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, 2012

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.)
425 Walnut Street, Suite 1800, Cincinnati, Ohio	45202
(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 August 1, 2012 was 22,105,821.

AGILYSYS, INC.

Index

Part I.        Financial Information
	Item 1	Financial Statements	3
		Condensed Consolidated Balance Sheets – June 30, 2012 (Unaudited) and March 31, 2012 (Audited)	3
		Condensed Consolidated Statements of Operations (Unaudited) – Three Months Ended June 30, 2012 and 2011	4
		Condensed Consolidated Statements of Comprehensive Loss (Unaudited) – Three Months Ended June 30, 2012 and 2011	5
		Condensed Consolidated Statements of Cash Flows (Unaudited) – Three Months Ended June 30, 2012 and 2011	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	32
	Item 4	Controls and Procedures	32
Part II.      Other Information			32
	Item 1	Legal Proceedings	32
	Item 1A	Risk Factors	32
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	32
	Item 3	Defaults Upon Senior Securities	32
	Item 4	Mine Safety Disclosures	33
	Item 5	Other Information	33
	Item 6	Exhibits	33
Signatures			34

2

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)	June 30, 2012			March 31, 2012
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	80,336		$	97,587
Accounts receivable, net of allowances of $609 and $632, respectively		34,656			32,531
Inventories		15,652			15,710
Prepaid expenses		3,188			2,975
Other current assets		1,790			5,492
Total current assets		135,622			154,295
Property and equipment, net		15,916			16,504
Goodwill		15,109			15,198
Intangible assets, net of amortization of $22,099 and $21,560, respectively		14,622			14,135
Other non-current assets		4,039			4,007
Total assets	$	185,308		$	204,139
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		23,815		$	24,938
Deferred revenue		25,542			28,441
Accrued liabilities		11,224			23,983
Capital lease obligations, current		470			647
Total current liabilities		61,051			78,009
Deferred income taxes, non-current		5,152			5,135
Capital lease obligations, non-current		288			347
Other non-current liabilities		5,883			6,210
Commitments and contingencies (see Note 7)
Shareholders’ equity:
Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 31,606,831 shares issued; and 22,104,245 and 21,875,850 shares outstanding and June 30, 2012 and March 31, 2012, respectively		9,482			9,482
Treasury shares, 9,502,586 and 9,730,981 at June 30, 2012 and March 31, 2012, respectively		(2,851	)		(2,919	)
Capital in excess of stated value		(15,720	)		(16,032	)
Retained earnings		122,083			123,876
Accumulated other comprehensive (loss) income		(60	)		31
Total shareholders’ equity		112,934			114,438
Total liabilities and shareholders’ equity	$	185,308		$	204,139

See accompanying notes to condensed consolidated financial statements.

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AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended June 30,
(In thousands, except per share data)	2012			2011
Net revenue:
Products	$	24,118		$	27,954
Support, maintenance and subscription services		18,436			17,525
Professional services		9,092			7,112
Total net revenue		51,646			52,591
Cost of goods sold:
Products		18,859			23,308
Support, maintenance and subscription services		6,799			6,468
Professional services		5,610			4,727
Total net cost of goods sold		31,268			34,503
Gross profit		20,378			18,088
		39.5	%		34.4	%
Operating expenses:
Product development		6,285			7,945
Sales and marketing		5,921			5,563
General and administrative		6,809			8,653
Depreciation of fixed assets		700			1,012
Amortization of intangibles		880			931
Asset impairments and related charges		208			—
Restructuring and related charges		1,125			2,346
Operating loss		(1,550	)		(8,362	)
Other (income) expenses:
Interest income		(4	)		(33	)
Interest expense		151			338
Other expenses (income), net		143			(37	)
Loss before income taxes		(1,840	)		(8,630	)
Income tax benefit		(47	)		(1,751	)
Loss from continuing operations		(1,793	)		(6,879	)
Income from discontinued operations, net of taxes		—			651
Net loss	$	(1,793	)	$	(6,228	)
(Loss) earnings per share – basic and diluted
Loss from continuing operations	$	(0.08	)	$	(0.30	)
Income from discontinued operations		—			0.03
Net loss per share	$	(0.08	)	$	(0.27	)
Weighted average shares outstanding:
Basic and diluted		21,836			22,953

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)	2012			2011
Net loss	$	(1,793	)	$	(6,228	)
Other comprehensive (loss) income, net of tax:
Translation adjustments (loss) gain		(87	)		86
Loss on sale of securities		(4	)		(9	)
Total comprehensive loss	$	(1,884	)	$	(6,151	)

See accompanying notes to condensed consolidated financial statements.

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AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)	Three months ended June 30,
	2012			2011
Operating activities
Net loss	$	(1,793	)	$	(6,228	)
Income from discontinued operations		—			651
Loss from continuing operations		(1,793	)		(6,879	)
Adjustments to reconcile loss from continuing operations to net cash used in operating activities
Restructuring and related charges		1,125			2,346
Payments for restructuring		(3,707	)		(344	)
Asset impairments and related charges		208			—
Depreciation		700			1,012
Amortization		1,129			1,531
Share based compensation		353			1,481
Changes in operating assets and liabilities:
Accounts receivable		(2,196	)		(2,259	)
Inventories		58			(5,753	)
Accounts payable		(1,316	)		7,277
Deferred revenue		(2,854	)		(5,399	)
Accrued liabilities		(10,717	)		(578	)
Income taxes payable (receivable)		68			(951	)
Other charges, net		(865	)		(163	)
Net cash used in operating activities from continuing operations		(19,807	)		(8,679	)
Net cash used in operating activities from discontinued operations		—			(12,555	)
Net cash used in operating activities		(19,807	)		(21,234	)
Investing activities
Proceeds from sale of marketable securities		4,347			15
Additional investments in corporate-owned life insurance policies and marketable securities		(4	)		(57	)
Capital expenditures		(1,526	)		(756	)
Net cash provided by (used in) investing activities from continuing operations		2,817			(798	)
Net cash provided by (used in) investing activities from discontinued operations		—			—
Net cash provided by (used in) investing activities		2,817			(798	)
Financing activities
Principal payments under long-term obligations		(198	)		(330	)
Exercise of employee stock options		67			210
Repurchase of common shares to satisfy employee tax withholding		(40	)		(565	)
Net cash used in financing activities from continuing operations		(171	)		(685	)
Net cash used in financing activities from discontinued operations		—			(20	)
Net cash used in financing activities		(171	)		(705	)
Effect of exchange rate changes on cash		(90	)		58
Cash flows used in continuing operations		(17,251	)		(10,104	)
Cash flows used in discontinued operations		—			(12,575	)
Net decrease in cash and cash equivalents		(17,251	)		(22,679	)
Cash and cash equivalents at beginning of period		97,587			74,354
Cash and cash equivalents at end of period	$	80,336		$	51,675

See accompanying notes to condensed consolidated financial statements.

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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 provider of innovative technology solutions for the hospitality and retail markets. Our intuitive solutions include property and lodging management, inventory and procurement, point-of-sale (POS), document management, mobile, wireless and other types of guest-engagement software. We also provide support, maintenance, resold hardware products and software hosting services. Our customers include retailers, casinos, resorts, restaurants and other customer-facing service providers, and a significant portion of our consolidated revenue is derived from contract support, maintenance agreements and professional services.

We operate extensively throughout North America, with additional sales and support offices in the United Kingdom and Asia. We have two operating segments: Hospitality Solutions Group (HSG) and Retail Solutions Group (RSG).

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 2012 refers to the fiscal year ending March 31, 2012.

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, 2012, as well as the Condensed Consolidated Statements of Operations, the Condensed Consolidated Statements of Comprehensive Loss and the Condensed Consolidated Statements of Cash Flows for the three-month periods ended June 30, 2012 and 2011, have been prepared without audit. However, these financial statements have been prepared on the same basis as those in the audited annual financial statements. In the opinion of management, all adjustments necessary to fairly present the results of operations, financial position, and cash flows have been made. Further, we have evaluated all significant events occurring subsequent to the date of the Condensed Consolidated Financial Statements and through the filing of this Quarterly Report.

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, 2012, filed with the Securities and Exchange Commission (“SEC”) on June 12, 2012.

Unless otherwise stated, current and prior period results in our condensed consolidated financial statements and these notes reflect our results from continuing operations and exclude the effect of discontinued operations (see Note 3).

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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, 2012, included in our Annual Report on Form 10-K. Except as described below, there have been no material changes our significant accounting policies and estimates from those disclosed therein.

Use of estimates. Preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.

Reclassifications. As a result of our reorganization in fiscal 2012, revenue and cost of goods sold are being reported in three categories: Products, Support, maintenance and subscription services and Professional services. In addition, operating expenses are differentiated in the following subcategories: Product development, Sales and marketing and General and administrative. Prior period presentation has been modified to conform to the current presentation.

Correction of Error. In the third quarter of fiscal 2012, we identified errors in the manner in which we recognized revenue for certain software license and professional service arrangements in prior periods. We re-assessed our accounting for contracts relating to such arrangements. Upon completion of such evaluation, it was determined that the previous accounting treatment did not take into account all the necessary revenue recognition criteria related to pricing concessions, implied postcontract support, professional services that were essential to the functionality of the software, application of contract accounting and specified enhancements, and certain billing errors. As a result, we determined that certain previously recognized revenue should instead have been deferred and recognized in future periods when the applicable criteria related to the above considerations have been met.

In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the materiality of the errors and concluded that the errors were not material to any of our previously issued financial statements. Correction of the errors was also not material to the fiscal 2012 results. As permitted by the accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we elected to present revised financial information as of and for the interim periods ended June 30, 2011 and September 30, 2011, and revised our previously issued fiscal year 2012 interim financial statements to correct the effect of these errors for when such financial statements are included in future filings. The adjustments to the quarter ended June 30, 2011 are comprised of (a.) the out of period impact for errors accumulated prior to fiscal 2012 of $1.0 million of corrections to revenue from continuing operations and $1.1 million of corrections to the loss from continuing operations and (b.) $0.3 million to revenue from continuing operations and $0.3 million to loss from continuing operations to revise the financial statements for revenue recognized in the quarter ended June 30, 2011 that should have been deferred to future periods. The adjustments to the quarter ended September 30, 2011 represent the revision to the financial statements for similar matters arising in the quarter.

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The following tables present the effect of this revision on our Condensed Consolidated Statements of Operations for all periods affected:

	Quarter Ended June 30, 2011									Quarter Ended September 30, 2011
(In thousands except per share amounts)	As Previously Reported			Adjustment			As Revised			As Previously Reported			Adjustment			As Revised
Net revenue	$	53,886		$	(1,295	)	$	52,591		$	53,587		$	(902	)	$	52,685
Costs of goods sold		34,359			144			34,503			31,972			(286	)		31,686
Net loss from continued operations		(5,440	)		(1,439	)		(6,879	)		(3,238	)		(316	)		(3,554	)
Loss per share for continuing operations – Basic and diluted		(0.24	)		(0.06	)		(0.30	)		(0.14	)		(0.02	)		(0.16	)

The revision did not have an effect on our operating cash flows for the three months ended June 30, 2011 or the six months ended September 30, 2011.

During the first quarter of fiscal 2013, we recorded out-of-period adjustments to increase revenues, restructuring and related charges and asset impairments and related charges by $0.3 million, $0.7 million and $0.2 million, respectively. The net impact of the adjustments increased our operating loss by $0.6 million and represents a correction of error. In fiscal 2012, we erroneously omitted certain revenue transactions, the costs associated with certain terminated individuals and certain third party development costs for our previously impaired developed technology. Pre-tax loss in the first quarter of fiscal 2013 increased by $0.6 million, or $(0.03) per share, due to these adjustments. Management performed an evaluation under Staff Accounting Bulletin No. 108 and concluded the effect of this adjustment was immaterial to prior year’s financial statements as well as the full-year fiscal 2013 financial statements.

Capitalized Software Development Costs. The capitalization of software development cost begins when a product’s technological feasibility has been established. Capitalization ends when the resulting product is available for general market release. Amortization of the capitalized software is classified within products cost of goods sold in the Condensed Consolidated Statements of Operations. For each capitalized software product, the annual amortization is equal to the greater of: (i) the amount computed using the ratio that the software product’s current fiscal year gross revenue bears to the total current fiscal year and anticipated future gross revenues for that product or (ii) the amount computed based on straight-line method over the remaining estimated economic life of the product. Unamortized costs will be evaluated for indicators of impairment at each balance sheet date, and if impaired, written down to net realizable value. We capitalized approximately $1.0 million and $0.3 million during the three months ended June 30, 2012 and 2011, respectively. Amortization of capitalized software was $0.2 million and $0.5 million for the three months ended June 30, 2012 and 2011, respectively.

Adopted and Recently Issued Accounting Pronouncements.

In September 2011, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update, ASU, No. 2011-08, Testing for Goodwill Impairment, which modifies the process of testing goodwill for impairment. The update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity would not be required to calculate the fair value of a reporting unit unless the entity determines it is more likely than not, based on a qualitative assessment, the fair value of goodwill is less than its carrying amount. The guidance also includes a number of events and circumstances to consider in conducting the qualitative assessment. This guidance is effective for fiscal years beginning on or after December 15, 2011. We adopted this guidance as of April 1, 2012 and it did not have a material impact on our consolidated financial statements or related disclosures.

In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, which modifies the requirements for presenting net income and other comprehensive income and requires that all non-owner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income

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or in two separate but consecutive statements. The amendment requires presentation of each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. In December 2011, the FASB issued amendments to the guidance to allow the FASB time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income in all periods presented. This guidance is effective for fiscal years and interim periods beginning on or after December 15, 2011. We adopted this guidance as of April 1, 2012 and it did not have an impact on our consolidated financial statements or related disclosures.

In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which modifies the disclosure requirements for offsetting financial instruments and derivative instruments. The update requires an entity to disclose information about offsetting and related arrangements and the effect of those arrangements on its financial position. This guidance is effective for reporting periods beginning on or after January 1, 2013, and is not expected to have a material impact on our consolidated financial statements or related disclosures.

Management continually evaluates the potential impact, if any, of all recent accounting pronouncements on our consolidated financial statements or related disclosures and, if significant, makes the appropriate disclosures required by such new accounting pronouncements.

3. Discontinued Operations

Sale of Assets and Operations of TSG – Fiscal 2012

In May 2011, we sold our TSG business for an aggregate purchase price of $64.0 million in cash, subject to a possible downward adjustment based on final working capital, to OnX Enterprise Solutions Limited and its subsidiary OnX Acquisition LLC (together, “OnX”), a leading IT solutions provider based in Toronto, Canada. In addition to the purchase agreement, we entered into a transition services agreement (“TSA”) with OnX, under which we provided certain transitional administrative and supportive services to OnX through January 31, 2012. In July 2011, our shareholders approved the sale and the transaction closed on August 1, 2011, the date on which certain other contingencies specified in the sale agreement were satisfied. The sale of TSG represented a disposal of a component of an entity. As such, the operating results of TSG have been reported as a component of discontinued operations in the Condensed Consolidated Statements of Operations for the periods presented.

Components of Results of Discontinued Operations

For the three months ended June 30, 2012 and 2011 the income from discontinued operations was comprised of the following:

(In thousands)	2012		2011
Discontinued operations:
Net revenue	$	—	$	97,757
Income from operations of TSG	$	—	$	1,361
Income tax expense		—		710
Income from discontinued operations	$	—	$	651

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4. Restructuring and Related 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. In addition, we assess the property and equipment associated with the related facilities for impairment. The remaining useful lives of property and equipment associated with the related operations are re-evaluated based on the respective restructuring plan, resulting in the acceleration of depreciation and amortization of certain assets.

