10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission file number 0-5734

AGILYSYS, INC.

(Exact name of registrant as specified in its charter)

Ohio	34-0907152
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1000 Windward Concourse, Suite 250, Alpharetta, Georgia	30005
(Address of principal executive offices)	(ZIP Code)
(770) 810-7800
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨		Accelerated filer	x
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of Common Shares of the registrant outstanding as of July 30, 2018 was 23,525,482.

AGILYSYS, INC.

Index

Part I. Financial Information
	Item 1	Financial Statements	3
		Condensed Consolidated Balance Sheets (Unaudited) - June 30, 2018 and March 31, 2018	3
		Condensed Consolidated Statements of Operations (Unaudited) - Three Months Ended June 30, 2018 and June 30, 2017	4
		Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - Three Months Ended June 30, 2018 and June 30, 2017	5
		Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended June 30, 2018 and June 30, 2017	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4	Controls and Procedures	30
Part II. Other Information
	Item 1	Legal Proceedings	30
	Item 1A	Risk Factors	30
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 3	Defaults Upon Senior Securities	30
	Item 4	Mine Safety Disclosures	30
	Item 5	Other Information	30
	Item 6	Exhibits	30
Signatures

2

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2018			March 31, 2018
(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	35,076		$	39,943
Accounts receivable, net of allowance for doubtful accounts of $809 and $900, respectively	20,306			16,389
Contract assets	5,273			—
Inventories	1,765			1,999
Prepaid expenses and other current assets	5,421			5,593
Total current assets	67,841			63,924
Property and equipment, net	17,113			17,512
Goodwill	19,622			19,622
Intangible assets, net	8,473			8,484
Software development costs, net	44,506			45,181
Other non-current assets	4,673			2,484
Total assets	$	162,228		$	157,207
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	9,033		$	8,400
Contract liabilities	30,781			26,820
Accrued liabilities	8,541			9,241
Capital lease obligations, current	96			120
Total current liabilities	48,451			44,581
Deferred income taxes, non-current	251			227
Capital lease obligations, non-current	51			57
Other non-current liabilities	3,726			3,911
Commitments and contingencies (see Note 8)
Shareholders' equity:
Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 31,606,831 shares issued; and 23,526,906 and 23,324,679 shares outstanding at June 30, 2018 and March 31, 2018, respectively	9,482			9,482
Treasury shares, 8,079,925 and 8,282,152 at June 30, 2018 and March 31, 2018, respectively	(2,425		)	(2,486		)
Capital in excess of stated value	(1,524		)	(1,911		)
Retained earnings	104,479			103,601
Accumulated other comprehensive loss	(263		)	(255		)
Total shareholders' equity	109,749			108,431
Total liabilities and shareholders' equity	$	162,228		$	157,207

See accompanying notes to condensed consolidated financial statements.

3

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended
	June 30,
(In thousands, except share data)	2018			2017
Net revenue:
Products	$	9,080		$	10,283
Support, maintenance and subscription services	17,929			16,667
Professional services	6,998			6,915
Total net revenue	34,007			33,865
Cost of goods sold:
Products (inclusive of developed technology amortization)	7,130			7,624
Support, maintenance and subscription services	4,074			4,035
Professional services	4,914			5,536
Total cost of goods sold	16,118			17,195
Gross profit	17,889			16,670
	52.6		%	49.2		%
Operating expenses:
Product development	7,089			6,626
Sales and marketing	4,754			5,130
General and administrative	6,005			6,800
Depreciation of fixed assets	606			611
Amortization of intangibles	543			485
Restructuring, severance and other charges	440			37
Legal settlements	91			—
Total operating expense	19,528			19,689
Operating loss	(1,639		)	(3,019		)
Other expense (income):
Interest (income)	(55		)	(28		)
Interest expense	3			2
Other expense (income), net	198			(113		)
Loss before taxes	(1,785		)	(2,880		)
Income tax (benefit) expense	(49		)	78
Net loss	$	(1,736	)	$	(2,958	)
Weighted average shares outstanding	23,095			22,720
Loss per share - basic and diluted:
Loss per share	$	(0.08	)	$	(0.13	)

See accompanying notes to condensed consolidated financial statements.

4

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three months ended
	June 30,
(In thousands)	2018			2017
Net loss	$	(1,736	)	$	(2,958	)
Other comprehensive (loss)/gain, net of tax:
Unrealized foreign currency translation adjustments	(8		)	44
Total comprehensive loss	$	(1,744	)	$	(2,914	)

See accompanying notes to condensed consolidated financial statements.

5

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three months ended
	June 30,
(In thousands)	2018			2017
Operating activities
Net loss	$	(1,736	)	$	(2,958	)
Adjustments to reconcile net loss to net cash used in operating activities
Net restructuring, severance and other charges	15			(12		)
Net legal settlements	91			—
Depreciation	606			611
Amortization	543			485
Amortization of developed technology	2,663			2,307
Deferred income taxes	28			106
Share-based compensation	409			1,219
Change in cash surrender value of company owned life insurance policies	(4		)	(6		)
Changes in operating assets and liabilities	(3,978		)	(2,236		)
Net cash used in operating activities	(1,363		)	(484		)
Investing activities
Capital expenditures	(744		)	(2,125		)
Capitalized software development costs	(2,132		)	(2,990		)
Investments in corporate-owned life insurance policies	(2		)	(2		)
Net cash used in investing activities	(2,878		)	(5,117		)
Financing activities
Repurchase of common shares to satisfy employee tax withholding	(495		)	(265		)
Principal payments under long-term obligations	(30		)	(31		)
Net cash used in financing activities	(525		)	(296		)
Effect of exchange rate changes on cash	(101		)	50
Net decrease in cash and cash equivalents	(4,867		)	(5,847		)
Cash and cash equivalents at beginning of period	$	39,943		$	49,255
Cash and cash equivalents at end of period	$	35,076		$	43,408
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Accrued capital expenditures	$	82		$	243
Accrued capitalized software development costs	57			681

See accompanying notes to condensed consolidated financial statements.

6

AGILYSYS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Table amounts in thousands, except per share data)

1. Nature of Operations and Financial Statement Presentation

Nature of Operations

Agilysys is a leading technology company that provides innovative software and services for point-of-sale (POS), payment gateway, reservation and table management, property management (PMS), inventory and procurement, business analytics, document management, guest offers management, and mobile and wireless solutions exclusively to the hospitality industry. Our products and services allow operators to streamline operations, improve efficiency and understand customer needs across their properties to deliver a superior overall guest experience. The result is improved guest loyalty, growth in wallet share and increased revenue as they connect and transact with their guests based upon a single integrated view of individual preferences and interactions. We serve four major market sectors: Gaming, both corporate and tribal; Hotels, Resorts and Cruise; Corporate Foodservice Management; and Restaurants, Universities, Stadia and Healthcare. A significant portion of our consolidated revenue is derived from contract support, maintenance and subscription services.

Agilysys operates across North America, Europe, Asia-Pacific, and India with headquarters located in Alpharetta, GA. For more information, visit www.agilysys.com.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include our accounts consolidated with our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on March 31st. References to a particular year refer to the fiscal year ending in March of that year. For example, fiscal 2019 refers to the fiscal year ending March 31, 2019.

Our unaudited interim financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to the Quarterly Report on Form 10-Q (Quarterly Report) under the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 10-01 of Regulation S-X under the Exchange Act. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

The Condensed Consolidated Balance Sheet as of June 30, 2018, as well as the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Loss, and the Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2018 and 2017, are unaudited. However, these financial statements have been prepared on the same basis as those in the audited annual financial statements, except for the recently adopted accounting pronouncements described below. In the opinion of management, all adjustments of a recurring nature necessary to fairly state the results of operations, financial position, and cash flows have been made.

These unaudited interim financial statements should be read together with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended March 31, 2018, filed with the Securities and Exchange Commission (SEC) on May 25, 2018.

2. Summary of Significant Accounting Policies

A detailed description of our significant accounting policies can be found in the audited financial statements for the fiscal year ended March 31, 2018, included in our Annual Report on Form 10-K. Our accounting policy for revenue recognition changed with the adoption of Accounting Standards Update ("ASU") No. 2014-09 ("Topic 606"), as described further

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below. There have been no other material changes to our significant accounting policies and estimates from those disclosed therein.

Reclassification - Certain prior year balances have been reclassed to conform to the current year presentation. Specifically, we have elected to present our changes in operating assets and liabilities on the condensed consolidated statements of cash flows as a single line item. Prior year results have been condensed to be consistent with current year presentation.

Adopted and Recently Issued Accounting Pronouncements

In February 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). ASU 2018-02 addresses the effect of the change in the U.S. federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017. The new standard is effective for annual periods, and for interim periods within those annual periods beginning after December 15, 2018, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, and ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. We have adopted this standard as of April 1, 2018; the adoption had no impact to our condensed consolidated financial statements. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. While we are still assessing the impact of this standard, we do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new guidance is effective for annual reporting periods beginning after December 15, 2017. The new standard must be adopted using a modified retrospective transition method, with the cumulative effect recognized as of the date of initial adoption. We have adopted this standard as of April 1, 2018; the adoption had no impact to our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance with the intent of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted, including adoption in an interim period. We have adopted this standard as of April 1, 2018; the adoption had no impact to our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). This new standard changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans, and other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted. We are currently reviewing this standard to assess the impact on our future consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition,

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measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance will require both types of leases to be recognized on the balance sheet. The new guidance is effective for all periods beginning after December 15, 2018 and we are currently evaluating the effects that the adoption of ASU No. 2016-02 will have on our consolidated financial statements, but anticipate that the new guidance will materially impact our consolidated financial statements given the significance of our leases.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We adopted ASU No. 2014-09 as of April 1, 2018 using the modified retrospective transition method. Please refer to Note 3, "Revenue Recognition" for further details.

3. Revenue Recognition

On April 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method applied to those contracts that were not completed as of the adoption date. Results for reporting periods beginning after the adoption date are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under prior guidance.

Disaggregation of Revenue

We derive and report our revenue from the sale of products (software and hardware including server, storage, and point of sale), support, maintenance and subscription services and professional services. Revenue recognized at a point in time (products) totaled $9.1 million and over time (support, maintenance and subscription services and professional services) totaled $24.9 million for the three months ended June 30, 2018. See Nature of Goods and Services section below for additional information regarding revenue recognition procedures for our revenue streams.

Nature of Goods and Services

Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer purchase order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Multiple contracts with a single counterparty entered into at the same time are evaluated to determine if the contracts should be combined and accounted for as a single contract.

Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract. Capable of being distinct means the customer can benefit from the goods or services either on its own or together with other resources that are readily available from third parties or from us. Distinct in the context of the contract means the transfer of the goods or services is separately identifiable from other promises in the contract. The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer. Typically, our contracts do not provide our customer with any right of return or refund; we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or a refund.

Typically, our customer contracts contain one or more of the following goods or services as performance obligations.

Our software licenses typically provide for a perpetual right to use our software. Generally, our contracts do not provide significant services of integration and customization and installation services are not required to be purchased directly from us. The software is delivered before related services are provided and is functional without professional services, updates and technical support. We have concluded that the software license is distinct as the customer can benefit from the

9

software on its own. Software revenue is typically recognized when the software is delivered or made available for download to the customer.

Revenue for hardware sales is recognized when the product is shipped to the customer and when obligations that affect the customer's final acceptance of the arrangement have been fulfilled. A majority of our hardware sales involves shipment directly from its suppliers to the end-user customers. In these transactions, we are the primary obligor as we are responsible for negotiating price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and we bear the credit risk if the customer does not pay for the goods. As the principal contact with the customer, we recognize revenue and cost of goods sold when we are notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination or upon installation at the customer site.

Support and certain maintenance revenue is derived from providing telephone and on-line technical support services, bug fixes, and unspecified software updates and upgrades to customers on a when-and-if-available basis. Each of these performance obligations provide benefit to the customer on a standalone basis and are distinct in the context of the contract. Each of these distinct performance obligations represent a stand ready obligation to provide service to a customer, which is concurrently delivered and has the same pattern of transfer to the customer, which is why we account for these support services as a single performance obligation.

Our subscription service revenue is comprised of fees for Software as a Service (“SaaS”) contracts that provide customers a right to access our software, which we maintain, and host in a data center, for a subscribed period. We do not provide the customer the contractual right to license the software outside of the data center at any time during the subscription period under these contracts. The customer can only benefit from the software and software maintenance when combined with the hosting service since the right to access is only provided to the software hosted in the data center. Accordingly, each of the rights to access the software, the maintenance services, and the hosting services is not considered a distinct performance obligation in the context of the contract and should be combined into a single performance obligation and recognized over the contract period. Typically, we invoice fees monthly.

Professional services revenues primarily consist of fees for consulting, installation, integration and training and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are being performed. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation.

We estimate standalone selling price ("SSP") based on the price at which the performance obligations are sold by considering certain specific factors related to our company together with customer information. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.

Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold. Revenue is recorded net of any applicable taxes collected and remitted to governmental agencies.

Contract Balances

Contract assets are rights to consideration in exchange for goods or services that we have transferred to a customer when that right is conditional on something other than the passage of time. The majority of our contract assets represent unbilled amounts related to professional services. We expect billing and collection of our contract assets to occur within the next twelve months. We receive payments from customers based upon contractual billing schedules and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities represent consideration received or consideration which is unconditionally due from customers prior to transferring goods or services to the customer under the terms of the contract.

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Revenue recognized during the three months ended June 30, 2018 from amounts included in contract liabilities at the beginning of the period was $11.6 million. During the three months ended June 30, 2018, we transferred $3.0 million to accounts receivable from contract assets recognized at April 1, 2018 because the right to the transaction consideration became unconditional.

Our arrangements are for a period of one year or less. We had approximately $34 million of remaining performance obligations as of June 30, 2018, which we expect to recognize over the next twelve months.

Assets Recognized from Costs to Obtain a Contract

We capitalize commission expenses paid to internal sales personnel expenses that are incremental to obtaining customer contracts. We have determined that these commission expenses are in fact incremental and would not have occurred absent the customer contract. Capitalized sales commissions are amortized on a straight-line basis over the period the goods or services are transferred to the customer to which the assets relate, which can range as long as five years. We have determined that certain sales incentive programs meet the requirements to be capitalized. We have capitalized $1.9 million of sales incentive costs in prior periods as part of our opening retained earnings adjustment on April 1, 2018. These balances are included in other non-current assets on our condensed consolidated balance sheet and are amortized as we satisfy the underlying performance obligations, generally based on the contract terms and anticipated renewals. During the three months ended June 30, 2018, we expensed $0.9 million of sales commissions, which is included in operating expenses - sales and marketing in our condensed consolidated statement of operations. All other costs to obtain a contract are not considered incremental and therefore are expensed as incurred.

Financial Statement Impact of Adoption on Previously Reported Results

We adopted Topic 606 using the modified retrospective method. The cumulative impact of applying the new guidance to all contracts with customers that were not completed as of April 1, 2018 was recorded as an adjustment to retained earnings as of the adoption date. As a result of applying the modified retrospective method to adopt the new standard, the following adjustments were made to noted accounts on the condensed consolidated balance sheet as of April 1, 2018:

(In thousands)	March 31, 2018	Adjustment from Topic 606		April 1, 2018
Assets:
Accounts receivable, net	16,389	3,124		19,513
Contract assets	—	4,583		4,583
Prepaid expenses and other current assets	5,593	(496	)	5,097
Other non-current assets	2,484	2,409		4,893
Liabilities:
Contract liabilities	26,820	7,006		33,826
Shareholders' equity:
Retained earnings	103,601	2,614		106,215

The acceleration of revenue that was deferred under prior guidance as of the adoption date was primarily attributable to the requirement of Topic 606 to allocate the transaction price to the performance obligations in the contract on a relative basis using SSP rather than allocating under the residual method, which allocates the entire arrangement discount to the delivered performance obligations.

Due to the Company's full valuation allowance as of the adoption date, there is no tax impact associated with the adoption of Topic 606.

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We made certain presentation changes to our condensed consolidated balance sheet on April 1, 2018 to comply with Topic 606. Prior to adoption of the new standard, we offset accounts receivable and contract liabilities (previously presented as deferred revenue on our condensed consolidated balance sheet) for unpaid deferred performance obligations included in contract liabilities. Under the new standard, we record accounts receivable and related contract liabilities for non-cancelable contracts with customers when the right to consideration is unconditional. Upon adoption, the right to consideration in exchange for goods or services that have been transferred to a customer when that right is conditional on something other than the passage of time were reclassified from accounts receivable to contract assets.

Impact of Topic 606 on Financial Statement Line Items

The impact of adoption of Topic 606 on our condensed consolidated balance sheet as of June 30, 2018 and on our condensed consolidated statement of operations for the three months ended June 30, 2018 was as follows:

	June 30, 2018
	As reported	Balance without adoption of Topic 606	Effect of Change Higher (Lower)
(In thousands)
Assets:
Accounts receivable, net	20,306	19,491	815
Contract assets	5,273	—	5,273
Prepaid expenses and other current assets	5,421	5,890	(469	)
Other non-current assets	4,673	2,211	2,462
Liabilities:
Contract liabilities	30,781	25,230	5,551
Shareholders' equity:
Retained earnings	104,479	101,949	2,530

	June 30, 2018
	As reported		Balance without adoption of Topic 606		Effect of Change Higher (Lower)
(In thousands)
Net revenue:
Products	9,080		8,702		378
Support, maintenance and subscription services	17,929		18,187		(258	)
Professional services	6,998		7,167		(169	)
Total net revenue:	34,007		34,056		(49	)
Operating expenses:
Sales and marketing	4,754		4,719		35
Net Loss	(1,736	)	(1,652	)	(84	)

The adoption of Topic 606 had no impact to cash used in operating, investing or financing activities on our condensed consolidated statement of cash flows.

