10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended March 31, 2020

or

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

For transition period from to

Commission file number 0-5734

AGILYSYS, INC.

(Exact name of registrant as specified in its charter)

Ohio	34-0907152
State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)
1000 Windward Concourse, Suite 250, Alpharetta, Georgia	30005
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (770) 810-7800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Shares, without par value	AGYS	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  ☐      No  ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  ☐      No  ☑

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 ☑   No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).       Yes  ☑   No  ☐

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

Large accelerated filer	☐		Accelerated filer	☑	Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  Yes ☑    No ☐

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

The aggregate market value of Common Shares held by non-affiliates as of May 20, 2020 was $375,276,893.

As of May 20, 2020, 23,400,816 shares of the registrant's common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement to be used in connection with its 2020 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.

AGILYSYS, INC.

Annual Report on Form 10-K

Year Ended March 31, 2020

Table of Contents

		Page
	PART I	4
ITEM 1.	Business	4
ITEM 1A.	Risk Factors	11
ITEM 1B.	Unresolved Staff Comments	17
ITEM 2.	Properties	17
ITEM 3.	Legal Proceedings	17
ITEM 4.	Mine Safety Disclosures	18
	PART II	19
ITEM 5.	Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	19
ITEM 6.	Selected Financial Data	21
ITEM 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	36
ITEM 8.	Financial Statements and Supplementary Data	37
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	65
ITEM 9A.	Controls and Procedures	65
ITEM 9B.	Other Information	65
	PART III	66
ITEM 10.	Directors, Executive Officers and Corporate Governance	66
ITEM 11.	Executive Compensation	66
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	66
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	66
ITEM 14.	Principal Accountant Fees and Services	66
	PART IV	67
ITEM 15.	Exhibits and Financial Statement Schedules	67
SIGNATURES		69

2

Forward Looking Information

This Annual 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. These statements include, but are not limited to, statements related to our current expectations, the performance of our business, our financial results, our liquidity and capital resources and other non-historical statements. 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. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict, and in many cases, are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, our ability to manage the direct and indirect impact of the novel coronavirus (“COVID-19”) pandemic on our business, operations, and customer demand for our products and services, our ability to achieve operational efficiencies and meet customer demand for products and services as well as the other risks identified in the risk factors set forth in Item 1A of this Annual Report. Any forward-looking statement made by us in this Annual Report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement made in this Annual Report or any other forward-looking statement that may be made from time to time, whether written or oral, whether as a result of new information, future events, or otherwise.

3

Part I

Item 1. Business.

Overview

Agilysys has been a leader in hospitality software for more than 40 years, delivering innovative guest-centric technology solutions for casinos, hotels, resorts, cruise ships, managed foodservice providers, sports and entertainment, and healthcare. Agilysys offers the most comprehensive solutions in the industry, including point-of-sale (POS), property management (PMS), inventory and procurement, payment solutions, and related hospitality applications, to manage the entire guest journey. Agilysys is known for its leadership in hospitality, its broad product offerings and its customer-centric service. Some of the largest hospitality companies around the world use Agilysys solutions to help improve guest loyalty, drive revenue growth, increase operational efficiencies and support social distancing.

The Company has just one reportable segment serving the global hospitality industry. Agilysys operates across North America, Europe, Asia-Pacific, and India with headquarters located in Alpharetta, GA.

Our principal executive offices and corporate services are located at 1000 Windward Concourse, Suite 250, Alpharetta, Georgia, 30005.

Reference herein to any particular year or quarter refers to periods within our fiscal year ended March 31. For example, fiscal 2020 refers to the fiscal year ended March 31, 2020.

History and Significant Events

Organized in 1963 as Pioneer-Standard Electronics, Inc., an Ohio corporation, we began operations as a distributor of electronic components and, later, enterprise computer solutions. Exiting the former business in fiscal 2003 with the sale of our Industrial Electronic Division, we used the proceeds to reduce debt and fund growth of our enterprise solutions business. This included acquiring businesses focused on higher-margin and more specialized solutions for the hospitality and retail industries. At the same time, we changed our name to Agilysys, Inc.

In fiscal 2004, we acquired Inter-American Data, Inc., which allowed us to become the leading developer and provider of technology solutions for hotel property management and inventory management in the casino and resort industries.

In fiscal 2007, we exited the enterprise computer distribution business. We used the proceeds from that sale to return cash to shareholders and fund a number of acquisitions that broadened our solutions and capabilities portfolios. We acquired InfoGenesis, Inc., Visual One Systems Corp. and Eatec Corporation in fiscal 2008, significantly expanding our specialized offerings to the hospitality industry through enterprise-class POS, PMS and inventory and procurement software solutions tailored for a variety of applications in cruise, golf, spa, gaming, lodging, resort and catering. These offerings feature highly intuitive, secure and robust solutions, easily scalable across multiple departments or property locations.

In fiscal 2012, we sold our IT solutions business and restructured our business model to focus on higher-margin, profitable growth opportunities in the hospitality and retail sectors. We also reduced our real-estate footprint and lowered overhead costs by relocating corporate services from Solon, Ohio to Alpharetta, Georgia, thus moving our senior management team closer to our remaining operating units.

In fiscal 2014, we sold our retail solutions and services business to Kyrus Solutions, Inc. (Kyrus), an affiliate of Clearlake Capital Group, L.P. Following completion of the transaction, our business focused exclusively on hospitality solutions and the growth opportunities in the hospitality market.

In fiscal 2018, we opened a software development center in Chennai, India, to supplement our product development efforts.

Today, we are focused on providing state-of-the-art, end-to-end solutions that enhance guest experiences and allow our customers to promote their brands. We help our customers win the guest recruitment battle and, in turn, grow revenue, reduce costs and increase efficiency. This is accomplished by developing and deploying innovative solutions that increase data speed and accuracy, integrate with other enterprise systems and create a common infrastructure for managing guest data thereby enabling more effective management, intelligent upselling, reduced shrinkage, improved brand recognition and better control of the guest relationship.

Our strategy is to increase the proportion of revenue we derive from ongoing support and maintenance agreements, subscription services, cloud applications and professional services.

4

Products, Support and Professional Services

We are a leading developer and marketer of software enabled solutions and services to the hospitality industry, including software solutions fully integrated with third party hardware and operating systems; support, maintenance and subscription services; and, professional services. Areas of specialization are point of sale, property management, and a broad range of solutions that support the ecosystem of these core solutions.

We present revenue and costs of goods sold in three categories:

• Products (hardware and software)

• Support, maintenance and subscription services

• Professional services

Total revenue for these three specific areas is as follows:

	Year ended March 31,
(In thousands)	2020		2019		2018
Products	$	44,230	$	39,003	$	33,699
Support, maintenance and subscription services		83,680		75,496		69,068
Professional services		32,847		26,343		24,593
Total	$	160,757	$	140,842	$	127,360

Products: Products revenue is comprised of revenue from the sale of software along with third party hardware and operating systems. Software sales include up front revenue for licensing our solutions on a perpetual basis. Software sales are driven by our solutions' ability to help customers meet the demands of their guests and improve operating efficiencies. Our software revenue is also driven by the ability of our customers to configure our solutions for their specific needs and the robust catalog of integrations we offer to third party solutions. Our software solutions require varying form factors of third party hardware and operating systems to operate, such as staff facing terminals, kiosk solutions, mobile tablets or servers. Third party hardware and operating system revenue is typically driven by new customer wins and existing customer hardware refresh purchases. 

