Part I. Financial Information [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) Presents Agilysys, Inc.'s unaudited condensed consolidated financial statements and notes for the three months ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (In thousands) | (In thousands) | June 30, 2025 (Unaudited) | March 31, 2025 | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and cash equivalents | $55,564 | $73,041 | | Accounts receivable, net | $35,057 | $31,529 | | Total current assets | $108,527 | $123,527 | | Goodwill | $136,103 | $130,640 | | Total assets | $426,046 | $434,370 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Accounts payable | $14,279 | $12,388 | | Contract liabilities | $65,389 | $70,654 | | Accrued liabilities | $12,284 | $22,324 | | Total current liabilities | $97,554 | $111,024 | | Debt, non-current | $12,000 | $24,000 | | Total shareholders' equity | $283,219 | $265,886 | | Total liabilities and shareholders' equity | $426,046 | $434,370 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (In thousands, except per share data) | (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net revenue: | | | | Products | $9,954 | $9,874 | | Subscription and maintenance | $48,623 | $38,043 | | Professional services | $18,098 | $15,595 | | **Total net revenue** | **$76,675** | **$63,512** | | Total cost of goods sold | $29,381 | $23,644 | | **Gross profit** | **$47,294** | **$39,868** | | Gross profit margin | 61.7% | 62.8% | | Total operating expense | $42,773 | $34,121 | | **Operating income** | **$4,521** | **$5,747** | | Income before taxes | $4,849 | $7,372 | | Income tax benefit | $(41) | $(6,734) | | **Net income** | **$4,890** | **$14,106** | | Net income per share - basic | $0.18 | $0.52 | | Net income per share - diluted | $0.17 | $0.50 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (In thousands) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net income | $4,890 | $14,106 | | Unrealized foreign currency translation adjustments | $7,227 | $(158) | | **Total comprehensive income** | **$12,117** | **$13,948** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (In thousands) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(4,346) | $1,098 | | Net cash used in investing activities | $(633) | $(869) | | Net cash used in financing activities | $(12,924) | $(925) | | Effect of exchange rate changes on cash | $426 | $(84) | | **Net decrease in cash and cash equivalents** | **$(17,477)** | **$(780)** | | Cash and cash equivalents at beginning of period | $73,041 | $144,891 | | **Cash and cash equivalents at end of period** | **$55,564** | **$144,111** | [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Condensed Consolidated Statements of Shareholders' Equity (Three Months Ended June 30, 2025, In thousands, except share data) | (In thousands, except share data) | Common Shares Stated value | In Treasury Stated value | Capital in excess of stated value | Retained earnings | Accumulated other comprehensive income (loss) | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at March 31, 2025 | $10,003 | $(1,600) | $109,785 | $160,980 | $(13,282) | $265,886 | | Share-based compensation | — | — | $5,376 | — | — | $5,376 | | Net income | — | — | — | $4,890 | — | $4,890 | | Unrealized translation adjustments | — | — | — | — | $7,227 | $7,227 | | **Balance at June 30, 2025** | **$10,003** | **$(1,595)** | **$114,996** | **$165,870** | **$(6,055)** | **$283,219** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Nature of Operations and Financial Statement Presentation](index=8&type=section&id=1.%20Nature%20of%20Operations%20and%20Financial%20Statement%20Presentation) - Agilysys is a leader in hospitality software for over 45 years, providing cloud-native SaaS and on-premise solutions including point-of-sale (POS), property management (PMS), inventory and procurement, and payments[21](index=21&type=chunk) - The Company operates as a single reportable segment serving the global hospitality industry[22](index=22&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - There have been no material changes to the company's significant accounting policies from those disclosed in its Annual Report on Form 10-K for the fiscal year ended March 31, 2025[28](index=28&type=chunk) - The company adopted ASU 2023-07 (Segment Reporting) as of April 1, 2024, with retrospective application, which only impacted disclosure requirements[31](index=31&type=chunk) - The company is currently assessing the impact of ASU 2024-03 (Expense Disaggregation) and ASU 2023-09 (Income Tax Disclosures), effective for fiscal 2028 and 2026 respectively[29](index=29&type=chunk)[30](index=30&type=chunk) [3. Revenue Recognition](index=9&type=section&id=3.%20Revenue%20Recognition) - Revenue is disaggregated into products (proprietary software licenses, third-party hardware and operating systems), subscription and maintenance, and professional services[42](index=42&type=chunk) - Products revenue is recognized at a point in time, while subscription, maintenance, and substantially all professional services revenue are recognized over time[42](index=42&type=chunk) - Capitalized sales incentive costs were **$6.5 million** as of June 30, 2025, with **$0.5 million** expensed (amortized) during the three months ended June 30, 2025[47](index=47&type=chunk) [4. Additional Balance Sheet Information](index=13&type=section&id=4.