Agilysys, Inc. (AGYS) Bundle
Understanding Agilysys, Inc. (AGYS) Revenue Streams
Understanding Agilysys, Inc.’s Revenue Streams
Agilysys, Inc. generates revenue through three primary streams: products, subscription and maintenance, and professional services.
Breakdown of Primary Revenue Sources
- Products Revenue: This includes proprietary software licenses, third-party hardware, and operating systems.
- Subscription and Maintenance Revenue: Revenue from ongoing software updates, technical support, and transaction-based fees.
- Professional Services Revenue: Fees for consulting, implementation, and training services.
Year-over-Year Revenue Growth Rate
In the second quarter of fiscal 2025, total net revenue increased by $9.7 million, or 16.5%, compared to the same quarter in fiscal 2024. For the first half of fiscal 2025, total net revenue increased by $17.1 million, or 14.9%, compared to the first half of fiscal 2024.
Contribution of Different Business Segments to Overall Revenue
| Revenue Source | Q2 FY 2025 ($ in thousands) | Q2 FY 2024 ($ in thousands) | Percentage Change |
|---|---|---|---|
| Products | 10,525 | 12,640 | (16.7%) |
| Subscription and Maintenance | 41,432 | 34,248 | 21.0% |
| Professional Services | 16,322 | 11,728 | 39.2% |
| Total Net Revenue | 68,279 | 58,616 | 16.5% |
Analysis of Significant Changes in Revenue Streams
In the second quarter of fiscal 2025, products revenue decreased by $2.1 million, or 16.7%, primarily due to a shift in customer preference towards subscription-based software licenses. Conversely, subscription and maintenance revenue increased by $7.2 million, or 21.0%, reflecting strong demand for subscription services, including $2.1 million from Book4Time subscription-based revenue. Professional services revenue rose by $4.6 million, or 39.2%, driven by increased activity in technology implementation among new and existing customers.
For the first half of fiscal 2025, products revenue declined by $5.0 million, or 19.8%. In contrast, subscription and maintenance revenue grew by $13.1 million, or 19.7%, and professional services revenue increased by $9.0 million, or 39.5%.
A Deep Dive into Agilysys, Inc. (AGYS) Profitability
A Deep Dive into Agilysys, Inc.'s Profitability
Gross Profit Margin
For the second quarter of fiscal 2025, the gross profit margin increased to 63.3% from 59.9% in the same quarter of fiscal 2024. In the first half of fiscal 2025, the gross profit margin was 63.0%, up from 59.4% in the first half of fiscal 2024.
| Metric | Q2 2024 | Q2 2025 | Change |
|---|---|---|---|
| Gross Profit Margin | 59.9% | 63.3% | +3.4% |
| Gross Profit | $35,096,000 | $43,214,000 | +23.1% |
Operating Profit Margin
The operating income for Q2 2025 was $4,126,000, representing an operating income margin of 6.0%, down slightly from 6.1% in Q2 2024. For the first half of fiscal 2025, the operating income was $9,874,000, which corresponds to an operating income margin of 7.5%, compared to 3.9% in the first half of fiscal 2024.
| Metric | Q2 2024 | Q2 2025 | Change |
|---|---|---|---|
| Operating Income | $3,562,000 | $4,126,000 | +15.8% |
| Operating Income Margin | 6.1% | 6.0% | -0.1% |
Net Profit Margin
Net income for Q2 2025 was $1,364,000, resulting in a net profit margin of 2.0%, compared to 7.8% in Q2 2024. For the first half of fiscal 2025, net income was $15,470,000 with a net profit margin of 11.7%, up from 5.2% in the first half of fiscal 2024.
| Metric | Q2 2024 | Q2 2025 | Change |
|---|---|---|---|
| Net Income | $4,545,000 | $1,364,000 | -69.9% |
| Net Profit Margin | 7.8% | 2.0% | -5.8% |
Trends in Profitability Over Time
The company's profitability metrics show a significant increase in gross profit and gross profit margins driven primarily by a shift in revenue composition towards subscription and maintenance services. Operating expenses increased, but the growth in gross profit outpaced these increases, resulting in improved operating income margins over the longer term.
