Agilysys, Inc. Q2 FY2026 earnings call

• Sales momentum: Fiscal 2026 second quarter was the best ever July to September period of sales and the second best of any quarter so far. The first half of this fiscal year was the best first half sales start to a fiscal year in history. Global sales were up 17% in the first half, subscription sales up 59%, international sales up 36%, gaming casino sales up 15%, POS products up 23%, and PMS products up 34%. - Revenue: Q2 revenue was a record, recurring revenue grew, and subscription revenue was a significant contributor. - AI impact: AI is helping improve all areas of the business, with features like dynamic pricing engine, revenue management capabilities, and intelligent guest profile module launched. - Marriott PMS project: Continues to make good progress and is in beta implementations.

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. Recurring revenue in fiscal 2026 Q2 grew 23% year-over-year and 4.8% sequentially to a record $51 million, with subscription revenue growing 33.1% year-over-year and constituting 65.5% of total recurring revenue. Product revenue was $10.1 million, and services revenue was a record $18.2 million, 12% higher than the comparable prior year quarter. Product backlog at the end of Q2 improved substantially, ending 49% higher than at the end of Q1.

• Raised full year revenue range from $308 million to $312 million to $315 million to $318 million. - Increased full year subscription revenue growth from 27% to 29%. - Adjusted EBITDA of 20% by revenue expectation remains unchanged. - Expect professional services revenue to decrease slightly sequentially in Q3 due to holidays and return to normal in Q4.

• Ability to achieve provided guidance levels. - Maintaining sales momentum. - Ability to convert the backlog into revenue. - Risks set forth in the company's reports on Form 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. - Customer implementation delays.

Q: Mayank Tandon asked about what's driving the record sales momentum.

A: Ramesh said the main reason is the product ecosystem getting better, having been reengineered and unified over years, and with the addition of senior talent.

Q: Matthew VanVliet asked about international strength performance.

A: Ramesh said it's more about product improvements, with EMEA and APAC making progress and more big opportunities, and winning more big customers will further improve it.

Q: Brian Schwartz asked about the efficiency curve.

A: Ramesh said efficiencies are improving across all departments, with services efficiency improved due to various reasons, and sales and product development efficiencies also improved, and will continue to improve.

Q: George Sutton asked if more major hospitality players are looking at them.

A: Ramesh said there are more conversations now, with products being impressive and senior sales staff opening doors.

Q: Nehal Chokshi asked if any customers represent more than 10% of ACV.

A: Dave said no, sales were broad-based.

Q: Stephen Sheldon asked about factors driving POS strength in Managed Food Service vertical.

A: Ramesh said POS was reengineered and the new modern unified solutions are performing well, plus efforts of the sales team.

Q: Stephen Sheldon asked about PMS product attachment.

A: Ramesh said PMS has high attach rates as there are more add-on modules, and customers like the unified ecosystem, with popular add-on products like golf, spa, etc.