Agilysys (NASDAQ:AGYS) Reports Sales Below Analyst Estimates in Q2 Results

Hospitality software provider Agilysys (NASDAQ:AGYS) missed analysts’ expectations in Q2 CY2024, with revenue up 13.3% year-over-year to $63.51 million. On the other hand, the company’s full-year outlook was in line with analysts’ estimates, with revenue coming in at $277.5 million at the halfway point. Non-GAAP earnings came in at $0.30 per share, an improvement from earnings of $0.18 per share in the same quarter last year.

Is Now the Time to Buy Agilysys? Find out in our full research report.

Agilysys (AGYS) Highlights in Q2 2024:

• Income: $63.51 million vs. analyst estimates of $64.44 million (1.4% miss)

• EPS (non-GAAP): $0.30 vs. analyst estimates of $0.26 (17.6% over)

• Business confirmed its revenue forecast for the full year at $277.5 million at the midpoint

• Gross Margin (GAAP): 62.8%, compared to 59% in the same quarter last year

• Free cash flow of $229,000, down 99.2% from the previous quarter

• Market capitalization: $2.92 billion

Ramesh Srinivasan, President and CEO of Agilysys, commented, “We are pleased to report our tenth consecutive record quarter of revenue of $63.5 million, an increase of 13.3% compared to the comparable quarter last year, including strong year-over-year growth of 32.0% for subscription revenue and 39.8% for services revenue. Adjusted EBITDA of $12.1 million, 19% of revenue, was slightly above our original expectations for the current quarter.”

Originally a subsidiary of electronics distributor Pioneer-Standard Electronics, Agilysys (NASDAQ:AGYS) offers a software-as-a-service platform that helps hotels, resorts, restaurants and other hospitality businesses manage their operations and workflows.

Software for the hotel and restaurant industry

Enterprise resource planning (ERP) and customer relationship management (CRM) are the two largest software categories, dominated by companies like Microsoft, Oracle, and Salesforce.com. Today, the secular trend of mass customization is driving vertical software that tailors ERP and CRM capabilities to specific industry requirements. Restaurants are a prime example, where a set of customized software vendors have emerged in recent years to create unique operating systems that combine tax and accounting software, order and delivery management, and supply chain management. Hotels and other hospitality providers are another example.

Increase in sales

As you can see below, Agilysys revenue has grown solidly over the past three years, from $38.73 million in Q1 2022 to $63.51 million this quarter.

Even though Agilysys missed analyst revenue estimates, quarterly revenue growth came in at 13.3% year-over-year. However, this growth slowed compared to the previous quarter, as the company’s revenue grew by just $1.29 million in Q2 compared to $1.66 million in Q1 CY2024. While we would like to see more revenue growth each quarter, one-time fluctuations are usually not concerning.

The story continues

Analysts covering the company had expected sales to rise 18% over the next 12 months, ahead of the financial results announcement.

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Money is everything

If you’ve been following StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that, in the end, cash is king and you can’t use accounting profits to pay bills. Agilysys’ free cash flow was $229,000 in Q2, becoming positive over the past year.

Agilysys generated $43.33 million in free cash flow over the past 12 months, a solid 17.7% of revenue. This high FCF margin is a result of its asset-light business model, which gives it optionality and plenty of cash to reinvest in the business.

Key takeaways from Agilysys’ Q2 results

It was great to see Agilysys improve its gross margin this quarter. Unfortunately, revenue fell short of analyst expectations. Overall, this quarter could have been better. Shares were flat at $111.80 immediately following the results.

Agilysys may have had a tough quarter, but does that really present an opportunity to invest now? When making such a decision, it is important to consider its valuation, business characteristics, as well as what happened in the last quarter. We discuss this in our full research report, which you can read here, it is free.