Agilysys Reports Unaudited Fiscal 2010 Third-Quarter and Nine-Month Results
Revenue Increases 41% Sequentially as IT Demand Stabilizes
Quarterly Earnings Increase Significantly to $0.64 Per Diluted Share, Versus Loss of $0.17 Per-Share in Prior-Year's Quarter
CLEVELAND, Feb. 3 /PRNewswire-FirstCall/ -- Agilysys, Inc. (Nasdaq: AGYS), a leading provider of innovative IT solutions, today announced unaudited financial results for the fiscal 2010 third quarter and nine months ended December 31, 2009.
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Fiscal 2010 Third-Quarter Unaudited Results of Operations
Revenue declined 1.7% to $220.4 million from the $224.1 million reported in the third quarter of fiscal 2009. Compared with the prior-year period, hardware sales increased 12.6%, offset by a 39.1% decline in services revenue. Software revenue during the quarter was down slightly compared with last year. Due to a higher proportion of hardware sales and lower service revenue, consolidated gross margin declined to 23.3% of sales during the period, compared with 26.3% in the prior year.
Cost-cutting initiatives and lower acquisition-related intangible amortization drove selling, general and administrative (SG&A) expense down $7.0 million, or 14.7%, to $40.5 million during the quarter. Operating income increased $11.8 million to $9.9 million, a substantial improvement from the operating loss of $1.9 million in last year's quarter. Last year's quarterly loss included $13.4 million in restructuring charges, compared with restructuring charges recorded in the current quarter of $0.7 million. Adjusted EBITDA (operating income plus depreciation and amortization) increased to $13.0 million for the quarter, compared with $4.8 million a year ago.
"The solid performance in the quarter reflects a stabilizing demand environment and our focus on managing cost structure," said Martin Ellis, president and chief executive officer. "We are pleased to report that our turnaround remains on track as we generated strong net earnings during the quarter."
Agilysys reported third-quarter net income of $14.9 million, or $0.64 per diluted share, a significant increase from the loss of $3.7 million, or $0.17 per diluted share, recorded in the previous year's quarter. Other income in the quarter included $2.3 million from a litigation settlement and $2.4 million from the gain recognized on a distribution from the Reserve Fund. Combined these items represented $0.18 per diluted share.
Fiscal 2010 Nine-Month Unaudited Results of Operations
Nine-month fiscal 2010 revenue was $506.0 million versus $575.3 million in the comparable period of fiscal 2009, reflecting lower sales in each of the company's three business segments. Hardware, software and services posted declines of 2.5%, 5.2%, and 39.3% respectively, versus the comparable period a year ago. Gross margin declined to 25.1% from 27.1% in last year's nine months due to the mix of higher hardware and lower services.
SG&A declined by $30.7 million, or 19.8%, to $124.7 million, largely due to cost-reduction initiatives. Adjusted EBITDA was $14.0 million for the nine-month period, versus a loss of $161.2 million in the fiscal 2009 nine-months, which included asset impairment and restructuring charges of $182.6 million. The company reported net income of $5.3 million, or $0.23 per diluted share, for the fiscal 2010 nine-month period, compared with a net loss of $170.3 million, or $7.54 per share, in the same year-ago period.
Business Outlook
"Uncertainty remains regarding the macroeconomic environment and the prospects for growth in demand for IT products and services. However, we are encouraged by the improving demand environment we've seen in the past two quarters. Near-term, we are optimistic regarding our outlook for the final quarter of the fiscal year and expect improved year-over-year financial performance. We have successfully restructured the organization to be profitable at lower revenue levels and are now well positioned with the operating leverage to capitalize on any future increase in IT spending," said Ellis.
Conference Call Information
A conference call will be held at 11:00 a.m. ET today to review unaudited fiscal 2010 third-quarter and nine-month results. A slide deck will be the basis for the review. Both the slide deck and the conference call can be accessed via the Investor Relations section of www.agilysys.com. Additionally, 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, and unanticipated deterioration in economic and financial conditions in the United States and around the world or the consequences if the shareholders either approve or fail to approve the proposed Control Share Acquisition by MAK Capital announced on November 20, 2009. 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 release, 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 and is a measure used in the Company's debt agreement. The non-GAAP measures included in this release have been reconciled to the comparable GAAP measures within an accompanying table, shown on the last page of this release.
