3
アメリカ合衆国
証券取引委員会
ワシントンD.C. 20549
フォーム
(マーク・ワン)
1934年の証券取引法第13条または15条に基づく四半期報告 |
四半期の期間は終了しました。
または
1934年証券取引法第13条または第15(d)項に基づく移行報告書 |
_____ から _____ までの移行期間
委任状ファイル番号：
(企業理念に基づく登録者の正確な名称)
(州またはその他の管轄区域の 法人または組織） |
(I.R.S.事業者) |
(主たる事務所の住所) |
(郵便番号) |
登録者の電話番号（市外局番を含む）: (
法第12(b)条に基づき登録された証券:
|
|
取引 シンボル |
|
|
|
|
登録者が（1）1934年の証券取引法の第13条または第15(d)条に基づいて、前の12ヶ月間に提出が必要なすべての報告書を提出したかどうか（または登録者がその報告書を提出することを要求されていたより短い期間のため）、（2）過去90日間にわたってその提出要件に従っていたかどうかをチェックマークで示してください。
登録者が過去12ヶ月間（または登録者がそのファイルを提出することが要求されていた短い期間）の間に、規則405の規定に基づいて提出が必要なすべてのインタラクティブデータファイルを電子的に提出したかどうかをチェックマークで示してください。
規制第1202条における「大口加速申請者」「加速申請者」「小規模報告会社」「新興成長会社」の定義については、チェックマークによって示します。取引所法の定義については、「大口加速申請者」「加速申請者」「小規模報告会社」「新興成長企業」を参照してください。
|
☒ |
|
加速 filer |
|
☐ |
|
非加速報告者 |
|
☐ |
|
小規模報告会社 |
|
|
新興成長企業 |
|
|
|
|
|
新興成長企業の場合は、註記欄にチェックマークを付けてください。申請者は、証券取引法第13(a)条に基づく新しいまたは改訂された財務会計基準の遵守のために延長された移行期間を使用しないことを選択しましたか。 ☐
登録者がシェル会社であるかどうか（取引所法第120億2条で定義される）をチェックマークで示してください。 はい ☐ いいえ
2024年10月18日現在、登録者は
1
AGILYSY株式会社S
目次
|
|
|
|
|
|||
|
|
|
|
|
項目 1 |
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
項目 2 |
20 |
|
|
|
|
|
|
項目3 |
29 |
|
|
|
|
|
|
項目4 |
29 |
|
|
|
|
|
|
|||
|
|
|
|
|
項目 1 |
31 |
|
|
|
|
|
|
項目1A |
31 |
|
|
|
|
|
|
項目 2 |
31 |
|
|
|
|
|
|
項目3 |
31 |
|
|
|
|
|
|
項目4 |
31 |
|
|
|
|
|
|
項目5 |
31 |
|
|
|
|
|
|
項目6 |
32 |
|
|
|
|
|
|
|
33 |
|
2
アジリシス, INC.
凝縮された統合統合された貸借対照表
(万単位、シェアデータを除く) |
|
2024年9月30日（レビュー未実施） |
|
|
3月31日、 |
|
||
資産 |
|
|
|
|
|
|
||
流動資産: |
|
|
|
|
|
|
||
現金及び現金同等物 |
|
$ |
|
|
$ |
|
||
売掛金、予想信用損失引当金控除後 |
|
|
|
|
|
|
||
契約資産 |
|
|
|
|
|
|
||
在庫 |
|
|
|
|
|
|
||
前払費用及びその他の流動資産 |
|
|
|
|
|
|
||
合計流動資産 |
|
|
|
|
|
|
||
不動産及び機器、純額 |
|
|
|
|
|
|
||
運用リース使用権資産 |
|
|
|
|
|
|
||
のれん |
|
|
|
|
|
|
||
無形資産（純額） |
|
|
|
|
|
|
||
繰延所得税、非流動 |
|
|
|
|
|
|
||
その他の非流動資産 |
|
|
|
|
|
|
||
総資産 |
|
$ |
|
|
$ |
|
||
負債および株主資本 |
|
|
|
|
|
|
||
流動負債: |
|
|
|
|
|
|
||
買掛金 |
|
$ |
|
|
$ |
|
||
契約上の負債 |
|
|
|
|
|
|
||
未払債務 |
|
|
|
|
|
|
||
運営リース負債、短期 |
|
|
|
|
|
|
||
流動負債合計 |
|
|
|
|
|
|
||
繰延税金、非流動 |
|
|
|
|
|
|
||
運営リース負債、長期 |
|
|
|
|
|
|
||
負債、非流動 |
|
|
|
|
|
|
||
その他の長期負債 |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
株主資本: |
|
|
|
|
|
|
||
無額面の普通株式、$ |
|
|
|
|
|
|
||
自己株式、 |
|
|
( |
) |
|
|
( |
) |
表示価値を超える資本 |
|
|
|
|
|
|
||
留保利益 |
|
|
|
|
|
|
||
累積その他の包括的損失 |
|
|
( |
) |
|
|
( |
) |
株主資本合計 |
|
|
|
|
|
|
||
総負債及び株主資本 |
|
$ |
|
|
$ |
|
||
監査されていない凝縮された連結財務諸表に関する注記を参照してください。
3
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
(In thousands, except per share data) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Products |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Subscription and maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of goods sold: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription and maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit margin |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation of fixed assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of internal-use software and intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other charges, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Legal settlements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Income before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax (benefit) provision |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Series A convertible preferred stock dividends |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net income attributable to common shareholders |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per share - basic: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per share - diluted: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
(In thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized foreign currency translation adjustments |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total comprehensive income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See accompanying notes to unaudited condensed consolidated financial statements.
5
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six Months Ended |
|
|||||
|
|
September 30, |
|
|||||
(In thousands) |
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Operating activities |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Loss on asset disposals |
|
|
|
|
|
|
||
Depreciation of fixed assets |
|
|
|
|
|
|
||
Amortization of internal-use software and intangibles |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Share-based compensation |
|
|
|
|
|
|
||
Changes in operating assets and liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
Investing activities |
|
|
|
|
|
|
||
Cash paid for business combination, net of cash acquired |
|
|
( |
) |
|
|
|
|
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Additional investments in corporate-owned life insurance policies |
|
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities |
|
|
|
|
|
|
||
Payment of preferred stock dividends |
|
|
|
|
|
( |
) |
|
Debt proceeds, net of issuance costs |
|
|
|
|
|
|
||
Proceeds from Employee Stock Purchase Plan purchases |
|
|
|
|
|
|
||
Repurchase of common shares to satisfy employee tax withholding |
|
|
( |
) |
|
|
( |
) |
Principal payments under long-term obligations |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
Effect of exchange rate changes on cash |
|
|
|
|
|
( |
) |
|
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
See accompanying notes to unaudited condensed consolidated financial statements.
6
AGILYSYS, INC.