Fiscal 2012 Restructuring Activity

In the first quarter of fiscal 2012, we announced restructuring actions, including the relocation of our corporate services from Solon, Ohio to Alpharetta, Georgia, designed to better align those services with our operating units and reduce costs following the sale of TSG. These restructuring actions were mostly completed by March 31, 2012 and have impacted or will impact approximately 130 employees. To date, we have recorded $12.0 million in restructuring charges, of which $1.1 million was recorded in the first quarter of fiscal 2013, related to the fiscal 2012 restructuring activity. These charges were primarily comprised of severance and related benefits. On a segment basis, these restructuring costs totaled $2.6 million, $0.6 million, and $8.8 million for HSG, RSG and Corporate/Other, respectively. As of June 30, 2012, we had a remaining liability of approximately $3.3 million recorded for fiscal 2012 restructuring activity. We expect to incur approximately $0.1 million in additional restructuring charges for severance and related benefits during the second quarter of fiscal 2013. As a result of taking these restructuring actions, we expect to realize between $14.0 million and $16.0 million in cost savings, of which approximately half has been recognized in the fiscal 2012 run rate. The remaining savings are being realized during fiscal 2013.

Fiscal 2009 Restructuring Activity

During fiscal 2009, we took steps to realign our cost and management structure. Since 2009, as previously disclosed, we have incurred charges totaling approximately $19.0 million related to the fiscal 2009 restructuring activity. As of June 30, 2012, we had approximately $0.4 million recorded for fiscal 2009 restructuring activity. We expect to incur minimal additional restructuring charges between fiscal 2013 and fiscal 2014 for ongoing facility obligations.

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

(In thousands)	Balance at March 31, 2012		Provision			Payments			Balance at June 30, 2012
Fiscal 2012 Restructuring Plan:
Severance and employment costs	$	5,507	$	1,161		$	(3,541	)	$	3,127
Facilities costs		297		(42	)		(100	)		155
Fiscal 2009 Restructuring Plan:
Facilities costs		495		6			(66	)		435
Total restructuring costs	$	6,299	$	1,125		$	(3,707	)	$	3,717

Approximately $2.4 million of the severance and other employment costs will be paid in fiscal 2013 and the remaining $0.7 million will be paid in fiscal 2014. Approximately $0.4 million of facilities obligations will be paid during fiscal 2013 and the remaining $0.2 million will be paid in fiscal 2014.

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5. Additional Balance Sheet Information

Additional information related to the Condensed Consolidated Balance Sheets is as follows:

(In thousands)	June 30, 2012		March 31, 2012
Other non-current assets:
Corporate owned life insurance policies	$	3,490	$	3,458
Other		549		549
Total	$	4,039	$	4,007
Accrued liabilities:
Salaries, wages, and related benefits	$	4,237	$	7,397
BEP obligations (1)		—		2,948
SERP obligations (1)		—		3,323
Restructuring liabilities		3,264		5,447
Other taxes payable		1,921		1,976
Income taxes payable		385		322
Other		1,417		2,570
Total	$	11,224	$	23,983
Other non-current liabilities:
Income taxes payable/uncertain tax positions	$	2,856	$	3,135
Deferred rent		2,269		2,013
Restructuring liabilities		453		852
Other		305		210
Total	$	5,883	$	6,210

(1) BEP and SERP obligations were fulfilled in April 2012.

6. Income Taxes

The following table compares our income tax benefit and effective tax rates for the three months ended June 30, 2012 and 2011:

	Three months ended June 30,
(Dollars in thousands)	2012			2011
Income tax benefit	$	(47	)	$	(1,751	)
Effective tax rate		2.8	%		20.3	%

We recorded an effective tax rate benefit from continuing operations of 2.8% in for the three months ended June 30, 2012, compared with an effective tax rate benefit of 20.3% for the three months ended June 30, 2011. For the three months ended June 30, 2012, the effective tax rate was different than the statutory rate due primarily to recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance. Other items effecting the rate include U.S. permanent book to tax differences. For the three months ended June 30, 2011, the effective tax rate was different than the statutory rate due primarily to the intra-period tax allocation rules associated with the discontinued operations. Other items effecting the rate include a decrease in unrecognized tax benefits attributable to the expiration of statute of limitations and other U.S. permanent book to tax differences.

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7. 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. The complaint 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 three patents 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. We dispute the allegations of wrongdoing and intend to vigorously defend ourselves in this matter.

On July 9, 2012, a putative class action lawsuit was filed against us in the United States District Court for the Northern District of California alleging violations of federal and state wage and hour laws, rules and regulations pertaining primarily to pay for missed meals and rest periods and failure to reimburse business expenses. The lawsuit purports to be a class action and seeks substantial damages. At this time, we are not able to predict the outcome of this lawsuit, or any possible monetary exposure associated with the lawsuit. Our management believes that the plaintiffs’ allegations are without merit and that their claims are not appropriate for class action treatment. We are vigorously defending these claims.

8. (Loss) Earnings per Share

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

	Three months ended June 30,
(In thousands, except per share data)	2012			2011
Numerator:
Loss from continuing operations – basic and diluted	$	(1,793	)	$	(6,879	)
Income from discontinued operations – basic and diluted		—			651
Net loss - basic and diluted	$	(1,793	)	$	(6,228	)
Denominator:
Weighted average shares outstanding – basic and diluted		21,836			22,953
(Loss) earnings per share – basic and diluted:
Loss from continuing operations	$	(0.08	)	$	(0.30	)
Income from discontinued operations	$	—		$	0.03
Net loss per share	$	(0.08	)	$	(0.27	)

Basic (loss) earnings 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 233,357 and 10,000 of restricted shares and performance shares at June 30, 2012 and 2011, respectively, as these shares were issued but were not vested and, therefore, not considered outstanding for purposes of computing basic earnings per share at the balance sheet dates. When a loss is reported, the denominator of diluted earnings per share cannot be adjusted for the dilutive impact of share-based

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compensation awards because doing so would be anti-dilutive. In addition, when a loss from continuing operations is reported, adjusting the denominator of diluted earnings per share would also be anti-dilutive to the loss per share, even if the entity has net income after adjusting for a discontinued operation. Therefore, for the three months ended June 30, 2012 and 2011, basic weighted-average shares outstanding were used in calculating the diluted net loss per share.

For the three months ended June 30, 2012 and 2011, stock options and SSARs on 1.7 million and 3.2 million common shares, respectively, were not included in computing diluted earnings per share because their effects were anti-dilutive.

9. Share-based Compensation

We may grant non-qualified stock options, incentive stock options, stock-settled stock appreciation rights, restricted shares, and restricted share units for up to 3.0 million common shares under our 2011 Stock Incentive Plan (“the 2011 Plan”). 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. The maximum aggregate number of restricted shares or restricted share units that may be granted under the 2011 Plan is 1.0 million.

We have a shareholder-approved 2006 Stock Incentive Plan (the “2006 Plan”), as well as, a 2000 Stock Option Plan for Outside Directors and a 2000 Stock Incentive Plan that still have vested awards outstanding. Awards are no longer being granted from these incentive plans.

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, stock-settled stock appreciation rights, 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 stock-settled appreciation right 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 for the three months ended June 30, 2012 and 2011:

	Three months ended June 30,
(In thousands)	2012		2011
Product development	$	68	$	113
Sales and marketing		15		114
General and administrative		270		1,254
Total share-based compensation expense	$	353	$	1,481

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Stock Options

The following table summarizes the activity during the three months ended June 30, 2012 for stock options awarded under the 2006 Plan:

No stock options were granted during the three months ended June 30, 2012.

(In thousands, except share and per share data)	Number of Options			Weighted- Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
				(per share)		(in years)
Outstanding at April 1, 2012		971,001		$	13.52
Exercised		(26,667	)		2.51
Cancelled/expired		(23,334	)		15.99
Outstanding and exercisable at June 30, 2012		921,000		$	13.78		3.68	$	498

Stock-Settled Stock Appreciation Rights

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.

The following table summarizes the activity during the three months ended June 30, 2012 for SSARs awarded under the 2011 and the 2006 Plan:

(In thousands, except share and per share data)	Number of Rights			Weighted -Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
				(per right)		(in years)
Outstanding at April 1, 2012		606,834		$	6.91
Granted		318,607			7.52
Exercised		(80,651	)		6.53
Forfeited		(24,708	)		7.42
Outstanding at June 30, 2012		820,082		$	7.17		7.72	$	1,234
Exercisable at June 30, 2012		363,055		$	6.67		5.19	$	727

As of June 30, 2012, total unrecognized stock based compensation expense related to non-vested SSARs was $1.9 million, which is expected to be recognized over a weighted-average vesting period of 2.5 years.

A total of 9,709 shares, net of 5,146 shares withheld to cover the employee’s minimum applicable income taxes, were issued from treasury shares to settle SSARs exercised during the three months ended June 30, 2012. The shares withheld were returned to treasury shares.

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Restricted Shares

We granted shares to certain of our Directors, executives and key employees under the 2011 Plan, the vesting of which is service-based. The following table summarizes the activity during the three months ended June 30, 2012 for restricted shares awarded under the 2011 Plan:

	Number of Shares			Weighted- Average Grant- Date Fair Value
				(per share)
Outstanding at April 1, 2012		48,558		$	7.80
Granted		182,321			7.76
Vested		(7,000	)		7.42
Forfeited		(8,250	)		7.42
Outstanding at June 30, 2012		215,629		$	7.80

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. Compensation expense related to restricted share awards is recognized ratably over the restriction period based upon the closing market price of our common shares on the grant date. As of June 30, 2012, total unrecognized stock based compensation expense related to non-vested restricted stock was $1.5 million, which is expected to be recognized over a weighted-average vesting period of 2.3 years. We do not include restricted stock in the calculation of earnings per share until the shares are vested.

Performance Shares

In the first quarter of fiscal 2013, we granted shares to certain of our key employees under the 2011 Plan, the vesting of which is contingent upon meeting various company-wide performance goals within a two-year period.

The following table summarizes the activity during the three months ended June 30, 2012 for performance shares awarded under the 2011 Plan:

	Number of shares		Weighted- Average Grant- Date Fair Value
			(per share)
Outstanding at April 1, 2012		—	$	—
Granted		17,728		8.64
Outstanding at June 30, 2012		17,728	$	8.64

The weighted-average grant date fair value of the performance shares is determined based upon the closing price of our common shares on the grant date and assumed that performance goals would be met at target. Compensation expense related to performance share awards is recognized ratably over the vesting period based upon the closing market price of our common shares on the grant date. As of June 30, 2012, total unrecognized stock based compensation expense related to non-vested performance shares was $0.1 million, which is expected to be recognized over a weighted-average vesting period of 1.9 years.

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10. 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, 2012.

The following tables present information about our financial assets and liabilities 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
(In thousands)	Recorded value as of June 30, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Corporate-owned life insurance — non-current	$	3,490	$	—	$	—	$	3,490

	Fair value measurement used
(In thousands)	Recorded value as of March 31, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Available for sale restricted marketable securities — current	$	4,408	$	4,408	$	—	$	—
Corporate-owned life insurance — non-current		3,458		—		—		3,458
Liabilities:
BEP — current		2,948		—		2,948		—

We maintained an investment in available for sale marketable securities, in a Rabbi Trust recorded in “Other current assets”, in which cost approximated fair value. The recorded value of our investment in available for sale marketable securities is based on quoted prices in active markets and, therefore, is classified within Level 1 of the fair value hierarchy. The Rabbi Trust was used to fund the BEP and SERP obligations, which were fulfilled in April 2012. The Rabbi Trust was subsequently closed.

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 expenses (income), net” in the Condensed Consolidated Statements of Operations.

The recorded value of the BEP obligation is measured as employee deferral contributions and our matching contributions less distributions made from the plan, and adjusted for the returns on the hypothetical investments selected by the participants, which are indirectly observable and therefore, classified within Level 2 of the fair value hierarchy. The BEP obligation was fulfilled in April 2012 with funds held in the Rabbi Trust.

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The following table presents a summary of changes in the fair value of the Level 3 assets and liabilities for the three months ended June 30, 2012 and 2011:

	Level 3 assets and liabilities
(In thousands)	2012		2011
Corporate-owned life insurance:
Balance on April 1	$	3,458	$	3,323
Unrealized losses relating to instruments held at reporting date		—		(4	)
Unrealized gain relating to instruments held at reporting date		28		—
Purchases, sales, issuances and settlements, net		4		46
Balance on June 30	$	3,490	$	3,365

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

	Fair value measurement used
(In thousands)	Recorded value as of June 30, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Goodwill	$	15,109	$	—	$	—	$	15,109
Intangible assets		14,622		—		—		14,622
Liabilities:
Restructuring liabilities — current	$	3,264	$	—	$	—	$	3,264
Other employee benefit plan obligations — non-current		196		—		—		196
Restructuring liabilities — non-current		453		—		—		453

	Fair value measurement used
(In thousands)	Recorded value as of March 31, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Goodwill	$	15,198	$	—	$	—	$	15,198
Intangible assets		14,135		—		—		14,135
Liabilities:
SERP obligations — current	$	3,323	$	—	$	—	$	3,323
Restructuring liabilities — current		5,447		—		—		5,447
Other employee benefit plans obligations — non-current		196		—		—		196
Restructuring liabilities — non-current		852		—		—		852

Intangible assets are valued at their estimated fair value at time of acquisition. We evaluate the fair value of our definite-lived and indefinite-lived intangible assets on an annual basis, or in interim periods if indicators of potential impairment exist. The income approach using “the relief from royalty method” was used to value indefinite-lived intangible assets.

The recorded value of SERP and other benefit plans obligations is based on estimates developed by management by evaluating actuarial information and includes assumptions such as discount rates, future compensation increases, expected retirement dates, payment forms, and mortality. The recorded value of these obligations is measured on an annual basis, or upon the occurrence of a plan curtailment or settlement. The SERP obligation was fulfilled in April 2012 with funds held in the Rabbi Trust.

Restructuring liabilities primarily consist of one-time termination benefits to former employees and ongoing costs related to long-term operating lease obligations. The recorded value of the termination benefits to

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employees is adjusted to the expected remaining obligation each period based on the arrangements made with the former employees. The recorded value of the ongoing lease obligations is based on the remaining lease term and payment amount, net of sublease income plus interest, discounted to present value. Changes in subsequent periods resulting from revisions to either the timing or amount of estimated cash flows over the remaining future periods are measured using the credit-adjusted, risk-free rate that was used to measure the restructuring liabilities initially.

The inputs used to value the our goodwill, intangible assets, employee benefit plan obligations, and restructuring liabilities are not observable in the market and therefore, these amounts are classified within Level 3 in the fair value hierarchy.

The following table presents a summary of changes in the fair value of the Level 3 assets and liabilities for the three months ended June 30, 2012 and 2011:

	Level 3 assets and liabilities
	Three months ended June 30, 2012
(In thousands)	Goodwill			Intangible assets			SERP obligations			Other employee benefit plans obligations		Restructuring liabilities
Balance at April 1, 2012	$	15,198		$	14,135		$	3,323		$	196	$	6,299
Unrealized losses relating to instruments still held at the reporting date		(89	)		—			—			—		—
Amortization		—			(539	)		—			—		—
Provisions, payments and other charges (net)		—			1,026			(3,323	)		—		(2,582	)
Balance at June 30, 2012	$	15,109		$	14,622		$	—		$	196	$	3,717

	Level 3 assets and liabilities
	Three months ended June 30, 2011
(In thousands)	Goodwill			Intangible assets			SERP obligations		Other employee benefit plans obligations		Restructuring liabilities
Balance at April 1, 2011	$	15,211		$	22,535		$	5,791	$	305	$	733
Unrealized losses relating to instruments still held at the reporting date		(13	)		—			—		—		—
Amortization		—			(766	)		—		—		—
Provisions, payments and other charges (net)		—			348			30		—		2,003
Balance at June 30, 2011	$	15,198		$	22,117		$	5,821	$	305	$	2,736

Unrealized losses related to goodwill represent fluctuations due to the movement of foreign currencies relative to the U.S. dollar and are recorded within “Accumulated other comprehensive (loss) income” in the Condensed Consolidated Balance Sheets.

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11. Business Segments

Description of Business Segments

Agilysys has two reportable business segments: HSG and RSG. The reportable segments are each managed separately and are supported by various practices as well as company-wide functional departments. These functional support departments include general accounting and finance, accounts payable, tax, information technology, legal, payroll, and benefits and a portion of these costs are reported in Corporate/Other. Corporate/Other is not a reportable business segment as defined by GAAP. As a result of the sale of the TSG business during fiscal 2012, and the TSA with OnX, Corporate/Other costs have been adjusted for the period presented to remove the portion of the functional support department costs that were transferred to OnX.

