AGILYSYS INC

Previous wording

During the three and nine months ended December 31, 2025, global macroeconomic and geopolitical conditions were, and continue to be, shaped by a number of factors, including, but not limited to, changes in global tariff and other trade policies, new and existing domestic and foreign laws and regulations, armed conflicts, foreign currency fluctuations, labor shortages and natural disasters. We believe such factors are negatively influencing customer spending and provider pricing decisions resulting in decreased demand, increased costs, and reduced margins with varying impact across our markets.

Current wording

During the three months ended June 30, 2026, global macroeconomic and geopolitical conditions were, and continue to be, shaped by a number of factors, including, but not limited to, changes in global tariff and other trade policies, new and existing domestic and foreign laws and regulations, armed conflicts, foreign currency fluctuations, labor shortages and natural disasters. We believe such factors are negatively influencing customer spending and provider pricing decisions resulting in decreased demand, increased costs, and reduced margins with varying impact across our markets.

Previous wording

Agilysys has been a leader in hospitality software for more than 45 years, delivering innovative cloud-native SaaS and on-premise solutions for hotels, resorts, cruise lines, casinos, corporate foodservice management, restaurants, universities, stadiums, and healthcare facilities. The Company’s software solutions include point-of-sale (POS), property management (PMS), inventory and procurement, payments, and related applications that manage and enhance the entire guest journey. Agilysys also is known for its world-class customer-centric service. Many of the top hospitality companies around the world use Agilysys solutions to improve guest loyalty, drive revenue growth, and increase operational efficiencies.

Current wording

Agilysys has been a leader in hospitality software for more than 45 years, delivering innovative cloud-native SaaS and on-premise solutions for hotels, multi-amenity resorts, cruise lines, casinos, corporate foodservice management, restaurants, universities, stadiums, and healthcare facilities. The Company’s software solutions include point-of-sale (POS), property management (PMS), inventory and procurement, payments, and related applications that manage and enhance the entire guest journey. Agilysys is also known for its world-class customer-centric service. Many of the top hospitality companies around the world use Agilysys solutions to improve guest loyalty, drive revenue growth, and increase operational efficiencies.

Previous wording

As required by the SEC, we separately present revenue earned as products revenue, subscription and maintenance revenue or professional services revenue in our condensed consolidated statements of operations. In addition to the SEC requirements, we may, at times, also refer to revenue as defined below. The terminology, definitions, and applications of terms we use to describe our revenue may be different from those used by other companies and caution should be used when comparing these financial measures to those of other companies. We use the following terms to describe revenue:

Current wording

As required by the SEC, we separately present revenue earned as subscription and maintenance revenue, professional services revenue or products revenue in our condensed consolidated statements of operations. In addition to the SEC requirements, we may, at times, also refer to revenue as defined below. The terminology, definitions, and applications of terms we use to describe our revenue may be different from those used by other companies and caution should be used when comparing these financial measures to those of other companies. We use the following terms to describe revenue:

Previous wording

Third Fiscal Quarter 2026 Compared to Third Fiscal Quarter 2025

Current wording

First Fiscal Quarter 2026 Compared to First Fiscal Quarter 2025

Previous wording

Net revenue. Total net revenue increased $10.8 million, or 15.6%, during the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025. Products revenue remained flat. The recent trend of declining products revenue due to increasing customer preference for subscription-based versus perpetual software licenses, was offset during the quarter by higher fulfillment of perpetual software licenses compared to the previous three quarters. Subscription and maintenance revenue increased $7.6 million, or 17.2%, compared to the third quarter of fiscal 2025 driven by continued growth in subscription-based service revenue. Total subscription revenue increased 23.1% during the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025. Professional services revenue increased $3.2 million, or 22.0%, due to higher service activity as our new and existing customers continue implementing technology to improve their operations.

Current wording

Net revenue. Total net revenue increased $11.0 million, or 14.3%, during the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026. Subscription and maintenance revenue increased $9.1 million, or 18.8%, compared to the first quarter of fiscal 2026 driven by continued growth in subscription-based service revenue. Total subscription revenue increased 26.1% during the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026. Professional services revenue increased $1.5 million, or 8.3%, due to higher service activity as our new and existing customers continue implementing technology to improve their operations. Products revenue increased $0.4 million, or 3.9%, due to the fulfillment of perpetual software licenses compared to the prior year quarter.