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 Agilysys are available on the Internet at: www.agilysys.com.
--FINANCIAL RESULTS FOLLOW--
Investor Contact: |
|
Curtis Stout |
|
Vice President and Treasurer |
|
Agilysys, Inc. |
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440-519-8635 |
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Media Contact: |
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Maureen Morreale |
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Senior Communications Manager |
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Agilysys, Inc. |
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440-519-8161 |
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AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
Dec 31, Dec 31,
------- -------
(In thousands,
except share and
per-share data) 2009 2008 2009 2008
---- ---- ---- ----
Net sales:
Products $186,979 $169,260 $418,213 $430,692
Services 33,373 54,816 87,740 144,573
------ ------ ------ -------
Total net sales 220,352 224,076 505,953 575,265
Cost of goods
sold:
Products 156,067 146,952 340,986 359,119
Services 12,956 18,102 37,914 59,994
------ ------ ------ ------
Total cost of
goods sold 169,023 165,054 378,900 419,113
------- ------- ------- -------
Gross margin 51,329 59,022 127,053 156,152
Selling, general and
administrative expenses 40,542 47,556 124,686 155,391
Asset impairment charges 238 - 238 145,643
Restructuring charges 677 13,357 745 36,930
--- ------ --- ------
Operating income (loss) 9,872 (1,891) 1,384 (181,812)
Other (income) expense:
Other (income)
expense, net (4,921) 1,175 (5,311) 695
Interest income - (59) (9) (521)
Interest expense 246 638 673 1,090
--- --- --- -----
Income (loss) before
income taxes 14,547 (3,645) 6,031 (183,076)
Income tax (benefit)
expense (345) (1,402) 658 (15,481)
---- ------ --- -------
Income (loss) from
continuing operations 14,892 (2,243) 5,373 (167,595)
Income (loss) from
discontinued operations 3 (1,477) (38) (2,751)
--- ------ --- ------
Net income (loss) $14,895 $(3,720) $5,335 $(170,346)
======= ======= ====== =========
Income (loss) per
share – basic
Income (loss) from
continuing operations $0.66 $(0.10) $0.24 $(7.42)
Loss from discontinued
operations 0.00 (0.07) 0.00 (0.12)
---- ----- ---- -----
Net income (loss) $0.66 $(0.17) $0.24 $(7.54)
===== ====== ===== ======
Income (loss) per
share – diluted
Income (loss) from
continuing operations $0.64 $(0.10) $0.23 $(7.42)
Loss from discontinued
operations 0.00 (0.07) 0.00 (0.12)
---- ----- ---- -----
Net income (loss) $0.64 $(0.17) $0.23 $(7.54)
Weighted average
shares outstanding
Basic 22,624,622 22,603,641 22,625,866 22,580,726
Diluted 23,170,992 22,603,641 23,010,272 22,580,726
Cash dividends per share $- $0.03 $0.06 $0.09
AGILYSYS, INC.
BUSINESS SEGMENT INFORMATION (UNAUDITED)
Three Months Ended Nine Months Ended
------------------ -----------------
Dec 31, Dec 31,
------- -------
(In thousands) 2009 2008 2009 2008
---- ---- ---- ----
Hospitality (HSG)
Total revenue $23,329 $27,911 $63,715 $76,153
Elimination of
intersegment revenue (833) - (1,890) (82)
---- --- ------ ---
Revenue from external
customers $22,496 $27,911 $61,825 $76,071
======= ======= ======= =======
Gross margin $14,312 $15,074 $38,089 $43,920
======= ======= ======= =======
63.6% 54.0% 61.6% 57.7%
Depreciation and
amortization $1,081 $1,551 $3,308 $4,737
Operating income (loss) 4,108 3,166 6,203 (105,598)
----- ----- ----- --------
Adjusted EBITDA $5,189 $4,717 $9,511 $(100,861)
====== ====== ====== =========
Asset impairment $90 $- $90 $110,851
Retail (RSG)
Total revenue $37,753 $34,793 $85,696 $102,497
Elimination of
intersegment revenue (43) (3) (63) (319)
--- --- --- ----
Revenue from
external customers $37,710 $34,790 $85,633 $102,178
======= ======= ======= ========
Gross margin $7,416 $8,937 $17,486 $23,431
====== ====== ======= =======
19.7% 25.7% 20.4% 22.9%
Depreciation and
amortization $49 $16 $143 $157
Operating income (loss) 2,925 4,229 5,688 (16,085)
----- ----- ----- -------
Adjusted EBITDA $2,974 $4,245 $5,831 $(15,928)
====== ====== ====== ========
Asset impairment $- $- $- $24,910
Technology (TSG)
Total revenue $162,425 $161,451 $360,818 $400,199
Elimination of
intersegment revenue (2,279) (76) (2,323) (3,183)
------ --- ------ ------
Revenue from external
customers $160,146 $161,375 $358,495 $397,016
======== ======== ======== ========
Gross margin $29,601 $33,765 $72,240 $85,210
======= ======= ======= =======
18.5% 20.9% 20.2% 21.5%
Depreciation and
amortization $811 $4,067 $5,579 $12,547
Operating income (loss) 9,648 11,817 13,434 (14,496)
----- ------ ------ -------
Adjusted EBITDA $10,459 $15,884 $19,013 $(1,949)
======= ======= ======= =======
Asset impairment $- $- $- $9,882
Restructuring charge $- $- $- $23,573
AGILYSYS, INC.
