How Agilysys is Poised After a Series of Acquisitions and Dispositions

Insiders have bought tens of thousands of shares of Agilysys AGYS this year, deeming further research worthy.

Agilysys’s core business is developing software to streamline procedures and boost guest experiences in the hospitality and retail industries. The company also generates significant revenue from maintenance agreements and professional services.

Customers and Competition

The company’s customer base includes casinos, hotels, stadiums, and just about any segment in the hospitality and retail industries. Although the company has offices in the UK, Singapore, and Hong Kong, the vast majority of sales (more than 90 percent) are domestic. This suggests a huge growth opportunity, especially as asian markets develop.

The business collaboration and management software space is very competitive, with new firms consistently entering the market. There is also competition from solutions developed in house. Because its solutions are developed for specific industries, Agilysys has an advantage over many competitors.

Financials

As Agilysys focuses its business on software, earnings have been negative. However, for fiscal 2013 (ended March 31) the company reported just a 1.1 million dollar loss, compared to a 41.2 million dollar loss in 2012 and 21.6 million dollar loss in 2011. This huge transition can be credited to a few figures.

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Revenue grew 17.2 percent year over year to 123.8 million; however, profit margin remained the same. In terms of reducing operating costs, the company made huge reductions to asset depreciation, amortization and impairments (11.8 million). Restructuring charges also fell by 14.4 million. Much of these changes can be credited with a series of recent dispositions and acquisitions.

For a company that has been unprofitable for several years, Agilysys has a very strong balance sheet. For the most recent quarter, ended September 30th, current assets were almost 125 million, with over 100 million in cash. Total assets are 184 million while, total liabilities are less than fifty million. Such a high amount of cash and D/E ratio takes away the fear of share delusion from a secondary offering.

Insiders and Institutions

Institutions and mutual funds, which own roughly 70 percent of the float, have not made any major changes in their positions this quarter. Institutional ownership is up 0.52 percent, while mutual fund ownership is down 3.36 percent.

What investors should really be paying attention to is the recent insider action. The Director, CEO, CTO, Controller, and Secretary all purchased shares a couple months ago at prices very close to what the company is trading at today. One should note that there were buys, not non open market acquisitions. While insiders can argue they are selling shares for a number of reasons, buying shares shows conviction that the price is set to rise.

Up almost 37 percent this year, shares closed at $11.45 Wednesday.