(Unaudited)
|
|
Three Months Ended September 30, 2024 |
|
|||||||||||||||||||||||||||||
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Issued |
|
|
In Treasury |
|
|
Capital in |
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||||||||
(In thousands, except share data) |
|
Shares |
|
|
Stated |
|
|
Shares |
|
|
Stated |
|
|
Stated |
|
|
Retained |
|
|
comprehensive |
|
|
Total |
|
||||||||
Balance at June 30, 2024 |
|
|
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Shares issued upon exercise of SSARs |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Shares withheld for taxes upon |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other common stock issuances, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Unrealized translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance at September 30, 2024 |
|
|
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended September 30, 2023 |
|
|||||||||||||||||||||||||||||
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Issued |
|
|
In Treasury |
|
|
Capital in |
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||||||||
(In thousands, except share data) |
|
Shares |
|
|
Stated |
|
|
Shares |
|
|
Stated |
|
|
Stated |
|
|
Retained |
|
|
comprehensive |
|
|
Total |
|
||||||||
Balance at June 30, 2023 |
|
|
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Shares issued upon exercise of SSARs |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Shares withheld for taxes upon |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other common stock issuances, net |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Series A convertible preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2023 |
|
|
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Six Months Ended September 30, 2024 |
|
|||||||||||||||||||||||||||||
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Issued |
|
|
In Treasury |
|
|
Capital in |
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||||||||
(In thousands, except share data) |
|
Shares |
|
|
Stated |
|
|
Shares |
|
|
Stated |
|
|
Stated |
|
|
Retained |
|
|
comprehensive |
|
|
Total |
|
||||||||
Balance at March 31, 2024 |
|
|
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Shares issued upon exercise of SSARs |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Shares withheld for taxes upon |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other common stock issuances, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Unrealized translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance at September 30, 2024 |
|
|
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Six Months Ended September 30, 2023 |
|
|||||||||||||||||||||||||||||
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Issued |
|
|
In Treasury |
|
|
Capital in |
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||||||||
(In thousands, except share data) |
|
Shares |
|
|
Stated |
|
|
Shares |
|
|
Stated |
|
|
Stated |
|
|
Retained |
|
|
comprehensive |
|
|
Total |
|
||||||||
Balance at March 31, 2023 |
|
|
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Shares issued upon exercise of SSARs |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Shares withheld for taxes upon |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other common stock issuances, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Series A convertible preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2023 |
|
|
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
See accompanying notes to unaudited condensed consolidated financial statements.
7
AGILYSYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Operations and Financial Statement Presentation
Nature of Operations
Agilysys has been a leader in hospitality software for more than 45 years, delivering innovative cloud-native SaaS and on-premise solutions for hotels, resorts and cruise lines, casinos, corporate foodservice management, restaurants, universities, stadiums, and healthcare. The Company’s software solutions include point-of-sale (POS), property management (PMS), inventory and procurement, payments, and related applications that manage and enhance the entire guest journey. Agilysys also is known for its world-class customer-centric service. Many of the top hospitality companies around the world use Agilysys solutions to improve guest loyalty, drive revenue growth, and increase operational efficiencies. Agilysys operates across North America, Europe, the Middle East, Asia-Pacific, and India, with headquarters in Alpharetta, GA.
The Company has just one reportable segment serving the global hospitality industry.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include our accounts consolidated with our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on March 31st. References to a particular year refer to the fiscal year ending in March of that year. For example, fiscal 2025 refers to the fiscal year ending March 31, 2025.
Our unaudited interim financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to the Quarterly Report on Form 10-Q (Quarterly Report) under the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 10-01 of Regulation S-X under the Exchange Act. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.
The Condensed Consolidated Balance Sheet as of September 30, 2024, as well as the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statements of Cash Flows, and Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended September 30, 2024 and 2023, are unaudited. However, these financial statements have been prepared on the same basis as those in the audited annual financial statements. In the opinion of management, all adjustments of a recurring nature necessary to fairly state the results of operations, financial position, and cash flows have been made.
These unaudited interim financial statements should be read together with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended March 31, 2024, filed with the Securities and Exchange Commission (SEC) on May 22, 2024.
Use of estimates
Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.
2. Summary of Significant Accounting Policies
A detailed description of our significant accounting policies can be found in the audited financial statements for the fiscal year ended March 31, 2024, included in our Annual Report on Form 10-K. There have been no material changes to our significant accounting policies from those disclosed therein.
Recently Issued Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) to update income tax
8
disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction. The amendments in the ASU also remove disclosures related to certain unrecognized tax benefits and deferred taxes. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, or our fiscal 2026. The amendments may be applied prospectively or retrospectively with early adoption is permitted. We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to expand reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to an entity's chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. ASU 2023-07 applies to entities with a single reportable segment. Annual disclosures are required for fiscal years beginning after December 15, 2023 or our fiscal 2025. Interim disclosures are required for periods within fiscal years beginning after December 15, 2024, or our fiscal 2026. Retrospective application is required for all prior periods presented with early adoption is permitted. We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.
3. Revenue Recognition
Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master service agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Performance obligations specific to each individual contract are defined within the terms of each order. Each performance obligation is identified based on the goods and services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which we will be entitled and expect to receive in exchange for transferring goods or services to the customer. Typically, our contracts do not provide our customer with any right of return or refund; we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or refund.
Typically, our customer contracts contain one or more of the following goods or services which constitute performance obligations.
Our proprietary software licenses typically provide for a perpetual right to use our software. Generally, our contracts do not provide significant services of integration and customization and installation services are not required to be purchased directly from us. The software is delivered before related services are provided and is functional without professional services, updates and technical support. We have concluded that the software license is distinct as the customer can benefit from the software on its own. Software revenue is typically recognized when the software is delivered or made available for download to the customer.
We recognize revenue for hardware sales when the product is shipped to the customer and when obligations that affect the customer’s final acceptance of the arrangement have been fulfilled. Hardware is purchased from suppliers and provided to the end-user customers via drop-ship or from inventory. We are responsible for negotiating price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and we bear the credit risk if the customer does not pay for the goods. As the principal contact with the customer, we recognize revenue and cost of goods sold when we ship or are notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination or upon installation at the customer site.
Our subscription service revenue is comprised of fees for contracts that provide customers a right to access our software for a subscribed period. We do not provide the customer the contractual right to license the software at any time outside of the subscription period under these contracts. Our subscription service revenue is primarily based on rates per location, including rates per points of sale and per room. We recognize certain subscription service revenue on a per-transaction basis. The customer can only benefit from the software and software maintenance when provided the right to access the software. Accordingly, each of the rights to access the software, the maintenance services, any hosting services, and any transaction-based services is not considered a distinct performance obligation in the context of the contract and should be combined into a single performance obligation to be recognized over the contract period. The Company recognizes subscription revenue over a one-month period based on the typical monthly invoicing and renewal cycle in accordance with our customer agreement terms.
We derive maintenance service revenue from providing unspecified updates, upgrades, bug fixes, and technical support services for our proprietary software. These services represent a stand-ready obligation that is concurrently delivered and
9
has the same pattern of transfer to the customer; we account for these maintenance services as a single performance obligation. Maintenance revenue includes the same services provided by third-parties for remarketed software. We recognize substantially all maintenance revenue over the contract period of the maintenance agreement. We also recognize certain maintenance service revenue based on the volume of payment transactions processed by third parties through access to our software.
Professional services revenues primarily consist of fees for consulting, implementation, installation, integration, development and training and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are being performed. Certain professional development services are recognized upon delivery of the developed solutions to the customer. At the end of each reporting period, we recognize the most likely amount of variable consideration on any contract holdbacks we expect to bill for development services delivered. Professional services can be provided by internal or external providers, do not significantly affect the customer’s ability to access or use other provided goods or services, and provide a measure of benefit beyond that of other promised goods or services in the contract. As a result, professional services are considered distinct in the context of the contract and represent a separate performance obligation. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation.
We use the market approach to derive standalone selling price (“SSP”) by maximizing observable data points (in the form of recently executed customer contracts) to determine the price customers are willing to pay for the goods and services transferred. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.
Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold. Revenue is recorded net of any applicable taxes collected and remitted to governmental agencies.