BUSINESS SEGMENT INFORMATION
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
Dec 31, Dec 31,
------- -------
(In thousands) 2009 2008 2009 2008
---- ---- ---- ----
Corporate / Other
Gross margin $- $1,246 $(762) $3,591
=== ====== ===== ======
Depreciation and
amortization (a) $1,201 $1,048 $3,610 $3,200
Operating loss (6,809) (21,103) (23,941) (45,633)
------ ------- ------- -------
Adjusted EBITDA $(5,608) $(20,055) $(20,331) $(42,433)
======= ======== ======== ========
Asset impairment $148 $- $148 $-
Restructuring charge $677 $13,357 $745 $13,357
Consolidated
Total revenue $223,507 $224,155 $510,229 $578,849
Elimination of
Intersegment
revenue (3,155) (79) (4,276) (3,584)
------ --- ------ ------
Revenue from external
customers $220,352 $224,076 $505,953 $575,265
======== ======== ======== ========
Gross margin $51,329 $59,022 $127,053 $156,152
======= ======= ======== ========
23.3% 26.3% 25.1% 27.1%
Depreciation and
amortization (a) $3,142 $6,682 $12,640 $20,641
Operating income
(loss) 9,872 (1,891) 1,384 (181,812)
----- ------ ----- --------
Adjusted EBITDA $13,014 $4,791 $14,024 $(161,171)
======= ====== ======= =========
Goodwill and intangible
asset impairment $238 $- $238 $145,643
Restructuring charge $677 $13,357 $745 $36,930
(a) Does not include the amortization of deferred financing fees totaling
$126 and $471 for the three months ended Dec. 31, 2009 and 2008,
respectively, and $346 and $584 for the nine months ended Dec. 31, 2009
and 2008, respectively, which related to the Corporate and Other segment.
AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Dec 31, Mar 31,
(In thousands) ------ ------
2009 2009
---- ----
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $24,435 $36,244
Accounts receivable, net 182,566 151,944
Inventories, net 25,138 27,216
Deferred income taxes –
current, net 4,930 6,836
Prepaid expenses and other
current assets 7,717 4,564
Income taxes receivable 6,171 3,871
Assets of discontinued
operations – current 282 1,075
--- -----
Total current assets 251,239 231,750
Goodwill 50,612 50,382
Intangible assets, net 32,717 36,659
Deferred income taxes – non-
current, net - 511
Other non-current assets 18,243 29,008
Assets of discontinued
operations – non-current - 56
Property and equipment, net 27,067 26,070
------ -----
Total assets $379,878 $374,436
======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $121,346 $28,042
Floor plan financing - 74,159
Deferred revenue 14,397 18,709
Accrued liabilities 23,902 37,807
Long-term debt – current 199 238
Liabilities of discontinued
operations – current 569 1,176
--- -----
Total current liabilities 160,413 160,131
Other non-current
liabilities 260 -
Shareholders' equity: 19,428 21,588
Common shares, without par
value, at $0.30 stated
value; authorized
80,000,000 shares;
31,606,831 shares issued
and 23,031,119 shares
outstanding at Dec 31,2009 9,370 9,366
Treasury stock (8,510,712
and 8,896,778 shares at Dec
31, 2009, and Mar 31, 2009,
respectively) (2,670) (2,670)
Capital in excess of stated
value (9,298) (11,036)
Retained earnings 203,922 199,947
Accumulated other
comprehensive loss (1,547) (2,890)
------ ------
Total shareholders' equity 199,777 192,717
------- ------
Total liabilities and
shareholders' equity 379,878 $374,436
======= ========
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
Dec 31,
------------------
Operating activities: 2009 2008
---- ----
Net income (loss) $5,335 $(170,346)
Add: Loss from discontinued operations 38 2,751
--- -----
Income (loss) from continuing operations 5,373 (167,595)
