AGILYSYS INC
For the period ended Sep 30, 2024. Filed Oct 28, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 28, 2024
AGYS$121.09+1.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-26.
0000950170-24-086879
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-28.
0000950170-24-117726
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 72 previous paragraphs and 103 current paragraphs.
55 unchanged; 17 reworded; 17 added; 0 removed; 0 previous and 14 current paragraphs rearranged.
Tables are not compared: 5 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
Book4Time
Current report
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.
Current report
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.
Current report
Interest expense. Interest expense consists of interest charges under our Credit Agreement and amortization of related debt issuance costs.
Current report
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.
Current report
Results of Operations
Current report
First Half Fiscal 2025 Compared to First Half Fiscal 2024
Current report
Net Revenue and Operating Income
Current report
Operating Expenses
Current report
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.
Current report
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.
Current report
Other income (expense)
Current report
Interest expense. Interest expense consists of interest charges under our Credit Agreement and amortization of related debt issuance costs.
Current report
Income Taxes
Current report
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.
Current report
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.
Current report
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.
Reworded paragraphs (17)
Previous wording
During the three months ended June 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.
Current wording
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.
Previous wording
First Fiscal Quarter 2025 Compared to First Fiscal Quarter 2024
Current wording
Second Fiscal Quarter 2025 Compared to Second Fiscal Quarter 2024
Previous wording
Net revenue. Total net revenue increased $7.5 million, or 13.3%, during the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024. Products revenue decreased $2.9 million, or 22.7%, 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 $5.9 million, or 18.4%, compared to the first quarter of fiscal 2024 driven by continued growth in subscription-based service revenue, which increased 32.0% during the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024. Professional services revenue increased $4.4 million, or 39.8%, due to higher sales and service activity as our new and existing customers continue implementing technology to improve their operations.
Current wording
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.
Previous wording
Gross profit and gross profit margin. Our total gross profit increased $6.8 million, or 20.6%, during the first quarter of fiscal 2025 and total gross profit margin increased from 59.0% to 62.8% compared to the first quarter of fiscal 2024 driven by changes in the composition of revenue by category. Products gross profit decreased $1.6 million, or 25.2%, and products gross profit margin decreased from 48.6% to 47.1% due to the composition of hardware and proprietary software products delivered. Subscription and maintenance gross profit increased $5.4 million, or 22.2%, and gross profit margin increased from 76.2% to 78.7% as revenue increases outpaced variable costs as a result of certain cost control initiatives. Professional services gross profit increased $2.9 million, or 124.6%, and gross profit margin increased from 21.1% to 33.9% reflecting improved utilization rates from efficiency gains on multi-solution implementations and revenue associated with a large development service contract.
Current wording
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.
Previous wording
Operating expenses, excluding other charges, net and legal settlements, increased $2.0 million, or 6.3%, during the first quarter of fiscal 2025 compared with the first quarter of fiscal 2024.
Current wording
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.
Previous wording
Product development. Product development increased $1.4 million, or 10.5%, in the first quarter of fiscal 2025 compared with the first quarter of fiscal 2024 due to hiring and increased salary, incentive and employee benefits rates across our development teams.
Current wording
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.
Previous wording
Sales and marketing. Sales and marketing decreased $0.3 million, or 3.9%, in the first quarter of fiscal 2025 compared with the first quarter of fiscal 2024 due to timing of marketing event and trade show activity.
Current wording
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.
Previous wording
Depreciation of fixed assets. Depreciation of fixed assets decreased $0.1 million, or 9.2%, in the first quarter of fiscal 2025 compared with the first quarter of fiscal 2024 due to the timing of assets reaching their useful life.
Current wording
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.
Previous wording
Amortization of internal-use software and intangibles. Amortization of internal-use software and intangibles decreased $0.2 million, or 41.6%, in the first quarter of fiscal 2025 compared with the first quarter of fiscal 2024 due to the full amortization of certain intangible assets.
Current wording
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.
Previous wording
General and administrative. General and administrative increased $1.1 million, or 11.9%, in the first quarter of fiscal 2025 compared with the first quarter of fiscal 2024 due to increased compensation rates across our administrative teams and payroll taxes associated with certain exercises of stock-settled appreciation rights during the quarter.
Current wording
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.
Previous wording
For the three months ended June 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.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
At June 30, 2024, 100% of our cash and cash equivalents, of which 96% 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.
Current wording
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.
Previous wording
We believe that cash flow from operating activities, cash on hand of $144.1 million as of June 30, 2024, and access to capital markets will provide adequate funds to meet our short- and long-term liquidity requirements.
Current wording
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.
Previous wording
Cash flow provided by operating activities. Cash flow provided by operating activities was $1.1 million in the first three months of fiscal 2025. The provision of cash was due to cash-based earnings of $10.8 million and a decrease of $9.7 million due to changes in net operating assets and liabilities. Cash-based earnings is net income of $14.1 million and $3.3 million of non-cash adjustments.
Current wording
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.
Previous wording
Cash flow used in investing activities. Consists primarily of property and equipment purchases, which decreased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due to leasehold improvements and equipment purchases for our new office lease in Las Vegas, Nevada during the three months ended June 30, 2023.
Current wording
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 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.
Previous wording
Cash flow used in financing activities. Cash flow used in financing activities decreased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due to a reduction from $1.8 million to $0.9 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.
Current wording
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.
Rearranged current paragraphs (14)
Current report — wording carried from elsewhere
The following table presents our consolidated revenue and operating results for the six months ended September 30, 2024 and 2023:
Current report — wording carried from elsewhere
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:
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
Other charges, net. Other charges, net consist of losses on asset disposals, severance costs and acquisition costs related to business combinations.
Current report — wording carried from elsewhere
Legal settlements. Legal settlements consist of settlements of employment and other business-related matters.
Current report — wording carried from elsewhere
Interest income. Interest income consists of interest earned on cash equivalents including short-term investments in commercial paper, treasury bills and money market funds.
Current report — wording carried from elsewhere
Other (expense), net. Other (expense), net mainly consists of movement of foreign currencies against the US dollar.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.