Measurement of Segment Operating Results and Segment Assets

We evaluate performance and allocate resources to our reportable segments based on operating income. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies elsewhere in the footnotes to the consolidated financial statements. Intersegment sales are recorded at pre-determined amounts to allow for intercompany profit to be included in the operating results of the individual reportable segments. Such intercompany profit is eliminated for consolidated financial reporting purposes.

Our Chief Executive Officer, who is the Chief Operating Decision Maker, does not evaluate a measurement of segment assets when evaluating the performance of our reportable segments. As such, information relating to segment assets is not provided in the financial information below.

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The following table presents segment profit and related information for each of our reportable segments for the three months years ended June 30, 2012 and 2011.

(In thousands)	Reportable Segments						Corporate/ Other
	HSG			RSG						Consolidated
Three Months Ended June 30, 2012
Total revenue:
Products	$	6,555		$	17,563		$	—		$	24,118
Support, maintenance and subscription services		12,393			6,267			—			18,660
Professional services		3,441			5,682			—			9,123
Elimination of intersegment revenue		(31	)		(224	)		—			(255	)
Revenue from external customers	$	22,358		$	29,288		$	—		$	51,646
Gross profit	$	14,665		$	5,713		$	—		$	20,378
Gross profit margin		65.6	%		19.5	%					39.5	%
Operating income (loss)	$	3,044		$	1,718		$	(6,312	)	$	(1,550	)
Interest expense, net		—			—			147			147
Other expense, net		—			—			143			143
Income (loss) from continuing operations before income taxes	$	3,044		$	1,718		$	(6,602	)	$	(1,840	)
Other charges:
Depreciation of fixed assets and amortization of intangibles	$	664		$	140		$	776		$	1,580
Asset impairments and related charges	$	208		$	—		$	—		$	208
Restructuring and related charges	$	593		$	—		$	532		$	1,125
Three Months Ended June 30, 2011
Total revenue:
Products	$	4,546		$	23,408		$	—		$	27,954
Support, maintenance and subscription services		11,637			6,067			—			17,704
Professional services		3,351			3,761			—			7,112
Elimination of intersegment revenue		—			(179	)		—			(179	)
Revenue from external customers	$	19,534		$	33,057		$	—		$	52,591
Gross profit	$	11,997		$	6,091		$	—		$	18,088
Gross profit margin		61.4	%		18.4	%					34.4	%
Operating (loss) income	$	(978	)	$	1,809		$	(9,193	)	$	(8,362	)
Interest expense, net		—			—			305			305
Other income, net		—			—			(37	)		(37	)
(Loss) income from continuing operations before income taxes	$	(978	)	$	1,809		$	(9,461	)	$	(8,630	)
Other charges:
Depreciation of fixed assets and amortization of intangibles	$	589		$	150		$	1,204		$	1,943
Restructuring and related charges	$	187		$	134		$	2,025		$	2,346

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Item 2. Managements’ 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 management believes 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, 2012, filed with the Securities and Exchange Commission (“SEC”). This discussion should 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, 2012. Information provided in the MD&A may include forward-looking statements that involve risks and uncertainties. Many factors could cause actual results to be materially different from those contained in the forward-looking statements. See “Forward-Looking Information” on page 29 of this Quarterly Report and Item 1A “Risk Factors” in Part I of our Annual Report for the fiscal year ended March 31, 2012 for additional information concerning these items. Management believes that this information, discussion, and disclosure is important in making decisions about investing in Agilysys.

Overview

Agilysys is a leading provider of innovative technology solutions for the hospitality and retail markets. Our intuitive solutions include property and lodging management, inventory and procurement, point-of-sale (POS), document management, mobile, wireless and other types of guest-engagement software. We also provide support, maintenance, resold hardware products and software hosting services. Our customers include retailers, casinos, resorts, restaurants and other customer-facing service providers, and a significant portion of our consolidated revenue is derived from contract support, maintenance agreements and professional services.

We operate extensively throughout North America, with additional sales and support offices in the United Kingdom and Asia. We have two operating segments: Hospitality Solutions Group (HSG) and Retail Solutions Group (RSG).

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

The primary objective of our ongoing strategic planning process is to create shareholder value by exploiting growth opportunities and strengthening our competitive position within the specific technology solutions and in the end markets we service. The plan builds on our existing strengths and targets industry leading growth and peer beating financial and operating results driven by new technology trends and market opportunities. Industry leading growth and peer beating financial and operational results will be achieved through tighter coupling and management of operating expenses of the business and sharpening the focus of our investments to concentrate on growth opportunities with the highest return by seeking the highest margin revenue opportunities in the markets in which we compete.

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Our strategic plan specifically focuses on:

• Strong customer focus, with clear and realistic service commitments.

• Growing sales of our proprietary offerings: products, support, maintenance and subscription services and professional services.

• Diversifying our customer base across geographies and industries.

• Capitalizing on our intellectual property and emerging technology trends.

Revenue – Defined

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:

• Revenue – We present revenue net of sales returns and allowances.

• 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.

Matters Affecting Comparability

On August 1, 2011, we completed the sale of our Technology Solutions Group (“TSG”) business to OnX Enterprise Solutions Limited and its subsidiary OnX Acquisition LLC (together “OnX”). For financial reporting purposes, TSG’s operating results for fiscal 2012 through the completion of the sale were classified within discontinued operations. Accordingly, the discussion and analysis presented below, reflects the continuing business of Agilysys.

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Results of Operations

First Fiscal Quarter 2013 Compared to First Fiscal Quarter 2012

Net Revenue and Operating Loss

The following table presents our consolidated revenue and operating results for the three months ended June 30, 2012 and 2011:

	Three months ended June 30,						Increase (decrease)
(Dollars in thousands)	2012			2011			$			%
Net revenue:
Products	$	24,118		$	27,954		$	(3,836	)		(13.7	)%
Support, maintenance and subscription services		18,436			17,525			911			5.2	%
Professional services		9,092			7,112			1,980			27.8	%
Total		51,646			52,591			(945	)		(1.8	)%
Cost of goods sold:
Products		18,859			23,308			(4,449	)		(19.1	)%
Support, maintenance and subscription services		6,799			6,468			331			5.1	%
Professional services		5,610			4,727			883			18.7	%
Total		31,268			34,503			(3,235	)		(9.4	)%
Gross profit		20,378			18,088			2,290			12.7	%
Gross profit margin		39.5	%		34.4	%
Operating expenses:
Product development		6,285			7,945			(1,660	)		(20.9	)%
Sales and marketing		5,921			5,563			358			6.4	%
General and administrative		6,809			8,653			(1,844	)		(21.3	)%
Depreciation of fixed assets		700			1,012			(312	)		(30.8	)%
Amortization of intangibles		880			931			(51	)		(5.5	)%
Asset impairments and related charges		208			—			208			nm
Restructuring and related charges		961			2,346			(1,385	)		nm
Operating loss	$	(1,386	)	$	(8,362	)	$	6,976			(83.4	)%
Operating loss percentage		(2.7	)%		(15.9	)%

nm - not meaningful.

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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,
	2012			2011
Net revenue:
Products		46.7	%		53.2	%
Support, maintenance and subscription services		35.7			33.3
Professional services		17.6			13.5
Total		100			100.0
Cost of goods sold:
Products		36.5			44.3
Support, maintenance and subscription services		13.2			12.3
Professional services		10.9			9.0
Total		60.5			65.6
Gross profit		39.5			34.4
Operating expenses:
Product development		12.2			15.1
Sales and marketing		11.5			10.6
General and administrative		13.2			16.5
Depreciation of fixed assets		1.4			1.9
Amortization of intangibles		1.7			1.8
Asset impairments and related charges		0.4			—
Restructuring and related charges		2.2			4.5
Operating loss		(3.0	)%		(15.9	)%

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The following table presents our revenue and operating results by business segment for the three months ended June 30, 2012 and 2011:

	Three months ended June 30,						Increase (decrease)
(Dollars in thousands)	2012			2011			$			%
Hospitality (HSG)
Revenue from external customers:
Products	$	6,555		$	4,546		$	2,009			44.2	%
Support, maintenance and subscription services		12,393			11,637			756			6.5	%
Professional services		3,410			3,351			59			1.8	%
Total revenue from external customers		22,358			19,534			2,824			14.5	%
Gross profit	$	14,665		$	11,997		$	2,668			22.2	%
Gross profit margin		65.6	%		61.4	%
Operating income (loss)	$	3,044		$	(978	)	$	4,022			(411.2	)%
Retail (RSG)
Revenue from external customers:
Products	$	17,563		$	23,408		$	(5,845	)		(25.0	)%
Support, maintenance and subscription services		6,043			5,888			155			2.6	%
Professional services		5,682			3,761			1,921			51.1	%
Total revenue from external customers		29,288			33,057			(3,769	)		(11.4	)%
Gross profit	$	5,713		$	6,091		$	(378	)		(6.2	)%
Gross profit margin		19.5	%		18.4	%
Operating income	$	1,718		$	1,809		$	(91	)		(5.0	)%
Total reportable business segments
Total revenue from external customers	$	51,646		$	52,591		$	(945	)		(1.8	)%
Gross profit	$	20,378		$	18,088		$	2,290			12.7	%
Gross profit margin		39.5	%		34.4	%
Operating income	$	4,762		$	831		$	3,931			473.0	%
Corporate/Other
Operating loss	$	(6,312	)	$	(9,193	)	$	2,881			31.3	%
Total Company
Total revenue from external customers	$	51,646		$	52,591		$	(945	)		(1.8	)%
Gross profit	$	20,378		$	18,088		$	2,290			12.7	%
Gross profit margin		39.5	%		34.4	%
Operating loss	$	(1,550	)	$	(8,362	)	$	6,812			(81.5	)%

nm - not meaningful

Net revenue. Total net revenue decreased $0.9 million or 1.8% during the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012. Products revenue decreased $3.8 million, or 13.7%, while support and maintenance and subscription services revenue increased $0.9 million, or 5.2%, and professional services revenue increased $2.0 million, or 27.8%.

HSG’s revenue increased $2.8 million or 14.5% in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012. The $2.0 million or 44.2% increase in products revenue was the result of the combination of organic growth in our traditional software licenses and the negative impact in the first quarter of fiscal 2012 of certain errors identified in the manner in which we recognized revenue for certain software license and professional services arrangements in prior periods. The out of period impact for errors accumulated in the first quarter of fiscal 2012 was approximately $1.2 million (see Note 2, Summary of Significant Accounting

26

Policies). The $0.8 million or 6.5% increase in support, maintenance and subscription services was the result of continued focus on selling subscription based services revenue which is typically recognized over a five year period, and ongoing support from traditional proprietary products.

RSG’s revenue decreased $3.8 million or 11.4 % in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012. We experienced a decline in products revenue of approximately $5.8 million or 25.0% as a result of the prior year quarter including hardware sales that did not repeat in the current quarter. This was partially offset by an increase in professional services revenue of $1.9 million, or 51.1%, and is the result of the implementations related to several multi-location, multi-year contracts for remarketed products.

Gross profit and gross profit margin. Our total gross profit increased $2.3 million or 12.7% for first quarter of fiscal 2013 and total gross profit margin increased 510 basis points to 39.5%. Products gross profit increased $0.6 million and gross profit margin increased 520 basis points to 21.8%. Support, maintenance and subscription services gross profit increased $0.6 million and gross margin percentage remained relatively the same at 63.1%. Professional services gross margin increased $1.1 million and gross profit margin increased 480 basis points to 38.3%.

HSG’s gross profit increased $2.7 million or 22.2% for first quarter of fiscal 2013 and gross profit margin improved 420 basis points to 65.6% in the first quarter of fiscal 2013 from 61.4% in first quarter of fiscal 2012. This is primarily due to products gross profit margin improvement of 1,510 basis points as a result of growth in our traditional proprietary software as well as selling higher margin opportunities within both proprietary and remarketed products. Support, maintenance and subscription services gross profit margins increased 90 basis points as less labor resources were needed for maintenance of our products. Professional services gross profit margin increased 970 basis points as a result of efficient management of project labor within implementation services.

RSG’s gross profit decreased $0.4 million or 6.2% for first quarter of fiscal 2013 and gross profit margin increased 110 basis points to 19.5% in first quarter of fiscal 2013 compared with 18.4% in first quarter of fiscal 2012. This is primarily due to higher professional service margins yielding an improvement of 370 basis points as a result of growth in the overall professional services revenue and improved labor efficiencies. The support gross profit margins decreased approximately 300 basis points due to the mix within remarketed product support in the quarter. Products gross profit margin declined 100 basis points consistent with price compression associated with remarketed products in the market.

Operating expenses

Operating expenses, excluding the one-time charges for asset impairments and related charges and restructuring and related charges, decreased $3.5 million, or 14.6% in the first quarter of fiscal 2013 compared with the first quarter of fiscal 2012. On a segment basis, HSG decreased $2.0 million, RSG decreased $0.1 million and Corporate decreased $1.4 million.

Product development. Product development includes all costs associated with research and development. Product development decreased $1.7 million or 20.9% in the first quarter of fiscal 2013 compared with the first quarter of fiscal 2012. Product development expenses decreased $1.7 million in HSG and remained flat in RSG in first quarter of fiscal 2013 compared to the first quarter of fiscal 2012. This decrease in HSG is driven by the continued investment in internal resources to enhance the existing products, headcount savings associated with the fiscal 2012 restructuring and the development of our future platforms, which are capitalized rather than expensed during the period.

Sales and marketing. Sales and marketing increased $0.4 million or 6.4% in the first quarter of fiscal 2013 compared with the first quarter of fiscal 2012. Sales and marketing expenses increased $0.5 million in HSG and decreased $0.1 million in RSG in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012. The increase in HSG is a result of continued investments in domestic and international sales resources, as well as certain incentive payments made to finalize prior year compensation plans. The decrease in RSG is associated with the savings realized from the fiscal 2012 restructuring.

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General and administrative. General and administrative decreased $1.8 million or 21.3% in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012. General and administrative expenses decreased $0.9 million in HSG and $0.9 million in Corporate, and remained flat in RSG. HSG expenses decreased as a result of lower employee related costs created by efficiencies in back-office processes. The Corporate savings are primarily the result of moving the corporate services from Solon, Ohio to Alpharetta, Georgia.

Depreciation of fixed assets. Depreciation of fixed assets decreased $0.3 million on a consolidated basis driven by our Corporate Services facility relocating from Solon, Ohio to Alpharetta, Georgia, and the closures of Emeryville, California and Frederick, Maryland in the fourth quarter of fiscal 2012.

Amortization of intangibles. Amortization of intangibles decreased $0.1 million in the first quarter of fiscal 2013. This decrease is due to certain internal use software reaching their useful lives during fiscal 2012.

Asset impairments and related charges. During the fourth quarter of 2012, it was determined that certain developed technologies would no longer be offered for sale. As a result during fiscal 2012, we impaired the entire remaining assets of $8.6 million, and accrued the costs associated with a transition plan for all of the existing customers off of this platform of $1.1 million. In the first quarter of fiscal 2013, we recorded in an additional $0.2 million related to the costs associated with this asset impairment.

Restructuring and related charges. Restructuring and related charges decreased $1.2 million or 52.0% in the first quarter of fiscal 2013, compared to the first quarter of fiscal 2012. In the first quarter of fiscal 2012, we announced restructuring actions, and recorded $2.4 million in restructuring charges, primarily comprised of severance and related benefits In the first quarter of fiscal 2013, we recorded an additional $1.1 million in restructuring charges associated with the remaining severance and related benefits of the fiscal 2012 restructuring charge. We expect to incur approximately $0.1 million in additional restructuring charges for severance and related benefits in the second quarter of fiscal 2013. Our restructuring actions are discussed further in Note 4, Restructuring and Related Charges.

Other (Income) Expenses

	Three months ended June 30,						(Unfavorable) favorable
(Dollars in thousands)	2012			2011			$			%
Other (income) expenses
Interest income	$	(4	)	$	(33	)	$	(29	)		(87.9	)%
Interest expense		151			338			187			55.3	%
Other expense (income), net		143			(37	)		(180	)		(486.5	)%
Total other expenses (income), net	$	290		$	268		$	(22	)		8.2	%

Interest income. Interest income decreased during the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012 as a result of higher interest earned in the 2012 from our interest bearing cash accounts.