Support, Maintenance and Subscription Services: Technical software support, software maintenance and software subscription services are a significant portion of our consolidated revenue and typically generate higher profit margins than products revenue. Growth has been driven by a strategic focus on developing and promoting these offerings while market demand for maintenance services and updates that enhance reliability, as well as the desire for flexibility in purchasing options, continue to reinforce this trend. Our commitment to exceptional service has enabled us to become a trusted partner with customers who wish to optimize the level of service they provide to their guests and maximize commerce opportunities both on premise and in the cloud.

Professional Services: We have industry-leading expertise in designing, implementing, integrating and installing customized solutions into both traditional and newly created platforms. For existing enterprises, we seamlessly integrate new systems and for start-ups and fast-growing customers, we become a partner that can manage large-scale rollouts and tight construction schedules. Our extensive experience ranges from staging equipment to phased rollouts as well as training staff to provide operational expertise to help achieve maximum effectiveness and efficiencies in a manner that saves our customers time and money.

Our portfolio of hospitality software solutions:

The hospitality industry has long been focused on operating end-to-end businesses, but the technology vendors that service the industry have been focused on product-centric solutions that make use of a high number of software modules and operating silos. To resolve this disconnect and more effectively align with the business operations of our customers, we have evolved our approach to be focused on delivering integrated “platform-centric” solutions for Lodging and Food & Beverage functions, including the applications necessary to support this ecosystem.

Our technology platform is aimed at transitioning our product and services offerings to better address the needs of hospitality operators as they focus on building better connections with guests before, during and post-visit. We offer an end-to-end solution that helps our customers improve the guest experience, increase top-line performance and reduce operating costs, which leads to opportunities for higher profitability. Our integrated yet modular products allow hospitality operators to recruit and retain customers into their facilities, increase their wallet share from each guest and improve the overall experience throughout the entire guest journey - from the initial customer touch point through post-visit interactions.

5

With our omni-channel suite of software products, we are uniquely positioned to offer solutions that allow our customers to adhere to social distancing guidelines and offer contactless solutions at every point of the guest journey for our hospitality operators while maximizing operational efficiency.

Point of Sale (POS) Solutions:

Agilysys POS solution suite allows our customers to provide their guests with an omni-channel experience within their property. Guests are empowered to create their own experiences through ordering from a mobile device or walking up to a self-service kiosk, but also providing for a more traditional experience with staff by interacting with a cashier or bar, or having a server come to them. Irrespective of the channel of interaction for the guest, our POS suite provides a single integrated enterprise grade back office management system with robust reporting capabilities. This allows our customers to manage menus, price changes, purchasing trends, inventory management and sales reporting from a single integrated source providing for increased efficiency as well as providing a richer guest profile.

Agilysys InfoGenesis® POS is an award-winning point of sale solution that combines a fast, intuitive and highly customizable terminal application with powerful, flexible reporting and configuration capabilities in the back office management portal. The system is easy to set up, and its scalable architecture enables customers to add workstations without having to build out expensive infrastructure. The system's detailed and high-quality reporting capabilities provide insight into sales data and guest purchasing trends. Engineered for all regions of the world, the InfoGensis POS solution suite offers a multinational set of features, including language, currency and fiscal technology, coupled with a robust enterprise management capability enabling the largest global customers to run their business efficiently. With a modern integration platform of APIs, the solution is also capable of integrating with a variety of ancillary applications allowing our customers to keep their entire technology estate. InfoGenesis POS is available as a cloud-based or on-premise solution.

Agilysys InfoGenesis Flex is a mobility solution that offers full point of sale functionality on a Windows tablet in 6, 8, or 10" form factors. It provides a sleek, modern alternative to traditional point of sale installations and can be used as a slim fixed terminal or as a convertible mobile POS simply by removing the tablet from its base.

Agilysys InfoGenesis KDS is a digital kitchen management solution that integrates with InfoGenesis, rGuest Buy® Kiosk and rGuest Buy OnDemand to deliver staff and customer originated orders to the kitchen for preparation. Custom attributes such as guest phone number, name, guest location or packaging instructions can be provided on each incoming order so the order can be fulfilled promptly to guests. Guests can optionally be notified of order completion via an order status monitor (OSM) or via text message.

rGuest Buy Kiosk is an enterprise-class self-service, customer-facing point of sale solution for the hospitality industry. It is ideal for food & beverage venues such as buffets, grab 'n go, corporate cafeterias and food courts. Its flexibility supports a variety of operational workflows, such as "order and pay", "order only", "pay at cashier" and “self check-out,” and integrates with a variety of property management, casino management and loyalty systems. rGuest Buy Kiosk is currently deployed at more than 270 customer sites across the country, including corporate cafeterias at a top five U.S. bank, a top 40 U.S. law firm, one of the nation's largest technology manufacturers, and at a national financial services firm.

rGuest Buy Kiosk’s intuitive guest-facing order and pay experiences transfer the control and convenience to the end user. The self-service components reduce on-site labor needed to manage venue operations, while improving guest throughput, check size, order accuracy, guest experience and satisfaction. The platform-driven and cloud-based solution allows for easy deployments and management at scale resulting in a lowered overall cost of ownership.

6

rGuest Buy OnDemand provides a visual, interactive food and beverage ordering experience to any mobile device - phone, tablet, laptop - with a browser-based self-service experience. Using a simple, intuitive interface, guests can easily order and reorder from anywhere across the property, driving order velocity and volume.

rGuest Buy OnDemand allows our customers to immediately offer an online ordering platform that is natively integrated with their physical location operations. Menus and price updates can be done in one place and automatically updated across all channels – online web store, digital menus and app ordering as well as POS terminals. Orders placed online are routed automatically to the appropriate kitchen for preparation. Orders placed from all channels are automatically available on the POS terminal at the physical location.

Property Management Systems (PMS):

Agilysys offers the most comprehensive suite of property management applications to serve the needs of our integrated resort and hospitality customers. Our platforms enable our customers to provide a seamless experience to their guests while driving operational efficiencies throughout the value chain. Our PMS suite of applications consists of the core property management system, a commission free booking engine, self-service check in and check out solutions, spa, golf, retail, accounting, sales and catering, service request optimization and condo management applications.

Agilysys Lodging Management System® (LMS™) is an on-premise or hosted, web and mobile-enabled, PMS solution targeting the operator with large, complex operations. It runs 24/7 to automate every aspect of hotel operations in properties from 100 to over 7,000 rooms, and has interfaces to a wide array of industry applications including but not limited to all core casino management systems and leading global distribution systems. Its foundation expands to incorporate modules for activities scheduling, attraction ticketing and more.

Agilysys Visual One® PMS is installed in hotels and resorts ranging from 50-1,500 rooms. It is a complete hospitality solution expanding beyond traditional PMS solutions enabling the resort to run its end-to-end operations, including front desk, housekeeping, sales & catering, maintenance, accounting, condo owner management, golf, retail POS, and activities. Visual One provides an integrated solution with interfaces to leading global distribution systems, casino management systems, hospitality automation and our other products.

rGuest® Stay PMS is the company’s cloud-based property management system that optimizes operational efficiency, increases revenue and enhances guest service. rGuest Stay is currently generally available for select-service hotels and chains, as well as for limited-service casino hotels. The guest-centric PMS leverages the rGuest standards-based platform on an open architecture with public APIs to enable richly integrated applications delivered from Agilysys, its partners and customers. rGuest Stay offers powerful capabilities for multi-property operations, allowing managers to view guest profiles, history and reservations, as well as room availability and operational reports, seamlessly across multiple properties.

