Insights

Why Agilysys Stock Is Falling Hard Today

What happened 

Shares of Agilysys (NASDAQ: AGYS), a hospitality software and services company, were plummeting this morning after the company reported its first-quarter results. Agilysys beat analysts’ consensus top- and bottom-line estimates, but investors may have been concerned that the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) was flat and free cash flow sank year over year. 

The tech stock was down by 10.7% as of 11:55 a.m. ET. 

So what 

Agilysys reported sales of $47.5 million in the quarter — an increase of nearly 23% year over year — which beat Wall Street’s consensus estimate of $45.6 million. That increase was due to a jump in recurring revenue, which reached $27.7 million in the quarter. 

Image source: Getty Images.

Agilysys’ earnings also beat expectations, with non-GAAP (adjusted) earnings per share of $0.21 — which were flat on a year-over-year basis — outpacing analysts’ average estimate of $0.18.  

“We are pleased to report a second consecutive record revenue quarter, despite lingering pandemic related industry challenges in international regions and managed food services,” Agilysys CEO Ramesh Srinivasan said in a press release. 

But investors’ strong negative reaction to the company’s stock today may be driven by the fact that Agilysys’ EBITDA fell from $6.9 million in the year-ago quarter to $6.7 million in the first quarter. They also had their eye on the company’s declining free cash flow.

The company said EBITDA fell “due to expected increased spend in sales, marketing and professional services and certain additional costs” and that free cash flow declined by $7.7 million because of additional payments the company made for inventory as it tries to protect itself against supply chain issues.  

Now what 

Agilysys reiterated its full-year revenue guidance with a range between $190 million and $195 million. Analysts’ consensus revenue estimate for the full year is about $193 million. 

Agilysys’ share price drop today is a good example of how investors are being extra cautious about technology stocks right now, even when companies beat Wall Street’s consensus estimates.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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