Cuộc họp công bố kết quả kinh doanh Q2 FY2027 của Agilysys (AGYS): Tăng trưởng mảng thuê bao thúc đẩy nâng dự báo

Agilysys (NASDAQ: AGYS) đã báo cáo doanh thu quý 2 năm tài chính 2027 đạt mức kỷ lục, tăng trưởng doanh thu thuê bao tăng tốc và lợi nhuận cao hơn. Số lượng đơn đặt hàng mạnh mẽ, việc triển khai đơn hàng tồn đọng nhanh hơn và nhu cầu tiếp tục duy trì trên các thị trường ngành nhà hàng - khách sạn đã khiến ban lãnh đạo nâng dự báo doanh thu, tăng trưởng doanh thu thuê bao và EBITDA điều chỉnh cho cả năm.

Các điểm chính

• Doanh thu quý 2 năm tài chính 2027 tăng 17,7% so với cùng kỳ năm trước lên mức kỷ lục 93,4 triệu USD, đánh dấu quý thứ 19 liên tiếp đạt doanh thu kỷ lục của Agilysys.
• Doanh thu định kỳ tăng 22% lên 62,2 triệu USD. Doanh thu thuê bao tăng 32,6% lên 44,2 triệu USD và lần đầu tiên đạt 71% doanh thu định kỳ.
• EBITDA điều chỉnh tăng lên mức kỷ lục 24,1 triệu USD, tương đương 25,9% doanh thu, so với 16,4 triệu USD của cùng kỳ năm trước.
• Ban lãnh đạo đã nâng dự báo doanh thu năm tài chính 2027 lên 374 triệu - 378 triệu USD, dự báo tăng trưởng doanh thu thuê bao lên ít nhất 34% và dự báo EBITDA điều chỉnh lên 25% doanh thu.
• Động lực bán hàng diễn ra trên diện rộng: doanh số bán hàng cho các khách sạn, khu nghỉ dưỡng và tàu du lịch trong nước tăng 33%, doanh số quản lý dịch vụ thực phẩm trong nước tăng 42% và doanh số khu vực Châu Á - Thái Bình Dương tăng 47% so với cùng kỳ năm trước.
• Hơn 2.000 cơ sở của Marriott đã đi vào hoạt động trên nền tảng PMS. Ban lãnh đạo cho biết việc triển khai vẫn đúng kế hoạch nhưng chưa đạt đến mốc một nửa xét theo số lượng cơ sở, số phòng hoặc doanh thu.

Kết quả tài chính chính

Doanh thu nửa đầu năm tài chính 2027 đạt 181 triệu USD, tăng 16,1% so với cùng kỳ năm trước. Dòng tiền tự do trong sáu tháng đầu năm tăng lên 22,1 triệu USD từ mức 10 triệu USD trong cùng kỳ năm trước.

Hiệu quả kinh doanh và hoạt động

Quý 2 là quý 2 có doanh số bán hàng mạnh nhất của Agilysys, không bao gồm số liệu thuê bao liên quan đến dự án Marriott PMS khỏi các chỉ số bán hàng chung của hãng. Doanh số bán hàng cho các khách sạn, khu nghỉ dưỡng và tàu du lịch trong nước đạt mức kỷ lục, cao hơn khoảng 23% so với mức cao nhất trước đó được ghi nhận hơn hai năm trước.

Quý này bao gồm một hợp đồng thay thế cạnh tranh cho nhiều cơ sở quy mô lớn, bao gồm PMS, quản lý kho và mua sắm thực phẩm & đồ uống, cùng tới 15 phân hệ phần mềm bổ sung. Doanh số bán sản phẩm PMS và các sản phẩm bổ trợ liên quan cũng đạt mức kỷ lục, không bao gồm các dự án PMS lớn đang triển khai.

Agilysys đã có thêm 14 khách hàng mới không bao gồm Book4time, hoặc 24 nếu bao gồm Book4time. Tất cả đều là hợp đồng dựa trên hình thức thuê bao. Công ty cũng bổ sung thêm 83 địa điểm thuộc sở hữu của các khách hàng hiện tại, không bao gồm các đợt cài đặt của Marriott. Trong số 107 cơ sở mới được thêm vào trong quý, 104 cơ sở dựa một phần hoặc toàn bộ trên hình thức thuê bao.

Hoạt động bán hàng chéo tiếp tục mạnh mẽ. Agilysys ghi nhận 119 trường hợp bán sản phẩm bổ sung cho các cơ sở khách hàng hiện tại, bao gồm 331 sản phẩm. Trung bình 2,8 sản phẩm trên mỗi hợp đồng là mức kỷ lục của công ty.

Doanh thu thuê bao PMS và các dịch vụ liên quan tăng 53,8% so với cùng kỳ năm trước, trong khi doanh thu thuê bao POS và các dịch vụ liên quan tăng 18,4%. Các phân hệ bổ sung chiếm 34% tổng doanh thu thuê bao. Ban lãnh đạo kỳ vọng tăng trưởng thuê bao liên quan đến POS sẽ duy trì ở khoảng từ 17-19% đến vùng thấp của khoảng 20% trong tương lai gần.

Doanh thu sản phẩm đạt gần 12 triệu USD, mức cao nhất trong gần ba năm. Ban lãnh đạo cho rằng mức tăng này là nhờ doanh số POS mạnh hơn dù tỷ lệ đính kèm phần cứng thấp hơn. Đơn hàng sản phẩm tồn đọng vào cuối quý cao hơn 90% so với cùng kỳ năm trước.

Việc triển khai PMS cho Marriott đã hoàn tất hầu như toàn bộ việc áp dụng tại các cơ sở cung cấp dịch vụ chọn lọc (select-service) và đang chuyển sang các cơ sở cung cấp dịch vụ toàn diện (full-service). Ban lãnh đạo cũng xác định POS và các phân hệ bổ trợ khác là cơ hội lớn tại các cơ sở của Marriott nhưng chưa định lượng giá trị tiềm năng của chúng.

Agilysys cho biết một số trong hơn 30 tính năng AI đã công bố của hãng đang trong giai đoạn sản xuất hoặc thử nghiệm thực tế. Công ty đã hoàn tất một khung AI chung bao gồm quản trị, quyền riêng tư, bảo mật, lựa chọn mô hình, giám sát và kiểm toán. Hệ thống đặt phòng trung tâm (Central Reservation System) và Hệ thống quản lý tổng doanh thu (Total Revenue Management System) thuần AI của công ty vẫn đi đúng tiến độ để triển khai dữ liệu khách hàng ban đầu vào cuối năm tài chính 2027.