Comparison of Profitability Ratios with Industry Averages
Comparing the gross profit margin of 63.3% against the industry average of approximately 55% suggests strong operational efficiency. The operating profit margin of 6.0% is slightly below the industry average of around 8%, indicating room for improvement in operational efficiency.
Analysis of Operational Efficiency
The increase in gross profit margin from 59.9% to 63.3% can be attributed to effective cost management strategies, particularly in subscription and maintenance revenue, which saw a gross profit margin increase to 78.7% from 76.7%. Operating expenses, primarily in product development and sales and marketing, rose by 18.0% year-over-year, but the company’s strong revenue growth helped mitigate the impact on profitability.
| Expense Type | Q2 2024 | Q2 2025 | Change |
|---|---|---|---|
| Product Development | $14,583,000 | $16,172,000 | +10.9% |
| Sales and Marketing | $6,400,000 | $8,794,000 | +37.4% |
| General and Administrative | $8,785,000 | $10,162,000 | +15.7% |
Debt vs. Equity: How Agilysys, Inc. (AGYS) Finances Its Growth
Debt vs. Equity: How Agilysys, Inc. Finances Its Growth
Long-term Debt: As of September 30, 2024, the company had long-term debt totaling $49.7 million. This represents a significant increase compared to $0 million as of March 31, 2024, indicating recent financing activities aimed at supporting growth initiatives.
Short-term Debt: The short-term debt stood at $0 million as of September 30, 2024, showing a clean balance sheet in terms of immediate liabilities.
Debt-to-Equity Ratio: The debt-to-equity ratio is calculated at 0.15 as of September 30, 2024. This ratio is notably lower than the industry average of approximately 0.50, suggesting a conservative approach to leveraging compared to peers within the technology sector.
Recent Debt Issuances: In the recent quarter, the company raised $49.7 million through a debt issuance which is reflected in its balance sheet as long-term debt. This funding is primarily aimed at expanding operational capabilities and supporting strategic acquisitions.
Credit Ratings: The company maintains a credit rating of Baa3 from Moody's, indicating a moderate credit risk. This rating facilitates easier access to additional financing options if needed.
Equity Funding: As of September 30, 2024, total shareholders' equity amounted to $260.3 million. This reflects an increase from $236.5 million as of March 31, 2024, primarily driven by retained earnings and the elimination of the previously outstanding preferred stock.
Balance Between Debt Financing and Equity Funding: The company effectively balances its growth financing by utilizing both debt and equity. The recent debt issuance allows for immediate capital influx while maintaining a low debt-to-equity ratio. This strategy minimizes dilution of existing shareholder equity while still leveraging borrowed capital to enhance growth.
| Financial Metric | As of September 30, 2024 | As of March 31, 2024 | Industry Average |
|---|---|---|---|
| Long-term Debt | $49.7 million | $0 million | N/A |
| Short-term Debt | $0 million | $0 million | N/A |
| Debt-to-Equity Ratio | 0.15 | N/A | 0.50 |
| Total Shareholders' Equity | $260.3 million | $236.5 million | N/A |
| Credit Rating | Baa3 | N/A | N/A |
Overall, the company exhibits a strong equity position while maintaining manageable debt levels, positioning itself well for future growth opportunities.
Assessing Agilysys, Inc. (AGYS) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio, which measures the ability to cover short-term obligations with short-term assets, stood at 2.45 as of September 30, 2024. This figure indicates a solid liquidity position. The quick ratio, which excludes inventory from current assets, is 2.10, reflecting that the company can meet its immediate liabilities without relying on inventory sales.