Interest expense. Interest expense consists of costs associated with capital leases, loans on corporate-owned life insurance policies and the amortization of deferred financing fees. Interest expense decreased $0.2 million in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012 due to the elimination of deferred financing fees associated with our previous credit facility, which was terminated in July 2011.

Other (income) expenses, net. In the first quarter of fiscal 2013 compared to the first quarter of 2012, the $0.2 million increase of other (income) expenses primarily consists of losses recognized as a result of movements in foreign currencies relative to the U.S. dollar and a loss recognized in connection with our marketable securities (Rabbi Trust).

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Income Taxes

	Three months ended June 30,						(Unfavorable) favorable
(Dollars in thousands)	2012			2011			$			%
Income tax benefit	$	(47	)	$	(1,751	)	$	(1,704	)		nm
Effective tax rate		2.8	%		20.3	%

nm - not meaningful

We recorded an effective tax rate benefit from continuing operations of 2.8% in for the first quarter of fiscal 2013, compared with an effective tax rate benefit of 20.3% for the first quarter of fiscal 2012. For the first quarter of fiscal 2013, the effective tax rate was different than the statutory rate due primarily to recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance. Other items effecting the rate include U.S. permanent book to tax differences.

For the first quarter of fiscal 2012, the effective tax rate was different than the statutory rate due primarily to the intra-period tax allocation rules associated with the discontinued operations. Other items effecting the rate include a decrease in unrecognized tax benefits attributable to the expiration of statute of limitations 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 $0.5 million 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.

Discontinued Operations

On May 28, 2011, Agilysys entered into a definitive agreement to sell the TSG business for an aggregate purchase price of $64.0 million in cash, subject to a possible downward adjustment based on final working capital, to OnX Enterprise Solutions Limited and its subsidiary OnX Acquisition LLC (together, “OnX”), a leading IT solutions provider based in Toronto, Canada. As such, the operating results of TSG, along with the gain on sale, have been reported as a component of discontinued operations in our Condensed Consolidated Statements of Operations for the periods presented.

For the three months ended June 30, 2012 and 2011 the income from discontinued operations was comprised of the following:

(In thousands)	2012		2011
Discontinued operations:
Net revenue	$	—	$	97,757
Income from operations of TSG	$	—	$	1,361
Income tax expense		—		710
Income from discontinued operations	$	—	$	651

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Liquidity and Capital Resources

Overview

Our operating cash requirements consist primarily of working capital needs, operating expenses, capital expenditures, and payments of principal and interest on indebtedness outstanding, which primarily consists of lease and rental obligations at June 30, 2012. We believe that cash flow from operating activities, cash on hand of $80.3 million as of June 30, 2012 and access to capital markets will provide adequate funds to meet our short-and long-term liquidity requirements.

As of June 30, 2012 and March 31, 2012, our total debt was approximately $0.8 million and $1.0 million, respectively, comprised of capital lease obligations in both periods.

At June 30, 2012, 100% of our cash and cash equivalents were deposited in bank accounts. Therefore, we believe that credit risk is limited with respect to our cash and cash equivalents balances.

Cash Flow

	Three months ended June 30,
(In thousands)	2012			2011
Net cash (used in) provided by continuing operations:
Operating activities	$	(19,807	)	$	(8,679	)
Investing activities		2,817			(798	)
Financing activities		(171	)		(685	)
Effect of exchange rate changes on cash		(90	)		58
Cash flows used in continuing operations		(17,251	)		(10,104	)
Net operating and financing cash flows used in discontinued operations		—			(12,575	)
Net decrease in cash and cash equivalents	$	(17,251	)	$	(22,679	)

Cash flow used in operating activities from continuing operations. Cash flows used in operating activities were $19.8 million and $8.7 million in the first quarter of fiscal 2013 and 2012, respectively. The use of cash during the first quarter of fiscal 2013 included $9.9 million of non-recurring payments including $6.2 million for BEP and SERP payments and $3.7 million in restructuring payments. Also contributing to the use of cash were the annual bonus payment of approximately $2.0 million and the $5.4 million in working capital movements related to timing of receipts from customers and payments to vendors.

The $8.7 million in cash used in operating activities in the first quarter of fiscal 2012 included $5.8 million in inventory, $5.4 million in deferred revenue, $2.3 million in accounts receivable and $1.0 million in income taxes payable. This was partially offset by $7.3 million in cash provided from accounts payable. The increase in inventory and accounts payable were a result of the higher sales volume in the first quarter of fiscal 2012.

Cash flow provided by (used in) investing activities from continuing operations. In the fiscal 2013, the $2.8 million in cash provided by investing activities was primarily comprised of the $4.3 million in funds from the marketable securities (Rabbi Trust), partially offset by $1.5 million used for the purchase of software, property and equipment. The funds from the Rabbi Trust were used to settle employee benefit obligations. The $1.5 million in capital expenditures was primarily internal capitalized software and capitalized product development technology.

In the first quarter of fiscal 2012, the $0.8 million in cash used in investing activities was primarily comprised the purchase of software, property and equipment.

30

Cash flow used in financing activities from continuing operations. During the first quarter of fiscal 2013, the $0.2 million used in financing activities was primarily comprised of payments on capital lease obligations.

The $0.7 million in cash used in financing activities in the first quarter of fiscal 2012 represented $0.3 million in principal payments on capital lease obligations and $0.2 million related to shares withheld for income taxes on the vesting or exercise of stock compensation awards.

Contractual Obligations

As of June 30, 2012, there were no other significant changes to our contractual obligations as presented in our Annual Report for the year ended March 31, 2012.

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, 2012. There have been no material changes in our significant accounting policies and estimates since March 31, 2012 except as discussed below.

Capitalized Software Development Costs. We capitalize certain costs related to the development of computer software. Capitalization of these costs begins when a detail program design or working model has been produced as evidenced by the completion of design, planning, coding and testing, such that the product meets its design specifications and has thereby established technological feasibility. Capitalization of these costs ends when the resulting product is available for general release to the public. Amortization of the capitalized software is classified within products cost of goods sold in the Condensed Consolidated Statements of Operations. For each capitalized software product, the annual amortization is equal to the greater of: (i) the amount computed using the ratio that the software product’s current fiscal year gross revenue bears to the total current fiscal year and anticipated future gross revenues for that product or (ii) the amount computed based on straight-line method over the remaining estimated economic life of the product. Unamortized costs will be evaluated for indicators of impairment at each balance sheet date, and if impaired, written down to net realizable value. We capitalized approximately $1.0 million and $0.3 million during the three months ended June 30, 2012 and 2011, respectively. Amortization of capitalized software was $0.2 million and $0.5 million for the three months ended June 30, 2012 and 2011, respectively.

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 of our Annual Report for the fiscal year ended March 31, 2012. 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.

31

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, 2012. There have been no material changes in our market risk exposures since March 31, 2012.

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”) and Chief Financial Officer (“CFO”), 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 and CFO 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

None.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in legal actions that arise in the ordinary course of business. It is the opinion of management that the resolution of any current pending litigation will not have a material adverse effect on our financial position or results of operations. We cannot give assurance, however, that an unfavorable outcome in one or more of these matters will not have a material effect on our results of operations for the period in which they are resolved.

On July 9, 2012, a putative class action lawsuit was filed against us in the United States District Court for the Northern District of California alleging violations of federal and state wage and hour laws, rules and regulations pertaining primarily to pay for missed meals and rest periods and failure to reimburse business expenses. The lawsuit purports to be a class action and seeks substantial damages. At this time, we are not able to predict the outcome of this lawsuit, or any possible monetary exposure associated with the lawsuit. Our management believes, however, that the plaintiffs’ allegations are without merit and that their claims are not appropriate for class action treatment. We are vigorously defending these claims.

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, 2012 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.

32

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer 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, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at June 30, 2012 and March 31, 2012, (ii) Condensed Consolidated Statements of Operations for the three months ended June 30, 2012 and 2011, (iii) Condensed Consolidated Statements of Comprehensive Loss for the three months ended June 30, 2012 and 2011, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2012 and 2011, and (v) Notes to Condensed Consolidated Financial Statements for the three months ended June 30, 2012.
	In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

33

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 9, 2012		/s/ Janine K. Seebeck
		Janine K. Seebeck
		Vice President Controller
		(Principal Accounting Officer and Duly Authorized Officer)

34

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, James H. Dennedy, 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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.

Dated: August 9, 2012

By:	/s/ James H. Dennedy
	James H. Dennedy
	President and Chief Executive Officer

35

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

I, Robert R. Ellis, 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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.

Dated: August 9, 2012

By:	/s/ Robert R. Ellis
	Robert R. Ellis
	Senior Vice President, Chief Financial Officer and Treasurer

36

EX-32.1

Exhibit 32.1

CERTIFICATION

I, James H. Dennedy, President and Chief Executive Officer of Agilysys, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2012 (the “Report”) fully complies (1) with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

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

Dated: August 9, 2012

By:	/s/ James H. Dennedy
	James H. Dennedy
	President and Chief Executive Officer

37

EX-32.2

Exhibit 32.2

CERTIFICATION

I, Robert R. Ellis, Senior Vice President and Chief Financial Officer of Agilysys, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2012 (the “Report”) fully complies (1) with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

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

Dated: August 9, 2012

By:	/s/ Robert R. Ellis
	Robert R. Ellis
	Senior Vice President, Chief Financial Officer and Treasurer

38

XML

(Loss) Earnings per Share (Details Textual)	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Earnings (Loss) per Share (Textual) [Abstract]
Outstanding weighted average basic shares excludes restricted shares	233,357	10,000
Stock options and SSARs [Member]
Earnings (Loss) per Share (Textual) [Abstract]
Anti-dilutive common shares	1,700,000	3,200,000

XML

Fair Value Measurements (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012
Recorded value [Member] | SERP obligations - current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:		$ 3,323
Recorded value [Member] | Restructuring liabilities - current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:	3,264	5,447
Recorded value [Member] | Restructuring liabilities - non-current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:	453	852
Recorded value [Member] | Other employee benefit plans obligations - non-current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:	196	196
Recorded value [Member] | Goodwill [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Assets:	15,109	15,198
Recorded value [Member] | Intangible Assets [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Assets:	14,622	14,135
Active markets for identical assets or liabilities (Level 1) [Member] | SERP obligations - current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:
Active markets for identical assets or liabilities (Level 1) [Member] | Restructuring liabilities - current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:
Active markets for identical assets or liabilities (Level 1) [Member] | Restructuring liabilities - non-current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:
Active markets for identical assets or liabilities (Level 1) [Member] | Other employee benefit plans obligations - non-current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:
Active markets for identical assets or liabilities (Level 1) [Member] | Goodwill [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Assets:
Active markets for identical assets or liabilities (Level 1) [Member] | Intangible Assets [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Assets:
Quoted prices in similar instruments and observable inputs (Level 2) [Member] | SERP obligations - current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:
Quoted prices in similar instruments and observable inputs (Level 2) [Member] | Restructuring liabilities - current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:
Quoted prices in similar instruments and observable inputs (Level 2) [Member] | Restructuring liabilities - non-current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:
Quoted prices in similar instruments and observable inputs (Level 2) [Member] | Other employee benefit plans obligations - non-current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:
Quoted prices in similar instruments and observable inputs (Level 2) [Member] | Goodwill [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Assets:
Quoted prices in similar instruments and observable inputs (Level 2) [Member] | Intangible Assets [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Assets:
Active markets for unobservable inputs (Level 3) [Member] | SERP obligations - current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:		3,323
Active markets for unobservable inputs (Level 3) [Member] | Restructuring liabilities - current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:	3,264	5,447
Active markets for unobservable inputs (Level 3) [Member] | Restructuring liabilities - non-current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:	453	852
Active markets for unobservable inputs (Level 3) [Member] | Other employee benefit plans obligations - non-current [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Liabilities:	196	196
Active markets for unobservable inputs (Level 3) [Member] | Goodwill [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Assets:	15,109	15,198
Active markets for unobservable inputs (Level 3) [Member] | Intangible Assets [Member]
Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis
Assets:	$ 14,622	$ 14,135

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012
Recorded value [Member] | BEP Current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Liabilities:		$ 2,948
Recorded value [Member] | Available for sale restricted marketable securities current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Assets:		4,408
Recorded value [Member] | Corporate owned life insurance non-current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Assets:	3,490	3,458
Active markets for identical assets or liabilities (Level 1) [Member] | BEP Current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Liabilities:
Active markets for identical assets or liabilities (Level 1) [Member] | Available for sale restricted marketable securities current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Assets:		4,408
Active markets for identical assets or liabilities (Level 1) [Member] | Corporate owned life insurance non-current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Assets:
Quoted prices in similar instruments and observable inputs (Level 2) [Member] | BEP Current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Liabilities:		2,948
Quoted prices in similar instruments and observable inputs (Level 2) [Member] | Available for sale restricted marketable securities current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Assets:
Quoted prices in similar instruments and observable inputs (Level 2) [Member] | Corporate owned life insurance non-current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Assets:
Active markets for unobservable inputs (Level 3) [Member] | BEP Current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Liabilities:
Active markets for unobservable inputs (Level 3) [Member] | Available for sale restricted marketable securities current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Assets:
Active markets for unobservable inputs (Level 3) [Member] | Corporate owned life insurance non-current [Member]
Financial assets and liabilities measured at fair value on a recurring basis
Assets:	$ 3,490	$ 3,458

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Restructuring and Related Charges (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Reconciliation of the beginning and ending balances of the Company's restructuring liabilities
Balance at March 31, 2012	$ 6,299
Provision	1,125	2,346
Payments and settlements for restructuring	(3,707)	(344)
Balance at June 30, 2012	3,717
Severance and employment costs [Member] | Fiscal 2012 Restructuring Plan [Member]
Reconciliation of the beginning and ending balances of the Company's restructuring liabilities
Balance at March 31, 2012	5,507
Provision	1,161
Payments and settlements for restructuring	(3,541)
Balance at June 30, 2012	3,127
Facilities costs [Member] | Fiscal 2012 Restructuring Plan [Member]
Reconciliation of the beginning and ending balances of the Company's restructuring liabilities
Balance at March 31, 2012	297
Provision	(42)
Payments and settlements for restructuring	(100)
Balance at June 30, 2012	155
Facilities costs [Member] | Fiscal 2009 Restructuring Plan [Member]
Reconciliation of the beginning and ending balances of the Company's restructuring liabilities
Balance at March 31, 2012	495
Provision	6
Payments and settlements for restructuring	(66)
Balance at June 30, 2012	$ 435

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Share-based Compensation (Tables)

3 Months Ended

Jun. 30, 2012

Share-based Compensation [Abstract]

Summary of share-based compensation expense for options

	Three months ended June 30,
(In thousands)	2012		2011
Product development	$	68	$	113
Sales and marketing		15		114
General and administrative		270		1,254
Total share-based compensation expense	$	353	$	1,481

Stock options granted by the Company

No stock options were granted during the three months ended June 30, 2012.