%20Additional%20Balance%20Sheet%20Information) Prepaid Expenses and Other Current Assets (In thousands) | (In thousands) | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Prepaid expenses | $6,911 | $8,059 | | Other | $558 | $1,201 | | **Total** | **$7,469** | **$9,260** | Accrued Liabilities (In thousands) | (In thousands) | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Salaries, wages, employee benefits, and payroll taxes | $8,568 | $17,007 | | Income and indirect taxes payable | $1,984 | $1,512 | | Other | $1,732 | $3,805 | | **Total** | **$12,284** | **$22,324** | [5. Supplemental Disclosures of Cash Flow Information](index=13&type=section&id=5.%20Supplemental%20Disclosures%20of%20Cash%20Flow%20Information) Supplemental Cash Flow Information (In thousands) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash receipts for interest | $355 | $1,424 | | Cash payments for interest | $219 | — | | Cash payments for income tax, net | $512 | $578 | | Cash payments for operating leases | $1,668 | $912 | | Accrued capital expenditures | $48 | $181 | [6. Income Taxes](index=14&type=section&id=6.%20Income%20Taxes) Income Tax Benefit (In thousands) | (Dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Income tax benefit | $(41) | $(6,734) | | Effective tax rate | nm | nm | - Income tax benefit was primarily driven by the impact of discrete excess tax benefits associated with Share-Based Compensation[51](index=51&type=chunk) - The India subsidiary is subject to **50%** of regular India income taxes during its second five years of operations (fiscal 2023 through fiscal 2027) due to operating in a "Special Economic Zone"[52](index=52&type=chunk) [7. Commitments and Contingencies](index=14&type=section&id=7.%20Commitments%20and%20Contingencies) - Management believes that the resolution of any current pending litigation will not have a material adverse effect on the company's financial position or results of operations[56](index=56&type=chunk) - As of June 30, 2025, the company has additional operating leases of approximately **$1.1 million** that have not yet commenced, expected to begin in fiscal years 2026 and 2027[57](index=57&type=chunk) [8. Earnings per Share](index=15&type=section&id=8.%20Earnings%20per%20Share) Earnings per Share Data (In thousands, except per share data) | (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net income | $4,890 | $14,106 | | Weighted average shares outstanding - basic | 27,794 | 27,134 | | Net income per share - basic | $0.18 | $0.52 | | Weighted average shares outstanding - diluted | 28,289 | 28,127 | | Net income per share - diluted | $0.17 | $0.50 | [9. Share-based Compensation](index=15&type=section&id=9.%20Share-based%20Compensation) Share-based Compensation Expense (In thousands) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Product development | $3,074 | $2,636 | | Sales and marketing | $498 | $331 | | General and administrative | $1,457 | $1,462 | | **Total share-based compensation expense** | **$5,029** | **$4,429** | - As of June 30, 2025, total unrecognized share-based compensation expense related to unvested restricted shares was **$4.9 million** (weighted-average vesting period of **1.5 years**) and for non-vested restricted stock units was **$12.7 million** (weighted-average vesting period of **2.2 years**)[70](index=70&type=chunk)[71](index=71&type=chunk) - No Stock-Settled Appreciation Rights (SSARs) were granted during the three months ended June 30, 2025, and 2024[69](index=69&type=chunk) [10. Segment Information](index=18&type=section&id=10.%20Segment%20Information) - The company operates as a single reporting segment, providing software solutions to the global hospitality industry[77](index=77&type=chunk) Segment Net Revenue and Net Income (In thousands) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net revenue: | | | | Products | $9,954 | $9,874 | | Subscription and maintenance | $48,623 | $38,043 | | Professional services | $18,098 | $15,595 | | **Total net revenue** | **$76,675** | **$63,512** | | Net income | $4,890 | $14,106 | Long-Lived Assets by Geographical Area (In thousands) | (In thousands) | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | United States | $17,715 | $18,618 | | India | $13,741 | $14,150 | | Rest of world | $898 | $1,064 | | **Total long-lived assets** | **$32,354** | **$33,832** | [11. Debt](index=20&type=section&id=11.%20Debt) - The company entered into a **$75.0 million** revolving credit facility on August 16, 2024, maturing on August 16, 2027[82](index=82&type=chunk)[83](index=83&type=chunk) - An initial **$50.0 million** was drawn from the Revolving Facility to fund the Book4Time acquisition[82](index=82&type=chunk) - The remaining principal balance of **$12.0 million** outstanding as of June 30, 2025, was repaid during July 2025[82](index=82&type=chunk) [12. Business Combination](index=21&type=section&id=12.