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AGILYSYS INC (AGYS)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY2026 delivered record revenue of $79.3M (+16.1% YoY), recurring revenue of $51.0M (+23% YoY), GAAP diluted EPS of $0.41, and adjusted diluted EPS of $0.40; free cash flow was $15.0M .
  • Management raised FY2026 revenue guidance to $315–$318M and increased subscription revenue growth guidance to 29% (from 27%), while maintaining adjusted EBITDA at 20% of revenue; guidance excludes material PMS subscription revenue from the large Marriott project .
  • Operational momentum: subscription bookings +41% YoY in Q2, H1 subscription bookings +59% YoY, subscription backlog +26% YoY; services revenue hit a record $18.2M, and product backlog +49% QoQ .
  • Stock reaction catalysts: clear top-line raise, sustained >30% subscription growth, record backlog visibility, and expanding AI-enabled product ecosystem (GetSense.AI) positioning across PMS/POS/F&B modules .

What Went Well and What Went Wrong

What Went Well

  • 15th consecutive record revenue quarter with total net revenue $79.3M (+16.1% YoY); recurring revenue $51.0M (64.3% mix), subscription revenue +33.1% YoY, now 65.5% of recurring revenue .
  • Sales momentum and backlog strength: “second highest selling success quarter,” subscription bookings +41% YoY, H1 +59% YoY; product backlog +49% QoQ; subscription ARR installed +79% YoY in Q2 and +50% YoY in H1 .
  • International and FSM strength: international sales +35% YoY; modernized unified POS is executing strongly in managed food service (FSM), with implementations simpler and performance improving; quote: “FSM sales results have not only been great… we are also seeing good momentum…” .

What Went Wrong

  • Gross margin compressed to 61.7% (from 63.3% YoY), attributed to one-time revenue mix, ramping newly hired services team, and downward trend in perpetual license revenue .
  • Q3 sequential headwind: professional services revenue expected to decline >5% due to fewer billable days around holidays before normalizing in Q4 .
  • Persistent customer-side implementation delays (outside AGYS control) can elongate backlog conversion despite internal capacity improvements; services backlog decreased 10% QoQ but delays remain an execution risk .

Financial Results

MetricQ2 FY2025Q1 FY2026Q2 FY2026
Revenue ($USD Millions)$68.279 $76.675 $79.299
GAAP Diluted EPS ($)$0.05 $0.17 $0.41
Adjusted Diluted EPS ($, non-GAAP)$0.34 $0.33 $0.40
Gross Margin (%)63.3% 61.7% 61.7%
Operating Income ($USD Millions)$4.126 $4.521 $14.147
Adjusted EBITDA ($USD Millions)$12.194 $12.487 $16.364
Free Cash Flow ($USD Millions)$5.939 $(4.979) $14.996

Segment / Revenue Mix

MetricQ2 FY2025Q1 FY2026Q2 FY2026
Products Revenue ($USD Millions)$10.525 $9.954 $10.095
Subscription & Maintenance Revenue ($USD Millions)$41.432 $48.623 $50.955
Professional Services Revenue ($USD Millions)$16.322 $18.098 $18.249
Recurring Revenue ($USD Millions)$41.4 $48.6 $51.0
Recurring Revenue Mix (%)60.7% 63.4% 64.3%
Subscription as % of Recurring60.5% 65.6% 65.5%

KPIs

KPIQ2 FY2026
Subscription ARR installed YoY change+79%
Subscription ARR installed H1 YoY change+50%
Subscription bookings YoY+41%
Subscription backlog vs FY25 exit+30%
Product backlog QoQ change+49%
Services backlog QoQ change-10%
Cash and equivalents ($USD Millions)$59.3
Debt, non-current ($USD Millions)$0 (paid down $24M H1)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Millions)FY2026$308–$312 $315–$318 Raised
Subscription Revenue Growth (%)FY202627% 29% Raised
Adjusted EBITDA (% of revenue)FY202620% 20% Maintained
Professional Services Revenue (seq)Q3 FY2026N/ADown >5% sequentially New
Product Revenue (quarterly level)FY2026 run-rateN/A“Around current levels” (~$10.1M) Maintain (qualitative)
PMS project in guidanceFY2026Excluded Excluded Maintained policy

