# AGILYSYS INC (AGYS) — Financial Analysis

**Exchange:** Nasdaq  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-06-12  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/AGYS/thesis · /stocks/AGYS/memo

## Financial Snapshot

---
source: coverage-next-full
ticker: AGYS
step: 04
title: Financial Quality & Adversarial Research Sweep
created: 2026-06-11
---

### Step 04 — Financial Quality: Agilysys Inc (AGYS)

#### 1. Income Statement Quality

##### Revenue Recognition
Agilysys recognizes revenue under ASC 606. Key policies: [S1, S4]
- **Subscription & Maintenance:** Recognized ratably over the contract term (monthly). Multi-year cloud contracts with annual escalators are typical. Revenue recognized only when services are delivered — no upfront recognition.
- **Professional Services:** Percentage-of-completion for implementation projects; time-and-materials for support.
- **Products:** Point-in-time (delivery); hardware recognized when shipped. Software licenses (legacy) recognized at delivery.

No unusual revenue recognition issues identified. Policy is consistent with comparable vertical SaaS companies.

##### One-Time Items to Strip

| Item | Period | Amount | Nature |
|------|--------|--------|--------|
| Deferred Tax Asset Valuation Allowance Release | Q3 FY2024 | ~$74M non-cash benefit | Non-recurring tax item; inflated FY2024 net income to $86.2M. True run-rate net income was ~$12M in FY2024. |
| Book4Time acquisition expenses | Q2 FY2025 | ~$2–3M est. | M&A transaction costs; one-time |
| COVID-era restructuring | FY2020–FY2021 | ~$8–10M | Historical; not relevant to forward |

**Adjusted Net Income (FY2026):** $38.8M reported is clean — no material one-time items. [S1, S4]

##### SBC (Stock-Based Compensation)
SBC is a meaningful non-cash charge: estimated ~$18–22M annually based on the ~$10M spread between operating income ($43M) and EBITDA ($53M) plus GAAP-to-non-GAAP reconciliation. This represents ~6–7% of revenue — elevated for a company of this size but consistent with SaaS talent market norms. [S1, S4 — Estimate]

SBC dilution: ~28.1M diluted shares outstanding (FY2026), roughly flat from FY2024. Share count growth is <1% annually. [S1, S4]

##### Gross Margin Consistency
Gross margin has been stable at 60–63% over the past five years, with a slight upward trend as subscription mix rises. No evidence of channel stuffing, rebates, or unusual COGS classifications. [S1, S4]

| Metric | FY2022 | FY2023 | FY2024 | FY2025 | FY2026 |
|--------|--------|--------|--------|--------|--------|
| Gross Margin | 62.4% | 61.0% | 60.7% | 62.4% | 62.6% |

#### 2. Balance Sheet Quality

| Metric | FY2026 | FY2025 | Assessment |
|--------|--------|--------|-----------|
| Cash | $116.9M | $73.0M | Healthy; self-funded FCF accumulation |
| Total Debt | $19.0M | $47.0M | Minimal; credit facility (used for Book4Time, now mostly repaid) |
| Net Cash | ~$98M | ~$26M | Strong net cash position |
| Working Capital | $59.0M | $12.5M | Adequate; improved materially in FY2026 |
| Goodwill / Intangibles | ~$108M est. | ~$115M est. | Book4Time acquisition goodwill; reasonable for M&A-driven growth |
| Shareholders' Equity | $326.8M | $265.9M | Growing via retained earnings; no equity dilution concerns |

**Balance sheet assessment: CLEAN.** [S1, S4]
- Net cash position eliminates solvency risk.
- Goodwill ($108M estimated) from Book4Time is manageable — ~4% of market cap; not impairment risk given Book4Time's profitable trajectory.
- No off-balance-sheet liabilities of note (operating lease liabilities are standard).