Dự báo của ban lãnh đạo

Ban lãnh đạo dự kiến doanh thu sản phẩm trong nửa cuối năm sẽ đạt 20 triệu - 22 triệu USD và tăng trưởng dịch vụ chuyên nghiệp đạt 5%-10% cho cả năm. Doanh thu dịch vụ chuyên nghiệp dự kiến sẽ duy trì quanh mức hiện tại trong nửa cuối năm.

Agilysys dự kiến doanh thu thuê bao tăng thêm so với quý trước khoảng 3,5 triệu - 3,7 triệu USD trong mỗi quý còn lại. Dựa trên các giả định kế hoạch của ban lãnh đạo, tăng trưởng doanh thu thuê bao có thể kết thúc năm tài chính ở mức khoảng 38%-39%.

Biên EBITDA điều chỉnh dự kiến sẽ cao hơn một chút so với 22% trong quý 3 năm tài chính do thời điểm ghi nhận một số chi phí, bao gồm cả phí dịch vụ chuyên môn. Ban lãnh đạo tiếp tục mục tiêu biên EBITDA điều chỉnh gần 30% trong quý 4 năm tài chính. Chi phí bồi thường bằng cổ phiếu dự kiến sẽ duy trì ở mức 6%-7% doanh thu trong năm tài chính 2027.

Rủi ro và các điểm cần theo dõi

• Ban lãnh đạo mô tả đợt triển khai Marriott là một cuộc chuyển đổi công nghệ lớn và phức tạp với sự tham gia của nhiều nhà cung cấp. Việc triển khai vẫn đúng kế hoạch, nhưng công ty cảnh báo rằng một dự án ở quy mô này không nên kỳ vọng sẽ diễn ra suôn sẻ ở mọi giai đoạn.
• Đợt triển khai của Marriott đang bước vào giai đoạn dịch vụ toàn diện (full-service), nơi các cơ sở thường có nhiều phòng hơn. Ban lãnh đạo từ chối đưa ra tỷ lệ phần trăm hoàn thành chính xác.
• Các tính năng AI ban đầu đang được thử nghiệm mà không thu phí khách hàng. Ban lãnh đạo cho biết việc kiếm tiền từ những tính năng này có thể bao gồm phí SaaS cao hơn hoặc định giá dựa trên mức độ sử dụng, nhưng còn quá sớm để xác định mô hình.
• Biên EBITDA điều chỉnh của quý 3 năm tài chính dự kiến sẽ giảm so với quý trước do thời điểm ghi nhận chi phí trước khi có sự cải thiện dự kiến của ban lãnh đạo trong quý 4.
• Công việc phát triển dựa trên yêu cầu của khách hàng đang giảm xuống mức rất thấp và dự kiến sẽ không đóng góp đáng kể trong thời gian tới.

Các điểm nổi bật trong phần Hỏi & Đáp với chuyên gia phân tích

Triển khai cho Marriott: Ban lãnh đạo cho biết hơn 2.000 cơ sở đã đi vào hoạt động. Việc cài đặt cho các cơ sở dịch vụ chọn lọc đã gần hoàn tất, trong khi đợt triển khai hiện đang chuyển sang các cơ sở dịch vụ toàn diện. Dự án vẫn chưa đạt mốc một nửa khi đo lường theo số lượng cơ sở, số phòng hoặc doanh thu.

Tăng tốc doanh thu thuê bao: Ban lãnh đạo cho biết sự tăng trưởng đến từ cả khách hàng Marriott và khách hàng ngoài Marriott. Việc triển khai nhanh hơn đã góp phần vào việc nâng dự báo, trong khi số lượng đơn đặt hàng cũng vượt kỳ vọng ban đầu của công ty. Đơn hàng tồn đọng kết thúc quý 2 chỉ thấp hơn một chút so với mức kỷ lục đạt được trong quý 1.

Chiến lược sản phẩm AI: Các khách hàng thử nghiệm hiện tại không bị tính phí cho các tính năng AI. Một số năng lực có thể trở thành những cải tiến sản phẩm tiêu chuẩn, trong khi những năng lực khác có thể hỗ trợ tăng phí SaaS hoặc định giá dựa trên giao dịch. Ban lãnh đạo cho biết phản hồi của khách hàng rất tích cực nhưng không cung cấp thời gian biểu thương mại hóa.

CRS và đặt phòng trực tiếp: Agilysys báo cáo sự quan tâm của khách hàng trong việc thử nghiệm bản beta đối với Hệ thống đặt phòng trung tâm và Hệ thống quản lý tổng doanh thu thuần AI. Các phiên bản đầu tiên sẽ chỉ hoạt động trong hệ sinh thái Agilysys, đặc biệt là với các sản phẩm PMS của hãng.

Năng lực bán hàng: Công ty đã tăng gần gấp đôi đại diện bán hàng chịu chỉ tiêu doanh số trong phân khúc khách sạn và khu nghỉ dưỡng từ vài năm trước. Ban lãnh đạo cho biết đội ngũ hiện đang tiến tới năng suất tối đa và không dự kiến sẽ gia tăng tuyển dụng lớn trong ngắn hạn để hỗ trợ sự tăng trưởng tiếp theo.

Toàn bộ biên bản cuộc họp báo cáo kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good day, ladies and gentlemen, and welcome to the Agilysys 2027 Second Quarter Conference Call. [Operator Instructions] As a reminder, today's conference may be recorded.

I would now like to turn the conference over to Jessica Hennessy, Vice President of Operations and Investor Relations at Agilysys. You may begin.

Jessica Hennessy

Thank you, Latif, and good afternoon, everybody. Thank you for joining the Agilysys 2027 Second Quarter Conference Call. We will get started in just a minute with management's comments, but before doing so, let me read the safe harbor language. Some statements made on today's call will be predictive and are intended to be made as forward-looking within the safe harbor protections of the U.S. Private Securities Litigation Reform Act of 1995, including statements regarding our financial guidance. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause results to differ materially.