(In thousands, except share and per share data)	Number of Options			Weighted- Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
				(per share)		(in years)
Outstanding at April 1, 2012		971,001		$	13.52
Exercised		(26,667	)		2.51
Cancelled/expired		(23,334	)		15.99
Outstanding and exercisable at June 30, 2012		921,000		$	13.78		3.68	$	498

Activity related SSARs award

(In thousands, except share and per share data)	Number of Rights			Weighted -Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
				(per right)		(in years)
Outstanding at April 1, 2012		606,834		$	6.91
Granted		318,607			7.52
Exercised		(80,651	)		6.53
Forfeited		(24,708	)		7.42
Outstanding at June 30, 2012		820,082		$	7.17		7.72	$	1,234
Exercisable at June 30, 2012		363,055		$	6.67		5.19	$	727

Activity related to restricted shares awarded by the Company

	Number of Shares			Weighted- Average Grant- Date Fair Value
				(per share)
Outstanding at April 1, 2012		48,558		$	7.80
Granted		182,321			7.76
Vested		(7,000	)		7.42
Forfeited		(8,250	)		7.42
Outstanding at June 30, 2012		215,629		$	7.80

Performance shares awarded by the Company

	Number of shares		Weighted- Average Grant- Date Fair Value
			(per share)
Outstanding at April 1, 2012		—	$	—
Granted		17,728		8.64
Outstanding at June 30, 2012		17,728	$	8.64

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Fair Value Measurements (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2012
Fair Value Measurements (Textual) [Abstract]
Transfers between level 1, level 2 and level 3	$ 0

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Share-based Compensation (Details 2) (Stock Incentive Loan [Member], Stock Settled Stock Appreciation Rights (SSARS) [Member], USD $)	3 Months Ended
	Jun. 30, 2012
Stock Incentive Loan [Member] | Stock Settled Stock Appreciation Rights (SSARS) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Rights Outstanding at April 1, 2012	606,834
Weighted Average Exercise Price Outstanding at April 1, 2012	$ 6.91
Number of Rights Granted,	318,607
Weighted Average Exercise Price Granted,	$ 7.52
Number of Rights Exercised	(80,651)
Weighted Average Exercise Price Exercised	$ 6.53
Number of Rights, Forfeited	(24,708)
Weighted Average Exercise Price, Forfeited	$ 7.42
Number of Rights Outstanding at June 30, 2012	820,082
Weighted Average Exercise Price Outstanding at June 30, 2012	$ 7.17
Aggregate Intrinsic Value Outstanding at June 30, 2012	$ 1,234
Remaining Contractual Term Outstanding at June 30, 2012	7 years 8 months 19 days
Number of Rights Exercisable at June 2012	363,055
Weighted Average Exercise Price Exercisable at June 30, 2012	$ 6.67
Remaining Contractual Term Exercisable at June 30, 2012	5 years 2 months 9 days
Aggregate Intrinsic Value Exercisable at June 30, 2012	$ 727

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Income Taxes (Details Textual)	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Income Taxes (Textual) [Abstract]
Effective tax rate	2.80%	20.30%

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Business Segments (Details Textual)	3 Months Ended
	Jun. 30, 2012 Segment
Business Segments (Textual) [Abstract]
Number of reportable segments	2

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Fair Value Measurements (Details 1) (Level 3 [Member], Corporate owned life insurance [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Level 3 [Member] | Corporate owned life insurance [Member]
Changes in the fair value of the Level 3 assets and liabilities related to continuing operations in corporate owned life insurance
Balance on April 1	$ 3,458	$ 3,323
Unrealized losses relating to instruments held at reporting date		(4)
Unrealized gain relating to instruments held at reporting date	28
Purchases, sales, issuances and settlements, net	4	46
Balance on June 30	$ 3,490	$ 3,365

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Discontinued Operations

3 Months Ended

Jun. 30, 2012

Discontinued Operations [Abstract]

Discontinued Operations

3. Discontinued Operations

Sale of Assets and Operations of TSG – Fiscal 2012

In May 2011, we sold our TSG business for an aggregate purchase price of $64.0 million in cash, subject to a possible downward adjustment based on final working capital, to OnX Enterprise Solutions Limited and its subsidiary OnX Acquisition LLC (together, “OnX”), a leading IT solutions provider based in Toronto, Canada. In addition to the purchase agreement, we entered into a transition services agreement (“TSA”) with OnX, under which we provided certain transitional administrative and supportive services to OnX through January 31, 2012. In July 2011, our shareholders approved the sale and the transaction closed on August 1, 2011, the date on which certain other contingencies specified in the sale agreement were satisfied. The sale of TSG represented a disposal of a component of an entity. As such, the operating results of TSG have been reported as a component of discontinued operations in the Condensed Consolidated Statements of Operations for the periods presented.

Components of Results of Discontinued Operations

For the three months ended June 30, 2012 and 2011 the income from discontinued operations was comprised of the following:

(In thousands)	2012		2011
Discontinued operations:
Net revenue	$	—	$	97,757
Income from operations of TSG	$	—	$	1,361
Income tax expense		—		710
Income from discontinued operations	$	—	$	651

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Share-based Compensation (Details 3) (Stock Incentive Plan [Member], Restricted Stock [Member], USD $)	3 Months Ended
	Jun. 30, 2012
Stock Incentive Plan [Member] | Restricted Stock [Member]
Activity Related to Restricted Shares Awarded by the Company
Number of shares Outstanding at April 1, 2012	48,558
Weighted Average Grant-Date Fair Value Outstanding at April 1, 2012	$ 7.80
Granted, Number of Shares	182,321
Granted, Weighted Average Grant Date Fair value	$ 7.76
Vested, Number of shares	(7,000)
Vested, Weighted Average Grant Date Fair value	$ 7.42
Forfeited, Number of Shares	(8,250)
Forfeited, Weighted Average Grant Date Fair Value	$ 7.42
Number of shares Outstanding at June 30, 2012	215,629
Weighted Average Grant-Date Fair Value Outstanding at June 30, 2012	$ 7.80

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Summary of Significant Accounting Policies (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Sep. 30, 2011 As Previously Reported [Member]	Jun. 30, 2011 As Previously Reported [Member]	Sep. 30, 2011 Adjustment [Member]	Jun. 30, 2011 Adjustment [Member]	Sep. 30, 2011 As Revised [Member]	Jun. 30, 2011 As Revised [Member]
Effect this revision on condensed consolidated statements of operations
Net revenue	$ 51,646	$ 52,591	$ 53,587	$ 53,886	$ (902)	$ (1,295)	$ 52,685	$ 52,591
Costs of goods sold	31,268	34,503	31,972	34,359	(286)	144	31,686	34,503
Net loss from continued operations	$ (1,840)	$ (8,630)	$ (3,238)	$ (5,440)	$ (316)	$ (1,439)	$ (3,554)	$ (6,879)
Loss per share for continuing operations - Basic and diluted	$ (0.08)	$ (0.30)	$ (0.14)	$ (0.24)	$ (0.02)	$ (0.06)	$ (0.16)	$ (0.30)

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Nature of Operations and Financial Statement Presentation (Details Textual)	3 Months Ended
	Jun. 30, 2012 Segment
Nature of Operations and Financial Statement Presentation (Textual) [Abstract]
Number of business reportable segment	2

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Share-based Compensation (Details 4) (Performance Shares [Member], USD $)	3 Months Ended
	Jun. 30, 2012
Performance Shares [Member]
Performance shares awarded by the Company
Number of shares Outstanding at April 1, 2012
Weighted Average Grant-Date Fair Value Outstanding at April 1, 2012
Granted, Number of Shares	17,728
Granted, Weighted Average Grant Date Fair value	$ 8.64
Number of shares Outstanding at June 30, 2012	17,728
Weighted Average Grant-Date Fair Value Outstanding at June 30, 2012	$ 8.64

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Summary of Significant Accounting Policies (Details Textual) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Summary of Significant Accounting Policies (Textual) [Abstract]
Revenue from continuing operation		$ 1.0
Loss from continuing operation		1.1
Revenue from continuing operation revenue recognition deferred	0.3
Loss from continuing operation recognition deferred	0.3
Increase in revenues	0.3
Increase in restructuring and related charges	0.7
Increase in asset impairments and related charges	0.2
Increase in operating loss	0.6
Pre-tax loss	0.6
Pre-tax loss per share	$ (0.03)
Capitalized software development costs	1.0	0.3
Amortization of capitalized software	$ 0.2	$ 0.5

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Discontinued Operations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Income from discontinued operations
Net revenue		$ 97,757
Income from operations of TSG		1,361
Income tax expense		710
Income from discontinued operations		$ 651

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Summary of Significant Accounting Policies

3 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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, 2012, included in our Annual Report on Form 10-K. Except as described below, there have been no material changes our significant accounting policies and estimates from those disclosed therein.

Use of estimates. Preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.

Reclassifications. As a result of our reorganization in fiscal 2012, revenue and cost of goods sold are being reported in three categories: Products, Support, maintenance and subscription services and Professional services. In addition, operating expenses are differentiated in the following subcategories: Product development, Sales and marketing and General and administrative. Prior period presentation has been modified to conform to the current presentation.

Correction of Error. In the third quarter of fiscal 2012, we identified errors in the manner in which we recognized revenue for certain software license and professional service arrangements in prior periods. We re-assessed our accounting for contracts relating to such arrangements. Upon completion of such evaluation, it was determined that the previous accounting treatment did not take into account all the necessary revenue recognition criteria related to pricing concessions, implied postcontract support, professional services that were essential to the functionality of the software, application of contract accounting and specified enhancements, and certain billing errors. As a result, we determined that certain previously recognized revenue should instead have been deferred and recognized in future periods when the applicable criteria related to the above considerations have been met.

In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the materiality of the errors and concluded that the errors were not material to any of our previously issued financial statements. Correction of the errors was also not material to the fiscal 2012 results. As permitted by the accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we elected to present revised financial information as of and for the interim periods ended June 30, 2011 and September 30, 2011, and revised our previously issued fiscal year 2012 interim financial statements to correct the effect of these errors for when such financial statements are included in future filings. The adjustments to the quarter ended June 30, 2011 are comprised of (a.) the out of period impact for errors accumulated prior to fiscal 2012 of $1.0 million of corrections to revenue from continuing operations and $1.1 million of corrections to the loss from continuing operations and (b.) $0.3 million to revenue from continuing operations and $0.3 million to loss from continuing operations to revise the financial statements for revenue recognized in the quarter ended June 30, 2011 that should have been deferred to future periods. The adjustments to the quarter ended September 30, 2011 represent the revision to the financial statements for similar matters arising in the quarter.

The following tables present the effect of this revision on our Condensed Consolidated Statements of Operations for all periods affected:

	Quarter Ended June 30, 2011									Quarter Ended September 30, 2011
(In thousands except per share amounts)	As Previously Reported			Adjustment			As Revised			As Previously Reported			Adjustment			As Revised
Net revenue	$	53,886		$	(1,295	)	$	52,591		$	53,587		$	(902	)	$	52,685
Costs of goods sold		34,359			144			34,503			31,972			(286	)		31,686
Net loss from continued operations		(5,440	)		(1,439	)		(6,879	)		(3,238	)		(316	)		(3,554	)
Loss per share for continuing operations – Basic and diluted		(0.24	)		(0.06	)		(0.30	)		(0.14	)		(0.02	)		(0.16	)

The revision did not have an effect on our operating cash flows for the three months ended June 30, 2011 or the six months ended September 30, 2011.

During the first quarter of fiscal 2013, we recorded out-of-period adjustments to increase revenues, restructuring and related charges and asset impairments and related charges by $0.3 million, $0.7 million and $0.2 million, respectively. The net impact of the adjustments increased our operating loss by $0.6 million and represents a correction of error. In fiscal 2012, we erroneously omitted certain revenue transactions, the costs associated with certain terminated individuals and certain third party development costs for our previously impaired developed technology. Pre-tax loss in the first quarter of fiscal 2013 increased by $0.6 million, or $(0.03) per share, due to these adjustments. Management performed an evaluation under Staff Accounting Bulletin No. 108 and concluded the effect of this adjustment was immaterial to prior year’s financial statements as well as the full-year fiscal 2013 financial statements.

Capitalized Software Development Costs. The capitalization of software development cost begins when a product’s technological feasibility has been established. Capitalization ends when the resulting product is available for general market release. Amortization of the capitalized software is classified within products cost of goods sold in the Condensed Consolidated Statements of Operations. For each capitalized software product, the annual amortization is equal to the greater of: (i) the amount computed using the ratio that the software product’s current fiscal year gross revenue bears to the total current fiscal year and anticipated future gross revenues for that product or (ii) the amount computed based on straight-line method over the remaining estimated economic life of the product. Unamortized costs will be evaluated for indicators of impairment at each balance sheet date, and if impaired, written down to net realizable value. We capitalized approximately $1.0 million and $0.3 million during the three months ended June 30, 2012 and 2011, respectively. Amortization of capitalized software was $0.2 million and $0.5 million for the three months ended June 30, 2012 and 2011, respectively.

Adopted and Recently Issued Accounting Pronouncements.

In September 2011, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update, ASU, No. 2011-08, Testing for Goodwill Impairment, which modifies the process of testing goodwill for impairment. The update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity would not be required to calculate the fair value of a reporting unit unless the entity determines it is more likely than not, based on a qualitative assessment, the fair value of goodwill is less than its carrying amount. The guidance also includes a number of events and circumstances to consider in conducting the qualitative assessment. This guidance is effective for fiscal years beginning on or after December 15, 2011. We adopted this guidance as of April 1, 2012 and it did not have a material impact on our consolidated financial statements or related disclosures.

In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, which modifies the requirements for presenting net income and other comprehensive income and requires that all non-owner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendment requires presentation of each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. In December 2011, the FASB issued amendments to the guidance to allow the FASB time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income in all periods presented. This guidance is effective for fiscal years and interim periods beginning on or after December 15, 2011. We adopted this guidance as of April 1, 2012 and it did not have an impact on our consolidated financial statements or related disclosures.

In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which modifies the disclosure requirements for offsetting financial instruments and derivative instruments. The update requires an entity to disclose information about offsetting and related arrangements and the effect of those arrangements on its financial position. This guidance is effective for reporting periods beginning on or after January 1, 2013, and is not expected to have a material impact on our consolidated financial statements or related disclosures.

Management continually evaluates the potential impact, if any, of all recent accounting pronouncements on our consolidated financial statements or related disclosures and, if significant, makes the appropriate disclosures required by such new accounting pronouncements.

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Discontinued Operations (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2012
Discontinued Operations (Textual) [Abstract]
Aggregate purchase price	$ 64.0

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Share-based Compensation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Summary of share-based compensation expense for options
Total share-based compensation expense	$ 353	$ 1,481
Product development [Member]
Summary of share-based compensation expense for options
Total share-based compensation expense	68	113
Selling and marketing [Member]
Summary of share-based compensation expense for options
Total share-based compensation expense	15	114
General and administrative [Member]
Summary of share-based compensation expense for options
Total share-based compensation expense	$ 270	$ 1,254

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012
Current assets:
Cash and cash equivalents	$ 80,336	$ 97,587
Accounts receivable, net of allowances of $609 and $632, respectively	34,656	32,531
Inventories	15,652	15,710
Prepaid expenses	3,188	2,975
Other current assets	1,790	5,492
Total current assets	135,622	154,295
Property and equipment, net	15,916	16,504
Goodwill	15,109	15,198
Intangible assets, net of amortization of $22,099 and $21,560, respectively	14,622	14,135
Other non-current assets	4,039	4,007
Total assets	185,308	204,139
Current liabilities:
Accounts payable	23,815	24,938
Deferred revenue	25,542	28,441
Accrued liabilities	11,224	23,983
Capital lease obligations, current	470	647
Total current liabilities	61,051	78,009
Deferred income taxes, non-current	5,152	5,135
Capital lease obligations, non-current	288	347
Other non-current liabilities	5,883	6,210
Commitments and contingencies (see Note 7)
Shareholders' equity:
Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 31,606,831 shares issued; and 22,104,245 and 21,875,850 shares outstanding and June 30, 2012 and March 31, 2012, respectively	9,482	9,482
Treasury shares, 9,502,586 and 9,730,981 at June 30, 2012 and March 31, 2012, respectively	(2,851)	(2,919)
Capital in excess of stated value	(15,720)	(16,032)
Retained earnings	122,083	123,876
Accumulated other comprehensive (loss) income	(60)	31
Total shareholders' equity	112,934	114,438
Total liabilities and shareholders' equity	$ 185,308	$ 204,139

