Agilysys Announces Unaudited Fiscal 2010 Fourth-Quarter and Full-Year Financial Results

CLEVELAND, June 3 /PRNewswire-FirstCall/ --

• Fiscal 2010 Earnings of $0.15 Per Diluted Share Compared With Loss of $12.58 in Fiscal 2009
• SG&A Expenses Decreased $31.7 Million in Fiscal 2010, or 16%, From Fiscal 2009
• Cash Increased $29.3 Million to $65.5 Million in Fiscal 2010

Agilysys, Inc. (Nasdaq: AGYS), a leading provider of innovative IT solutions, today announced unaudited financial results for the fiscal 2010 fourth quarter and full year ended March 31, 2010.

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Fourth-Quarter 2010 Unaudited Results of Operations

Year-over-year revenue declined in the fourth quarter of fiscal 2010. The company reported revenue of $135.8 million, which was 13% lower than the $155.5 million reported in last year's comparable quarter. The lower revenue reflected weaker-than-anticipated demand in the company's Technology Solutions Group.

Sales of hardware, software and services declined 13%, 25% and 3%, respectively, compared with the fourth quarter of fiscal 2009. Gross margin expanded to 26.4% of sales, compared with 25.7% of sales in the fiscal 2009 fourth quarter. The improvement in gross margin resulted primarily from a larger proportion of sales being derived from proprietary services and the company's higher-margin Hospitality and Retail Solutions Groups. A decline in vendor incentives tempered the favorable margin impact from the change in sales mix during the period.

Selling, general and administrative (SG&A) expense was $42.6 million for the quarter, a decrease of $4.8 million from the prior year, primarily due to lower compensation and intangible amortization.

Operating loss for the quarter narrowed to $6.9 million, a notable improvement from the operating loss reported in last year's fourth quarter of $97.5 million. Quarterly results for the prior year included charges related to restructuring and asset impairment ("Charges") totaling $90.1 million, compared with $0.1 million in the current year. Adjusted EBITDA (operating income plus depreciation and amortization), excluding Charges, was a loss of $3.6 million for the quarter, compared with a loss of $0.9 million a year ago.

The net loss from continuing operations for the quarter was $0.5 million, or a loss of $0.02 per share, compared with a net loss from continuing operations of $114.6 million, or a loss of $5.07 per share, in the prior-year fourth quarter.

"Despite the very difficult market environment and lower sales levels experienced throughout the fiscal year, we made significant progress in resetting the cost structure and making select, but important, investments in the company," said Martin Ellis, president and chief executive officer. "Moreover, our focus on working capital management and strong cash generation position us very well to advance our growth strategy of developing higher-value solutions with more proprietary software and services."

Fiscal 2010 Unaudited Results of Operations

Full-year revenue in fiscal 2010 decreased 12.4% to $640.4 million from $730.7 million in fiscal 2009 due to the weak economic environment and lower levels of corporate IT spending. Hardware sales, which comprised 69% of total sales, declined 5%, while sales of software and services were down 9% and 33%, respectively, compared with the prior fiscal year.

As a result of the lower sales, full-year gross profit declined $34.6 million, or 17.6%, to $161.5 million, versus $196.1 million in fiscal 2009. Gross margin as a percentage of sales was 25.2% in fiscal 2010, compared with 26.8% last year. Gross margin was negatively impacted by lower vendor rebates and lower selling margins.

SG&A expense decreased $31.7 million, or 16%, to $167.2 million, compared with $198.9 million in the prior fiscal year. The decrease was primarily due to cost-reduction efforts, lower intangible amortization and lower variable compensation.

The operating loss for the year was $6.8 million, compared with the operating loss of $275.4 million in fiscal 2009. Charges related to restructuring and asset impairment totaled $272.7 million in the prior year, versus $1.1 million in the current year. Adjusted EBITDA, excluding Charges, was $10.1 million for fiscal 2010, compared with $24.3 million a year ago. The decrease was due to lower sales and lower gross margin, reflecting a challenging IT demand environment for most of the year.