Important factors that could cause actual results to vary materially from these forward-looking statements include our ability to achieve the increased guidance levels, continue to improve profitability levels, the company's ability to maintain sales momentum, utilize AI to continue to increase competitive advantages and the risks set forth in the company's reports on Form 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. As a reminder, any references to record financial and business levels during this call refer only to the time period after Agilysys has made the transformation to an entirely hospitality focused software solutions company in fiscal year 2014.

With that, I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and CEO of Agilysys. Ramesh, please go ahead.

Ramesh Srinivasan

Thank you, Jess. Good evening. Welcome to the Fiscal 2027 Second Quarter Earnings Call. Joining Jess and me on the call today at our Atlanta Alpharetta headquarters is Dave Wood, CFO.

Before we get started, just a quick note that I've been on the road traveling quite a bit during the recent several weeks visiting customers and for other business purposes. And since I think a few days ago, while I asked in Texas before I got to Atlanta. So apologies for my very scratchy throat and voice today.

Let me start with sales. We continue to measure sales and selling success in annual contract value terms and continue to exclude subscription numbers pertaining to the Marriott PMS project from each of the general business update numbers, including sales, backlog and cumulative value of ARR, annual recurring revenue, implemented during the quarter. And they are included, of course, in all our usual revenue and overall financial results.

Fiscal 2027 second quarter was our best ever Q2 July to September period of sales following Q1, which shows the best ever Q1 April to June sales period. Sales levels during the quarter were good across the various sales verticals, especially in hotels and resorts. This was the best quarter on record by a fair distance for sales in the domestic HRC, hotels, resorts and cruise ships, vertical.

The sales highlight of the quarter was a major 7 figure on steroids multi property competitive replacement win in the HRC resort space featuring property management system, PMS, inventory procurement for food and beverage and as many as 15, 1-5, as many as 15 additional software modules. Happy to see our ongoing sales and marketing growth driving investments in the HRC hotels and resorts area beginning to result in such large-scale wins on a regular basis now and making this quarter the highest ever for domestic HRC sales, about 23% higher than the previous highest HRC sales quarter recorded a little more than 2 years ago.

Looking at sales levels during the second quarter of fiscal 2027 compared to the second quarter last fiscal year. Sales pertaining to the domestic HRC vertical was up 33%. Domestic food service management, FSM sales were up 42%. The modernized and unified POS platform continues to perform well in the field, driving POS sales up across several sales verticals, especially in FSM, which, for all practical purposes, is a POS-only vertical.

And Asia Pacific sales were up 47% year-over-year during the second quarter, showing continued sales momentum in the APAC region following a record Q1. Fiscal 2027 Q2 property management system, PMS product sales including add-on modules were also an all-time best record. This is, of course, without counting anything from the ongoing large PMS projects.

Overall, business momentum continues to be impressively good, fueled by increasing sales levels, which are in turn being driven by the growing product ecosystem superiority and a steadfast focus on the hospitality industry with no distractions whatsoever. Our product ecosystem competitive advantage continues to widen over time. The modernized set of interconnected software solutions has now been in the field for a few years, and we continue to grow the number of reference customers who have converted from our oldest technology solutions or from competitive ones.

Several such customers now have excellent return on software investment stories to share with the industry. Considering we're operating in a total addressable market that is far larger than our current size, the growing competitive superiority of the product ecosystem should continue to drive a long extensive growth path for us.

During Q2 fiscal 2027, July to September, we added 14, 1-4, 14 new customers excluding Book4time spa and 24 including Book4time, and all of them were subscription-based sales agreements. These 14 new customer sales wins included an average of 5.6 products per day. New PMS customers continue to invest in the multiproduct ecosystem from day 1 of their partnership with us. New customer deals featured an average of 9.3 products per day when PMS was part of the purchase suite.

We also added 83 new sites, which did not have any of our products before. But the parent company was already our customer, not including any of the hundreds of Marriott sites currently installing our PMS product. Of the 107 new properties added during the quarter across new and current customers, 104 were either partially or fully subscription-based. In addition, there were 119, that is 1-1-9, 119 instances of selling additional products to properties already running at each one of our products. This is the fourth consecutive quarter of the number of instances of such new product sales to current customer properties exceeding the 100 mark, our longest such streak. These 119 instances of new product sales involved a total of 331 new products sold, just shy of the previous highest quarter number. The average of 2.8 products per new product sales agreement this quarter is the highest on record.

All this data continues to confirm the thesis that nothing drives enterprise software revenue performance like true meaningful sustained product innovation, which creates real value for customers and their guests. Our investments in R&D, now further fueled by AI-driven productivity and quality improvements, are continuing to provide great reasons for both current and new customers to partner with us, stick with us and license an increasing number of software modules. In the ultimate analysis, nothing really wins like product innovation.

Before we move on to revenue, three quick updates regarding the Marriott PMS project, GHS acquisition and progress with AI initiatives. The Marriott PMS project continues to make good progress and remains on plan. Just as a quick reminder, this is a huge technology transformation undertaking, one of the biggest ever attempted in the hospitality industry. And such big, challenging technology projects cannot be expected to go completely smooth sailing every step of the way. So far, so very good.

The second, GHS acquisition completed during the quarter was minor to our revenue and profitability levels, but crucial in a tactical sense for a portion of casino gaming customers. Gaming Hospitality Solutions, GHS, is a 30-year-old software, 3-0, 30-year-old software company specializing in loyalty and offer management primarily for tribal casinos with the main purpose of connecting a casino's loyalty program to its gas pumps, enabling their guests to earn and redeem points across the casino floor, hotel, restaurants and fuel stations. In addition, GHS offers a loyalty promotions module specifically for Royal Caribbean.

The primary developer owner of GHS was planning to retire, and we picked up this company as a way to protect the interest of mutual customers, a list that includes about 40, 4-0, includes about 40 tribal gaming casinos and the Royal Caribbean Cruise Line Group. The overall revenue gain from this acquisition during fiscal 2027 will only be a few hundred thousand dollars of maintenance revenue.

We continue to make good progress with AI initiatives and with our objective to be the AI leader in hospitality. Earlier this year, during the April customer user conference, we announced 30-plus AI-based features, that is 3-0, 30-plus AI-based features which were in various stages of development and the creation of a couple of entirely AI-native software modules to round out our product ecosystem.