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Share-based Compensation (Details Textual) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2012
Stock Based Compensation (Textual) [Abstract]
Vesting period of performance shares	2 years
Stock option granted	0
Restricted Stock [Member]
Stock Based Compensation (Textual) [Abstract]
Unrecognized stock based compensation expense related to non-vested restricted stock	1.5
Weighted-average vesting period	2 years 3 months 18 days
Stock Settled Stock Appreciation Rights (SSARS) [Member]
Stock Based Compensation (Textual) [Abstract]
Unrecognized stock based compensation expense related to non-vested stock options	1.9
Shares withheld to cover the employee's minimum applicable income taxes	5,146
Weighted-average vesting period	2 years 6 months
Total treasury shares to settle SSARs	9,709
Performance Shares [Member]
Stock Based Compensation (Textual) [Abstract]
Compensation expense	0.1
Weighted-average vesting period	1 year 10 months 24 days
2011 Stock Incentive Plan [Member]
Stock Based Compensation (Textual) [Abstract]
Shares authorized under 2011 Stock incentive plan	3,000,000
2011 Stock Incentive Plan [Member] | Restricted Shares and Restricted Share Units [Member]
Stock Based Compensation (Textual) [Abstract]
Shares authorized under 2011 Stock incentive plan	1,000,000
Maximum number of shares subject to stock options and restricted shares	400,000
2011 Stock Incentive Plan [Member] | Stock Settled Stock Appreciation Rights (SSARS) [Member]
Stock Based Compensation (Textual) [Abstract]
Maximum number of shares subject to stock options and restricted shares	800,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating activities
Net loss	$ (1,793)	$ (6,228)
Income from discontinued operations		651
Loss from continuing operations	(1,793)	(6,879)
Adjustments to reconcile loss from continuing operations to net cash used in operating activities
Restructuring and related charges	1,125	2,346
Payments and settlements for restructuring	(3,707)	(344)
Asset impairments and related charges	208
Depreciation	700	1,012
Amortization	1,129	1,531
Share based compensation	353	1,481
Changes in operating assets and liabilities:
Accounts receivable	(2,196)	(2,259)
Inventories	58	(5,753)
Accounts payable	(1,316)	7,277
Deferred revenue	(2,854)	(5,399)
Accrued liabilities	(10,717)	(578)
Income taxes payable (receivable)	68	(951)
Other charges, net	(865)	(163)
Net cash used in operating activities from continuing operations	(19,807)	(8,679)
Net cash used in operating activities from discontinued operations		(12,555)
Net cash used in operating activities	(19,807)	(21,234)
Investing activities
Proceeds from sale of marketable securities	4,347	15
Additional investments in corporate-owned life insurance policies and marketable securities	(4)	(57)
Capital expenditures	(1,526)	(756)
Net cash provided by (used in) investing activities from continuing operations	2,817	(798)
Net cash provided by (used in) investing activities from discontinued operations
Net cash provided by (used in) investing activities	2,817	(798)
Financing activities
Principal payments under long-term obligations	(198)	(330)
Exercise of employee stock options	67	210
Repurchase of common shares to satisfy employee tax withholding	(40)	(565)
Net cash used in financing activities from continuing operations	(171)	(685)
Net cash used in financing activities from discontinued operations		(20)
Net cash used in financing activities	(171)	(705)
Effect of exchange rate changes on cash	(90)	58
Cash flows used in continuing operations	(17,251)	(10,104)
Cash flows used in discontinued operations		(12,575)
Net decrease in cash and cash equivalents	(17,251)	(22,679)
Cash and cash equivalents at beginning of period	97,587	74,354
Cash and cash equivalents at end of period	$ 80,336	$ 51,675

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Additional Balance Sheet Information (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012
Other non-current assets:
Corporate Owned Life Insurance Policy	$ 3,490	$ 3,458
Other	549	549
Total	4,039	4,007
Accrued liabilities:
Salaries, wages, and related benefits	4,237	7,397
BEP obligations		2,948
SERP obligations		3,323
Restructuring Liabilities	3,264	5,447
Other taxes payable	1,921	1,976
Income taxes payable	385	322
Other	1,417	2,570
Total	11,224	23,983
Other non-current liabilities:
Income taxes payable/Uncertain tax positions	2,856	3,135
Deferred rent	2,269	2,013
Restructuring Liabilities	453	852
Other	305	210
Total	$ 5,883	$ 6,210

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Additional Balance Sheet Information (Tables)

3 Months Ended

Jun. 30, 2012

Additional Balance Sheet Information [Abstract]

Additional information related to the Company's Condensed Consolidated Balance Sheets

(In thousands)	June 30, 2012		March 31, 2012
Other non-current assets:
Corporate owned life insurance policies	$	3,490	$	3,458
Other		549		549
Total	$	4,039	$	4,007
Accrued liabilities:
Salaries, wages, and related benefits	$	4,237	$	7,397
BEP obligations (1)		—		2,948
SERP obligations (1)		—		3,323
Restructuring liabilities		3,264		5,447
Other taxes payable		1,921		1,976
Income taxes payable		385		322
Other		1,417		2,570
Total	$	11,224	$	23,983
Other non-current liabilities:
Income taxes payable/uncertain tax positions	$	2,856	$	3,135
Deferred rent		2,269		2,013
Restructuring liabilities		453		852
Other		305		210
Total	$	5,883	$	6,210

(1) BEP and SERP obligations were fulfilled in April 2012.

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Effective tax rates from continuing operations
Income tax benefit	$ (47)	$ (1,751)
Effective tax rate	2.80%	20.30%

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(Loss) Earnings per Share (Tables)

3 Months Ended

Jun. 30, 2012

(Loss) Earnings per Share [Abstract]

Computing (loss) earnings per share and the effect on income and the weighted average number of dilutive potential common shares

	Three months ended June 30,
(In thousands, except per share data)	2012			2011
Numerator:
Loss from continuing operations – basic and diluted	$	(1,793	)	$	(6,879	)
Income from discontinued operations – basic and diluted		—			651
Net loss - basic and diluted	$	(1,793	)	$	(6,228	)
Denominator:
Weighted average shares outstanding – basic and diluted		21,836			22,953
(Loss) earnings per share – basic and diluted:
Loss from continuing operations	$	(0.08	)	$	(0.30	)
Income from discontinued operations	$	—		$	0.03
Net loss per share	$	(0.08	)	$	(0.27	)

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Nature of Operations and Financial Statement Presentation

3 Months Ended

Jun. 30, 2012

Nature of Operations and Financial Statement Presentation [Abstract]

Nature of Operations and Financial Statement Presentation

1. Nature of Operations and Financial Statement Presentation

Nature of Operations

Agilysys is a leading provider of innovative technology solutions for the hospitality and retail markets. Our intuitive solutions include property and lodging management, inventory and procurement, point-of-sale (POS), document management, mobile, wireless and other types of guest-engagement software. We also provide support, maintenance, resold hardware products and software hosting services. Our customers include retailers, casinos, resorts, restaurants and other customer-facing service providers, and a significant portion of our consolidated revenue is derived from contract support, maintenance agreements and professional services.

We operate extensively throughout North America, with additional sales and support offices in the United Kingdom and Asia. We have two operating segments: Hospitality Solutions Group (HSG) and Retail Solutions Group (RSG).

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 2012 refers to the fiscal year ending March 31, 2012.

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, 2012, as well as the Condensed Consolidated Statements of Operations, the Condensed Consolidated Statements of Comprehensive Loss and the Condensed Consolidated Statements of Cash Flows for the three-month periods ended June 30, 2012 and 2011, have been prepared without audit. However, these financial statements have been prepared on the same basis as those in the audited annual financial statements. In the opinion of management, all adjustments necessary to fairly present the results of operations, financial position, and cash flows have been made. Further, we have evaluated all significant events occurring subsequent to the date of the Condensed Consolidated Financial Statements and through the filing of this Quarterly Report.

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, 2012, filed with the Securities and Exchange Commission (“SEC”) on June 12, 2012.

Unless otherwise stated, current and prior period results in our condensed consolidated financial statements and these notes reflect our results from continuing operations and exclude the effect of discontinued operations (see Note 3).

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Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012
Condensed Consolidated Balance Sheets [Abstract]
Accounts receivable, allowances	$ 609	$ 632
Intangible assets, accumulated amortization	$ 22,099	$ 21,560
Common stock, no par value
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	22,104,245	21,875,850
Treasury shares	9,502,586	9,730,981

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Business Segments

3 Months Ended

Jun. 30, 2012

Business Segments [Abstract]

Business Segments

11. Business Segments

Description of Business Segments

Agilysys has two reportable business segments: HSG and RSG. The reportable segments are each managed separately and are supported by various practices as well as company-wide functional departments. These functional support departments include general accounting and finance, accounts payable, tax, information technology, legal, payroll, and benefits and a portion of these costs are reported in Corporate/Other. Corporate/Other is not a reportable business segment as defined by GAAP. As a result of the sale of the TSG business during fiscal 2012, and the TSA with OnX, Corporate/Other costs have been adjusted for the period presented to remove the portion of the functional support department costs that were transferred to OnX.

Measurement of Segment Operating Results and Segment Assets

We evaluate performance and allocate resources to our reportable segments based on operating income. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies elsewhere in the footnotes to the consolidated financial statements. Intersegment sales are recorded at pre-determined amounts to allow for intercompany profit to be included in the operating results of the individual reportable segments. Such intercompany profit is eliminated for consolidated financial reporting purposes.

Our Chief Executive Officer, who is the Chief Operating Decision Maker, does not evaluate a measurement of segment assets when evaluating the performance of our reportable segments. As such, information relating to segment assets is not provided in the financial information below.

The following table presents segment profit and related information for each of our reportable segments for the three months years ended June 30, 2012 and 2011.

(In thousands)	Reportable Segments						Corporate/ Other
	HSG			RSG						Consolidated
Three Months Ended June 30, 2012
Total revenue:
Products	$	6,555		$	17,563		$	—		$	24,118
Support, maintenance and subscription services		12,393			6,267			—			18,660
Professional services		3,441			5,682			—			9,123
Elimination of intersegment revenue		(31	)		(224	)		—			(255	)
Revenue from external customers	$	22,358		$	29,288		$	—		$	51,646
Gross profit	$	14,665		$	5,713		$	—		$	20,378
Gross profit margin		65.6	%		19.5	%					39.5	%
Operating income (loss)	$	3,044		$	1,718		$	(6,312	)	$	(1,550	)
Interest expense, net		—			—			147			147
Other expense, net		—			—			143			143
Income (loss) from continuing operations before income taxes	$	3,044		$	1,718		$	(6,602	)	$	(1,840	)
Other charges:
Depreciation of fixed assets and amortization of intangibles	$	664		$	140		$	776		$	1,580
Asset impairments and related charges	$	208		$	—		$	—		$	208
Restructuring and related charges	$	593		$	—		$	532		$	1,125
Three Months Ended June 30, 2011
Total revenue:
Products	$	4,546		$	23,408		$	—		$	27,954
Support, maintenance and subscription services		11,637			6,067			—			17,704
Professional services		3,351			3,761			—			7,112
Elimination of intersegment revenue		—			(179	)		—			(179	)
Revenue from external customers	$	19,534		$	33,057		$	—		$	52,591
Gross profit	$	11,997		$	6,091		$	—		$	18,088
Gross profit margin		61.4	%		18.4	%					34.4	%
Operating (loss) income	$	(978	)	$	1,809		$	(9,193	)	$	(8,362	)
Interest expense, net		—			—			305			305
Other income, net		—			—			(37	)		(37	)
(Loss) income from continuing operations before income taxes	$	(978	)	$	1,809		$	(9,461	)	$	(8,630	)
Other charges:
Depreciation of fixed assets and amortization of intangibles	$	589		$	150		$	1,204		$	1,943
Restructuring and related charges	$	187		$	134		$	2,025		$	2,346

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Document and Entity Information	3 Months Ended
	Jun. 30, 2012	Aug. 01, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	AGILYSYS INC
Entity Central Index Key	0000078749
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--03-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		22,104,245

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Use of estimates

Use of estimates. Preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.

Reclassifications

Reclassifications. As a result of our reorganization in fiscal 2012, revenue and cost of goods sold are being reported in three categories: Products, Support, maintenance and subscription services and Professional services. In addition, operating expenses are differentiated in the following subcategories: Product development, Sales and marketing and General and administrative. Prior period presentation has been modified to conform to the current presentation.

Correction of Error

Correction of Error. In the third quarter of fiscal 2012, we identified errors in the manner in which we recognized revenue for certain software license and professional service arrangements in prior periods. We re-assessed our accounting for contracts relating to such arrangements. Upon completion of such evaluation, it was determined that the previous accounting treatment did not take into account all the necessary revenue recognition criteria related to pricing concessions, implied postcontract support, professional services that were essential to the functionality of the software, application of contract accounting and specified enhancements, and certain billing errors. As a result, we determined that certain previously recognized revenue should instead have been deferred and recognized in future periods when the applicable criteria related to the above considerations have been met.

In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the materiality of the errors and concluded that the errors were not material to any of our previously issued financial statements. Correction of the errors was also not material to the fiscal 2012 results. As permitted by the accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we elected to present revised financial information as of and for the interim periods ended June 30, 2011 and September 30, 2011, and revised our previously issued fiscal year 2012 interim financial statements to correct the effect of these errors for when such financial statements are included in future filings. The adjustments to the quarter ended June 30, 2011 are comprised of (a.) the out of period impact for errors accumulated prior to fiscal 2012 of $1.0 million of corrections to revenue from continuing operations and $1.1 million of corrections to the loss from continuing operations and (b.) $0.3 million to revenue from continuing operations and $0.3 million to loss from continuing operations to revise the financial statements for revenue recognized in the quarter ended June 30, 2011 that should have been deferred to future periods. The adjustments to the quarter ended September 30, 2011 represent the revision to the financial statements for similar matters arising in the quarter.

Capitalized Software Development Costs

Capitalized Software Development Costs. The capitalization of software development cost begins when a product’s technological feasibility has been established. Capitalization ends when the resulting product is available for general market release. Amortization of the capitalized software is classified within products cost of goods sold in the Condensed Consolidated Statements of Operations. For each capitalized software product, the annual amortization is equal to the greater of: (i) the amount computed using the ratio that the software product’s current fiscal year gross revenue bears to the total current fiscal year and anticipated future gross revenues for that product or (ii) the amount computed based on straight-line method over the remaining estimated economic life of the product. Unamortized costs will be evaluated for indicators of impairment at each balance sheet date, and if impaired, written down to net realizable value. We capitalized approximately $1.0 million and $0.3 million during the three months ended June 30, 2012 and 2011, respectively. Amortization of capitalized software was $0.2 million and $0.5 million for the three months ended June 30, 2012 and 2011, respectively.

Adopted and Recently Issued Accounting Pronouncements

Adopted and Recently Issued Accounting Pronouncements.

In September 2011, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update, ASU, No. 2011-08, Testing for Goodwill Impairment, which modifies the process of testing goodwill for impairment. The update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity would not be required to calculate the fair value of a reporting unit unless the entity determines it is more likely than not, based on a qualitative assessment, the fair value of goodwill is less than its carrying amount. The guidance also includes a number of events and circumstances to consider in conducting the qualitative assessment. This guidance is effective for fiscal years beginning on or after December 15, 2011. We adopted this guidance as of April 1, 2012 and it did not have a material impact on our consolidated financial statements or related disclosures.

In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, which modifies the requirements for presenting net income and other comprehensive income and requires that all non-owner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendment requires presentation of each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. In December 2011, the FASB issued amendments to the guidance to allow the FASB time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income in all periods presented. This guidance is effective for fiscal years and interim periods beginning on or after December 15, 2011. We adopted this guidance as of April 1, 2012 and it did not have an impact on our consolidated financial statements or related disclosures.

In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which modifies the disclosure requirements for offsetting financial instruments and derivative instruments. The update requires an entity to disclose information about offsetting and related arrangements and the effect of those arrangements on its financial position. This guidance is effective for reporting periods beginning on or after January 1, 2013, and is not expected to have a material impact on our consolidated financial statements or related disclosures.

