Earnings Call: Agilysys Reports Record Q2 Sales and Raises Full-Year Revenue Guidance

Agilysys (NASDAQ:) Inc. reported robust sales in the second quarter of fiscal year 2024, with net annual contract value reaching an all-time high. The company’s revenue for the quarter hit a record $58.6 million, marking a 22.8% increase from the previous year. According to InvestingPro data, the company’s revenue growth for the last twelve months (LTM2024.Q1) was 20.54%. The company also raised its full-year revenue guidance to a range of $235 million to $238 million, expecting a 28% growth in subscription revenue.

Key takeaways from the earnings call:

• Agilysys experienced sales growth across various sectors, including gaming casinos, resorts, cruise ships, hotels, and managed food service providers.
• International sales, particularly in Europe and APAC, saw significant growth.
• The company added 17 new customers and 70 new properties during the quarter, focusing on subscription-based agreements.
• Recurring revenue grew by 18%, driven by a 29% increase in subscription revenue.
• The company anticipates an EBITDA margin of 14% for the full year, one percentage point higher than previous guidance. This aligns with the InvestingPro data, which shows an EBITDA growth of 42.01% for LTM2024.Q1.

Agilysys executives attributed the company’s growth to an increase in new customers and the fact that clients are now signing up for multiple products compared to previous years. The company’s point-of-sale (POS) strength and investments made by current customers in new sites and product expansions also contributed to the growth.

The company’s gross profit margin was 59.9%, and it expects to improve profitability going forward. InvestingPro data shows a gross profit margin of 60.68% for LTM2024.Q1. Agilysys also reported higher-than-expected gross margins due to increased revenue levels and a sequential subscription increase.

Addressing concerns about cybersecurity incidents, company executive Ramesh Srinivasan assured that the company’s revenue growth is broad-based and not dependent on a few customers. He stated that the company has implemented multiple layers of cybersecurity measures and works with vendor partners to protect themselves and their customers.

In terms of the managed food service (FSM) business, it is recovering well from the impact of COVID-19, but the star performer in Q2 was the hotels, resorts, and cruise ships segment. Srinivasan also highlighted the progress with mid-size management companies, stating that a majority of sales deals were on the POS side and that there is still considerable growth potential in the POS market.

Reflecting on InvestingPro Tips, Agilysys holds more cash than debt on its balance sheet, and its consistently increasing earnings per share indicate a strong financial position. It’s also worth noting that the company’s high earnings quality, with free cash flow exceeding net income, is a positive sign for investors.

The company reported strong sales for the first half of the fiscal year, which were higher than the previous year. The CEO attributes this success to the company’s product strength and expansion into new geographical areas. They also mentioned significant sales wins from resort and cruise ship clients. The CEO expects the trend of sizable sales opportunities to continue in the future. The conference call concluded with the CEO expressing gratitude and stating that they will report third-quarter results in three months.

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