These 30-plus features are distributed across the 4 pillars of AI-driven usage: agentic AI, multimodal user experiences, guest hyperpersonalization and revenue optimization. Several of these new features are now in pilot testing at select customer sites, while several others are already in production use. The initial feedback from customers has been positive, and we expect these features to become deeply embedded in the daily operations of hospitality operators.

We are now into the development of the next wave of AI features that go beyond AI-based guests and operational insights, voice and chat capabilities, going beyond those features into agentic workflow automation and cascading intelligence, which will use demand signals to automate specific workflows to achieve efficient staff scheduling, product inventory levels, connected guest experience offerings and optimized pricing. Development of a couple of fully AI-native modules, CRS and revenue intelligence that we have recently renamed as total revenue management system is progressing on plan. We expect initial data implementations of these 2 new modules to happen at customer sites later this fiscal year. The initial versions of both these modules are designed to work only within the boundaries of our product ecosystem.

Now beyond all that, the most crucial AI-related development project completed during the quarter was the AI common framework, which provides the control centers for AI governance, privacy through tokenization of personal information, security, appropriate LLM model selections, value-based usage for each task, monitoring and auditing. We believe that the best way to achieve widespread traction with use of AI in the hospitality industry is to deliver rich functionality and feature sets that are also taken cost sensitive. We have focused our initial efforts on building a good control framework and infrastructure.

Based on our recent extensive participation in various hospitality industry AI conferences, roundtables and future-looking committees, it does seem like we are leading the industry in the AI journey for hospitality. The new and modern code base of each of our software solutions and the very presence of a product ecosystem that no competitor matches up with today have allowed us to make AI-based features a seamless part of the product sets compared to others with older code basis and only individual products. The ecosystem presence is becoming an even bigger differentiator in today's AI everywhere world.

Now on to revenue, profitability and raising guidance levels. Fiscal 2027 Q2 revenue was a record $93.4 million, the 19th, 1-9, the 19th consecutive record revenue quarter, 17.7%, that is 1-7, 17.7% higher than the comparable prior year period and 6.5% higher than the sequentially preceding quarter. Overall, revenue during the first half of fiscal 2027, Q1 plus Q2, was $181 million, 16.1%, that is 1-6, 16.1% higher than revenue during the first half of last fiscal year.

Fiscal 2027 Q2 recurring revenue grew 22% year-over-year and 7.7% sequentially quarter-over-quarter to a record $62.2 million. Q2 recurring revenue year-over-year and quarter-over-quarter increases of $11.2 million and $4.4 million, respectively, are both all-time high levels and were driven by increases in subscription revenue. Subscription revenue increased 32.6% year-over-year and 10% sequentially quarter-over-quarter to a record $44.2 million and now constitutes 71% of total recurring revenue, the first time subscription revenue has been more than 70% of total recurring revenue.

This is now the 20th consecutive quarter of subscription revenue growth of at least 23%. Growing subscription revenue each quarter year-over-year by between 23% and 45% over a period of 5 long years is a remarkable achievement that any enterprise software unit has a right to be proud of. That requires consistent performance across every operational role.

It is not a coincidence that it was around that time 5 years ago when we were at the beginning stages of releasing the completely reengineered and modernized product versions and getting started on the formation of a cloud-native set of hospitality-focused software solutions. Subscription revenue from POS and POS-related add-on modules grew by 18.4%, that is 1-8, 18.4% year-over-year, while subscription revenue pertaining to PMS and PMS-related modules grew by 53.8%. We expect subscription revenue growth in POS and POS-related modules to remain in the high teens, low 20s percentage levels for the foreseeable future. Add-on modules across both POS and PMS constituted 34% of total subscription revenue.

Fiscal 2027 Q2 was the best quarter on record with respect to the sum of annual recurring revenue, ARR, of all subscription products implemented during the quarter, not including the Marriott PMS installs. Fiscal 2027 Q2 annual maintenance was also a record $17.9 million, that's 1-7, $17.9 million. The current high subscription revenue growth levels are coming for the most part from new incremental installations and are not dependent on us pressuring customers to convert from their current on-premise installations to the cloud. Virtually all the modernized software solutions across each current and upcoming product versions are designed to be cloud native, but can also work equally effectively in on-premises installations if that's the customer preference. When the customer preferences for modern solutions and an on-premises install, we are currently almost the only game in town.

Fiscal 2027 Q2 product revenue consisting of hardware we sold and perpetual software licenses were just shy of $12 million, the highest level in close to 3 years. Excellent POS sales performance during recent quarters has driven higher hardware shipments during the quarter and has also driven the current quarter end product backlog to a level that is 90%, 9-0, 90% higher than at the same time last fiscal year, giving us good visibility for the second half of the fiscal year. Product revenue during the second half of fiscal 2027 should remain close to the first half level.

Fiscal 2027 Q2 July to September services revenue was $19.2 million, that is 1-9, $19.2 million, 5.3% higher year-over-year. Contributions to professional services revenue from customer based development work continues to decrease to very low levels and are not expected to be a factor going forward. Implementation services efficiencies continue to increase as the modernized solutions are becoming easier to implement, especially with increasing use of AI tools during the implementation process.

We are now selling more software recurring fees for every dollar of services sold compared to previous years, which is a good business trend that makes us more competitive in price sensitivities. We expect professional services revenue to remain around current levels during the second half of the fiscal year and grow steadily in the medium and long term along with overall business expansion.

Given the current strong sales momentum, pace of implementations and near record backlog levels, our expectations for full year 2027 financial results have increased further, and we are raising guidance levels again. We started this fiscal year with a full year revenue range guidance of $365 million to $370 million and subscription revenue growth expectation of at least 30%, 3-0, of at least 30% before increasing the respective guidance levels to $368 million to $373 million and at least 32% at the end of Q1. At the end of Q2, we now expect for the full year fiscal 2027 revenue range to be $374 million to $378 million and subscription revenue growth to be at least 34%.

Fiscal 2027 Q2 adjusted EBITDA was a record $24.1 million and 25.9% of revenue. Our first half profitability performance has done better than our original expectations going into the fiscal year, and we now expect full year adjusted EBITDA to be 25% ahead of the previous guidance of 24%. We continue to expect to exit the fiscal year with adjusted EBITDA during Q4 being close to 30% of revenue, that is 3-0, being close to 30% of revenue, though we expect that percentage to be only slightly north of 22% during Q3 due to unfavorable timing of certain costs, including [ professional fees ].