Focused on improving revenue and streamlining operations, rGuest Stay is designed to enable hotels to gather and analyze guest information across properties that can be used to create loyalty-generating offers and increase guest wallet share. In addition, running natively in a browser on both desktop and tablet devices, it delivers real-time operating metrics so that hotels can more accurately forecast demand and scale guest services accordingly.

Virtual Check-in and Check-out Solutions

Today’s hotels cater to guests with high expectations when it comes to technological efficiency. An emerging trend in the hotel industry that has accelerated in the COVID-19 environment, where social distancing is now the norm, is the ability for guests to check themselves in or out of their room without interacting with the front desk. To that end, we offer software modules that enable this approach and are fully integrated with our core PMS solutions.

7

rGuest Express Kiosk simplifies check-in and check-out, optimizes staff productivity and enhances the guest experience by enabling a seamless self-service option for guests to use in the hotel lobby at a kiosk. More properties are turning to kiosks to reduce overhead and offer more self-service options. With rGuest Express Kiosk, it’s easy to elevate service levels without adding front-line staff. rGuest Express Kiosk provides ID verification to allow for hotels to enforce security standards efficiently and to allow the guest to bypass the front desk and observe social distancing guidelines.

rGuest Express Mobile simplifies check-in and check-out even further and at the same time allows operators to offer mobile keys, concurrent dining reservations or room upsells, all on a personal mobile device such as a smart phone or tablet. Properties are turning to mobility at an ever-increasing pace to improve efficiency. With rGuest Express Mobile, it’s easy to reduce wait times and empower guests by putting the power of choice in the palm of their hand. rGuest Express Mobile allows for digital ID verification before securely delivering the digital room key to the guest phone allowing operators to maintain security standards while allowing the guest to bypass the front desk.

Point of Sale and Property Management Ecosystem Offerings:

The following solutions integrate with and are complementary to our point of sale or property management systems, or both. These solutions, for the most part, can stand alone and do not require POS or PMS to be functional. However, we lead with our core POS and PMS solutions discussed above and focus on selling these complimentary ecosystem solutions into our customer base.

rGuest® Pay payment processing solution is our innovative payment gateway. rGuest Pay protects guests’ financial data and reduces risk by leveraging point-to-point encryption (P2PE) and tokenization with every credit card transaction. rGuest Pay Gateway leverages one of the first payment gateways in the world to receive official PCI-P2PE validation, allowing us to offer PCI cost and scope reduction that other providers cannot. These security benefits are built on top of a full-featured, enterprise-grade gateway that offers broad support for U.S., Canadian, European and certain Asian countries’ credit card processors and a wide variety of payment device options for every use-case, including countertop, pay-at-table, EMV, mobile tablet, and signature capture scenarios.

rGuest Pay offers contactless payment options on all markets as well as supporting various wallet payment options like Apple Pay®, Google Pay®, AliPay®, and WeChat®.

rGuest Spa software covers all aspects of running a spa, from scheduling guests for services to managing staff schedules. With this guest-centric technology, spas have more time to focus on creating personalized experiences in places of quiet tranquility. rGuest Spa is a single solution that connects effortlessly to our other software solutions. The solution includes real-time integration, simplifies the appointment booking process, enhances the guest experience, and maximizes the value of the spa as a revenue center.

Integrated with our booking engine, rGuest Book, customers can book both their hotel room and their spa appointments from a single place giving operators additional opportunities to upsell and cross sell various amenities that they can offer.

rGuest Golf is a guest centric golf management software that offers golf property managers complete pro shop management with tee time scheduling, member profile/billing, tournament management and Web and e-mail access bundled into one solution. Customers are given the option of using our robust built in retail POS module or they may choose to leverage the power of InfoGenesis. Staff can easily schedule and personalize reservations for guests which then appear on itineraries, confirmations, and folios. Resort operations with multiple amenities can integrate with rGuest Book and allow patrons to book both their resort reservation and their golf tee time simultaneously.

8

rGuest Book is a commission-free, easy-to-use reservation system that’s designed to move guests effortlessly through the booking process of hotel rooms, spa appointments and golf tee times. The solution allows booking of one or more rooms and is seamlessly connected with our core PMS solutions to provide a flawless experience for guests and hotel operators. rGuest Book is the only booking engine in the market that seamlessly integrates with the core primary gaming system and allows for casino operators to enable their patrons to self-book their entitlements resulting in increased guest satisfaction and reduced operational expenses. The solution also allows operators to capture increased revenue through add-ons and upsells of premium rooms.

rGuest Service is our new integrated service optimization platform that allows our customers to provide an integrated hospitality experience for their guests while driving greater operational efficiency by connecting departments across the hotel - front desk, house-keeping, concierge, maintenance, bell desk, food runners, wait staff, etc. The rGuest service platform provides a unified communication and messaging service for guest and staff interaction as well as internal staff interaction. Apart from providing the functionality for managing back of house operations like house-keeping, engineering and maintenance, the rGuest service platform proactively tracks events and exceptions that take place in the hotel or resort and drive targeted action to ensure high level of guest satisfaction at all times.

Agilysys’ Eatec® solution provides core purchasing, inventory, recipe, forecasting, production and sales analysis functions and is unique in offering catering, restaurant, buffet management and nutrition modules in a single web-enabled solution. Agilysys’ Eatec Mobile is an optional app that can be downloaded from Google Play and Apple app stores and provides users with access to Eatec application from any Android® and iOS® device. Users can provide inventory receiving and transfer operations seamlessly from any mobile device even when they are offline using Eatec’s innovative store and forward capabilities.

Agilysys Stratton Warren System (SWS) integrates with all leading financial and POS software products. The software manages the entire procurement process via e-commerce, from business development to the management of enterprise-wide backend systems and daily operations. Agilysys SWS Direct is an add-on module for SWS that provides a convenient, efficient and intuitive shopping cart experience to SWS users. SWS Direct streamlines operations, provides enhanced bidding and request for pricing services, and offers supplier registration tools and self-service maintenance capabilities.

Agilysys DataMagine™ document management solution is a U.S.-patented imaging module and archiving solution that allows users to securely capture and retrieve documents and system-generated information. DataMagine integrates with other Agilysys products, adding functionality and providing seamless workflows that cross functional areas. DataMagine helps drive the Go Green initiative at a number of our customer sites by enabling a completely paperless experience through all facets of the customers operations - from signature capture at the front desk to automated routing of PO’s and requisition orders for approvals. DataMagine provides robust indexing and archiving features to allows easy contextual based document retrieval.

rGuest® Seat solution is a guest-centric reservation and wait list management solution that helps operators to book any location. The solution allows operators to manage restaurant, cabana and auditorium reservations. With an innovative doll house view approach, patrons have the ability to select and book a specific seat in a restaurant or a specific cabana on a pool deck online. With built in price yielding capabilities, rGuest Seat allows operators to maximize revenue opportunities for various locations. Using the built-in guest management system, operators can build guest profiles and provide a superior experience while driving repeat guests.

