EX-99.1 2 l38741exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(AGILYSYS LOGO)
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—February 3, 2010—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.
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.
AGILYSYS, INC. • 28925 FOUNTAIN PARKWAY • SOLON, OH 44139 • WWW.AGILYSYS.COM

 

 

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
AGILYSYS, INC. • 28925 FOUNTAIN PARKWAY • SOLON, OH 44139 • WWW.AGILYSYS.COM

 

 

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.
440-519-8635
curtis.stout@agilysys.com
Media Contact:
Maureen Morreale
Senior Communications Manager
Agilysys, Inc.
440-519-8161
maureen.morreale@agilysys.com
AGILYSYS, INC. • 28925 FOUNTAIN PARKWAY • SOLON, OH 44139 • WWW.AGILYSYS.COM

 

 

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. • 28925 FOUNTAIN PARKWAY • SOLON, OH 44139 • WWW.AGILYSYS.COM

 

 

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. • 28925 FOUNTAIN PARKWAY • SOLON, OH 44139 • WWW.AGILYSYS.COM

 

 

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. • 28925 FOUNTAIN PARKWAY • SOLON, OH 44139 • WWW.AGILYSYS.COM

 

 

AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
                 
    Dec 31,     Mar 31,  
(In thousands)   2009     2009  
    (Unaudited)          
ASSETS
                
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. • 28925 FOUNTAIN PARKWAY • SOLON, OH 44139 • WWW.AGILYSYS.COM

 

 

AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                 
    Nine Months Ended  
    Dec 31,  
    2009     2008  
Operating activities:
                
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. • 28925 FOUNTAIN PARKWAY • SOLON, OH 44139 • WWW.AGILYSYS.COM

 

 

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.
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