Disaggregation of Revenue
We derive and report our revenue from the sale of products (proprietary software licenses, third party hardware and operating systems), subscription and maintenance, and professional services. Products revenue recognized at a point in time totaled $
Contract Balances
Contract assets are rights to consideration in exchange for goods or services that we have transferred to a customer when that right is conditional on something other than the passage of time. The majority of our contract assets represent unbilled amounts related to products and professional services. We expect billing and collection of our contract assets to occur within the next twelve months. We receive payments from customers based upon contractual billing schedules and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities represent consideration received or consideration which is unconditionally due from customers prior to transferring goods or services to the customer under the terms of the contract.
Revenue recognized from amounts included in contract liabilities at the beginning of the year was $
Substantially all of our arrangements are for a period of one year or less. As a result, unsatisfied performance obligations as of September 30, 2024 are expected to be satisfied and the allocated transaction price recognized in revenue within a period of 12 months or less.
Assets Recognized from Costs to Obtain a Contract
Sales commission expenses that would not have occurred absent the customer contracts are considered incremental costs to obtain a contract. We expense the incremental costs to obtain a contract as incurred when the expected benefit and amortization period is one year or less. For subscription contracts that are renewed monthly based on an agreement term,
10
we capitalize commission expenses and amortize as we satisfy the underlying performance obligations, generally based on the contract terms and anticipated renewals.
We had $
4. Additional Balance Sheet Information
Additional information related to the condensed consolidated balance sheets is as follows:
(In thousands) |
|
September 30, 2024 |
|
|
March 31, 2024 |
|
||
Prepaid expenses and other current assets: |
|
|
|
|
|
|
||
Prepaid expenses |
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Accrued liabilities: |
|
|
|
|
|
|
||
Salaries, wages, employee benefits, and payroll taxes |
|
$ |
|
|
$ |
|
||
Income and indirect taxes payable |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
5. Supplemental Disclosures of Cash Flow Information
Additional information related to the condensed consolidated statements of cash flows is as follows:
|
|
Six Months Ended |
|
|||||
(In thousands) |
|
|
2024 |
|
|
|
2023 |
|
Cash receipts for interest |
|
$ |
|
|
$ |
|
||
Cash payments for interest |
|
|
|
|
|
|
||
Cash payments for income tax, net |
|
|
|
|
|
|
||
Cash payments for operating leases |
|
|
|
|
|
|
||
Cash payments for finance leases |
|
|
|
|
|
|
||
Accrued capital expenditures |
|
|
|
|
|
|
||
6. Income Taxes
The following table compares our income tax provision and effective tax rates for the three and six months ended September 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
(In thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Income tax (benefit) provision |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Effective tax rate |
|
nm |
|
|
|
% |
|
nm |
|
|
|
% |
||||
nm - not meaningful
11
For the three months ended September 30, 2024, income tax provision and the effective tax rate were primarily driven by activity in India and certain U.S. jurisdictions.
For the six months ended September 30, 2024, income tax (benefit) and the effective tax rate were primarily driven by the impact of discrete excess tax benefits associated with Share-Based Compensation.
For the three and six months ended September 30, 2023, income tax provision and the effective tax rate were primarily driven by activity within the foreign jurisdictions in which the company operates as valuation allowances were recorded against deferred tax assets in the U.S. and Canada. We released valuation allowances recorded against Canadian, U.S. Federal and certain state deferred tax assets in the period ending December 31, 2023.
Our India subsidiary operates in a “Special Economic Zone (“SEZ”)”. One of the benefits associated with the SEZ is that the India subsidiary is not subject to regular India income taxes during its first five years of operations, which included fiscal 2018 through fiscal 2022. The India subsidiary is subject to
We have recorded and maintain valuation allowances offsetting the Company’s deferred tax assets in certain U.S. States and foreign jurisdictions. The ultimate realization of deferred tax assets depends on various factors including the generation of future taxable income in the periods in which the underlying temporary differences are deductible. We maintain valuation allowances for deferred tax assets until we have sufficient evidence to support the reversal of all or some portion of the allowances.
7. Commitments and Contingencies
We are involved in legal actions that arise in the ordinary course of business. It is the opinion of management that the resolution of any current pending litigation will not have a material adverse effect on our financial position or results of operations.
As of September 30, 2024, we have an additional operating lease that has not yet commenced of approximately $
8. Earnings per Share
The following data shows the amounts used in computing earnings per share and the effect on earnings and the weighted average number of shares of dilutive potential common shares.
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
(In thousands, except per share data) |
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Series A convertible preferred stock dividends |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net income attributable to common shareholders |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive SSARs |
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive unvested restricted shares |
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive unvested restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income per share - basic: |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Income per share - diluted: |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Anti-dilutive SSARs, restricted shares, |
|
|
|
|
|
|
|
|
|
|
|
||||
12
Basic income per share is computed as net income attributable to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes
Diluted income per share includes the impact of all potentially dilutive securities on earnings per share. We have stock-settled appreciation rights (SSARs), restricted shares, restricted stock units, and preferred shares that are potentially dilutive securities.
9. Share-based Compensation
We may grant incentive stock options, non-qualified stock options, SSARs, restricted shares, restricted stock units, and performance shares under our shareholder-approved Amended and Restated 2024 Equity Incentive Plan (the 2024 Plan) for up to
We may distribute authorized but unissued shares or treasury shares to satisfy share option and SSAR exercises or grants of restricted shares, restricted stock units, performance shares, or ESPP shares.
For SSARs, the exercise price must be set at least equal to the closing market price of our common shares on the date of grant. The maximum term of SSARs is seven years from the date of grant. The Compensation Committee of the Board of Directors establishes the period over which SSARs subject to a service condition vest and the vesting criteria for SSARs subject to a market condition.
Restricted shares and restricted stock units, whether time-vested or performance-based, may be issued at no cost or at a purchase price that may be below their fair market value, but are subject to forfeiture and restrictions on their sale or other transfer. Performance-based grants may be conditioned upon the attainment of specified performance objectives and other conditions, restrictions, and contingencies. Restricted shares have the right to receive dividends, if any, upon vesting, subject to the same forfeiture provisions that apply to the underlying grants.
We record compensation expense related to SSARs, restricted shares, restricted stock units, performance shares, and ESPP shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date. The fair value of restricted stock unit and restricted share grants subject only to a service condition is based on the closing price of our common shares on the grant date. For stock option and SSAR grants subject only to a service condition, we estimate the fair value on the grant date using the Black-Scholes-Merton option pricing model with inputs including the closing market price at grant date, exercise price and assumptions regarding the risk-free interest rate, expected volatility of our common shares based on historical volatility, and expected term as estimated using the simplified method. We use the simplified method for SSAR grants because we believe historical exercise data does not provide a reasonable basis upon which to estimate the expected term. For restricted stock unit, restricted share, and SSAR grants subject to a market condition, we estimate the fair value on the grant date through a lattice option pricing model that utilizes a Monte Carlo analysis with inputs including the closing market price at grant date, share price threshold, performance period term and assumptions regarding the risk-free interest rate and expected volatility of our common shares based on historical volatility. Inputs for SSAR grants subject to a market condition also include exercise price, remaining contractual term, and suboptimal exercise factor.
We record compensation expense for restricted stock units, restricted shares, and SSAR grants subject to a service condition using the graded vesting method. We record compensation expense for ESPP shares on a straight-line basis over the applicable offering period. We record compensation expense for SSAR grants subject only to a market condition over the derived service period, which is an output of the lattice option pricing model. Under the 2020 Plan, the fair value of performance shares is based on the closing price of our common shares on the settlement date of the performance award, for which we record compensation expense over the service period consistent with our annual bonus incentive plan as approved by the Compensation Committee of the Board of Directors.
