How did AGYS's revenue and expenses trend in Q3 2025?

Agilysys Inc (AGYS) experienced notable growth in revenue and strategic shifts in expenses during Q3 2025, reflecting both opportunities and challenges in the hospitality software market.

1. **Revenue Trend**:
- AGYS achieved a record total net revenue of $69.6 million for Q3 2025, marking a 14.9% increase from the previous year.
- Subscription revenue significantly surged by 45.1%, reaching $28.3 million, which was a key driver of revenue growth.
- Recurring revenue, including subscription and maintenance charges, reached a record $44.4 million, accounting for 63.8% of total net revenue.
2. **Expense Analysis**:
- Product revenue, which includes hardware and other one-time sales, declined by 15.8% to $10.7 million compared to the previous year.
- Services revenue showed a positive trend, increasing by 13.5% to $14.5 million compared to the same quarter last year.
- Gross margin improved slightly to 63.0% from 62.5% in the previous year, indicating better cost management.
3. **Net Income and Profitability**:
- Net income attributable to common shareholders dropped to $3.8 million from $76.9 million in the prior year, primarily due to discrete tax events in the previous year.
- Adjusted EBITDA rose to $14.7 million from $11.8 million in the prior year, suggesting improved operational efficiency.
- Free cash flow increased to $19.7 million from $11.3 million in the third quarter of fiscal 2024, reflecting better liquidity and reduced financial strain.
4. **Challenges and Strategic Focus**:
- AGYS faced challenges in product revenue, particularly in the point-of-sale (POS) segment and international markets, which impacted overall sales and revenue levels.
- The company's focus on innovation and integration, such as the Book4Time acquisition, could drive future growth.
- AGYS revised its full fiscal year total revenue guidance to $273 million, reflecting a cautious approach amidst ongoing sales challenges.

In conclusion, AGYS's Q3 2025 financial results demonstrate robust growth in subscription revenue and improvements in gross margin and adjusted EBITDA. However, the decline in net income and challenges in product revenue highlight areas that require attention. The company's strategic shifts and revised guidance indicate a balanced approach to capitalize on growth opportunities while addressing operational and market-related challenges.