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AGILYSYS INC (AGYS)·Q1 2026 Earnings Summary

Executive Summary

  • AGYS delivered its 14th consecutive record quarter: revenue rose 20.7% year over year to $76.7M, driven by 44.3% subscription growth and 16% services growth; gross margin was 61.7% .
  • Versus S&P Global consensus, AGYS posted a revenue beat (actual $76.7M vs $74.4M consensus*) but a miss on Primary EPS (actual $0.33 vs $0.362 consensus*) for Q1 FY26; adjusted EBITDA was $12.5M .
  • Guidance: subscription revenue growth raised to 27% for FY26 (from 25%), while total revenue ($308–$312M) and adjusted EBITDA (20% margin) were maintained .
  • Catalysts: accelerating subscription bookings and backlog at record levels, improving POS momentum and international breadth, plus recent AI-enabled product launches (Intelligent Guest Profiles; Book with S.P.E.N.D.) showcased at HITEC .

What Went Well and What Went Wrong

What Went Well

  • Subscription-led growth: recurring revenue reached a record $48.6M (63.4% of total); subscription was 65.6% of recurring revenue and grew 44.3% YoY, supported by strong implementations and backlog expansion .
  • Sales momentum across verticals and geographies: Q1 was the second-best sales quarter on record; FSM recovered, gaming set a Q1 record, and international was second highest sequentially, with broad multi-product wins .
  • Strategic product/AI differentiation: management highlighted unique advantages from an integrated modern cloud-native ecosystem enabling AI features (personalized upselling, AI-assisted concierge, NLP analytics, conversational ordering) that deepen competitive moats .
    • “There is now ample evidence that our modernized set of cloud-native software solutions is gaining serious traction… creating a serious competitive advantage” .

What Went Wrong

  • EPS/EBITDA below expectations due to timing and one-time costs: sales and marketing expense spiked on the annual user conference in Q1, pressuring profitability; adjusted EBITDA of $12.5M implies lower seasonality vs annual target .
  • Product revenue softness: one-time product sales (perpetual licenses/hardware) were “below expectations,” reflecting lower hardware attach rates and customer preference for cloud, limiting near-term product line contribution .
  • Free cash flow turned negative: FCF was $(5.0)M in Q1, with working capital timing and debt repayment ($12M in Q1 and fully repaid in July) impacting cash; ending cash fell to $55.6M .

Financial Results

Headline Comparisons vs Prior Periods and Wall Street Consensus

MetricQ3 2025Q4 2025Q1 2026
Revenue ($USD Millions)$69.6 $74.3 $76.7
Revenue Consensus Mean ($USD Millions)*$73.15$71.42$74.35
Gross Margin %63.0% 60.7% 61.7%
GAAP Diluted EPS ($USD)$0.14 $0.14 $0.17
Primary EPS Consensus Mean ($USD)*$0.3425$0.2860$0.3617
Adjusted Diluted EPS ($USD)$0.38 $0.54 $0.33
Adjusted EBITDA ($USD Millions)$14.72 $14.79 $12.49

Values with asterisks are from S&P Global.

Segment Revenue Mix

Segment ($USD Millions)Q3 2025Q4 2025Q1 2026
Products$10.68 $10.25 $9.95
Subscription & Maintenance$44.38 $46.20 $48.62
Professional Services$14.51 $17.83 $18.10
Total Net Revenue$69.56 $74.27 $76.68

KPIs and Operating Metrics

KPIQ3 2025Q4 2025Q1 2026
Recurring Revenue ($USD Millions)$44.4 $46.2 $48.6
Recurring Revenue % of Total63.8% 62.2% 63.4%
Subscription as % of Recurring63.8% 64.4% 65.6%
Free Cash Flow ($USD Millions)$19.73 $26.45 $(4.98)
Ending Cash ($USD Millions)$60.76 $73.04 $55.56
Operating Income ($USD Millions)$7.41 $5.31 $4.52
Net Income ($USD Millions)$3.83 $3.93 $4.89

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Subscription Revenue Growth (% YoY)FY 202625% 27% Raised
Total Revenue ($USD Millions)FY 2026$308–$312 $308–$312 Maintained
Adjusted EBITDA (% of revenue)FY 202620% 20% Maintained
PMS project in guidanceFY 2026Excludes material PMS subscription revenue Excludes material PMS subscription revenue Maintained

