Agilysys, Inc. Reports Third Quarter Revenue Growth of 30% and Adjusted Earnings of $0.08 Per Diluted Share and GAAP Earnings of

  Agilysys, Inc. Reports Third Quarter Revenue Growth of 30% and Adjusted
  Earnings of $0.08 Per Diluted Share and GAAP Earnings of $0.02 Per Diluted
  Share

                         Raises Fiscal 2013 Guidance

Business Wire

ALPHARETTA, Ga. -- January 31, 2013

Agilysys, Inc. (Nasdaq: AGYS), a leading developer and marketer of proprietary
enterprise software, services and solutions to the hospitality and retail
industries, today reported operating results for its fiscal 2013 third quarter
ended December 31, 2012, and raised its revenue and adjusted operating income
forecast for the full year.

Summary of Fiscal 2013 Third Quarter Financial Results

  *Total net revenue increased $15.6 million, or 30%, to $67.2 million from
    $51.6 million in the prior-year period. Revenues for the Company’s
    Hospitality segment increased $6.5 million, or 30%, year over year, while
    revenues for the Company’s Retail segment rose $9.1 million, or 31%, from
    the prior-year period.
  *Recurring revenues (which are comprised of support, maintenance and
    subscription services) for the quarter were $19.4 million, an increase of
    6% over the same period in fiscal 2012.
  *Gross margin was 35% in the fiscal 2013 third quarter compared to gross
    margin of 39% in the prior-year period. The decrease in the margin
    reflects a change in the mix of the products sold in the period.
  *Adjusted operating income (excluding stock-based compensation,
    amortization of intangibles and other one-time items) increased $3.3
    million year over year to $2.1 million from an adjusted operating loss of
    $1.2 million in the year-ago period (see reconciliation below).
  *Adjusted net income (non-GAAP) from continuing operations grew to $1.7
    million, or $0.08 per diluted share, compared with an adjusted net loss of
    $1.4 million, or ($0.06) per share, last year (see reconciliation below).
  *Net income for the period was $0.5 million, or $0.02 per diluted share,
    for the fiscal 2013 third quarter compared to a net loss of $6.5 million,
    or ($0.29), in the prior-year period, inclusive of a loss of ($0.03) from
    discontinued operations in the prior-year period.

James Dennedy, President and CEO of Agilysys, commented, “Our operating
results for the third quarter and first nine months of fiscal 2013 reflect our
expectations from the strategic initiatives implemented in the middle of
fiscal 2012. Our personnel have eagerly embraced our strategy and as a result,
we are delivering increased quality to our customers and value to our
shareholders. Our success to date with the Company’s refocused business
strategy is reflected in the growth of our Hospitality business, which
continues to outpace growth in the overall industry, and in our ability to
optimize the strong cash flow generated by our Retail business.

“Notwithstanding the progress made to date, we are still in the early stages
of executing the refocused business strategy. We believe our emphasis on
pursuing higher quality, recurring revenue opportunities and serving markets
that place a premium on using technology to deliver a higher quality customer
experience will produce above-market returns for our shareholders. Our
approach to implementing this strategy will provide a more innovative place
for our people to develop their careers and add more value to the solutions
our customers receive from Agilysys. In future periods, we believe our
operating leverage will continue to improve; recurring revenue, as a
percentage of our overall business, will increase; product development
investments will provide new innovation enabling our customers to grow their
business; and our team will further improve upon the industry-leading customer
service for which Agilysys is known.”

Summary of Fiscal 2013 First Nine Months Financial Results

  *Total net revenue for the period increased $16.2 million, or 10%, to
    $173.1 million, compared with $156.9 million in the comparable prior-year
    period. The Hospitality segment grew 18%, or $11.3 million, and the Retail
    segment revenue increased 5%, or approximately $5.0 million.
  *Recurring revenues (which are comprised of support, maintenance and
    subscription services) for the period were $57.3 million, an increase of
    7% over the first nine months of fiscal 2012.
  *Gross margin of 38% was relatively flat compared to the prior-year period.
  *Adjusted operating income (excluding stock-based compensation,
    amortization of intangibles and other one-time items) for the first nine
    months of fiscal 2013 increased year over year by $8.7 million to $4.3
    million from an adjusted operating loss of $4.4 million in the comparable
    year-ago period (see reconciliation below).
  *Adjusted net income (non-GAAP) from continuing operations grew to $3.8
    million or $0.17 per diluted share, compared with the adjusted net loss of
    $5.8 million, or ($0.26) per share, in the first nine months of fiscal
    2012 (see reconciliation below).
  *GAAP net loss was $1.6 million, or ($0.07) per share, in the first nine
    months of fiscal 2013 compared with a GAAP net loss of $5.8 million, or
    ($0.26) per share, in the year-ago period. GAAP net loss for the first
    nine months of fiscal 2012 includes net income of $10.4 million, or $0.46
    per share, related to discontinued operations.

