• Revenue: $69.6 million, a 14.9% increase from the prior year quarter.
• Product Revenue: $10.7 million, 15.8% lower than Q3 last year.
• Services Revenue: $14.5 million, 13.5% higher than the prior year quarter.
• Recurring Revenue: $44.4 million, 26.4% higher than the prior year period.
• Subscription Revenue: $28.3 million, 45.1% higher than the prior year quarter.
• Gross Profit: $43.9 million, with a gross margin of 63%.
• Operating Income: $7.4 million.
• Net Income: $3.8 million, with a gain per diluted share of $0.14.
• Adjusted EBITDA: $14.7 million, 21.2% of revenue.
• Free Cash Flow: $19.7 million for the quarter.
• Cash and Marketable Securities: $60.8 million as of December 31, 2024.

• Warning! GuruFocus has detected 5 Warning Signs with AGYS.

Release Date: January 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Agilysys Inc (NASDAQ:AGYS) reported a record revenue of $69.6 million for fiscal 2025 Q3, marking the 12th consecutive record revenue quarter.
• Recurring revenue reached a record $44.4 million, a 26.4% increase from the prior year, with subscription revenue growing by 45.1%.
• The company added 12 new customers in Q3, with 11 being fully subscription-based, and an average of 6 products purchased per new customer, a record high.
• Sales of property management systems (PMS) and related modules were 70% higher than the same quarter last year, excluding Book4Time.
• Agilysys Inc (NASDAQ:AGYS) continues to see strong sales momentum, with a record level of global demo plus sales pipeline, 20% higher than the previous year.

Negative Points

• Point-of-sale (POS) sales were below expectations, particularly in the managed food services vertical, impacting overall sales and revenue levels.
• Product revenue was $10.7 million, 15.8% lower than Q3 last year, due to challenges in POS sales and a shift towards cloud-based subscription models.
• Sales levels in the APAC and EMEA regions remained disappointing, with international sales still dependent on a few large deals rather than consistent smaller sales.
• The company faced challenges in hiring for implementation services teams, affecting services revenue and margin.
• Agilysys Inc (NASDAQ:AGYS) lowered its annual revenue guidance to $273 million due to onetime revenue challenges, despite strong subscription growth.

Q & A Highlights

Q: Can you provide more details on the development process for the major project and any changes in scope? A: Ramesh Srinivasan, President & CEO: The project is progressing well with no major changes. It's a massive transformational project involving multiple vendors, and we are now moving into the ecosystem system performance testing and deployment planning phases. Test properties and pilot sites are expected to go live in the second half of calendar 2025.

Q: What gives you confidence that POS sales trends will improve in the coming quarters? A: Ramesh Srinivasan, President & CEO: Our confidence is based on the pipeline of sales opportunities, which is 22% higher for POS compared to last year. We are working on significant POS sales opportunities, and Q1 was the low point, with improvements expected in the coming quarters.

Q: Can you discuss the focus on new customer acquisition and any changes in sales strategy? A: Ramesh Srinivasan, President & CEO: We are focusing on ensuring full territory coverage and expanding the sales team, especially in hotels and resorts. There is room for growth with the current sales team, and we are working on creating more referenceable customers with the newer versions of our products.

Q: How should we think about gross margins and professional services growth moving forward? A: Dave Wood, CFO: Gross margins are expected to continue expanding incrementally, likely growing a point or two from the current 62-63%. Professional services growth should align with top-line revenue growth, around 15-20%, once onetime anomalies are accounted for.

Q: Can you clarify the 70% year-over-year increase mentioned in the call? A: Ramesh Srinivasan, President & CEO: The 70% increase refers to sales of PMS and related modules in Q3 compared to last year, excluding Book4Time. This is due to additional signings with new customers who didn't have our PMS products before.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.