AGILYSYS INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 Q1 FY14 EARNINGS RELEASE - July 30, 2013

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EXHIBIT 99.1




AGILYSYS’ FIRST QUARTER REVENUE INCREASES 9% TO $24.5 MILLION;
REPORTS ADJUSTED AND GAAP EARNINGS PER DILUTED SHARE OF $0.06 AND $0.02, RESPECTIVELY

- First Quarter Adjusted Operating Income Rises $1.9 Million Year over Year to $1.5 Million -

Alpharetta, GA – July 25, 2013 – Agilysys, Inc. (Nasdaq: AGYS), a leading developer and provider of innovative information technology, services and solutions for the hospitality industry, today reported operating results for its fiscal 2014 first quarter.

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. Agilysys’ business is now focused exclusively on providing innovative software enabled solutions to the hospitality industry.

Summary of Fiscal 2014 First Quarter Financial Results

•
Total net revenue increased $2.1 million, or 9%, to $24.5 million, from $22.4 million in the prior-year period.

•
Recurring revenues (comprised of support, maintenance and subscription services) for the quarter were $13.2 million, an increase of 8% over the prior-year period.

•
Gross margin was 66% in the quarter compared to 62% in the prior-year period.

•
Adjusted operating income (excluding stock-based compensation, amortization of intangibles and other one-time items) from continuing operations increased $1.9 million year over year to $1.5 million from an adjusted operating loss from continuing operations of $0.4 million in the year-ago period (see reconciliation below).

•
Adjusted net income (non-GAAP) from continuing operations grew to $1.4 million, or $0.06 per diluted share, compared with an adjusted net loss from continuing operations of $0.9 million, or ($0.04) per share, last year (see reconciliation below).

•
Income from continuing operations for the period was $0.4 million, or $0.02 per diluted share, compared to a loss from continuing operations of $2.7 million, or ($0.12) per share, in the prior-year period. Inclusive of discontinued operations, net income for the quarter was $1.3 million, or $0.06 per diluted share, compared to a net loss of $1.8 million, or ($0.08) per share, in the prior-year period.

James Dennedy, president and CEO of Agilysys, commented, “Our first quarter financial results reflect the success of the business strategies we have implemented, primarily our emphasis on the pursuit of the highest margin markets we can address with the highest value solutions in the industry. This strategy continues to deliver year-over-year growth in total revenue, recurring revenue and gross margin. Further, our revenue growth continues to outpace the overall market rate of growth―another key proof point of our strategy. Equally importantly we have generated these improvements with a lower overall expense structure in the business. Capital efficiency is the key metric we rely on to assess the quality of the business and financial objectives we have accomplished. In this regard, our business and our personnel have performed at an exceptional level.”

“Looking ahead, we expect further improvements in our team members’ performance and the business,” Dennedy added. Our strong balance sheet enables Agilysys to invest in growing our people, expanding the markets we serve, adding more value to the solutions we deliver and accelerating our growth in these areas through select M&A opportunities. We believe our focus on capital efficiency will deliver above market revenue growth and create greater value for our team, customers and investors.”





Robb Ellis, chief operating officer and chief financial officer, added, “Agilysys’ successful first quarter provides strong support that our business model is primed to deliver positive operating results. During the quarter, we generated above market revenue growth which we believe will be sustainable throughout fiscal 2014. This growth and the margin expansion that we experienced resulted in adjusted operating income of $1.5 million.”

“In addition, we have a strong balance sheet with over $100 million of cash including the net proceeds received from the sale of our Retail business unit on July 1st,” continued Ellis. “With this solid financial foundation and our operational discipline, we anticipate investing the operating income generated throughout fiscal 2014 and a portion of our cash back into the business. These investments will include addressing growth opportunities; such as the largely untapped international market and upsell opportunities into our existing customer base, as well as pursuing strategic acquisitions that complement our product capabilities and help grow our customer base. These investments will help drive consistent organic growth that will exceed the hospitality industry’s rate of growth.”

Ellis concluded, “We believe that our focus on achieving high returns on capital deployed will result in the growth of our installed base and improve and expand our product offerings so that we can achieve consistent profitable revenue growth.”

2014 First Quarter Conference Call and Webcast
Agilysys is hosting a conference call and webcast today, July 25, 2013, beginning at 4:30 P.M. ET. Both the call and the webcast are open to the general public. The conference call number is 224-357-2393 (domestic or international). 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 http://agilysys.com/home/InvestorRelations/EventPresentation.htm. Approximately two hours after the call has concluded, an archived version of the webcast will be available for replay at the same location at http://agilysys.com/home/InvestorRelations/EventPresentation.htm.

Forward-Looking Language
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. 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.

About Agilysys
Agilysys is a leading developer and marketer of proprietary enterprise software, services and solutions to the hospitality industry. The company specializes in market-leading point-of-sale, property management, inventory & procurement and mobile & wireless solutions that are designed to streamline operations, improve efficiency and enhance the guest experience. Agilysys serves casinos, resorts, hotels, foodservice venues, stadiums and cruise lines. Agilysys operates extensively



throughout North America, Europe and Asia, with corporate services located in Alpharetta, GA, EMEA headquarters in Cheshire, UK, and APAC offices in Singapore and Hong Kong. For more information, visit www.agilysys.com.