Earnings Call Themes & Trends

TopicQ3 2025 (Q-2)Q4 2025 (Q-1)Q1 2026 (Current)Trend
AI/Technology initiativesModernization transition; subscription strength despite POS headwinds Accelerating demand for cloud-native ecosystem; record sales Detailed AI roadmap across PMS/POS and guest experiences; internal AI for efficiency Improving differentiation
POS & FSM verticalsManaged food services (FSM) headwinds impacted product revenue Services implementations at record levels; product revenue still challenged FSM rebound; POS bookings up; subscription POS sales +61% sequentially Recovering
International momentumLimited commentary on breadth Record backlog across products/services Second highest quarter; breadth of multi-product deals; focus on “singles/doubles” as well as big wins Improving
Backlog & implementationsRevised FY25 revenue lower; guidance implies execution focus Record backlog; strong services implementations Record backlog in recurring/services; faster implementation pace; subscription backlog +23% vs FY25 exit Strengthening
Services as leading indicatorServices normalizing post large dev project Record services revenue; strong implementations Services revenue record; leading indicator for future subscription revenue Positive
Marriott PMS projectIn progress; excluded from guidance Progressing well; excluded Lab integrations nearing completion; test properties rollout planned; excluded from FY26 subscription guidance On track

Management Commentary

  • CEO on competitive moat: “Our modernized set of cloud-native software solutions is gaining serious traction… creating a serious competitive advantage” .
  • CEO on sales breadth: “Fiscal 2026 April to June was our broadest and widest sales success quarter ever… FSM vertical [is] back in full form… international business picking up steam” .
  • CFO on profitability timing: “Sales and marketing increased… mostly due to the user conference… For the year [it] will normalize… We are still on track for 20% adjusted EBITDA for the full fiscal year” .
  • CEO on AI product vision: personalized upsell via dynamic PMS upgrade engine, AI concierge, NLP analytics, conversational ordering, AI agents; plus internal AI use across development, services, support .
  • CEO on subscription focus: “We are therefore increasing the subscription growth guidance… from 25% to 27%” .

Q&A Highlights

  • Sales capacity and productivity: Sales force up ~45% YoY, with improved territory coverage and creation of an inside sales team, driving door-opening and higher win rates .
  • International execution: Products are in good shape; momentum driven by large multi-product deals with aim to expand “singles/doubles,” build references, and scale sales/marketing .
  • User conference cost: Elevated Q1 sales/marketing spend; conference cost called out as less than $3M, with full-year normalization expected .
  • Book4Time cross-sell: Early wins; integrating to use Book4Time as conduit into broader AGYS portfolio; training required for multi-product selling .
  • EBITDA guardrail: Management reiterated confidence in 20% adjusted EBITDA for FY26 while continuing to invest for growth .

Estimates Context

  • Q1 FY26 Revenue: Actual $76.7M vs consensus* $74.4M → beat (+$2.3M, +3.1%). Adjusted diluted EPS: Actual $0.33 vs Primary EPS consensus* $0.3617 → miss (−$0.0317, −8.8%) .
  • Q4 FY25 Revenue: Actual $74.3M vs consensus* $71.4M → beat; Adjusted diluted EPS $0.54 vs Primary EPS consensus* $0.286 → beat .
  • Q3 FY25 Revenue: Actual $69.6M vs consensus* $73.15M → miss; Adjusted diluted EPS $0.38 vs Primary EPS consensus* $0.3425 → beat .
  • Note: EBITDA definitions vary; company reports adjusted EBITDA ($12.5M in Q1), while consensus* may reflect different methodologies. Management maintained FY26 adjusted EBITDA margin guidance at 20% .

Values with asterisks are from S&P Global.

Key Takeaways for Investors

  • Subscription momentum is the core driver; raised FY26 subscription growth guidance to 27% indicates strong backlog conversion and sales execution—constructive for revenue visibility .
  • Mix shift away from hardware/perpetual licenses to cloud is structural; short-term product revenue softness is expected but supports higher-quality recurring mix over time .
  • Profitability cadence: Q1 margin compression tied to timing (user conference). Full-year adjusted EBITDA at 20% suggests margin normalization in H2; watch quarterly cadence .
  • AI-enabled product differentiation (Intelligent Guest Profiles, Book with S.P.E.N.D.) and integrated ecosystem should enhance upsell/attach, lifting Revenue per Guest and supporting multi-product wins .
  • International and FSM recovery broaden growth vectors beyond core hotel/resort/casino segments; sustained multi-vertical breadth reduces concentration risk .
  • Near-term trading: Expect positive reactions to revenue beat and guidance raise; EPS miss may temper enthusiasm—focus on accelerating subscription bookings/backlog as the key narrative .
  • Medium-term thesis: Execution on implementations and AI roadmap, plus Marriott PMS milestones, can re-rate recurring growth durability and margins; monitor services as leading indicator and subscription backlog growth (+23% vs FY25 exit) .