Previous wording

Gross profit and gross profit margin. Our total gross profit increased $6.4 million, or 14.6%, during the third quarter of fiscal 2026 and total gross profit margin decreased from 63.0% to 62.5% compared to the third quarter of fiscal 2025 driven by changes in the composition of revenue by category. Products gross profit decreased $0.4 million, or 7.6%, and products gross profit margin decreased from 48.0% to 44.3% due to the composition of hardware products delivered. Subscription and maintenance gross profit increased $6.3 million, or 17.9%, and gross profit margin increased from 78.5% to 79.0% as subscription revenue increases outpaced associated variable costs as a result of certain cost control measures. Professional services gross profit increased $0.5 million, or 13.6%, and gross profit margin decreased from 26.7% to 24.9% reflecting lower utilization rates due to continued hiring and training of new staff.

Current wording

Gross profit and gross profit margin. Our total gross profit increased $8.4 million, or 17.7%, during the first quarter of fiscal 2027 and total gross profit margin increased from 61.7% to 63.5% compared to the first quarter of fiscal 2026 driven by changes in the composition of revenue by category. Subscription and maintenance gross profit increased $6.4 million, or 16.5%, and gross profit margin decreased from 79.5% to 78.0% as certain variable costs increased ahead of related subscription revenue. Professional services gross profit increased $2.0 million, or 41.5%, and gross profit margin increased from 27.1% to 35.4% reflecting improved utilization rates from efficiency gains on multi-solution implementations. Products gross profit decreased 1.2%, and products gross profit margin decreased from 37.7% to 35.9% due to the composition of hardware and proprietary software products delivered.

Previous wording

Operating expenses, excluding other (gains) charges, net, and legal settlements, net, increased $5.2 million, or 14.3%, during the third quarter of fiscal 2026 compared with the third quarter of fiscal 2025.

Current wording

Operating expenses, excluding other (gains) charges, net, and legal settlements, net, increased $3.4 million, or 8.0%, during the first quarter of fiscal 2027 compared with the first quarter of fiscal 2026.

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Product development. Product development increased $4.0 million, or 26.4%, in the third quarter of fiscal 2026 compared with the third quarter of fiscal 2025 due to hiring and increased salary, incentive and employee benefits rates across our development teams.

Current wording

Product development. Product development increased $2.8 million, or 16.0%, in the first quarter of fiscal 2027 compared with the first quarter of fiscal 2026 due to hiring and increased salary, incentive and employee benefits rates across our development teams.

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Sales and marketing. Sales and marketing increased $0.1 million, or 1.0%, in the third quarter of fiscal 2026 compared with the third quarter of fiscal 2025 due to hiring and increased compensation rates across our sales teams offset by timing of marketing event and trade show activity.

Current wording

Sales and marketing. Sales and marketing increased $0.4 million, or 3.4%, in the first quarter of fiscal 2027 compared with the first quarter of fiscal 2026 due to hiring and increased compensation rates across our sales teams offset by timing of marketing event and trade show activity.

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General and administrative. General and administrative increased $1.3 million, or 13.6%, in the third quarter of fiscal 2026 compared with the third quarter of fiscal 2025 due to increased compensation rates across our administrative teams.

Current wording

General and administrative. General and administrative increased $0.4 million, or 3.3%, in the first quarter of fiscal 2027 compared with the first quarter of fiscal 2026 due to increased compensation rates across our administrative teams.

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Depreciation of fixed assets. Depreciation of fixed assets remained consistent with the third quarter of fiscal 2025.

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Depreciation of fixed assets. Depreciation of fixed assets remained consistent with the first quarter of fiscal 2026.

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Amortization of internal-use software and intangibles. Amortization of internal-use software and intangibles decreased $0.2 million in the third quarter of fiscal 2026 compared with the third quarter of fiscal 2025 as a result of changes to the purchase price allocation during the measurement period impacting certain intangible assets resulting from the Book4Time acquisition.

Current wording

Amortization of internal-use software and intangibles. Amortization of internal-use software and intangibles remained consistent with the first quarter of fiscal 2026.

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Other income, net. Other income, net, mainly consists of movement of foreign currencies against the U.S. dollar.

Current wording

Other income (expense), net. Other income (expense), net, mainly consists of movement of foreign currencies against the U.S. dollar.