Adjustments to reconcile net income (loss)
from continuing operations to net cash
provided by (used for) operating activities
(net of effects from business acquisitions):
Impairment of property and equipment 238 -
Impairment of investment in
The Reserve Fund's Primary Fund - 1,087
Impairment of goodwill and
intangible assets - 166,223
Gain on redemption of cost basis investment - (56)
Gain on investment in The
Reserve Fund's Primary Fund (2,505) -
Loss on the sale of securities 91 -
Depreciation 2,859 2,863
Amortization 10,127 18,362
Deferred income taxes 2,724 (20,087)
Stock based compensation 1,709 825
Changes in working capital:
Accounts receivable (30,622) (4,849)
Inventories 2,078 (31)
Accounts payable 93,671 (90,739)
Accrued and other liabilities (20,442) (29,404)
Income taxes payable (5,243) 1,359
Other changes, net (2) (823)
Other non-cash adjustments (1,128) 701
------ ---
Total adjustments 53,555 45,431
------ ------
Net cash provided by (used for) operating
activities 58,928 (122,164)
Investing activities:
Proceeds from (claim on) The Reserve
Fund's Primary Fund 2,337 (7,657)
Proceeds from the redemption of cost basis
investment - 9,513
Proceeds from borrowings against
company-owned life insurance policies 12,500 -
Change in cash surrender value of company
owned life insurance policies (159) (155)
Acquisition of businesses, net
of cash acquired - (2,381)
Purchase of property and equipment (9,672) (4,335)
------ ------
Net cash provided by (used
for) investing activities 5,006 (5,015)
Financing activities:
Floor plan financing agreement, net (74,159) 131,323
Proceeds from borrowings under
credit facility 5,000 -
Principal payments under credit facility (5,000) -
Principal payment under long Term
Obligations (258) (71)
Issuance of common shares 33 -
Debt financing costs (1,520) -
Dividends paid (1,360) (2,038)
------ ------
Net cash (used for) provided
by financing activities (77,264) 129,214
Effect of exchange rate changes on cash 1,317 (69)
----- ---
Cash flows (used for) provided
by continuing operations (12,013) 1,966
Cash flows of discontinued operations:
Operating cash flows 204 510
Investing cash flows - -
--- ---
Net (decrease) increase in cash (11,809) 2,476
Cash at beginning of period 36,244 69,935
------ ------
Cash at end of period $24,435 $72,411
======= =======
AGILYSYS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
Dec 31, Dec 31,
------ ------
(In thousands) 2009 2008 2009 2008
---- ---- ---- ----
Net income (loss) $14,895 $(3,720) $5,335 $(170,346)
Plus:
Interest expense, net 246 579 664 569
Other income, net (4,921) 1,175 (5,311) 695
Income tax (benefit) expense (345) (1,402) 658 (15,481)
Depreciation and Amortization
expense (a) 3,142 6,682 12,640 20,641
Income (loss) from discontinued
operations, net of tax (3) 1,477 38 2,751
---- ---- ---- ----
Adjusted EBITDA 13,014 4,791 14,024 (161,171)
Asset impairment charges 238 - 238 145,643
Restructuring charges 677 13,357 745 36,930
---- ---- ---- ----
Adjusted EBITDA excluding asset
impairment and restructuring
charges $13,929 $18,148 $15,007 $21,402
======= ======= ======= =======
(a) Depreciation and amortization expense excludes amortization of
deferred finance costs, totaling $126 and $471 for the three months
ended Dec. 31, 2009 and 2008, respectively, and $346 and $584 for the
nine months ended Dec. 31, 2009 and 2008, respectively, as such costs
are already included in interest expense, net.
SOURCE Agilysys, Inc.
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