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4. Restructuring Charges

We recognize restructuring charges when a plan that materially changes the scope of our business or the manner in which that business is conducted is adopted and communicated to the impacted parties, and the expenses have been incurred or are reasonably estimable.

Fiscal 2018 Restructuring Plan

As of June 30, 2018, we had a remaining liability of approximately $0.1 million recorded for the fiscal 2018 restructuring plan.

Following is a reconciliation of the beginning and ending balances of the restructuring liability:

	Balance at		Provisions/Adjustments		Payments			Balance at
(In thousands)	March 31, 2018							June 30, 2018
Fiscal 2018 Restructuring Plan:
Restructuring and other employment costs	$	198	$	—	$	(111	)	$	87
Total restructuring costs	$	198	$	—	$	(111	)	$	87

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5. Intangible Assets and Software Development Costs

The following table summarizes our intangible assets and software development costs:

	June 30, 2018							March 31, 2018
	Gross					Net		Gross					Net
	carrying		Accumulated			carrying		carrying		Accumulated			carrying
(In thousands)	amount		amortization			amount		amount		amortization			amount
Amortized intangible assets:
Customer relationships	$	10,775	$	(10,775	)	$	—	$	10,775	$	(10,775	)	$	—
Non-competition agreements	2,700		(2,700		)	—		2,700		(2,700		)	—
Developed technology	10,398		(10,398		)	—		10,398		(10,398		)	—
Trade names	230		(157		)	73		230		(146		)	84
Patented technology	80		(80		)	—		80		(80		)	—
	24,183		(24,110		)	73		24,183		(24,099		)	84
Unamortized intangible assets:
Trade names	8,400		N/A			8,400		8,400		N/A			8,400
Total intangible assets	$	32,583	$	(24,110	)	$	8,473	$	32,583	$	(24,099	)	$	8,484
Software development costs	$	67,541	$	(23,035	)	$	44,506	$	53,368	$	(20,372	)	$	32,996
Project expenditures not yet in use	—		—			—		12,185		—			12,185
Total software development costs	$	67,541	$	(23,035	)	$	44,506	$	65,553	$	(20,372	)	$	45,181

The following table summarizes our remaining estimated amortization expense relating to in service intangible assets and software development costs.

	Estimated
	Amortization
(In thousands)	Expense
Fiscal year ending March 31,
2019	$	9,973
2020	12,599
2021	12,515
2022	5,403
2023	3,399
2024	690
Total	$	44,579

Amortization expense for software development costs related to assets to be sold, leased, or otherwise marketed was $2.7 million and $2.3 million for the three months ended June 30, 2018 and 2017, respectively. These charges are included as Products cost of goods sold within the condensed consolidated statements of operations. Amortization expense relating to other definite-lived intangible assets was $11,500 for the three months ended June 30, 2018 and 2017. These charges are classified as Amortization of intangibles within the condensed consolidated statements of operations along with Amortization expense related to our Capitalized Internal-Use Software that we classify in Property and Equipment, net within the condensed consolidated balance sheets.

Capitalized software development costs for software internally developed to be sold, leased, or otherwise marketed, are carried on our balance sheet at carrying value, net of accumulated amortization. We capitalized approximately $2.0 million and $2.8 million during the three months ended June 30, 2018 and 2017, respectively.

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6. Additional Balance Sheet Information

Additional information related to the condensed consolidated balance sheets is as follows:

(In thousands)	June 30, 2018		March 31, 2018
Accrued liabilities:
Salaries, wages, and related benefits	$	6,055	$	6,793
Other taxes payable	694		769
Restructuring liabilities	86		198
Accrued legal settlements	91		—
Severance liabilities	197		—
Professional fees	271		288
Deferred rent	411		407
Other	736		786
Total	$	8,541	$	9,241
Other non-current liabilities:
Uncertain tax positions	$	1,435	$	1,519
Deferred rent	2,215		2,313
Other	76		79
Total	$	3,726	$	3,911

Accounts Receivable, net

Accounts receivable, net of allowance for doubtful accounts was $20.3 million and $16.4 million as of June 30, 2018 and March 31, 2018, respectively. The related allowance for doubtful accounts was $0.8 million and $0.9 million as of June 30, 2018 and March 31, 2018, respectively.

7. Income Taxes

The following table compares our income tax (benefit) expense and effective tax rates for the three months ended June 30, 2018 and 2017:

	Three months ended
	June 30,
(Dollars in thousands)	2018			2017
Income tax (benefit) expense	$	(49	)	$	78
Effective tax rate	2.7		%	(2.7		)%

For the three months ended June 30, 2018, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, an adjustment to true-up uncertain tax positions, certain foreign and state tax effects and other U.S. permanent book to tax differences.

For the three months ended June 30, 2017, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state tax effects, and other U.S. permanent book to tax differences.

We have recorded a valuation allowance offsetting substantially all of our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Because of our losses in prior periods, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences.

15

On December 22, 2017, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB No. 118 allows registrants to record provisional amounts for a period up to one year from the date of enactment of the Tax Act when the registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. It is uncertain if and to what extent various states will enact legislation to conform to the Tax Act. Because legislative guidance and accounting interpretations are expected in the future, we consider the accounting of the deferred tax remeasurement including the ability to offset indefinite lived deferred tax liabilities with certain deferred tax assets to be incomplete and therefore only consider amounts related to these items to be reasonably estimated as of March 31, 2018 and June 30, 2018. We expect to refine and complete the accounting for the Tax Act during fiscal 2019 as we obtain, prepare and analyze additional information and as additional legislative, regulatory and accounting guidance and interpretations become available.

8. Commitments and Contingencies

Agilysys is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. We provide for costs related to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on our future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount or timing of the resolution of such matters. While it is not possible to predict with certainty, management believes that the ultimate resolution of such individual or aggregated matters will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

On April 6, 2012, Ameranth, Inc. filed a complaint against us for patent infringement in the United States District Court for the Southern District of California. Ameranth alleges, among other things, that point-of-sale and property management and other hospitality information technology products, software, components and/or systems sold by us infringe a patent owned by Ameranth purporting to cover generation and synchronization of menus, including restaurant menus, event tickets, and other products across fixed, wireless and/or internet platforms as well as synchronization of hospitality information and hospitality software applications across fixed, wireless and internet platforms. The complaint seeks monetary damages, injunctive relief, costs and attorneys' fees. At this time, we are not able to predict the outcome of this lawsuit, or any possible monetary exposure associated with the lawsuit. However, we dispute the allegations of wrongdoing and are vigorously defending ourselves in this matter.

9. (Loss) per Share

The following data shows the amounts used in computing (loss) per share and the effect on earnings and the weighted average number of shares of dilutive potential common shares.

	Three months ended
	June 30,
(In thousands, except per share data)	2018			2017
Numerator:
Net loss	$	(1,736	)	$	(2,958	)
Denominator:
Weighted average shares outstanding	23,095			22,720
Loss per share - basic and diluted:
Loss per share	$	(0.08	)	$	(0.13	)
Anti-dilutive stock options, SSARs, restricted shares and performance shares	1,356			1,575

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Basic loss per share is computed as net income available to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes 490,117 and 646,134 of restricted shares at June 30, 2018 and 2017, respectively, as these shares were issued but were not vested and therefore, not considered outstanding for purposes of computing basic loss per share at the balance sheet dates.

Diluted loss per share includes the effect of all potentially dilutive securities on earnings per share. We have stock options, stock-settled appreciation rights ("SSARs"), unvested restricted shares and unvested performance shares that are potentially dilutive securities. When a loss is reported, the denominator of diluted earnings per share cannot be adjusted for the dilutive impact of share-based compensation awards because doing so would be anti-dilutive. Therefore, for all periods presented, basic weighted-average shares outstanding were used in calculating the diluted net loss per share.

10. Share-based Compensation

We may grant non-qualified stock options, incentive stock options, SSARs, restricted shares, and restricted share units under our shareholder-approved 2016 Stock Incentive Plan ("2016 Plan") for up to2.0 million common shares, plus 957,575 common shares, the number of shares that were remaining for grant under the 2011 Stock Incentive Plan ("2011 Plan") as of the effective date of the 2016 Plan, plus the number of shares remaining for grant under the 2011 Plan that are forfeited, settled in cash, canceled or expired. The maximum aggregate number of restricted shares or restricted share units that may be granted under the 2016 Plan is 1.25 million. With respect to awards that are intended to qualify for the performance-based exception to the deductibility limitations of Section 162(m) of the Internal Revenue Code, the maximum number of shares subject to stock options or SSARs that may be granted to an individual in a calendar year is 800,000 shares, and the maximum number of shares subject to restricted shares or restricted share units that may be granted to an individual in a calendar year is 400,000 shares.

We may distribute authorized but unissued shares or treasury shares to satisfy share option and appreciation right exercises or restricted share and performance share awards.

We record compensation expense related to stock options, SSARs, restricted shares, and performance shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date. The fair value of restricted share and performance share awards is based on the closing price of our common shares on the grant date. The fair value of stock option and SSARs awards is estimated on the grant date using the Black-Scholes-Merton option pricing model, which includes assumptions regarding the risk-free interest rate, dividend yield, life of the award, and the volatility of our common shares.

The following table summarizes the share-based compensation expense for options, SSARs, restricted and performance awards included in the Condensed Consolidated Statements of Operations:

	Three months ended
	June 30,
(In thousands)	2018			2017
Product development	$	(85	)	$	421
Sales and marketing	65			169
General and administrative	429			629
Total share-based compensation expense	409			1,219

Stock-Settled Appreciation Rights

SSARs are rights granted to an employee to receive value equal to the difference in the price of our common shares on the date of the grant and on the date of exercise. This value is settled in common shares of Agilysys, Inc.

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The following table summarizes the activity during the three months ended June 30, 2018 for SSARs awarded under the 2011 and 2016 Plans:

	Number of Rights		Weighted-Average Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value
(In thousands, except share and per share data)			(per right)		(in years)
Outstanding at April 1, 2018	1,103,160		$	10.6
Granted	158,244		14.22
Exercised	(154,312	)	10.57
Forfeited	(32,359	)	10.36
Cancelled/expired	(3,492	)	9.60
Outstanding at June 30, 2018	1,071,241		$	11.15	5.4	$	2,516
Exercisable at June 30, 2018	499,292		$	10.46	4.8	$	2,516

As of June 30, 2018, total unrecognized stock based compensation expense related to non-vested SSARs was $1.2 million, which is expected to be recognized over a weighted-average vesting period of 3.1 years.

Restricted Shares

We granted shares to certain of our Directors, executives and key employees, the vesting of which is service-based. The following table summarizes the activity during the three months ended June 30, 2018 for restricted shares awarded under the 2011 and 2016 Plans:

	Number of Shares		Weighted-Average Grant-Date Fair Value
(In thousands, except share and per share data)			(per share)
Outstanding at April 1, 2018	243,354		$	10.78
Granted	233,410		14.22
Vested	—		—
Forfeited	(49,938	)	10.32
Outstanding at June 30, 2018	426,826		$	12.72

The weighted-average grant date fair value of the restricted shares is determined based upon the closing price of our common shares on the grant date. As of June 30, 2018, total unrecognized stock based compensation expense related to non-vested restricted stock was $4.3 million, which is expected to be recognized over a weighted-average vesting period of 2.3 years.

Performance Shares

We awarded certain restricted shares to our Chief Executive Officer, the vesting of which is performance based. The number of shares that vest will be based on relative attainment of a performance metric and any unvested shares will forfeit upon settlement of the bonus.

The following table summarizes the activity during the three months ended June 30, 2018 for the performance shares awarded under the 2016 Plan:

	Number of Shares
(In thousands, except share and per share data)
Outstanding at April 1, 2018	91,463
Granted	63,291
Forfeited	(75,641	)
Vested	(15,822	)
Outstanding at June 30, 2018	63,291

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Based on the performance goals, management estimates a liability of $450,000 to be settled through the vesting of a variable number of the performance shares subsequent to March 31, 2019. As of June 30, 2018, total unrecognized stock based compensation expense related to non-vested performance shares was $405,000, which is expected to be recognized over the remaining vesting period of 9 months.

11. Fair Value Measurements

We estimate the fair value of financial instruments using available market information and generally accepted valuation methodologies. We assess the inputs used to measure fair value using a three-tier hierarchy. The hierarchy indicates the extent to which pricing inputs used in measuring fair value are observable in the market. Level 1 inputs include unadjusted quoted prices for identical assets or liabilities and are the most observable. Level 2 inputs include unadjusted quoted prices for similar assets and liabilities that are either directly or indirectly observable, or other observable inputs such as interest rates, foreign currency exchange rates, commodity rates, and yield curves. Level 3 inputs are not observable in the market and include our own judgments about the assumptions market participants would use in pricing the asset or liability. The use of observable and unobservable inputs is reflected in the hierarchy assessment disclosed in the tables below.

There were no significant transfers between Levels 1, 2, and 3 during the three months ended June 30, 2018 and 2017.

The following tables present information about our financial assets measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

	Fair value measurement used
	Recorded value as of		Active markets for identical assets or liabilities	Quoted prices in similar instruments and observable inputs	Active markets for unobservable inputs
(In thousands)	June 30, 2018		(Level 1)	(Level 2)	(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	859	—	—	$	859

	Fair value measurement used
	Recorded value as of		Active markets for identical assets or liabilities	Quoted prices in similar instruments and observable inputs	Active markets for unobservable inputs
(In thousands)	March 31, 2018		(Level 1)	(Level 2)	(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	853	—	—	$	853

The recorded value of the corporate-owned life insurance policies is adjusted to the cash surrender value of the policies obtained from the third party life insurance providers, which are not observable in the market, and therefore, are classified within Level 3 of the fair value hierarchy. Changes in the cash surrender value of these policies are recorded within “Other (income) expenses, net” in the Condensed Consolidated Statements of Operations.

19

The following table presents a summary of changes in the fair value of the Level 3 assets:

	Three months ended
	June 30,
(In thousands)	2018		2017
Corporate-owned life insurance:
Balance on April 1	$	853	$	809
Unrealized gain relating to instruments held at reporting date	4		4
Purchases, sales, issuances and settlements, net	2		2
Balance on June 30	$	859	$	815

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

In “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), management explains the general financial condition and results of operations for Agilysys and subsidiaries including:

—    what factors affect our business;

—    what our earnings and costs were;

—    why those earnings and costs were different from the year before;

—    where the earnings came from;

—    how our financial condition was affected; and

—    where the cash will come from to fund future operations.

The MD&A analyzes changes in specific line items in the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows and provides information that managementbelieves is important to assessing and understanding our consolidated financial condition and results of operations. This Quarterly Report on Form 10-Q updates information included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018, filed with the Securities and Exchange Commission (SEC). This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes that appear in Item 1 of this Quarterly Report as well as our Annual Report for the year ended March 31, 2018. Information provided in the MD&A may includeforward-looking statements that involve risks and uncertainties. Many factors couldcause actual results to be materially different from those contained in the forward-lookingstatements. See “Forward-Looking Information” on page 27 of this Quarterly Report, Item 1A "Risk Factors" in Part II of this Quarterly Report, and Item 1A “Risk Factors”in Part I of our Annual Report for the fiscal year ended March 31, 2018 for additional informationconcerning these items. Management believes that this information, discussion, and disclosure is important in making decisions about investing in Agilysys.

Overview

Agilysys is a leading technology company that provides innovative software and services for point-of-sale (POS), payment gateway, reservation and table management, property management (PMS), inventory and procurement, business analytics, document management, guest offers management, and mobile and wireless solutions exclusively to the hospitality industry. Our products and services allow operators to streamline operations, improve efficiency and understand customer needs across their properties to deliver a superior overall guest experience. The result is improved guest loyalty, growth in wallet share and increased revenue as they connect and transact with their guests based upon a single integrated view of individual preferences and interactions. We serve four major market sectors: Gaming, both corporate and tribal; Hotels, Resorts and Cruise; Corporate Foodservice Management; and Restaurants, Universities, Stadia and Healthcare. A significant portion of our consolidated revenue is derived from contract support, maintenance and subscription services.

Agilysys operates across North America, Europe, Asia-Pacific, and India with headquarters located in Alpharetta, GA. For more information, visit www.agilysys.com.

Our top priority is to increase shareholder value by improving operating and financial performance and profitably growing the business through superior products and services. To that end, we expect to invest a certain portion of our cash on hand to fund enhancements to existing software products, to develop and market new software products, and to expand our customer breadth, both vertically and geographically.

Our strategic plan specifically focuses on:

• Putting the customer first

• Accelerating our product development

• Improving organizational efficiency and teamwork

• Developing our employees and leaders

• Growing revenue by improving the breadth and depth of our product set across both our well established products and our newer rGuest platform

21

• Growing revenue through international expansion

The primary objective of our ongoing strategic planning process is to create shareholder value by capitalizing on growth opportunities, turning profitable and strengthening our competitive position within the specific technology solutions and end markets we serve. Profitability and industry leading growth will be achieved through tighter management of operating expenses and sharpening the focus of our investments to concentrate on growth opportunities that offer the highest returns.

