Summary
Agilysys reported fiscal 2023 second quarter total net revenue of $47.7 million, up 26.0% from the prior-year quarter. Gross profit rose 21.1% to $29.4 million. Gross margin was 61.5%, down 2.5 percentage points. Operating income rose 161.3% to $2.9 million, and operating margin was 6.1%, up 3.2 percentage points. Net income rose 264.2% to $3.6 million. Diluted EPS rose 500.0% to $0.12. Recurring revenue represented 60.8% of total net revenue, compared to 63.4% in the prior-year quarter. Subscription revenue increased 28.6% year over year and was 48.9% of total recurring revenues, compared to 46.0% in the prior-year quarter. The company described the quarter as its third consecutive record revenue quarter.
Revenue growth came from all main lines. Products revenue increased 44.5%, professional services revenue increased 24.2%, and subscription and maintenance revenue increased 20.8%. Gross margin fell because of revenue mix. Professional services margin declined on lower utilization rates and higher non-billable hours tied to new, more complex multi-solution implementations. Subscription and maintenance margin declined as certain variable costs increased ahead of related revenue. Products margin declined due to the composition of hardware products delivered. Operating expenses excluding other charges and legal settlements increased 18.7%. Sales and marketing increased 55.4% on key hires, more marketing events and trade shows, and higher commissions. Product development increased 10.5%, and general administrative increased 16.1%. Management said a strong surge in selling success during August and September pushed combined product, services and recurring revenue backlog back close to record levels.
Cash flow was softer. Operating cash flow was $3.0 million, down 18.0% from the prior-year quarter. Capital expenditures were $0.7 million, up 36.5%. Free cash flow was $2.3 million compared to $3.2 million in the prior-year quarter. Deferred revenue was $37.6 million, up 22.6% from the prior-year quarter. For the first half of fiscal 2023, revenue was $95.2 million, up 24.3%. First half gross profit rose 17.8% to $57.9 million. First half gross margin was 60.7%, down 3.4 percentage points. First half operating income rose 88.5% to $6.0 million. First half net income rose 123.9% to $6.6 million. First half diluted EPS rose 175.0% to $0.22. First half operating cash flow was $3.1 million, down 73.3%.
Non-GAAP profitability improved. Adjusted EBITDA was $7.4 million compared to $6.3 million in the prior-year quarter. Adjusted diluted EPS was $0.24 compared to $0.18. Management reiterated its full year fiscal 2023 outlook of $190 million to $195 million. That outlook includes approximately 30% subscription growth year over year and Adjusted EBITDA of greater than 15% of revenue. The outlook covers the full fiscal year. The CEO said second half fiscal 2023 results should be better than the first half and that the company remains on target for the expectations provided at the beginning of the year.
Risks remain. The company faces macroeconomic challenges, the ongoing COVID-19 pandemic, foreign exchange movements, and tax valuation allowances that reduce deferred tax assets. Complex implementation work hurt professional services margin through lower utilization and higher non-billable hours. Sales and marketing investments are rising faster than revenue, and free cash flow declined year over year. The MD&A also points to risk factors in the company's SEC filings, including those in its annual report and quarterly report, as factors that could cause actual results to differ from forward-looking statements. Management said profitability and free cash flow remain a priority as the company makes strategic investments in sales and marketing.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $47.7M | $47.5M | +0.5% | $37.9M | +26.0% |
| Gross profit | $29.4M | $28.5M | +3.1% | $24.3M | +21.1% |
| Gross margin | 61.5% | 60.0% | +1.5 pp | 64.0% | -2.5 pp |
| Research & development | $12.6M | $11.6M | +8.8% | $11.4M | +10.5% |
| Sales & marketing | $5.3M | $5.4M | -1.7% | $3.4M | +55.4% |
| General & administrative | $7.6M | $7.4M | +3.0% | $6.5M | +16.1% |
| Operating income (loss) | $2.9M | $3.0M | -3.5% | $1.1M | +161.3% |
| Operating margin | 6.1% | 6.4% | -0.3 pp | 3.0% | +3.2 pp |
| Net income (loss) | $3.6M | $3.0M | +17.7% | $982.0K | +264.2% |
| Net margin | 7.5% | 6.4% | +1.1 pp | 2.6% | +4.9 pp |
| Diluted EPS | $0.12 | $0.10 | +$0.02 | $0.02 | +$0.10 |
Risks
Total gross profit margin decreased from 64.0% to 61.5% in Q2 FY2023 and from 64.1% to 60.7% year to date, driven by changes in revenue composition and lower professional services gross margin (17.0% vs 24.5%) from lower utilization on complex multi-solution implementations.
Operating cash flow for the first half of FY2023 was $3.1 million, down 73.3% from $11.7 million in the prior-year period, primarily due to an $11.0 million decrease in net operating assets and liabilities.
COVID-19 continues to impact the business, and because an increasing portion of revenue is subscription-based, the effect on results of operations may not be fully reflected for some time. The ultimate impact remains uncertain.
A valuation allowance offsets substantially all deferred tax assets in the U.S. and certain foreign jurisdictions, as management believes it is more likely than not that these deductible differences will not be realized.
Operating expenses rose due to hiring and increased salary rates, with sales and marketing up 55.4% in Q2 FY2023 and 65.8% year to date, and product development up 10.5% in Q2, reflecting wage inflation and investments in key hires.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Recurring Revenue
Subscription Revenue Growth
Recurring Revenue as % of Total Net Revenue
Summary, forecast, risks and KPIs are extracted from AGILYSYS INC's SEC filings for Q2 FY2023 (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.