With that, let me hand over the call to Dave for further color on our business operations and financial results. Dave?

Dave Wood

Thank you, Ramesh. Taking a look at our financial results, beginning with the income statement. Second quarter fiscal 2027 revenue was a quarterly record of $93.4 million, a 17.7% increase from total net revenue of $79.3 million in the comparable prior year period.

Q2 marked another quarter of strong momentum in our business. Sales levels were at a second quarter all-time high, with PMS bookings at record levels. The backlog, excluding the large rollout, remains at record levels, and revenue continues to pace ahead of our fiscal year FY '27 guidance.

Professional services increased 5.3% over the prior year quarter to $19.2 million, which is in line with the financial plan, but slightly lower than Q1 FY '27 due to timing of [indiscernible]. Professional services backlog increased over last quarter, leaving plenty of visibility into the remainder of the fiscal year. We are pleased to see our professional services gross margins remain above the 30% mark for the third consecutive quarter at 30.9%. We may see fluctuations on a quarterly basis, but we should be finishing the year over 30% gross margins for professional services.

Total recurring revenue represented 66.6% of total net revenue for the fiscal second quarter compared to 64.3% of total net revenue in the second quarter of fiscal 2026. As anticipated, recurring revenue is growing as a percentage of total revenue, which will continue to drive up gross margin and profitability levels. Subscription revenue growth was better than expected at 32.6% for the second quarter of fiscal 2027. Subscription sales and backlog levels, while maintaining low customer churn, have us trending ahead of the FY '27 plan.

Moving down the income statement. Gross profit was $60.3 million compared to $49 million in the second quarter of fiscal 2026. Gross profit margin was 64.6% compared to 61.7% in the second quarter of fiscal 2026. Product mix will continue to drive gross margin levels up to the mid- to high 60% range over the next several years. Combined, the 3 main operating expense line items, product development, sales and marketing and general and administrative expenses, excluding stock-based compensation, were 38.9% of revenue in the fiscal 2027 second quarter compared to 41.3% of revenue in the prior year quarter.

Operating income for Q2 FY '27 of $15.2 million, net income of $13.2 million and gain per diluted share of $0.46 compares favorably to the prior year gain of $14.1 million, $11.7 million and $0.41. Adjusted net income, normalizing for certain noncash and nonrecurring charges, of $19.1 million is well above adjusted net income of $11.4 million in the prior year, and adjusted diluted earnings per share of $0.67 is well above $0.40 in the prior year period.

For the 2027 second quarter, adjusted EBITDA was $24.1 million compared to $16.4 million in the year ago quarter. We are pleased to see our profitability levels end up well ahead of the original FY '27 plan, with adjusted EBITDA coming in at 25.9% of revenue for the quarter.

Moving to the balance sheet and cash flow statements. Cash and marketable securities as of September 30, 2026, was $137.6 million compared to $116.9 million on March 31, 2026. We remain comfortable with our current levels of cash. As it relates to free cash flow, we are pleased to see an increase for the first half of the fiscal year. Free cash flow in the quarter was $14.8 million compared to $15 million in the prior year quarter. Free cash flow for the first 6 months of FY '27 was $22.1 million compared to $10 million in the first 6 months of FY '26.

Like in previous years, we expect free cash flow to be higher in the second half of fiscal year '27. Full year adjusted EBITDA and free cash flow after normalizing the impact of CapEx continue to be good proxies for health of the business.

For our fiscal year 2027, we are raising our revenue guidance to be in the $374 million to $378 million range. We expect product revenue to remain in the $20 million to $22 million range for the second half of the fiscal year. Professional services started strong and should still grow in the 5% to 10% range.

We are again raising our subscription revenue guidance from at least 32% growth to at least 34% growth for the year due to faster deployment of our backlog than anticipated in the previous guidance. We are also raising our adjusted EBITDA expectations from 24% to 25% of revenue with the strong start to the year in revenue. We still expect to exit FY '27 close to 30% of revenue. Adjusted EBITDA excludes stock-based compensation, which will continue in the 6% to 7% range for the fiscal year.

In closing, Q2 continued the strong start to the fiscal year, leaving us with plenty of visibility into the remainder of the year. With that, I will now turn the call back over to Ramesh.

Ramesh Srinivasan

Thank you, Dave. The Agilysys success story continues to get better. This is a story of disciplined growth across both revenue and profitability driven by sustainable, extensive and difficult to duplicate product innovation. This success story has used no shortcuts, but has been built on top of the tough to get done foundation of a modernized set of software solutions that are based on a combination of model technology and decades of domain knowledge gathered from thousands of prior implementations, all focused on 1 industry.

This is a story which only gets further strengthened. I mean, technology breakthroughs like AI come along, which help add another layer of excellence on top of the structure already built on solid good bedrock of modern products, deep domain knowledge and employee- and customer-centric culture and financial discipline. This is a story of organic growth for the most part, with inorganic growth being used only sparingly to add additional breadth and strength with an opportunistic conservative and patient mindset and only as an addition to strong organic growth.

We are pleased with the fiscal Q2 July to September results and how well the high performance of sales, product development and implementation to this quarter and during the first half of the year have set us up to achieve our fiscal 2027 full year goals. To repeat one of our old phrases, our barrier to excellence in hospitality-focused technology is increasing significantly with time. We are lucky to be operating in a total addressable market that is about 50, 5-0, about 50x larger than our current size, and we intend to drive home that advantage with complete focus on hospitality and no distractions.

This industry is hungry for superior and better interconnected model technology solutions, and we expect to continue building on our pace of product innovation to be the primary technology partner who satisfies that need. We continue to see an increase in the number of customer properties seeing tangible operational and guest experience improvements directly attributable to our products and services. Our balance sheet remains clean with no debt, giving us the room to remain flexible and agile with future growth opportunities. We have good reasons to remain bullish about our future business prospects and our ability to bring to bear sustained good increases in shareholder value.

With that, Latif, can you please open up the call for questions?

Operator

[Operator Instructions] Our first question comes from the line of Mayank Tandon of Needham.