%20Business%20Combination) - On August 20, 2024, Agilysys acquired Book4Time Parent, Inc., a hospitality software company, for a net cash consideration of **$145.8 million**, aiming to increase solutions-per-customer globally[88](index=88&type=chunk)[89](index=89&type=chunk) Book4Time Acquisition Purchase Price Allocation (In thousands) | (In thousands) | Total | | :--- | :--- | | **Components of Purchase Price:** | | | Cash | $148,280 | | **Total purchase price** | **$148,280** | | **Allocation of Purchase Price:** | | | Net tangible assets (liabilities) | $(16,697) | | Identifiable intangible assets | $61,000 | | Goodwill | $103,977 | | **Total purchase price allocation** | **$148,280** | - Goodwill recognized in the acquisition amounted to **$104.0 million**, which is not deductible for income tax purposes and includes **$1.5 million** for assembled workforce valuation[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations for the three months ended June 30, 2025, covering key financial trends, acquisition impact, and liquidity [Overview](index=23&type=section&id=Overview) - Global macroeconomic and geopolitical conditions are impacting customer spending, increasing costs, and reducing margins, particularly outside the United States[98](index=98&type=chunk) - Agilysys acquired Book4Time Parent, Inc., a global leader in spa management SaaS software, on August 20, 2024, for **$145.8 million** net cash[99](index=99&type=chunk) - The company's strategic plan focuses on product innovation, international expansion, increasing organizational efficiency, and developing employees to drive revenue growth and profitability[103](index=103&type=chunk)[105](index=105&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Net Revenue and Operating Income Comparison (In thousands) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Increase (decrease) $ | Increase (decrease) % | | :--- | :--- | :--- | :--- | :--- | | Net revenue: | | | | | | Products | $9,954 | $9,874 | $80 | 0.8% | | Subscription and maintenance | $48,623 | $38,043 | $10,580 | 27.8% | | Professional services | $18,098 | $15,595 | $2,503 | 16.1% | | **Total net revenue** | **$76,675** | **$63,512** | **$13,163** | **20.7%** | | Gross profit | $47,294 | $39,868 | $7,426 | 18.6% | | Gross profit margin | 61.7% | 62.8% | | | | Operating income | $4,521 | $5,747 | $(1,226) | (21.3%) | - Subscription and maintenance revenue increased by **27.8%** due to continued growth in subscription-based service revenue, including contributions from Book4Time customers[108](index=108&type=chunk) - Sales and marketing expenses increased by **68.1%** due to hiring, increased compensation rates, sales team additions from the Book4Time acquisition, and timing of marketing events[111](index=111&type=chunk) - Amortization of internal-use software and intangibles increased by **$1.2 million** (**480.5%**) due to the addition of certain intangible assets from the Book4Time acquisition[113](index=113&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Cash Flow Summary (In thousands) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in): | | | | Operating activities | $(4,346) | $1,098 | | Investing activities | $(633) | $(869) | | Financing activities | $(12,924) | $(925) | | Effect of exchange rate changes on cash | $426 | $(84) | | **Increase (decrease) in cash** | **$(17,477)** | **$(780)** | - The net decrease in cash and cash equivalents was primarily due to cash used in operating activities and **$12.0 million** in debt repayments[126](index=126&type=chunk)[127](index=127&type=chunk) - Management believes that cash flow from operating activities, **$55.6 million** cash on hand, and access to capital markets will provide adequate funds to meet short- and long-term liquidity requirements[125](index=125&type=chunk) [Off-Balance Sheet Arrangements](index=29&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company has not entered into any off-balance sheet arrangements that have had or are reasonably likely to have a material effect on its financial condition or results of operations[129](index=129&type=chunk) [Critical Accounting Policies](index=29&type=section&id=Critical%20Accounting%20Policies) - There have been no material changes in the company's significant accounting policies and estimates since March 31, 2025[130](index=130&type=chunk) [Forward-Looking Information](index=29&type=section&id=Forward-Looking%20Information) - Forward-looking statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those described[131](index=131&type=chunk) - The company undertakes no obligation to update any forward-looking statements[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes in the company's market risk exposures since March 31, 2025, as detailed in its Annual Report - There have been no material changes in the company's market risk exposures since March 31, 2025[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=29&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The