22

Revenue - Defined

On April 1, 2018 we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method applied to the contracts that were not completed as of the adoption date. Results for operating periods beginning after the adoption date are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under prior guidance in effect at that time. For additional information regarding the adoption of this accounting standard, please refer to Note 3, "Revenue Recognition" in our condensed consolidated financial statement in Part I, Item I of this report for further details.

As required by the SEC, we separately present revenue earned as products revenue, support, maintenance and subscription services revenue or professional services revenue in our condensed consolidated statements of operations. In addition to the SEC requirements, we may, at times, also refer to revenue as defined below. The terminology, definitions, and applications of terms we use to describe our revenue may be different from those used by other companies and caution should be used when comparing these financial measures to those of other companies. We use the following terms to describe revenue:

• Products revenue – Revenue earned from the sales of hardware equipment and proprietary and remarketed software.

• Support, maintenance and subscription services revenue – Revenue earned from the sale of proprietary and remarketed ongoing support, maintenance and subscription or hosting services.

• Professional services revenue – Revenue earned from the delivery of implementation, integration and installation services for proprietary and remarketed products.

23

Results of Operations

First Fiscal Quarter 2019 Compared to First Fiscal Quarter 2018

Net Revenue and Operating Loss

The following table presents our consolidated revenue and operating results for the three months ended June 30, 2018 and 2017:

	Three months ended
	June 30,						Increase (decrease)
(Dollars in thousands)	2018			2017			$			%
Net revenue:
Products	$	9,080		$	10,283		$	(1,203	)	(11.7	)%
Support, maintenance and subscription services	17,929			16,667			1,262			7.6
Professional services	6,998			6,915			83			1.2
Total net revenue	34,007			33,865			142			0.4
Cost of goods sold:
Products (inclusive of developed technology amortization)	7,130			7,624			(494		)	(6.5	)
Support, maintenance and subscription services	4,074			4,035			39			1.0
Professional services	4,914			5,536			(622		)	(11.2	)
Total cost of goods sold	16,118			17,195			(1,077		)	(6.3	)
Gross profit	$	17,889		$	16,670		$	1,219		7.3	%
Gross profit margin	52.6		%	49.2		%
Operating expenses:
Product development	$	7,089		$	6,626		$	463		7.0	%
Sales and marketing	4,754			5,130			(376		)	(7.3	)
General and administrative	6,005			6,800			(795		)	(11.7	)
Depreciation of fixed assets	606			611			(5		)	(0.8	)
Amortization of intangibles	543			485			58			12.0
Restructuring, severance and other charges	440			37			403			nm
Legal settlements	91			—			91			100.0
Operating loss	$	(1,639	)	$	(3,019	)	$	1,380		(45.7	)%
Operating loss percentage	(4.8		)%	(8.9		)%

nm - not meaningful

24

The following table presents the percentage relationship of our Condensed Consolidated Statement of Operations line items to our consolidated net revenues for the periods presented:

	Three months ended
	June 30,
	2018		2017
Net revenue:
Products	26.7	%	30.4	%
Support, maintenance and subscription services	52.7		49.2
Professional services	20.6		20.4
Total	100.0	%	100.0	%
Cost of goods sold:
Products (inclusive of developed technology amortization)	21.0	%	22.5	%
Support, maintenance and subscription services	12.0		11.9
Professional services	14.4		16.3
Total	47.4	%	50.8	%
Gross profit	52.6	%	49.2	%
Operating expenses:
Product development	20.8	%	19.6	%
Sales and marketing	14.0		15.1
General and administrative	17.7		20.1
Depreciation of fixed assets	1.8		1.8
Amortization of intangibles	1.6		1.4
Restructuring, severance and other charges	1.3		0.1
Legal settlements	0.3		—
Operating loss	(4.8	)%	(8.9	)%

Net revenue. Total net revenue increased $0.1 million, or 0.4%, during the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018. Products revenue decreased $1.2 million, or 11.7%, due primarily to decreased sales of third party hardware. Support, maintenance and subscription services revenue increased $1.3 million, or 7.6%, compared to the first quarter of fiscal 2018 driven by growth in customers using our on premise software products which require the payment of support and maintenance along with continued increases in subscription based service revenue, which increased approximately 18.7% during the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018. Professional services revenue remained relatively flat with a slight increase of 1.2%, as a result of timing on customer installation and implementation projects related to the sale of on premise and subscription based solutions.

Gross profit and gross profit margin. Our total gross profit increased $1.2 million, or 7.3%, for the first quarter of fiscal 2019 and total gross profit margin increased approximately 3.4% to 52.6% from 49.2%. Products gross profit decreased $0.7 million and gross profit margin decreased approximately 4.4% to 21.5% primarily as a result of increased developed technology amortization. Support, maintenance and subscription services gross profit increased $1.2 million and gross margin increased 1.5% to 77.3% due to the scalable nature of our infrastructure supporting and hosting customers. Professional services gross profit increased $0.7 million and gross profit margin increased 9.9% to 29.8% due to restructuring of our professional services workforce during 2018 including a more efficient operating structure and more limited use of contract labor.

Operating expenses

Operating expenses, excluding the charges for legal settlements, restructuring, severance and other charges, decreased $0.7 million, or 3.3%, during the first quarter of fiscal 2019 compared with the first quarter of fiscal 2018.

Product development. Product development increased $0.5 million, or 7.0%, in the first quarter of fiscal 2019 due primarily to the expansion of our India Development Center, resulting in the doubling of our research and development

25

resources, offset by the reduction of contract labor costs incurred as a result. We also experienced a benefit of approximately $0.5 million due to stock compensation forfeitures during the period. We capitalized approximately $2.3 million and $3.5 million in total development costs during the three months ended June 30, 2018 and 2017, respectively.

Sales and marketing. Sales and marketing decreased $0.4 million, or 7.3%, in the first quarter of fiscal 2019 compared with the first quarter of fiscal 2018. The change is primarily reflecting strategic initiatives undertaken to better align compensation with common industry standards for a software technology focused company.

General and administrative. General and administrative decreased $0.8 million, or 11.7%, in the first quarter of fiscal 2019 compared with the first quarter of fiscal 2018 due to approximately $0.2 million reduction in stock compensation for executive grants, $0.5 million reduction in salaries and contract labor costs as a result of the employment mix between full time and contract labor, and $0.1 million reduction of one-time incentive compensation.

Restructuring, severance, and other charges. Restructuring, severance, and other charges increased $0.4 million during the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018 due to increased severance payments and executive search fees.

Other Expenses (Income)

	Three months ended
	June 30,						(Unfavorable) favorable
(Dollars in thousands)	2018			2017			$			%
Other expense (income):
Interest (income)	$	(55	)	$	(28	)	$	27		96.4	%
Interest expense	3			2			(1		)	(50.0	)%
Other expense (income), net	198			(113		)	(311		)	nm
Total other expense (income), net	$	146		$	(139	)	$	(285	)	nm

nm - not meaningful

Interest income. Interest income consists of interest earned on investments in certificates of deposit, commercial paper, corporate bonds, and corporate-owned life insurance policies.

Interest expense. Interest expense consists of costs associated with capital leases.

Other expense (income). Other expense (income) consists mainly of the impact of foreign currency due to movement of European and Asian currencies against the US dollar.

Income Taxes

	Three months ended
	June 30,						(Unfavorable) favorable
(Dollars in thousands)	2018			2017			$		%
Income tax (benefit) expense	$	(49	)	$	78		$	127	nm
Effective tax rate	2.7		%	(2.7		)%

nm - not meaningful

For the three months ended June 30, 2018, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, an adjustment to true-up uncertain tax positions, certain foreign and state tax effects, and other U.S. permanent book to tax differences.

26

For the three months ended June 30, 2017, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state tax effects, and other U.S. permanent book to tax differences.

Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months a reduction in unrecognized tax benefits may occur in the range of zero to $0.1 million of tax and zero to $0.1 million of interest based on the outcome of tax examinations and as a result of the expiration of various statutes of limitations. We are routinely audited; due to the ongoing nature of current examinations in multiple jurisdictions, other changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time.

We have recorded a valuation allowance offsetting substantially all of our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Because of our losses in prior periods, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences.

Liquidity and Capital Resources

Overview

Our operating cash requirements consist primarily of working capital needs, operating expenses, and capital expenditures. We believe that cash flow from operating activities, cash on hand of $35.1 million as of June 30, 2018 and access to capital markets will provide adequate funds to meet our short- and long-term liquidity requirements in the next 12 months.

As of June 30, 2018 and March 31, 2018, our total debt was approximately $0.1 million, comprised of capital lease obligations in both periods.

At June 30, 2018, 100% of our cash and cash equivalents were deposited in bank accounts or invested in highly liquid investments with original maturities of three months or less. We maintain approximately 90% of our cash and cash equivalents in the United States. Therefore, we believe that credit risk is limited with respect to our cash and cash equivalents.

Cash Flow

	Three months ended
	June 30,
(In thousands)	2018			2017
Net cash (used in):
Operating activities	$	(1,363	)	$	(484	)
Investing activities	(2,878		)	(5,117		)
Financing activities	(525		)	(296		)
Effect of exchange rate changes on cash	(101		)	50
Net decrease in cash and cash equivalents	$	(4,867	)	$	(5,847	)

Cash flow used in operating activities. Cash flow used in operating activities was $1.4 million in the first three months of fiscal 2019. A working capital decrease of $3.9 million and operating loss of $1.6 million were offset by $3.8 million in depreciation and amortization and $0.4 million in share-based compensation.

Cash flow used in investing activities. For the first three months of fiscal 2019, the $2.9 million in cash used in investing activities was primarily comprised of $2.1 million for the development of proprietary software and $0.7 million for purchase of property and equipment, and internal use software development.

Cash flow used in financing activities.  During the first three months of fiscal 2019, the $0.5 million used in financing activities was primarily comprised of $0.5 million related to the repurchase of shares to satisfy employee tax withholding on share based compensation.

27

Contractual Obligations

As of June 30, 2018, there were no significant changes to our contractual obligations as presented in our Annual Report for the year ended March 31, 2018.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies

A detailed description of our significant accounting policies is included in our Annual Report for the year ended March 31, 2018. There have been no material changes in our significant accounting policies and estimates since March 31, 2018 except as noted in Note 2, Summary of Significant Accounting Policies.

28

Forward-Looking Information

This Quarterly Report and other publicly available documents, including the documents incorporated herein and therein by reference, contain, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions, or beliefs and are subject to a number of factors, assumptions, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in Item 1A in Part II of this Quarterly Report and Item IA of our Annual Report for the fiscal year ended March 31, 2018. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events, or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk affecting us, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our Annual Report for the fiscal year ended March 31, 2018. There have been no material changes in our market risk exposures since March 31, 2018.

29

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision of and with the participation of our Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Corporate Controller and Treasurer, management evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report. Based on that evaluation, the CEO, CFO and Corporate Controller and Treasurer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.

Change in Internal Control over Financial Reporting

In connection with the adoption of ASC 606, we assessed the impact to our internal controls over financial reporting and noted no material changes during the quarter ended June 30, 2018.

PART II. OTHER INFORMATION

Item 1.     Legal Proceedings

None.

Item 1A. Risk Factors

There have been no material changes in the risk factors included in our Annual Report for the fiscal year ended March 31, 2018 that may materially affect our business, results of operations, or financial condition.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

None.

Item 6.    Exhibits

10.1Form of Directors Restricted Stock Award Agreement

10.2Form of Restricted Stock Award Agreement

10.3Form of Stock Appreciation Right Agreement

31.1Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

31.3Rule 13a-14(a)/15d-14(a) Certification of Corporate Controller and Treasurer.

32Certification of Chief Executive Officer, Chief Financial Officer and Corporate Controller and Treasurer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

101 The following materials from our quarterly report on Form 10-Q for the quarter ended June 30, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at June 30, 2018 and March 31, 2018, (ii) Condensed Consolidated Statements of Operations for the three months ended June 30, 2018 and 2017, (iii) Condensed Consolidated Statements of Comprehensive Loss for the three months ended June 30, 2018 and 2017, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2018 and 2017, and (v) Notes to Condensed Consolidated Financial Statements for the three months ended June 30, 2018.

30

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.

AGILYSYS, INC.

Date:	August 2, 2018	/s/ Anthony S. Pritchett
		Anthony S. Pritchett
		Chief Financial Officer
		(Principal Financial Officer and Duly Authorized Officer)

31

EX-10.1

Exhibit 10.1

RESTRICTED SHARE AWARD AGREEMENT

Recipient:

Date of Grant:

Common Shares:

THIS RESTRICTED SHARE AWARD AGREEMENT (the “Agreement”) is entered into as of the Grant Date set forth above by and between Agilysys, Inc., an Ohio corporation (the “Company”), and the Recipient set forth above (“you” or the “Recipient”).

1. Award. As of the Grant Date, and subject to the terms and conditions of this Agreement, the Company hereby grants you an award (the “Award”) of the number of Common Shares set forth above (the “Restricted Shares”). This Award is granted to you pursuant to the Agilysys, Inc. 2016 Stock Incentive Plan, as amended from time to time (the “Plan”), and is subject to the terms and conditions set forth in this Agreement.

2.Terms of Award.

(a)Entry of Shares. The Restricted Shares subject to the Award shall be entered in your name in book-entry format (the “Book-Entry”) by the transfer agent of the Company (the “Transfer Agent”) subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement.

(b)Restrictions. Until such time as the Restricted Shares have vested, you shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, alienate, encumber or charge any Restricted Shares (including any Common Shares issued as the result of the investment of cash dividends attributable to the Restricted Shares) or any interest therein in any manner whatsoever, any attempt to so do shall be ineffective and your rights to such shares shall immediately terminate and such shares shall be forfeited, and the Company shall not be required to transfer on its books any such Restricted Shares which purportedly shall have attempted to have been sold, assigned, transferred, conveyed, disposed of, pledged, hypothecated, burdened, alienated, encumbered or charged in violation of this Agreement.

(c)Vesting. The Restricted Shares will vest on ____________, subject to the other terms and conditions of this Agreement, including that you remain a member of the Board of Directors as of the specified date.

(d)Vested Shares - Removal of Restrictions; Payment. Upon Restricted Shares becoming vested, the Company shall cause the Transfer Agent to move the Book-Entry representing such Common Shares, together with any Common Shares issued as a result of the investment of cash dividends attributable to such Common Shares pursuant to Section 2(f), to a non-restricted account, thereby removing all restrictions hereunder, and shall cause the Transfer Agent to notify you that the Common Shares, together with any Common Shares issued as a result of the investment of cash dividends attributable to such Common Shares pursuant to Section 2(f), are free and clear of all restrictions (but subject to any applicable securities law restrictions or other restrictions imposed upon Common Shares generally).

(e)Forfeiture. If your service as a member of the Board of Directors of the Company terminates for any reason other than death, Disability or Cause, prior to the Restricted Shares becoming vested, then upon your termination of service, any Restricted Shares which have not otherwise been canceled or forfeited as of the date of termination, together with any Shares issued as a result of the investment of cash dividends attributable to the Restricted Shares, shall immediately vest on a pro-rata.

The pro-rata basis shall be determined by multiplying the number of Restricted Shares subject to the Award times the number of full months you have served as a member of the Board of Directors since his or her most recent election or appointment divided by twelve months. The Company shall cause the Transfer Agent to move the vested Shares, together with any vested Shares issued as a result of the investment of cash dividends attributable to the vested Shares, to a non-restricted account, as set forth in Section 3(d), and the unvested portion of the Restricted Shares shall be forfeited, and you and all persons who might claim through you will have no further interests under this Agreement of any kind whatsoever. If your service as a Director terminates for Cause, all Restricted Shares shall be forfeited.

(f)Voting Rights and Dividends. You shall have all of the voting rights attributable to the Restricted Shares issued pursuant to this Agreement. Cash dividends declared and paid by the Company with respect to the Restricted Shares shall not be paid to you. Rather, those cash dividends shall be invested in Common Shares which shall be subject to the vesting provisions of Section 2(c) and the other terms and conditions of this Agreement. By executing this Agreement, you irrevocably consent to: (i) the Company’s withholding of the payment of those dividends; and (ii) the investment of those dividends in Common Shares issued in your name and held in book-entry format by the Transfer Agent subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement. If you forfeit any rights you have under this Agreement, you shall, on the date of such forfeiture, no longer have any rights as a shareholder with respect to the Restricted Shares and shall no longer be entitled to vote or receive dividends on such shares.

3.Death or Disability of Recipient. Upon your termination of service as a Director of the Company due to death or Disability, Restricted Shares which have not otherwise been canceled or forfeited as of the date of death or Disability, together with any Shares issued as a result of the investment of cash dividends attributable to the Restricted Shares, shall be distributed to the you or your estate, as the Committee deems appropriate, free and clear of any restrictions (but subject to any applicable securities law restrictions or other restrictions imposed on Shares generally).

4.Change in Control. Upon a Change in Control prior to the termination of this Agreement, Restricted Shares which have not vested and have not otherwise been canceled or forfeited as of the date of the Change in Control, together with any Shares issued as a result of the investment of cash dividends attributable to the Restricted Shares, shall immediately vest and be free and clear of any restrictions (but subject to any applicable securities law restrictions or other restrictions imposed on Shares generally), and the Company shall cause the Transfer Agent to move the Shares, together with any Shares issued as a result of the investment of cash dividends attributable to the Shares, to a non-restricted account, as set forth in Section 2(d).