Phần hỏi đáp

Mayank Tandon

I wanted to start by just giving -- I guess, asking you a question on the Marriott progress. Ramesh, you shared some thoughts on that. But could you give us a little bit more detail in terms of -- is there a way to maybe talk about in terms of how many properties have rolled out, what percentage of rooms have you been able to go live? Any details that can give us some sense of sort of where you are in that implementation of the Marriott rollout.

Ramesh Srinivasan

the project is going well, Mayank, and we cannot get too much into the details because this is a Marriott project. This is not us. And it involves multiple vendors. And I think Marriott is going to be coming up with their earnings release pretty soon in a week or so, and it's best to rely on them for the results.

But we can tell you that well more than 2,000 properties are live, and the projects have gone well so far. Virtually all of the select service properties implementations have been completed. And this major project is going to go through a number of transitions, and now it is going through a transition from pretty much completing the select service properties and then moving on to the full service properties.

Now in terms of percentage of completion, Mayank, it varies, right, depending on whether you're looking at properties and -- or rooms or revenue, right? There are different numbers there. But I think we can tell you that we have not yet reached the halfway mark with any of that. Whether with properties or with rooms or with revenue, we are not close to the halfway mark.

Mayank Tandon

Got it. That's helpful color. And just as a quick follow-up, I'll stay on the Marriott theme. I was just curious, is it too early to maybe see any progress on their ability to buy add-on modules? Are you there yet? Or is that something that you'll see later in the life cycle of this rollout? And is there any way to quantify the potential opportunity from the add-on modules that you may be able to sell into Marriott over and above the core PMS? Any way to size the opportunity over time?

Ramesh Srinivasan

It's going to be difficult to quantify that, Mayank. But in terms of add-on modules, please keep in mind, that has progressed quite well in the last few years. So even before we acquired Book4time spa, for instance, the Book4time spa product was the standard at literally thousands of Marriott properties. So that was already there.

And since these PMS implementations have started, we have made good progress with POS properties -- with POS at Marriott properties, and that has continuously increased the in pace over the last year or 2 years. And that's a huge opportunity ahead of us. We have not even scratched the surface of implementing POS in Marriott properties. And so that is true of a couple of other big brands as well.

I can't put a number on it, but that's a huge opportunity. We are already the gold standard at Marriott properties, but there are only so many such properties with golf courses. So we continue to make progress. Digital marketing, we have made progress. So there are various modules, we continue to make progress with that. Like whether it's Marriott or with other big brand opportunities, opportunities are huge in front of us, but can't put a more helpful number for you on that, Mayank.

Operator

Our next question comes from the line of Stephen Sheldon of William Blair.

Stephen Sheldon

First one, just on the -- maybe for Dave. In the full year guidance, just curious, what you're assuming in terms of sequential subscription revenue growth in 3Q and 4Q? And I guess, can you provide any ballpark on what year-over-year exit growth you've assumed in 4Q? Specifically for subscription revenue, it seems like you guys have a line of sight to very notable acceleration. So any detail there would be helpful.

Dave Wood

Yes. So I think -- I mean, in Q1, we were about $3.3 million in sequential growth. In Q2, we were about $4 million. I mean, like we said, it was a good quarter in go-live. So we're expecting a little bit less than the $4 million in go-lives. So for the remainder of the year, call it, $3.5 million to $3.7 million in Govis go-lives. And that would kind of get you to the at least 34% growth. And that would put the exit rate in the kind of 38% to 39% growth rate for subscription. So again, we could do better than that, but that's kind of how we're thinking about it.

Stephen Sheldon

Perfect. That's helpful. And then just as a follow-up on the Central Reservation System progression. It sounds like that's still on track with beta testing later this fiscal year. So I guess, any updates on interest levels you're seeing from hospitality operators and thinking about your CRS? And associated with that, what's your view on Agilysys' opportunity to potentially help hospitality brands support more direct bookings over time? As consumer agentic functionality net of news, et cetera continues to expand, should we be thinking about that as a potential opportunity?

Ramesh Srinivasan

So Stephen, I wouldn't get too far ahead of ourselves, but we do have those medium, long-term vision aspects in mind when we started developing the CRS. But I don't want to get too ahead of ourselves. Does it set us up well to handle those kinds of inevitable future possibilities in hospitality? Absolutely, yes. Having our own CRS that to entirely AI-native module sort of built -- I wouldn't call it necessarily the right way, implying the other ones are not the right way, but built with the benefit of hindsight, built during the AI age.

So we are building towards all that, Stephen, but we are nowhere close to giving you any kind of an idea on that. Currently, our CRS is only focused to work with our ecosystem, especially our PMS products. And it is very -- it is created in the AI age. So it has -- it has taken all that into account.

And there is reasonable customer interest. We just finished our customer advisory board meetings, and they're all curious and interested. And there is no shortage of customers who are putting up their hands and saying we'd like to be the beta site. So we have all that lined up, both for the CRS and for the other total revenue management system we are developing. The beta site interests are there. We are strictly focused only within our product ecosystem. And then over the next year or 2, it is going to be one of the strong products in our product suite.

Operator

Our next question comes from the line of Matt VanVliet of Cantor Fitzgerald.

Matthew VanVliet

I guess, when you look at the momentum you're seeing in the HRC group, curious, how much of this -- do you feel like it's just getting more shots on goal from the investments you've made around marketing and some of the leadership there and then in the go-to-market team and sort of the additions you made to the team there versus the market just being maybe a little bit more willing to spend these days? So curious on how you'd sort of stack rank some of the improvements you've seen in the results and what you're attributing that to?

Ramesh Srinivasan

Yes, Matt. To start with both in HRC and SSM, the starting point is our market share was very low. The market share did not do justice to where we were. So that is to start with. But now we are getting good shots on goal. Not only are we getting shots on goal, but they are pretty good shots on goal because of extended marketing efforts, our marketing team is doing a lot better job of unearthing new opportunities.

We have expanded the sales team, not only in terms of quantity, but also in terms of quality of leadership. There's one more senior HRC leader who just joined us last month. So the team quality and quantity, the number of sales reps have also increased. And the product, now we have products. And we have ecosystem which is very crucial for hotels and resorts because they are mostly multi amenity. They typically have a golf course. They have spa facilities. They deal with group bookings. They have never really had a great loyalty promotions module before. And they want check-in, check-out and processes like that to be through the mobile a lot more automated.