Robb Ellis, Chief Operating Officer and Chief Financial Officer, added, “We
are pleased with the solid results we have generated and believe we have
attractive opportunities to continue improving the business over the long
term. Our results continue to reflect a good balance of current quarter
performance and the prudent long-term investments we are making in the
business. With nearly $80 million in cash and no debt, Agilysys has a solid
balance sheet and the financial flexibility to support our goal of generating
consistent profitable revenue growth while investing in our business to
address new growth opportunities. Based on the success of the quarter and
visibility into the year, we are increasing our fiscal 2013 guidance which
reflects strong revenue growth and a return to profitable operations relative
to fiscal 2012.”

Raises Fiscal 2013 Outlook

The table below compares the Company’s updated guidance to its prior guidance
for fiscal 2013 and to the reported results for fiscal 2012:

      (In millions, except   Fiscal 2013   Fiscal 2013    Fiscal 2012
            per-share)
                                    Updated        Previous        As Reported
                                                                   
            Revenue                 $230 - $232    $208 - $211     $208.9
                                                                   
            Adjusted operating      $6.0 - $6.5    $3.5 - $4.5     ($7.9)
            income (loss)
                                                                   
            Adjusted earnings       $0.24 -
            (loss) per share        $0.26          $0.16 - $0.21   ($0.39)
            (non-GAAP)


The Company’s updated guidance reflects year over year revenue growth of
approximately 10% resulting in adjusted operating income improving by
approximately $14 million and adjusted earnings per share improving by
$0.63-$0.65.

2013 Third Quarter Conference Call and Webcast

Agilysys is hosting a conference call and webcast today, January 31, 2013,
beginning at 4:30P.M.ET. Both the call and the webcast are open to the
general public. The conference call number is 913-312-1495 (domestic or
international) and the passcode is 5825485. A slide deck, which will be the
basis for the review, will accompany the conference call and can be accessed
at http://agilysys.com/home/InvestorRelations/EventPresentation.htm. Please
call five minutes prior to the presentation to ensure that you are connected.

Interested parties may also access the conference call live on the Internet at
http://agilysys.com/home/InvestorRelations/EventPresentation.htm.
Approximately two hours after the call has concluded, an archived version of
the webcast will be available for replay at the same location at
http://agilysys.com/home/InvestorRelations/EventPresentation.htm.

Forward-Looking Language

This press release and other publicly available documents, including the
documents incorporated herein and therein by reference, contain, and our
officers and representatives may from time to time make, "forward-looking
statements" within the meaning of the safe harbor provisions of the U.S.
Private Securities Litigation Reform Act of 1995. Forward-looking statements
can be identified by words such as: "anticipate," "intend," "plan," "goal,"
"seek," "believe," "project," "estimate," "expect," "strategy," "future,"
"likely," "may," "should," "will" and similar references to future periods.
These statements are not guarantees of future performance and involve risks,
uncertainties and assumptions that are difficult to predict. These statements
are based on management’s current expectations, intentions or beliefs and are
subject to a number of factors, assumptions and uncertainties that could cause
actual results to differ materially from those described in the
forward-looking statements. Factors that could cause or contribute to such
differences or that might otherwise impact the business include the risk
factors set forth in Item 1A of the company’s Annual Report for the fiscal
year ended March 31, 2012. Copies are available from the SEC or the Agilysys
website. We undertake no obligation to update any such factor or to publicly
announce the results of any revisions to any forward-looking statements
contained herein whether as a result of new information, future events or
otherwise.

Use of Non-GAAP Financial Information

To supplement the unaudited condensed consolidated financial statements
presented in accordance with U.S. GAAP in this press release, certain non-GAAP
financial measures as defined by the SEC rules are used. These non-GAAP
financial measures include adjusted operating income (loss) from continuing
operations, adjusted net income (loss), adjusted net income (loss) per share
and adjusted cash flow from operations. Management believes that such
information can enhance investors' understanding of the company's ongoing
operations. See the accompanying tables below for reconciliations of adjusted
operating income (loss) from continuing operations and adjusted net income
(loss), and adjusted cash flow from operations to the comparable GAAP
measures.

