Reports Record Recurring Revenue of $22.8M Inclusive of Subscription Revenue Growth of 18%
Reports Positive Adjusted EBITDA of $7.6M
Quarterly Free Cash Flow of $7.8M and Cash Balance Increase of $6.9M to $92.6M
Alpharetta, GA – January 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.
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 third quarter, and statements we make regarding our ability to meet liquidity demands, the timing of the hospitality industry’s recovery after the pandemic, and our ability to accelerate revenue growth and enhance profitability 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.