So the needs are there. Our product ecosystem is there. We have very low market share in those verticals, and we have increased the sales and marketing investments as well. So altogether, I think the shots on goals are increasing now, and we have good high-quality shots on goal.

Matthew VanVliet

All right. Very helpful. And then when you look at the customers that you have and sort of what their initiatives are around implementing AI, both internally for sort of their operational side and anything customer-facing, how much is the context in the business-specific data that you're providing on your platform helping you sell some of your AI modules versus customers looking to build some of their own with various coding tools and things of that nature? So just curious on how your ability to monetize what you've developed so far internally is looking like? And ultimately, what do you think that looks like over the next 12 to 18 months?

Ramesh Srinivasan

I think it continues to help us push our sales levels higher with all the new AI features. So just to break down your question, though, a lot of our customer-driven AI initiatives that they are doing internally have to do with their internal workflows. Like even for us, example, we are using AI internally now to improve our workflows within our company that until now, we were managing with Excel spreadsheets and manual processes. AI is coming in very handy to automate those internal processes. So that's what a lot of our customers are focused on as far as their AI initiatives are concerned.

Now as far as core systems execution systems like us, like our systems that they are using, they are expecting these systems to contain a lot more AI features to make things easier for their staff and to improve guest experiences. And we are now providing them at a steady pace. So we are basically enhancing our products with more AI features that makes it more and more easier for them to improve operational efficiencies and provide a lot better guest experiences.

So it falls into two different categories. They do their own internal workflow improvements and improvements in data lakes and all that. They are providing -- they are looking for technology providers like us to use AI features to improve the products so that it further helps them in terms of improving such operational efficiencies. So you got to put that into two different buckets.

Operator

Our next question comes from the line of George Sutton of Craig-Hallum.

George Sutton

Ramesh, you mentioned that you've been with a number of roundtables and conferences and the like and you're seeing that your AI advantages are increasingly significant. I wondered if you can just go into a few more details there, what you're seeing competitively. And what has been the customer response? Is this part of why you're seeing the increased shots on goal?

Ramesh Srinivasan

That is one of the reasons, George. So just to be transparent with you, George, I have only attended here and there, most of the AI roundtables and future-looking committees and all that. The main participation comes from our Chief Marketing Officer, Frank Pitsikalis, and also supported by our strategy heads, Rohith Kori and Sudharshan Chary. They are the ones representing us in most of these, and they have done a great job so far. And a lot of the keynote speeches and a lot of the keynote presentations, the top 100 CIOs committees that we are participating in all.

During that participation -- I mean, I have to accept the fact, George, we are a little prejudiced. We are obviously prejudiced with the way we are integrating it. But even beyond that, it seems very clear to us that they are looking to us more and more about how is AI going to lead, what kind of AI-related leadership, AI-related products are we going to be providing to the industry. More and more, they seem to be looking towards us is how it feels.

And that definitely is one of the reasons why we are seeing increased sales levels, especially in the HRC and FSM verticals. And that's how it seems like because we are looking at the number of conversations we are leading. We are looking at the number of conferences where they are looking at us to provide the leadership role and to give them context as to what is going on with AI in the industry. That's how it definitely feels to us, George, based on the feedback we are getting from our marketing and strategy leaders who are attending these conferences.

George Sutton

Great. The big surprise number for us was on the product revenue side. We've been sort of underwhelmed, I'd say, in the recent past, given what you've talked about being open systems and open platforms, so enabling your customers to use whatever they need on the hardware side. What has driven the strength, in your opinion? Is it -- have you really improved the product leadership? Or is it really just the result of a handful of deals? Just curious, what's changed there?

Ramesh Srinivasan

Yes. Good question, George. So let me be clear on that. The hardware attach rate to POS sales continues to remain low. So what you stated, we have made the POS terminals in our modernized solutions more open in the sense that they support all the operating systems out there. They support Windows, iOS and Android. So customers can go buy their own iPads and don't need to buy hardware being sold by us. That fact is still true.

So per unit of POS sales, the hardware attach rate is lower than it was a year or 2 ago. So if there is an F&B outlet that used to require 10 terminals, 6 of them can be bought from us, 4 of them, they can use iPads. That state is still true. But what has improved our product revenue now is just the expansion in POS sales. Even though the hardware multiplying factor is low, the overall POS sales has increased so impressively in the last 2, 3 quarters since we released -- 1.5 years ago, we released the unified version, the modernized POS version. We went through our bumps in the road with POS and got past that. So overall POS sales has increased so much that even with the reduced hardware attach rate, the hardware product related product revenue has also increased for us beyond our expectations.

Operator

Our next question comes from the line of Nehal Chokshi of Northland.

Nehal Chokshi

Congrats on an amazing quarter. So subscription revenue growth accelerated from 26.2% in the June quarter. You said 32% or 32.4% in the September quarter. Is it fair to say that the principal driver of this acceleration is layering in revenue from Marriott?

Dave Wood

Yes. I mean, really, I mean, it's everything. I mean, obviously, we're having record sales levels. I mean, everything is going well. I would say it's kind of across the board. I mean, Marriott is going as planned, and everything else is kind of doing a little bit better. But there's really been no change -- material change to the Marriott rollout. So it's really broad-based, that's non-Marriott and Marriott alike.

Nehal Chokshi

Okay. Just to be clear, you're seeing acceleration in subscription revenue from both Marriott and non-Marriott properties?

Dave Wood

That's correct.

Nehal Chokshi

Okay. Fantastic. And then, given that you're raising subscription revenue guidance, recognizing the comment that the deployment from backlog has been faster than expected and that's providing that raise, how should we think about how bookings has proceeded year-to-date, fiscal year-to-date? Has that been ahead of expectations as well? Or is it just merely that you're deploying faster from backlog?

Ramesh Srinivasan

The sales bookings have also done better than we expected going into the fiscal year, Nehal. And the best proof of that is the fact our current backlog, despite the high subscription revenue we are reporting and despite the increased implementations and delivery at the end of the quarter, at the end of Q2, our backlog levels are very close to record high levels. Very close, within a tic of record levels, which happened at the end of Q1.

So while the implementation, execution delivery has increased, driving revenue up, the backlog remains at a very close to a decimal point less of the record level. So that means that the sales bookings have also gone better than expected.

