Agilysys (NasdaqGS:AGYS) Q3 2026 Earnings call January 26, 2026 04:30 PM ET Company ParticipantsBrian Schwartz - Managing DirectorDave Wood - CFOGeorge Sutton - Managing DirectorJessica Hennessy - VP of Investor Relations and OperationsMatthew Filek - Senior Equity Research AssociateMatthew VanVliet - Managing Director, Equity ResearchMayank Tandon - Managing DirectorRamesh Srinivasan - President and CEOConference Call ParticipantsAllan Verkhovski - Director and Application Software AnalystNehal Chokshi - M ...

Agilysys (NasdaqGS:AGYS) Q3 2026 Earnings call January 26, 2026 04:30 PM ET Company ParticipantsBrian Schwartz - Managing DirectorDave Wood - CFOGeorge Sutton - Managing DirectorJessica Hennessy - VP of Investor Relations and OperationsMatthew Filek - Senior Equity Research AssociateMatthew VanVliet - Managing Director, Equity ResearchMayank Tandon - Managing DirectorRamesh Srinivasan - President and CEOConference Call ParticipantsAllan Verkhovski - Director and Application Software AnalystNehal Chokshi - M ...

Financial Data and Key Metrics Changes - Fiscal 2026 Q3 revenue reached a record $80.4 million, a 15.6% increase from $69.6 million in the prior year quarter, marking the 16th consecutive record revenue quarter [11][18] - Recurring revenue was $52 million, up 17.2% year-over-year, representing 64.7% of total revenue for the quarter [12][20] - Subscription revenue hit a record $34.9 million, a 23.1% increase compared to the prior year quarter, with subscription bookings up 37% year-over-year [12][18] Business Line Data and Key Metrics Changes - The Hotels, Resorts, and Cruise Ships (HRC) sales vertical had its best Q3 sales quarter on record, driven by significant new customer wins [5] - Food Service Management (FSM) sales for the first three quarters of fiscal 2026 surpassed full-year sales from the previous two years, indicating strong growth potential [6] - Casino gaming experienced a sales slowdown in October and November but rebounded in December, marking the best December month in the company's history [6][11] Market Data and Key Metrics Changes - Cumulative international sales for the first three quarters are close to making fiscal 2026 the second-best international sales year, although Q3 international sales were described as lackluster [7] - Subscription SaaS sales for the first three quarters reached 95% of the previous best full-year sales, with a year-over-year increase of 37% [8] Company Strategy and Development Direction - The company is focused on leveraging AI tools to improve implementation efficiencies and reduce customer delays, which is expected to enhance sales and profitability [15][16] - The management emphasized the competitive advantage gained from a modernized cloud-native product ecosystem, which is difficult for competitors to replicate [26][27] - The company is optimistic about future growth opportunities, particularly in the PMS segment, which is entirely software-based [27][32] Management's Comments on Operating Environment and Future Outlook - Management noted that the total addressable market remains large relative to the company's size, with significant growth possibilities ahead, especially in the PMS business [27] - The company expects fiscal 2026 full-year revenue to reach $318 million, with subscription revenue growth guidance maintained at 29% [17][24] - Management expressed confidence in the business's ability to drive top-line growth while improving profitability levels, anticipating exciting growth in the next couple of fiscal years [32] Other Important Information - The company reported a free cash flow of $22.7 million for the quarter, compared to $19.7 million in the prior year quarter, indicating strong financial health [24] - The company has maintained a debt-free status after paying down its credit revolver by $24 million in the first half of the fiscal year [24] Q&A Session Summary Question: Insights on gaming and casino space weakness - Management noted the sales slowdown in October and November was temporary, with a strong recovery in December, and did not speculate on specific causes [34][35] Question: Marriott PMS rollout expectations - The pilot phase for the Marriott PMS project was successful, and implementation waves are expected to increase in size and scope in the coming months [36][38] Question: International performance and sales capacity - Management confirmed no sales capacity issues and highlighted ongoing efforts to secure larger deals internationally, despite some quarter-to-quarter fluctuations [44][46] Question: AI capabilities and competition - AI is being integrated across the platform, enhancing operational efficiency and competitive advantage, although no significant competitive responses have been observed [53][55] Question: Professional services gross margins - Margins were impacted by seasonal factors and lower utilization during the holiday period, with no reliance on third-party labor for implementations [87][88] Question: Product development spend and AI impact - While AI is improving product development speed, the demand for innovation remains high, and operational leverage may materialize in FY27 and beyond [90]