Investor Contact:
 
Robb Ellis
Richard Land, Norberto Aja, Jim Leahy
Chief Operating Officer and Chief Financial Officer
JCIR
Agilysys, Inc.
212-835-8500 or agys@jcir.com
770-810-7800 or investorrelations@agilysys.com
 







# # #

- Financial tables follow -



AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 
Three Months Ended
(In thousands, except per share data)
 
June 30,
 
 
2013
 
2012
 
 
 
 
 
Net revenue:
 
 
 
 
Products
 
$
7,820

 
$
6,778

Support, maintenance and subscription services
 
13,175

 
12,169

Professional services
 
3,505

 
3,442

Total net revenue
 
24,500

 
22,389

Cost of goods sold:
 
 
 
 
Products
 
3,787

 
3,581

Support, maintenance and subscription services
 
2,307

 
2,624

Professional services
 
2,267

 
2,291

Total cost of goods sold
 
8,361

 
8,496

Gross profit
 
16,139

 
13,893

Operating expenses:
 
 
 
 
Product development
 
6,476

 
4,420

Sales and marketing
 
3,248

 
4,201

General and administrative
 
4,809

 
5,279

Depreciation of fixed assets
 
488

 
585

Amortization of intangibles
 
794

 
855

Asset impairment and related charges
 
—

 
208

Restructuring, severance and other charges
 
55

 
1,125

Operating income (loss)
 
269

 
(2,780
)
Other (income) expenses :
 
 
 
 
Interest income
 
(13
)
 
(4
)
Interest expense
 
61

 
264

Other (income) expenses, net
 
(35
)
 
144

Income (loss) before income taxes
 
256

 
(3,184
)
Income tax benefit
 
(105
)
 
(529
)
Income (loss) from continuing operations
 
361

 
(2,655
)
Income from discontinued operations, net of taxes
 
955

 
862

Net income (loss)
 
$
1,316

 
$
(1,793
)
 
 
 
 
 
Basic weighted average shares outstanding
 
22,022

 
21,836

 
 
 
 
 
Net income (loss) per share – basic:
 
 
 
 
Income (loss) from continuing operations
 
$
0.02

 
$
(0.12
)
Income from discontinued operations
 
0.04

 
0.04

Net income (loss) per share
 
$
0.06

 
$
(0.08
)
 
 
 
 
 
Diluted weighted average shares outstanding
 
22,292

 
21,836

 
 
 
 
 
Net income (loss) per share – diluted:
 
 
 
 
Income (loss) from continuing operations
 
$
0.02

 
$
(0.12
)
Income from discontinued operations
 
0.04

 
0.04

Net income (loss) per share
 
$
0.06

 
$
(0.08
)




AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(In thousands, except share data)
 
June 30,
 
March 31,
 
2013
 
2013
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
70,611

 
$
82,931

Accounts receivable, net of allowance of $771 and $786, respectively
 
18,757

 
17,892

Inventories
 
1,462

 
1,080

Prepaid expenses
 
3,228

 
3,167

Other current assets
 
420

 
671

Current assets - discontinued operations
 
28,672

 
40,020

Total current assets
 
123,150

 
145,761

Property and equipment, net
 
14,394

 
13,855

Goodwill
 
17,507

 
14,128

Intangible assets, net
 
11,598

 
11,283

Capitalized software development, net
 
8,520

 
5,596

Other non-current assets
 
4,217

 
4,179

Non-current assets - discontinued operations
 
2,156

 
2,162

Total assets
 
$
181,542

 
$
196,964

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
9,804

 
$
10,427

Deferred revenue
 
19,319

 
20,461

Accrued and other current liabilities
 
10,618

 
12,938

Capital lease obligations – current
 
73

 
58

Current liabilities - discontinued operations
 
16,454

 
29,756

Total current liabilities
 
56,268

 
73,640

Deferred income taxes – non-current
 
3,900

 
4,002

Capital lease obligations – non-current
 
15

 
28

Other non-current liabilities
 
5,531

 
4,640

Non-current liabilities - discontinued operations
 
769

 
798

Shareholders’ equity:
 
 
 
 
Common shares, without par value, at $0.30 stated value; authorized 80,000,000 shares; 31,606,831 issued; and 22,404,581 and 22,145,915 shares outstanding at June 30, 2013 and March 31, 2013 , respectively
 
9,482

 
9,482

Treasury shares (9,202,250 and 9,460,916 shares at June 30, 2013 and March 31, 2013, respectively)
 
(2,760
)
 
(2,838
)
Capital in excess of stated value
 
(14,509
)
 
(14,267
)
Retained earnings
 
123,894

 
122,578

Accumulated other comprehensive loss
 
(1,048
)
 
