Agilysys Reports Unaudited Fiscal 2012 Second-Quarter and First-Half Results

- Second-Quarter Gross Margin Expands More Than 400 Basis Points on 9% Revenue Growth from Continuing Operations

- Company Remains Debt Free, With $94 Million Cash on Hand at September 30

- Interim President and CEO James Dennedy Assumes Full Role

News provided by

Agilysys, Inc.

Nov 09, 2011, 08:02 ET

CLEVELAND, Nov. 9, 2011 /PRNewswire/ -- Agilysys, Inc. (Nasdaq: AGYS), a leading developer and marketer of proprietary enterprise software, services and solutions to the hospitality and retail industries, today announced unaudited financial results for the fiscal 2012 second quarter and first half ended September 30, 2011. As previously announced, Agilysys closed the sale of its Technology Solutions ("TSG") business on August 1, 2011, and accordingly, TSG's operating results, including the gain on the sale, as well as its assets and liabilities, are reported as components of discontinued operations.

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

Fiscal 2012 Second-Quarter Unaudited Results of Continuing Operations

Consolidated revenue increased 8.6% to $53.6 million in the second quarter, compared with $49.3 million in last year's comparable quarter.  Revenue from the Company's Hospitality Solutions Group grew by 10.0% over the prior year, and its Retail Solutions Group's revenues increased by 7.7%.

Gross margin increased sharply during the quarter to 40.3%, up from 36.0% in the second quarter of last year, due to higher services and hardware margins and a greater proportion of higher-margin proprietary software revenues.

Commenting on the results, James Dennedy, president and chief executive officer, stated: "Both operating segments generated higher sales and gross margins during the quarter. This reinforces our strategy of deriving a higher proportion of revenue from proprietary services and software solutions."

SG&A expenses declined as a percentage of net sales in the second quarter to 45.6%, compared with 49.4% in the prior-year quarter. SG&A expenses totaled $24.5 million, up from $24.3 million—primarily  due to $1.4 million in accelerated depreciation related to assets associated with the facility the Company is vacating in Solon, Ohio—offset by cost reductions initiated in the last several quarters.

Dennedy added: "We are making good progress with the transition of corporate services to Georgia and the realignment of the organization. Upon completion of the restructuring, we expect to reduce annual costs by approximately $14 million to $16 million, and enhance our position to exploit opportunities we see in the hospitality and retail markets."

The Company reported an operating loss for the quarter of $5.2 million, which included $2.4 million in restructuring charges, versus the operating loss of $6.7 million in last year's second quarter. Adjusted EBITDA (defined as operating income plus depreciation and amortization), excluding restructuring and asset impairment charges, was $1.0 million for the quarter, compared with a loss of $4.0 million in the prior-year second quarter. (See reconciliation below.)

Agilysys reported a net loss from continuing operations of $3.2 million, or a loss of $0.14 per share, for the second quarter, compared with a loss from continuing operations of $4.9 million, or $0.22 per share, in the previous year's quarter.

Fiscal 2012 First-Half Unaudited Results from Continuing Operations

Consolidated sales in the first half of fiscal 2012 increased 11.8% to $107.5 million, compared with the $96.1 million reported in the first half of fiscal 2011.

Gross margin was essentially unchanged at 38.3% in the first half, compared with 38.2% in fiscal 2011's first six months.

SG&A expenses increased nominally to $48.6 million, from $47.5 million, due to accelerated depreciation related to assets located at the Company's corporate headquarters and higher stock compensation related expenses driven by the sale of the Company's TSG business.

For the six-month period, the Company reported an operating loss of $12.1 million, compared with an operating loss of $11.2 million in the first half of the prior fiscal year. Year to date, adjusted EBITDA, excluding restructuring and asset impairment charges, was a loss of $1.2 million, versus a loss of $5.5 million in the first half of the prior year. (See reconciliation below.) For the first half of fiscal 2011, the net reported loss from continuing operations was $8.7 million, or a loss of $0.38 per share, versus the previous year's net loss from continuing operations of $13.2 million, or a loss of $0.58 per share.

Liquidity

Cash on hand grew to $93.7 million at September 30, 2011, primarily as a result of the proceeds from the sale of Agilysys' TSG business, which closed on August 1, 2011. The Company remains debt free, except for certain capital leases. In conjunction with the sale of the TSG business, Agilysys authorized the repurchase of up to 1.6 million common shares. During the second quarter, the Company repurchased 800,000 shares at an average price of $8.27 per share for $6.6 million. Subsequent to quarter end and through November 7, 2011, Agilysys repurchased an additional 344,000 shares, and has 456,000 shares remaining under its current repurchase program.

For additional information, please refer to the Company's Form 10-Q, which will be filed later today with the Securities and Exchange Commission.