5.Effect of Corporate Reorganization or Other Changes Affecting Number or Kind of Shares. The provisions of this Agreement will be applicable to the Restricted Shares, Shares or other securities, if any, which may be acquired by you related to the Restricted Shares as a result of a liquidation, recapitalization, reorganization, redesignation or reclassification, split-up, reverse split, merger, consolidation, dividend, combination or exchange of Restricted Shares or Shares, exchange for other securities, a sale of all or substantially all assets or the like. The Committee may appropriately adjust the number and kind of Restricted Shares, Shares or other securities described in this Agreement to reflect such a change.

6.Nontransferability of Shares. Upon the acquisition of any Shares pursuant to this Agreement, if the Shares have not been registered under the Securities Act of 1933, as amended (the “Act”), they may not be sold, transferred or otherwise disposed of unless a registration statement under the Act with respect to the Shares has become effective or unless you establish to the satisfaction of the Company that an exemption from such registration is available. You will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or this Agreement.

7.Legend. If certificates representing the Restricted Shares subject to the Award are requested by you, the certificates for Restricted Shares, and any Shares issued as a result of the investment of cash dividends attributed to the Restricted Shares, shall contain the following or a substantially similar legend:

“THE TRANSFERABILITY OF THIS CERTIFICATE AND THE COMMON SHARES REPRESENTED BY IT ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING CONDITIONS OF FORFEITURE) CONTAINED IN THE AGILYSYS, INC. 2016 STOCK INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND THE COMPANY. A COPY OF THIS PLAN AND AWARD AGREEMENT ARE ON FILE IN THE OFFICE OF THE SECRETARY OF THE COMPANY.”

8. Internal Revenue Code Section 409A. This Agreement, Award and the compensation and benefits hereunder are intended to meet the requirements for exemption from coverage under Code Section 409A for restricted property set forth in Treas. Reg. Section 1.409A-1(b)(6), as well as any other applicable exemption, and shall be construed and administered accordingly. If the Company determines that any compensation or benefits awarded or payable under this Agreement may be subject to taxation under Code Section 409A, the Company shall, after consultation with you, have the authority to adopt, prospectively or retroactively, such amendments to this Agreement or to take any other actions it determines necessary or appropriate to exempt the compensation and benefits payable under this Agreement from Code Section 409A or meet the requirements of Code Section 409A. In no event, however, shall this Section or any other provisions of the Plan or this Agreement be construed to require the Company to provide any gross-up for the tax consequences of any provisions of, or awards or payments under, this Agreement, and the Company shall have no responsibility for tax consequences of any kind to you (or any other person or entity), whether or not such consequences are contemplated at the time of entry into this Agreement, or result from the terms or operation of this Agreement.

9.Notices. All notices or other communications relating to the Plan and this Agreement as it relates to you shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt or, if mailed, by regular U.S. mail, postage prepaid, by the Company to you at your address then on file with the Company. You are responsible for notifying the Company of a change in your address.

10.Governing Law. Except as may otherwise be provided in the Plan, this Agreement will be governed by, construed and enforced in accordance with the internal laws of the State of Ohio without giving effect to its conflict of laws principles.

11.Amendment. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement. However, no such action may be inconsistent with the terms of the Plan or materially and adversely affect your rights without your written consent. Notwithstanding the foregoing, the Company may, after consulting with you, unilaterally amend this Agreement to comply with law, preserve favorable tax effects or avoid unfavorable tax effects for either of the parties.

12.Effect of Waiver. Any waiver of any term, condition or breach thereof will not be a waiver of any other term or condition or of the same term or condition for the future, or of any subsequent breach.

13.Separability. In the event of the invalidity of any part or provision of this Agreement, such invalidity will not affect the enforceability of any other part or provision of this Agreement.

14.Successors and Legal Representatives. This Agreement will bind and inure to the benefit of the Company and you and its and your respective beneficiaries, heirs, legatees, executors, administrators, estates, successors, assigns, legal representatives, guardians and caretakers.

15.Transferability. The Award shall not be transferable by you other than by will or the laws of descent and distribution, and the Award may be exercised during your lifetime only by you (or such other person as may be permitted to exercise the Award on your behalf).

16.No Further Liability. The liability of the Company, its affiliates and the Committee under or in connection with this Agreement is limited to the obligations set forth herein and no terms or provisions of this Agreement shall be construed to impose any liability on the Company, its affiliates, the Committee or their directors and employees in favor of any person or entity with respect to any loss, cost, tax or expense which the person or entity may incur in connection with or arising from any transaction related to this Agreement. No third-party beneficiaries are intended.

17.The Plan. The Plan is hereby incorporated by reference and made a part of this Agreement for all purposes, and when taken together with this Agreement, shall govern the rights of you and the Company with respect to the Award. You irrevocably agree to, and accept, the terms, conditions and restrictions of the Plan and this Agreement on your own behalf and on behalf of any beneficiaries, heirs, legatees, guardians, representatives, successors and assigns.All capitalized terms used in this Agreement, unless otherwise defined, shall have the meaning ascribed to them under the Plan. In the event and to the extent of an express conflict or inconsistency among any of this Agreement, any written agreement with you then in effect, the provisions of the Plan, and any rules, regulations, and interpretations of the Plan adopted by the Committee, then the following order of priority shall control; (a) any written agreement then in effect, (b) the Plan, (c) any rules, regulations, and interpretations of the Plan adopted by the Committee, and (d) this Agreement; and to the extent that any other document controls this Agreement shall be deemed to be modified accordingly.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement and agree to the terms hereof.

“Company”

___________________________________

“Recipient”

EX-10.2

Exhibit 10.2

RESTRICTED SHARE AWARD AGREEMENT

Recipient:

Date of Grant:

Common Shares:

THIS RESTRICTED SHARE AWARD AGREEMENT (the “Agreement”) is entered into as of the Grant Date set forth above by and between Agilysys, Inc., an Ohio corporation (the “Company”), and the Recipient set forth above (“you” or the “Recipient”).

1. Award. As of the Grant Date, and subject to the terms and conditions of this Agreement, the Company hereby grants you an award (the “Award”) of the number of Common Shares set forth above (the “Restricted Shares”). This Award is granted to you pursuant to the Agilysys, Inc. 2016 Stock Incentive Plan, as amended from time to time (the “Plan”), and is subject to the terms and conditions set forth in this Agreement.

2.Terms of Award.

(a)Entry of Shares. The Restricted Shares subject to the Award shall be entered in your name in book-entry format (the “Book-Entry”) by the transfer agent of the Company (the “Transfer Agent”) subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement.

(b)Restrictions. Until such time as the Restricted Shares have vested, you shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, alienate, encumber or charge any Restricted Shares (including any Common Shares issued as the result of the investment of cash dividends attributable to the Restricted Shares) or any interest therein in any manner whatsoever, any attempt to so do shall be ineffective and your rights to such shares shall immediately terminate and such shares shall be forfeited, and the Company shall not be required to transfer on its books any such Restricted Shares which purportedly shall have attempted to have been sold, assigned, transferred, conveyed, disposed of, pledged, hypothecated, burdened, alienated, encumbered or charged in violation of this Agreement.

(c)Vesting. The Restricted Shares will vest as follows, subject to the other terms and conditions of this Agreement, including that you remain employed as of the specified dates:

[insert vesting schedule]

Notwithstanding anything herein to the contrary, except as otherwise may be provided in Section 3 hereof, vesting hereunder is subject to you remaining employed by the Company or its subsidiaries, divisions or affiliated businesses as of the date vesting would otherwise occur hereunder.

(d)Vested Shares - Removal of Restrictions; Payment. Upon Restricted Shares becoming vested, the Company shall cause the Transfer Agent to move the Book-Entry representing such Common Shares, together with any Common Shares issued as a result of the investment of cash dividends attributable to such Common Shares pursuant to Section 2(f), to a non-restricted account, thereby removing all restrictions hereunder, and shall cause the Transfer Agent to notify you that the Common Shares, together with any Common Shares issued as a result of the investment of cash dividends attributable to such Common Shares pursuant to Section 2(f), are free and clear of all restrictions (but subject to any applicable securities law restrictions or other restrictions imposed upon Common Shares generally).

(e)Forfeiture. If your employment with the Company and its subsidiaries, divisions, and affiliated businesses terminates prior to any portion of the Restricted Shares becoming vested, then the non-vested Restricted Shares as of the date of his or her termination of employment, together with any Common Shares issued as a result of the investment of cash dividends attributable to the Restricted Shares, shall be forfeited, and you and all persons who might claim through him or her will have no further interests under this Agreement, the Restricted Shares or the Award of any kind whatsoever.

(f)Voting Rights and Dividends. You shall have all of the voting rights attributable to the Restricted Shares issued pursuant to this Agreement. Cash dividends declared and paid by the Company with respect to the Restricted Shares shall not be paid to you. Rather, those cash dividends shall be invested in Common Shares which shall be subject to the vesting provisions of Section 2(c) and the other terms and conditions of this Agreement. By executing this Agreement, you irrevocably consent to: (i) the Company’s withholding of the payment of those dividends; and (ii) the investment of those dividends in Common Shares issued in your name and held in book-entry format by the Transfer Agent subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement. If you forfeit any rights you have under this Agreement, you shall, on the date of such forfeiture, no longer have any rights as a shareholder with respect to the Restricted Shares and shall no longer be entitled to vote or receive dividends on such shares.

3.Change in Control.

(a)Upon a Change in Control prior to the termination of this Agreement, Restricted Shares which have not vested and have not otherwise been canceled or forfeited as of the date of the Change in Control, together with any Common Shares issued as a result of the investment of cash dividends attributable to the Restricted Shares (collectively, the “Held Shares”), shall vest in accordance with the terms of this Section 3 and without regard to the vesting schedule in Section 2(c) (subject to any applicable securities law restrictions or other restrictions imposed on Common Shares generally). The Held Shares shall remain in a restricted account subject to removal of the restrictions on forfeiture pursuant to the terms of this Agreement.

(b)Notwithstanding the foregoing, the Held Shares shall remain subject to the restrictions set forth in Section 2(b) and shall vest only in the event your continued employment through the earlier of (i) 12 months after the date of the Change in Control, or (ii) the date you cease to be an employee with the Company or its successor on account of an involuntary termination of employment by the Company without Cause (the “Holding Period”).

(c)If your employment with the Company or its successor terminates prior to the end of the Holding Period due to any reason other than an involuntary termination of employment by the Company without Cause, including, without limitation, on account of your death, Disability, Retirement, voluntary termination or termination for Cause, then the Held Shares shall be forfeited, and you and all persons who might claim through you will have no further interests under this Agreement, the Restricted Shares, the Held Shares, or the Award of any kind whatsoever.

(d)Upon the end of the Holding Period, the Company shall cause the Transfer Agent to move the Held Shares which have not been forfeited, together with any Common Shares issued as a result of the investment of cash dividends attributable to the Common Shares, to a non-restricted account, as set forth in Section 2(d).

(e)If Common Shares generally are convertible into a right to receive non-equity consideration in connection with the Change in Control, then the Held Shares shall be convertible into the right to receive such non-equity consideration, and the right to receive such non-equity

consideration shall be subject to the Holding Period under this Section 3 on the same basis as the Held Shares.

4. Effect of Corporate Reorganization or Other Changes Affecting Number or Kind of Shares. The provisions of this Agreement will be applicable to the Restricted Shares, Shares or other securities, if any, which may be acquired by you related to the Restricted Shares as a result of a liquidation, recapitalization, reorganization, redesignation or reclassification, split-up, reverse split, merger, consolidation, dividend, combination or exchange of Restricted Shares or Shares, exchange for other securities, a sale of all or substantially all assets or the like. The Committee may appropriately adjust the number and kind of Restricted Shares, Shares or other securities described in this Agreement to reflect such a change.

5.Nontransferability of Shares. Upon the acquisition of any Shares pursuant to this Agreement, if the Shares have not been registered under the Securities Act of 1933, as amended (the “Act”), they may not be sold, transferred or otherwise disposed of unless a registration statement under the Act with respect to the Shares has become effective or unless you establish to the satisfaction of the Company that an exemption from such registration is available. You will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or this Agreement.

6.Legend. If certificates representing the Restricted Shares subject to the Award are requested by you, the certificates for Restricted Shares, and any Shares issued as a result of the investment of cash dividends attributed to the Restricted Shares, shall contain the following or a substantially similar legend:

“THE TRANSFERABILITY OF THIS CERTIFICATE AND THE COMMON SHARES REPRESENTED BY IT ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING CONDITIONS OF FORFEITURE) CONTAINED IN THE AGILYSYS, INC. 2016 STOCK INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND THE COMPANY. A COPY OF THIS PLAN AND AWARD AGREEMENT ARE ON FILE IN THE OFFICE OF THE SECRETARY OF THE COMPANY.”

7. Internal Revenue Code Section 409A. This Agreement, Award and the compensation and benefits hereunder are intended to meet the requirements for exemption from coverage under Code Section 409A for restricted property set forth in Treas. Reg. Section 1.409A-1(b)(6), as well as any other applicable exemption, and shall be construed and administered accordingly. If the Company determines that any compensation or benefits awarded or payable under this Agreement may be subject to taxation under Code Section 409A, the Company shall, after consultation with you, have the authority to adopt, prospectively or retroactively, such amendments to this Agreement or to take any other actions it determines necessary or appropriate to exempt the compensation and benefits payable under this Agreement from Code Section 409A or meet the requirements of Code Section 409A. In no event, however, shall this Section or any other provisions of the Plan or this Agreement be construed to require the Company to provide any gross-up for the tax consequences of any provisions of, or awards or payments under, this Agreement, and the Company shall have no responsibility for tax consequences of any kind to you (or any other person or entity), whether or not such consequences are contemplated at the time of entry into this Agreement, or result from the terms or operation of this Agreement.

8. Tax Withholding. The Committee shall cause the Company to sell the fewest number of Shares for the proceeds of such sale to equal (or exceed by not more than the actual sale price of a single Share) your or any other recipient’s minimum withholding tax liability resulting from any

distribution or otherwise resulting in connection with this Award. The Company will deliver the proceeds of the sale to the appropriate taxing authorities in satisfaction of such tax liability.

9. No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed to grant you any right to remain an employee with the Company or its affiliates, or to be employed in any particular position therewith. The Plan and this Agreement do not constitute a contract of employment, and the Company and each affiliate expressly reserves the right, at any time, to terminate your employment free from liability, or any claim, under the Plan and this Agreement, except as may be specifically provided therein.

10. Notices. All notices or other communications relating to the Plan and this Agreement as it relates to you shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt or, if mailed, by regular U.S. mail, postage prepaid, by the Company to you at your address then on file with the Company. You are responsible for notifying the Company of a change in your address.

11. Governing Law. Except as may otherwise be provided in the Plan, this Agreement will be governed by, construed and enforced in accordance with the internal laws of the State of Ohio without giving effect to its conflict of laws principles.

12. Amendment. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement. However, no such action may be inconsistent with the terms of the Plan or materially and adversely affect your rights without your written consent. Notwithstanding the foregoing, the Company may, after consulting with you, unilaterally amend this Agreement to comply with law, preserve favorable tax effects or avoid unfavorable tax effects for either of the parties.

13. Effect of Waiver. Any waiver of any term, condition or breach thereof will not be a waiver of any other term or condition or of the same term or condition for the future, or of any subsequent breach.

14. Separability. In the event of the invalidity of any part or provision of this Agreement, such invalidity will not affect the enforceability of any other part or provision of this Agreement.

15. Successors and Legal Representatives. This Agreement will bind and inure to the benefit of the Company and you and its and your respective beneficiaries, heirs, legatees, executors, administrators, estates, successors, assigns, legal representatives, guardians and caretakers.

16. Transferability. The Award shall not be transferable by you other than by will or the laws of descent and distribution, and the Award may be exercised during your lifetime only by you (or such other person as may be permitted to exercise the Award on your behalf).

17. No Further Liability. The liability of the Company, its affiliates and the Committee under or in connection with this Agreement is limited to the obligations set forth herein and no terms or provisions of this Agreement shall be construed to impose any liability on the Company, its affiliates, the Committee or their directors and employees in favor of any person or entity with respect to any loss, cost, tax or expense which the person or entity may incur in connection with or arising from any transaction related to this Agreement. No third-party beneficiaries are intended.

18. Recoupment Right. You acknowledge that if the Board of Directors of the Company (including a Committee of the Board) determines that the Company’s financials are restated due directly or

indirectly to the fraud, ethical misconduct, intentional misconduct or a breach of fiduciary duty by you, the Board (or Committee) shall have sole discretion to take such actions, as permitted by law, as it deems necessary to cancel the Award and to recover all or a portion of any gains realized in respect of the Award, provided such recovery cannot extend back more than three years.