Previous wording

For the three months ended December 31, 2025 and 2024, income tax provision and the effective tax rate were primarily driven by the tax effects of share-based compensation, GILTI and the mix of earnings in the U.S. and India.

Current wording

For the three months ended June 30, 2026, income tax provision and the effective tax rate were primarily driven by the tax effects of share-based compensation, Net Controlled Foreign Corporation Tested Income (NCTI) and the mix of earnings in the U.S. and India.

Previous wording

For the nine months ended December 31, 2024, income tax provision and the effective tax rate were primarily driven by the impact of discrete excess tax benefits associated with Share-Based Compensation.

Current wording

For the three months ended June 30, 2025, income tax provision and the effective tax rate were primarily driven by the impact of discrete excess tax benefits associated with share-based compensation.

Previous wording

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is a stimulus bill which was in response to economic consequences of the COVID-19 pandemic. The CARES Act provided an employee retention credit, which is a refundable tax credit against certain employment taxes. During the three months ended December 31, 2025 and 2024, we recorded $3.0 million and $0.5 million, respectively, of employee retention credits under the CARES Act including associated interest received or expected to be received in cash as other (gains) charges, net, in the condensed consolidated statements of operations. As of December 31, 2025, we recorded $3.0 million of employee retention credits receivable as other current assets on the condensed consolidated balance sheet.

Current wording

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is a stimulus bill which was in response to economic consequences of the COVID-19 pandemic. The CARES Act provided an employee retention credit, which is a refundable tax credit against certain employment taxes. During the three months ended June 30, 2025, we recorded $0.2 million of employee retention credits under the CARES Act including associated interest received or expected to be received in cash as other (gains) charges, net, in the condensed consolidated statements of operations. As of June 30, 2026, we have recorded $3.0 million of employee retention credits receivable as other current assets on the condensed consolidated balance sheet.

Previous wording

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in the Company’s fiscal 2026, including the restoration of immediate expensing of domestic research and development expenditures, reinstatement of accelerated fixed asset depreciation and modifications to the international tax framework. We applied the relevant changes to the Company’s income tax provision for the period ended December 31, 2025, which did not materially impact the Company’s consolidated tax position. We expect future cash tax savings resulting from the full expensing of U.S. research and development expenses under the OBBBA.

Current wording

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in the Company’s fiscal 2026, including the restoration of immediate expensing of domestic research and development expenditures, reinstatement of accelerated fixed asset depreciation and modifications to the international tax framework. We applied the relevant changes to the Company’s income tax provision for the period ended June 30, 2026, which did not materially impact the Company’s consolidated tax position. We expect future cash tax savings resulting from the full expensing of U.S. research and development expenses under the OBBBA. OBBBA also amended and extended to calendar year 2030 the statute of limitations for employee retention credits under the CARES Act for certain employment taxes incurred during the three months ended September 30, 2021.

Previous wording

On August 20, 2024, we acquired Book4Time Parent, Inc. (“Book4Time”), the global leader in spa management SaaS software, as further described in Note 12, Business Combination, to our condensed consolidated financial statements included under Part I, Item 1 of this quarterly report. The cash consideration for the acquisition totaled $145.8 million of net cash, partially funded by a credit agreement (the “Credit Agreement”) we entered into on August 16, 2024 (the “Credit Agreement Closing Date”), with the lenders party thereto and Bank of America, N.A., as lender and administrative agent, as further described in Note 11, Debt, to our condensed consolidated financial statements included under Part I, Item 1 of this quarterly report.

Current wording

Our cash requirements consist primarily of working capital needs, capital expenditures, and payments of contractual obligations. Our contractual obligations consist primarily of operating leases for office space and a credit agreement (the “Credit Agreement”) we entered into on August 16, 2024, with the lenders party thereto and Bank of America, N.A., as lender and administrative agent, as further described in Note 11, Debt, to our condensed consolidated financial statements included under Part I, Item 1 of this quarterly report.

Previous wording

The Credit Agreement provides for a revolving credit facility in the initial maximum aggregate principal amount of $75 million (the “Revolving Facility”). The Revolving Facility includes the ability for the Company to request an increase to the commitments under the Revolving Facility by an additional aggregate principal amount of up to $25 million. On the Credit Agreement Closing Date, we drew $50 million on the Revolving Facility, the proceeds of which we used to fund the Business Combination described below. We have repaid the entire principal balance as of July 2025.

