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Why Agilysys Stock Fell Sharply on Wednesday

What happened

Shares of software specialist Agilysys (NASDAQ: AGYS) fell sharply on Wednesday. The stock declined as much as 21.1%. As of 2 p.m. EST, however, shares were down about 18%.

The stock's pullback follows the hospitality-focused software company's fiscal third-quarter earnings report. The tech stock is likely taking a hit because management's guidance for fiscal fourth-quarter revenue was weaker than expected.

Image source: Getty Images.

So what

Agilysys reported fiscal third-quarter revenue of $36.7 million, down 13% year over year but ahead of analysts' average forecast for revenue of about $36.1 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter was $7.6 million, up from $3.2 million in the year-ago period.

The company's guidance for the fiscal fourth quarter, however, was worse than expected. Management said it expected revenue during the period to be in line with its fiscal third-quarter revenue. This is below analysts' average forecast for revenue of $39.7 million during the period.

Now what

"The current hospitality industry business headwinds caused by the pandemic remain challenging," said Agilysys CEO Ramesh Srinivasan in the company's earnings report. "There is still significant uncertainty in the industry about when the expected recovery will become a reality."

However, Srinivasan said he believes the company is setting itself up well for "renewed growth when the hospitality industry shifts to the anticipated reopening and recovery phase, especially with respect to increasing the pace of product innovation and levels of customer service."

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Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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