Summary
Agilysys reported fiscal 2026 second quarter revenue of $79.30 million, up 16.1% from the prior-year quarter. Year-to-date revenue reached $155.98 million, up 18.4%. The growth came from subscription and maintenance revenue, which rose 23.0% and included $5.3 million from Book4Time. Total subscription revenue increased 33.1%. Professional services revenue increased 11.8%. Products revenue declined 4.1% as customers shifted to subscription licenses and needed less hardware. For the first half, subscription and maintenance revenue increased 25.3% and included $10.4 million from Book4Time. Total subscription revenue increased 38.3%. Professional services revenue increased 13.9%. Products revenue decreased 1.7%.
Profitability improved sharply. Gross profit rose 13.3% to $48.97 million, but gross margin slipped to 61.7% from 63.3%. Operating income jumped 242.9% to $14.15 million, lifting operating margin to 17.8% from 6.0%. Net income was $11.71 million, up 758.5%, and diluted EPS was $0.41, up from $0.05. The quarter included $5.9 million of employee retention credits recorded in other gains. Operating expenses excluding other charges and legal settlements increased 8.7%. Product development rose 10.2%, sales and marketing rose 11.2%, and general and administrative remained consistent. Amortization of internal-use software and intangibles increased due to the addition of certain intangible assets from the Book4Time acquisition. For the first half, gross profit increased 15.9% to $96.26 million, operating income rose 89.1% to $18.67 million, net income grew 7.3% to $16.60 million, and diluted EPS was $0.59, up 7.3%. Gross margin for the first half was 61.7%, down from 63.0%. Operating margin for the first half was 12.0%, up from 7.5%. The margin decline reflected revenue mix. Products gross margin fell to 40.2% from 50.5%, and professional services gross margin fell to 26.3% from 32.4%, while subscription and maintenance gross margin held at 78.7%.
Cash generation was strong. Operating cash flow for the quarter was $15.21 million, up 130.8%. Year-to-date operating cash flow was $10.87 million, up 41.4%. Capital expenditures were $0.22 million for the quarter, down 66.7%, and $0.85 million year-to-date, down 44.1%. Deferred revenue stood at $62.89 million, up 13.6% from the prior-year quarter. The company ended the quarter with $59.3 million in cash and cash equivalents. It repaid the entire $50 million principal balance on its revolving credit facility as of July 2025. Year-to-date cash-based earnings were $35.0 million, offset by a $24.1 million decrease in net operating assets and liabilities. Financing activities used $23.965 million year-to-date, including $24.0 million in debt repayments. Investing activities used $0.85 million year-to-date.
Risks remain. Management flagged macroeconomic and geopolitical conditions, including changes in tariff and trade policies, new regulations, armed conflicts, foreign currency fluctuations, labor shortages, and natural disasters. These factors are pressuring customer spending and provider pricing, leading to decreased demand, increased costs, and reduced margins, particularly outside the United States. The company also faces tax audits and maintains valuation allowances against certain deferred tax assets. The Book4Time acquisition, completed in August 2024 for $145.8 million in net cash, added intangible amortization and integration costs. The One Big Beautiful Bill Act, signed in July 2025, is expected to produce future cash tax savings from full expensing of U.S. research and development expenses. The company has a $75 million revolving credit facility with a $25 million increase option.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $79.3M | $76.7M | +3.4% | $68.3M | +16.1% |
| Gross profit | $49.0M | $47.3M | +3.5% | $43.2M | +13.3% |
| Gross margin | 61.8% | 61.7% | +0.1 pp | 63.3% | -1.5 pp |
| Research & development | $17.8M | $17.5M | +2.1% | $16.2M | +10.2% |
| Sales & marketing | $9.8M | $11.8M | -17.1% | $8.8M | +11.2% |
| General & administrative | $10.2M | $10.8M | -5.5% | $10.2M | +0.0% |
| Total operating expenses | $34.8M | $42.8M | -18.6% | — | — |
| Operating income (loss) | $14.1M | $4.5M | +212.9% | $4.1M | +242.9% |
| Operating margin | 17.8% | 5.9% | +11.9 pp | 6.0% | +11.8 pp |
| Net income (loss) | $11.7M | $4.9M | +139.5% | $1.4M | +758.5% |
| Net margin | 14.8% | 6.4% | +8.4 pp | 2.0% | +12.8 pp |
| Diluted EPS | $0.41 | $0.17 | +$0.24 | $0.05 | +$0.36 |
Risks
MD&A states global macroeconomic and geopolitical conditions, including tariff and trade policy changes, regulations, armed conflicts, foreign currency fluctuations, labor shortages and natural disasters, are impacting customer spending and provider pricing decisions, resulting in decreased demand, increased costs and reduced margins particularly outside the United States.
Gross margin decreased from 63.3% to 61.7% in FY2026 Q2 and from 63.0% to 61.7% in the first half, driven by revenue mix; products gross margin fell from 50.5% to 40.2% in Q2 and professional services gross margin fell from 32.4% to 26.3% in Q2 due to lower utilization from hiring and training and timing of large projects.
Products revenue decreased 4.1% in FY2026 Q2 and 1.7% in the first half as customers increasingly prefer subscription-based software licenses over perpetual licenses and need less hardware, shifting revenue toward subscription and maintenance.
Operating expenses rose on hiring and increased salary, incentive and benefits rates across development and sales teams; sales and marketing increased 36.5% in the first half, and professional services margins were pressured by lower utilization from continued hiring and training of new staff.
The company is consistently subject to tax audits, and changes in gross unrecognized tax benefits could occur over the next 12 months; it also maintains valuation allowances against deferred tax assets in certain U.S. states and foreign jurisdictions.
Summary, forecast, risks and KPIs are extracted from AGILYSYS INC's SEC filings for Q2 FY2026 (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 1, 2026.