Summary
Agilysys posted record revenue of $49.9 million in its fiscal 2023 third quarter, a 26.5% gain from $39.5 million a year earlier. Nine-month revenue reached $145.2 million, up 25.1%. Every revenue line grew. Products revenue rose 32.0% on higher deliveries to new customers and expansion at existing accounts. Professional services revenue climbed 45.7% as customers implemented technology. Subscription and maintenance revenue increased 20.0%, and subscription revenue alone grew 28.8% year over year. Recurring revenue, which combines subscription and maintenance charges, was a record $30.2 million, or 60.4% of total net revenue, down from 63.7% of the mix a year earlier because one-time product and services revenue grew faster. Subscription revenue accounted for 49.8% of total recurring revenue, up from 46.4%.
Profit rose faster than sales. Gross profit was $30.8 million for the quarter, up 24.5%, while gross margin slipped to 61.7% from 62.6% as the revenue mix shifted. Over nine months, gross profit reached $88.6 million, up 20.0%, and gross margin fell to 61.1% from 63.6%. Operating income was $3.5 million, up 116.0%, and operating margin was 7.0% against 4.1%, a gain of 2.9 percentage points. Net income was $3.9 million, up 152.4% from $1.5 million, and diluted EPS was $0.13 versus $0.04. Nine-month net income was $10.5 million, up 133.7%, with diluted EPS of $0.35 against $0.12.
The company spent heavily to sell. Sales and marketing expense rose 49.3% in the quarter on key hires, more trade show activity and higher commissions. Product development rose 10.8% and general and administrative costs rose 16.5%, both on hiring and higher salary and incentive rates. Adjusted EBITDA, a non-GAAP measure, was $8.1 million compared with $6.6 million a year ago, equal to 16.1% of revenue. Adjusted diluted EPS, also non-GAAP, was $0.26 against $0.19. Free cash flow, another non-GAAP figure, was $11.7 million versus $9.9 million.
Cash generation was uneven. Operating cash flow was $14.6 million in the quarter, up 43.6% from $10.1 million. Nine-month operating cash flow was $17.7 million, down 19.0% from $21.8 million, held back by a $4.6 million use of cash from changes in net operating assets and liabilities. Capital expenditures rose to $2.8 million in the quarter from $0.29 million, and to $3.6 million over nine months from $1.1 million. Deferred revenue was $55.9 million, up 29.5% year over year.
Management raised full-year fiscal 2023 revenue guidance to $195 million to $198 million, inclusive of close to 30% subscription revenue growth year over year, and reiterated an adjusted EBITDA target of greater than 15% of revenue for the full fiscal year. The CEO said selling momentum has driven the combined product, services and recurring revenue backlog back to record levels and that escalating hospitality demand should overcome macro-economic challenges in the short and medium term.
Risks still matter. The pandemic continues to shape operations, customer activity and supplier availability. Agilysys records a valuation allowance against substantially all of its U.S. deferred tax assets and certain foreign ones, so realizing those assets hinges on future taxable income, and tax examinations could change unrecognized tax benefits. Margin is the other watch item. Gross margin fell on both the quarter and the nine-month comparisons as the revenue mix shifted, and sales and marketing spending grew 49.3% in the quarter, ahead of the 26.5% revenue gain.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $49.9M | $47.7M | +4.6% | $39.5M | +26.5% |
| Gross profit | $30.8M | $29.4M | +4.8% | $24.7M | +24.5% |
| Gross margin | 61.6% | 61.5% | +0.1 pp | 62.6% | -1.0 pp |
| Research & development | $12.4M | $12.6M | -1.3% | $11.2M | +10.8% |
| Sales & marketing | $5.9M | $5.3M | +10.6% | $3.9M | +49.3% |
| General & administrative | $7.9M | $7.6M | +4.7% | $6.8M | +16.5% |
| Operating income (loss) | $3.5M | $2.9M | +19.0% | $1.6M | +116.0% |
| Operating margin | 7.0% | 6.1% | +0.9 pp | 4.1% | +2.9 pp |
| Net income (loss) | $3.9M | $3.6M | +8.8% | $1.5M | +152.4% |
| Net margin | 7.8% | 7.5% | +0.3 pp | 3.9% | +3.9 pp |
| Diluted EPS | $0.13 | $0.12 | +$0.01 | $0.04 | +$0.09 |
Risks
COVID-19 continues to impact the business, with uncertainty remaining about the extent of future effects on financial condition and results of operations as noted in the MD&A.
Gross profit margin decreased from 62.6% to 61.7% in the third quarter of fiscal 2023 and from 63.6% to 61.1% year to date, driven by revenue composition. Professional services gross profit margin decreased from 24.8% to 20.5% year to date due to lower utilization rates on complex implementations.
Sales and marketing expense increased 49.3% in the third quarter and 59.5% year to date, outpacing revenue growth, due to key hires, higher marketing event activity and increased commissions.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from AGILYSYS INC's SEC filings for Q3 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.