Agilysys Reports Unaudited Fiscal 2011 First-Quarter Results

CLEVELAND, Aug. 4 /PRNewswire-FirstCall/ --

• Strong Services and Software Growth Drives Increase in Gross Margin
• Company Remains Debt-Free with $50 Million in Cash on Hand

Agilysys, Inc. (Nasdaq: AGYS), a leading provider of innovative IT solutions, today announced unaudited financial results for its fiscal 2011 first quarter ended June 30, 2010.

(Logo:  http://photos.prnewswire.com/prnh/20030915/AGLSLOGO )

(Logo:  http://www.newscom.com/cgi-bin/prnh/20030915/AGLSLOGO )

First-Quarter 2011 Unaudited Results of Operations

Consolidated revenue for the fiscal 2011 first quarter increased 1.9% from the year-ago period to $132.4 million. Services increased 11%, software increased 35%, and hardware sales declined 7%, compared with the first quarter of fiscal 2010.  Revenue from the Company's Hospitality Solutions Group increased 44%, while the Retail and Technology Solutions groups declined 3% and 4%, respectively.

Gross margin in the quarter expanded to 25.6%, compared with 24.5% in the first quarter of the prior fiscal year. The improvement was largely due to the higher software and services revenue, which carries higher average margins compared with hardware sales.  The margin improvement was partially offset by a decline in vendor incentives in the quarter, as well as pricing pressure on hardware.

Selling, general and administrative (SG&A) expense declined 11% to $40.1 million, compared with $44.8 million in the prior-year first quarter. The decrease was primarily attributable to lower compensation and benefit expense and acquisition-related intangibles amortization.

The pre-tax loss for the quarter narrowed to $5.8 million from $12.4 million last year. Despite the pre-tax loss, the Company recorded income tax expense of $4.5 million in the first quarter of fiscal 2011 related to a correction of an error in the Company's prior period deferred tax valuation allowance.

The reported net loss for the quarter was $10.3 million, or a loss of $0.45 per share, compared with the net loss of $12.4 million, or a loss of $0.55 per share, in the prior-year quarter.

Adjusted EBITDA (operating income plus depreciation and amortization), excluding restructuring charges, was a loss of $2.7 million, versus a loss of $6.6 million in last year's first quarter.

Martin Ellis, president and chief executive officer of Agilysys, commented: "Our strategy of developing higher-value solutions with more proprietary software and services is contributing to improved margins. On a segment basis, HSG and RSG met expectations. While TSG revenue lagged expectations during the quarter, we successfully increased attach rates, bundling more software and services with hardware sales."

Financial Position

At June 30, 2010, cash on hand was $50.0 million, compared with $51.0 million at June 30, 2009, and $65.5 million at March 31, 2010. The Company is currently debt-free and has no outstanding balance on its $50 million credit facility. The Company's year-to-date decrease in cash is primarily related to higher accounts receivable balances in connection with the transition of invoicing to the Company's new ERP platform. The Company indicated that the transition process has been largely completed and invoicing and collections are expected to improve in future quarters.

Business Outlook

"Our investments in people, infrastructure and product development are starting to make the contributions that we expected. The demand environment has improved which bodes well for the future and our new integrated Oracle ERP platform will, over time, contribute to improved financial reporting, internal controls and operating efficiencies, as well as enhance customer service," 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. Agilysys also expects to incur capital expenditures of approximately $10 million and depreciation and amortization of approximately $12.5 million.

Conference Call Information

A conference call will be held at 11:00 a.m. ET today to review unaudited fiscal 2011 first-quarter 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. 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 release 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, expected benefits and outcomes from our recent ERP implementation, 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. The Company does 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, Inc.