Agilysys Inc. (NASDAQ: AGYS) unveiled its financial outcomes for the third quarter, revealing strong top-line advancement but a minor setback in earnings per share compared to analyst projections. Following the earnings announcement, shares of the company declined significantly in extended trading on Monday, reflecting investor concerns over the missed EPS target.
In the reported period, Agilysys achieved earnings of $0.42 per share, which did not meet the consensus estimate of $0.46 per share as compiled by Benzinga Pro. While this shortfall disappointed some market participants, the company posted quarterly revenues totaling $80.39 million, surpassing the expected $79.03 million. This figure also represents a marked increase relative to the $69.56 million recorded during the same quarter of the previous year.
The revenue growth is primarily attributed to robust subscription revenues and an expanding share of recurring revenue streams. Recurring revenue, encompassing subscription and maintenance fees, accounted for $52 million this quarter, representing 64.7% of the entire net revenue. This is a slight increase in proportion compared to $44.4 million—or 63.8% of total net revenue—reported in the equivalent quarter last year.
Subscription revenue exhibited strong expansion, rising by 23.1% year-over-year and constituting 67% of the recurring revenue in the recent quarter. This sustained growth in subscription business is a positive indicator of the company's ongoing ability to maintain steady contract-based income over time.
Nevertheless, the company's gross margin experienced a marginal decline, amounting to 62.5% in the third quarter, down from 63.0% during the analogous period last year. This contraction suggests slightly increased costs or possibly changing revenue mix factors that impacted profitability on a per-dollar basis.
Ramesh Srinivasan, CEO of Agilysys, highlighted the significance of these results by noting the quarter as the 16th consecutive period of record revenue, with a total year-over-year increase in revenue of 15.6%. He particularly underscored the 23.1% growth in subscription revenue as a key driver of this sustained momentum.
Following the earnings release, Agilysys shares reacted unfavorably in the extended trading session, declining approximately 14.05% to close at $97.60 per share on Monday. This market movement illustrated investor disappointment linked to the earnings per share miss despite the topline gains.
In summary, while Agilysys delivered commendable revenue growth and continued increase in recurring revenue proportions, the earnings result underperformed relative to expectations and triggered a substantial decrease in its stock price beyond regular trading hours. The balance between sustaining revenue momentum and managing margin pressures will be critical moving forward.