CEO, CFO, and Corporate Controller and Treasurer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[133](index=133&type=chunk) [Changes in Internal Control over Financial Reporting](index=29&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No changes in internal control over financial reporting occurred during the three months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[134](index=134&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=30&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and have inherent limitations, including the possibility of faulty judgments, simple errors, circumvention, or management override[135](index=135&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings for the period - No legal proceedings to report[137](index=137&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes in the risk factors previously disclosed in the company's Annual Report for the fiscal year ended March 31, 2025 - No material changes in the risk factors included in the Annual Report for the fiscal year ended March 31, 2025[138](index=138&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities and use of proceeds to report[139](index=139&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities for the period - No defaults upon senior securities to report[140](index=140&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[141](index=141&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - No other information to report[142](index=142&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from key officers and XBRL documents - Exhibits include Rule 13a-14(a)/15d-14(a) Certifications of the Chief Executive Officer, Chief Financial Officer, and Corporate Controller and Treasurer, along with XBRL documents[144](index=144&type=chunk) [Signatures](index=33&type=section&id=Signatures) The Quarterly Report was signed on behalf of Agilysys, Inc. by William David Wood III, Chief Financial Officer, on July 24, 2025 - The Quarterly Report was signed by William David Wood III, Chief Financial Officer, on July 24, 2025[148](index=148&type=chunk)

Market Overview - The S&P 500 has reached new all-time highs despite ongoing macroeconomic challenges [1] - Macroeconomic headwinds include risks related to trade deals and declining consumer spending [1] Analyst Background - Gary Alexander has extensive experience in covering technology companies and advising startups [1] - He has been a contributor to Seeking Alpha since 2017 and has been featured in various web publications [1]

Core Insights - Agilysys reported revenue of $76.68 million for the quarter ended June 2025, reflecting a year-over-year increase of 20.7% [1] - The earnings per share (EPS) for the quarter was $0.33, up from $0.30 in the same quarter last year [1] - The reported revenue exceeded the Zacks Consensus Estimate of $74.47 million by 2.96%, while the EPS fell short of the consensus estimate of $0.39 by 15.38% [1] Revenue Breakdown - Product revenue was $9.95 million, slightly below the estimated $10.49 million, representing a year-over-year increase of 0.8% [4] - Subscription and maintenance revenue reached $48.62 million, surpassing the estimated $46.62 million, with a significant year-over-year increase of 27.8% [4] - Professional services revenue amounted to $18.1 million, exceeding the estimated $17.26 million, and showed a year-over-year growth of 16.1% [4] Stock Performance - Agilysys shares have returned 6.2% over the past month, outperforming the Zacks S&P 500 composite's return of 5.4% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Core Viewpoint - Agilysys reported quarterly earnings of $0.33 per share, missing the Zacks Consensus Estimate of $0.39 per share, but showing an increase from $0.30 per share a year ago [1][2] Financial Performance - The earnings surprise for the quarter was -15.38%, while the previous quarter saw a positive surprise of +107.69% with earnings of $0.54 per share against an expectation of $0.26 [2] - Agilysys generated revenues of $76.68 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 2.96% and up from $63.51 million year-over-year [3] Stock Performance - Agilysys shares have declined approximately 12.5% since the beginning of the year, contrasting with the S&P 500's gain of 7.1% [4] - The current Zacks Rank for Agilysys is 3 (Hold), indicating expected performance in line with the market in the near future [7] Future Outlook - The consensus EPS estimate for the upcoming quarter is $0.38 on revenues of $77.12 million, and for the current fiscal year, it is $1.65 on revenues of $309.99 million [8] - The Computer - Integrated Systems industry, to which Agilysys belongs, is currently ranked in the top 21% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [9]

