Agilysys Inc (AGYS) Reports Record Revenue Growth in Q3 Fiscal 2024
Revenue Growth: Agilysys Inc (NASDAQ:AGYS) achieved a 21.3% increase in total net revenue, reaching a record $60.6 million.
Subscription Revenue: Subscription revenue grew by 29.9%, contributing significantly to the overall revenue increase.
Net Income Spike: Net income attributable to common shareholders surged to $76.9 million, influenced by discrete tax events.
Adjusted EBITDA: Adjusted EBITDA rose to $11.8 million, with the company increasing its full fiscal year guidance to 15% of revenue.
Free Cash Flow: Free cash flow remained robust at $11.3 million, with an ending cash balance of $116.2 million.
On January 22, 2024, Agilysys Inc (NASDAQ:AGYS), a global leader in hospitality software solutions, announced its financial results for the third quarter of fiscal year 2024, which ended on December 31, 2023. The company reported a significant increase in revenue and profitability, marking its eighth consecutive record revenue quarter. The full details of the financial results can be found in the company's 8-K filing.
Agilysys specializes in developing industry-specific technology solutions for managing business operations in sectors such as gaming, hotels, resorts, and cruise lines. The company's comprehensive suite of solutions includes property management, point-of-sale, inventory and procurement, and analytics, among others. The majority of Agilysys' revenues are generated through contract support, maintenance, and subscription services.
Financial Highlights and Challenges
The third quarter saw Agilysys' total net revenue climb to $60.6 million, a 21.3% increase from the $49.9 million reported in the same period of the previous fiscal year. This growth was driven in part by a 29.9% increase in subscription revenue, which now represents 55.6% of total recurring revenue. The company's gross margin also improved slightly to 62.5% from 61.7% year-over-year.
Net income attributable to common shareholders was notably higher at $76.9 million, or $2.85 per diluted share, compared to $3.4 million, or $0.13 per diluted share, in the prior-year period. This increase included the impact of discrete tax events, such as a $65.1 million release of valuation allowances against certain deferred tax assets.
Adjusted EBITDA for the quarter was $11.8 million, up from $8.1 million in the comparable prior-year period. Adjusted diluted EPS was $0.35 per share, an increase from $0.26 per share year-over-year. Free cash flow for the quarter was $11.3 million, slightly down from $11.7 million in the third quarter of fiscal 2023.
"We are pleased with our continuing good business momentum, highlighted by the eighth consecutive record revenue quarter, 21.3% year-over-year revenue growth that includes subscription revenue growth of 29.9% and Adjusted EBITDA of 19.4%," said Ramesh Srinivasan, President and CEO of Agilysys.
Financial Achievements and Industry Impact
The company's financial achievements are particularly significant in the software industry, where recurring revenue streams such as subscriptions are highly valued for their predictability and potential for growth. Agilysys' ability to consistently increase its subscription revenue underscores the company's competitive positioning and the value of its software solutions in the hospitality industry.
Agilysys' raised guidance for full fiscal year Adjusted EBITDA to 15% of revenue reflects management's confidence in the company's operational efficiency and growth trajectory. This is further supported by the company's strong backlog and improved profitability, indicating disciplined growth and a focus on delivering shareholder value.
Analysis of Performance
Agilysys' performance in the third quarter demonstrates the company's robust financial health and its ability to capitalize on the growing demand for hospitality technology solutions. The increase in subscription revenue is a testament to the company's strategic focus on building a recurring revenue model that can sustain long-term growth.
The company's improved gross margin and net income profitability levels indicate effective cost management and operational efficiency. The significant net income increase, primarily due to discrete tax events, may not be indicative of underlying operational performance but does contribute to a strengthened balance sheet.
Agilysys' outlook for fiscal 2024 remains positive, with the company expecting continued good business growth and increased profitability. The raised Adjusted EBITDA guidance and reaffirmed revenue projections suggest that Agilysys is well-positioned to maintain its growth momentum and deliver on its promises to shareholders.
For investors and potential GuruFocus.com members, Agilysys Inc (NASDAQ:AGYS) presents a compelling case as a value investment opportunity, particularly for those interested in the software and hospitality sectors. The company's strong financial results, consistent revenue growth, and positive outlook underscore its potential for continued success.
Explore the complete 8-K earnings release (here) from Agilysys Inc for further details.
This article first appeared on GuruFocus.