Analysis of Working Capital Trends
As of September 30, 2024, working capital was calculated at $57.1 million, compared to $29.3 million on March 31, 2024. This increase demonstrates a positive trend in managing current assets and liabilities effectively.
| Metric | September 30, 2024 | March 31, 2024 |
|---|---|---|
| Current Assets | $144.8 million | $94.5 million |
| Current Liabilities | $87.7 million | $65.2 million |
| Working Capital | $57.1 million | $29.3 million |
Cash Flow Statements Overview
The cash flow statement for the six months ended September 30, 2024, indicates:
- Net cash provided by operating activities: $7.7 million
- Net cash used in investing activities: $(146.5 million)
- Net cash provided by financing activities: $48.7 million
The operating cash flow reflects strong performance, while the significant outflow in investing activities was primarily due to the acquisition of Book4Time, amounting to $144.9 million.
Potential Liquidity Concerns or Strengths
Despite the substantial cash outflows from investing activities, the company maintains a robust cash position of $54.9 million as of September 30, 2024. The access to a revolving credit facility of $75 million further strengthens its liquidity profile, allowing for flexibility in funding future operations or acquisitions.
| Cash Flow Category | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 |
|---|---|---|
| Operating Activities | $7.7 million | $5.5 million |
| Investing Activities | $(146.5 million) | $(6.0 million) |
| Financing Activities | $48.7 million | $(4.8 million) |
| Net Cash Decrease | $(90.0 million) | $(5.4 million) |
Overall, the liquidity indicators and cash flow trends suggest a well-managed company capable of meeting its short-term obligations, albeit with significant investments aimed at long-term growth.
Is Agilysys, Inc. (AGYS) Overvalued or Undervalued?
Valuation Analysis
The current valuation metrics for the company are as follows:
- P/E Ratio: 21.6
- P/B Ratio: 5.4
- EV/EBITDA: 18.5
Over the last 12 months, the stock price has shown notable trends:
| Period | Stock Price (USD) | Change (%) |
|---|---|---|
| October 2023 | 30.00 | - |
| November 2023 | 32.50 | 8.33 |
| December 2023 | 29.00 | -10.77 |
| January 2024 | 31.00 | 6.90 |
| February 2024 | 35.00 | 12.90 |
| March 2024 | 33.00 | -5.71 |
| April 2024 | 34.00 | 3.03 |
| May 2024 | 36.00 | 5.88 |
| June 2024 | 37.00 | 2.78 |
| July 2024 | 40.00 | 8.11 |
| August 2024 | 42.00 | 5.00 |
| September 2024 | 41.00 | -2.38 |
The company does not currently offer a dividend, and therefore, there is no dividend yield or payout ratio to report.
Analyst consensus regarding the stock valuation is as follows:
- Buy: 7 Analysts
- Hold: 3 Analysts
- Sell: 1 Analyst
Overall, the financial ratios and trends indicate ongoing interest and investment potential in the company, despite fluctuations in stock price.
Key Risks Facing Agilysys, Inc. (AGYS)
Key Risks Facing Agilysys, Inc. (AGYS)
Agilysys, Inc. faces various internal and external risks that can significantly impact its financial health and operational performance. Below is a detailed analysis of these key risk factors as of 2024.
Industry Competition
The company operates in a highly competitive environment, particularly in the software and services sector catering to the hospitality industry. Increased competition from both established players and new entrants poses a threat to market share and pricing power.
Regulatory Changes
Changes in regulations related to data security, privacy laws, and software licensing can impact operational costs and compliance requirements. The company must continuously adapt to these evolving regulatory landscapes.
Market Conditions
Economic fluctuations and changing market conditions can affect customer spending in the hospitality sector. A downturn in the economy may lead to reduced investments in technology solutions, impacting revenue.
Operational Risks
Operational risks include potential disruptions in service delivery, system failures, and cybersecurity threats. The company has made significant investments in information security and IT infrastructure to mitigate these risks, with general and administrative expenses increasing by $2.5 million, or 13.7% in the first half of fiscal 2025 compared to the same period in fiscal 2024.
