AGYS · Research
Agilysys Grew Subscription Revenue 21.99% and Paid Off Its Debt
Agilysys sells hospitality software to hotels, resorts, casinos and cruise lines. Fiscal Q2 subscription and maintenance revenue grew 21.99% to $62.16M, two thirds of revenue.
| Scorecard | Read |
|---|---|
| Thesis | Agilysys is shifting hospitality operators to subscription at a 22% pace with almost no capital need, and owner cash nearly matches EBITDA |
| What proves it wrong | Subscription growth falls below 15%, or products revenue declines for two quarters |
| Next catalyst | Fiscal Q3 2027 results, late January 2027; date not yet announced |
| Key multiple | 52.78x EV / GAAP EBITDA of $59.30M |
| Debt | No borrowings; Bank of America revolver matures Aug 16, 2027, no principal drawn |
| Stock pay | $24.07M from the cash flow line, 6.99% of revenue |
What Agilysys sells and how it gets paid
Agilysys sells software for hospitality: property management, point of sale, inventory and guest experience, for hotels, resorts, casinos, cruise lines and food service.
Fiscal Q2 2027 revenue was $93.36M, up 17.73%. Subscription and maintenance was $62.16M, up 21.99%.
Professional services rose 5.27% to $19.21M, and products, mostly hardware, rose 18.77% to $11.99M [1].
Six-month revenue was $181.04M, up 16.07%, and subscription and maintenance was $119.90M [1].
Subscription and maintenance gross margin was 79.71% in Q2 [1]. As that line grows faster, the mix lifts total margin.
The toll-gate test
Agilysys owns the guest and transaction record at a property. Replacing a hotel's property management system means retraining staff and migrating reservations.
The weak test is pricing. Agilysys charges per property and module, not on the value of each stay or transaction.
The owner-cash staircase
Start with GAAP EBITDA of $59.30M: operating income of $49.33M plus D&A of $9.97M over the twelve months [1]. Each step down the staircase removes one thing an owner cannot spend.
Step one is operating cash flow of $82.14M, above EBITDA by $22.83M. Operating cash is above EBITDA because stock pay is non-cash and the ERC refund of $3.0M arrived in cash [1].
Step two subtracts stock pay of $24.07M, taken from the cash flow line. That leaves $58.07M.
Stock pay is 6.99% of revenue.
Step three subtracts all capex of $1.87M, including capitalized software. Owner cash is $56.19M, or 16.32% of revenue and 94.75% of EBITDA.
Capital expenditures were $0.88M in six months, against $0.85M a year earlier, per the cash flow statement [1].
| Step | Twelve months | What the gap is |
|---|---|---|
| GAAP EBITDA | $59.30M | Operating income plus D&A |
| Operating cash flow | $82.14M | Working capital, cash taxes, interest and non-cash items |
| After stock pay | $58.07M | Stock pay treated as a real cost |
| After all capex | $56.19M | What an owner could take out |
Owner cash of $56.19M is 16.32% of revenue and 94.76% of EBITDA. Few software companies convert so fully.
D&A uses three cash flow lines: depreciation, amortization of internal-use software and intangibles, and amortization of developed technology
Balance sheet and debt
Agilysys has no debt. It repaid $24.0M of borrowings in the prior-year period [1], and its revolver, maturing Aug 16, 2027, had no principal drawn [1].
Cash was $137.56M at Sep 30, 2026 [1].
What gets overlooked
The employee retention credit receivable of $3.02M was collected this year [1]. It is a one-off cash inflow that flatters operating cash flow.
Products revenue is hardware, low margin and lumpy. Growth of 18.77% in Q2 reflects new property rollouts more than a trend.
Accrued salaries and benefits fell to $14.64M from $21.01M [1]. That bonus payout reduced operating cash in the half.
Share repurchases were only to cover employee tax withholding, $1.20M in six months [1]. Stock pay is not offset by buybacks.
Where the money goes
Total operating expense rose 29.41% to $45.06M in Q2, faster than revenue [1]. Operating income still rose to $15.25M from $14.15M.
Operating margin was 16.33% in Q2, down from 17.84% a year earlier, because cost growth outran revenue growth [1].