9

rGuest Analyze is a cloud-based data analytic platform focused on the needs of the hospitality industry. It is a full business intelligence solution that collects data from Agilysys point of sale and property management solutions and helps food & beverage and property operators gain critical insight into business operations and performance. Out-of-the-box analysis helps hospitality operators manage costs, minimize loss due to fraud, boost item sales, increase server productivity, occupancy, room revenue, and other profit enhancing capabilities.

Representative Agilysys clients include:

7 Cedars Casino	Drive Shack	Pinnacle Entertainment
AVI Foodsystems, Inc.	Dickies Arena	Prairie Band Casino & Resort
Banner Health	Drury Hotels	Rosewood Castiglion Del Bosco
Boyd Gaming Corporation	Ellis Island Hotel, Casino and Brewery	Resorts World Bimini
Caesars Entertainment	Golden Nugget Lake Charles	Rosen Hotels & Resorts
Cal Dining at UC Berkeley	Grand Central Hotel in Belfast	Royal Caribbean International
Camelback Lodge & Waterpark	Grand Sierra Resort and Casino	Royal Lahaina Resort
Carnival UK	Hialeah Park	Seaport District – NYC
Cartoon Network Hotel	Hilton Worldwide	Spooky Nook Sports
Casino del Sol Resort	Intercontinental Hotel Group	Stations Casino
Catholic Charities	Kiawah	The Venetian Resort Hotel Casino
Chukchansi Gold Resort & Casino	Kimpton Hotels	The Kessler Collection
Compass Group North America	Longwood University	Treehouse - London
Comanche Nation of Oklahoma	Maryland Live! Casino	Vail Resorts
Copper Mountain	MGM	Valley View Casino & Hotel
Costa Pacifica	Oxford Casino	Vanderbilt University
The Cosmopolitan of Las Vegas	Palm Garden Hotel	Wendover Resorts
Crystal Springs Resort	Pinehurst Resort	Yale University

Industry and Markets

We are a technology software solutions company exclusively focused on the hospitality industry for more than 4 decades. Our solutions are mission critical to core hospitality operations. Our software solutions are required to run the operations of the hospitality business and designed to drive substantial customer benefits through increased revenue, improved operational efficiency, enhanced guest experience and improved employee morale. In addition, many of our solutions enable social distancing capabilities for our customers. Our innovative software solutions described above have been purpose-built to serve the unique needs of the following hospitality sectors: casinos, hotels, resorts, cruise ships, managed foodservice providers, sports and entertainment, and healthcare. We operate across North America, Europe, Asia-Pacific and India with headquarters located in Alpharetta, GA.

The sectors we serve are going through unprecedented and uncertain times with the COVID-19 pandemic. While the near-term outlook is hard to predict with closures and travel restrictions, these market sectors will recover. The long-term outlook remains strong and we expect the momentum from the last three years to eventually pick back up with a focus on social distancing and mobile applications. Prior to COVID-19, we estimated our total addressable market to be approximately $4.8 billion in annual recurring revenue opportunity. While the size of the opportunity might face pressure in an economic downturn, we feel it is still in the billions of dollars and we are only a fraction of that size. We continue to feel good about our opportunity to win market share given our relative competitive strength in the industry.

Customers

Our customers include large, medium-sized and boutique hospitality providers, both owned and franchised, as well as divisions or departments of large corporations in the hospitality industry. We concentrate on serving the needs of customers in a range of customer-focused settings where brand differentiation is important and guest recruitment is intense. Our customer base is highly fragmented.

10

Seasonality

Occasionally, the timing of large one-time orders, such as those associated with significant remarketed product sales around large customer refresh cycles or significant volume rollouts, creates variability in our quarterly results.

Competition

Our solutions face a highly competitive market. Competition exists with respect to developing and maintaining relationships with customers, pricing for products and solutions, and customer support and service.

We compete with other full-service providers that sell and service bundled POS and PMS solutions comprised of hardware, software, support and services. These companies, some of which are much larger than we are, include Oracle Corp., NCR, Constellation Software, Inc., Amadeus IT Group and Infor. We also compete with smaller software companies like POSitouch, Northwind and Appetize Technologies. In addition, we compete with PMS systems that are designed and maintained in-house by large hotel chains.

Environmental Matters

We believe we are compliant in all material respects with all applicable environmental laws. Presently, we do not anticipate that such compliance will have a material effect on capital expenditures, earnings or competitive position with respect to any of our operations.

Employees

As of March 31, 2020, we had 1,275 employees. We are not a party to any collective bargaining agreements, have had no strikes or work stoppages and consider our employee relations to be good.

Access to Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports are available free of charge through our corporate website, http://www.agilysys.com, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (SEC). The information posted on our website is not incorporated into this Annual Report. Reports, proxy and information statements, and other information regarding issuers that file electronically, are maintained on the SEC website, http://www.sec.gov.

Item 1A.  Risk Factors.

Risks Relating to Our Business

COVID-19 has adversely impacted our business and may further impact our business, financial results and liquidity for an unknown period of time.

The global spread and unprecedented impact of COVID-19 is complex and rapidly evolving and has resulted in disruption to our business, the hospitality industry and the global economy. The COVID-19 pandemic has led government and other authorities around the world to impose measures intended to control its spread, including restrictions on freedom of movement, gatherings of large numbers of people, and business operations such as travel bans, border closings, business closures, quarantines, shelter-in-place orders, and social distancing measures. As a result, the COVID-19 pandemic and its consequences have significantly reduced demand for gaming, hotels, resorts, cruises, corporate foodservice, restaurants, university cafeterias, and stadia and have had a material detrimental impact on global commercial activity across these hospitality industries that we serve, and in some cases, has caused the closure of our customers’ businesses. Business closures have resulted in our inability to complete certain implementations and negatively impacted our ability to recognize revenue. We have also taken impairments on certain of our rGuest solutions based upon the impacts of COVID-19 on our business.

The extent to which COVID-19 continues to adversely impact our business, operations, and financial results significantly depends on the effect upon the demand for our customers’ hospitality services, which may be affected by, among other things, the duration and scope of COVID-19 (including whether and to what extent a resurgence of the virus could occur after the pandemic initially subsides); the negative impact it has on global regional economies and economic activity, including its impact on unemployment rates and consumer confidence and discretionary spending; its short and longer-term impact on the demand for hospitality businesses; the ability of our customers to successfully navigate the impacts of COVID-19; actions governments, businesses and individuals take in response to the pandemic; and how quickly economies, travel activity, businesses, universities and demand for lodging, destination resorts, cruises and stadia events recovers after the pandemic subsides. To the extent that our hospitality customers’ businesses continue to be impacted, it may have the following effects on our business:

• Effect on Revenue and Liquidity: If our hospitality customers continue to have a material decline in their revenues, they could be unable to continue to pay for our services, and potentially even go out of business. If our customers are unable or unwilling to continue to pay for our services on a timely basis or at all, our revenue and liquidity would be adversely affected.

