Earnings Call Insights: Agilysys, Inc. (AGYS) Q3 2026
Management View
- CEO Ramesh Srinivasan reported “Q3 fiscal 2026 was the second best Q3 October to December period sales quarter” and described it as “the best Q3 sales quarter on record for the hotels, resorts and cruise ships, HRC sales vertical, highlighted by several significant new customer wins.” Srinivasan highlighted wins with Bolt Farm Treehouse in Tennessee and Sands Resort in South Carolina, both selecting multiple Agilysys solutions.
- Srinivasan noted that “casino gaming, our strongest sales vertical for several years now witnessed a relative sales slowdown during the months of October and November… but recovered well during the month of December.” He also stated, “cumulative subscription SaaS sales during the first three quarters of fiscal 2026 is already at 95% of previous best full year sales which happened to be last fiscal year. Fiscal 2026 year-to-date subscription sales is up 37% year-over-year.”
- Srinivasan provided an update on the Marriott PMS project: “PMS pilot property implementations have been completed successfully across the U.S. and Canada. We are now in the exciting process of getting going on the implementation waves, which are expected to keep increasing in size and scope during coming months.”
- CFO Dave Wood stated, “Third quarter fiscal 2026 revenue was a quarterly record of $80.4 million, a 15.6% increase from total net revenue of $69.6 million in the comparable prior year period. Onetime revenue consisting of product and professional services was up 12.7% over the prior year quarter and in line with our expected 5% to 10% increase in onetime revenue for the fiscal year. Recurring revenue was up 17.2% on the back of strong subscription revenue growth.”
Outlook
- Guidance for fiscal 2026 full year revenue was raised to $318 million, at the top end of the previous range, with Srinivasan stating, “we now expect fiscal 2026 full year revenue to be 3-1-8, $318 million at the top end of the recent guidance range.”
- Subscription revenue growth is expected to be 29% for the year, unchanged from the prior quarter’s guidance. Srinivasan reiterated, “we are currently expecting the year-over-year growth to be 29% as stated previously, not including any significant subscription revenue contribution from the Marriott PMS project.”
- Adjusted EBITDA is projected to remain at 20% of revenue for fiscal year 2026.
Financial Results
- Fiscal 2026 Q3 revenue reached $80.4 million, marking the 16th consecutive record revenue quarter and a 15.6% increase over the prior year quarter.
- Product revenue was $10.7 million, described as “about the same as Q3 last fiscal year, slightly ahead of our expectations.”
- Recurring revenue for Q3 was $52 million, a 17.2% increase year-over-year and representing 64.7% of total revenue. Subscription revenue reached $34.9 million, up 23.1% year-over-year.
- Gross profit for Q3 was $50.2 million, with a gross profit margin of 62.5%. Operating income was $11.7 million, net income was $9.9 million, and diluted EPS was $0.35. Adjusted net income was $12.2 million, with adjusted diluted EPS of $0.42.
- Cash and marketable securities stood at $81.5 million as of December 31, 2025. The company is now debt-free.
- Free cash flow in the quarter was $22.7 million.
Q&A
- Mayank Tandon, Needham: Asked about casino gaming sales weakness in October and November and potential links to a government shutdown. CEO Srinivasan responded, “I wouldn’t speculate… there are various different reasons… but we are not going to speculate. We can’t put our finger on it. So I’m just going to assume this was just a temporary slowdown.”
- Tandon also inquired about the Marriott PMS mass rollout expectations and margin impacts. Srinivasan said, “we are a little shy about sharing too many details because all that should come from the customer, not from us… Most of the costs and other elements are well provided for… But it is fair to believe that if this year is going to be 20% adjusted EBITDA by revenue, next year is going to be better.”
- Matthew VanVliet, Cantor Fitzgerald: Queried international sales performance and sales capacity. Srinivasan responded, “We have no sales capacity issues in any of our verticals… there is no sales capacity issue… I wouldn’t assign any particular reason to it, like holidays or anything.”
- Allan M. Verkhovski, BTIG: Asked about AI capabilities and competition. Srinivasan said, “AI is permeating all through the business… we are not seeing anything from the competition that is related to AI, nothing significant at least.”
- Brian Schwartz, Oppenheimer: Asked about the POS business. Srinivasan explained, “our POS business… went through a tough phase when we were going through the modernization process… Now the modernized solution has been in the field for now pretty close to two years… it gives us a massive technology advantage over competing POS systems.”
- George Sutton, Craig-Hallum: Asked about improvements in implementation efficiency. Srinivasan stated, “implementation efficiency is getting better is helping us with converting bookings to revenue faster… our services costs decrease, and we become even more competitive.”
Sentiment Analysis
- Analysts focused on areas of temporary weakness, particularly in gaming, while also probing for details on international performance, margin impacts from large projects, and the competitive landscape in AI and POS. The tone was neutral to slightly positive, with some skepticism regarding short-term sales fluctuations.
- Management maintained a confident and steady tone, providing detailed responses and emphasizing ongoing business momentum, innovation, and backlog strength. Srinivasan used phrases such as “we remain confident in the current state of our business and our ability to continue driving top line growth while simultaneously improving profitability levels.”
- Compared to the previous quarter, analyst tone was slightly more probing regarding short-term volatility but remained constructive. Management’s tone was similarly confident, with slight increases in specificity regarding implementation and pipeline progress.
Quarter-over-Quarter Comparison
- Revenue guidance increased from the previous range ($315M–$318M) to the top end ($318M), and subscription revenue growth guidance remained at 29%, the same as last quarter’s raised level.
- Implementation efficiency and the use of AI were highlighted more prominently this quarter, with management emphasizing improvements in converting bookings to revenue and reducing service costs.
- Analysts continued to focus on sales momentum, implementation capacity, and the effects of large projects like Marriott PMS. There was increased attention to short-term sales fluctuations in gaming and international segments.
- Key metrics such as recurring revenue, subscription growth, and gross margin remained strong, with incremental improvements in cash flow and balance sheet health.
- Management’s confidence and forward-looking statements remained strong, while analysts’ inquiries shifted toward near-term risks and competitive differentiation.
Risks and Concerns
- Temporary slowdown in casino gaming sales during October and November was discussed, with management unable to pinpoint a specific cause but considering it a temporary issue.
- International sales were described as “somewhat lackluster” for the quarter, with management attributing this to the uneven nature of large deal flow rather than structural problems.
- Potential seasonality and customer-related delays in implementations were noted, though management cited improvements in efficiency.
- Analysts raised questions about possible margin impacts from major rollouts, but management indicated that most costs are accounted for and expects continued margin expansion.
- No new or heightened competitive threats were identified, particularly regarding AI capabilities.
Final Takeaway
Management emphasized that Agilysys continues to deliver record revenue and recurring revenue growth, supported by robust sales momentum, expanding customer wins, and operational efficiencies. The company reiterated its full-year revenue guidance at $318 million and a 29% subscription revenue growth target, with strong cash flows, a debt-free balance sheet, and ongoing innovation in AI and product modernization. Management remains confident in sustaining both top-line and profitability gains, positioning Agilysys for continued growth into fiscal 2027.