Agilysys Narrows Losses on Uptick in Sales in Fiscal Q1
Published: September 7, 2010
by Timothy Prickett Morgan
Business continues to be tough for application and services provider Agilysys, but things are getting better.
In the first quarter of fiscal 2011 ended on June 30, the maker of software for retailers and hotels said that revenues were up 1.9 percent, to $132.4 million. Product sales were down a fraction of a percent, to $104.1 million, but services revenues rose by 10.7 percent, to $28.3 million. The company cut its operating loss almost in half, to $6.6 million, and after paying income taxes (it did not pay taxes on profits in the current quarter, but corrected a past mistake in its tax bill and cut a check for $4.5 million to the IRS) Agilysys posted a net loss of $10.3 million--not good, of course, but better than the $12.4 million loss in the year-ago quarter.
Martin Ellis, president and chief executive officer at Agilysys, said that the company's Hospitality Group and Retail Group both performed in line with expectations within the quarter, but the Technology Solutions Group, did not do as well as expected.
The Hospitality Group posted sales of $23.1 million, up 43.7 percent, and had an operating profit of $2.2 million compared to an operating loss of $2.1 million in the first quarter of fiscal 2010 ended in June of that year. The Retail Group saw a 2.5 percent decline, to $23.8 million, but increased its operating profit to $1.8 million, up from $1.4 million a year ago. Agilysys said that the revenue decline in its retail business was due primarily to decreased hardware and software sales. The Technology Solutions Group, which does systems integration and other professional services, had a revenue decline of 4.4 percent, to $85.6 percent. TSG's operating loss narrowed to $1.8 million, down from a $2.9 million operating loss in the year-ago period. The company said that rebates from IT suppliers were lower in the quarter and that competitive pricing put pressure on profits as well.
Looking ahead to the rest of fiscal 2011, Agilysys said that the "demand environment has improved" but there is still a lot of pressure on pricing. The company ended the quarter with $50 million in cash, after burning through $15 million from April through June to install a new Oracle ERP system and to pay down some other charges, but expects to generate between $10 million and $15 million for all of fiscal 2011 ending next March.
As The Four Hundred goes to press, Agilysys has a market capitalization of $107 million, and is bouncing back from a low set just after its financials came out. That is about one-fifth the value Wall Street was putting on the company back before the economic meltdown started in December 2007, but nowhere near the rock-bottom that the company's stock hit in September 2008, when the company was valued at a mere $48 million. The amazing thing is that Infor or Oracle had not snapped up Agilysys for its software businesses back during the trough and then spun out the problematic Technology Solutions Group to IBM, Hewlett-Packard, or Dell. Or held on to it to boost their own services businesses.
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