(1,099
)
Total shareholders’ equity
 
115,059

 
113,856

Total liabilities and shareholders’ equity
 
$
181,542

 
$
196,964













AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Three Months Ended
(In thousands)
June 30,
 
2013
 
2012
Operating activities:
 
 
 
Net income (loss)
$
1,316

 
$
(1,793
)
Income from discontinued operations
955

 
862

Income (loss) from continuing operations
361

 
(2,655
)
Adjustments to reconcile net income (loss) from continuing operations to net cash used in operating activities:
 
 
 
Restructuring, severance and other charges
55

 
1,125

Payments for restructuring charges
(354
)
 
(3,549
)
Payments for legal settlements
(87
)
 
—

Asset impairments and related charges
—

 
208

Depreciation
488

 
585

Amortization of intangibles
734

 
1,104

Share-based compensation
367

 
152

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(583
)
 
430

Inventories
(302
)
 
227

Prepaids
(62
)
 
(83
)
Accounts payable
(1,064
)
 
(366
)
Deferred revenue
(1,681
)
 
(3,929
)
Accrued and other liabilities
(3,444
)
 
(7,846
)
Other changes, net
(107
)
 
(231
)
Net cash used in operating activities from continuing operations
(5,679
)
 
(14,828
)
Net cash used in operating activities from discontinued operations
(785
)
 
(4,979
)
Net cash used in operating activities
(6,464
)
 
(19,807
)
 
 
 
 
Investing activities:
 
 
 
Cash paid for acquisitions, net
(1,750
)
 
—

Capital expenditures
(1,396
)
 
(532
)
Capitalized software development costs
(1,868
)
 
(814
)
Proceeds from marketable securities and company owned life insurance policies
—

 
4,343

Net cash (used in) provided by investing activities from continuing operations
(5,014
)
 
2,997

Net cash used in investing activities from discontinued operations
(117
)
 
(180
)
Net cash (used in) provided by investing activities
(5,131
)
 
2,817

 
 
 
 
Financing activities:
 
 
 
Repurchases of shares to satisfy employee tax withholding and option price
(571
)
 
(40
)
Exercise of employee stock options
—

 
67

Principal payment under long-term obligations
(23
)
 
(107
)
Net cash used in financing activities from continuing operations
(594
)
 
(80
)
Net cash used in financing activities from discontinued operations
(80
)
 
(91
)
Net cash used in financing activities
(674
)
 
(171
)
 
 
 
 
Effect of exchange rate changes on cash
(51
)
 
(90
)
Cash flows used in continuing operations
(11,338
)
 
(12,001
)
Cash flows provided by (used in) discontinued operations:
(982
)
 
(5,250
)
Net decrease in cash
(12,320
)
 
(17,251
)
Cash and cash equivalents at beginning of period
82,931

 
97,587

Cash and cash equivalents at end of period
$
70,611

 
$
80,336







AGILYSYS, INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
(UNAUDITED)
(In thousands, except per share data)
 
Three Months Ended
June 30,
 
 
2013
 
2012
 
 
 
 
 
Operating income (loss)
 
$
269

 
$
(2,780
)
Share-based compensation expense
 
367

 
152

Amortization of intangibles
 
794

 
855

Asset impairments and related charges
 
—

 
208

Restructuring, severance and other charges
 
55

 
1,125

Adjusted operating income (loss) from continuing operations (a)
 
1,485

 
(440
)
 
 
 
 
 
Other expenses, net
 
13

 
404

Cash income tax expense (benefit) (b)
 
49

 
36

Adjusted net income (loss) from continuing operations (a)
 
$
1,423

 
$
(880
)
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
Basic
 
22,022

 
21,836

Diluted
 
22,292

 
21,836

 
 
 
 
 
Adjusted net income (loss) per share from continuing operations (a):
 
 
 
 
Basic
 
$
0.06

 
$
(0.04
)
Diluted
 
$
0.06

 
$
(0.04
)
 
 
 
 
 
(a) Non-GAAP financial measure
 
 
 
 
 
 
 
 
 
(b) Taxes calculated based upon our estimated cash tax payments for the three ended June 30, 2013 and 2012.
 
 
 
 
 




AGILYSYS, INC.
RECONCILIATION OF OPERATING CASH FLOWS FROM CONTINUING OPERATIONS TO
ADJUSTED CASH FLOWS FROM CONTINUING OPERATIONS
(UNAUDITED)
(In thousands)
 
June 30,
 
 
2013
 
2012
Operating activities:
 
 
 
 
Net cash used in continuing operations
 
$
(5,679
)
 
$
(14,828
)
Non-recurring cash items:
 
 
 
 
Restructuring, severance and other payments
 
354

 
3,549

Payments for legal settlements
 
87

 
—

BEP/SERP payments
 
—

 
4,468

Adjusted cash used in continuing operations (a)
 
$
(5,238
)
 
$
(6,811
)
 
 
 
 
 
(a) Non-GAAP financial measure
 
 
 
 




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