19. The Plan. The Plan is hereby incorporated by reference and made a part of this Agreement for all purposes, and when taken together with this Agreement, shall govern the rights of you and the Company with respect to the Award. You irrevocably agree to, and accept, the terms, conditions and restrictions of the Plan and this Agreement on your own behalf and on behalf of any beneficiaries, heirs, legatees, guardians, representatives, successors and assigns.All capitalized terms used in this Agreement, unless otherwise defined, shall have the meaning ascribed to them under the Plan. In the event and to the extent of an express conflict or inconsistency among any of this Agreement, any written employment agreement with you then in effect, the provisions of the Plan, and any rules, regulations, and interpretations of the Plan adopted by the Committee, then the following order of priority shall control; (a) any written employment agreement then in effect, (b) the Plan, (c) any rules, regulations, and interpretations of the Plan adopted by the Committee, and (d) this Agreement; and to the extent that any other document controls this Agreement shall be deemed to be modified accordingly.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement and agree to the terms hereof.

“Company”

___________________________________

“Recipient”

EX-10.3

Exhibit 10.3

STOCK SETTLED APPRECIATION RIGHTS AGREEMENT

Recipient:

Grant Date:

Common Shares:

Exercise Price:

THIS STOCK SETTLED APPRECIATION RIGHTS AGREEMENT (the “Agreement”) is entered into as of the Grant Date set forth above by and between Agilysys, Inc., an Ohio corporation (the “Company”), and the Recipient set forth above (“you” or the “Recipient”).

1. Award. Effective as of the Grant Date set forth above, the Company grants to you stock-settled stock appreciation rights (the “SSARs”) to purchase the number of common shares of the Company set forth above, at the Exercise Price per share set forth above. These SSARs are granted to you pursuant to the Agilysys, Inc. 2016 Stock Incentive Plan, as amended from time to time (the “Plan”), and is subject to the terms and conditions set forth in this Agreement.

2. Term. The term of the SSAR shall be for a period of 7 years from the date of grant, and these SSARs shall expire at the close of regular business hours at the Company’s principal office on the last day of the term of the SSAR, or, if earlier, on the applicable expiration date provided for in sections 3 and 4 hereof.

3. Vesting. The SSARs will vest as follows, subject to the other terms and conditions of this Agreement, including that you remain employed as of the specified dates:

[insert vesting schedule]

Notwithstanding anything herein to the contrary, except as otherwise may be provided in Section 4 and 5, vesting hereunder is subject to you remaining employed by the Company or its subsidiaries, divisions or affiliated businesses as of the date vesting would otherwise occur hereunder.

4. Exercisability.

(a)To the extent that SSARs have become exercisable with respect to a number of Shares, you may thereafter exercise the SSARs either as to all or any part of such Shares at any time or from time-to-time prior to expiration or other termination of the SSAR. Except as provided in Sections 4 and 5, the SSARs may not be exercised at any time unless you are at such time an employee of the Company or its subsidiaries, divisions or affiliated businesses (an “Employee”).

(b)If you cease to be an Employee by reason of your Retirement, all vested SSARs shall remain exercisable, and your right to exercise vested SSARs shall terminate upon the last day of the term of the SSAR. Non-vested SSARs shall continue to vest as provided in Section 2, but such SSARs shall be exercisable for two years from the date that such SSARs vests or, if

shorter, until the last day of the term of the SSARs, and your right to exercise such SSAR shall terminate thereafter.

(c)If you cease to be an Employee due to your Disability, the SSARs shall be deemed vested with respect to all Shares then subject to the SSARs, and your right to exercise the SSARs shall terminate upon the earlier of the date that is one year from the date of such cessation of employment or the last day of the term of the SSAR.

(d)If you cease to be an Employee for any reason other than your death, Disability, or Retirement, the SSARs may be exercised only to the extent of the exercise rights, if any, which had accrued as of the date of such cessation pursuant to Section 2 hereof and which have not theretofore been exercised. Upon any such cessation of employment, such accrued exercise rights shall in any event terminate upon the earlier of the date that is 90 days from the date of such cessation of employment or the last day of the term of the SSAR.

(e)Nothing contained in this Agreement shall confer upon you any right to continue in the employ of the Company or any of its Subsidiaries, or to limit or interfere in any way with the right of the Company or any such Subsidiary to terminate your employment at any time, with or without cause.

5. Death of Recipient. If you die while an Employee, such person or persons as shall have acquired, by will or by the laws of descent and distribution, the right to exercise the SSARs (the “Personal Representative”) shall be entitled to exercise the SSARs as to all of the Shares then subject to the SSARs. Such exercise rights shall terminate upon the earlier of the date one year from the date of your death or the last day of the term of the SSARs. If, after Retirement, you die prior to the last day of the term of the SSARs, the Personal Representative shall be entitled to exercise all unexercised SSARs, and such SSARs shall remain exercisable, for the greater of the remainder of the exercise period (as applicable) or one year from the date of your death, but in no event shall the SSARs be exercisable after the last day of the term of the SSARs. If you die during the one-year period commencing on the date of your termination due to your Disability, the Personal Representative shall be entitled to exercise the SSARs, and such SSARs shall remain exercisable until one year from the date of such death, but in no event shall the SSARs be exercisable after the last day of the term of the SSARs.

6. Change of Control.

(a)Upon a Change in Control, this SSAR shall become fully exercisable and shall immediately be deemed exercised as to all Shares then subject to the SSARs. The net number of Shares issued to you pursuant to this Section 5 as a result of the deemed exercise (the “Held Shares”) shall be subject to the restrictions set forth in this Section 5 (in addition to any applicable securities law restrictions or other restrictions imposed on Shares generally).

(b)During the Holding Period, you shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, alienate, encumber or charge any Held Shares or any interest therein in any manner whatsoever, and the Company shall not be required to transfer on its books any such Held Shares which shall have been sold, assigned, transferred, conveyed, disposed of, pledged, hypothecated, burdened, alienated, encumbered or charged in violation of this Agreement.

(c)During the Holding Period, you shall have all of the voting rights attributable to the Held Shares. Cash dividends declared and paid by the Company with respect to the Held Shares shall not be paid to you. Rather, those cash dividends shall be invested in additional Shares which shall be subject to the Holding Period. You irrevocably consent to: (i) the Company’s withholding of the payment of those dividends; and (ii) the investment of those dividends in Shares issued in your name and book-entered on your behalf subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement.

(d)The Held Shares shall remain subject to the restrictions set forth in this Section 5 and such restrictions shall lapse in the event of (a) your continued employment through the earlier of (i) 12 months after the date of the Change in Control, or (ii) the date you cease to be an employee with the Company, a Subsidiary or any of their successors on account of an involuntary termination of employment by the Company or such Subsidiary or successor without Cause or on account of a termination of your employment by you for Good Reason (determined, in each case, in accordance with your employment agreement, or in absence thereof, the Plan, as in effect immediately prior to the Change in Control), or (b) without regard to the application of this Section 5, the date the Held Shares would vest by reason of a termination of employment or Change in Control under your employment agreement in effect immediately prior to the Change in Control (the “Holding Period”).

(e)If your employment with the Company, and of its Subsidiaries, or any of their successors terminates prior to the end of the Holding Period due to any reason other than an involuntary termination of employment by the Company without Cause or on account of a termination of your employment by you for Good Reason (determined, in each case, in accordance with your employment agreement, or in absence thereof, the Plan, as in effect immediately prior to the Change in Control), including, without limitation, on account of your death, Disability, Retirement, voluntary termination or termination for Cause, then the Held Shares shall be forfeited, and you and all persons who might claim through you will have no further interests under this Agreement, all Shares subject to the SSAR, the Held Shares, or the SSAR of any kind whatsoever.

(f)Upon the end of the Holding Period, the Company shall cause the transfer agent of the Company to move the Held Shares which have not been forfeited, together with any Common Shares issued as a result of the investment of cash dividends attributable to the Common Shares, to a non-restricted account.

(g)If Common Shares generally are convertible into a right to receive non-equity consideration in connection with the Change in Control, then the Held Shares shall be convertible into the right to receive such non-equity consideration, and the right to receive such non-equity consideration shall be subject to the Holding Period under this Section 5 on the same basis as the Held Shares.

7. Waiver of Terms and Conditions. The Committee has the power and authority to waive or accelerate the vesting provisions of the SSARs, or to waive or modify the other terms and conditions of and restrictions and limitations on the SSARs, provided such waiver or modification is not (a) materially detrimental to you, nor (b) inconsistent with the terms of the Plan and any employment agreement with you then in effect.

8. Method of Exercise. The SSARs may be exercised by delivery to the Legal Department of the Company a completed notice of exercise in the form prescribed by the Legal Department

(obtainable from the Secretary of the Company) by or on behalf of the person entitled to exercise the SSARs, setting forth the number of Shares with respect to which SSARs are being exercised. SSARs will be settled in the Company’s Common Shares, net of the Exercise Price and any required tax withholding.

9. Issuance of Shares. Upon receipt by the Company prior to expiration of the SSARs of a duly completed notice of exercise and, with respect to any SSARs exercised by any person other than you, by proof satisfactory to the Committee of the right of such person to exercise the SSARs, and subject to section 5 hereof, the Company shall cause its transfer agent to enter in its books and records on your behalf the net number of Shares derived after accounting for the Exercise Price and any required tax withholding.  You or such other person exercising the SSARs shall not have any of the rights of a shareholder with respect to the Shares covered by the SSARs until such Shares are book-entered on behalf of you or such other person exercising the SSAR, subject to any applicable restrictions under Section 5.

10. Regulatory Compliance. You agree that the Company shall not be obligated to issue any Shares upon exercise of the SSARs if such issuance would cause the Company to violate any federal or state law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission and The Nasdaq Stock Market) having jurisdiction over the affairs of the Company. You agree that you will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Shares complies with the provisions of this section.

11. Investment Representation.

(a)You represent to the Company that you understand that, unless at the time of exercise of the SSARs a registration statement under the Securities Act of 1933, as amended, is in effect covering the Shares, as a condition to the exercise of the SSARs, the Company may require you to represent that you are acquiring the Shares for your own account only and not with a view to, or for sale in connection with, any distribution of the Shares.

(b)You understand and agrees that the certificate or certificates representing any Shares acquired hereunder may bear an appropriate legend relating to registration and resale under federal and state securities laws.

12. Notices. All notices or other communications relating to the Plan and this Agreement as it relates to you shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt or, if mailed, by regular U.S. mail, postage prepaid, by the Company to you at your address then on file with the Company. You are responsible for notifying the Company of a change in your address.

13. Governing Law. Except as may otherwise be provided in the Plan, this Agreement will be governed by, construed and enforced in accordance with the internal laws of the State of Ohio without giving effect to its conflict of laws principles.

14. Amendment. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement. However, no such action may be inconsistent with the terms of the Plan or materially and adversely affect your rights without your written consent. Notwithstanding the foregoing, the Company may, after consulting

with you, unilaterally amend this Agreement to comply with law, preserve favorable tax effects or avoid unfavorable tax effects for either of the parties.

15. Effect of Waiver. Any waiver of any term, condition or breach thereof will not be a waiver of any other term or condition or of the same term or condition for the future, or of any subsequent breach.

16. Separability. In the event of the invalidity of any part or provision of this Agreement, such invalidity will not affect the enforceability of any other part or provision of this Agreement.

17. Successors and Legal Representatives. This Agreement will bind and inure to the benefit of the Company and you and its and your respective beneficiaries, heirs, legatees, executors, administrators, estates, successors, assigns, legal representatives, guardians and caretakers.

18. Transferability. The SSARs shall not be transferable by you other than by will or the laws of descent and distribution, and the SSARs may be exercised during your lifetime only by you (or such other person as may be permitted to exercise SSARs on your behalf).

19. No Further Liability. The liability of the Company, its affiliates and the Committee under or in connection with this Agreement is limited to the obligations set forth herein and no terms or provisions of this Agreement shall be construed to impose any liability on the Company, its affiliates, the Committee or their directors and employees in favor of any person or entity with respect to any loss, cost, tax or expense which the person or entity may incur in connection with or arising from any transaction related to this Agreement. No third-party beneficiaries are intended.

20. Recoupment Right. You acknowledge that if the Board of Directors of the Company (including a Committee of the Board) determines that the Company’s financials are restated due directly or indirectly to the fraud, ethical misconduct, intentional misconduct or a breach of fiduciary duty by you, the Board (or Committee) shall have sole discretion to take such actions, as permitted by law, as it deems necessary to cancel the SSAR and to recover all or a portion of any gains realized in respect of the SSAR, provided such recovery cannot extend back more than three years.

21. The Plan. The Plan is hereby incorporated by reference and made a part of this Agreement for all purposes, and when taken together with this Agreement, shall govern the rights of you and the Company with respect to the Award. You irrevocably agree to, and accept, the terms, conditions and restrictions of the Plan and this Agreement on your own behalf and on behalf of any beneficiaries, heirs, legatees, guardians, representatives, successors and assigns. All capitalized terms used in this Agreement, unless otherwise defined, shall have the meaning ascribed to them under the Plan. In the event and to the extent of an express conflict or inconsistency among any of this Agreement, any written employment agreement with you then in effect, the provisions of the Plan, and any rules, regulations, and interpretations of the Plan adopted by the Committee, then the following order of priority shall control; (a) any written employment agreement then in effect, (b) the Plan, (c) any rules, regulations, and interpretations of the Plan adopted by the Committee, and (d) this Agreement; and to the extent that any other document controls this Agreement shall be deemed to be modified accordingly.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement and agree to the terms hereof.

“Company”

___________________________________

“Recipient”

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, Ramesh Srinivasan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Agilysys, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2018

By:	/s/ Ramesh Srinivasan
	Ramesh Srinivasan
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

I, Anthony S. Pritchett, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Agilysys, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2018

By:	/s/ Anthony S. Pritchett
	Anthony S. Pritchett
	Chief Financial Officer
	(Principal Financial Officer)

EX-31.3

Exhibit 31.3

CERTIFICATION OF THE CORPORATE CONTROLLER AND TREASURER

I, Chris J. Robertson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Agilysys, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2018

By:	/s/ Chris J. Robertson
	Chris J. Robertson
	Corporate Controller and Treasurer
	(Principal Accounting Officer)

EX-32.6

Exhibit 32

CERTIFICATION

Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Ramesh Srinivasan, the Chief Executive Officer, Anthony S. Pritchett, the Chief Financial Officer, and Chris J. Robertson, the Corporate Controller and Treasurer, of Agilysys, Inc. (the “Company”), hereby certify, that, to their knowledge:

1. The Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2018 (the “Report”) fully complies (1) with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2018

By:	/s/ Ramesh Srinivasan
	Ramesh Srinivasan
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ Anthony S. Pritchett
	Anthony S. Pritchett
	Chief Financial Officer
	(Principal Financial Officer)
	/s/ Chris J. Robertson
	Chris J. Robertson
	Corporate Controller and Treasurer
	(Principal Accounting Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Jun. 30, 2018	Jul. 30, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	AGILYSYS INC
Entity Central Index Key	0000078749
Current Fiscal Year End Date	--03-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		23,525,482

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018
Current assets:
Cash and cash equivalents	$ 35,076	$ 39,943
Accounts receivable, net of allowance for doubtful accounts of $809 and $900, respectively	20,306	16,389
Contract assets	5,273	0
Inventories	1,765	1,999
Prepaid expenses and other current assets	5,421	5,593
Total current assets	67,841	63,924
Property and equipment, net	17,113	17,512
Goodwill	19,622	19,622
Intangible assets, net	8,473	8,484
Software development costs, net	44,506	45,181
Other non-current assets	4,673	2,484
Total assets	162,228	157,207
Current liabilities:
Accounts payable	9,033	8,400
Contract liabilities	30,781	26,820
Accrued liabilities	8,541	9,241
Capital lease obligations, current	96	120
Total current liabilities	48,451	44,581
Deferred income taxes, non-current	251	227
Capital lease obligations, non-current	51	57
Other non-current liabilities	3,726	3,911
Commitments and contingencies (see Note 8)
Shareholders' equity:
Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 31,606,831 shares issued; and 23,526,906 and 23,324,679 shares outstanding at June 30, 2018 and March 31, 2018, respectively	9,482	9,482
Treasury shares, 8,079,925 and 8,282,152 at June 30, 2018 and March 31, 2018, respectively	(2,425)	(2,486)
Capital in excess of stated value	(1,524)	(1,911)
Retained earnings	104,479	103,601
Accumulated other comprehensive loss	(263)	(255)
Total shareholders' equity	109,749	108,431
Total liabilities and shareholders' equity	$ 162,228	$ 157,207

XML

Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 809	$ 900
Accounts receivable, net	$ 20,306	$ 16,389
Common stock, stated value	$ 0.30	$ 0.30
Common stock, shares authorized	80,000,000	80,000,000
Common stock, shares issued	31,606,831	31,606,831
Common stock, shares outstanding	23,526,906	23,324,679
Treasury shares	8,079,925	8,282,152