13
The following table summarizes the share-based compensation expense for restricted and performance grants included in the condensed consolidated statements of operations:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
(In thousands) |
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Product development |
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
||||
Total share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-Settled Appreciation Rights
SSARs are rights granted to an employee to receive value equal to the difference between the price of our common shares on the date of exercise and the exercise price. The value is settled in common shares of Agilysys, Inc.
We use a Black-Scholes-Merton option pricing model to estimate the fair value of service condition SSARs and a lattice option pricing model to estimate the fair value of market condition SSARs. There were no SSARs granted during the six months ended September 30, 2024 and 2023.
The following table summarizes the activity during the six months ended September 30, 2024 for SSARs awarded under the 2020 and 2016 Plans:
(In thousands, except share and per share data) |
|
Number of |
|
|
Weighted-Average Exercise Price |
|
|
Remaining |
|
|
Aggregate |
|
||||
|
|
|
|
|
(per right) |
|
|
(in years) |
|
|
|
|
||||
Outstanding at April 1, 2024 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expired |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
As of September 30, 2024, there was
Restricted Shares
We granted shares to certain of our Directors, executives and key employees, the vesting of which is service-based. Certain restricted shares are also subject to a market condition.
|
|
Number of Shares |
|
|
Weighted-Average |
|
||
|
|
|
|
|
(per share) |
|
||
Outstanding at April 1, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
The weighted-average grant date fair value of the restricted shares includes grants subject only to a service condition and certain grants subject to both a service condition and a market condition. As of September 30, 2024, total unrecognized share-based compensation expense related to unvested restricted shares was $
14
Restricted Stock Units
We granted restricted stock units to our Chief Executive Officer, the vesting of which is service-based. Certain restricted stock units are also subject to a market condition.
|
|
Number of Shares |
|
|
Weighted-Average Grant-Date Fair Value |
|
||
|
|
|
|
|
(per share) |
|
||
Outstanding at April 1, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
|
|
|
|
||
Forfeited |
|
|
|
|
|
|
||
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
As of September 30, 2024, total unrecognized share-based compensation expense related to non-vested restricted stock units was $
Performance Shares
Upon approval of the Compensation Committee of our Board of Directors, after achieving the performance conditions associated with our annual bonus plan, we granted
Employee Stock Purchase Plan Shares
The ESPP permits participants to purchase common stock through regular payroll deductions, up to a specified percentage of their eligible compensation. The ESPP is compensatory because, among other provisions, it currently allows participants to purchase stock at up to a
|
|
Offering Period Ended |
|
|
Offering Period Ending |
|
||
|
|
June 30, 2024 |
|
|
December 31, 2024 |
|
||
Grant date fair value |
|
$ |
|
|
$ |
|
||
Risk-free interest rate over contractual term |
|
|
% |
|
|
% |
||
Expected term (in years) |
|
|
|
|
|
|
||
Expected volatility |
|
|
% |
|
|
% |
||
The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury bond whose maturity period approximates the expected term of the ESPP shares. The expected term is the offering period, which is typically six months.
We record amounts withheld from participants during each offering period in accrued salaries, wages and related benefits in the consolidated balance sheets until such shares are purchased. Amounts withheld from participants for the offering period ending December 31, 2024 totaled $
As of September 30, 2024, there was $
15
10. Debt
Revolving Credit Facility
On August 16, 2024 (the “Credit Agreement Closing Date”), we entered into a credit agreement (the “Credit Agreement”) with the lenders party thereto and Bank of America, N.A., as lender and administrative agent (in such capacity, the “Agent”). The Credit Agreement provides for a revolving credit facility in the initial maximum aggregate principal amount of $
The Revolving Facility matures on August 16, 2027, the three-year anniversary of the Credit Agreement Closing Date, at which time any and all outstanding principal balance will be due and payable. The Company may voluntarily repay outstanding loans and terminate commitments under the Revolving Facility at any time without premium or penalty. There are no repayments required before August 16, 2027. Debt issuance costs relating to the Revolving Facility of $
Our obligations under the Revolving Facility are guaranteed by certain of the Company’s subsidiaries (the “Subsidiary Guarantors”), subject to certain customary exceptions and limitations. Pursuant to a security and pledge agreement, dated as of the Credit Agreement Closing Date, among the Company, the Subsidiary Guarantors and the Agent, the Revolving Facility is secured by a first-priority lien on substantially all of the Company’s and the Subsidiary Guarantors’ present and future personal assets and intangible assets and the outstanding capital stock of the Company’s subsidiaries owned by the Company or any Subsidiary Guarantor, in each case, subject to certain customary exceptions and limitations.
The Initial Revolving Loan bears interest at the (as defined in the Credit Agreement), plus an initial margin of
The Credit Agreement contains certain restrictive covenants, including financial covenants that require the Company to maintain a consolidated interest coverage ratio and a consolidated leverage ratio determined at the end of each fiscal quarter as defined in the Credit Agreement.
16
11. Business Combination
On
The purchase price consisted of $
The following table sets forth the components and the allocation of the purchase price for our acquisition of Book4Time:
(In thousands) |
|
Total |
|
|
Components of Purchase Price: |
|
|
|
|
Cash |
|
$ |
|
|
Total Purchase Price |
|
$ |
|
|
|
|
|
|
|
Allocation of Purchase Price: |
|
|
|
|
Accounts receivable, net |
|
$ |
|
|
Other current assets, including cash acquired |
|
|
|
|
Other assets |
|
|
|
|
Current and other liabilities |
|
|
( |
) |
Deferred tax liabilities |
|
|
( |
) |
Contract liabilities |
|
|
( |
) |
Net tangible assets (liabilities) |
|
|
( |
) |
Identifiable intangible assets: |
|
|
|
|
Customer relationships |
|
|
|
|
Non-competition agreements |
|
|
|
|
Developed technology |
|
|
|
|
Trade name |
|
|
|
|
Total identifiable intangible assets |
|
|
|
|
Goodwill |
|
|
|
|
Total purchase price allocation |
|
$ |
|
|
We assigned the acquired customer relationships, non-competition agreements, developed technology, and trade name estimated useful lives of
The goodwill recognized in the Book4Time purchase price allocation is attributable to synergies in products and technologies to serve a broader customer base, and the addition of a skilled, assembled workforce, which is not separable from goodwill under FASB Accounting Standards Codification 805. As part of the acquisition, the Company acquired fully trained personnel thereby avoiding the expenditure that would have been required to hire and train equivalent personnel. We considered the replacement cost method as most appropriate for the assembled workforce valuation. We valued the assembled workforce included in goodwill at $
As of the Acquisition Date, we recorded current liabilities of $
We have prepared the Book4Time purchase price allocation on a preliminary basis. Changes to the allocation may occur as additional information becomes available during the measurement period (up to one year from the Acquisition Date). The
17
primary areas that remain preliminary include, but are not limited to, intangible assets including the initial assumptions used in their estimates of fair values and their respective estimated useful lives, income taxes, and residual goodwill.
The Company recognized acquisition costs of $
Revenue attributable to Book4Time included in our condensed consolidated statement of operations for the three months ended September 30, 2024 was $
Unaudited Pro-Forma Information
The financial information in the table below summarizes the combined results of operations of Agilysys and Book4Time, on a pro forma basis, as though the companies had been combined as of the beginning of the periods presented. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on April 1, 2023 or of results that may occur in the future.
The following unaudited pro forma financial information for the three- and six-month periods ended September 30, 2024 and September 30, 2023, combines the historical results of Agilysys and of Book4Time, as converted to U.S. GAAP, for the respective periods:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
(In thousands) |
Pro Forma |
|
|
Pro Forma |
|
|
Pro Forma |
|
|
Pro Forma |
|
||||
Revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net income (loss) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
We based the foregoing pro forma results on estimates and assumptions that we believe are reasonable. The pro forma results include adjustments primarily related to purchase accounting. We included acquisition costs and other non-recurring charges incurred in the earliest period presented.