Interim President and CEO James Dennedy Assumes Full Role

Agilysys also announced the appointment of James Dennedy as president and chief executive officer of the Company. Dennedy, 46, has led Agilysys as interim president and CEO since May 2011, when the Company announced the divesture of TSG.

Commenting on the appointment, Agilysys Chairman Keith Kolerus stated, "We are pleased to welcome Jim in his expanded capacity with the Company. Since joining the Board in 2009, his contributions to our strategic mission have been noteworthy, having not only served on the Board's special committee, but also directly participating in the development and execution of Agilysys' restructuring plan. As we transition to a faster growing and more profitable company, having Jim at the helm on a permanent basis stabilizes our new leadership team."

"We are confident that Jim's past successes at identifying market trends and leading high-growth businesses, along with his clear vision for Agilysys to execute on key strategic initiatives—product integration, capability development, investment prioritization and partner expansion—will continue to positively impact our Company and ultimately benefit shareholders."

Dennedy, who will retain his position as a member of the Agilysys Board, concluded: "My enthusiasm for the opportunities to profitably expand the Company's retail and hospitality capabilities has been a driving factor in my choice to continue in this role. The results we are reporting today further support my decision and I am honored to have the opportunity to lead the Company in the pursuit of our strategy to profitably grow the business."

Conference Call Information

A conference call will be held today, November 9, 2011, at 11 a.m. ET to review unaudited second-quarter and first-half fiscal 2012 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. In addition, a replay of the call will be archived on the website for approximately 30 days.

To be added to Agilysys' email distribution list, please click on the link below:

http://www.agilysys.com/home/InvestorRelations/

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 Quarterly Report 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 related to the concentrated ownership of our outstanding shares by MAK Capital, unanticipated deterioration in economic and financial conditions in the United States and around the world, consequences associated with the sale of the Company's TSG business, and uncertainties regarding restructuring actions and/or the relocation of the Company's corporate headquarters. 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 "Risk Factors," which is included in Part I, Item 1A of the Company's Annual Report for the fiscal year ended March 31, 2011. 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 press 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. The non-GAAP measures included in this press release have been reconciled to the comparable GAAP measures within the accompanying table that can be found below.

About Agilysys

Agilysys is a leading developer and marketer of proprietary enterprise software, services and solutions to the hospitality and retail industries.  The Company specializes in market-leading point-of-sale, property management, inventory and procurement, and mobile and wireless solutions that are designed to streamline operations, improve efficiency and enhance the consumer's experience. Agilysys serves casinos, resorts, hotels, foodservice venues, stadiums, cruise lines, grocery stores, convenience stores, general and specialty retail businesses and partners.  Headquartered in Cleveland, Agilysys operates extensively throughout North America, with additional sales and support offices in the United Kingdom, Singapore and Hong Kong. For more information, visit www.agilysys.com.

Investor Contact:

Curtis Stout
Vice President and Treasurer
Agilysys, Inc.
440-519-8635
[email protected]

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands, except share and per share data)

Three Months Ended

Six Months Ended

September 30,

September 30,


2011

2010

2011

2010









Net sales:







Products

$   27,094

$   24,664

$    55,879

$        48,156

Services

26,494

24,662

51,595

47,957

Total net sales

53,588

49,326

107,474

96,113

Cost of goods sold:







Products

20,605

19,721

43,966

36,549

Services

11,367

11,843

22,365

22,844

Total cost of goods sold

31,972

31,564

66,331

59,393

Gross margin

21,616

17,762

41,143

36,720

Selling, general and administrative expenses

24,460

24,347

48,563

47,450

Asset impairment charges

-

59

-

59

Restructuring charges

2,370

10

4,716

403

Operating loss

(5,214)

(6,654)

(12,136)

(11,192)

Other expenses (income):







Other expenses (income), net

308

(856)

271

(1,959)

Interest income

(17)

(17)

(49)

(40)

Interest expense

539

278

877

563

Loss before income taxes

(6,044)

(6,059)

(13,235)

(9,756)

Income tax (benefit) expense

(2,806)

(1,143)

(4,557)

3,452

Loss from continuing operations

(3,238)

(4,916)

(8,678)

(13,208)

Income from discontinued operations, net of taxes

10,487

2,702

11,138

742

Net income (loss)

$    7,249

$   (2,214)

$   2,460

$ (12,466)









Net loss (income) per share – basic and diluted:







Loss from continuing operations

$    (0.14)

$    (0.22)

$   (0.38)

$     (0.58)

Income from discontinued operations

0.46

0.12

0.49

0.03

Net income (loss)

$      0.32

$    (0.10)

$      0.11

$     (0.55)









Weighted average shares outstanding:







Basic and diluted

22,853,057

22,750,474

22,902,872

22,750,254

AGILYSYS, INC.