Management continually evaluates the potential impact, if any, of all recent accounting pronouncements on our consolidated financial statements or related disclosures and, if significant, makes the appropriate disclosures required by such new accounting pronouncements.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Net revenue:
Products	$ 24,118	$ 27,954
Support, maintenance and subscription services	18,436	17,525
Professional services	9,092	7,112
Total net revenue	51,646	52,591
Cost of goods sold:
Products	18,859	23,308
Support, maintenance and subscription services	6,799	6,468
Professional services	5,610	4,727
Total net cost of goods sold	31,268	34,503
Gross profit	20,378	18,088
Gross Profit Ratio	39.50%	34.40%
Operating Expenses:
Product development	6,285	7,945
Sales and marketing	5,921	5,563
General and administrative	6,809	8,653
Depreciation of fixed assets	700	1,012
Amortization of intangibles	880	931
Asset impairments and related charges	208
Restructuring and related charges	1,125	2,346
Operating loss	(1,550)	(8,362)
Other (income) expenses:
Interest income	(4)	(33)
Interest expense	151	338
Other expenses (income), net	143	(37)
Loss before income taxes	(1,840)	(8,630)
Income tax benefit	(47)	(1,751)
Loss from continuing operations	(1,793)	(6,879)
Income from discontinued operations, net of taxes		651
Net loss - basic and diluted	$ (1,793)	$ (6,228)
(Loss) earnings per share - basic and diluted
Loss from continuing operations	$ (0.08)	$ (0.30)
Income from discontinuing operations		$ 0.03
Net loss per share	$ (0.08)	$ (0.27)
Weighted average shares outstanding:
Basic and diluted	21,836	22,953

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Income Taxes

3 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

6. Income Taxes

The following table compares our income tax benefit and effective tax rates for the three months ended June 30, 2012 and 2011:

	Three months ended June 30,
(Dollars in thousands)	2012			2011
Income tax benefit	$	(47	)	$	(1,751	)
Effective tax rate		2.8	%		20.3	%

We recorded an effective tax rate benefit from continuing operations of 2.8% in for the three months ended June 30, 2012, compared with an effective tax rate benefit of 20.3% for the three months ended June 30, 2011. For the three months ended June 30, 2012, the effective tax rate was different than the statutory rate due primarily to recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance. Other items effecting the rate include U.S. permanent book to tax differences. For the three months ended June 30, 2011, the effective tax rate was different than the statutory rate due primarily to the intra-period tax allocation rules associated with the discontinued operations. Other items effecting the rate include a decrease in unrecognized tax benefits attributable to the expiration of statute of limitations and other U.S. permanent book to tax differences.

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Additional Balance Sheet Information

3 Months Ended

Jun. 30, 2012

Additional Balance Sheet Information [Abstract]

Additional Balance Sheet Information

5. Additional Balance Sheet Information

Additional information related to the Condensed Consolidated Balance Sheets is as follows:

(In thousands)	June 30, 2012		March 31, 2012
Other non-current assets:
Corporate owned life insurance policies	$	3,490	$	3,458
Other		549		549
Total	$	4,039	$	4,007
Accrued liabilities:
Salaries, wages, and related benefits	$	4,237	$	7,397
BEP obligations (1)		—		2,948
SERP obligations (1)		—		3,323
Restructuring liabilities		3,264		5,447
Other taxes payable		1,921		1,976
Income taxes payable		385		322
Other		1,417		2,570
Total	$	11,224	$	23,983
Other non-current liabilities:
Income taxes payable/uncertain tax positions	$	2,856	$	3,135
Deferred rent		2,269		2,013
Restructuring liabilities		453		852
Other		305		210
Total	$	5,883	$	6,210

(1) BEP and SERP obligations were fulfilled in April 2012.

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Income Taxes (Tables)

3 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Effective tax rates from continuing operations

	Three months ended June 30,
(Dollars in thousands)	2012			2011
Income tax benefit	$	(47	)	$	(1,751	)
Effective tax rate		2.8	%		20.3	%

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Effect this revision on condensed consolidated statements of operations

	Quarter Ended June 30, 2011									Quarter Ended September 30, 2011
(In thousands except per share amounts)	As Previously Reported			Adjustment			As Revised			As Previously Reported			Adjustment			As Revised
Net revenue	$	53,886		$	(1,295	)	$	52,591		$	53,587		$	(902	)	$	52,685
Costs of goods sold		34,359			144			34,503			31,972			(286	)		31,686
Net loss from continued operations		(5,440	)		(1,439	)		(6,879	)		(3,238	)		(316	)		(3,554	)
Loss per share for continuing operations – Basic and diluted		(0.24	)		(0.06	)		(0.30	)		(0.14	)		(0.02	)		(0.16	)

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Share-based Compensation

3 Months Ended

Jun. 30, 2012

Share-based Compensation [Abstract]

Share-based Compensation

9. Share-based Compensation

We may grant non-qualified stock options, incentive stock options, stock-settled stock appreciation rights, restricted shares, and restricted share units for up to 3.0 million common shares under our 2011 Stock Incentive Plan (“the 2011 Plan”). 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. The maximum aggregate number of restricted shares or restricted share units that may be granted under the 2011 Plan is 1.0 million.

We have a shareholder-approved 2006 Stock Incentive Plan (the “2006 Plan”), as well as, a 2000 Stock Option Plan for Outside Directors and a 2000 Stock Incentive Plan that still have vested awards outstanding. Awards are no longer being granted from these incentive plans.

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, stock-settled stock appreciation rights, 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 stock-settled appreciation right 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 for the three months ended June 30, 2012 and 2011:

	Three months ended June 30,
(In thousands)	2012		2011
Product development	$	68	$	113
Sales and marketing		15		114
General and administrative		270		1,254
Total share-based compensation expense	$	353	$	1,481

Stock Options

The following table summarizes the activity during the three months ended June 30, 2012 for stock options awarded under the 2006 Plan:

No stock options were granted during the three months ended June 30, 2012.

(In thousands, except share and per share data)	Number of Options			Weighted- Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
				(per share)		(in years)
Outstanding at April 1, 2012		971,001		$	13.52
Exercised		(26,667	)		2.51
Cancelled/expired		(23,334	)		15.99
Outstanding and exercisable at June 30, 2012		921,000		$	13.78		3.68	$	498

Stock-Settled Stock Appreciation Rights

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.

The following table summarizes the activity during the three months ended June 30, 2012 for SSARs awarded under the 2011 and the 2006 Plan:

(In thousands, except share and per share data)	Number of Rights			Weighted -Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
				(per right)		(in years)
Outstanding at April 1, 2012		606,834		$	6.91
Granted		318,607			7.52
Exercised		(80,651	)		6.53
Forfeited		(24,708	)		7.42
Outstanding at June 30, 2012		820,082		$	7.17		7.72	$	1,234
Exercisable at June 30, 2012		363,055		$	6.67		5.19	$	727

As of June 30, 2012, total unrecognized stock based compensation expense related to non-vested SSARs was $1.9 million, which is expected to be recognized over a weighted-average vesting period of 2.5 years.

A total of 9,709 shares, net of 5,146 shares withheld to cover the employee’s minimum applicable income taxes, were issued from treasury shares to settle SSARs exercised during the three months ended June 30, 2012. The shares withheld were returned to treasury shares.

Restricted Shares

We granted shares to certain of our Directors, executives and key employees under the 2011 Plan, the vesting of which is service-based. The following table summarizes the activity during the three months ended June 30, 2012 for restricted shares awarded under the 2011 Plan:

	Number of Shares			Weighted- Average Grant- Date Fair Value
				(per share)
Outstanding at April 1, 2012		48,558		$	7.80
Granted		182,321			7.76
Vested		(7,000	)		7.42
Forfeited		(8,250	)		7.42
Outstanding at June 30, 2012		215,629		$	7.80

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. Compensation expense related to restricted share awards is recognized ratably over the restriction period based upon the closing market price of our common shares on the grant date. As of June 30, 2012, total unrecognized stock based compensation expense related to non-vested restricted stock was $1.5 million, which is expected to be recognized over a weighted-average vesting period of 2.3 years. We do not include restricted stock in the calculation of earnings per share until the shares are vested.

Performance Shares

In the first quarter of fiscal 2013, we granted shares to certain of our key employees under the 2011 Plan, the vesting of which is contingent upon meeting various company-wide performance goals within a two-year period.

The following table summarizes the activity during the three months ended June 30, 2012 for performance shares awarded under the 2011 Plan:

	Number of shares		Weighted- Average Grant- Date Fair Value
			(per share)
Outstanding at April 1, 2012		—	$	—
Granted		17,728		8.64
Outstanding at June 30, 2012		17,728	$	8.64

The weighted-average grant date fair value of the performance shares is determined based upon the closing price of our common shares on the grant date and assumed that performance goals would be met at target. Compensation expense related to performance share awards is recognized ratably over the vesting period based upon the closing market price of our common shares on the grant date. As of June 30, 2012, total unrecognized stock based compensation expense related to non-vested performance shares was $0.1 million, which is expected to be recognized over a weighted-average vesting period of 1.9 years.

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Commitments and Contingencies

3 Months Ended

Jun. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and contingencies

7. 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. The complaint 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 three patents 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. We dispute the allegations of wrongdoing and intend to vigorously defend ourselves in this matter.

On July 9, 2012, a putative class action lawsuit was filed against us in the United States District Court for the Northern District of California alleging violations of federal and state wage and hour laws, rules and regulations pertaining primarily to pay for missed meals and rest periods and failure to reimburse business expenses. The lawsuit purports to be a class action and seeks substantial damages. At this time, we are not able to predict the outcome of this lawsuit, or any possible monetary exposure associated with the lawsuit. Our management believes that the plaintiffs’ allegations are without merit and that their claims are not appropriate for class action treatment. We are vigorously defending these claims.

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(Loss) Earnings Per Share

3 Months Ended

Jun. 30, 2012

(Loss) Earnings per Share [Abstract]

(Loss) Earnings per Share

8. (Loss) Earnings per Share

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

	Three months ended June 30,
(In thousands, except per share data)	2012			2011
Numerator:
Loss from continuing operations – basic and diluted	$	(1,793	)	$	(6,879	)
Income from discontinued operations – basic and diluted		—			651
Net loss - basic and diluted	$	(1,793	)	$	(6,228	)
Denominator:
Weighted average shares outstanding – basic and diluted		21,836			22,953
(Loss) earnings per share – basic and diluted:
Loss from continuing operations	$	(0.08	)	$	(0.30	)
Income from discontinued operations	$	—		$	0.03
Net loss per share	$	(0.08	)	$	(0.27	)

Basic (loss) earnings 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 233,357 and 10,000 of restricted shares and performance shares at June 30, 2012 and 2011, respectively, as these shares were issued but were not vested and, therefore, not considered outstanding for purposes of computing basic earnings per share at the balance sheet dates. 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. In addition, when a loss from continuing operations is reported, adjusting the denominator of diluted earnings per share would also be anti-dilutive to the loss per share, even if the entity has net income after adjusting for a discontinued operation. Therefore, for the three months ended June 30, 2012 and 2011, basic weighted-average shares outstanding were used in calculating the diluted net loss per share.

For the three months ended June 30, 2012 and 2011, stock options and SSARs on 1.7 million and 3.2 million common shares, respectively, were not included in computing diluted earnings per share because their effects were anti-dilutive.

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Fair Value Measurements

3 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

10. 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, 2012.

The following tables present information about our financial assets and liabilities 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
(In thousands)	Recorded value as of June 30, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Corporate-owned life insurance — non-current	$	3,490	$	—	$	—	$	3,490

	Fair value measurement used
(In thousands)	Recorded value as of March 31, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Available for sale restricted marketable securities — current	$	4,408	$	4,408	$	—	$	—
Corporate-owned life insurance — non-current		3,458		—		—		3,458
Liabilities:
BEP — current		2,948		—		2,948		—

We maintained an investment in available for sale marketable securities, in a Rabbi Trust recorded in “Other current assets”, in which cost approximated fair value. The recorded value of our investment in available for sale marketable securities is based on quoted prices in active markets and, therefore, is classified within Level 1 of the fair value hierarchy. The Rabbi Trust was used to fund the BEP and SERP obligations, which were fulfilled in April 2012. The Rabbi Trust was subsequently closed.

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 expenses (income), net” in the Condensed Consolidated Statements of Operations.

The recorded value of the BEP obligation is measured as employee deferral contributions and our matching contributions less distributions made from the plan, and adjusted for the returns on the hypothetical investments selected by the participants, which are indirectly observable and therefore, classified within Level 2 of the fair value hierarchy. The BEP obligation was fulfilled in April 2012 with funds held in the Rabbi Trust.

The following table presents a summary of changes in the fair value of the Level 3 assets and liabilities for the three months ended June 30, 2012 and 2011:

	Level 3 assets and liabilities
(In thousands)	2012		2011
Corporate-owned life insurance:
Balance on April 1	$	3,458	$	3,323
Unrealized losses relating to instruments held at reporting date		—		(4	)
Unrealized gain relating to instruments held at reporting date		28		—
Purchases, sales, issuances and settlements, net		4		46
Balance on June 30	$	3,490	$	3,365

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

	Fair value measurement used
(In thousands)	Recorded value as of June 30, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Goodwill	$	15,109	$	—	$	—	$	15,109
Intangible assets		14,622		—		—		14,622
Liabilities:
Restructuring liabilities — current	$	3,264	$	—	$	—	$	3,264
Other employee benefit plan obligations — non-current		196		—		—		196
Restructuring liabilities — non-current		453		—		—		453

	Fair value measurement used
(In thousands)	Recorded value as of March 31, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Goodwill	$	15,198	$	—	$	—	$	15,198
Intangible assets		14,135		—		—		14,135
Liabilities:
SERP obligations — current	$	3,323	$	—	$	—	$	3,323
Restructuring liabilities — current		5,447		—		—		5,447
Other employee benefit plans obligations — non-current		196		—		—		196
Restructuring liabilities — non-current		852		—		—		852

Intangible assets are valued at their estimated fair value at time of acquisition. We evaluate the fair value of our definite-lived and indefinite-lived intangible assets on an annual basis, or in interim periods if indicators of potential impairment exist. The income approach using “the relief from royalty method” was used to value indefinite-lived intangible assets.

The recorded value of SERP and other benefit plans obligations is based on estimates developed by management by evaluating actuarial information and includes assumptions such as discount rates, future compensation increases, expected retirement dates, payment forms, and mortality. The recorded value of these obligations is measured on an annual basis, or upon the occurrence of a plan curtailment or settlement. The SERP obligation was fulfilled in April 2012 with funds held in the Rabbi Trust.

Restructuring liabilities primarily consist of one-time termination benefits to former employees and ongoing costs related to long-term operating lease obligations. The recorded value of the termination benefits to employees is adjusted to the expected remaining obligation each period based on the arrangements made with the former employees. The recorded value of the ongoing lease obligations is based on the remaining lease term and payment amount, net of sublease income plus interest, discounted to present value. Changes in subsequent periods resulting from revisions to either the timing or amount of estimated cash flows over the remaining future periods are measured using the credit-adjusted, risk-free rate that was used to measure the restructuring liabilities initially.

The inputs used to value the our goodwill, intangible assets, employee benefit plan obligations, and restructuring liabilities are not observable in the market and therefore, these amounts are classified within Level 3 in the fair value hierarchy.

The following table presents a summary of changes in the fair value of the Level 3 assets and liabilities for the three months ended June 30, 2012 and 2011:

	Level 3 assets and liabilities
	Three months ended June 30, 2012
(In thousands)	Goodwill			Intangible assets			SERP obligations			Other employee benefit plans obligations		Restructuring liabilities
Balance at April 1, 2012	$	15,198		$	14,135		$	3,323		$	196	$	6,299
Unrealized losses relating to instruments still held at the reporting date		(89	)		—			—			—		—
Amortization		—			(539	)		—			—		—
Provisions, payments and other charges (net)		—			1,026			(3,323	)		—		(2,582	)
Balance at June 30, 2012	$	15,109		$	14,622		$	—		$	196	$	3,717

	Level 3 assets and liabilities
	Three months ended June 30, 2011
(In thousands)	Goodwill			Intangible assets			SERP obligations		Other employee benefit plans obligations		Restructuring liabilities
Balance at April 1, 2011	$	15,211		$	22,535		$	5,791	$	305	$	733
Unrealized losses relating to instruments still held at the reporting date		(13	)		—			—		—		—
Amortization		—			(766	)		—		—		—
Provisions, payments and other charges (net)		—			348			30		—		2,003
Balance at June 30, 2011	$	15,198		$	22,117		$	5,821	$	305	$	2,736

Unrealized losses related to goodwill represent fluctuations due to the movement of foreign currencies relative to the U.S. dollar and are recorded within “Accumulated other comprehensive (loss) income” in the Condensed Consolidated Balance Sheets.