12. Preferred Stock
Series A Convertible Preferred Stock
On May 22, 2020, we completed the sale of
Conversion
On November 24, 2023, at our option, we required conversion of all the outstanding shares of Convertible Preferred Stock to common stock. On November 27, 2023, we filed a Certificate of Elimination with the Secretary of State of the State of Delaware with respect to the Convertible Preferred Stock pursuant to which the Convertible Preferred Stock was eliminated and returned to the status of authorized and unissued preferred shares of the Company. Following the mandatory conversion of the outstanding shares of the Convertible Preferred Stock on November 24, 2023, there were no outstanding shares of the Convertible Preferred Stock. Accordingly, we removed the Series A convertible preferred stock,
Dividends
18
Prior to the conversion on November 24, 2023,
Accounting Policy
Prior to the conversion on November 24, 2023, we classified convertible preferred stock as temporary equity in the consolidated balance sheets due to certain contingent redemption clauses that were at the election of the Holders. We increased the carrying value of the convertible preferred stock to its redemption value for all undeclared dividends using the interest method.
19
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
In “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), management explains the general financial condition and results of operations for Agilysys and subsidiaries including:
— what factors affect our business;
— what our earnings and costs were;
— why those earnings and costs were different from the year before;
— where the earnings came from;
— how our financial condition was affected; and
— where the cash will come from to fund future operations.
The MD&A analyzes changes in specific line items in the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows and provides information that management believes is important to assessing and understanding our consolidated financial condition and results of operations. This Quarterly Report on Form 10-Q updates information included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, filed with the Securities and Exchange Commission (SEC). This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes that appear in Item 1 of this Quarterly Report as well as our Annual Report for the year ended March 31, 2024. Information provided in the MD&A may include forward-looking statements that involve risks and uncertainties. Many factors could cause actual results to be materially different from those contained in the forward-looking statements. See “Forward-Looking Information” on page 29 of this Quarterly Report, Item 1A "Risk Factors" in Part II of this Quarterly Report, and Item 1A “Risk Factors” in Part I of our Annual Report for the fiscal year ended March 31, 2024 for additional information concerning these items. Management believes that this information, discussion, and disclosure is important in making decisions about investing in Agilysys.
Overview
Recent Developments
Macroeconomic Conditions
During the three and six months ended September 30, 2024, global macroeconomic conditions were, and continue to be, influenced by a number of factors, including, but not limited to, political unrest, armed conflicts, labor shortages and natural disasters. We believe such conditions are impacting customer spending and provider pricing decisions resulting in decreased demand, increased costs, and reduced margins particularly in areas outside of the United States.
Book4Time
On August 20, 2024, we acquired Book4Time Parent, Inc. (“Book4Time”), the global leader in spa management SaaS software, as further described in Note 11, “Business Combination”, to our condensed consolidated financial statements included under Part I, Item 1 of this quarterly report. The cash consideration for the acquisition totaled $147.2 million of net cash, partially funded by a credit agreement (the “Credit Agreement”) we entered into on August 16, 2024 (the “Credit Agreement Closing Date”), with the lenders party thereto and Bank of America, N.A., as lender and administrative agent, as further described in Note 10, “Debt”, to our condensed consolidated financial statements included under Part I, Item 1 of this quarterly report.
Our Business
Agilysys has been a leader in hospitality software for more than 45 years, delivering innovative cloud-native SaaS and on-premise solutions for hotels, resorts and cruise lines, casinos, corporate foodservice management, restaurants, universities, stadiums, and healthcare. The Company’s software solutions include point-of-sale (POS), property management (PMS), inventory and procurement, payments, and related applications that manage and enhance the entire guest journey. Agilysys also is known for its world-class customer-centric service. Many of the top hospitality companies around the world use Agilysys solutions to improve guest loyalty, drive revenue growth, and increase operational efficiencies.
The Company has just one reportable segment serving the global hospitality industry. Agilysys operates across North America, Europe, the Middle East, Asia-Pacific and India with headquarters located in Alpharetta, Georgia.
20
Our top priority is increasing shareholder value by improving operating and financial performance and profitably growing the business through superior products and services. To that end, we expect to invest a certain portion of our cash on hand to fund enhancements to existing software products, to develop and market new software products, and to expand our customer breadth, both vertically and geographically.
Our strategic plan specifically focuses on:
The primary objective of our ongoing strategic planning process is to create shareholder value by capitalizing on growth opportunities, increasing profitability and strengthening our competitive position within the specific technology solutions and end markets we serve. Profitability and industry-leading growth will be achieved through tighter management of operating expenses and sharpening the focus of our investments to concentrate on growth opportunities that offer the highest returns.
Revenue - Defined
As required by the SEC, we separately present revenue earned as products revenue, subscription and maintenance revenue or professional services revenue in our condensed consolidated statements of operations. In addition to the SEC requirements, we may, at times, also refer to revenue as defined below. The terminology, definitions, and applications of terms we use to describe our revenue may be different from those used by other companies and caution should be used when comparing these financial measures to those of other companies. We use the following terms to describe revenue:
21
Results of Operations
Second Fiscal Quarter 2025 Compared to Second Fiscal Quarter 2024
Net Revenue and Operating Income
The following table presents our consolidated revenue and operating results for the three months ended September 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
Increase (decrease) |
|
||||||||||
(In thousands) |
|
|
2024 |
|
|
|
2023 |
|
|
$ |
|
|
% |
|
||
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Products |
|
$ |
10,525 |
|
|
$ |
12,640 |
|
|
$ |
(2,115 |
) |
|
|
(16.7 |
)% |
Subscription and maintenance |
|
|
41,432 |
|
|
|
34,248 |
|
|
|
7,184 |
|
|
|
21.0 |
% |
Professional services |
|
|
16,322 |
|
|
|
11,728 |
|
|
|
4,594 |
|
|
|
39.2 |
% |
Total net revenue |
|
|
68,279 |
|
|
|
58,616 |
|
|
|
9,663 |
|
|
|
16.5 |
% |
Cost of goods sold: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Products |
|
|
5,206 |
|
|
|
6,751 |
|
|
|
(1,545 |
) |
|
|
(22.9 |
)% |
Subscription and maintenance |
|
|
8,827 |
|
|
|
7,804 |
|
|
|
1,023 |
|
|
|
13.1 |
% |
Professional services |
|
|
11,032 |
|
|
|
8,965 |
|
|
|
2,067 |
|
|
|
23.1 |
% |
Total cost of goods sold |
|
|
25,065 |
|
|
|
23,520 |
|
|
|
1,545 |
|
|
|
6.6 |
% |
Gross profit |
|
$ |
43,214 |
|
|
$ |
35,096 |
|
|
$ |
8,118 |
|
|
|
23.1 |
% |
Gross profit margin |
|
|
63.3 |
% |
|
|
59.9 |
% |
|
|
|
|
|
|
||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product development |
|
$ |
16,172 |
|
|
$ |
14,583 |
|
|
$ |
1,589 |
|
|
|
10.9 |
% |
Sales and marketing |
