Agilysys(AGYS) - 2026 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) Presents Agilysys, Inc.'s unaudited condensed consolidated financial statements and notes for the three months ended June 30, 2025 Condensed Consolidated Balance Sheets 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 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 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 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 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 1. Nature of Operations and Financial Statement Presentation - 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] - The Company operates as a single reportable segment serving the global hospitality industry[22] 2. Summary of Significant Accounting Policies - 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] - The company adopted ASU 2023-07 (Segment Reporting) as of April 1, 2024, with retrospective application, which only impacted disclosure requirements[31] - 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][30] 3. Revenue Recognition - Revenue is disaggregated into products (proprietary software licenses, third-party hardware and operating systems), subscription and maintenance, and professional services[42] - Products revenue is recognized at a point in time, while subscription, maintenance, and substantially all professional services revenue are recognized over time[42] - 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] 4. Additional Balance Sheet Information 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 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 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] - 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] 7. Commitments and Contingencies - 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] - 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] 8. Earnings per Share 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 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][71] - No Stock-Settled Appreciation Rights (SSARs) were granted during the three months ended June 30, 2025, and 2024[69] 10. Segment Information - The company operates as a single reporting segment, providing software solutions to the global hospitality industry[77] 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 - The company entered into a $75.0 million revolving credit facility on August 16, 2024, maturing on August 16, 2027[82][83] - An initial $50.0 million was drawn from the Revolving Facility to fund the Book4Time acquisition[82] - The remaining principal balance of $12.0 million outstanding as of June 30, 2025, was repaid during July 2025[82] 12. Business Combination - 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][89] 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 - Global macroeconomic and geopolitical conditions are impacting customer spending, increasing costs, and reducing margins, particularly outside the United States[98] - Agilysys acquired Book4Time Parent, Inc., a global leader in spa management SaaS software, on August 20, 2024, for $145.8 million net cash[99] - The company's strategic plan focuses on product innovation, international expansion, increasing organizational efficiency, and developing employees to drive revenue growth and profitability[103][105] Results of Operations 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] - 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] - 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] Liquidity and Capital Resources 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][127] - 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] Off-Balance Sheet Arrangements - 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] Critical Accounting Policies - There have been no material changes in the company's significant accounting policies and estimates since March 31, 2025[130] Forward-Looking Information - Forward-looking statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those described[131] - The company undertakes no obligation to update any forward-looking statements[131] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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 - 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] Changes in Internal Control over Financial Reporting - 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] Inherent Limitations on Effectiveness of Controls - 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] Part II. Other Information Item 1. Legal Proceedings The company reported no legal proceedings for the period - No legal proceedings to report[137] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities for the period - No defaults upon senior securities to report[140] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[141] Item 5. Other Information The company reported no other information for the period - No other information to report[142] Item 6. Exhibits 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] 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]