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Restructuring and Related Charges (Details Textual) (USD $)	3 Months Ended		12 Months Ended	3 Months Ended								51 Months Ended	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Mar. 31, 2012 Employee	Jun. 30, 2012 Maximum [Member]	Jun. 30, 2012 Minimum [Member]	Jun. 30, 2012 HSG [Member]	Jun. 30, 2012 RSG [Member]	Jun. 30, 2012 Corporate/Other [Member]	Jun. 30, 2012 Employee Severance [Member]	Jun. 30, 2012 Severance and Employment Costs [Member]	Jun. 30, 2012 Fiscal 2009 Restructuring Plan [Member]	Jun. 30, 2012 Fiscal 2009 Restructuring Plan [Member]	Jun. 30, 2012 Fiscal 2012 Restructuring Plan [Member]	Jun. 30, 2012 Fiscal 2013 Restructuring Plan [Member]
Restructuring Charges (Textual) [Abstract]
Number of Employees impacted or will impact through restructuring actions			130
Restructuring and related charges	$ 1,125,000	$ 2,346,000				$ 2,600,000	$ 600,000	$ 8,800,000			$ 400,000		$ 12,000,000	$ 1,100,000
Liability on restructuring activity	3,300,000
Severance and other employment costs									100,000			19,000,000
Severance and other employment costs next year										2,400,000
Severance and other employment costs next 2 year										700,000
Ongoing facility lease obligations	400,000
Ongoing facility lease obligations cost next year	200,000
Cost savings				$ 16,000,000	$ 14,000,000
Restructuring actions are expected	Mar. 31, 2012

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Business Segments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Revenue:
Products	$ 24,118	$ 27,954
Support, maintenance and subscription services	18,436	17,525
Professional services	9,092	7,112
Elimination of intersegment sales	(255)	(179)
Revenue from external customers	51,646	52,591
Gross profit	20,378	18,088
Gross profit margin	39.50%	34.40%
Operating income (loss)	(1,550)	(8,362)
Interest expense, net	147	305
Other income, net	143	(37)
Income (loss) from continuing operations before income taxes	(1,840)	(8,630)
Other Charges:
Depreciation and amortization	1,580	1,943
Asset impairments and related charges	208
Restructuring and related charges	1,125	2,346
HSG [Member]
Revenue:
Products	6,555	4,546
Support, maintenance and subscription services	12,393	11,638
Professional services	3,441	3,351
Elimination of intersegment sales	(31)
Revenue from external customers	22,358	19,534
Gross profit	14,665	11,997
Gross profit margin	65.60%	61.40%
Operating income (loss)	3,044	(978)
Interest expense, net
Other income, net
Income (loss) from continuing operations before income taxes	3,044	(978)
Other Charges:
Depreciation and amortization	664	589
Asset impairments and related charges	208
Restructuring and related charges	593	187
RSG [Member]
Revenue:
Products	17,563	23,408
Support, maintenance and subscription services	6,267	6,067
Professional services	5,682	3,761
Elimination of intersegment sales	(224)	(179)
Revenue from external customers	29,288	33,057
Gross profit	5,713	6,091
Gross profit margin	19.50%	18.40%
Operating income (loss)	1,718	1,809
Interest expense, net
Other income, net
Income (loss) from continuing operations before income taxes	1,718	1,809
Other Charges:
Depreciation and amortization	140	150
Asset impairments and related charges
Restructuring and related charges		134
Corporate/Other [Member]
Revenue:
Products
Support, maintenance and subscription services
Professional services
Elimination of intersegment sales
Revenue from external customers
Gross profit
Gross profit margin
Operating income (loss)	(6,312)	(9,193)
Interest expense, net	147	305
Other income, net	143	(37)
Income (loss) from continuing operations before income taxes	(6,602)	(9,461)
Other Charges:
Depreciation and amortization	776	1,204
Asset impairments and related charges
Restructuring and related charges	$ 532	$ 2,025

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Restructuring and Related Charges (Tables)

3 Months Ended

Jun. 30, 2012

Restructuring and Related Charges [Abstract]

Reconciliation of the beginning and ending balances of the company's restructuring liabilities

(In thousands)	Balance at March 31, 2012		Provision			Payments			Balance at June 30, 2012
Fiscal 2012 Restructuring Plan:
Severance and employment costs	$	5,507	$	1,161		$	(3,541	)	$	3,127
Facilities costs		297		(42	)		(100	)		155
Fiscal 2009 Restructuring Plan:
Facilities costs		495		6			(66	)		435
Total restructuring costs	$	6,299	$	1,125		$	(3,707	)	$	3,717

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Fair Value Measurements (Tables)

3 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Assets and liabilities measured at fair value on a recurring basis

	Fair value measurement used
(In thousands)	Recorded value as of June 30, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Corporate-owned life insurance — non-current	$	3,490	$	—	$	—	$	3,490

	Fair value measurement used
(In thousands)	Recorded value as of March 31, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Available for sale restricted marketable securities — current	$	4,408	$	4,408	$	—	$	—
Corporate-owned life insurance — non-current		3,458		—		—		3,458
Liabilities:
BEP — current		2,948		—		2,948		—

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

	Level 3 assets and liabilities
(In thousands)	2012		2011
Corporate-owned life insurance:
Balance on April 1	$	3,458	$	3,323
Unrealized losses relating to instruments held at reporting date		—		(4	)
Unrealized gain relating to instruments held at reporting date		28		—
Purchases, sales, issuances and settlements, net		4		46
Balance on June 30	$	3,490	$	3,365

Financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis

	Fair value measurement used
(In thousands)	Recorded value as of June 30, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Goodwill	$	15,109	$	—	$	—	$	15,109
Intangible assets		14,622		—		—		14,622
Liabilities:
Restructuring liabilities — current	$	3,264	$	—	$	—	$	3,264
Other employee benefit plan obligations — non-current		196		—		—		196
Restructuring liabilities — non-current		453		—		—		453

	Fair value measurement used
(In thousands)	Recorded value as of March 31, 2012		Active markets for identical assets or liabilities (Level 1)		Quoted prices in similar instruments and observable inputs (Level 2)		Active markets for unobservable inputs (Level 3)
Assets:
Goodwill	$	15,198	$	—	$	—	$	15,198
Intangible assets		14,135		—		—		14,135
Liabilities:
SERP obligations — current	$	3,323	$	—	$	—	$	3,323
Restructuring liabilities — current		5,447		—		—		5,447
Other employee benefit plans obligations — non-current		196		—		—		196
Restructuring liabilities — non-current		852		—		—		852

Summary of changes in the fair value of the Level 3 assets and liabilities

	Level 3 assets and liabilities
	Three months ended June 30, 2012
(In thousands)	Goodwill			Intangible assets			SERP obligations			Other employee benefit plans obligations		Restructuring liabilities
Balance at April 1, 2012	$	15,198		$	14,135		$	3,323		$	196	$	6,299
Unrealized losses relating to instruments still held at the reporting date		(89	)		—			—			—		—
Amortization		—			(539	)		—			—		—
Provisions, payments and other charges (net)		—			1,026			(3,323	)		—		(2,582	)
Balance at June 30, 2012	$	15,109		$	14,622		$	—		$	196	$	3,717

	Level 3 assets and liabilities
	Three months ended June 30, 2011
(In thousands)	Goodwill			Intangible assets			SERP obligations		Other employee benefit plans obligations		Restructuring liabilities
Balance at April 1, 2011	$	15,211		$	22,535		$	5,791	$	305	$	733
Unrealized losses relating to instruments still held at the reporting date		(13	)		—			—		—		—
Amortization		—			(766	)		—		—		—
Provisions, payments and other charges (net)		—			348			30		—		2,003
Balance at June 30, 2011	$	15,198		$	22,117		$	5,821	$	305	$	2,736

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Fair Value Measurements (Details 3) (Level 3 [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Mar. 31, 2012
SERP obligations [Member]
Changes in the fair value of the Level 3 assets and liabilities related to continuing operations
Balance at April 1, 2011	$ 3,323	$ 5,791	$ 5,791
Unrealized losses relating to instruments still held at the reporting date
Amortization
Purchases, sales, issuances and settlements, net	(3,323)		30
Balance at March 31,2012		5,821	3,323
Other employee benefits plans obligations [Member]
Changes in the fair value of the Level 3 assets and liabilities related to continuing operations
Balance at April 1, 2011	196	305	305
Unrealized losses relating to instruments still held at the reporting date
Amortization
Purchases, sales, issuances and settlements, net
Balance at March 31,2012	196	305	196
Restructuring liabilities [Member]
Changes in the fair value of the Level 3 assets and liabilities related to continuing operations
Balance at April 1, 2011	6,299	733	733
Unrealized losses relating to instruments still held at the reporting date
Amortization
Purchases, sales, issuances and settlements, net	(2,582)		2,003
Balance at March 31,2012	3,717	2,736	6,299
Goodwill [Member]
Changes in the fair value of the Level 3 assets and liabilities related to continuing operations
Balance at April 1, 2012	15,198	15,211	15,211
Unrealized losses relating to instruments still held at the reporting date	(89)		(13)
Amortization
Purchases, sales, issuances and settlements, net
Balance at June 30,2012	15,109	15,198	15,198
Intangible Assets [Member]
Changes in the fair value of the Level 3 assets and liabilities related to continuing operations
Balance at April 1, 2012	14,135	22,535	22,535
Unrealized losses relating to instruments still held at the reporting date
Amortization	(539)	(766)
Purchases, sales, issuances and settlements, net	1,026		348
Balance at June 30,2012	$ 14,622	$ 22,117	$ 14,135

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Share-based Compensation (Details 1) (2006 Stock Incentive Plan [Member], Stock Options [Member], USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2012
2006 Stock Incentive Plan [Member] | Stock Options [Member]
Stock options granted by the Company
Outstanding at April 1, 2012, Number of Options	971,001
Outstanding at April 1, 2012, Weighted Average Exercise Price	$ 13.52
Exercised, Number of Options	(26,667)
Exercised, Weighted-Average Exercise Price	$ 2.51
Cancelled/expired, Number of options	(23,334)
Cancelled/Expired, Weighted-Average Exercise Price	$ 15.99
Outstanding and exercisable at June 30, 2012, Number of Options	921,000
Outstanding and exercisable at June 30, 2012, Weighted Average Exercise Price	$ 13.78
Remaining Contractual Term, Outstanding and exercisable at June 30, 2012	3 years 8 months 5 days
Aggregate Intrinsic Value, Outstanding and exercisable at June 30, 2012	$ 498

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Condensed Consolidated Statements of Comprehensive Loss [Abstract]
Net loss	$ (1,793)	$ (6,228)
Other comprehensive (loss) income, net of tax:
Translation adjustments (loss) gain	(87)	86
Loss on sale of securities	(4)	(9)
Total comprehensive loss	$ (1,884)	$ (6,151)

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Restructuring and Related Charges

3 Months Ended

Jun. 30, 2012

Restructuring and Related Charges [Abstract]

Restructuring and Related Charges

4. Restructuring and Related 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. In addition, we assess the property and equipment associated with the related facilities for impairment. The remaining useful lives of property and equipment associated with the related operations are re-evaluated based on the respective restructuring plan, resulting in the acceleration of depreciation and amortization of certain assets.

Fiscal 2012 Restructuring Activity

In the first quarter of fiscal 2012, we announced restructuring actions, including the relocation of our corporate services from Solon, Ohio to Alpharetta, Georgia, designed to better align those services with our operating units and reduce costs following the sale of TSG. These restructuring actions were mostly completed by March 31, 2012 and have impacted or will impact approximately 130 employees. To date, we have recorded $12.0 million in restructuring charges, of which $1.1 million was recorded in the first quarter of fiscal 2013, related to the fiscal 2012 restructuring activity. These charges were primarily comprised of severance and related benefits. On a segment basis, these restructuring costs totaled $2.6 million, $0.6 million, and $8.8 million for HSG, RSG and Corporate/Other, respectively. As of June 30, 2012, we had a remaining liability of approximately $3.3 million recorded for fiscal 2012 restructuring activity. We expect to incur approximately $0.1 million in additional restructuring charges for severance and related benefits during the second quarter of fiscal 2013. As a result of taking these restructuring actions, we expect to realize between $14.0 million and $16.0 million in cost savings, of which approximately half has been recognized in the fiscal 2012 run rate. The remaining savings are being realized during fiscal 2013.

Fiscal 2009 Restructuring Activity

During fiscal 2009, we took steps to realign our cost and management structure. Since 2009, as previously disclosed, we have incurred charges totaling approximately $19.0 million related to the fiscal 2009 restructuring activity. As of June 30, 2012, we had approximately $0.4 million recorded for fiscal 2009 restructuring activity. We expect to incur minimal additional restructuring charges between fiscal 2013 and fiscal 2014 for ongoing facility obligations.

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

(In thousands)	Balance at March 31, 2012		Provision			Payments			Balance at June 30, 2012
Fiscal 2012 Restructuring Plan:
Severance and employment costs	$	5,507	$	1,161		$	(3,541	)	$	3,127
Facilities costs		297		(42	)		(100	)		155
Fiscal 2009 Restructuring Plan:
Facilities costs		495		6			(66	)		435
Total restructuring costs	$	6,299	$	1,125		$	(3,707	)	$	3,717

Approximately $2.4 million of the severance and other employment costs will be paid in fiscal 2013 and the remaining $0.7 million will be paid in fiscal 2014. Approximately $0.4 million of facilities obligations will be paid during fiscal 2013 and the remaining $0.2 million will be paid in fiscal 2014.

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Business Segments (Tables)

3 Months Ended

Jun. 30, 2012

Business Segments [Abstract]

Segment profit and related information

(In thousands)	Reportable Segments						Corporate/ Other
	HSG			RSG						Consolidated
Three Months Ended June 30, 2012
Total revenue:
Products	$	6,555		$	17,563		$	—		$	24,118
Support, maintenance and subscription services		12,393			6,267			—			18,660
Professional services		3,441			5,682			—			9,123
Elimination of intersegment revenue		(31	)		(224	)		—			(255	)
Revenue from external customers	$	22,358		$	29,288		$	—		$	51,646
Gross profit	$	14,665		$	5,713		$	—		$	20,378
Gross profit margin		65.6	%		19.5	%					39.5	%
Operating income (loss)	$	3,044		$	1,718		$	(6,312	)	$	(1,550	)
Interest expense, net		—			—			147			147
Other expense, net		—			—			143			143
Income (loss) from continuing operations before income taxes	$	3,044		$	1,718		$	(6,602	)	$	(1,840	)
Other charges:
Depreciation of fixed assets and amortization of intangibles	$	664		$	140		$	776		$	1,580
Asset impairments and related charges	$	208		$	—		$	—		$	208
Restructuring and related charges	$	593		$	—		$	532		$	1,125
Three Months Ended June 30, 2011
Total revenue:
Products	$	4,546		$	23,408		$	—		$	27,954
Support, maintenance and subscription services		11,637			6,067			—			17,704
Professional services		3,351			3,761			—			7,112
Elimination of intersegment revenue		—			(179	)		—			(179	)
Revenue from external customers	$	19,534		$	33,057		$	—		$	52,591
Gross profit	$	11,997		$	6,091		$	—		$	18,088
Gross profit margin		61.4	%		18.4	%					34.4	%
Operating (loss) income	$	(978	)	$	1,809		$	(9,193	)	$	(8,362	)
Interest expense, net		—			—			305			305
Other income, net		—			—			(37	)		(37	)
(Loss) income from continuing operations before income taxes	$	(978	)	$	1,809		$	(9,461	)	$	(8,630	)
Other charges:
Depreciation of fixed assets and amortization of intangibles	$	589		$	150		$	1,204		$	1,943
Restructuring and related charges	$	187		$	134		$	2,025		$	2,346

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(Loss) Earnings per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Numerator:
Loss from continuing operations - basic and diluted	$ (1,793)	$ (6,879)
Income from discontinued operations, net of taxes		651
Net loss - basic and diluted	$ (1,793)	$ (6,228)
Denominator:
Weighted average shares outstanding - basic and diluted	21,836	22,953
(Loss) earnings per share - basic and diluted
Loss from continuing operations	$ (0.08)	$ (0.30)
Income from discontinuing operations		$ 0.03
Net loss per share	$ (0.08)	$ (0.27)

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Discontinued Operations (Tables)

3 Months Ended

Jun. 30, 2012

Discontinued Operations [Abstract]

Income from discontinued operations

(In thousands)	2012		2011
Discontinued operations:
Net revenue	$	—	$	97,757
Income from operations of TSG	$	—	$	1,361
Income tax expense		—		710
Income from discontinued operations	$	—	$	651