Interest income was $1.07M in Q2 and interest expense only $0.07M [1]. Cash now earns more than the company pays.
Six-month operating income was $24.99M, up from $18.67M [1]. The first half as a whole shows margin expansion, so Q2 cost growth may be timing.
The subscription shift
Subscription and maintenance cost of goods was $12.61M in Q2, up from $10.85M [1]. Hosting cost grows with cloud customers but slower than revenue.
Professional services revenue of $19.21M grew only 5.27% [1]. Implementation capacity, not demand, may be the limit on how fast properties go live.
Products revenue is hardware sold with point-of-sale rollouts. It grew 18.77%, which signals new property deployments that will add subscription revenue later [1].
Gross margin by line
Gross margin was 64.6% in Q2, up from 61.7% [1]. The mix moved toward subscription, which carries the highest margin.
Subscription and maintenance gross margin was 79.71% in Q2 on $62.16M of revenue [1]. Six-month subscription revenue rose 20.41% to $119.90M.
Professional services margin was 30.94%, and products margin 40.18% [1]. Both lines exist to get properties live on subscription.
As subscription becomes a larger share, gross margin rises without price increases. That is the core of the operating case.
Gross profit rose 23.16% to $60.31M in Q2, well ahead of revenue growth of 17.73% [1]. Professional services cost actually fell, to $13.27M from $13.45M, while that revenue grew.
Cash paid for income taxes was $1.07M in six months and for operating leases $3.30M [1]. Long-lived assets sit mainly in the United States, $14.35M, and India, $10.38M [1].
The balance sheet
Cash rose to $137.56M at September 30 from $116.89M at March 31 [1]. Financing used only $0.48M in six months, against $23.97M a year earlier when debt was repaid.
Agilysys has no borrowings outstanding. The revolver is a backstop for acquisitions, not a funding need.
The revolver was entered on Aug 16, 2024 with Bank of America as administrative agent, requires no repayments before maturity, and its $0.3M of issuance costs amortize over three years [1].
Cash flow detail
Six-month operating cash flow was $23.01M, more than double $10.87M a year earlier [1]. Working capital still absorbed $19.52M [1].
Accrued salaries and benefits fell to $14.64M from $21.01M, which points to annual bonus payouts [1].
Share-based compensation was $12.28M in six months, up 22.45% and 6.78% of revenue [1]. That is a real cost, and the staircase subtracts it.
Owner cash therefore depends on the full fiscal year, not one half. A bonus payout in the first half depresses the six-month figure every year.
Hotel and casino operators pay on long contracts. Revenue of $181.04M in six months, up 16.07%, is the better read on demand than half-year cash flow [1].
The test for the next filing is whether operating cash flow keeps pace with subscription growth of 20.41%. If it lags for a full year, the margin case weakens.
Superintelligence risk and opportunity
Hotels run on thin staff. Agents that handle guest requests, upsells and check-in fit directly on top of the property system.
Agilysys holds the guest record those agents need. If it sells agent tools per property, that is new subscription revenue.
The risk is that large booking platforms and hotel chains build agents that bypass the property system.
Management and capital allocation
Capital goes to product and to paying off debt. With no debt and rising cash, buybacks or acquisitions are the open question.
The CEO received 7,570 shares in May 2026 for meeting bonus plan conditions [1]. Pay is tied to annual targets.
Peers on the same basis
Peer figures come from each company's latest periodic filing [2][3][4]. Figures are derived from filed statements, and nothing here is a price view.
Toast and PAR are restaurant point-of-sale peers. EverCommerce shows what a slower vertical SMB platform trades at.
Bull, base and bear cases
| Case | What it needs | What it looks like |
|---|---|---|
| Bull | Cloud conversions accelerate and agents add modules | Subscription growth above 22%; GAAP operating margin above 18% |
| Base | Subscription growth near 20% | Services and products steady; owner cash grows with revenue |
| Bear | Travel slows and rollouts slip | Subscription growth below 15%; products revenue falls |
Catalysts and what to watch
Fiscal Q3 2027 results come in late January 2027. Agilysys has not announced the date.
Watch subscription and maintenance growth against 21.99%, its share of revenue against 66.58% and capital use.
Watch operating cash without the ERC refund, which will not repeat.
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