Nehal Chokshi

And then finally, the number of Marriott properties you expect to deploy for this existing set of properties is around 6,000, right? So if you've deployed around 2,000 so far, you're about 33% the way through. Is that an appropriate characterization?

Ramesh Srinivasan

The number is well more than 2,000. And I don't want to get into the percentage of completion and all that, Nehal. I'd rather let our customers do that. But I can tell you, we are not close to the halfway point yet.

In terms -- and the numbers vary widely, Nehal. If you look at properties, it's 1 percentage number. If you look at rooms, it is different because the full-service properties coming up have a much higher number of rooms for property. And then if you look at it in revenue, it is different. So I would say that altogether, we have not yet reached the halfway point. We are not close to it.

Operator

Our next question comes from the line of Billy Fitzsimmons of Piper Sandler.

William Fitzsimmons

I know there have been a couple of questions on Marriott already. For me, for Marriott, can you just frame how the select service SKU is ramping versus the full service SKU, maybe relative to your expectations? Maybe a couple of details on where we are in the rollout of each of those things? Because I know historically, in quarters past, the select one has been ramping faster.

Ramesh Srinivasan

It is -- just to be clear, Billy, I want to be careful not to get too much detail on this. It is best to get the details from the customer. But I can tell you, it is not as if both started at the same time, Billy. That's what you're imagining in your head.

The initial portion of the project, the initial set of implementations were targeted to be select service. That was the first phase of the project. And that has gone as well as expected, that has gone well. And that is about at its end stage.

And now the next phase of the project starts, which is mostly about full-service properties. So it's not as if both started at the same time and one went better than the other. That's not the way it was. Initially, all the focus is only on select service. That's almost completed, went well. Now we're getting started on the full service program.

William Fitzsimmons

Crystal clear. And then my other question would be, you launched 30 AI features at Agilysys Inspire. What are customers' early indications of the -- what are the early indications of customers' willingness to pay for these capabilities? Because it seems like a material part of your opportunity is cross-selling into the existing base. You've mentioned in the prepared remarks today, 14 new customers had adopted an average of 5.6 products. And we know that that's kind of above your exit rate for products per customer last year. How do we think about the opportunity to get your existing base to where you're landing with these new customers?

Ramesh Srinivasan

Yes, Billy. So let's answer the question without talking about AI. Just as a normal process of our business growing, as you can see from our record new product sales, which is basically selling new products to current customer properties, is at a record level now. We have a long growth path ahead of selling our modernized solutions with or without AI to current customer properties.

Now if you look at that number and if you look at conservatively, each of our customer properties can use, say, somewhere whether -- somewhere between 5 and 8 products per property. And we are only like in the 2s now, right? If you don't include our major big brand customers, that number is probably at 2.8 now. So we have a long growth path ahead of selling our current modernized solutions to our current customer base. We've got a long growth path ahead in that.

But now let's talk about the AI-based features. The initial AI-based features that are in production use are in beta properties, and we are not charging customers for that. Customers are using those, giving us feedback, and so forth, the feedback has been very positive.

Now when it comes to the monetization stage of all these features, they will fall into various buckets, Billy. Some of these features will just be normal enhancements we do to our products because customers pay us hundreds of thousands, millions of dollars of recurring fees, expecting that we will invest in R&D and continue enhancing those products. AI will be part of those features. So some of the AI features will fall in that bucket.

Some of the AI features will fall in the monetizable bucket. And they will fall into various ways of monetizing it. There could be an increase in the SaaS fees for certain bulk usage. It could be transactional based on the level of usage. That falls into various categories. It is too early to comment on that now. The current beta properties are at no charge, and the customers are giving us feedback as to how it is improving their operations and guest experience. That's the stage we are in now.

Operator

[Operator Instructions] Our next question comes from the line of Brian Schwartz of Oppenheimer.

Brian Schwartz

Ramesh, I just wanted to ask you about the broader opportunity with new logos. And we talked before about a potential halo effect because of the Marriott relationship. Are you seeing that happen yet with other hotel groups? Or do you still have to have other things happen in terms of implementation success to translate into greater commercial wins and opportunities? Is that still on the come for the business? Or are you starting to see that happen already?

Ramesh Srinivasan

I mean, big hotel brands and those big decisions will happen when the time is right for those hotel brands. It is just not going to happen just based on the fact that certain other implementations have gone well. Each of these big companies have their own cycles of technology renewal, if you will. And at that time, there will be RFPs. And I'm very confident that we will be a significant participant in the RFP.

Nobody is going to come directly to us, and nobody is just going to come just because we've had successful implementations. Right? All these companies have their own cycles and their own budgetary processes where different technology initiatives come up were done. But the next time it comes up for any of the big brands, I'm pretty confident that we will be one of the major players competing for it.

And as more and more of these implementations happen and as more and more of these implementations become more successful, the talk of the town, the talk in the town, the talk in the hospitality industry will increase, and it will increase our chances. That's the way we look at it.

And at the moment, we are not dependent on just the big brands. We have a large growth path ahead of us just based on our current customers and a whole lot of other customers who are investing more and more in us, especially in international regions. So the growth paths are there, and this is one of the growth paths that will open up when the time is right.

Brian Schwartz

And the follow-up for Dave. I just wanted to ask maybe underlying the -- you talked about a record sales performance in Q2. How much is that coming from higher productivity among the existing reps versus adding more capacity, having bigger deals or shorter cycle durations? And then maybe the follow-up would be, how much further can productivity improve without materially having to increase headcount for the business?

Dave Wood

Yes. No, it's a good question. I mean, I think the answer is both. I mean, obviously, especially in our hotels and resorts segment, we increased our quota-carrying sales reps. We almost doubled them a couple of years ago.

So there was a lot of ramp left on the team. This is the first year where we're really starting to see them carry full quotas. And obviously, they're filling up the bucket. So I think there's still ramp left to go on the team. I don't think we have any kind of big hiring coming up, and we can continue to grow the business. But it is nice because this year, we're really seeing pretty close to a ramp team.

Operator

Thank you. I would now like to turn the conference back to Ramesh Srinivasan for closing remarks. Sir?

Ramesh Srinivasan

Thank you, Latif. Thank you all for your guidance and support. Our best wishes for a great and safe holiday season. Merry Christmas, and happy holidays to you all. We look forward to talking to you again in about 3 months from now. Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.