Current wording

The Credit Agreement provides for a revolving credit facility in the initial maximum aggregate principal amount of $75 million (the “Revolving Facility”). The Revolving Facility includes the ability for the Company to request an increase to the commitments under the Revolving Facility by an additional aggregate principal amount of up to $25 million. There is no principal balance outstanding as of June 30, 2026.

Previous wording

We have expanded our business in part by investing in strategic growth through business acquisitions. We have used cash as consideration in our business acquisitions, including $145.8 million of net cash, partially funded by our Revolving Facility, during the nine months ended December 31, 2024, to complete the acquisition of Book4Time. We completed no business combinations during the nine months ended December 31, 2025.

Current wording

We have expanded our business in part by investing in strategic growth through business acquisitions. We have used cash as consideration in our business acquisitions partially funded by our Revolving Facility. We completed no business combinations during the three months ended June 30, 2026 and 2025, respectively.

Previous wording

At December 31, 2025, 100% of our cash and cash equivalents, of which 92% were located in the United States, were deposited in bank accounts or invested in highly liquid investments including commercial paper and treasury bills with original maturity from the date of acquisition of three months or less and money market funds. We determine the fair value of commercial paper using significant other observable inputs based on pricing from independent sources that use quoted prices in active markets for identical assets or other observable inputs including benchmark yields and interest rates. We believe credit risk is limited with respect to our cash and cash equivalents.

Current wording

At June 30, 2026, 100% of our cash and cash equivalents, of which 90% were located in the United States, were deposited in bank accounts or invested in highly liquid investments including commercial paper and treasury bills with original maturity from the date of acquisition of three months or less and money market funds. We determine the fair value of commercial paper using significant other observable inputs based on pricing from independent sources that use quoted prices in active markets for identical assets or other observable inputs including benchmark yields and interest rates. We believe credit risk is limited with respect to our cash and cash equivalents.

Previous wording

We believe that cash flow from operating activities, cash on hand of $81.5 million as of December 31, 2025, and access to capital markets will provide adequate funds to meet our short- and long-term liquidity requirements.

Current wording

We believe that cash flow from operating activities, cash on hand of $123.7 million as of June 30, 2026, and access to capital markets will provide adequate funds to meet our short- and long-term liquidity requirements.

Previous wording

Cash flow provided by operating activities. Due to cash-based earnings of $55.9 million and a decrease of $21.7 million due to changes in net operating assets and liabilities. Cash-based earnings is net income of $26.5 million and $29.4 million of non-cash adjustments.

Current wording

Cash flow provided by (used in) operating activities. Due to cash-based earnings of $18.7 million and a decrease of $10.9 million due to changes in net operating assets and liabilities. Cash-based earnings is net income of $9.0 million and $9.7 million of non-cash adjustments.

Previous wording

Cash flow (used in) provided by financing activities. Consists of $24.0 million in debt repayments during the nine months ended December 31, 2025, proceeds from Employee Stock Purchase Plan purchases, and the repurchase of shares to satisfy employee tax withholding on share-based compensation.

Current wording

Cash flow used in financing activities. Consists of the repurchase of shares to satisfy employee tax withholding on share-based compensation and, for the three months ended June 30, 2025, $12.0 million in debt repayments.

Previous wording

This Quarterly Report and other publicly available documents, including the documents incorporated herein and therein by reference, contain, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," “outlook,” “forecast,” “preliminary,” "estimate," "expect," "strategy," "future," "likely," "may," “would,” “could,” "should," "will" and similar references to future periods. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions, or beliefs and are subject to a number of factors, assumptions, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in Item 1A in Part II of this Quarterly Report and Item IA of our Annual Report for the fiscal year ended March 31, 2025. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events, or otherwise.

Current wording

This Quarterly Report and other publicly available documents, including the documents incorporated herein and therein by reference, contain, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," “outlook,” “forecast,” “preliminary,” "estimate," "expect," "strategy," "future," "likely," "may," “would,” “could,” "should," "will" and similar references to future periods. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions, or beliefs and are subject to a number of factors, assumptions, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in Item 1A in Part II of this Quarterly Report and Item 1A of our Annual Report for the fiscal year ended March 31, 2026. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events, or otherwise.