Gross margin was 60 percent in the fiscal 2014 third quarter, compared to 55 percent 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.
- 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.
- 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.
“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," said James Dennedy, president and CEO of Agilysys. "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," said Dennedy. "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.”
Summary of Fiscal 2014 Nine Months Financial Results:
- Total net revenue for the period increased $2.3 million, or 3 percent, 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 percent over the first nine months of fiscal 2013.
- Gross margin of 64 percent compares to gross margin of 59 percent 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.
- 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.
- 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.
“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," said Janine Seebeck, chief financial officer. "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, Sept. 30, 2012, Dec. 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.
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.