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Hospitality industry software provider Agilysys (NASDAQ:AGYS) missed analysts' expectations in Q2 CY2024, with revenue up 13.3% year on year to $63.51 million. On the other hand, the company's outlook for the full year was close to analysts' estimates with revenue guided to $277.5 million at the midpoint. It made a non-GAAP profit of $0.30 per share, improving from its profit of $0.18 per share in the same quarter last year.
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Agilysys (AGYS) Q2 CY2024 Highlights:
- Revenue: $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% beat)
- The company reconfirmed its revenue guidance for the full year of $277.5 million at the midpoint
- Gross Margin (GAAP): 62.8%, up from 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
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.
Hospitality & Restaurant SoftwareEnterprise resource planning (ERP) and customer relationship management (CRM) are two of the largest software categories dominated by the likes of Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), and Salesforce.com (NYSE:CRM). 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 GrowthAs you can see below, Agilysys's revenue growth has been solid over the last three years, growing from $38.73 million in Q1 2022 to $63.51 million this quarter.
Even though Agilysys fell short of analysts' revenue estimates, its quarterly revenue growth was still up 13.3% year on year. However, its growth did slow down compared to last quarter as the company's revenue increased by just $1.29 million in Q2 compared to $1.66 million in Q1 CY2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.
Looking ahead, analysts covering the company were expecting sales to grow 18% over the next 12 months before the earnings results announcement.
Cash Is KingIf you've followed 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 the bills. Agilysys's free cash flow came in at $229,000 in Q2, turning positive over the last year.
Agilysys has generated $43.33 million in free cash flow over the last 12 months, a solid 17.7% of revenue. This strong FCF margin stems from its asset-lite business model, giving it optionality and plenty of cash to reinvest in its business.
Key Takeaways from Agilysys's Q2 Results It was great to see Agilysys improve its gross margin this quarter. However, its revenue unfortunately missed analysts' expectations. Overall, this quarter could have been better. The stock remained flat at $111.80 immediately following the results.
