Agilysys (AGYS) Extends Record Run With Upbeat Outlook

Agilysys, Inc. ((AGYS)) has held its Q3 earnings call. Read on for the main highlights of the call.

Agilysys Extends Record Streak With Strong Q3 and Upbeat Outlook

Agilysys’ latest earnings call painted a picture of sustained strength and growing momentum. Management highlighted record revenue, accelerating subscription and recurring streams, healthier profitability, and a stronger balance sheet, all of which supported a raise in full‑year guidance. While acknowledging pockets of short‑term friction—such as a brief casino slowdown, seasonal services margin pressure, and some variability in international and backlog metrics—the tone of the call remained decidedly optimistic, with leadership emphasizing structural tailwinds from cloud, subscription and AI‑driven efficiencies.

Record Quarterly Revenue Marks 16th Consecutive High

Agilysys delivered record Q3 fiscal 2026 revenue of $80.4 million, up 15.6% year over year and the company’s 16th straight quarter of record revenue. This consistency underlines durable demand across its hospitality technology portfolio and signals that growth is broad‑based rather than dependent on a single product or one‑off deal. For investors, a multi‑year run of record quarterly revenue suggests a business that is still in the build‑out phase of a long‑term growth cycle rather than approaching saturation.

Recurring and Subscription Revenue Power the Model

Recurring revenue, the backbone of any modern software business, climbed to a record $52.0 million, up 17.2% year over year and representing 64.7% of total revenue. Subscription revenue, the most strategic component of the recurring base, surged to a record $34.9 million, up 23.1% year over year, marking the 17th consecutive quarter of at least 23% subscription growth. This steady shift toward a higher mix of predictable, subscription‑based revenue enhances visibility, smooths cyclicality, and generally commands higher valuation multiples in the market.

Subscription Momentum Accelerates Year-to-Date

Beyond the quarter, subscription momentum remains robust on a year‑to‑date basis. Fiscal 2026 subscription sales are up 37% versus last year, and cumulative SaaS subscription sales through three quarters have already reached 95% of the company’s previous best full‑year total. Management also noted that subscription run rate has doubled over the last 2.5 years, underscoring how fast the business is converting its installed base and new customers into recurring, cloud‑based revenue streams. This trajectory is central to the company’s long‑term growth narrative.

Revenue Guidance Raised to Top End of Range

Reflecting confidence in demand and execution, Agilysys raised its full‑year fiscal 2026 revenue guidance to $318 million, the top end of its prior $315–$318 million range. The company held firm on its subscription revenue growth guidance of 29% year over year and maintained its long‑stated target of adjusted EBITDA at 20% of revenue. With year‑to‑date revenue of $236.4 million growing 17.4% and Q3 performance ahead of plan, the raised guidance signals management’s conviction that momentum will carry through the final quarter and beyond.

Profitability and Cash Position Show Clear Improvement

Profitability metrics strengthened meaningfully, enhancing the investment case. Operating income rose to $11.7 million from $7.4 million a year ago, while net income climbed to $9.9 million from $3.8 million. GAAP diluted EPS more than doubled to $0.35 from $0.14, and adjusted diluted EPS increased to $0.42 from $0.38. Adjusted EBITDA reached $17.3 million versus $14.7 million, with year‑to‑date adjusted EBITDA running at 19.5% of revenue and on track to surpass 20% for the full year. The balance sheet also strengthened: cash and marketable securities increased to $81.5 million, the company paid down its $24 million revolver, and it now operates debt‑free. Free cash flow improved to $22.7 million from $19.7 million, providing more flexibility for investment and potential capital return over time.

Services and Implementation Efficiency Drive Faster Revenue Conversion

Professional services revenue came in at a record $17.7 million, up 22% year over year, reflecting a strong implementation pipeline and healthy customer onboarding. Perhaps more important than the top‑line growth, services revenue backlog actually declined sequentially, which management framed as a positive sign of improved implementation efficiency and faster conversion of bookings into revenue. As Agilysys’ cloud‑native products become easier to deploy, the company can onboard more customers with less friction, shortening time‑to‑value for customers and accelerating the monetization cycle.

New Customers, Property Additions and Cross-Sell Fuel Expansion

Customer‑level activity remained vibrant. Agilysys added 16 new customers in the quarter, all on subscription, plus 13 new Book4time Spa customers. The company also brought 91 new properties onto its platform from existing parent customers and 120 total new properties in the quarter, with 118 of those properties at least partially on subscription. Cross‑selling was a standout: there were 109 cross‑sell instances where existing properties added 248 new products. This combination of new logo wins, property expansion within existing accounts, and multi‑product adoption underscores the company’s ability to deepen relationships and increase average revenue per customer.