|
|
8,794 |
|
|
|
6,400 |
|
|
|
2,394 |
|
|
|
37.4 |
% |
General and administrative |
|
|
10,162 |
|
|
|
8,785 |
|
|
|
1,377 |
|
|
|
15.7 |
% |
Depreciation of fixed assets |
|
|
915 |
|
|
|
1,209 |
|
|
|
(294 |
) |
|
nm |
|
|
Amortization of internal-use software and intangibles |
|
|
904 |
|
|
|
347 |
|
|
|
557 |
|
|
|
160.5 |
% |
Other charges, net |
|
|
2,037 |
|
|
|
210 |
|
|
|
1,827 |
|
|
nm |
|
|
Legal settlements |
|
|
104 |
|
|
|
— |
|
|
|
104 |
|
|
nm |
|
|
Operating income |
|
$ |
4,126 |
|
|
$ |
3,562 |
|
|
$ |
564 |
|
|
|
15.8 |
% |
Operating income percentage |
|
|
6.0 |
% |
|
|
6.1 |
% |
|
|
|
|
|
|
||
nm - not meaningful
22
The following table presents the percentage relationship of our condensed consolidated statement of operations line items to our consolidated net revenues for the periods presented:
|
|
Three Months Ended |
|
|||||
|
|
|
2024 |
|
|
|
2023 |
|
Net revenue: |
|
|
|
|
|
|
||
Products |
|
|
15.4 |
% |
|
|
21.6 |
% |
Subscription and maintenance |
|
|
60.7 |
|
|
|
58.4 |
|
Professional services |
|
|
23.9 |
|
|
|
20.0 |
|
Total net revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of goods sold: |
|
|
|
|
|
|
||
Products |
|
|
7.6 |
% |
|
|
11.5 |
% |
Subscription and maintenance |
|
|
12.9 |
|
|
|
13.3 |
|
Professional services |
|
|
16.2 |
|
|
|
15.3 |
|
Total cost of goods sold |
|
|
36.7 |
% |
|
|
40.1 |
% |
Gross profit |
|
|
63.3 |
% |
|
|
59.9 |
% |
Operating expenses: |
|
|
|
|
|
|
||
Product development |
|
|
23.7 |
% |
|
|
24.9 |
% |
Sales and marketing |
|
|
12.9 |
|
|
|
10.9 |
|
General and administrative |
|
|
14.9 |
|
|
|
15.0 |
|
Depreciation of fixed assets |
|
|
1.3 |
|
|
|
2.1 |
|
Amortization of internal-use software and intangibles |
|
|
1.3 |
|
|
|
0.6 |
|
Other charges, net |
|
|
3.0 |
|
|
|
0.3 |
|
Legal settlements |
|
|
0.2 |
|
|
|
— |
|
Operating income |
|
|
6.0 |
% |
|
|
6.1 |
% |
Net revenue. Total net revenue increased $9.7 million, or 16.5%, during the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024. Products revenue decreased $2.1 million, or 16.7%, due to increasing customer preference for subscription-based software licenses instead of perpetual software licenses and to their decreasing need for hardware due to improvements we have made to our technology enabling more support for consumer grade devices our customers can source elsewhere. Subscription and maintenance revenue increased $7.2 million, or 21.0%, compared to the second quarter of fiscal 2024 driven by continued growth in subscription-based service revenue including $2.1 million in Book4Time subscription-based revenue. Total subscription revenue, including Book4Time subscription revenue, increased 36.6% during the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024. Professional services revenue increased $4.6 million, or 39.2%, due to higher sales and service activity as our new and existing customers continue implementing technology to improve their operations.
Gross profit and gross profit margin. Our total gross profit increased $8.1 million, or 23.1%, during the second quarter of fiscal 2025 and total gross profit margin increased from 59.9% to 63.3% compared to the second quarter of fiscal 2024 driven by changes in the composition of revenue by category. Products gross profit decreased $0.6 million, or 9.7%, and products gross profit margin increased from 46.6% to 50.5% due to the composition of hardware and proprietary software products delivered. Subscription and maintenance gross profit increased $6.2 million, or 23.3%, and gross profit margin increased from 77.2% to 78.7% as revenue increases outpaced variable costs as a result of certain cost control measures. Professional services gross profit increased $2.5 million, or 91.5%, and gross profit margin increased from 23.6% to 32.4% reflecting improved utilization rates from efficiency gains on multi-solution implementations and revenue associated with a large development service contract.
Operating Expenses
Operating expenses, excluding other charges, net and legal settlements, increased $5.6 million, or 18.0%, during the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024.
Product development. Product development increased $1.6 million, or 10.9%, in the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 due to hiring and increased salary, incentive and employee benefits rates across our development teams.
23
Sales and marketing. Sales and marketing increased $2.4 million, or 37.4%, in the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 due to hiring and increased compensation rates across our sales teams along with higher volume of marketing event and trade show activity.
General and administrative. General and administrative increased $1.4 million, or 15.7%, in the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 due to investments in our information security and information technology infrastructure and increased compensation rates across our administrative teams.
Depreciation of fixed assets. Depreciation of fixed assets decreased $0.3 million, or 24.3%, in the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 due to the timing of assets reaching their useful life.
Amortization of internal-use software and intangibles. Amortization of internal-use software and intangibles increased $0.6 million, or 160.5%, in the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 due to the addition of certain intangible assets resulting from the Book4Time acquisition.
Other charges, net. Other charges, net consist of losses on asset disposals, severance costs and acquisition costs related to business combinations.
Legal settlements. Legal settlements consist of settlements of employment and other business-related matters.
Other income (expense)
|
|
Three Months Ended |
|
|
Favorable (unfavorable) |
|
||||||||||
(In thousands) |
|
|
2024 |
|
|
|
2023 |
|
|
$ |
|
|
% |
|
||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
1,095 |
|
|
$ |
1,227 |
|
|
$ |
(132 |
) |
|
|
(10.8 |
)% |
Interest expense |
|
|
(458 |
) |
|
|
— |
|
|
|
(458 |
) |
|
nm |
|
|
Other income, net |
|
|
383 |
|
|
|
51 |
|
|
|
332 |
|
|
nm |
|
|
Total other income, net |
|
$ |
1,020 |
|
|
$ |
1,278 |
|
|
$ |
(258 |
) |
|
|
(20.2 |
)% |
nm - not meaningful
Interest income. Interest income consists of interest earned on cash equivalents including short-term investments in commercial paper, treasury bills and money market funds.
Interest expense. Interest expense consists of interest charges under our Credit Agreement and amortization of related debt issuance costs.
Other (expense), net. Other (expense), net mainly consists of movement of foreign currencies against the US dollar.
Income Taxes
|
|
Three Months Ended |
|
|
Favorable (unfavorable) |
|||||||||
(In thousands) |
|
|
2024 |
|
|
|
2023 |
|
|
$ |
|
|
% |
|
Income tax provision |
|
$ |
3,782 |
|
|
$ |
295 |
|
|
$ |
(3,487 |
) |
|
nm |
Effective tax rate |
|
nm |
|
|
|
6.1 |
% |
|
|
|
|
|
||
nm - not meaningful
For the three months ended September 30, 2023, income tax provision and the effective tax rate were primarily driven by activity within the foreign jurisdictions in which the company operates as valuation allowances were recorded against deferred tax assets in the U.S. and Canada. We released valuation allowances recorded against Canadian, U.S. Federal and certain state deferred tax assets in the period ending December 31, 2023.
For the three months ended September 30, 2024, income tax provision and the effective tax rate were primarily driven by activity in the U.S. and India.
24
We are consistently subject to tax audits. Due to the nature of examinations in multiple jurisdictions, changes could occur in the amount of gross unrecognized tax benefits during the next 12 months that we cannot anticipate.
We have recorded and maintain valuation allowances offsetting the Company’s deferred tax assets in certain U.S. States and foreign jurisdictions. The ultimate realization of deferred tax assets depends on various factors including the generation of future taxable income in the periods in which the underlying temporary differences are deductible. We maintain valuation allowances for deferred tax assets until we have sufficient evidence to support the reversal of all or some portion of the allowances.