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Net revenue:
Net revenue	$ 34,007,000	$ 33,865,000
Cost of goods sold:
Products (inclusive of developed technology amortization)	7,130,000	7,624,000
Support, maintenance and subscription services	4,074,000	4,035,000
Professional services	4,914,000	5,536,000
Total cost of goods sold	16,118,000	17,195,000
Gross profit	$ 17,889,000	$ 16,670,000
Gross Profit Ratio	52.60%	49.20%
Operating expenses:
Product development	$ 7,089,000	$ 6,626,000
Sales and marketing	4,754,000	5,130,000
General and administrative	6,005,000	6,800,000
Depreciation of fixed assets	606,000	611,000
Amortization	543,000	485,000
Amortization of intangibles	11,500	485,000
Severance Costs	440,000	37,000
Accrued Legal Settlements	91,000	0
Total operating expense	19,528,000	19,689,000
Operating loss	(1,639,000)	(3,019,000)
Other expense (income):
Interest (income)	(55,000)	(28,000)
Interest expense	3,000	2,000
Other expense (income), net	198,000	(113,000)
Loss before taxes	(1,785,000)	(2,880,000)
Income tax (benefit) expense	(49,000)	78,000
Net loss	$ (1,736,000)	$ (2,958,000)
Weighted average shares outstanding (in shares)	23,095	22,720
Loss per share - basic and diluted:
Loss per share (in dollars per share)	$ (0.08)	$ (0.13)
Products
Net revenue:
Net revenue	$ 9,080,000	$ 10,283,000
Support, maintenance and subscription services
Net revenue:
Net revenue	17,929,000	16,667,000
Professional services
Net revenue:
Net revenue	$ 6,998,000	$ 6,915,000

XML

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Statement of Comprehensive Income [Abstract]
Net loss	$ (1,736)	$ (2,958)
Other comprehensive (loss)/gain, net of tax:
Unrealized foreign currency translation adjustments	(8)	44
Total comprehensive loss	$ (1,744)	$ (2,914)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Operating activities
Net loss	$ (1,736)	$ (2,958)
Adjustments to reconcile net loss to net cash used in operating activities
Net restructuring, severance and other charges	15	(12)
Net legal settlements	91	0
Depreciation	606	611
Amortization	543	485
Amortization of developed technology	2,663	2,307
Deferred income taxes	28	106
Share-based compensation	409	1,219
Change in cash surrender value of company owned life insurance policies	(4)	(6)
Increase (Decrease) in Operating Capital	(3,978)	(2,236)
Net cash used in operating activities	(1,363)	(484)
Investing activities
Capital expenditures	(744)	(2,125)
Capitalized software development costs	(2,132)	(2,990)
Investments in corporate-owned life insurance policies	(2)	(2)
Net cash used in investing activities	(2,878)	(5,117)
Financing activities
Repurchase of common shares to satisfy employee tax withholding	(495)	(265)
Principal payments under long-term obligations	(30)	(31)
Net cash used in financing activities	(525)	(296)
Effect of exchange rate changes on cash	(101)	50
Net decrease in cash and cash equivalents	(4,867)	(5,847)
Cash and cash equivalents at beginning of period	39,943	49,255
Cash and cash equivalents at end of period	35,076	43,408
Accrued capital expenditures	82	243
Accrued capitalized software development costs	$ 57	$ 681

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Nature of Operations and Financial Statement Presentation

3 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations and Financial Statement Presentation

Nature of Operations and Financial Statement Presentation

Nature of Operations

Agilysys is a leading technology company that provides innovative software and services for point-of-sale (POS), payment gateway, reservation and table management, property management (PMS), inventory and procurement, business analytics, document management, guest offers management, and mobile and wireless solutions exclusively to the hospitality industry. Our products and services allow operators to streamline operations, improve efficiency and understand customer needs across their properties to deliver a superior overall guest experience. The result is improved guest loyalty, growth in wallet share and increased revenue as they connect and transact with their guests based upon a single integrated view of individual preferences and interactions. We serve four major market sectors: Gaming, both corporate and tribal; Hotels, Resorts and Cruise; Corporate Foodservice Management; and Restaurants, Universities, Stadia and Healthcare. A significant portion of our consolidated revenue is derived from contract support, maintenance and subscription services.

Agilysys operates across North America, Europe, Asia-Pacific, and India with headquarters located in Alpharetta, GA. For more information, visit www.agilysys.com.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include our accounts consolidated with our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on March 31st. References to a particular year refer to the fiscal year ending in March of that year. For example, fiscal 2019 refers to the fiscal year ending March 31, 2019.

Our unaudited interim financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to the Quarterly Report on Form 10-Q (Quarterly Report) under the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 10-01 of Regulation S-X under the Exchange Act. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

The Condensed Consolidated Balance Sheet as of June 30, 2018, as well as the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Loss, and the Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2018 and 2017, are unaudited. However, these financial statements have been prepared on the same basis as those in the audited annual financial statements, except for the recently adopted accounting pronouncements described below. In the opinion of management, all adjustments of a recurring nature necessary to fairly state the results of operations, financial position, and cash flows have been made.

These unaudited interim financial statements should be read together with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended March 31, 2018, filed with the Securities and Exchange Commission (SEC) on May 25, 2018.

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Summary of Significant Accounting Policies

3 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

A detailed description of our significant accounting policies can be found in the audited financial statements for the fiscal year ended March 31, 2018, included in our Annual Report on Form 10-K. Our accounting policy for revenue recognition changed with the adoption of Accounting Standards Update ("ASU") No. 2014-09 ("Topic 606"), as described further below. There have been no other material changes to our significant accounting policies and estimates from those disclosed therein.

Reclassification - Certain prior year balances have been reclassed to conform to the current year presentation. Specifically, we have elected to present our changes in operating assets and liabilities on the condensed consolidated statements of cash flows as a single line item. Prior year results have been condensed to be consistent with current year presentation.

Adopted and Recently Issued Accounting Pronouncements

In February 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). ASU 2018-02 addresses the effect of the change in the U.S. federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017. The new standard is effective for annual periods, and for interim periods within those annual periods beginning after December 15, 2018, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, and ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. We have adopted this standard as of April 1, 2018; the adoption had no impact to our condensed consolidated financial statements. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. While we are still assessing the impact of this standard, we do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new guidance is effective for annual reporting periods beginning after December 15, 2017. The new standard must be adopted using a modified retrospective transition method, with the cumulative effect recognized as of the date of initial adoption. We have adopted this standard as of April 1, 2018; the adoption had no impact to our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance with the intent of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted, including adoption in an interim period. We have adopted this standard as of April 1, 2018; the adoption had no impact to our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). This new standard changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans, and other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted. We are currently reviewing this standard to assess the impact on our future consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance will require both types of leases to be recognized on the balance sheet. The new guidance is effective for all periods beginning after December 15, 2018 and we are currently evaluating the effects that the adoption of ASU No. 2016-02 will have on our consolidated financial statements, but anticipate that the new guidance will materially impact our consolidated financial statements given the significance of our leases.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We adopted ASU No. 2014-09 as of April 1, 2018 using the modified retrospective transition method. Please refer to Note 3, "Revenue Recognition" for further details.

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Revenue Recognition

3 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

On April 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method applied to those contracts that were not completed as of the adoption date. Results for reporting periods beginning after the adoption date are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under prior guidance.

Disaggregation of Revenue

We derive and report our revenue from the sale of products (software and hardware including server, storage, and point of sale), support, maintenance and subscription services and professional services. Revenue recognized at a point in time (products) totaled $9.1 million and over time (support, maintenance and subscription services and professional services) totaled $24.9 million for the three months ended June 30, 2018. See Nature of Goods and Services section below for additional information regarding revenue recognition procedures for our revenue streams.

Nature of Goods and Services

Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer purchase order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Multiple contracts with a single counterparty entered into at the same time are evaluated to determine if the contracts should be combined and accounted for as a single contract.

Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract. Capable of being distinct means the customer can benefit from the goods or services either on its own or together with other resources that are readily available from third parties or from us. Distinct in the context of the contract means the transfer of the goods or services is separately identifiable from other promises in the contract. The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer. Typically, our contracts do not provide our customer with any right of return or refund; we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or a refund.

Typically, our customer contracts contain one or more of the following goods or services as performance obligations.

Our software licenses typically provide for a perpetual right to use our software. Generally, our contracts do not provide significant services of integration and customization and installation services are not required to be purchased directly from us. The software is delivered before related services are provided and is functional without professional services, updates and technical support. We have concluded that the software license is distinct as the customer can benefit from the software on its own. Software revenue is typically recognized when the software is delivered or made available for download to the customer.

Revenue for hardware sales is recognized when the product is shipped to the customer and when obligations that affect the customer's final acceptance of the arrangement have been fulfilled. A majority of our hardware sales involves shipment directly from its suppliers to the end-user customers. In these transactions, we are the primary obligor as we are responsible for negotiating price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and we bear the credit risk if the customer does not pay for the goods. As the principal contact with the customer, we recognize revenue and cost of goods sold when we are notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination or upon installation at the customer site.

Support and certain maintenance revenue is derived from providing telephone and on-line technical support services, bug fixes, and unspecified software updates and upgrades to customers on a when-and-if-available basis. Each of these performance obligations provide benefit to the customer on a standalone basis and are distinct in the context of the contract. Each of these distinct performance obligations represent a stand ready obligation to provide service to a customer, which is concurrently delivered and has the same pattern of transfer to the customer, which is why we account for these support services as a single performance obligation.

Our subscription service revenue is comprised of fees for Software as a Service (“SaaS”) contracts that provide customers a right to access our software, which we maintain, and host in a data center, for a subscribed period. We do not provide the customer the contractual right to license the software outside of the data center at any time during the subscription period under these contracts. The customer can only benefit from the software and software maintenance when combined with the hosting service since the right to access is only provided to the software hosted in the data center. Accordingly, each of the rights to access the software, the maintenance services, and the hosting services is not considered a distinct performance obligation in the context of the contract and should be combined into a single performance obligation and recognized over the contract period. Typically, we invoice fees monthly.

Professional services revenues primarily consist of fees for consulting, installation, integration and training and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are being performed. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation.

We estimate standalone selling price ("SSP") based on the price at which the performance obligations are sold by considering certain specific factors related to our company together with customer information. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.

Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold. Revenue is recorded net of any applicable taxes collected and remitted to governmental agencies.

Contract Balances

Contract assets are rights to consideration in exchange for goods or services that we have transferred to a customer when that right is conditional on something other than the passage of time. The majority of our contract assets represent unbilled amounts related to professional services. We expect billing and collection of our contract assets to occur within the next twelve months. We receive payments from customers based upon contractual billing schedules and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities represent consideration received or consideration which is unconditionally due from customers prior to transferring goods or services to the customer under the terms of the contract.

Revenue recognized during the three months ended June 30, 2018 from amounts included in contract liabilities at the beginning of the period was $11.6 million. During the three months ended June 30, 2018, we transferred $3.0 million to accounts receivable from contract assets recognized at April 1, 2018 because the right to the transaction consideration became unconditional.

Our arrangements are for a period of one year or less. We had approximately $34 million of remaining performance obligations as of June 30, 2018, which we expect to recognize over the next twelve months.

Assets Recognized from Costs to Obtain a Contract

We capitalize commission expenses paid to internal sales personnel expenses that are incremental to obtaining customer contracts. We have determined that these commission expenses are in fact incremental and would not have occurred absent the customer contract. Capitalized sales commissions are amortized on a straight-line basis over the period the goods or services are transferred to the customer to which the assets relate, which can range as long as five years. We have determined that certain sales incentive programs meet the requirements to be capitalized. We have capitalized $1.9 million of sales incentive costs in prior periods as part of our opening retained earnings adjustment on April 1, 2018. These balances are included in other non-current assets on our condensed consolidated balance sheet and are amortized as we satisfy the underlying performance obligations, generally based on the contract terms and anticipated renewals. During the three months ended June 30, 2018, we expensed $0.9 million of sales commissions, which is included in operating expenses - sales and marketing in our condensed consolidated statement of operations. All other costs to obtain a contract are not considered incremental and therefore are expensed as incurred.

Financial Statement Impact of Adoption on Previously Reported Results

We adopted Topic 606 using the modified retrospective method. The cumulative impact of applying the new guidance to all contracts with customers that were not completed as of April 1, 2018 was recorded as an adjustment to retained earnings as of the adoption date. As a result of applying the modified retrospective method to adopt the new standard, the following adjustments were made to noted accounts on the condensed consolidated balance sheet as of April 1, 2018:

(In thousands)	March 31, 2018	Adjustment from Topic 606		April 1, 2018
Assets:
Accounts receivable, net	16,389	3,124		19,513
Contract assets	—	4,583		4,583
Prepaid expenses and other current assets	5,593	(496	)	5,097
Other non-current assets	2,484	2,409		4,893
Liabilities:
Contract liabilities	26,820	7,006		33,826
Shareholders' equity:
Retained earnings	103,601	2,614		106,215

The acceleration of revenue that was deferred under prior guidance as of the adoption date was primarily attributable to the requirement of Topic 606 to allocate the transaction price to the performance obligations in the contract on a relative basis using SSP rather than allocating under the residual method, which allocates the entire arrangement discount to the delivered performance obligations.

Due to the Company's full valuation allowance as of the adoption date, there is no tax impact associated with the adoption of Topic 606.

We made certain presentation changes to our condensed consolidated balance sheet on April 1, 2018 to comply with Topic 606. Prior to adoption of the new standard, we offset accounts receivable and contract liabilities (previously presented as deferred revenue on our condensed consolidated balance sheet) for unpaid deferred performance obligations included in contract liabilities. Under the new standard, we record accounts receivable and related contract liabilities for non-cancelable contracts with customers when the right to consideration is unconditional. Upon adoption, the right to consideration in exchange for goods or services that have been transferred to a customer when that right is conditional on something other than the passage of time were reclassified from accounts receivable to contract assets.

Impact of Topic 606 on Financial Statement Line Items

The impact of adoption of Topic 606 on our condensed consolidated balance sheet as of June 30, 2018 and on our condensed consolidated statement of operations for the three months ended June 30, 2018 was as follows:

	June 30, 2018
	As reported	Balance without adoption of Topic 606	Effect of Change Higher (Lower)
(In thousands)
Assets:
Accounts receivable, net	20,306	19,491	815
Contract assets	5,273	—	5,273
Prepaid expenses and other current assets	5,421	5,890	(469	)
Other non-current assets	4,673	2,211	2,462
Liabilities:
Contract liabilities	30,781	25,230	5,551
Shareholders' equity:
Retained earnings	104,479	101,949	2,530

	June 30, 2018
	As reported		Balance without adoption of Topic 606		Effect of Change Higher (Lower)
(In thousands)
Net revenue:
Products	9,080		8,702		378
Support, maintenance and subscription services	17,929		18,187		(258	)
Professional services	6,998		7,167		(169	)
Total net revenue:	34,007		34,056		(49	)
Operating expenses:
Sales and marketing	4,754		4,719		35
Net Loss	(1,736	)	(1,652	)	(84	)

The adoption of Topic 606 had no impact to cash used in operating, investing or financing activities on our condensed consolidated statement of cash flows.

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Restructuring and Related Charges

3 Months Ended

Jun. 30, 2018

Restructuring Charges [Abstract]

Restructuring and Related Charges

Restructuring Charges

We recognize restructuring charges when a plan that materially changes the scope of our business or the manner in which that business is conducted is adopted and communicated to the impacted parties, and the expenses have been incurred or are reasonably estimable.

Fiscal 2018 Restructuring Plan

As of June 30, 2018, we had a remaining liability of approximately $0.1 million recorded for the fiscal 2018 restructuring plan.

Following is a reconciliation of the beginning and ending balances of the restructuring liability:

	Balance at		Provisions/Adjustments		Payments			Balance at
(In thousands)	March 31, 2018							June 30, 2018
Fiscal 2018 Restructuring Plan:
Restructuring and other employment costs	$	198	$	—	$	(111	)	$	87
Total restructuring costs	$	198	$	—	$	(111	)	$	87

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Intangible Assets and Software Development Costs

3 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Software Development Costs

Intangible Assets and Software Development Costs

The following table summarizes our intangible assets and software development costs:

	June 30, 2018							March 31, 2018
	Gross					Net		Gross					Net
	carrying		Accumulated			carrying		carrying		Accumulated			carrying
(In thousands)	amount		amortization			amount		amount		amortization			amount
Amortized intangible assets:
Customer relationships	$	10,775	$	(10,775	)	$	—	$	10,775	$	(10,775	)	$	—
Non-competition agreements	2,700		(2,700		)	—		2,700		(2,700		)	—
Developed technology	10,398		(10,398		)	—		10,398		(10,398		)	—
Trade names	230		(157		)	73		230		(146		)	84
Patented technology	80		(80		)	—		80		(80		)	—
	24,183		(24,110		)	73		24,183		(24,099		)	84
Unamortized intangible assets:
Trade names	8,400		N/A			8,400		8,400		N/A			8,400
Total intangible assets	$	32,583	$	(24,110	)	$	8,473	$	32,583	$	(24,099	)	$	8,484
Software development costs	$	67,541	$	(23,035	)	$	44,506	$	53,368	$	(20,372	)	$	32,996
Project expenditures not yet in use	—		—			—		12,185		—			12,185
Total software development costs	$	67,541	$	(23,035	)	$	44,506	$	65,553	$	(20,372	)	$	45,181

The following table summarizes our remaining estimated amortization expense relating to in service intangible assets and software development costs.

	Estimated
	Amortization
(In thousands)	Expense
Fiscal year ending March 31,
2019	$	9,973
2020	12,599
2021	12,515
2022	5,403
2023	3,399
2024	690
Total	$	44,579

Amortization expense for software development costs related to assets to be sold, leased, or otherwise marketed was $2.7 million and $2.3 million for the three months ended June 30, 2018 and 2017, respectively. These charges are included as Products cost of goods sold within the condensed consolidated statements of operations. Amortization expense relating to other definite-lived intangible assets was $11,500 for the three months ended June 30, 2018 and 2017. These charges are classified as Amortization of intangibles within the condensed consolidated statements of operations along with Amortization expense related to our Capitalized Internal-Use Software that we classify in Property and Equipment, net within the condensed consolidated balance sheets.