Financial Data and Key Metrics Changes - Q1 fiscal 2026 revenue reached a record $76.7 million, a 20.7% increase from $63.5 million in the prior year [25][16] - Subscription revenue grew by 44% year over year, with organic subscription revenue increasing by 24% [17][27] - Recurring revenue, including subscription and annual maintenance, reached $48.6 million, 28% higher than the prior year, representing 63.4% of total revenue [17][27] - Adjusted EBITDA for Q1 was $12.5 million, slightly higher than $12.1 million in the previous year [30] Business Line Data and Key Metrics Changes - Subscription software sales were up 79% year over year, marking the fourth consecutive record sales quarter for subscription sales [26][17] - Professional services revenue increased by 16% year over year, reaching a record $18.1 million [27][16] - Foodservice Management (FSM) vertical saw a significant turnaround, achieving the best sales quarter in two and a half years [6][9] Market Data and Key Metrics Changes - International sales were the second highest on record, indicating strong momentum in the international market [8][9] - The casino gaming sales vertical had its best Q1 period on record, 15% higher than the previous best [8][9] - The company added 24 new customers in Q1, with an average of six products purchased per customer [11][15] Company Strategy and Development Direction - The company is focused on expanding its integrated ecosystem of hospitality software solutions, which is seen as a competitive advantage [12][44] - There is a strong emphasis on AI integration within product offerings to enhance customer experience and operational efficiency [13][80] - The company plans to maintain a disciplined approach to M&A, focusing on opportunities that complement its product set or expand market share [90][92] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the annual revenue guidance of $308 million to $312 million for fiscal 2026 [21][32] - The company anticipates continued growth in subscription revenue, raising its guidance from 25% to 27% for the fiscal year [19][32] - Management noted that operational challenges from the previous fiscal year have been largely resolved, leading to improved sales visibility [72][26] Other Important Information - The company remains debt-free after paying off its credit revolver [31] - The user conference in Q1 was a significant cost driver, impacting sales and marketing expenses [47][30] Q&A Session Summary Question: Sales capacity and productivity trends - Management indicated that sales capacity has increased by 45% year over year, with a focus on hotel and resort verticals [36][38] Question: International market momentum - Management noted that the product ecosystem is strong, and the focus is on installing new projects to create reference customers [42][46] Question: Cost impact of the user conference - The user conference significantly impacted sales and marketing expenses, accounting for most of the increase in that line item [47][50] Question: Sales organization improvements - Management confirmed that the sales structure is in a good place, with ongoing investments in marketing to enhance presence [56][57] Question: Subscription revenue visibility - Management expressed strong visibility into subscription revenue backlog and ongoing sales momentum [85][86] Question: M&A strategy - Management remains patient and conservative regarding M&A, focusing on opportunities that complement existing products or expand market share [90][92]

Financial Data and Key Metrics Changes - Q1 fiscal 2026 revenue reached a record $76.7 million, a 20.7% increase from $63.5 million in the prior year [15][24] - Subscription revenue grew by 44% year over year, with organic subscription revenue increasing by 24% [16][26] - Recurring revenue, including subscription and annual maintenance, reached $48.6 million, up 28% from the prior year [16][26] - Adjusted net income for Q1 was $9.3 million, compared to $8.3 million in the prior year [29] Business Line Data and Key Metrics Changes - Subscription software sales were up 79% year over year, marking a record quarter [25][26] - Professional services revenue increased by 16% year over year, reaching a record $18.1 million [26] - Food Service Management (FSM) vertical saw a significant turnaround, achieving the best sales quarter in two and a half years [8][9] Market Data and Key Metrics Changes - International sales were the second highest for Q1, indicating strong momentum in the international market [8][9] - Casino gaming sales vertical had its best Q1 period on record, up 15% from the previous best [9] Company Strategy and Development Direction - The company is focused on expanding its integrated ecosystem of hospitality software solutions, which is seen as a competitive advantage [12][44] - There is a strong emphasis on AI integration into products to enhance customer experience and operational efficiency [13][80] - The company plans to maintain a disciplined approach to M&A, focusing on opportunities that complement its product set or expand market share [92][95] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the annual revenue guidance of $308 million to $312 million for fiscal 2026 [20][32] - The company anticipates continued growth in subscription revenue, raising its guidance from 25% to 27% for the fiscal year [18][32] - Management noted that operational challenges from the