Guidance

Guidance figures are based on the company’s current estimates and are subject
to change by factors outside the company’s control. While this guidance is
provided to give investors insight into expectations for the period, actual
results may vary.

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. 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.

AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

(In thousands, except     Three Months Ended       Nine Months Ended
per share data)            December 31,              December 31,
                           2012        2011         2012         2011
                                                                   
Net revenue:
Products                   $ 40,210     $ 25,725     $ 89,262      $ 80,387
Support, maintenance and     19,405       18,275       57,347        53,704
subscription services
Professional services       7,596      7,582      26,494      22,767  
Total net revenue            67,211       51,582       173,103       156,858
Cost of goods sold:
Products                     32,225       20,128       70,108        63,733
Support, maintenance and     6,911        6,223        20,779        19,270
subscription services
Professional services       4,626      5,298      16,308      14,835  
Total cost of goods sold    43,762     31,649     107,195     97,838  
Gross profit                 23,449       19,933       65,908        59,020
Operating expenses:
Product development          8,612        7,722        24,241        23,378
Sales and marketing          5,425        5,408        16,039        16,868
General and                  7,167        7,319        20,596        23,466
administrative
Depreciation of fixed        633          1,063        2,024         3,177
assets
Amortization of              832          914          2,554         2,782
intangibles
Asset impairment and         -            -            208           -
related charges
Restructuring, severance    (31    )    4,556      1,524       10,590  
and other charges
Operating income (loss)      811          (7,049 )     (1,278  )     (21,241 )
Other (income) expenses:
Interest income              -            (4     )     (8      )     (54     )
Interest expense             56           60           225           937
Other expenses, net         220        22         202         293     
Income (loss) before         535          (7,127 )     (1,697  )     (22,417 )
income taxes
Income tax expense          19         (1,353 )    (69     )    (6,209  )
(benefit)
Income (loss) from           516          (5,774 )     (1,628  )     (16,208 )
continuing operations
(Loss) income from
discontinued operations,    -          (735   )    -           10,403  
net of taxes
Net income (loss)          $ 516       $ (6,509 )   $ (1,628  )   $ (5,805  )
                                                                   
Basic weighted average      21,900     22,148     21,873      22,650  
shares outstanding
                                                                   
Net income (loss) per
share – basic:
Income (loss) from         $ 0.02       $ (0.26  )   $ (0.07   )   $ (0.72   )
continuing operations
(Loss) income from          -          (0.03  )    -           0.46    
discontinued operations
Net income (loss) per      $ 0.02      $ (0.29  )   $ (0.07   )   $ (0.26   )
share
                                                                   
Diluted weighted average    22,088     22,148     21,873      22,650  
shares outstanding
                                                                   
Net income (loss) per
share – diluted:
Income (loss) from         $ 0.02       $ (0.26  )   $ (0.07   )   $ (0.72   )
continuing operations
(Loss) income from          -          (0.03  )    -           0.46    
discontinued operations
Net income (loss) per      $ 0.02      $ (0.29  )   $ (0.07   )   $ (0.26   )
share


AGILYSYS, INC.
BUSINESS SEGMENT INFORMATION
(UNAUDITED)

              Three Months Ended December 31, 2012                   Three Months Ended December 31, 2011
               Reportable Segments      Corporate/                    Reportable Segments      Corporate/  
(In            HSG         RSG          Other         Consolidated     HSG         RSG          Other         Consolidated
thousands)
                                                                                                                
Net revenue:
Products       $ 12,251     $ 27,959     $ -           $  40,210        $ 6,618      $ 19,107     $ -           $  25,725
Support,
maintenance
and              12,461       6,944        -              19,405          12,243       6,032        -              18,275
subscription
services
Professional    3,478      4,118      -            7,596         2,819      4,763      -            7,582   
services
Total net      $ 28,190     $ 39,021     $ -           $  67,211        $ 21,680     $ 29,902     $ -           $  51,582
revenue
                                                                                                                
Gross profit   $ 16,168     $ 7,281      $ -           $  23,449        $ 13,957     $ 5,976      $ -           $  19,933
Gross profit     57.4   %     18.7   %                    34.9    %       64.4   %     20.0   %                    38.6    %
margin
                                                                                                                