Capitalized software development costs for software internally developed to be sold, leased, or otherwise marketed, are carried on our balance sheet at carrying value, net of accumulated amortization. We capitalized approximately $2.0 million and $2.8 million during the three months ended June 30, 2018 and 2017, respectively.

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Additional Balance Sheet Information

3 Months Ended

Jun. 30, 2018

Balance Sheet Related Disclosures [Abstract]

Additional Balance Sheet Information

Additional Balance Sheet Information

Additional information related to the condensed consolidated balance sheets is as follows:

(In thousands)	June 30, 2018		March 31, 2018
Accrued liabilities:
Salaries, wages, and related benefits	$	6,055	$	6,793
Other taxes payable	694		769
Restructuring liabilities	86		198
Accrued legal settlements	91		—
Severance liabilities	197		—
Professional fees	271		288
Deferred rent	411		407
Other	736		786
Total	$	8,541	$	9,241
Other non-current liabilities:
Uncertain tax positions	$	1,435	$	1,519
Deferred rent	2,215		2,313
Other	76		79
Total	$	3,726	$	3,911

Accounts Receivable, net

Accounts receivable, net of allowance for doubtful accounts was $20.3 million and $16.4 million as of June 30, 2018 and March 31, 2018, respectively. The related allowance for doubtful accounts was $0.8 million and $0.9 million as of June 30, 2018 and March 31, 2018, respectively.

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Income Taxes

3 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table compares our income tax (benefit) expense and effective tax rates for the three months ended June 30, 2018 and 2017:

	Three months ended
	June 30,
(Dollars in thousands)	2018			2017
Income tax (benefit) expense	$	(49	)	$	78
Effective tax rate	2.7		%	(2.7		)%

For the three months ended June 30, 2018, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, an adjustment to true-up uncertain tax positions, certain foreign and state tax effects and other U.S. permanent book to tax differences.

For the three months ended June 30, 2017, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state tax effects, and other U.S. permanent book to tax differences.

We have recorded a valuation allowance offsetting substantially all of our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Because of our losses in prior periods, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences.

On December 22, 2017, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB No. 118 allows registrants to record provisional amounts for a period up to one year from the date of enactment of the Tax Act when the registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. It is uncertain if and to what extent various states will enact legislation to conform to the Tax Act. Because legislative guidance and accounting interpretations are expected in the future, we consider the accounting of the deferred tax remeasurement including the ability to offset indefinite lived deferred tax liabilities with certain deferred tax assets to be incomplete and therefore only consider amounts related to these items to be reasonably estimated as of March 31, 2018 and June 30, 2018. We expect to refine and complete the accounting for the Tax Act during fiscal 2019 as we obtain, prepare and analyze additional information and as additional legislative, regulatory and accounting guidance and interpretations become available.

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Commitments and Contingencies

3 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Agilysys is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. We provide for costs related to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on our future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount or timing of the resolution of such matters. While it is not possible to predict with certainty, management believes that the ultimate resolution of such individual or aggregated matters will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

On April 6, 2012, Ameranth, Inc. filed a complaint against us for patent infringement in the United States District Court for the Southern District of California. Ameranth alleges, among other things, that point-of-sale and property management and other hospitality information technology products, software, components and/or systems sold by us infringe a patent owned by Ameranth purporting to cover generation and synchronization of menus, including restaurant menus, event tickets, and other products across fixed, wireless and/or internet platforms as well as synchronization of hospitality information and hospitality software applications across fixed, wireless and internet platforms. The complaint seeks monetary damages, injunctive relief, costs and attorneys' fees. At this time, we are not able to predict the outcome of this lawsuit, or any possible monetary exposure associated with the lawsuit. However, we dispute the allegations of wrongdoing and are vigorously defending ourselves in this matter.

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Loss Per Share

3 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Loss Per Share

(Loss) per Share

The following data shows the amounts used in computing (loss) per share and the effect on earnings and the weighted average number of shares of dilutive potential common shares.

	Three months ended
	June 30,
(In thousands, except per share data)	2018			2017
Numerator:
Net loss	$	(1,736	)	$	(2,958	)
Denominator:
Weighted average shares outstanding	23,095			22,720
Loss per share - basic and diluted:
Loss per share	$	(0.08	)	$	(0.13	)
Anti-dilutive stock options, SSARs, restricted shares and performance shares	1,356			1,575

Basic loss per share is computed as net income available to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes 490,117 and 646,134 of restricted shares at June 30, 2018 and 2017, respectively, as these shares were issued but were not vested and therefore, not considered outstanding for purposes of computing basic loss per share at the balance sheet dates.

Diluted loss per share includes the effect of all potentially dilutive securities on earnings per share. We have stock options, stock-settled appreciation rights ("SSARs"), unvested restricted shares and unvested performance shares that are potentially dilutive securities. When a loss is reported, the denominator of diluted earnings per share cannot be adjusted for the dilutive impact of share-based compensation awards because doing so would be anti-dilutive. Therefore, for all periods presented, basic weighted-average shares outstanding were used in calculating the diluted net loss per share.

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Share-based Compensation

3 Months Ended

Jun. 30, 2018

Share-based Compensation [Abstract]

Share-based Compensation

Share-based Compensation

We may grant non-qualified stock options, incentive stock options, SSARs, restricted shares, and restricted share units under our shareholder-approved 2016 Stock Incentive Plan ("2016 Plan") for up to2.0 million common shares, plus 957,575 common shares, the number of shares that were remaining for grant under the 2011 Stock Incentive Plan ("2011 Plan") as of the effective date of the 2016 Plan, plus the number of shares remaining for grant under the 2011 Plan that are forfeited, settled in cash, canceled or expired. The maximum aggregate number of restricted shares or restricted share units that may be granted under the 2016 Plan is 1.25 million. With respect to awards that are intended to qualify for the performance-based exception to the deductibility limitations of Section 162(m) of the Internal Revenue Code, the maximum number of shares subject to stock options or SSARs that may be granted to an individual in a calendar year is 800,000 shares, and the maximum number of shares subject to restricted shares or restricted share units that may be granted to an individual in a calendar year is 400,000 shares.

We may distribute authorized but unissued shares or treasury shares to satisfy share option and appreciation right exercises or restricted share and performance share awards.

We record compensation expense related to stock options, SSARs, restricted shares, and performance shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date. The fair value of restricted share and performance share awards is based on the closing price of our common shares on the grant date. The fair value of stock option and SSARs awards is estimated on the grant date using the Black-Scholes-Merton option pricing model, which includes assumptions regarding the risk-free interest rate, dividend yield, life of the award, and the volatility of our common shares.

The following table summarizes the share-based compensation expense for options, SSARs, restricted and performance awards included in the Condensed Consolidated Statements of Operations:

	Three months ended
	June 30,
(In thousands)	2018			2017
Product development	$	(85	)	$	421
Sales and marketing	65			169
General and administrative	429			629
Total share-based compensation expense	409			1,219

Stock-Settled Appreciation Rights

SSARs are rights granted to an employee to receive value equal to the difference in the price of our common shares on the date of the grant and on the date of exercise. This value is settled in common shares of Agilysys, Inc.

The following table summarizes the activity during the three months ended June 30, 2018 for SSARs awarded under the 2011 and 2016 Plans:

	Number of Rights		Weighted-Average Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value
(In thousands, except share and per share data)			(per right)		(in years)
Outstanding at April 1, 2018	1,103,160		$	10.6
Granted	158,244		14.22
Exercised	(154,312	)	10.57
Forfeited	(32,359	)	10.36
Cancelled/expired	(3,492	)	9.60
Outstanding at June 30, 2018	1,071,241		$	11.15	5.4	$	2,516
Exercisable at June 30, 2018	499,292		$	10.46	4.8	$	2,516

As of June 30, 2018, total unrecognized stock based compensation expense related to non-vested SSARs was $1.2 million, which is expected to be recognized over a weighted-average vesting period of 3.1 years.

Restricted Shares

We granted shares to certain of our Directors, executives and key employees, the vesting of which is service-based. The following table summarizes the activity during the three months ended June 30, 2018 for restricted shares awarded under the 2011 and 2016 Plans:

	Number of Shares		Weighted-Average Grant-Date Fair Value
(In thousands, except share and per share data)			(per share)
Outstanding at April 1, 2018	243,354		$	10.78
Granted	233,410		14.22
Vested	—		—
Forfeited	(49,938	)	10.32
Outstanding at June 30, 2018	426,826		$	12.72

The weighted-average grant date fair value of the restricted shares is determined based upon the closing price of our common shares on the grant date. As of June 30, 2018, total unrecognized stock based compensation expense related to non-vested restricted stock was $4.3 million, which is expected to be recognized over a weighted-average vesting period of 2.3 years.

Performance Shares

We awarded certain restricted shares to our Chief Executive Officer, the vesting of which is performance based. The number of shares that vest will be based on relative attainment of a performance metric and any unvested shares will forfeit upon settlement of the bonus.

The following table summarizes the activity during the three months ended June 30, 2018 for the performance shares awarded under the 2016 Plan:

	Number of Shares
(In thousands, except share and per share data)
Outstanding at April 1, 2018	91,463
Granted	63,291
Forfeited	(75,641	)
Vested	(15,822	)
Outstanding at June 30, 2018	63,291

Based on the performance goals, management estimates a liability of $450,000 to be settled through the vesting of a variable number of the performance shares subsequent to March 31, 2019. As of June 30, 2018, total unrecognized stock based compensation expense related to non-vested performance shares was $405,000, which is expected to be recognized over the remaining vesting period of 9 months.

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Fair Value Measurements

3 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

We estimate the fair value of financial instruments using available market information and generally accepted valuation methodologies. We assess the inputs used to measure fair value using a three-tier hierarchy. The hierarchy indicates the extent to which pricing inputs used in measuring fair value are observable in the market. Level 1 inputs include unadjusted quoted prices for identical assets or liabilities and are the most observable. Level 2 inputs include unadjusted quoted prices for similar assets and liabilities that are either directly or indirectly observable, or other observable inputs such as interest rates, foreign currency exchange rates, commodity rates, and yield curves. Level 3 inputs are not observable in the market and include our own judgments about the assumptions market participants would use in pricing the asset or liability. The use of observable and unobservable inputs is reflected in the hierarchy assessment disclosed in the tables below.

There were no significant transfers between Levels 1, 2, and 3 during the three months ended June 30, 2018 and 2017.

The following tables present information about our financial assets measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

	Fair value measurement used
	Recorded value as of		Active markets for identical assets or liabilities	Quoted prices in similar instruments and observable inputs	Active markets for unobservable inputs
(In thousands)	June 30, 2018		(Level 1)	(Level 2)	(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	859	—	—	$	859

	Fair value measurement used
	Recorded value as of		Active markets for identical assets or liabilities	Quoted prices in similar instruments and observable inputs	Active markets for unobservable inputs
(In thousands)	March 31, 2018		(Level 1)	(Level 2)	(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	853	—	—	$	853

The recorded value of the corporate-owned life insurance policies is adjusted to the cash surrender value of the policies obtained from the third party life insurance providers, which are not observable in the market, and therefore, are classified within Level 3 of the fair value hierarchy. Changes in the cash surrender value of these policies are recorded within “Other (income) expenses, net” in the Condensed Consolidated Statements of Operations.

The following table presents a summary of changes in the fair value of the Level 3 assets:

	Three months ended
	June 30,
(In thousands)	2018		2017
Corporate-owned life insurance:
Balance on April 1	$	853	$	809
Unrealized gain relating to instruments held at reporting date	4		4
Purchases, sales, issuances and settlements, net	2		2
Balance on June 30	$	859	$	815

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Adopted and Recently Issued Accounting Pronouncements

Adopted and Recently Issued Accounting Pronouncements

In February 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). ASU 2018-02 addresses the effect of the change in the U.S. federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017. The new standard is effective for annual periods, and for interim periods within those annual periods beginning after December 15, 2018, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, and ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. We have adopted this standard as of April 1, 2018; the adoption had no impact to our condensed consolidated financial statements. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. While we are still assessing the impact of this standard, we do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new guidance is effective for annual reporting periods beginning after December 15, 2017. The new standard must be adopted using a modified retrospective transition method, with the cumulative effect recognized as of the date of initial adoption. We have adopted this standard as of April 1, 2018; the adoption had no impact to our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance with the intent of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted, including adoption in an interim period. We have adopted this standard as of April 1, 2018; the adoption had no impact to our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). This new standard changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans, and other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted. We are currently reviewing this standard to assess the impact on our future consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance will require both types of leases to be recognized on the balance sheet. The new guidance is effective for all periods beginning after December 15, 2018 and we are currently evaluating the effects that the adoption of ASU No. 2016-02 will have on our consolidated financial statements, but anticipate that the new guidance will materially impact our consolidated financial statements given the significance of our leases.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We adopted ASU No. 2014-09 as of April 1, 2018 using the modified retrospective transition method. Please refer to Note 3, "Revenue Recognition" for further details.

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Revenue Recognition (Tables)

3 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

As a result of applying the modified retrospective method to adopt the new standard, the following adjustments were made to noted accounts on the condensed consolidated balance sheet as of April 1, 2018:

(In thousands)	March 31, 2018	Adjustment from Topic 606		April 1, 2018
Assets:
Accounts receivable, net	16,389	3,124		19,513
Contract assets	—	4,583		4,583
Prepaid expenses and other current assets	5,593	(496	)	5,097
Other non-current assets	2,484	2,409		4,893
Liabilities:
Contract liabilities	26,820	7,006		33,826
Shareholders' equity:
Retained earnings	103,601	2,614		106,215

The impact of adoption of Topic 606 on our condensed consolidated balance sheet as of June 30, 2018 and on our condensed consolidated statement of operations for the three months ended June 30, 2018 was as follows:

	June 30, 2018
	As reported	Balance without adoption of Topic 606	Effect of Change Higher (Lower)
(In thousands)
Assets:
Accounts receivable, net	20,306	19,491	815
Contract assets	5,273	—	5,273
Prepaid expenses and other current assets	5,421	5,890	(469	)
Other non-current assets	4,673	2,211	2,462
Liabilities:
Contract liabilities	30,781	25,230	5,551
Shareholders' equity:
Retained earnings	104,479	101,949	2,530

	June 30, 2018
	As reported		Balance without adoption of Topic 606		Effect of Change Higher (Lower)
(In thousands)
Net revenue:
Products	9,080		8,702		378
Support, maintenance and subscription services	17,929		18,187		(258	)
Professional services	6,998		7,167		(169	)
Total net revenue:	34,007		34,056		(49	)
Operating expenses:
Sales and marketing	4,754		4,719		35
Net Loss	(1,736	)	(1,652	)	(84	)

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Restructuring and Related Charges (Tables)

3 Months Ended

Jun. 30, 2018

Restructuring Charges [Abstract]

Restructuring and Related Costs

Following is a reconciliation of the beginning and ending balances of the restructuring liability:

	Balance at		Provisions/Adjustments		Payments			Balance at
(In thousands)	March 31, 2018							June 30, 2018
Fiscal 2018 Restructuring Plan:
Restructuring and other employment costs	$	198	$	—	$	(111	)	$	87
Total restructuring costs	$	198	$	—	$	(111	)	$	87

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Intangible Assets and Software Development Costs (Tables)

3 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

The following table summarizes our intangible assets and software development costs:

	June 30, 2018							March 31, 2018
	Gross					Net		Gross					Net
	carrying		Accumulated			carrying		carrying		Accumulated			carrying
(In thousands)	amount		amortization			amount		amount		amortization			amount
Amortized intangible assets:
Customer relationships	$	10,775	$	(10,775	)	$	—	$	10,775	$	(10,775	)	$	—
Non-competition agreements	2,700		(2,700		)	—		2,700		(2,700		)	—
Developed technology	10,398		(10,398		)	—		10,398		(10,398		)	—
Trade names	230		(157		)	73		230		(146		)	84
Patented technology	80		(80		)	—		80		(80		)	—
	24,183		(24,110		)	73		24,183		(24,099		)	84
Unamortized intangible assets:
Trade names	8,400		N/A			8,400		8,400		N/A			8,400
Total intangible assets	$	32,583	$	(24,110	)	$	8,473	$	32,583	$	(24,099	)	$	8,484
Software development costs	$	67,541	$	(23,035	)	$	44,506	$	53,368	$	(20,372	)	$	32,996
Project expenditures not yet in use	—		—			—		12,185		—			12,185
Total software development costs	$	67,541	$	(23,035	)	$	44,506	$	65,553	$	(20,372	)	$	45,181

Schedule of remaining estimated amortization expense

The following table summarizes our remaining estimated amortization expense relating to in service intangible assets and software development costs.