• Effect on Growth: As a result of the material decline in our hospitality customers’ revenue, our customers and prospective customers have substantially curtailed new technology purchases. Customers may also have difficulty obtaining new

11

financing or drawing on existing credit facilities, resulting in them having diminished capital to spend on new technology purchases. Finally, customers or prospective customers may delay, terminate or not go forward with projects in development, for which we may have sold or software.

Additionally, in response to COVID-19, we have taken steps to reduce operating costs and improve efficiency, including furloughing approximately 24% of our employees in the United States, APAC and EMEA. Such steps, and further changes we may make in the future to reduce our costs, may negatively impact our ability to attract and retain employees, including furloughed employees potentially not returning to work with us when the COVID-19 public health emergency subsidies. If this were to occur, we may experience operational challenges that result in a negative impact on our customer services and ultimately, loss of market share, which could limit our ability to grow and expand our business.

Our business is impacted by changes in macroeconomic and/or global conditions.

We conduct our business internationally, changes in global, national, or regional economies, governmental policies (including in areas such as trade, travel, immigration, healthcare, and related issues), geopolitical conditions (such as political unrest and armed conflicts), natural disasters, or outbreaks of disease (such as COVID-19 pandemic) may impact our business. Any general weakening of, and related declining corporate confidence in, the global economy or the curtailment in corporate spending could cause current or potential customers to reduce or eliminate their information technology budgets and spending, which could cause customers to delay, decrease or cancel purchases of our products and services; cause customers not to pay us; or to delay payment for previously purchased products and services.

For example, our business is impacted by decreases in travel and leisure activities resulting from weak economic conditions, increases in energy prices and changes in currency values, political instability, heightened travel security measures, travel advisories, disruptions in air travel, and concerns over disease, violence, war, or terrorism. As discussed above under “COVID-19 has adversely impacted our business and may further impact our business, financial results and liquidity for an unknown period of time,” our performance has been affected by these conditions associated with COVID-19 and could be materially affected going forward if these conditions worsen or continue for an extended period or in other circumstances that we are unable to foresee or mitigate. Even after COVID-19 subsides, our business, markets, growth prospects and business model could be materially impacted or altered as a result of adverse changes in travel and leisure activities.

Similarly, increases in energy prices can result in higher ingredient and food costs for our customers with restaurant operations, which may adversely affect demand for our customers’ restaurant businesses, and in turn, our business, financial results and liquidity.

Our business may be adversely impacted by international trade disputes.

We depend on third-party manufacturers and suppliers located outside of the United States, including in China, in connection with the supply of certain of our hardware products and related components. Accordingly, our business is subject to risks associated with international supply. For example, the Trump Administration has called for substantial changes to U.S. foreign trade policy, including imposing greater restrictions on international trade and significant increases in tariffs on goods imported into the United States from China and other countries. Increased tariffs, including on goods imported from China, or the institution of additional protectionist trade measures could adversely affect our supply costs, and in turn, our business, financial results and liquidity.

Our future success will depend on our ability to develop new products, product upgrades and services that achieve market acceptance.

Our business is characterized by rapid and continual changes in technology and evolving industry standards. We believe that in order to remain competitive in the future we will need to continue to develop new products, product upgrades and services, requiring the investment of significant financial resources. If we fail to accurately anticipate our customer's needs and technological trends, or are otherwise unable to complete the development of a product or product upgrade on a timely basis, we will be unable to introduce new products or product upgrades into the market that are demanded by our customers and prospective customers on a timely basis, if at all, and our business and operating results would be materially and adversely affected.

The development process for most new products and product upgrades is complicated, involves a significant commitment of time and resources and is subject to a number of risks and challenges including:

• Managing the length of the development cycle for new products and product enhancements;

• Adapting to emerging and evolving industry standards and to technological developments by our competitors and customers; and

• Extending the operation of our products and services to new and evolving platforms, operating systems and hardware products, such as mobile devices.

Our product development activities are costly and recovering our investment in product development may take a significant amount of time, if it occurs at all. We anticipate continuing to make significant investments in software research and development and related product opportunities because we believe it is necessary to compete successfully. We cannot estimate with any certainty when we will, if ever, receive significant revenues from these investments.

12

If we are not successful in managing these risks and challenges, or if our new products, product upgrades, and services are not technologically competitive or do not achieve market acceptance, our business and operating results could be adversely affected.

If we fail to meet our customers' performance expectations, our reputation may be harmed, and we may be exposed to legal liability.

Our ability to attract and retain customers depends to a large extent on our relationships with our customers and our reputation for high quality services and solutions. As a result, if a customer is not satisfied with our products and services, our reputation may be damaged. Moreover, if we fail to meet our customers' performance expectations or if customers experience service disruptions, breaches or other quality issues, we may lose customers and be subject to legal liability, particularly if such failure, service disruptions or breaches adversely impact our customers' businesses.

In addition, many of our projects are critical to the operations of our customers' businesses. While our contracts typically include provisions designed to limit our exposure to legal claims relating to our products and services, these provisions may not adequately protect us or may not be enforceable in all cases. The general liability insurance coverage that we maintain, including coverage for errors and omissions, is subject to important exclusions and limitations. We cannot be certain that this coverage will continue to be available on reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. A successful assertion of one or more large claims against us that exceeds our available insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our profitability.

We face extensive competition in the markets in which we operate, and our failure to compete effectively could result in price reductions and/or decreased demand for our products and services.

Several companies offer products and services similar to ours. The rapid rate of technological change in the hospitality market makes it likely we will face competition from new products designed by companies not currently competing with us. We believe our competitive ability depends on our product offerings, our experience in the hospitality industry, our product development and systems integration capability, and our customer service organization. There is no assurance, however, that we will be able to compete effectively in the hospitality technology market in the future.

We compete for customers based on several factors, including price. The competitive markets in which we operate may oblige us to reduce our prices in order to contend with the pricing models of our competitors. If our competitors discount certain products or services, we may have to lower prices on certain products or services in order to attract or retain customers. Any such price modifications would likely reduce margins and could have adverse effects. In addition, if we fail to reduce our prices in order to contend with the pricing models of our competitors, we may not be able to retain customers or grow our business, which could adversely affect our revenues and liquidity.

We are subject to laws and regulations governing the protection of personally identifiable information; we are also subject to cyber-attacks. A failure to comply with applicable privacy or data protection laws or the occurrence of a cyber-attack could harm our reputation and have a material adverse effect on our business.

We collect, process, transmit, and/or store (on our systems and those of third-party providers) customer transactional data, as well as their and our customers’ and employees’ personally identifiable information and/or other data and information. Personally identifiable information is increasingly subject to legislation and regulations in numerous jurisdictions with regard to privacy and data security such as such as the California Consumer Privacy Act and the European Union’s General Data Protection Regulation. Moreover, what constitutes personally identifiable information and what other data and/or information is subject to the privacy laws varies by jurisdiction and continues to evolve, and the laws that do reference data privacy continue to be interpreted by the courts and their applicability and reach are therefore uncertain. Our failure and/or the failure of our customers, vendors, and service providers to comply with applicable privacy and data protection laws and regulations could damage our reputation, discourage current and/or potential customers from using our products and services, and result in fines, governmental investigations and/or enforcement actions, complaints by private individuals, and/or the payment of penalties to consumers.