previous fiscal year are largely behind them, contributing to improved sales visibility [73][88] Other Important Information - The company remains debt-free after paying off its credit revolver [30] - The user conference in Q1 significantly impacted sales and marketing expenses, which are expected to normalize throughout the year [28][47] Q&A Session Summary Question: Sales capacity and productivity trends - Management indicated that sales capacity has increased by 45% year over year, with a focus on hotel resorts and the establishment of an inside sales team [36][38] Question: International market momentum - Management noted that the international business is gaining traction, primarily through larger deals, and emphasized the importance of creating reference customers [42][46] Question: User conference costs impact on profit margins - The user conference was a significant contributor to increased sales and marketing expenses, with costs estimated to be around $3 million [47][49] Question: Subscription revenue visibility and growth potential - Management confirmed strong visibility in subscription revenue backlog and highlighted the potential for growth from faster go-lives and better cross-sales [85][88] Question: M&A strategy - Management remains patient and conservative regarding M&A opportunities, focusing on complementary products or market share gains [92][95]

[Financial Highlights & Business Update](index=1&type=section&id=Financial%20Highlights%20%26%20Business%20Update) Agilysys achieved its 14th consecutive record revenue quarter, driven by strong subscription growth, despite a decrease in GAAP net income Q1 FY2026 Financial Highlights (YoY) | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Total Net Revenue | $76.7M | $63.5M | +20.7% | | Recurring Revenue | $48.6M | $38.0M | +27.9% | | Subscription Revenue | $31.9M (approx) | $22.1M (approx) | +44.3% | | Net Income | $4.9M | $14.1M | -65.2% | | Adjusted EBITDA | $12.5M | $12.1M | +3.3% | | Adjusted Diluted EPS | $0.33 | $0.30 | +10.0% | | Free Cash Flow | $(5.0)M | $0.2M | N/A | - The company achieved its **14th consecutive record revenue quarter**, with top-line growth of approximately **21% YoY**[4](index=4&type=chunk) - Q1 FY2026 was the **second-highest selling quarter** in the company's history, with annual contract value **24% higher** than the same period last year, leading to record levels of recurring and services revenue backlog[5](index=5&type=chunk) [Fiscal 2026 Outlook](index=1&type=section&id=Fiscal%202026%20Outlook) Agilysys raised its FY2026 subscription revenue growth guidance while maintaining total revenue and Adjusted EBITDA margin forecasts - The company raised its full fiscal year 2026 subscription revenue growth guidance to **27%** year-over-year, an increase from the original guidance of **25%**[6](index=6&type=chunk)[7](index=7&type=chunk) - Full year fiscal 2026 total revenue guidance is maintained at **$308 million to $312 million**[7](index=7&type=chunk) - Adjusted EBITDA expectations for the full fiscal year remain at **20% of revenue**[7](index=7&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents the consolidated financial statements, detailing Q1 FY2026 performance, including income, balance sheet, and cash flow changes [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 FY2026 Income Statement (in thousands) | Line Item | Q1 2026 (ended Jun 30, 2025) | Q1 2025 (ended Jun 30, 2024) | | :--- | :--- | :--- | | **Total net revenue** | **$76,675** | **$63,512** | | Gross profit | $47,294 | $39,868 | | *Gross profit margin* | *61.7%* | *62.8%* | | Total operating expense | $42,773 | $34,121 | | Operating income | $4,521 | $5,747 | | **Net income** | **$4,890** | **$14,106** | | **Net income per share - diluted** | **$0.17** | **$0.50** | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $55,564 | $73,041 | | Total current assets | $108,527 | $123,527 | | **Total assets** | **$426,046** | **$434,370** | | Total current liabilities | $97,554 | $111,024 | | Debt, non-current | $12,000 | $24,000 | | **Total shareholders' equity** | **$283,219** | **$265,886** | | **Total liabilities and shareholders' equity** | **$426,046** | **$434,370** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 FY2026 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2026 (ended Jun 30, 2025) | Q1 2025 (ended Jun 30, 2024) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(4,346) | $1,098 | | Net cash used in investing activities | $(633) | $(869) | | Net cash used in financing activities | $(12,924) | $(925) | | **Net decrease in cash and cash equivalents** | **$(17,477)** | **$(780)** | | Cash and cash equivalents at end of period | $55,564 | $144,111 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section reconciles GAAP to non-GAAP financial measures, including Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow [Reconciliation of Net Income to EBITDA and Adjusted EBITDA](index=9&type=section&id=Reconciliation%20of%20Net%20Income%20to%20EBITDA%20and%20Adjusted%20EBITDA) Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q1 