#### 3. Cash Flow Statement Quality

| Metric | FY2022 | FY2023 | FY2024 | FY2025 | FY2026 |
|--------|--------|--------|--------|--------|--------|
| Operating CF | $28.5M | $34.5M | $48.2M | $55.1M | $70.0M |
| CapEx | ($1.2M) | ($7.2M) | ($8.1M) | ($2.8M) | ($1.9M) |
| Free Cash Flow | $27.3M | $27.2M | $40.1M | $52.3M | $68.2M |
| FCF Margin | 16.8% | 13.7% | 16.9% | 19.0% | 21.4% |
| FCF / Net Income | 4.2x | 1.9x | 0.5x* | 2.3x | 1.8x |

*FY2024 FCF/NI ratio depressed by the $74M non-cash tax benefit inflating net income.

**Cash flow quality: HIGH.** FCF has grown every year (excluding the FY2024 numerics distortion), and FCF margin has expanded consistently. Operating CF closely tracks EBITDA. CapEx is extremely low (software company: no manufacturing, minimal hardware procurement), meaning the business is nearly pure capital-light. [S1, S4]

#### 4. Adversarial Research Sweep

*Note: This analysis is based on public records, SEC filings, and news sources available as of June 2026. Earnings transcripts were not reviewed on this research path.*

##### Short Seller / Critical Reports
**No material short-seller reports identified** on AGYS as of June 2026. The company does not appear to have been the subject of activist short campaigns. Short interest is low (historically <5% of float). [S8 — web search]

##### Legal / Regulatory Issues
**No material pending litigation** identified from SEC filings. The FY2026 10-K notes standard litigation disclosures but no cases that appear material to the investment thesis. [S1 — 10-K risk factors]

##### Management Departures or Governance Red Flags
**None identified.** CEO Srinivasan has been in place since 2015. CFO Dave Wood joined in 2023 (replacement for prior CFO; transition handled without incident). Board composition is stable. [S5]

##### Customer/Contract Controversy
**None identified.** No material contract losses or public disputes with major customers. The Marriott and IHG network approvals (positive) are publicly documented. [S7]

##### Accounting Policy Red Flags
**None identified.** Revenue recognition is straightforward. The FY2024 DTA valuation allowance release was properly disclosed and non-recurring — it is transparent in SEC filings and does not indicate earnings manipulation. [S1]

##### Cybersecurity / Data Breach
**None material identified** as of June 2026. The 10-K discloses cybersecurity risk as a standard risk factor; no breach incidents are noted in 8-Ks. [S1]

##### Competitive Loss Events
**No major competitive loss documented.** Q3 FY2026 showed margin compression (operating income declined sequentially), which caused stock volatility — this appears to be timing of R&D investments and new product launches, not customer loss. [S4, S8]

##### Verdict: CLEAN
The adversarial sweep produced no material negative findings. The primary financial complexity — the FY2024 DTA release — is disclosed, well-understood by analysts, and does not affect the underlying business trajectory. The stock's de-rating from $145 to $91 appears to reflect valuation compression (SaaS multiple contraction) and near-term margin concerns, not a fundamental business deterioration.

#### 5. Key Financial Adjustments for Modeling

For forward modeling in /complete-coverage Steps 13–15, apply these adjustments:
1. **Strip DTA release from FY2024 net income:** True recurring NI was ~$12M; use this for historical normalization.
2. **Add back SBC to EBITDA:** ~$20M annually. Adj. EBITDA for FY2026 ≈ $53M + $15M SBC addback ≈ $67–68M.
3. **FCF is the primary cash earnings metric:** Use FCF margin (21%) rather than GAAP operating margin (13.5%) for value-creation analysis.
4. **Products revenue assumed to decline to ~$35M by FY2028:** Already flat at $41M for two years; gradual decline consistent with on-premise end-of-life.

#### 6. Source Index

| # | Source | Description |
|---|--------|-------------|
| S1 | SEC XBRL | P&L, balance sheet, cash flow, footnotes |
| S4 | StockAnalysis.com | Standardized financials, key metrics |
| S5 | SEC filings / proxy | Governance, management, M&A |
| S7 | Industry research | Competitive context |
| S8 | Consensus / analyst | Short interest, analyst commentary |

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/AGYS/fundamental

## Navigation

- Overview: /stocks/AGYS
- Financials (this page): /stocks/AGYS/financials
- Thesis: /stocks/AGYS/thesis
- Investment Memo: /stocks/AGYS/memo
- Coverage universe: /stocks