13

We have established practices and procedures intended to protect our systems and information against cyber-attacks. However, there can be no assurance that such measures will prevent all cyber-attacks from impacting our systems and information. Oursystems, and those of our third-party providers, have and could in the future become subject to cyber-attacks, including using computer viruses, credential harvesting, dedicated denial of services attacks, malware, social engineering, and other means for obtaining unauthorized access to, or disrupting the operation of, our systems and those of our third-party providers. Any operational disruptions, unauthorized access, or misappropriation of information (including personally identifiable information or personal data) could harm our relationship with our customers and could have a material adverse effect on our business, financial condition, reputation, and results of operations.

Actual or perceived security vulnerabilities in our software products may result in reduced sales or liabilities.

Our software may be used in connection with processing sensitive data (e.g., credit card numbers). It may be possible for the data to be compromised if our customer does not maintain appropriate security procedures. In those instances, the customer may attempt to seek damages from us. While we believe that all of our current software complies with applicable industry security requirements and that we take appropriate security measures to reduce the possibility of breach through our support and other systems, we cannot assure that our customers' systems will not be breached, or that all unauthorized access can be prevented. If a customer, or other person, seeks redress from us as a result of a security breach, our business could be adversely affected.

We have incurred losses in each of the last several years, and we may continue to incur losses in the future.

We have incurred operating losses in each of the last several years, including the year ended March 31, 2020, and we may continue to incur losses in the future as we continue to invest in our products. Our lack of profitability limits the resources available to us to invest in developing new products, product upgrades and services and otherwise in improving business operations.

We may incur goodwill and intangible asset impairment charges that adversely affect our operating results.

As of March 31, 2020, we had $19.6 million and $8.4 million of goodwill and intangible assets (including capitalized software development costs), net, respectively, on our Consolidated Balance Sheet. We review our goodwill and intangible assets for impairment on at least an annual basis. As of March 31, 2020, we determined the net realizable value of intangible assets consisting of capitalized software development costs for certain solutions within our rGuest suite of products no longer exceeded their carrying value, and as a result, recorded non-cash impairment charges of $22.0 million. The impact of the COVID-19 pandemic on the hospitality industry resulted in significantly lower sales and cash flow projections for the related rGuest solutions after evaluating the Company’s strategy for market development and continued costs to support the software. As a result, we recorded impairment charges to reduce the net realizable value of the related assets to zero. Our future operating results and the market price of our common stock could be materially adversely affected if we are required to write down the carrying value of goodwill or other intangible assets in the future.

If we fail to attract, retain and motivate key employees, our business may be harmed.

Our success depends on the skill, experience and dedication of our employees. There can be no assurance that we will be able to successfully attract, retain and motivate the personnel that we need. If we are unable to attract, retain and motivate sufficiently experienced and capable personnel, especially in product development, customer services and support, operations, sales and management, our business and financial results may suffer. For example, if we are unable to attract and retain a sufficient number of skilled technical personnel, our ability to develop high quality products and provide high quality customer service may be impaired. Experienced and capable personnel in the technology industry remain in high demand, and there is continual competition for their talents. Although we believe our compensation, benefits and other employment amenities are competitive in the markets in which we compete for talent, we may have difficulty attracting sufficiently experienced and capable personnel or retaining and motivating talented employees, and in such events our business may suffer.

Additionally, in response to COVID-19, we furloughed approximately 24% of our employees to reduce operating costs and improve efficiency. If this action negatively impacts our ability to attract employees or if employees do not resume their employment at the end of the furlough, we may experience operational challenges that result in a negative impact on our customer services and ultimately, loss of market share, which could limit our ability to grow and expand our business. See “COVID-19 has adversely impacted our business and may further impact our business, financial results and liquidity for an unknown period of time” above for additional information regarding this risk.

Our international operations have many associated risks.

We continue to strategically manage our presence in international markets, and these efforts require significant management attention and financial resources. We may not be able to successfully penetrate international markets, or, if we do, there can be no assurance that we will grow our business in these markets at the same rate as in North America. Because of these inherent complexities and

14

challenges, lack of success in international markets could adversely affect our business, results of operations, cash flow, and financial condition.

We have international offices in the United Kingdom, China, Malaysia, the Philippines, Singapore, and India. We have committed resources to maintaining and further expanding, where appropriate, our sales offices and sales and support channels in key international markets. However, our efforts may not be successful. International sales are subject to many risks and difficulties, including those arising from the following: building and maintaining a competitive presence in new markets; staffing and managing foreign operations; complying with a variety of foreign laws; producing localized versions of our products; developing integrations between our products and other locally-used products; import and export restrictions and tariffs, enforcing contracts and collecting accounts receivable; unexpected changes in regulatory requirements; reduced protection for intellectual property rights in some countries; potential adverse tax treatment; language and cultural barriers; currency fluctuations; and political and economic instability abroad.

Natural disasters or other catastrophic events affecting our principal facilities could cripple our business.

Natural disasters or other catastrophic events, particularly those affecting employees in our Alpharetta headquarters or India research and development center, may cause damage or disruption to our operations, and thus could have a negative effect on us. Most of our administrative functions are concentrated in our Alpharetta headquarters and most of our software development activity is concentrated in our India research and development center. Although we maintain crisis management and disaster response plans, a natural disaster, fire, power shortage, pandemic, act of terrorism or other catastrophic event occurring in either geographic location that prevents or substantially impairs our employees’ ability to work could make it difficult or impossible for us to deliver our products and services to customers.

We may not be able to enforce or protect our intellectual property rights.

We rely on a combination of copyright, patent, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology. Any failure to protect our intellectual property rights would diminish or eliminate the competitive advantages that we derive from our proprietary technology.

We may be subject to claims of infringement of third-party intellectual property rights.

Third parties may assert claims that our software or technology infringe, misappropriate, or otherwise violate their intellectual property or other proprietary rights. Such claims may be made by our competitors seeking to obtain a competitive advantage or by other parties. The risk of claims may increase as the number of software products that we offer and competitors in our market increase and overlaps occur. Any such claims, regardless of merit, that result in litigation could result in substantial expenses, divert the attention of management, cause significant delays in introducing new or enhanced services or technology, materially disrupt the conduct of our business, and have a material adverse effect on our business, financial condition, and results of operations.

While we do not believe that our products and services infringe any patents or other intellectual property rights, from time to time, we receive claims that we have infringed the intellectual property rights of others. For example, on April 6, 2012, Ameranth, Inc. filed a complaint against us in the U.S. District Court for the Southern District of California, alleging that certain of our products infringe patents owned by Ameranth directed to configuring and transmitting hospitality menus (e.g., restaurant menus) for display on electronic devices, and synchronizing the menu content between the devices. This lawsuit remains pending.

If we fail to maintain our data centers and other systems, the demand for our subscription services and our ability to operate our business efficiently could diminish, which could have a material adverse effect on our business.

We currently utilize data center hosting facilities, some of which are managed by third-parties, to provide cloud-based products and hosting services to our customers and to support our internal business operations. If these data center facilities fail or encounter any damage, it could result in interruptions in services to our customers or disruption of our business operations. This could result in unanticipated downtime for our customers, and in turn, our reputation and business could be adversely affected. Similarly any significant disruption or deficiency in the operation of our internal systems could have a material adverse effect on our ability to fulfill and invoice customer orders, apply cash receipts, place purchase orders with suppliers, and make cash disbursements, which may have a material adverse effect on our business, financial condition, or results of operations.