Earnings Call Themes & Trends

TopicQ4 FY2025 (Q-2)Q1 FY2026 (Q-1)Q2 FY2026 (Current)Trend
AI/Technology InitiativesModernization end-stages; capacity build-out Focus on backlog/implementations; subscription +44% GetSense.AI; dynamic upgrade pricing; multi-amenity revenue mgmt; invoice automation; intelligent guest profiles Expanding AI features and narrative
Product Performance (POS/PMS)Transformation year; record sales; modernization nearing completion Sales strong incl. POS; elevated deploy velocity Unified modern POS executing; FSM vertical strong; PMS attach rates high (avg 14 products when PMS included) Momentum improving across modules
International RegionsNot emphasizedNot emphasizedEMEA at record levels; international sales +35% YoY; UK wins (Rudding Park) Broadening global traction
Backlog & CapacityRecord backlog, services hiring success Record backlog despite strong implementations Subscription backlog +26% YoY; services capacity ramp complete; customer-side delays persist Strong visibility; execution improving
Marriott PMS ProjectProgressing well; excluded from guidance Progress continues; excluded from guidance In beta; excluded from guidance and sales metrics Advancing; conservative guidance policy

Management Commentary

  • CEO: “Q2 Fiscal 2026 was our second highest selling success quarter… sustained high demand… kept cumulative backlogs at record levels… providing us good visibility for the second half of the fiscal year.”
  • CFO: “Subscription bookings were up 41%… year-to-date subscription bookings are up 59%… subscription backlog remains at record levels and 26% higher than the same time last year.”
  • CEO on AI: “We launched our GetSense.AI… dynamic pricing for room upgrades… unique revenue management across spa, golf, dining… invoice automation… intelligent guest profile module… making personalization at scale possible.”
  • CEO on POS/FSM: “All our new implementations are… unified… a lot easier to implement… producing good results… FSM will continue to do well.”
  • CFO on margins: “Gross margin was down slightly due to margins associated with one-time revenue… ramping newly hired professional services… and downward trend in on-premise perpetual license revenue.”

Q&A Highlights

  • Margin trajectory and Marriott rollout: Management expects the Marriott deployment to be margin accretive over multi-quarter periods; near-term investment could create quarter-to-quarter noise, but subscription-heavy contribution supports margin uplift .
  • International momentum: EMEA working at record levels; APAC pipeline growing (focus to improve “singles and doubles”); strength driven by unified ecosystem rather than “halo effect” from Marriott .
  • Delivery capacity/backlog: Services capacity build largely complete; ability to deploy backlog improved, though customer readiness remains the gating factor; services backlog fell 10% QoQ .
  • Competitive positioning: Increasing attention from larger hospitality players; ecosystem breadth and faster innovation cycle widening advantages over thin-code competitors .
  • Sales breadth: No single customer >10% of ACV; broad-based strength across gaming, international, and FSM .

Estimates Context

MetricQ2 FY2026 ConsensusQ2 FY2026 ActualBeat/Miss
Revenue ($USD)$76.865M*$79.299M Beat
Primary EPS ($)$0.383*$0.40*Beat
EBITDA ($USD)$14.943M*$9.521M*Miss (note)

Notes:

  • Company-reported adjusted EBITDA was $16.364M, while S&P Global’s “EBITDA actual” appears lower, likely due to differing definitions (e.g., non-GAAP adjustments). Cross-reference company’s reconciliation for adjusted EBITDA.
  • Next quarter (Q3 FY2026) consensus: Revenue $79.203M*, EPS $0.452*, EBITDA $16.836M*.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Top-line trajectory and mix: Revenue beat consensus with stronger recurring mix and subscription growth; visibility bolstered by record backlog across product and subscription streams .
  • Guidance credibility: FY2026 revenue and subscription growth raised, EBITDA margin maintained at 20%; exclusions of PMS subscription revenue add conservatism and optionality .
  • AI as differentiation: GetSense.AI is now embedded across modules, enabling pricing, personalization, and automation advantages that reinforce the unified ecosystem moat .
  • Execution vector: Services capacity build largely complete; expect minor Q3 seasonality (PS down >5% seq) then normalization in Q4; product revenue expected around current levels .
  • Margin watch: Gross margin pressure from one-time mix and services ramp should ease as subscription mix continues to rise; monitor perpetual license decline and services utilization .
  • International/FSM upside: EMEA strength and FSM POS modernization provide durable growth lanes; broad-based ACV without single-customer concentration reduces risk .
  • Estimate revisions: Expect upward adjustments to FY revenue and subscription growth assumptions following the guide raise; note S&P EBITDA vs company adjusted EBITDA definition differences when modeling .