Agilysys, Inc. Q3 FY2026 earnings call

• Sales: Q3 2026 was the second best Q3 October to December period sales quarter for hotels, resorts and cruise ships, with several significant new customer wins. Casino gaming had a sales slowdown in October and November but recovered well in December. Foodservice management sales over the first three quarters of fiscal 2026 is higher than previous years. - Marriott PMS project: Being expertly managed by customer personnel, with pilot property implementations completed successfully across the U.S. and Canada, and now in the process of implementation waves. - AI: Permeating all through the business, improving various areas including product development, quality assurance, implementation services efficiencies, etc. - New customers and properties: Added 16 new fully subscription-based customers (excluding Book4time) and 91 new properties during the quarter.

Fiscal 2026 Q3 revenue was a record $80.4 million, the 16th consecutive record revenue quarter, 15.6% higher than the comparable prior year quarter. Product revenue was $10.7 million, about the same as Q3 last fiscal year. Services revenue in Q3 2026 October to December was $17.7 million, 22% higher than the comparable prior year quarter. Recurring revenue was a record $52 million, 17.2% higher than the comparable prior year period, with subscription revenue at $34.9 million, 23.1% higher year-over-year. Foodservice management sales over the first three quarters of fiscal 2026 is already higher than full year sales during each of the previous two years. Cumulative international sales over the first 3 quarters is close to making fiscal 2026 the second best international sales year. Cumulative subscription SaaS sales during the first three quarters of fiscal 2026 is at 95% of previous best full year sales.

• Fiscal 2026 full year revenue expected to be $318 million at the top end of the recent guidance range. - Subscription revenue year-over-year growth expected to be 29%. - Adjusted EBITDA of 20% of revenue remains the same for fiscal year 2026.

Important factors that could cause actual results to vary materially from forward-looking statements include the ability to achieve provided guidance levels, increase implementation efficiencies, convert the backlog into revenue, and 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.

Q: Mayank Tandon asked about weakness in gaming and casino space in October and November and if government shutdown could affect December momentum.

A: Ramesh Srinivasan said it was a temporary slowdown and not to speculate on reasons.

Q: Mayank Tandon asked about Marriott PMS mass rollout expectations and margin impact.

A: Ramesh Srinivasan said pilot phase was successful, rollout is ongoing, and most costs are provided for but wouldn't give exact FY '27 profitability guidance.

Q: Matthew VanVliet asked about international performance and sales capacity.

A: Ramesh Srinivasan said no sales capacity issues, international sales has ups and downs but is a good year overall.

Q: Matthew VanVliet asked about Joe and Terrie's impact on top of funnel.

A: Ramesh Srinivasan said big doors are opening due to them, and normal pipeline continues.

Q: Allan Verkhovski asked about AI capabilities and subscription revenue growth deceleration in Q4.

A: Dave Wood said implied growth is north of 20% due to Book4time acquisition, core business still growing over 25%.

Q: Brian Schwartz asked about POS business improvement.

A: Ramesh Srinivasan said POS business is improving due to modern product, better guest and staff features, and winning competitive deals.

Q: George Sutton asked about implementations improving pitch of new business.

A: Ramesh Srinivasan said implementation efficiencies increasing helps convert bookings to revenue faster and reduces services costs, aiding sales.

Q: George Sutton asked about reference customers.

A: Ramesh Srinivasan said reference customer volume is expanding, customers are getting real value, and prestigious customers are willing to take calls.

Q: Nehal Chokshi asked about best customers taking reference calls.

A: Ramesh Srinivasan said it's due to successes with ecosystem products and both big and small customers in pipeline.

Q: Matthew Filek asked about professional services gross margins and product development leverage.

A: Dave Wood said margins were affected by seasonality, and product development leverage will materialize in FY '27 and beyond due to AI benefits and customer demand.