	Estimated
	Amortization
(In thousands)	Expense
Fiscal year ending March 31,
2019	$	9,973
2020	12,599
2021	12,515
2022	5,403
2023	3,399
2024	690
Total	$	44,579

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Additional Balance Sheet Information (Tables)

3 Months Ended

Jun. 30, 2018

Balance Sheet Related Disclosures [Abstract]

Schedule of Additional information related to the Condensed Consolidated Balance Sheets

Additional information related to the condensed consolidated balance sheets is as follows:

(In thousands)	June 30, 2018		March 31, 2018
Accrued liabilities:
Salaries, wages, and related benefits	$	6,055	$	6,793
Other taxes payable	694		769
Restructuring liabilities	86		198
Accrued legal settlements	91		—
Severance liabilities	197		—
Professional fees	271		288
Deferred rent	411		407
Other	736		786
Total	$	8,541	$	9,241
Other non-current liabilities:
Uncertain tax positions	$	1,435	$	1,519
Deferred rent	2,215		2,313
Other	76		79
Total	$	3,726	$	3,911

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Income Taxes (Tables)

3 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Effective tax rates from continuing operations

The following table compares our income tax (benefit) expense and effective tax rates for the three months ended June 30, 2018 and 2017:

	Three months ended
	June 30,
(Dollars in thousands)	2018			2017
Income tax (benefit) expense	$	(49	)	$	78
Effective tax rate	2.7		%	(2.7		)%

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Loss per Share (Tables)

3 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Schedule of amounts used in computing loss per share and the effect on earnings and the weighted average number of shares of dilutive potential common shares

The following data shows the amounts used in computing (loss) per share and the effect on earnings and the weighted average number of shares of dilutive potential common shares.

	Three months ended
	June 30,
(In thousands, except per share data)	2018			2017
Numerator:
Net loss	$	(1,736	)	$	(2,958	)
Denominator:
Weighted average shares outstanding	23,095			22,720
Loss per share - basic and diluted:
Loss per share	$	(0.08	)	$	(0.13	)
Anti-dilutive stock options, SSARs, restricted shares and performance shares	1,356			1,575

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Share-based Compensation (Tables)

3 Months Ended

Jun. 30, 2018

Share-based Compensation [Abstract]

Summary of share-based compensation expense for options

The following table summarizes the share-based compensation expense for options, SSARs, restricted and performance awards included in the Condensed Consolidated Statements of Operations:

	Three months ended
	June 30,
(In thousands)	2018			2017
Product development	$	(85	)	$	421
Sales and marketing	65			169
General and administrative	429			629
Total share-based compensation expense	409			1,219

Activity related SSARs award

The following table summarizes the activity during the three months ended June 30, 2018 for SSARs awarded under the 2011 and 2016 Plans:

	Number of Rights		Weighted-Average Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value
(In thousands, except share and per share data)			(per right)		(in years)
Outstanding at April 1, 2018	1,103,160		$	10.6
Granted	158,244		14.22
Exercised	(154,312	)	10.57
Forfeited	(32,359	)	10.36
Cancelled/expired	(3,492	)	9.60
Outstanding at June 30, 2018	1,071,241		$	11.15	5.4	$	2,516
Exercisable at June 30, 2018	499,292		$	10.46	4.8	$	2,516

Activity related to restricted shares awarded by the Company

The following table summarizes the activity during the three months ended June 30, 2018 for restricted shares awarded under the 2011 and 2016 Plans:

	Number of Shares		Weighted-Average Grant-Date Fair Value
(In thousands, except share and per share data)			(per share)
Outstanding at April 1, 2018	243,354		$	10.78
Granted	233,410		14.22
Vested	—		—
Forfeited	(49,938	)	10.32
Outstanding at June 30, 2018	426,826		$	12.72

Performance shares awarded

The following table summarizes the activity during the three months ended June 30, 2018 for the performance shares awarded under the 2016 Plan:

	Number of Shares
(In thousands, except share and per share data)
Outstanding at April 1, 2018	91,463
Granted	63,291
Forfeited	(75,641	)
Vested	(15,822	)
Outstanding at June 30, 2018	63,291

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Fair Value Measurements (Tables)

3 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value on a recurring basis

The following tables present information about our financial assets measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

	Fair value measurement used
	Recorded value as of		Active markets for identical assets or liabilities	Quoted prices in similar instruments and observable inputs	Active markets for unobservable inputs
(In thousands)	June 30, 2018		(Level 1)	(Level 2)	(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	859	—	—	$	859

	Fair value measurement used
	Recorded value as of		Active markets for identical assets or liabilities	Quoted prices in similar instruments and observable inputs	Active markets for unobservable inputs
(In thousands)	March 31, 2018		(Level 1)	(Level 2)	(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	853	—	—	$	853

Summary of changes in the fair value of the Level 3 assets and liabilities Corporate-owned life insurance

The following table presents a summary of changes in the fair value of the Level 3 assets:

	Three months ended
	June 30,
(In thousands)	2018		2017
Corporate-owned life insurance:
Balance on April 1	$	853	$	809
Unrealized gain relating to instruments held at reporting date	4		4
Purchases, sales, issuances and settlements, net	2		2
Balance on June 30	$	859	$	815

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Nature of Operations and Financial Statement Presentation (Details)	Jun. 30, 2018 market
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of major markets served	4

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Revenue Recognition - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Apr. 01, 2018
Disaggregation of Revenue [Line Items]
Net revenue	$ 34,007	$ 33,865
Revenue recognized	11,600
Transfers to accounts receivable	3,000
Capitalized contract cost, net			$ 1,900
Capitalized contract cost, amortization	900
Products
Disaggregation of Revenue [Line Items]
Net revenue	9,080	$ 10,283
Support, Maintenance, Subscription Services, And Professional Services [Member]
Disaggregation of Revenue [Line Items]
Net revenue	$ 24,927

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Revenue Recognition - Remaining Performance Obligation (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01 $ in Millions	3 Months Ended
	Jun. 30, 2018 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 34
Remaining performance obligation, expected timing of satisfaction, period	12 months

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Revenue Recognition - Financial Statement Impact of Adoption (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Apr. 01, 2018	Mar. 31, 2018
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	$ 34,007	$ 33,865
Sales and marketing	4,754	5,130
Accounts receivable, net	20,306		$ 19,513	$ 16,389
Contract assets	5,273		4,583	0
Prepaid expenses and other current assets	5,421		5,097	5,593
Other non-current assets	4,673		4,893	2,484
Contract liabilities	30,781		33,826	26,820
Retained earnings	104,479		106,215	103,601
Net loss	(1,736)	(2,958)
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	34,056
Sales and marketing	4,719
Accounts receivable, net	19,491			16,389
Contract assets	0			0
Prepaid expenses and other current assets	5,890			5,593
Other non-current assets	2,211			2,484
Contract liabilities	25,230			26,820
Retained earnings	101,949			$ 103,601
Net loss	(1,652)
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	(49)
Sales and marketing	35
Accounts receivable, net	815		3,124
Contract assets	5,273		4,583
Prepaid expenses and other current assets	(469)		(496)
Other non-current assets	2,462		2,409
Contract liabilities	5,551		7,006
Retained earnings	2,530		$ 2,614
Net loss	(84)
Products
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	9,080	10,283
Products | Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	8,702
Products | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	378
Support, maintenance and subscription services
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	17,929	16,667
Support, maintenance and subscription services | Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	18,187
Support, maintenance and subscription services | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	(258)
Professional services
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	6,998	$ 6,915
Professional services | Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	7,167
Professional services | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net revenue	$ (169)

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Restructuring and Related Charges (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018
Restructuring Charges [Abstract]
Restructuring reserve	$ 87	$ 198

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Restructuring and Related Charges (Details) $ in Thousands	3 Months Ended
	Jun. 30, 2018 USD ($)
Restructuring Reserve [Roll Forward]
Balance at March 31, 2018	$ 198
Restructuring Reserve, Accrual Adjustment	0
Restructuring Charges	(111)
Balance at June 30, 2018	$ 87

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Intangible Assets and Software Development Costs - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018
Amortized intangible assets:
Gross carrying amount	$ 24,183	$ 24,183
Accumulated amortization	(24,110)	(24,099)
Net carrying amount	73	84
Finite Lived Software Development Costs [Abstract]
Finite Lived Software Development Costs Gross	67,541	65,553
Finite Lived Software Development Costs Accumulated Amortization	(23,035)	(20,372)
Finite Lived Software Development Costs Net	44,506	45,181
Total intangible assets, gross carrying amount	32,583	32,583
Intangible Assets, Net (Excluding Goodwill)	8,473	8,484
Trade Names [Member]
Unamortized intangible assets:
Carrying amount, excluding accumulated impairment	8,400	8,400
Customer Relationships [Member]
Amortized intangible assets:
Gross carrying amount, excluding accumulated impairment	10,775	10,775
Accumulated amortization, excluding accumulated impairment	(10,775)	(10,775)
Net carrying amount, excluding accumulated impairment	0	0
Developed Technology Rights [Member]
Amortized intangible assets:
Gross carrying amount, excluding accumulated impairment	10,398	10,398
Accumulated amortization, excluding accumulated impairment	(10,398)	(10,398)
Net carrying amount, excluding accumulated impairment	0	0
Noncompete Agreements [Member]
Amortized intangible assets:
Gross carrying amount, excluding accumulated impairment	2,700	2,700
Accumulated amortization, excluding accumulated impairment	(2,700)	(2,700)
Net carrying amount, excluding accumulated impairment	0	0
Trade Names [Member]
Amortized intangible assets:
Gross carrying amount, excluding accumulated impairment	230	230
Accumulated amortization, excluding accumulated impairment	(157)	(146)
Net carrying amount, excluding accumulated impairment	73	84
Patented Technology [Member]
Amortized intangible assets:
Gross carrying amount, excluding accumulated impairment	80	80
Accumulated amortization, excluding accumulated impairment	(80)	(80)
Net carrying amount, excluding accumulated impairment	0	0
Software Development Costs [Member]
Finite Lived Software Development Costs [Abstract]
Finite Lived Software Development Costs Gross Excluding Accumulated Impairment	67,541	53,368
Finite Lived Software Development Costs Accumulated Amortization Excluding Accumulated Impairment	(23,035)	(20,372)
Finite Lived Software Development Costs, Net Excluding, Accumulated Impairment	44,506	32,996
Project Expenditures Not Yet In Use [Member]
Finite Lived Software Development Costs [Abstract]
Finite Lived Software Development Costs Gross Excluding Accumulated Impairment	0	12,185
Finite Lived Software Development Costs Accumulated Amortization Excluding Accumulated Impairment	0	0
Finite Lived Software Development Costs, Net Excluding, Accumulated Impairment	$ 0	$ 12,185

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Intangible Assets and Software Development Costs - Schedule of Future Amortization Expense (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2019	$ 9,973
2020	12,599
2021	12,515
2022	5,403
2023	3,399
2024	690
Total	$ 44,579

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Intangible Assets and Software Development Costs (Details Textual) - USD ($)	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Finite-Lived Intangible Assets [Line Items]
Amortization of developed technology	$ 2,663,000	$ 2,307,000
Amortization of Intangible Assets	11,500	485,000
Developed Technology Internal [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of developed technology	$ 2,700,000	$ 2,300,000

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Intangible Assets and Software Development Costs Capitalized Software Costs (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Capitalized Software Development Costs	$ 2.0	$ 2.8

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Additional Balance Sheet Information (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018
Accrued liabilities:
Salaries, wages, and related benefits	$ 6,055	$ 6,793
Other taxes payable	694	769
Restructuring liabilities	86	198
Accrued legal settlements	91	0
Severance liabilities	197	0
Professional fees	271	288
Deferred rent	411	407
Other	736	786
Total	8,541	9,241
Other non-current liabilities:
Uncertain tax positions	1,435	1,519
Deferred rent	2,215	2,313
Other	76	79
Total	$ 3,726	$ 3,911

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Additional Balance Sheet Information Accounts receivable, net (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Apr. 01, 2018	Mar. 31, 2018
Additional Balance Sheet Information [Abstract]
Accounts receivable, net	$ 20,306	$ 19,513	$ 16,389
Allowance for doubtful accounts receivable	$ 809		$ 900

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Effective tax rates from continuing operations
Income tax (benefit) expense	$ (49)	$ 78
Effective tax rate	2.70%	(2.70%)

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Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Numerator [Abstract]
Net loss	$ (1,736)	$ (2,958)
Denominator [Abstract]
Weighted average shares outstanding (in shares)	23,095	22,720
Earnings Per Share, Basic and Diluted [Abstract]
Loss per share (in dollars per share)	$ (0.08)	$ (0.13)
Earnings Per Share, Diluted [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,356,000	1,575,000

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Loss per Share (Details Textual) - shares	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Earnings Per Share [Abstract]
Incremental common shares attributable to restricted shares (in shares)	490,117	646,134

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Share-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based Compensation	$ 409	$ 1,219
Product development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Summary of share-based compensation expense for options	(85)	421
Selling and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Summary of share-based compensation expense for options	65	169
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Summary of share-based compensation expense for options	$ 429	$ 629

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Share-based Compensation (Details 2) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted Average Exercise Price, Cancelled/Expired	$ 9.60
Stock Settled Stock Appreciation Rights (SSARS) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Rights Outstanding at Beginning of Period	1,103,160
Number of Rights Granted,	158,244
Number of Rights Exercised	(154,312)
Number of Rights, Forfeited	(32,359)
Number of Rights Cancelled/Expired	(3,492)
Number of Rights Outstanding at End of Period	1,103,160	1,071,241.000
Weighted Average Exercise Price Outstanding at Beginning of Period	$ 10.60
Weighted Average Exercise Price Granted,	14.22
Weighted Average Exercise Price Exercised	10.57
Weighted Average Exercise Price, Forfeited	10.36
Weighted Average Exercise Price Outstanding at End of Period	$ 10.60	$ 11.15
Remaining Contractual Term Outstanding at End of Period	5 years 4 months 24 days
Aggregate Intrinsic Value Outstanding at End of Period	$ 2,516
Number of Rights Exercisable at End of Period	499,292
Weighted Average Exercise Price Exercisable at End of Period	$ 10,460,000
Remaining Contractual Term Exercisable at End of Period	4 years 9 months 18 days
Aggregate Intrinsic Value Exercisable at End of Period	$ 2,516

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Share-based Compensation (Details 3)	3 Months Ended
	Jun. 30, 2018 $ / shares shares
Restricted Stock [Member]
Activity Related to Restricted Shares Awarded by the Company
Number of shares Outstanding at Beginning of Period	243,354
Granted, Number of Shares	233,410
Vested, Number of shares	0
Forfeited, Number of Shares	(49,938)
Number of shares Outstanding at End of Period	426,826
Weighted Average Grant-Date Fair Value Outstanding at Beginning of Period | $ / shares	$ 10.78
Granted, Weighted Average Grant Date Fair value | $ / shares	14.22
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value | $ / shares	0.00
Forfeited, Weighted Average Grant Date Fair Value | $ / shares	10.32
Weighted Average Grant-Date Fair Value Outstanding at End of Period | $ / shares	$ 12.72
Performance Shares [Member]
Activity Related to Restricted Shares Awarded by the Company
Number of shares Outstanding at Beginning of Period	91,463
Granted, Number of Shares	63,291
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested Options Forfeited, Number of Shares	(75,641)
Number of shares Outstanding at End of Period	63,291
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares	(15,822)

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Share-based Compensation (Details Textual)	3 Months Ended
	Jun. 30, 2018 USD ($) shares
Stock Based Compensation (Textual) [Abstract]
Maximum number of shares subject to stock options and restricted shares	1,300,000
Restricted Stock [Member]
Stock Based Compensation (Textual) [Abstract]
Unrecognized stock based compensation expense related to non-vested restricted stock | $	$ 4,300,000
Weighted-average vesting period	2 years 3 months 15 days
Stock Settled Stock Appreciation Rights (SSARS) [Member]
Stock Based Compensation (Textual) [Abstract]
Unrecognized stock based compensation expense related to non-vested SSARs | $	$ 1,200,000
Weighted-average vesting period	3 years 1 month 21 days
Performance Shares [Member]
Stock Based Compensation (Textual) [Abstract]
Deferred compensation liability | $	$ 0
Unrecognized stock based compensation expense related to non-vested restricted stock | $	$ 405,000
Weighted-average vesting period	9 months
Two Thousand and Sixteen Stock Incentive Plan [Member]
Stock Based Compensation (Textual) [Abstract]
Shares authorized under 2016 Stock incentive plan	2,000,000
Two Thousand and Sixteen Stock Incentive Plan [Member] | Stock Options [Member]
Stock Based Compensation (Textual) [Abstract]
Maximum number of shares subject to stock options and restricted shares	800,000
Two Thousand and Sixteen Stock Incentive Plan [Member] | Restricted Shares and Restricted Share Units [Member]
Stock Based Compensation (Textual) [Abstract]
Maximum number of shares subject to stock options and restricted shares	400,000
2011 Stock Incentive Plan [Member]
Stock Based Compensation (Textual) [Abstract]
Shares available for grant	957,575

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Fair Value Measurements (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018
Assets:
Corporate-owned life insurance — non-current	$ 859	$ 853
Active markets for identical assets or liabilities (Level 1) [Member]
Assets:
Corporate-owned life insurance — non-current	0	0
Quoted prices in similar instruments and observable inputs (Level 2) [Member]
Assets:
Corporate-owned life insurance — non-current	0	0
Active markets for unobservable inputs (Level 3) [Member]
Assets:
Corporate-owned life insurance — non-current	$ 859	$ 853

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Fair Value Measurements (Details 1) - Cash Surrender Value [Member] - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	$ 853	$ 809
Unrealized gain relating to instruments held at reporting date	4	4
Purchases, sales, issuances and settlements, net	2	2
Balance at end of period	$ 859	$ 815