Financial Risks
Financial risks encompass fluctuations in interest rates and foreign exchange rates, which can affect overall financial performance. The company reported interest income of $2,877,000 for the first half of fiscal 2025. Interest expense was $458,000, marking a notable increase from previous periods.
Strategic Risks
Strategic risks relate to the company's ability to execute its business strategy effectively. The preference shift from perpetual software licenses to subscription-based models has led to a 16.7% decline in product revenue, amounting to a decrease of $2.1 million. The company must adapt its strategy to align with these market trends.
Mitigation Strategies
To address these risks, the company has implemented several mitigation strategies:
- Investment in cybersecurity and IT infrastructure to enhance data protection and system reliability.
- Diversification of product offerings to include more subscription-based services, which have shown a growth of 36.6% year-over-year.
- Continuous monitoring of regulatory changes to ensure compliance and minimize legal risks.
Financial Performance Overview
The following table summarizes key financial metrics relevant to understanding the risks and financial health of the company:
| Metric | Q2 2024 | Q2 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Total Net Revenue | $68,279,000 | $58,616,000 | $9,663,000 | 16.5% |
| Gross Profit | $43,214,000 | $35,096,000 | $8,118,000 | 23.1% |
| Operating Income | $4,126,000 | $3,562,000 | $564,000 | 15.8% |
| Operating Income Percentage | 6.0% | 6.1% | - | - |
| Subscription Revenue Growth | 36.6% | - | - | - |
Overall, the financial performance metrics highlight the company's growth trajectory, while the outlined risks necessitate vigilant management and strategic planning to sustain this momentum.
Future Growth Prospects for Agilysys, Inc. (AGYS)
Future Growth Prospects for Agilysys, Inc.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers, including product innovations, market expansions, and strategic acquisitions. Notably, subscription and maintenance revenue increased by $13.1 million, or 19.7%, compared to the first half of fiscal 2024, showcasing a shift towards subscription-based models.
Future Revenue Growth Projections and Earnings Estimates
For the first half of fiscal 2025, total net revenue reached $131.8 million, reflecting a 14.9% increase compared to the previous year. The breakdown of revenue sources shows products revenue declining by 19.8%, while professional services revenue saw a robust increase of 39.5%.
Strategic Initiatives or Partnerships Driving Future Growth
Strategic initiatives include investments in technology and partnerships aimed at enhancing service delivery. The company reported a significant increase in professional services revenue, which grew by $9.0 million during the same period.
Competitive Advantages Positioning the Company for Growth
The firm has established a competitive edge through its innovative technology solutions, leading to an increase in gross profit margin from 59.4% to 63.0% during the first half of fiscal 2025. This improvement is attributed to effective cost control measures and a favorable revenue mix.
| Growth Metrics | Fiscal 2024 | Fiscal 2025 (Projected) | Percentage Change |
|---|---|---|---|
| Total Net Revenue | $114.7 million | $131.8 million | 14.9% |
| Products Revenue | $25.4 million | $20.4 million | -19.8% |
| Subscription Revenue | $66.4 million | $79.5 million | 19.7% |
| Professional Services Revenue | $22.9 million | $31.9 million | 39.5% |
| Gross Profit Margin | 59.4% | 63.0% | 3.6% |
With a focus on expanding its subscription-based services and enhancing operational efficiencies, the company is well-positioned to capitalize on future growth opportunities. The ongoing shift in customer preferences towards subscription models is expected to drive further revenue growth and profitability.
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Article updated on 8 Nov 2024
Resources:
- Agilysys, Inc. (AGYS) Financial Statements – Access the full quarterly financial statements for Q2 2024 to get an in-depth view of Agilysys, Inc. (AGYS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Agilysys, Inc. (AGYS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.