Private Securities Litigation Reform Act of 1995, including statements regarding our financial guidance. As is our usual practice in these calls, let me cover sales and selling success first before discussing revenue, profitability, guidance increase, and other business updates. On a year-to-date basis, Food Service Management (FSM) sales over the first three quarters of fiscal 2026 is already higher than full year sales during each of the previous two years. 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.

Our win-loss ratio in competitive deals remains impressively high and far ahead of normal established enterprise software norms. Before moving on to revenue details, a quick word on the Marriott PMS project. We continue to exclude the Marriott PMS project from all our sales and backlog numbers. Product revenue was $10.7 million, which was about the same as Q3 last fiscal year, slightly ahead of our expectations.

Fiscal 2026 Q3 October to December services revenue was $17.7 million, that is $17.7 million, 22% higher than the comparable prior year quarter and in line with our expectations for this quarter. This quarter was a record high for normal projects implementation services revenue. We continue to make good headway in improving software implementation efficiencies and finding ways to reduce customer implementation delays. Services revenue backlog at the end of Q3 was less than at the end of the previous quarter, which is a good indicator of improving implementation efficiencies.

What went well
  • Record Q3 revenue of $80.4M, up 15.6% YoY and the 16th consecutive record revenue quarter
  • Record subscription revenue of $34.9M, up 23.1% YoY (17th straight quarter of 23%+ subscription growth); PMS subscription up 30% and POS subscription up 20%
  • Best Q3 sales quarter on record for the Hotels, Resorts & Cruise Ships vertical and the best December sales month in company history; calendar 2025 was the best sales year ever
  • Raised full-year top-line guidance to $318M and lifted subscription growth guidance from 25% to 29%
  • Debt-free after paying down the $24M revolver; free cash flow of $22.7M (vs $19.7M) and cash/securities of $81.5M
  • Marriott PMS pilot implementations completed successfully across the U.S. and Canada, now moving into scaling implementation waves
What went wrong
  • Casino gaming, the strongest vertical, saw a sales slowdown in October and November (deals postponed, not lost) before recovering in December
  • International sales were lackluster in Q3 and remain lumpy given reliance on large ecosystem deals rather than steady small/medium wins
  • Gross margin slipped to 62.5% from 63% on one-time revenue mix and the ramp of newly hired professional services staff
  • Professional services gross margin came in around the mid-20s, below some analyst expectations, due to lower holiday-season utilization
  • Implied Q4 subscription growth decelerates to just north of 20%, dragged down by Book4Time year-over-year comps

Guidance Changes

MetricPeriodCurrent guidance
Total revenueFY2026$318M (raised)
Subscription revenue growthFY202629%
Adjusted EBITDA marginFY202620% (maintained)
Professional services revenueQ4 FY2026~$18M range

Performance Breakdown

MetricYoYNote
Total revenue +15.6% Record $80.4M vs $69.6M, driven by strong subscription and services growth
Subscription revenue +23.1% Record $34.9M; 67% of recurring revenue, up from 63.8%; growth from new incremental projects, not maintenance cannibalization
Recurring revenue +17.2% Record $52M, 64.7% of total revenue
Professional services revenue +22% Record for normal implementation services; improved backlog deployment vs weak Q3 FY2025
Product revenue ~0% $10.7M, about flat with prior year, slightly ahead of expectations
Adjusted EBITDA +17.7% $17.3M vs $14.7M; running at 19.5% of revenue YTD, trending toward 20% guidance
Net income — $9.9M vs $3.8M prior year; diluted EPS $0.35 vs $0.14
Adjusted diluted EPS — $0.42 vs $0.38 prior year
Free cash flow — $22.7M vs $19.7M prior year quarter
Subscription ARR installed +40% Best quarter on record for ARR of subscription projects implemented

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Marriott PMS projectPilot property implementationsPilot completed successfully; entering implementation waves that scale up over coming months (excluded from sales/backlog)—
POS businessModernization drag, subscription growth in mid-to-high teensModernized product settled after ~2 years; subscription growth back to 20%, expanding into higher education and healthcare—
Reference customersLacked references on newly modernized productsBase rebuilt and expanding fast; larger, more prestigious customers taking prospect reference calls—
AI adoption—Permeating internal operations and products (NLP, voice recognition, image recognition, room upgrades); boosting implementation efficiency and competitive advantage—
Implementation efficiencyBacklog low point in Q3 FY2025Improved management and AI tools speeding booking-to-revenue conversion; services backlog down QoQ—

Q&A Summary

Was the Oct/Nov gaming weakness tied to the government shutdown, and could a future shutdown slow the December momentum?
Management would not speculate on the cause; called it a temporary slowdown after years of strong gaming runs, noting December came roaring back to normal levels.
What is the timing for the Marriott PMS mass rollout, and any near-term margin impact?
Pilot completed successfully; implementation waves will steadily increase in size over coming months. Most costs are already provided for, and FY2027 profitability should exceed this year's 20% adjusted EBITDA, with Marriott one contributing factor.
Was international weakness due to the holidays or sales capacity, and will you add capacity?
No sales capacity issues in any vertical after heavy hiring last year; international remains lumpy because it still depends on big ecosystem deals rather than steady singles and doubles, but it is still a very good year.
What impact have new sales leaders Joe and Terrie had on top-of-funnel demand?
They are opening large 'big door' opportunities not counted in the pipeline (value hard to assign); the normal singles/doubles/triples pipeline continues to move steadily forward.
How are AI capabilities resonating with customers and affecting competition and sales cycles?
AI is permeating both internal operations and products (NLP, voice/image recognition, intelligent upgrades); competition shows nothing significant on AI, and it is strengthening Agilysys's competitive advantage.
What drives the implied ~20% Q4 subscription growth deceleration, and how should we think about next year?
Book4Time year-over-year comps pull growth into the low 20s while the core business still grows around 25%; next year stays in the 20% range plus contribution from larger projects.
What is driving improving POS win rates -- go-to-market, product maturity, or referenceability?
The modernized POS has settled after nearly two years, uniquely combining guest- and staff-facing features across iOS, Windows and Android in one code base; growth is back to 20% and expanding into higher education and healthcare.
Was all the delayed gaming demand caught up in December, or is more catch-up ahead?
Not all was caught up; December returned to normalcy but remaining postponed deals will be made up in coming months. These were postponements, not lost deals.
Are better implementations helping the ability to pitch and win new business?
Yes -- faster implementations shorten the booking-to-revenue gap and lower services costs, making Agilysys more competitive since it is not the lowest-price vendor.
Why did professional services gross margin come in around the mid-20s -- costly third-party labor?
No third parties; it was mainly lower holiday-season utilization plus ramp capacity from heavy hiring, with nearly all services done by Agilysys employees.

More on Agilysys Inc

Reported 2026-01-26 · figures from the Agilysys Inc Q3 2026 earnings call.

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