Agilysys Posts Record Fiscal Q1 Revenue

Key Points

• Revenue increased 20.7% year over year to $76.7 million, but missed analyst estimates by $11.1 million (GAAP).

• Subscription revenue increased 44.3% year-over-year. Recurring revenue reached a record 63.4% of total revenue.

• Adjusted EPS was $0.33, below the $0.46 consensus, and free cash flow (non-GAAP) turned negative to ($5.0 million).

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Agilysys (NASDAQ:AGYS), known for its hospitality software platforms and cloud solutions, announced its fiscal 2026 first-quarter earnings on July 21, 2025. The company delivered its fourteenth consecutive record revenue quarter as sales rose 20.7% compared to the prior-year period, but results fell significantly short of analyst expectations. The revenue figure was $76.7 million (GAAP), compared with the $87.79 million consensus. Non-GAAP diluted earnings per share (EPS) came in at $0.33, missing the $0.46 estimate, while adjusted EBITDA grew modestly. Despite strong underlying growth, compressed margins and a negative free cash flow (non-GAAP) weighed on results, suggesting mixed performance for the opening months of the new fiscal year.

Company Background and Key Strategic Focus

Agilysys provides industry-focused software for hospitality operators, including hotels, resorts, and casinos. Its main offerings are hospitality management systems that automate operations like guest check-in, reservations, and food service management.

Recently, the company has been moving from traditional product sales to delivering cloud-based, subscription software. The main driver has been recurring revenue from ongoing subscriptions and maintenance. A key success factor has been the rapid adoption of its modern, connected software suite in property management systems (PMS) and point-of-sale (POS) solutions. Keeping its products unified and easy to update has helped expand its customer base and improve sales retention.

Quarter Highlights: Revenue Record, Missed Estimates, and Business Drivers

Total revenue (GAAP) reached a new high, extending the company's streak of record results to fourteen consecutive quarters. However, this period marked a steep miss versus analyst predictions, with actual GAAP revenue falling $11.1 million short of consensus. Despite this, performance in core focus areas remained strong. Recurring revenue—mainly subscriptions and maintenance—accounted for 63.4% of total sales, up from 59.9 % a year earlier. Within recurring revenue, subscription revenue climbed 44.3% year-over-year, and now forms 65.6% of recurring sales, compared with 57.0% in the prior-year quarter (Q4 FY2024).

Professional services revenue (GAAP) rose 16.1% year-over-year. The company's modernized POS and PMS software, both cloud-based hospitality technology solutions, continue to see rapid uptake. Customers also are buying additional add-on modules, which boosts margins and increases dependency on the Agilysys suite. The acquisition of Book4Time, a cloud-based spa and activity management platform, contributed to subscription momentum and brought cross-selling opportunities. Backlog for services and subscriptions sits at record levels, with new and add-on sales up 24% by annual contract value.

Despite posting its highest-ever sales figure, several financial metrics reflected pressure, including a 68% year-over-year increase in sales and marketing and a 19% year-over-year increase in research and development spending. Gross margin (GAAP) slipped 1.1 percentage points year over year. Management underlined that these investments are deliberate to support long-term growth over short-term profitability.

Free cash flow (non-GAAP) dropped into negative territory, compared to positive levels in the fiscal 2025 first quarter, and the cash balance fell to $55.6 million from $73.0 million at the end of the previous quarter. The company ended the quarter with $12.0 million in long-term debt, reduced from $24.0 million three months prior.

On the product side, there was continued momentum in modernized, unified POS and PMS software for hotels and resorts. These product families are software platforms designed to help hospitality clients manage bookings, guest profiles, and payments. High customer adoption and strong feedback for the new cloud solutions helped drive both recurring revenue and backlog. The integration of Book4Time, which manages spa and wellness operations for large resorts, is progressing and beginning to add cross-sell benefits, with sales teams now marketing a unified suite to a broad base of customers.

Financial Outlook and What to Watch Ahead

Management maintained its revenue target for FY2026, with full-year sales expected between $308 million and $312 million. This guidance assumes approximately 12% growth at the midpoint over fiscal year 2025. Subscription revenue is forecast to increase 27%, an upward revision from the original 25 % figure. The company aims for an adjusted EBITDA margin of 20%.

Leadership again confirmed that results and guidance do not include projected revenue from the major new Marriott property management system rollout, which remains in its pilot phase. Management provided no further quantitative guidance around that contract. Investors should monitor progress on this large project, the path for subscription and recurring revenue, and any improvements in free cash flow and cash conversion. Margins and cost discipline are also key factors to watch in coming periods. AGYS does not currently pay a dividend.

Note: Revenue and net income are presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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