Summary
Agilysys reported total net revenue of $34.4 million for the fiscal 2021 second quarter, a 15.6% decline from $40.7 million in the prior-year quarter. The weakness sat in the transactional parts of the business. Product sales and professional services both fell hard as hospitality customers postponed technology investment decisions, and travel limits plus temporary site closures slowed implementations and installations. Support, maintenance and subscription work held up far better. For the first six months of fiscal 2021, revenue was $64.2 million, down 18.9%.
Recurring revenue, which the company defines as support, maintenance and subscription services, was 64.9% of total net revenue in the quarter, compared with 49.9% a year earlier. Subscription revenue grew 23.9%. That mix shift explains most of the margin expansion. Gross profit rose 14.5% to $23.2 million, and gross margin widened to 67.4% from 49.6%. The absence of software development cost amortization flattered the products line, and a largely flat cost base against higher recurring revenue carried the rest.
The bottom line flipped to a profit. Operating income was $6.1 million for the quarter, compared with an operating loss of $2.9 million a year ago. Net income was $5.9 million, compared with a net loss of $2.9 million. Diluted EPS was $0.22, compared with a loss of $0.13 per diluted share a year ago, the first positive GAAP EPS quarter since fiscal 2014. On a non-GAAP basis, adjusted EBITDA was a record $8.6 million, compared with $3.0 million, and adjusted diluted EPS was $0.29 against $0.04. Through six months, net income was $5.4 million and diluted EPS was $0.15, versus a net loss of $4.5 million and a loss of $0.19 per diluted share in the prior-year period.
Cash generation was the standout. Operating cash flow was $11.6 million for the quarter, up 267.7% from $3.1 million, and $6.6 million for the first six months, up 438.2% from $1.2 million. Free cash flow, a non-GAAP measure, was $11.3 million in the quarter, compared with $1.8 million a year earlier. Capital expenditures were $0.2 million, down 83.3% from $1.4 million, a sign of how much spending was pulled back. Cash and cash equivalents ended September 30, 2020 at $85.7 million, versus $46.7 million at the fiscal 2020 year-end, helped by the $35 million MAK Capital convertible preferred investment that pays a 5.25% dividend. Deferred revenue was $30.8 million, up 4.1% from the prior-year quarter.
Guidance stays narrow. For the fiscal 2021 third quarter, management expects revenue to increase 5% over second quarter fiscal 2021 results and adjusted EBITDA of approximately $7.0 million. The company is still not releasing full fiscal year 2021 guidance. The sequential step-down in adjusted EBITDA reflects the end of one-time cost actions such as salary reductions, continued hiring in research and development, and the return of spending items like virtual trade shows. Management describes the October to December quarter as particularly uncertain and expects the hospitality business climate to remain tough for a few more quarters, with a robust recovery beginning sometime in calendar 2021.
Risk sits on the demand side. Customer technology investment decisions were postponed more than management anticipated, in-person meetings and trade shows are off the table, and access to customer sites remains limited. The company also carries a valuation allowance against substantially all of its U.S. and certain foreign deferred tax assets, and it deferred $1.3 million in employer payroll taxes under the CARES Act. Cost relief from furloughs, salary reductions and a hiring freeze on non-essential roles will not repeat at the same level, which is why third quarter adjusted EBITDA is guided lower than the $8.6 million just reported.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $34.4M | $29.8M | +15.3% | $40.7M | -15.6% |
| Gross profit | $23.2M | $18.6M | +24.8% | $20.2M | +14.5% |
| Gross margin | 67.4% | 62.2% | +5.2 pp | 49.6% | +17.7 pp |
| Research & development | $8.3M | $8.3M | -0.1% | $10.8M | -23.4% |
| Sales & marketing | $2.4M | $2.6M | -9.7% | $4.9M | -51.9% |
| General & administrative | $5.2M | $5.7M | -8.8% | $6.0M | -13.6% |
| Operating income (loss) | $6.0M | -$423.0K | +1530.3% | -$2.9M | +310.0% |
| Operating margin | 17.6% | -1.4% | +19.0 pp | -7.1% | +24.7 pp |
| Net income (loss) | $5.9M | -$517.0K | +1234.8% | -$2.9M | +301.1% |
| Net margin | 17.1% | -1.7% | +18.8 pp | -7.2% | +24.3 pp |
| Diluted EPS | $0.22 | — | — | — | — |
Risks
The COVID-19 pandemic has depressed demand and delayed customer contracts, with revenue down 15.6% in FY2021 Q2 and down 18.9% year to date versus the prior year periods. Restrictions on face-to-face meetings, in-person demonstrations, trade shows and customer site access have delayed implementations and reduced recognized revenue, and management cannot predict the ultimate impact on future periods.
Products revenue fell 44.8% in FY2021 Q2 and professional services revenue fell 35.5%, attributed to lower sales plus delayed deliveries, installations and integration from customer temporary site closures and travel restrictions tied to COVID-19. Deferred revenue rose only 4.1% versus the prior-year quarter, suggesting a softer bookings environment.
Support, maintenance and subscription services growth slowed to 5.9% year to date and 9.7% in FY2021 Q2 because of one-time COVID-19 related financial relief provided to customers, and management notes the growth rate is significantly lower than reported in recent periods. Subscription-based service revenue still rose 23.9% in FY2021 Q2 but the concessions mask underlying momentum.
Cost reductions including a hiring freeze on non-essential positions, employee furloughs, layoffs, retirement benefit limitations and salary decreases for executives and certain employees drove a 51.9% drop in sales and marketing and 23.4% drop in product development in FY2021 Q2. Management warns these actions may adversely affect the company if they remain in place for an extended period.
The May 2020 MAK Capital investment added $35 million of convertible preferred stock with a 5.25% dividend that accumulates and increases liquidation preference for undeclared amounts, and the company began paying related dividends in the first half of fiscal 2021. This adds an ongoing dividend obligation and potential dilution on conversion.
A valuation allowance offsets substantially all deferred tax assets in the U.S. and certain foreign jurisdictions because management believes it is more likely than not the benefits will not be realized. Continued reliance on net operating losses to offset taxes is dependent on generating future taxable income.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from AGILYSYS INC's SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.