Alpharetta, GA – February 9, 2017 – Agilysys, Inc. (Nasdaq: AGYS), a global provider of next-generation hospitality software solutions and services, today reported operating results for its fiscal 2017 third quarter ended December 31, 2016.
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Summary of Fiscal 2017 Third Quarter Financial Results
- Total net revenue was $33.4 million, compared to total net revenue of $31.3 million in the comparable prior-year period.
Recurring revenues (which are comprised of support, maintenance and subscription services) were a quarterly record $16.2 million, or 49% of total net revenue, compared to $14.9 million, or 48% of total net revenue, for the same period in fiscal 2016. SaaS revenues increased 48% year over year and comprised 24% of total recurring revenues, compared to 18% of total recurring revenues in the third quarter of fiscal 2016.
Gross margin was 48.6% in the fiscal 2017 third quarter, compared to 52.7% in the prior-year period. Fiscal 2017 third quarter gross margin primarily reflects the previously disclosed impact of the amortization of software development costs for first generation versions of the Company’s rGuest® solutions, which achieved general availability in the first half of fiscal 2017.
Net loss in the fiscal 2017 third quarter was $(1.7) million, or $(0.08) per diluted share, compared to a net loss of $(1.7) million, or $(0.07) per diluted share, in the prior-year period.
Adjusted EBITDA (non-GAAP) was $3.0 million, compared to Adjusted EBITDA of $0.6 million in the same period last year (see reconciliation below).
Ramesh Srinivasan, President and CEO of Agilysys, commented, “Our fiscal 2017 third quarter results demonstrate progress in multiple areas of the business. Compared to the same period last year, our installed point of sale end points increased 15% and the number of rooms managed by our lodging solutions rose 6%. Our subscription based SaaS revenue improved 48% compared to the third quarter of last year. Our total contract value for subscription based SaaS licenses sold nearly doubled during the first nine months of fiscal 2017 compared to the same period last year. Our recurring revenue, of which SaaS revenue is a growing component, is a source of considerable strength for us in terms of increasing future earnings predictability.
“Agilysys already possesses many competitive advantages. We offer best-in-market technology solutions that can help take the hospitality industry to the next level in terms of guest attraction, service and retention. Our recent, well-attended Inspire Customer and Partner User Conference served as further confirmation of our commanding position in the marketplace. We expect to achieve significant improvements over the near and long term in our product innovation and delivery velocity, customer service capabilities, cost effectiveness, execution efficiencies and overall cost per unit of meaningful output. Given our significant past investments and competitive strengths already inherent in the Company, we expect to start demonstrating a steady decrease in our overall expenses as a percentage of revenue going forward. I am happy to have this opportunity to lead Agilysys during this exciting period of disciplined revenue growth and operating performance improvement.”
Summary of Fiscal 2017 Nine Months Financial Results
Total net revenue was $97.1 million, compared to total net revenue of $88.4 million in the comparable prior-year period.
Recurring revenues (which are comprised of support, maintenance and subscription services) were $47.1 million, or 49% of total net revenue, compared to $44.5 million, or 50% of total net revenue, in the first nine months of fiscal 2016. SaaS revenues increased 42% year over year and comprised 23% of total recurring revenues, compared to 17% of total recurring revenues in the first nine months of fiscal 2016.
Gross margin was 49.8% in the first nine months of fiscal 2017, compared to 57.1% in the comparable year-ago period. The Company’s gross margin for the first nine months of fiscal 2017 primarily reflects the previously disclosed impact of the amortization of software development costs for first generation versions of the Company’s rGuest® solutions which achieved general availability in the first half of fiscal 2017.
Net loss in the first nine months of fiscal 2017 was $(6.4) million, or $(0.28) per diluted share, compared to a net loss of $(2.2) million, or $(0.10) per diluted share, in the first nine months of fiscal 2016.
Adjusted EBITDA (non-GAAP) was $4.7 million, compared to Adjusted EBITDA of $3.3 million in the same period last year (see reconciliation below).
Updated Fiscal 2017 Outlook
Agilysys today revised its full year guidance as it now expects fiscal 2017 revenue will be in a range of $128 million - $131 million, modestly below the previously anticipated range of $132 - $136 million. The decline in the Company’s revenue outlook is attributable to a reduction in realized and anticipated up front product sales in the last half of the year. In addition, the Company now expects gross margin for fiscal 2017 will be slightly below 50%, reflecting the lower full-year revenue outlook, the impact of higher cost of goods sold related to the recent general availability of first generation versions of rGuest products, and a continued shift in revenue towards more subscription-based sales.
Tony Pritchett, Interim Chief Financial Officer, commented, “Our financial position and balance sheet remain strong and the underlying positive trends of the business including revenue growth opportunities remain encouraging. While we are revising revenue guidance for the year, primarily due to lower product sales, we are encouraged by the continued growth in recurring revenue, including subscription based SaaS revenue. With a new CEO bringing in fresh perspectives on our business including opportunities for growth and improvement, we are already in the process of implementing better execution strategies that will accelerate product development and other deliverables. We strongly believe that our overall spend rate as a percentage of revenue is now at its peak and our initiatives currently underway will lead to a reduction in the near term. We expect these actions will help significantly improve near and long term results.”
2017 Third Quarter Conference Call and Webcast
Agilysys is hosting a conference call and webcast today, February 9, 2017, beginning 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 56122372. 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 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, and include the statements in the second paragraph following the bullets under the heading “Summary of Fiscal 2017 Third Quarter Financial Results” and the statements under the heading “Updated Fiscal 2017 Outlook.” 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, 2016. 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 cash flow from operations and adjusted EBITDA. Management believes that such information can enhance investors' understanding of the company's ongoing operations. See the accompanying tables below for reconciliations of adjusted cash flow from operations and adjusted EBITDA to the comparable GAAP measures.
Agilysys is a leading technology company that provides innovative point-of-sale, property management, inventory and procurement, workforce management, analytics, document management and mobile and wireless solutions and services to the hospitality industry. The company's solutions and services allow property managers to better connect, interact and transact with their customers by streamlining operations, improving efficiency, increasing guest recruitment and wallet share, and enhancing the guest experience. Agilysys serves four major market sectors: Gaming, both corporate and tribal; Hotels, Resorts and Cruise; Foodservice Management; and Restaurants, Universities, Stadia and Healthcare. A significant portion of the company's consolidated revenue is derived from contract support, maintenance and subscription services. Agilysys operates throughout North America, Europe and Asia, with corporate services located in Alpharetta, GA. For more information, visit www.agilysys.com.
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