Private Securities Litigation Reform Act of 1995, including statements regarding our financial guidance. As has become customary in these updates, let me cover the details pertaining to sales and selling success first before switching to revenue, profitability, guidance increases, and other business updates. one five were up 15% despite last year being a big record sales year. They selected as many as 21 Agilysys software solutions, including POS, PMS, service optimization, booking engine, sales and catering, golf, and spa.

Fiscal 2026 Q2 revenue was a record $79.3 million, the 15th consecutive record revenue quarter, 16.1% higher than the comparable prior year period. Overall, revenue during the first half of fiscal 2026, Q1 plus Q2, was $156 million, 18.4% higher than revenue during the first half of last fiscal year. Fiscal 2026 Q2 recurring revenue grew 23% year-over-year and 4.8% sequentially quarter-over-quarter to a record $51 million. This recurring revenue year-over-year increase was driven mainly by subscription revenue increase of 33.1%.

This is now the seventh consecutive quarter of overall subscription growth of greater than 30%. Subscription revenue now constitutes 65.5% of total recurring revenue compared to 60.5% Q2 last year. Subscription revenue from POS and related add-on modules grew by 18% year-over-year, and organic subscription revenue from PMS and related add-on modules grew by 55%. Fiscal 2026 Q2 was the best quarter on record with respect to the sum of annual recurring revenue, ARR, of all subscription projects implemented during the quarter.

What went well
  • Record Q2 revenue of $79.3M, up 16.1% YoY and the 15th consecutive record revenue quarter; best-ever July-September sales quarter and best first-half sales start in company history
  • Recurring revenue hit a record $51M (+23% YoY), driven by subscription revenue up 33.1% YoY — the 7th straight quarter of subscription growth above 30%
  • Raised full-year guidance again: subscription revenue growth to 29% (from 27%) and total revenue to $315-318M (from $308-312M)
  • Became debt-free after paying down the $24M revolver in H1; free cash flow of $15M vs $5.9M a year ago
  • 18 new customers added, all subscription-based, at a record average of 7 products per deal; operating income jumped to $14.1M from $4.1M
What went wrong
  • Gross margin declined to 61.7% from 63.3% YoY on one-time revenue mix, ramping newly hired services staff, and declining on-premise perpetual license revenue
  • Cash and marketable securities fell to $59.3M from $73M at fiscal year-end on working-capital timing and the revolver paydown
  • Ongoing customer-driven implementation delays that management can only partly mitigate
  • Professional services revenue expected to drop more than 5% sequentially in Q3 due to fewer billable days over the holidays
  • Continued downward trend in on-premise perpetual license revenue

Guidance Changes

MetricPeriodCurrent guidance
Subscription revenue growthFY202629%
Total revenueFY2026$315M-$318M
Adjusted EBITDA (% of revenue)FY202620%
Professional services revenue (sequential)Q3 FY2026down more than 5% sequentially

Performance Breakdown

MetricYoYNote
Total revenue +16.1% Record $79.3M vs $68.3M, driven by recurring revenue and strong project implementations
Recurring revenue +23% Record $51M, led by subscription growth; now 64.3% of total net revenue vs 60.7% prior year
Subscription revenue +33.1% 7th consecutive quarter above 30%; subscription now 65.5% of recurring revenue vs 60.5% a year ago
Professional services revenue +11.8% Record $18.2M, increasingly driven by project implementations
Annual maintenance revenue +7.5% Record despite customer preference for cloud SaaS
Adjusted EBITDA +34% $16.4M vs $12.2M in the year-ago quarter
Diluted EPS — $0.41 vs $0.05 prior year; adjusted diluted EPS $0.40 vs $0.34
Free cash flow — $15M vs $5.9M in the prior year quarter

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
AI tools—Boosting efficiency across services (automating complex product configuration), product development, and implementation speed; building sustainable competitive advantages—
Product ecosystem modernization6-7 years re-engineering products into unified, cloud-native modernized solutionsModernization complete and in the field 1-3 years; products improving rapidly and easier to implement, widening the gap versus competitors—
Marriott PMS project—Excluded from all sales numbers and guidance; expected to be margin accretive over a couple of quarters—
Services capacityBulk capacity build completed around April-May of the calendar yearEnough capacity now to deploy what is being sold; teams will expand steadily but no more bulk hiring needed—
Product ecosystem attach rates—New customers average 7 products per deal (record); PMS deals average 14 products; popular add-ons include golf, spa, sales & catering, booking engine, and loyalty promotions—

Q&A Summary

What is driving the record sales momentum — market adoption of cloud or Agilysys becoming better known through product innovation? (Needham)
Mainly the improving cloud-native product ecosystem after 6-7 years of re-engineering, plus little competing industry innovation widening Agilysys's advantage, aided by senior sales hires like Joe Youssef opening major doors.
As the Marriott rollout goes live, will margins step back or be accretive? (Needham)
Largely margin accretive over a couple of quarters; there could be a quarter of investment beforehand, but most people are already on staff and future contribution is higher-margin subscription revenue.
Can you detail international strength across EMEA vs APAC, and any Marriott halo effect? (Cantor)
It is more product-driven than any halo effect; EMEA is at record levels especially the UK, APAC is pursuing more big opportunities but wants more singles and doubles; management is very bullish on international as a major growth engine.
Where does services delivery capacity stand — are more headcount rounds needed? (Cantor)
The bulk services capacity build was completed around April-May; teams will expand steadily as the company grows but no more bulk hiring is required; remaining delays are largely customer-driven.
Where are you on the efficiency curve of the sales and service investments? (Oppenheimer)
Seeing efficiency gains across the organization from AI and other factors — services staff more productive, products easier to install, AI automating configurations; sales productivity still has runway; expects much bigger gains next year.
Did the business experience less summer seasonality this Q2 than last year? (Oppenheimer)
Better visibility this year from more sales capacity, record backlog measured in months not weeks, and professional-services capacity to deploy that backlog.
Are you attracting larger players who previously chose thin code-based vendors? (Craig-Hallum)
Yes — getting attention from larger players than a year or two ago, credited to the widening product ecosystem gap and senior sales staff opening doors; more conversations than ever.
Did any single customer represent more than 10% of the quarter's ACV? (Northland)
No customer was over 10%; the quarter was broad-based, led by gaming, international, and managed food service.
Can you reiterate the midterm organic subscription revenue growth outlook? (Northland)
A little over 25% for the quarter and trending to about 25% organic for the year.
Did the guidance raise reflect any change in Marriott assumptions? (William Blair)
No — the Marriott PMS project is excluded entirely from sales and guidance; the raise was driven by general broad-based sales momentum.

More on Agilysys Inc

Reported 2025-10-27 · figures from the Agilysys Inc Q2 2026 earnings call.

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