Results of Operations
First Half Fiscal 2025 Compared to First Half Fiscal 2024
Net Revenue and Operating Income
The following table presents our consolidated revenue and operating results for the six months ended September 30, 2024 and 2023:
|
|
Six Months Ended |
|
|
Increase (decrease) |
|
||||||||||
(In thousands) |
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Products |
|
$ |
20,400 |
|
|
$ |
25,422 |
|
|
$ |
(5,022 |
) |
|
|
(19.8 |
)% |
Subscription and maintenance |
|
|
79,474 |
|
|
|
66,373 |
|
|
|
13,101 |
|
|
|
19.7 |
% |
Professional services |
|
|
31,917 |
|
|
|
22,881 |
|
|
|
9,036 |
|
|
|
39.5 |
% |
Total net revenue |
|
|
131,791 |
|
|
|
114,676 |
|
|
|
17,115 |
|
|
|
14.9 |
% |
Cost of goods sold: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Products |
|
|
10,432 |
|
|
|
13,317 |
|
|
|
(2,885 |
) |
|
|
(21.7 |
)% |
Subscription and maintenance |
|
|
16,935 |
|
|
|
15,441 |
|
|
|
1,494 |
|
|
|
9.7 |
% |
Professional services |
|
|
21,342 |
|
|
|
17,764 |
|
|
|
3,578 |
|
|
|
20.1 |
% |
Total cost of goods sold |
|
|
48,709 |
|
|
|
46,522 |
|
|
|
2,187 |
|
|
|
4.7 |
% |
Gross profit |
|
$ |
83,082 |
|
|
$ |
68,154 |
|
|
$ |
14,928 |
|
|
|
21.9 |
% |
Gross profit margin |
|
|
63.0 |
% |
|
|
59.4 |
% |
|
|
|
|
|
|
||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product development |
|
$ |
30,892 |
|
|
$ |
27,904 |
|
|
$ |
2,988 |
|
|
|
10.7 |
% |
Sales and marketing |
|
|
15,808 |
|
|
|
13,701 |
|
|
|
2,107 |
|
|
|
15.4 |
% |
General and administrative |
|
|
20,645 |
|
|
|
18,150 |
|
|
|
2,495 |
|
|
|
13.7 |
% |
Depreciation of fixed assets |
|
|
1,752 |
|
|
|
2,133 |
|
|
|
(381 |
) |
|
|
(17.9 |
)% |
Amortization of internal-use software and intangibles |
|
|
1,155 |
|
|
|
776 |
|
|
|
379 |
|
|
|
48.8 |
% |
Other charges, net |
|
|
2,587 |
|
|
|
969 |
|
|
|
1,618 |
|
|
|
167.0 |
% |
Legal settlements |
|
|
369 |
|
|
|
— |
|
|
|
369 |
|
|
nm |
|
|
Operating income |
|
$ |
9,874 |
|
|
$ |
4,521 |
|
|
$ |
5,353 |
|
|
|
118.4 |
% |
Operating income percentage |
|
|
7.5 |
% |
|
|
3.9 |
% |
|
|
|
|
|
|
||
nm - not meaningful
25
The following table presents the percentage relationship of our condensed consolidated statement of operations line items to our consolidated net revenues for the periods presented:
|
|
Six Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net revenue: |
|
|
|
|
|
|
||
Products |
|
|
15.5 |
% |
|
|
22.1 |
% |
Subscription and maintenance |
|
|
60.3 |
|
|
|
57.9 |
|
Professional services |
|
|
24.2 |
|
|
|
20.0 |
|
Total net revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of goods sold: |
|
|
|
|
|
|
||
Products |
|
|
7.9 |
% |
|
|
11.6 |
% |
Subscription and maintenance |
|
|
12.8 |
|
|
|
13.5 |
|
Professional services |
|
|
16.3 |
|
|
|
15.5 |
|
Total cost of goods sold |
|
|
37.0 |
% |
|
|
40.6 |
% |
Gross profit |
|
|
63.0 |
% |
|
|
59.4 |
% |
Operating expenses: |
|
|
|
|
|
|
||
Product development |
|
|
23.4 |
% |
|
|
24.3 |
% |
Sales and marketing |
|
|
12.0 |
|
|
|
11.9 |
|
General and administrative |
|
|
15.7 |
|
|
|
15.8 |
|
Depreciation of fixed assets |
|
|
1.3 |
|
|
|
1.9 |
|
Amortization of internal-use software and intangibles |
|
|
0.9 |
|
|
|
0.7 |
|
Other charges, net |
|
|
2.0 |
|
|
|
0.9 |
|
Legal settlements |
|
|
0.2 |
|
|
|
— |
|
Operating income |
|
|
7.5 |
% |
|
|
3.9 |
% |
Net revenue. Total net revenue increased $17.1 million, or 14.9%, during the first half of fiscal 2025 compared to the first half of fiscal 2024. Products revenue decreased $5.0 million, or 19.8%, due to increasing customer preference for subscription-based software licenses instead of perpetual software licenses and to their decreasing need for hardware due to improvements we have made to our technology enabling more support for consumer grade devices our customers can source elsewhere. Subscription and maintenance revenue increased $13.1 million, or 19.7%, compared to the first half of fiscal 2024 driven by continued growth in subscription-based service revenue including $2.1 million in Book4Time subscription-based service revenue. Total subscription revenue, including Book4Time subscription revenue, increased 34.4% during the first half of fiscal 2025 compared to the first half of fiscal 2024. Professional services revenue increased $9.0 million, or 39.5%, due to higher sales and service activity as our new and existing customers continue implementing technology to improve their operations.
Gross profit and gross profit margin. Our total gross profit increased $14.9 million, or 21.9%, during the first half of fiscal 2025 and total gross profit margin increased from 59.4% to 63.0% compared to the first half of fiscal 2024 driven by changes in the composition of revenue by category. Products gross profit decreased $2.1 million, or 17.7%, and products gross profit margin increased from 47.6% to 48.9% due to the composition of hardware and proprietary software products delivered. Subscription and maintenance gross profit increased $11.6 million, or 22.8%, and gross profit margin increased from 76.7% to 78.7% as revenue increases outpaced variable costs as a result of certain cost control measures. Professional services gross profit increased $5.5 million, or 106.7% and gross profit margin increased from 22.4% to 33.1% reflecting improved utilization rates from efficiency gains on multi-solution implementations and revenue associated with a large development service contract.
Operating Expenses
Operating expenses, excluding other charges, net and legal settlements, increased $7.6 million, or 12.1%, during the first half of fiscal 2025 compared with the first half of fiscal 2024.
Product development. Product development increased $3.0 million, or 10.7%, in the first half of fiscal 2025 compared with the first half of fiscal 2024 due to hiring and increased salary, incentive and employee benefits rates across our development teams.
26
Sales and marketing. Sales and marketing increased $2.1 million, or 15.4%, in the first half of fiscal 2025 compared with the first half of fiscal 2024 due to hiring and increased compensation rates across our sales teams along with higher volume of marketing event and trade show activity.
General and administrative. General and administrative increased $2.5 million, or 13.7%, in the first half of fiscal 2025 compared with the first half of fiscal 2024 due to investments in our information security and information technology infrastructure, increased compensation rates across our administrative teams and, during the quarter ended June 30, 2024, payroll taxes associated with certain exercises of stock-settled appreciation rights.
Depreciation of fixed assets. Depreciation of fixed assets decreased $0.4 million, or 17.9%, in the first half of fiscal 2025 compared with the first half of fiscal 2024 due to the timing of assets reaching their useful life.