If we fail to maintain an effective system of internal controls, we may not be able to detect fraud, which could have a material adverse impact on our business.

While we believe our internal control over financial reporting is effective, a controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that control issues and instances of fraud, if any, within our company have been detected.

15

We have encountered risks associated with maintaining large cash balances.

While we have attempted to invest our cash balances in investments we considered to be relatively safe, we nevertheless confront credit and liquidity risks. Bank failures could result in reduced liquidity or the actual loss of money held in deposit accounts in excess of federally insured amounts, if any.

If we acquire new businesses, we may not be able to successfully integrate themor attain the anticipated benefits.

As part of our operating history and growth strategy, we have acquired other businesses. In the future, we may continue to seek acquisitions. We can provide no assurance that we will be able to identify and acquire targeted businesses or obtain financing for such acquisitions on satisfactory terms. The process of integrating acquired businesses into our operations may result in unforeseen difficulties and may require a disproportionate amount of resources and management attention. If integration of our acquired businesses is not successful, we may not realize the potential benefits of an acquisition or suffer other adverse effects.

We may have exposure to greater than anticipated tax liabilities.

Some of our products and services may be subject to sales taxes in states where we have not collected and remitted such taxes from our customers. We have reserves for certain state sales tax contingencies based on the likelihood of obligation. These contingencies are included in “Other non-current liabilities” in our Consolidated Balance Sheets. We believe we have appropriately accrued for these contingencies. In the event that actual results differ from these reserves, we may need to make adjustments, which could materially impact our financial condition and results of operations.

We are subject to litigation, which may be costly.

As a company that does business with many customers, employees and suppliers, we are subject to litigation. The results of such litigation are difficult to predict, and we may incur significant legal expenses if any such claim were filed. While we generally take steps to reduce the likelihood that disputes will result in litigation, litigation is very commonplace and could have an adverse impact on our business.

Our dependence on certain strategic partners makes us vulnerable to the extent we rely on them.

We rely on a concentrated number of vendors for the majority of our hardware and for certain software and related services needs. We do not have long term agreements with many of these vendors. If we can no longer obtain these hardware, software or services needs from our major suppliers due to mergers, acquisitions or consolidation within the marketplace, material changes in their partner programs, their refusal to continue to supply to us on reasonable terms or at all, and we cannot find suitable replacement suppliers, it may have a material adverse impact on our future operating results and gross margins.

Risks Relating to the Industries We Serve

Our business depends to a significant degree on the hospitality industry and a weakening could adversely affect our business and results of operations.

Because our customer base is concentrated in the hospitality industry, our business is largely dependent on the health of that industry. Our sales are dependent in large part on the health of the hospitality industry, which in turn is dependent on the domestic and international economy. Instabilities or downturns in the hospitality industry, such as those resulting from the impact of COVID-19, as discussed above, could disproportionately impact our revenue, as customers may exit the industry or delay, cancel or reduce planned expenditures for our products. For additional information regarding the potential impact of COVID-19 on our business, see “COVID-19 has adversely impacted our business and may further impact our business, financial results and liquidity for an unknown period of time” above for additional information.

Consolidation in the gaming and other hospitality industries could adversely affect our business.

Customers that we serve may seek to achieve economies of scale and other synergies by combining with or acquiring other companies. The hospitality industry has experienced recent consolidations, including the hotel and gaming sectors of the industry. Although recent consolidations in the hospitality industry have not materially adversely affected our business, there is no assurance that future consolidations will not have such affect. For example, if one of our current customers merges or consolidates with a company that relies on another provider's products or services, it could decide to reduce or cease its purchases of products or services from us, which could have an adverse effect our business.

16

Insolvencies in the hospitality industry could adversely affect our business.

Customers that we serve may be or become insolvent. Most of our customers have been significantly affected by the COVID-19 pandemic. Loss of revenue and other operating challenges may cause some of our customers to declare bankruptcy or cause their lenders to declare a default, accelerate the related debt, or foreclose on their property. Customers in bankruptcy may not have sufficient assets to pay us unpaid fees or reimbursements we are owed under their agreements with us. If a significant number of customers file for bankruptcy or otherwise fail to pay amounts owed to us, our revenues and liquidity could be adversely affected.

Risks Relating to Our Stock

Our stock has been volatile and we expect that it will continue to be volatile.

Our stock price has been volatile, and we expect it will continue to be volatile. For example, during the year ended March 31, 2020, the trading price of our common stock ranged from a high close of $36.85 to a low close of $13.00. The market price for our common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control. Factors affecting the trading price of our common stock may include:

• uncertainties the COVID-19 pandemic has caused for the global economy;

• economic news or other events generally causing volatility in the trading markets;

• our operating results failing to meet the expectation of securities analysts or investors in a particular period or failure of securities analysts to publish reports about us or our business;

• announcements by us or our competitors of acquisitions, new offerings or improvements, significant contracts, commercial relationships or capital commitments;

• our ability to market new and enhanced solutions on a timely basis;

• any major change in our board or management; general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

On May 11, 2020, we entered into an agreement to sell $35 million of preferred stock with a 5.25% cumulative dividend and convertible into common stock at a conversion price of $20.1676 per share. Until converted, the preferred stock may impede stock price increases above the conversion price.

Additionally, our ownership base has been and may continue to be concentrated in a few shareholders, which could increase the volatility of our common share price over time.

Item 1B.  Unresolved Staff Comments.

None.

Item 2.  Properties.

Our corporate headquarters are located in Alpharetta, Georgia where we lease approximately 33,000 square feet of office space. In addition, we lease approximately 33,000 square feet of office space in Las Vegas, Nevada, 12,000 square feet of office space in Bellevue, Washington, 12,000 square feet of office space in Santa Barbara, California, and 6,000 square feet of warehouse space in Roswell, Georgia. Internationally, we lease approximately 104,000 square feet of office space in Chennai, India and lease several other smaller office locations throughout Europe and Asia. Our major leases contain renewal options for periods of up to 10 years. We believe that our current facilities and office space are sufficient to meet our needs and do not anticipate any difficulty securing additional space as needed.

Item 3.  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.

On April 6, 2012, Ameranth, Inc. filed a complaint against us in the U.S. District Court for the Southern District of California alleging that certain of our products infringe patents owned by Ameranth directed to configuring and transmitting hospitality menus (e.g., restaurant menus) for display on electronic devices, and synchronizing the menu content between devices. The case against us was consolidated with similar cases brought by Ameranth against more than 30 other defendants. Most of the patents at issue in the case were invalidated by the U.S. Court of Appeals for the Federal Circuit in 2016. Cases against us and our co-defendants remained pending in the District Court with respect to one surviving Ameranth patent. In September 2018, the District Court found that patent invalid, and granted summary judgment in favor of the movant co-defendants. In early 2019, Ameranth appealed the District Court's summary judgment ruling to the U.S. Court of Appeals for the Federal Circuit. In November 2019, the U.S. Court of Appeals for the

17

Federal Circuit affirmed the lower court’s summary judgement with respect to all claims except for two, which were not asserted against Agilysys. Shortly thereafter, Ameranth moved for a rehearing en banc, which was denied in February 2020. Finally, Ameranth filed for writ of certiorari to the United States Supreme Court. The Supreme Court has not yet responded to the writ.