Full-year net income from continuing operations was $3.6 million, or $0.15 per diluted share, for fiscal 2010. Net income included a $5.2 million income tax benefit recorded for losses that were carried back to offset prior years' taxable income and reversal of prior-year reserves. This compares with the net loss from continuing operations of $282.2 million, or a loss of $12.49 per share, last year.

Accounts Receivable and Cash

The accounts receivable portfolio improved significantly in fiscal 2010. Days sales outstanding declined from 88 days at fiscal year-end 2009 to 69 days at fiscal year-end 2010, resulting in a $49.5 million reduction in accounts receivable. In addition, the average age of trade receivables improved by 6 days. Strong accounts receivable and working capital management contributed to cash on hand growing $29.3 million in fiscal 2010, reaching $65.5 million at March 31, 2010.

Business Outlook

Ellis continued: "We are a leaner and more focused company. Our investments in infrastructure and product development were sustained throughout the recession and are expected to make important contributions to future success. Subsequent to the end of the fiscal year, we went live on our new integrated Oracle ERP platform, which will further improve financial reporting, internal controls and operating efficiencies, as well as enhance customer service."

"HSG and RSG continue to gain traction, while demand in TSG remains uncertain in the short-term. Longer–term, we expect to benefit from broader demand for IT products and services. We intend to provide more comprehensive guidance as the demand environment becomes clearer," Ellis concluded.

The outlook for cash-flow generation remains strong and the company expects to generate $10 million to $15 million in cash flow in fiscal 2011. The company also expects to incur capital expenditures of approximately $10 million and depreciation and amortization of approximately $12.5 million.

The company will file its Form 10-K with the SEC next week.

Conference Call Information

A conference call will be held today at 11:00 a.m. ET. A slide deck, which will be the basis for the review, will accompany the conference call. Both the slide deck and the conference call can be accessed via the Investor Relations section of www.agilysys.com. In addition, a replay of the call will be archived on the website.

Forward-Looking Language

This release contains certain management expectations, which may constitute forward-looking information within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the Private Securities Reform Act of 1995. Forward-looking information speaks only as to the date of this presentation and may be identified by use of words such as "may," "will," "believes," "anticipates," "plans," "expects," "estimates," "projects," "targets," "forecasts," "continues," "seeks," or the negative of those terms or similar expressions. Many important factors could cause actual results to be materially different from those in forward-looking information including, without limitation, competitive factors, disruption of supplies, changes in market conditions, pending or future claims or litigation, or technology advances. No assurances can be provided as to the outcome of cost reductions, business strategies, future financial results, unanticipated downturns to our relationships with customers, and macroeconomic demand for IT products and services, unanticipated difficulties integrating acquisitions, new laws and government regulations, interest rate changes, consequences of MAK Capital's shareholder-approved control share acquisition proposal, and unanticipated deterioration in economic and financial conditions in the United States and around the world or the consequences. We do not undertake to update or revise any forward-looking information even if events make it clear that any projected results, actions, or impact, express or implied, will not be realized.

Other potential risks and uncertainties that may cause actual results to be materially different from those in forward-looking information are described in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC), under Item 1A, "Risk Factors." Copies are available from the SEC or the Agilysys website.

Use of Non-GAAP Financial Information

To supplement the unaudited condensed consolidated financial statements presented in accordance with U.S. GAAP in this presentation, certain non-GAAP financial measures as defined by the SEC rules are used. Management believes that such information can enhance investors' understanding of the company's ongoing operations. The non-GAAP measures included in this presentation have been reconciled to the comparable GAAP measures within an accompanying table, shown on the last page of this presentation.

About Agilysys, Inc.

Agilysys is a leading provider of innovative IT solutions to corporate and public-sector customers, with special expertise in select markets, including retail and hospitality. The company uses technology — including hardware, software and services — to help customers resolve their most complicated IT needs. The company possesses expertise in enterprise architecture and high availability, infrastructure optimization, storage and resource management, identity management and business continuity; and provides industry-specific software, services and expertise to the retail and hospitality markets. Headquartered in Cleveland, Agilysys operates extensively throughout North America, with additional sales and support offices in the United Kingdom, Singapore and Hong Kong.

News releases and other information on the company are available on the Internet at: http://www.agilysys.com.

SOURCE Agilysys