Product Lines Show Broad-Based Strength

The company’s core product areas each delivered solid performance. Property Management System (PMS) subscription revenue grew 30% year over year, while Point‑of‑Sale (POS) and related subscription revenue rose 20%, an acceleration from the mid‑to‑high teens growth seen previously. Add‑on modules, including Book4time, comprised 37% of subscription revenue, indicating that customers are increasingly adopting complementary solutions rather than purchasing a single product. Such broad‑based product strength reduces concentration risk and suggests the platform is becoming more deeply embedded in customers’ operations.

Strategic Wins and Progress With Major Hospitality Players

Agilysys highlighted several strategic wins that could have long‑term implications. The company secured sizable deals with large hospitality brand groups and signed a global POS “hunting license” master agreement with a major hospitality corporation, potentially opening the door to expanded future deployments. Importantly, Agilysys successfully completed a key PMS pilot with Marriott, and rollout waves are now starting, managed directly by the customer. While these Marriott rollouts are not included in current sales or backlog figures, they serve as proof points for the product’s scalability and may contribute to future brand credibility and demand.

AI and Product Modernization Boost Speed and Scale

Management emphasized growing use of AI tools across the organization, from product development and quality assurance to implementation, marketing, sales and support. Combined with cloud‑native, modernized products, these tools are making implementations faster and less resource‑intensive. The company attributed a 40% year‑over‑year increase in subscription ARR installed in Q3 to these modernization efforts and higher implementation velocity. For investors, this indicates Agilysys is not just selling more software; it is also structurally lowering deployment friction and potentially expanding its addressable market by reducing complexity for customers.

Short-Term Casino/Gaming Slowdown Appears Transitory

Not all end markets were perfectly smooth. The casino gaming vertical experienced a relative sales slowdown in October and November, which pulled down activity for those months. However, management said that demand recovered in December and that deals were postponed rather than lost, with a catch‑up expected in coming months. This suggests a temporary timing issue rather than a structural decline in gaming‑related demand.

International Revenue Still Lumpy but Directionally Positive

International performance remained uneven, described as “somewhat lackluster” in Q3 with a choppy, up‑and‑down pattern quarter to quarter. Still, cumulative international sales are pacing close to the second‑best year‑to‑date performance historically. The volatility stems largely from dependence on fewer, larger deals rather than a broad, diversified base of smaller transactions. The message for investors: international remains an opportunity, but it will likely contribute in a lumpy fashion until Agilysys builds a more granular and consistent pipeline abroad.

Margins Face Mild Pressure From Mix and Services Ramp

Gross margin ticked down modestly to 62.5% from 63.0% a year ago, driven by revenue mix and increased professional services hiring. Within services, gross margins landed in the mid‑20% range, slightly below expectations, due in part to seasonal utilization declines over the holidays and the ramp‑up of recently added services staff. Management’s commentary framed these pressures as manageable and largely tied to growth investments rather than structural margin deterioration.

Subscription Backlog and Book4time Mix Create Perceived Deceleration

Subscription backlog currently stands at about 88% of its all‑time high, a level that remains robust but not yet back to peak. Management hinted that some quarters may show apparent deceleration as the business absorbs the Book4time acquisition and laps strong comparables. Specifically, the company expects implied subscription growth in Q4 to be just above 20%, below the higher growth rates posted in recent quarters. However, they stressed that the underlying core business remains stronger than this headline growth rate might imply, suggesting that any slowdown is more about acquisition mix and timing than weakening demand.

Guidance Signals Confidence in Growth and Profitability Trajectory

Agilysys’ guidance reinforced the upbeat tone of the call. Management raised full‑year FY26 revenue guidance to $318.0 million, the top end of the prior range, and reaffirmed expectations for 29% subscription revenue growth (excluding one large roll‑out) and adjusted EBITDA at 20% of revenue. Year‑to‑date results—revenue up 17.4%, record Q3 revenue of $80.4 million, recurring revenue up 17.2%, subscription revenue up 23.1%, and subscription bookings up 37%—support this outlook. The company expects professional services revenue to rebound to roughly $18 million in Q4, with product backlog at roughly 85% of the prior quarter’s exit level and combined backlog hovering at about 90% of record levels. Installed ARR grew 40% year over year in Q3, subscription run‑rate has doubled in 2.5 years, and adjusted EBITDA is already at 19.5% of revenue through three quarters and trending slightly above 20% for the year. With $81.5 million in cash and securities, no debt and solid free cash flow, Agilysys is positioned to fund growth while steadily improving profitability.

In sum, Agilysys’ earnings call underscored a company executing well on a transition to a high‑growth, high‑margin subscription model, with record revenue, rising recurring streams, expanding customer adoption and disciplined cost management. While investors should watch near‑term noise in certain verticals, international markets and backlog metrics, the overall picture remains one of strong fundamentals, increasing operational efficiency and a balance sheet that supports continued investment. The raised guidance and upbeat commentary around AI‑enabled implementation and marquee customer wins suggest that, barring macro surprises, Agilysys is on track for continued growth and margin expansion.