2026 (ended Jun 30, 2025) | Q1 2025 (ended Jun 30, 2024) | | :--- | :--- | :--- | | Net income | $4,890 | $14,106 | | EBITDA | $7,186 | $6,717 | | **Adjusted EBITDA** | **$12,487** | **$12,118** | [Reconciliation of Net Income to Adjusted Net Income](index=10&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20Net%20Income) Adjusted Net Income & EPS Reconciliation (in thousands, except per share data) | Line Item | Q1 2026 (ended Jun 30, 2025) | Q1 2025 (ended Jun 30, 2024) | | :--- | :--- | :--- | | Net income | $4,890 | $14,106 | | **Adjusted net income** | **$9,285** | **$8,311** | | Diluted weighted average shares outstanding | 28,289 | 28,127 | | **Adjusted diluted earnings per share** | **$0.33** | **$0.30** | [Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow](index=11&type=section&id=Reconciliation%20of%20Net%20Cash%20Provided%20by%20Operating%20Activities%20to%20Free%20Cash%20Flow) Free Cash Flow Reconciliation (in thousands) | Line Item | Q1 2026 (ended Jun 30, 2025) | Q1 2025 (ended Jun 30, 2024) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(4,346) | $1,098 | | Capital expenditures | $(633) | $(869) | | **Free cash flow** | **$(4,979)** | **$229** | [Supplementary Information](index=3&type=section&id=Supplementary%20Information) This section provides administrative and legal details, including conference call information, forward-looking statements, and a corporate profile - The company hosted a conference call and webcast on July 21, 2025, to discuss the quarterly results[9](index=9&type=chunk) - The press release contains forward-looking statements, including revenue and Adjusted EBITDA guidance, which are subject to risks and uncertainties[11](index=11&type=chunk)[12](index=12&type=chunk) - Agilysys is a global provider of hospitality software solutions, serving a wide range of customers including hotels, resorts, casinos, cruise lines, and stadiums[17](index=17&type=chunk)[19](index=19&type=chunk)

Summary of Agilysys (AGYS) FY Conference Call - June 03, 2025 Company Overview - Agilysys is a leading software provider for the hospitality industry, specializing in POS solutions and property management systems (PMS) [2][5] - The company has a global presence in approximately 118 countries, with major offices in Alpharetta, Atlanta, and Las Vegas [10][12] Core Business and Market Segments - Casino gaming constitutes about 50% of Agilysys' revenue, making it the largest vertical for the company [13] - Other significant verticals include hotels, resorts, cruise ships, and food service management (FSM) [14][18] - Agilysys has established relationships with major clients such as Royal Caribbean and Carnival UK in the cruise sector [15] Product Offerings - The company has developed a modern cloud-native hospitality ecosystem that includes POS, PMS, and inventory procurement systems [7][24] - Agilysys emphasizes customer-centric solutions, allowing for both cloud and on-premise installations [33][35] - The product suite includes loyalty promotions, digital marketing, and guest-facing kiosks, enhancing guest experiences [50][51] Financial Performance - Agilysys reported a revenue of $275.6 million for the fiscal year ending March 2025, with guidance for $308 million to $312 million for the next fiscal year [72][74] - Subscription revenue has grown by 27% annually over the last four years, with a projected growth of 25% for the upcoming year [36][74] - Recurring revenue constitutes approximately 62% of total revenue, with subscription revenue being a significant driver [71][72] Growth Opportunities - The company has identified international markets as a significant growth area, currently representing only 8% of total revenue [25][22] - Agilysys aims to increase its market share in PMS, currently connected to less than 300,000 rooms, with potential to triple this through new contracts like the one with Marriott [63][64] Challenges and Strategic Focus - Agilysys faces challenges in brand recognition and market presence, as it is perceived as an older company [77][78] - The company is focused on product innovation and customer satisfaction, with a strong emphasis on R&D, employing 1,500 out of 2,300 employees in this area [41][43] - The management is committed to maintaining a hospitality-focused strategy, avoiding distractions from other markets [39][40] Technological Advancements - Agilysys is integrating AI into its products to enhance efficiency and improve customer interactions, such as in booking systems and image generation for menus [55][57] - The company has modernized its product offerings, ensuring that all core products are cloud-native and capable of on-premise deployment [34][46] Conclusion - Agilysys is positioned for significant growth within the hospitality technology sector, leveraging its innovative product suite and expanding into international markets while addressing brand recognition challenges [66][70]

