Agilysys (NASDAQ:AGYS) President and CEO Ramesh Srinivasan said the hospitality software provider is entering a new phase of growth after years of rebuilding its product portfolio, with subscription revenue, property management systems and artificial intelligence features expected to drive the business.
Speaking at a William Blair conference session hosted by research analyst Stephen Sheldon, Srinivasan described Agilysys as a company that has effectively recreated itself since 2017, when it began modernizing its hospitality-focused software suite. He said the company, which ended its latest fiscal year with about $319 million in annual revenue, has guided for $365 million to $370 million in revenue for the current fiscal year.
Subscription Revenue Remains the Growth Engine
Srinivasan said Agilysys has now posted 17 consecutive quarters of sequential record revenue and has grown subscription revenue year over year by at least 23% for 18 consecutive quarters. He said subscription revenue has doubled over the past two and a half years, while total revenue has doubled and subscription revenue has tripled over the past four years.
The company expects at least 30% subscription revenue growth in the current fiscal year, which Srinivasan said would mark the third consecutive year of subscription growth above that level. He said about two-thirds of total revenue is now recurring, including subscription revenue and annual maintenance, and that Agilysys is approaching a point where more than half of revenue will come from subscriptions.
Agilysys’ point-of-sale business still accounts for more than 50% of total revenue, but Srinivasan said the company’s property management system, or PMS, segment is its fastest-growing area. He said PMS recurring revenue is expected to exceed POS recurring revenue for the first time this fiscal year.
Marriott Rollout Highlights PMS Momentum
Srinivasan pointed to Marriott as the company’s largest historical win, saying the hotel operator selected Agilysys in December 2022 for thousands of properties after the company was not initially part of the request-for-proposal process. According to Srinivasan, Marriott called Agilysys after reviewing other products and asked to see the company’s PMS offering.
“The single biggest deal we have ever won in our company’s history was an incoming 800 call from a small company called Marriott,” Srinivasan said.
He said more than 1,000 Marriott properties are already live on the system, citing Marriott’s own recent earnings call.
Agilysys serves several hospitality verticals, including casino gaming, managed food service, hotels, cruise ships and multi-unit restaurants. Srinivasan said more than 50% of Agilysys revenue comes from casino gaming. He also said international revenue represents only about 9% of the business, which he described as both a limitation and a growth opportunity, particularly in APAC and EMEA.
Product Ecosystem Is Central to Strategy
Srinivasan emphasized that Agilysys is focused entirely on hospitality software, including POS, PMS, inventory procurement for food and beverage and related modules. He said about two-thirds of the company is in research and development and that the company’s main advantage is an integrated product ecosystem built around POS and PMS.
He said Agilysys customers use an average of 2.3 products per property, while eight or nine modules may apply to a typical property. That creates additional selling opportunities within the existing customer base, he said.
The company’s product ecosystem includes modules for mobile ordering, kiosks, handheld server devices, web booking, service optimization, sales and catering, golf, spa, loyalty and promotions. Srinivasan said the integrated approach helps customers reduce the number of vendors they rely on and accelerate innovation across amenities.
AI Features Added With Guardrails
Srinivasan said Agilysys is introducing more than 35 AI features before the end of July, with many already in place. He grouped the features into four categories: hyper-personalization, multimodal user experience, agentic AI and revenue intelligence.
He said the company’s AI work builds on an “intelligent guest profile” that can connect data across multiple resort amenities, allowing employees in areas such as front desk, golf, spa or dining to receive AI-generated guest insights. He gave the example of staff seeing a short AI-generated summary that may include a guest’s prior stay history, preferences or service issues.
Srinivasan said Agilysys has put governance controls around AI usage, including limits on development and cloud costs, and said the company will not train large language models using customer data. He also cited the need to protect personally identifiable information and comply with GDPR in Europe.
“We are not going to use AI as a crutch to report lowering of profitability,” Srinivasan said, adding that both gross margin and operating margin are expected to improve this year with increased use of AI.
Profitability Targets Move Higher
Srinivasan said Agilysys expects adjusted EBITDA margin of 24% for the current fiscal year, up from 21% previously. He said the company expects first-quarter profitability to be lower, around 16%, due to costs including its April user conference and annual expenses, but expects profitability to rise through the year and approach 30% in the fourth quarter.
He said the company’s rebuilding phase has largely been completed and that operating leverage is beginning to take hold.
“Now we have all the products created. Now we have to behave like a good enterprise software company,” Srinivasan said.
During a brief question-and-answer session, Sheldon asked about customer conversations at Agilysys’ Inspire user conference. Srinivasan said hospitality operators are seeking innovation, better guest satisfaction, fewer integration challenges and more efficient operations, particularly as they evaluate AI-enabled features.
“They are looking to modernize,” Srinivasan said. “More than anything else, they are looking for better guest satisfaction.”
About Agilysys (NASDAQ:AGYS)
Agilysys, Inc is a publicly traded technology company (NASDAQ: AGYS) that specializes in providing software and services to the hospitality industry. The company’s solutions span property management, point-of-sale, inventory and procurement, workforce management, analytics and mobile guest engagement. These offerings are designed to streamline hotel and resort operations, enhance guest experiences and improve financial performance for clients across the lodging, gaming, cruise, senior living and higher-education markets.
Agilysys delivers its portfolio through both cloud-based and on-premises deployments, enabling hoteliers and hospitality operators to select the infrastructure model that best aligns with their operational requirements and IT strategies.
