Agilysys (NASDAQ:AGYS) Exceeds Q4 Expectations

Anthony Lee /
2023/05/16 4:21 pm EDT

Hospitality industry software provider Agilysys (NASDAQ:AGYS) beat analyst expectations in Q4 FY2023 quarter, with revenue up 13.6% year on year to $52.9 million. Guidance for the full year was also close to analyst expectations with revenues guided to $232.5 million at the midpoint. Agilysys made a GAAP profit of $4.08 million, improving on its profit of $1.98 million, in the same quarter last year.

Is now the time to buy Agilysys? Access our full analysis of the earnings results here, it's free.

Agilysys (AGYS) Q4 FY2023 Highlights:

  • Revenue: $52.9 million vs analyst estimates of $52.1 million (1.57% beat)
  • EPS (non-GAAP): $0.26 vs analyst estimates of $0.22 (18.2% beat)
  • Management's revenue guidance for upcoming financial year 2024 is $232.5 million at the midpoint, missing analyst estimates by 0.17% and predicting 17.4% growth (vs 22.2% in FY2023)
  • Free cash flow of $13.2 million, up 12.1% from previous quarter
  • Gross Margin (GAAP): 60.8%, up from 59.5% same quarter last year

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

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

Sales Growth

As you can see below, Agilysys's revenue growth has been strong over the last two years, growing from quarterly revenue of $36.3 million in Q4 FY2021, to $52.9 million.

Agilysys Total Revenue

This quarter, Agilysys's quarterly revenue was once again up 13.6% year on year. We can see that the company increased revenue by $2.98 million quarter on quarter. That's a solid improvement on the $2.18 million increase in Q3 2023, so shareholders should appreciate the re-acceleration of growth.

For the upcoming financial year management expects revenue to be $232.5 million at the midpoint, growing 17.4% compared to 21.8% increase in FY2023.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Cash Is King

If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Agilysys's free cash flow came in at $13.2 million in Q4, up 101% year on year.

Agilysys Free Cash Flow

Agilysys has generated $27.2 million in free cash flow over the last twelve months, a solid 13.7% of revenues. This strong FCF margin is a result of Agilysys asset lite business model and provides it plenty of cash to invest in the business.

Key Takeaways from Agilysys's Q4 Results

With a market capitalization of $1.92 billion Agilysys is among smaller companies, but its more than $112.8 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

Agilysys topped analysts’ revenue expectations this quarter, even if just narrowly, while adjusted EBITDA was in line. That feature of these results really stood out as a positive. On the other hand, Agilysys's revenue and adjusted EBITDA guidance for the full year both missed analysts' expectations. There was also some gross margin deterioration. Overall, it seems to us that this was a mixed quarter for Agilysys and the guidance could weigh on shares. The company is down 2.43% on the results and currently trades at $75.9 per share.

Should you invest in Agilysys right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.