Core Insights - Five stocks have been added to the Zacks Rank 1 (Strong Buy) List, indicating strong potential for investment returns Company Summaries - **PVH (PVH)**: Specializes in designing and marketing branded apparel, with a Zacks Consensus Estimate for current year earnings increasing by 8.3% over the last 60 days [1] - **Maximus (MMS)**: Operates global government health and human services programs, with a Zacks Consensus Estimate for current year earnings increasing by 6.7% over the last 60 days [2] - **Allianz (ALIZY)**: Provides property-casualty insurance, life/health insurance, and asset management services, with a Zacks Consensus Estimate for current year earnings increasing by 6.3% over the last 60 days [2] - **Popular (BPOP)**: Offers a comprehensive suite of banking and financial services, with a Zacks Consensus Estimate for current year earnings increasing by 4.8% over the last 60 days [3] - **Agilysys (AGYS)**: A leading provider of IT solutions for corporate and public-sector customers, with a Zacks Consensus Estimate for current year earnings increasing by 4.4% over the last 60 days [4]

Revenue Growth - Total net revenue increased by $38.2 million, or 16.1%, in fiscal 2025 compared to fiscal 2024, reaching $275.6 million[192] - Subscription and maintenance revenue grew by $32.0 million, or 23.2%, driven by continued growth in subscription-based revenue, including service to Book4Time customers[192] - Professional services revenue increased by $13.9 million, or 27.7%, due to higher sales and service activity[192] - Total net revenue for fiscal 2024 was $237.5 million, an increase of $39.4 million or 19.9% compared to fiscal 2023[206] - Subscription and maintenance revenue grew by $19.8 million or 16.7%, driven by a 29.6% increase in subscription-based revenue[207] - Professional services revenue increased by $14.2 million or 39.2%, reflecting higher sales and service activity[207] - Revenue from international operations constituted 10% of total revenue in fiscal 2025, compared to 6% in fiscal 2024 and 7% in fiscal 2023[251] Profitability - Gross profit increased by $27.7 million, or 19.2%, with gross profit margin rising from 60.7% to 62.4%[194] - Operating income rose to $22.6 million, an increase of $6.8 million or 43.4%, with operating income percentage improving from 6.6% to 8.2%[192] - Gross profit rose by $23.4 million or 19.4%, while gross profit margin slightly decreased from 61.0% to 60.7%[208] - Operating expenses increased by $19.6 million or 18.3%, but as a percentage of total revenue, they decreased by 0.7%[209] Expenses - Product development expenses increased by $5.7 million, or 10.0%, due to hiring and increased compensation rates[196] - Sales and marketing expenses rose by $4.7 million, or 16.5%, attributed to hiring and expanded marketing activities[197] - Product development expenses rose by $6.5 million or 12.9% due to increased hiring and compensation rates[210] Cash Flow - Cash flow from operating activities for fiscal 2025 was $55.1 million, up from $48.2 million in fiscal 2024[226][227] - Cash flows used in investing activities for fiscal 2025 were $148.6 million, primarily due to $145.8 million for business combinations and property and equipment purchases[229] - Cash flows used in financing activities for fiscal 2025 were $21.9 million, driven by $49.6 million in debt proceeds and $26.0 million in debt repayments[232] - Cash flows used in financing activities for fiscal 2024 were $8.6 million, primarily due to share repurchases of $6.9 million[233] - Cash flows used in investing activities for fiscal 2024 were $7.6 million, mainly from $8.1 million in property and equipment purchases[230] - Cash flows used in investing activities for fiscal 2023 were $6.9 million, primarily due to $7.3 million in property and equipment purchases[231] Acquisitions - The company acquired Book4Time for $145.8 million, enhancing its position in the spa management SaaS market[183] - The company completed the acquisition of Book4Time for $145.8 million in net cash during the year ended March 31, 2025[224] Tax and Interest - Effective tax rate for fiscal 2025 was 9.4%, influenced by U.S. R&D credits and the release of valuation allowances against foreign deferred tax assets[203] - Interest income decreased by $1.3 million, or 25.6%, to $3.8 million, while total other income, net fell by $1.9 million, or 38.3%, to $3.0 million[201] - Interest income increased to $5.1 million in fiscal 2024, up from $2.2 million in fiscal 2023[216] Other Financial Information - The company had $78.5 million of federal net operating loss carryforwards expiring between fiscal years 2033 to 2039[220] - The cash surrender value of corporate-owned life insurance policies was $1.1 million, recorded under "Other non-current assets" as of the balance sheet date[234] - The present value of future proceeds owed to designated beneficiaries of corporate-owned life insurance policies was $0.1 million, recorded within "Other non-current liabilities"[234] - Share repurchases in fiscal 2025 amounted to $2.7 million to satisfy employee tax withholding on share-based compensation[232] - The company has not entered into any off-balance sheet arrangements that could affect its financial condition[235]