Operating
income         $ 3,998      $ 3,020      $ (6,207  )   $  811           $ 1,864      $ 1,439      $ (10,352 )   $  (7,049  )
(loss)
Interest         -            -            56             56              -            -            56             56
expense, net
Other
expenses,       -          -          220          220           -          -          22           22      
net
Income
(loss) from
continuing     $ 3,998     $ 3,020     $ (6,483  )   $  535          $ 1,864     $ 1,439     $ (10,430 )   $  (7,127  )
operations
before
income taxes
                                                                                                                
                                                                                                                
               Nine Months Ended December 31, 2012                      Nine Months Ended December 31, 2011
               Reportable Segments       Corporate/                     Reportable Segments       Corporate/
               HSG          RSG          Other         Consolidated     HSG          RSG          Other         Consolidated
                                                                                                                
Net revenue:
Products       $ 26,087     $ 63,175     $ -           $  89,262        $ 18,399     $ 61,988     $ -           $  80,387
Support,
maintenance
and              37,812       19,535       -              57,347          35,291       18,413       -              53,704
subscription
services
Professional    10,882     15,612     -            26,494        9,800      12,967     -            22,767  
services
Total net      $ 74,781     $ 98,322     $ -           $  173,103       $ 63,490     $ 93,368     $ -           $  156,858
revenue
                                                                                                                
Gross profit   $ 46,690     $ 19,218     $ -           $  65,908        $ 40,187     $ 18,833     $ -           $  59,020
Gross profit     62.4   %     19.5   %                    38.1    %       63.3   %     20.2   %                    37.6    %
margin
                                                                                                                
Operating
income         $ 10,254     $ 6,862      $ (18,394 )   $  (1,278  )     $ 2,075      $ 5,169      $ (28,485 )   $  (21,241 )
(loss)
Interest         -            -            217            217             -            -            883            883
expense, net
Other
expenses,       -          -          202          202           -          -          293          293     
net
Income
(loss) from
continuing     $ 10,254    $ 6,862     $ (18,813 )   $  (1,697  )     $ 2,075     $ 5,169     $ (29,661 )   $  (22,417 )
operations
before
income taxes


AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(In thousands, except share data)                  December 31,  March 31,
                                                    2012           2012
ASSETS
Current assets:
Cash and cash equivalents                           $  79,838      $ 97,587
Accounts receivable, net of allowance of $759 and      51,923        32,531
$632, respectively
Inventories                                            18,192        15,710
Prepaid expenses                                       2,863         2,975
Other current assets                                  1,538       5,492   
Total current assets                                   154,354       154,295
Property and equipment, net                            15,231        16,504
Goodwill                                               14,259        15,198
Intangible assets, net                                 15,922        14,135
Other non-current assets                              4,005       4,007   
Total assets                                        $  203,771    $ 204,139 
                                                                   
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable                                    $  42,298      $ 24,938
Deferred revenue                                       23,717        28,441
Accrued and other current liabilities                  13,428        23,983
Capital lease obligations – current                   342         647     
Total current liabilities                              79,785        78,009
Deferred income taxes – non-current                    5,186         5,135
Capital lease obligations – non-current                428           347
Other non-current liabilities                          5,151         6,210
Shareholders’ equity:
Common shares, without par value, at $0.30 stated
value; authorized 80,000,000 shares; 31,606,831
issued; and 22,136,981 and 21,875,850 shares           9,482         9,482
outstanding at December 31, 2012 and March 31,
2012, respectively
Treasury shares (9,469,850 shares at December 31,      (2,840  )     (2,919  )
2012 and 9,730,981 shares at March 31, 2012)
Capital in excess of stated value                      (14,919 )     (16,032 )
Retained earnings                                      122,248       123,876
Accumulated other comprehensive (loss) income         (750    )    31      
Total shareholders’ equity                            113,221     114,438 
Total liabilities and shareholders’ equity          $  203,771    $ 204,139 


AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

                                                    Nine Months Ended
(In thousands)                                       December 31,
                                                     2012         2011
Operating activities:
Net loss                                             $ (1,628  )   $ (5,805  )
Income from discontinued operations                   -           10,403  
Loss from continuing operations                        (1,628  )     (16,208 )
Adjustments to reconcile net loss from continuing
operations to net cash used in operating
activities:
Restructuring, severance and other charges             1,524         10,590
Payments for restructuring charges                     (6,550  )     (3,916  )
Asset impairments and related charges                  208           -
Depreciation                                           2,024         3,177
Amortization                                           3,304         4,757
Share-based compensation                               1,274         2,350
Changes in operating assets and liabilities:
Accounts receivable                                    (19,369 )     1,746
Inventories                                            (2,479  )     (773    )
Accounts payable                                       16,610        2,771
Deferred revenue                                       (4,673  )     (10,677 )
Accrued and other liabilities                          (7,071  )     (4,846  )
Income taxes payable                                   (319    )     1,635
Other changes, net                                    (243    )    (375    )
Net cash used in operating activities from             (17,388 )     (9,769  )
continuing operations
Net cash used in operating activities from            -           (27,923 )
discontinued operations
Net cash used in operating activities                  (17,388 )     (37,692 )
                                                                   
Investing activities:
Proceeds from the sale of marketable securities        4,347         5,025
Proceeds from the sale of TSG                          -             59,470
Investments in marketable securities                   -             (40,039 )
Capital expenditures                                   (4,051  )     (3,089  )
(Investments in) proceeds from Company-owned life     (85     )    235     
insurance policies
Net cash provided by investing activities from         211           21,602
continuing operations
Net cash provided by investing activities from        -           -       
discontinued operations
Net cash provided by investing activities              211           21,602
                                                                   
Financing activities:
Exercise of employee stock options                     67            210
Repurchases of shares to satisfy employee tax          (148    )     (1,328  )
withholding and option price
Repurchase of common stock                             -             (12,127 )
Principal payment under long-term obligations         (545    )    (823    )
Net cash used in financing activities from             (626    )     (14,068 )
continuing operations
Net cash used in financing activities from            -           -       
discontinued operations
Net cash used in financing activities                  (626    )     (14,068 )
                                                                   
Effect of exchange rate changes on cash               54          (135    )
Cash flows used in continuing operations               (17,749 )     (2,370  )
Cash flows used in discontinued operations            -           (27,923 )
Net decrease in cash                                   (17,749 )     (30,293 )
Cash and cash equivalents at beginning of period      97,587      74,354  
Cash and cash equivalents at end of period           $ 79,838     $ 44,061  


AGILYSYS, INC.
RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
(UNAUDITED)

(In thousands, except per  Three Months Ended       Nine Months Ended
share data)
                            December 31,              December 31,
                            2012        2011         2012        2011
                                                                   
Operating income (loss)     $ 811        $ (7,049 )   $ (1,278 )   $ (21,241 )
Share-based compensation      443          361          1,274        2,350
expense
Amortization of               832          914          2,554        2,782
intangibles
Asset impairments and         -            -            208          -
related charges
Impact from revision to
prior period financial        -            -            -            1,127
statements
Restructuring, severance     (31    )    4,556      1,524      10,590  
and other charges
Adjusted operating income
(loss) from continuing        2,055        (1,218 )     4,282        (4,392  )
operations (a)
                                                                   
Other expenses, net           276          78           419          1,176
Cash income tax expense      50         82         113        241     
(b)
Adjusted net income         $ 1,729     $ (1,378 )   $ 3,750     $ (5,809  )
(loss) (a)
                                                                   
Weighted average shares
outstanding:
Basic                         21,900       22,148       21,873       22,650
Diluted                       22,088       22,148       21,873       22,650
                                                                   
Adjusted net income
(loss) per share (a):
Basic                       $ 0.08       $ (0.06  )   $ 0.17       $ (0.26   )
Diluted                     $ 0.08       $ (0.06  )   $ 0.17       $ (0.26   )

(a) Non-GAAP financial measure

(b) Taxes calculated based upon our cash tax rate for the three and nine
months ended December 31, 2012 and 2011.


AGILYSYS, INC.
RECONCILIATION OF OPERATING CASH FLOWS FROM CONTINUING OPERATIONS
TO ADJUSTED CASH FLOWS FROM CONTINUING OPERATIONS
(UNAUDITED)

                                             Nine Months Ended
(In thousands)                                December 31,
                                              2012         2011
Operating activities:
Net cash used in continuing operations        $ (17,388 )   $ (9,769 )
Non-recurring cash items:
Restructuring payments                          6,550         3,916
BEP/SERP payments                              6,271       4,420  
Adjusted cash used in continuing operations   $ (4,567  )   $ (1,433 )

Contact:

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