Amortization of internal-use software and intangibles. Amortization of internal-use software and intangibles increased $0.4 million, or 48.8%, in the first half of fiscal 2025 compared with the first half of fiscal 2024 due to the addition of certain intangible assets resulting from the Book4Time acquisition.
Other charges, net. Other charges, net consist of losses on asset disposals, severance costs and acquisition costs related to business combinations.
Legal settlements. Legal settlements consist of settlements of employment and other business-related matters.
Other income (expense)
|
|
Six Months Ended |
|
|
(Unfavorable) favorable |
|||||||||
(In thousands) |
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
$ |
2,877 |
|
|
$ |
2,328 |
|
|
$ |
(549 |
) |
|
nm |
Interest expense |
|
|
(458 |
) |
|
|
— |
|
|
|
458 |
|
|
nm |
Other income (expense), net |
|
|
226 |
|
|
|
(109 |
) |
|
|
(335 |
) |
|
nm |
Total other income (expense), net |
|
$ |
2,645 |
|
|
$ |
2,219 |
|
|
$ |
(426 |
) |
|
nm |
nm - not meaningful
Interest income. Interest income consists of interest earned on cash equivalents including short-term investments in commercial paper, treasury bills and money market funds.
Interest expense. Interest expense consists of interest charges under our Credit Agreement and amortization of related debt issuance costs.
Other (expense), net. Other (expense), net mainly consists of movement of foreign currencies against the US dollar.
Income Taxes
|
|
Six Months Ended |
|
|
(Unfavorable) favorable |
|||||||||
(In thousands) |
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|||
Income tax (benefit) provision |
|
$ |
(2,951 |
) |
|
$ |
647 |
|
|
$ |
3,598 |
|
|
nm |
Effective tax rate |
|
nm |
|
|
|
9.6 |
% |
|
|
|
|
|
||
nm - not meaningful
For the six months ended September 30, 2023, income tax provision and the effective tax rate were primarily driven by activity within the foreign jurisdictions in which the company operates as valuation allowances were recorded against deferred tax assets in the U.S. and Canada. We released valuation allowances recorded against Canadian, U.S. Federal and certain state deferred tax assets in the period ending December 31, 2023.
For the six months ended September 30, 2024, income tax (benefit) and the effective tax rate were primarily driven by the impact of discrete excess tax benefits associated with Share-Based Compensation.
27
We are consistently subject to tax audits. Due to the nature of examinations in multiple jurisdictions, changes could occur in the amount of gross unrecognized tax benefits during the next 12 months that we cannot anticipate.
We have recorded and maintain valuation allowances offsetting the Company’s deferred tax assets in certain U.S. States and foreign jurisdictions. The ultimate realization of deferred tax assets depends on various factors including the generation of future taxable income in the periods in which the underlying temporary differences are deductible. We maintain valuation allowances for deferred tax assets until we have sufficient evidence to support the reversal of all or some portion of the allowances.
Liquidity and Capital Resources
Overview
Our primary recurring source of cash is the collection of proceeds from the sale of products and services to our customers, including cash periodically collected in advance of delivery or performance.
Our cash requirements consist primarily of working capital needs, capital expenditures, and payments of contractual obligations. Our contractual obligations consist primarily of operating leases for office space and our Credit Agreement.
The Credit Agreement provides for a revolving credit facility in the initial maximum aggregate principal amount of $75 million (the “Revolving Facility”). The Revolving Facility includes the ability for the Company to request an increase to the commitments under the Revolving Facility by an additional aggregate principal amount of up to $25 million. On the Credit Agreement Closing Date, we drew $50 million on the Revolving Facility, the proceeds of which we used to fund the Business Combination described below.
We have expanded our business in part by investing in strategic growth through business acquisitions. We have used cash as consideration in our business acquisitions, including $144.9 million of net cash, partially funded by our Revolving Facility, during the six months ended September 30, 2024, to complete the acquisition of Book4Time. We completed no business combinations during the six months ended September 30, 2023.
At September 30, 2024, 100% of our cash and cash equivalents, of which 89% were located in the United States, were deposited in bank accounts or invested in highly liquid investments including commercial paper and treasury bills with original maturity from the date of acquisition of three months or less and money market funds. We determine the fair value of commercial paper using significant other observable inputs based on pricing from independent sources that use quoted prices in active markets for identical assets or other observable inputs including benchmark yields and interest rates. We believe credit risk is limited with respect to our cash and cash equivalents.
We believe that cash flow from operating activities, cash on hand of $54.9 million as of September 30, 2024, and access to capital markets will provide adequate funds to meet our short- and long-term liquidity requirements.
Cash Flow
|
|
Six Months Ended |
|
|||||
(In thousands) |
|
|
2024 |
|
|
|
2023 |
|
Net cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
7,688 |
|
|
$ |
5,470 |
|
Investing activities |
|
|
(146,465 |
) |
|
|
(6,004 |
) |
Financing activities |
|
|
48,680 |
|
|
|
(4,788 |
) |
Effect of exchange rate changes on cash |
|
|
94 |
|
|
|
(107 |
) |
Decrease in cash |
|
$ |
(90,003 |
) |
|
$ |
(5,429 |
) |
Cash flow provided by operating activities. Due to cash-based earnings of $19.2 million and a decrease of $11.5 million due to changes in net operating assets and liabilities. Cash-based earnings is net income of $15.5 million and $3.7 million of non-cash adjustments.
Cash flow used in investing activities. Consists primarily of $144.9 million in cash paid for business combination, net of cash acquired, and property and equipment purchases, which decreased during the six months ended September 30, 2024
28
compared to the six months ended September 30, 2023 due primarily to leasehold improvements and equipment purchases for our new office lease in Chennai, India during the six months ended September 30, 2023.
Cash flow provided by financing activities. Consists primarily of $49.7 million in debt proceeds, net of issuance costs, and a reduction from $3.9 million to $1.4 million in the repurchase of shares to satisfy employee tax withholding on share-based compensation and a reduction from $0.9 million to zero in preferred stock dividend payments during the respective periods.
Contractual Obligations
As of September 30, 2024, there were no significant changes to our contractual obligations as presented in our Annual Report for the year ended March 31, 2024.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Policies
A detailed description of our significant accounting policies is included in our Annual Report for the year ended March 31, 2024. There have been no material changes in our significant accounting policies and estimates since March 31, 2024.
Forward-Looking Information
This Quarterly Report 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 in Part II of this Quarterly Report and Item IA of our Annual Report for the fiscal year ended March 31, 2023. 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative disclosures about market risk affecting us, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our Annual Report for the fiscal year ended March 31, 2024. There have been no material changes in our market risk exposures since March 31, 2024.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision of and with the participation of our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and Corporate Controller and Treasurer, as Principal Accounting Officer (“PAO”), management evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report. Based on that evaluation, the CEO, CFO and PAO concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
29
No changes in our internal control over financial reporting occurred during the six months ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our CEO, CFO and PAO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be achieved. Further, the design of a control system must reflect the impact of resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the possibility that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors. Additionally, controls can be circumvented by individual acts, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all possible future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There have been no material changes in the risk factors included in our Annual Report for the fiscal year ended March 31, 2024 that may materially affect our business, results of operations, or financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
31
Item 6. Exhibits
10.1* |
|
|
|
|
|
31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. |
|
|
|
31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. |
|
|
|
31.3 |
|
Rule 13a-14(a)/15d-14(a) Certification of Corporate Controller and Treasurer. |
|
|
|
32 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
* |
|
Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request. |
32
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.
AGILYSYS, INC.
Date: |
October 28, 2024 |
/s/ William David Wood III |
|
|
William David Wood III |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer and Duly Authorized Officer) |
33