BUSINESS SEGMENT INFORMATION

(UNAUDITED)  (In thousands)

Three Months Ended September 30, 2011

Three Months Ended September 30, 2010

Reportable Segments

Reportable Segments

(In thousands)

HSG

RSG

Corporate/

Other

Consolidated

HSG

RSG

Corporate/

Other

Consolidated










Total Net Revenue

$ 22,631

$ 30,957

$            -

$    53,588

$ 20,570

$ 28,756

$            -

$   49,326










Gross margin

$ 14,523

$   7,093

$            -

$    21,616

$ 12,215

$   5,547

$            -

$   17,762

Gross margin percentage

64.2%

22.9%

40.3%

59.4%

19.3%

36.0%










Operating income (loss)

$  1,401

$   2,168

$ (8,783)

$    (5,214)

$      214

$   1,079

(7,947)

$   (6,654)

Other expenses, net

-

-

(308)

(308)

-

-

856

856

Interest expense, net

-

-

(522)

(522)

-

-

(261)

(261)

Income (loss) from continuing operations before income taxes

$  1,401

$  2,168

$  (9,613)

$    (6,044)

$    214

$  1,079

$  (7,352)

$  (6,059)

Other information:








Capital expenditures

$    708

$         -

$            -

$        708

$    391

$   104

$    1,357

$    1,852

Non-cash charges:








Depreciation and Amortization (1)

$ 1,118

$    155

$    2,556

$     3,829

$ 1,071

$      81

$   1,397

$    2,549

Asset impairment charges

$         -

$         -

$            -

$             -

$      59

$         -

$           -

$         59

Restructuring charges

$    619

$    231

$    1,520

$     2,370

$         -

$         -

$        10

$         10

Total

$ 1,737

$    386

$    4,076

$     6,199

$ 1,130

$      81

$   1,407

$    2,618











Six Months Ended September 30, 2011

Six Months Ended September 30, 2010

Reportable Segments

Reportable Segments

HSG

RSG

Corporate/

Other

Consolidated

HSG

RSG

Corporate/

Other

Consolidated










Total Net Revenue

$ 43,591

$ 63,883

$        -

$  107,474

$ 43,619

$  52,494

$         -

$  96,113










Gross margin

$  27,790

$ 13,353

$        -

$    41,143

$ 25,503

$  11,217

$         -

$  36,720

Gross margin percentage

63.8%

20.9%

38.3%

58.5%

21.4%

38.2%










Operating income (loss)

$   1,916

$ 4,263

$ (18,315)

$  (12,136)

$  2,454

$    2,847

$(16,493)

$ (11,192)

Other income, net

-

-

(271)

(271)

-

-

1,959

1,959

Interest expense, net

-

-

(828)

(828)

-

-

(523)

(523)

Income (loss) from continuing operations before income taxes

$   1,916

$  4,263

$ (19,414)

$  (13,235)

$   2,454

$  2,847

$(15,057)

$   (9,756)

Other information:








Capital expenditures

$   1,457

$          7

$             -

$      1,464

$  1,356

$     104

$    2,083

$    3,543

Non-cash charges:








Depreciation and Amortization (2)

$  2,176

$     306

$     3,758

$      6,240

$  2,162

$    161

$    2,882

$    5,205

$          -

$          -

$             -

$             -

$       59

$         -

$            -

$         59

Restructuring charges

$     806

$     365

$     3,545

$      4,716

$          -

$         -

$       403

$       403

Total

$  2,982

$     671

$     7,303

$    10,956

$  2,221

$    161

$    3,285

$    5,667

(1) Does not include the amortization of deferred financing fees totaling $437 and $131 for the three months ended September 30, 2011 and 2010, respectively.

(2) Does not include the amortization of deferred financing fees totaling $568 and $262 for the six months ended September 30, 2011 and 2010, respectively.

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


September 30,

March 31,

(In thousands, except share data)

2011

2011

ASSETS

(Unaudited)

Current assets:



Cash and cash equivalents

$     93,662

$     70,559

Accounts receivable, net

30,114

31,926

Inventories, net

13,649

10,921

Deferred income taxes – current

85

-

Prepaid expenses

2,844

2,829

Income taxes receivable

1,365

1,403

Other current assets

11,333

6,344

Assets of discontinued operations – current

-

105,810

Total current assets

153,052

229,792

Goodwill

15,104

15,211

Intangible assets, net

21,962

22,535

Other non-current assets

4,066

11,709

Assets of discontinued operations – non-current

-

8,296

Property and equipment, net

20,938

24,855

Total assets

$   215,122

$   312,398





LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:



Accounts payable

$     15,910

$    17,852

Deferred revenue

14,604

23,995

Accrued and other current liabilities

27,104

14,594

Income taxes payable

125

265

Deferred income taxes – current

-

77

Capital lease obligations – current

970

999

Liabilities of discontinued operations – current

-

89,005

Total current liabilities

58,713

146,787

Deferred income taxes – non-current

4,093

3,894

Capital lease obligations – non-current

619

907

Other non-current liabilities

6,453

11,972

Liabilities of discontinued operations – non-current

-

734

Shareholders' equity:



Common shares, without par value, at $0.30 stated
value; authorized 80,000,000 shares; 31,606,831 issued;
and 22,575,300 and 23,022,398 shares outstanding at
September 30, 2011 and March 31, 2011, respectively

9,482

9,482

Treasury shares (9,031,531 shares at September 30,
2011 and 8,584,433 at March 31, 2011)

(2,709)

(2,575)

Capital in excess of stated value

(10,325)

(5,421)

Retained earnings

149,119

146,659

Accumulated other comprehensive loss

(323)

(41)

Total shareholders' equity

145,244

148,104

Total liabilities and shareholders' equity

$     215,122

$   312,398

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


Six Months Ended

(In thousands)

September 30,

Operating activities:

2011

2010

Net income (loss)

$       2,460

$  (12,466)

Less: Income from discontinued operations

(11,138)

(742)

Loss from continuing operations

(8,678)

(13,208)

Adjustments to reconcile net loss from continuing operations to net cash used for operating activities:



Restructuring charges

4,716

403

Gain on redemption of Company-owned life insurance policies

-

(2,065)

Gain on redemption of investment in The Reserve Fund's Primary Fund

-

(147)

Asset impairment charges

-

59

Loss on the sale of securities

166

-

Depreciation

3,432

1,786

Amortization

3,376

3,681

Deferred income taxes

36

4,429

Stock based compensation

1,989

1,437

Change in cash surrender value of company owned life insurance policies

(68)

301

Changes in operating assets and liabilities:



Accounts receivable

1,751

(7,000)

Inventories

(2,729)

(3,417)

Accounts payable

(1,935)

494

Accrued and other liabilities

(5,826)

(1,950)

Income taxes receivable

(763)

372

Other changes, net

(14)

(209)

Other non-cash adjustments

(561)

69

Total adjustments

3,570

(1,757)

Net cash used for operating activities

(5,108)

(14,965)

Investing activities:



Proceeds from the sale of business

59,470

-

Proceeds from The Reserve Fund's Primary Fund

-

147

Proceeds from redemption of/borrowings against Co.-owned life insurance policies

-

2,248

Additional investments in Company-owned life insurance policies

(46)

(746)

Proceeds from the sale of marketable securities

2,036

14

Additional investments in marketable securities

(22)

-

Purchase of property and equipment

(1,464)

(3,543)

Net cash provided by (used for) investing activities

59,974

(1,880)

Financing activities:



Proceeds from borrowings under credit facility

-

15,325

Principal payments under credit facility

-

(15,325)

Repurchase of common shares

(6,617)

-

Repurchases of shares to satisfy employee tax withholding

(972)

(188)

Principal payment under long term obligations

(609)

(306)

Net cash used for financing activities

(8,198)

(494)

Effect of exchange rate changes on cash

(151)

166

Cash flows provided by (used for) continuing operations

46,517

(17,173)

Cash flows of discontinued operations:



Operating cash flows, net

(23,336)

(13,096)

Investing cash flows, net

-

(73)

Financing cash flows, net

(78)

(2)

Net increase (decrease) in cash

23,103

(30,344)

Cash at beginning of period

70,559

62,801

Cash at end of period


$    93,662

$   32,457

AGILYSYS, INC.

RECONCILIATION OF LOSS FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA

(UNAUDITED)

(In thousands)

Three Months Ended

Six Months Ended

September 30,

September 30,


2011

2010

2011

2010










Loss from continuing operations

$    (3,238)

$    (4,916)

$    (8,678)

$   (13,208)

Plus:








   Interest expense, net

522

261

828

523

   Income tax (benefit) expense

(2,806)

(1,143)

(4,557)

3,452

   Depreciation and amortization expense (a)

3,829

2,549

6,240

5,205

   Other expenses (income), net

308

(856)

271

(1,959)

Adjusted EBITDA

$    (1,385)

$    (4,105)

$    (5,896)

$    (5,987)

Asset impairment charges

-

59

-

59

Restructuring charges

2,370

10

4,716

403

Adjusted EBITDA excluding charges

$        985

$    (4,036)

$    (1,180)

$    (5,525)




















(a) Depreciation and amortization expense excludes amortization of deferred financing fees totaling $437 and $131 for the

     three months ended September 30, 2011 and 2010, respectively, and $568 and $262 for the six months ended

     September 30, 2011 and 2010, respectively, as such costs are already included in interest expense, net.











SOURCE Agilysys, Inc.

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