We were not a party to the appeal, and it is currently unclear what impact the summary judgment ruling or writ of certiorari may have on our case. Ameranth seeks monetary damages, injunctive relief, costs and attorneys’ fees from us. At this time, we are not able to predict the outcome of the remaining claims in the lawsuit, or any possible monetary exposure associated with the lawsuit. However, we dispute the allegations of wrongdoing and are vigorously defending ourselves in this matter.

Item 4. Mine Safety Disclosures.

Not applicable.

18

Part II

Item 5.  Market for Registrant's Common Equity,Related Shareholder Matters and IssuerPurchases of Equity Securities.

Market Information

Our common shares, without par value, are traded on the NASDAQ Stock Market LLC under the symbol “AGYS”. As of May 20, 2020, there were 1,551 registered holders of our common shares, without par value.

Dividends

We did not pay dividends in fiscal 2020 or 2019 on our common stock and are unlikely to do so in the foreseeable future. The current policy of the Board of Directors is to retain any available earnings for use in the operations of our business.

Shareholder Return Performance Presentation

The following chart compares the value of $100 invested in our common shares, including reinvestment of dividends, with a similar investment in the Russell 2000 Index (the “Russell 2000”) and with the companies listed in the SIC Code 7373-Computer Integrated Systems Design for the period March 31, 2015 through March 31, 2020. The stock price performance in this graph is not necessarily indicative of the future performance of our common shares.

19

Comparison of 5 Year Cumulative Total Return

INDEXED RETURNS

			Fiscal Years Ended March 31,
	Base Period
Company Name / Index	2015		2016		2017		2018		2019		2020
Agilysys, Inc.	$	100.00	$	103.76	$	96.04	$	121.44	$	215.14	$	169.72
Russell 2000	$	100.00	$	90.24	$	113.90	$	127.33	$	129.94	$	98.77
Peer Group	$	100.00	$	87.03	$	106.85	$	123.24	$	128.15	$	122.52

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, of the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

20

Item 6.  Selected Financial Data.

The following selected consolidated financial and operating data was derived from our audited consolidated financial statements. The selected financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto, and Item 7 contained in Part II of this Annual Report.

	Year ended March 31,
(In thousands, except per share data)	2020			2019			2018			2017			2016
Operating results
Net revenue	$	160,757		$	140,842		$	127,360		$	127,678		$	120,366
Gross profit		80,952			73,880			64,417			63,785			68,106
Operating loss		(34,061	)		(13,081	)		(12,080	)		(11,408	)		(4,313	)
Operating loss, net of taxes		(34,067	)		(13,164	)		(8,350	)		(11,721	)		(3,765	)
Net loss	$	(34,067	)	$	(13,164	)	$	(8,350	)	$	(11,721	)	$	(3,765	)
Per share data (1)
Basic and diluted
Net loss	$	(1.47	)	$	(0.57	)	$	(0.37	)	$	(0.52	)	$	(0.17	)
Weighted-average shares outstanding - basic and diluted		23,233			23,037			22,801			22,615			22,483
Balance sheet data at year end
Cash and cash equivalents	$	46,653		$	40,771		$	39,943		$	49,255		$	60,608
Working capital		23,985			21,193			19,343			27,183			41,401
Total assets		154,562			163,591			157,207			167,305			185,157
Total debt		49			57			177			237			333
Total shareholders’ equity		71,757			100,622			108,431			113,669			123,473

(1) 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 all periods presented, basic weighted-average shares outstanding were used in calculating the diluted net loss per share.

21

Item 7. 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 Consolidated Statements of Operations and Consolidated Statements of Cash Flows and provides information that managementbelieves is important to assessing and understanding our consolidated financial condition and results of operations. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes that appear in Item 8 of this Annual Report titled, "Financial Statements and Supplementary Data." Information provided in the MD&A may includeforward-looking statements that involve risks and uncertainties. Many factors couldcause actual results to be materially different from those contained in the forward-lookingstatements. See “Forward-Looking Information” on page 3 of this Annual Report and Item 1A “Risk Factors”in Part I of this Annual Report for additional informationconcerning these items. Management believes that this information, discussion, and disclosure is important in making decisions about investing in Agilysys.

Overview

Recent Developments

COVID-19 Pandemic

During the fourth quarter ended March 31, 2020, concerns related to the spread of COVID-19 began to create global business disruptions as well as disruptions in our operations and to cause negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on various factors, including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Because an increasing portion of our business is based on a subscription model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We have taken actions to mitigate the impact on our business. We are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications. These modifications may delay or reduce sales and harm productivity and collaboration. We have observed other organizations making similar alterations to their normal business operations, including restrictions imposed by our customers on our ability to access their sites for implementations and support. The pandemic could have an adverse impact on demand for our customers’ products and services, which in turn could negatively impact the willingness of our customers to enter into or renew contracts with us. The pandemic has impacted our ability to complete certain implementations, negatively impacting our ability to recognize revenue, and could also negatively impact the payment of accounts receivable and collections.

In addition, during the first quarter of our fiscal 2021, we have reduced discretionary costs, implemented a hiring freeze on non-essential positions and reduced payroll and related costs through layoffs, employee furloughs, employee retirement benefit limitations, and salary decreases for executive team members and certain other employees of the Company.

We may take further actions that alter our business operations as the situation evolves. As a result, the ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.

Our Business

Agilysys has been a leader in hospitality software for more than 40 years, delivering innovative guest-centric technology solutions for casinos, hotels, resorts, cruise ships, managed foodservice providers, sports and entertainment, and healthcare. Agilysys offers the most comprehensive software solutions in the industry, including point-of-sale (POS), property management (PMS), inventory and procurement, payment solutions, and related hospitality applications, to manage the entire guest journey. Agilysys is known for its leadership in hospitality, its broad product offerings and its customer-centric service. Some of the largest hospitality companies around the world use Agilysys solutions to help improve guest loyalty, drive revenue growth, increase operational efficiencies and support social distancing.

The Company has just one reportable segment serving the global hospitality industry. Agilysys operates across North America, Europe, Asia-Pacific, and India with headquarters located in Alpharetta, Georgia.

22

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

Our strategic plan specifically focuses on:

• Putting the customer first

• Accelerating our product development

• Improving our liquidity

• Increasing organizational efficiency and teamwork

• Developing our employees and leaders

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

• Growing revenue through international expansion

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

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 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 software licenses, third party hardware and operating systems

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

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

23

Results of Operations

Fiscal2020Compared with Fiscal2019

Net Revenue and Operating Loss

The following table presents our consolidated revenue and operating results for the fiscal years ended March 31, 2020 and 2019:

	Year ended March 31,						Increase (decrease)
(Dollars in thousands)	2020			2019			$			%
Net revenue:
Products	$	44,230		$	39,003		$	5,227			13.4	%
Support, maintenance and subscription services		83,680			75,496			8,184			10.8	%
Professional services		32,847			26,343			6,504			24.7	%
Total net revenue		160,757			140,842			19,915			14.1	%
Cost of goods sold:
Products (inclusive of developed technology amortization)		36,427			31,811			4,616			14.5	%
Support, maintenance and subscription services		19,248			15,895			3,353			21.1	%
Professional services		24,130			19,256			4,874			25.3	%
Total cost of goods sold		79,805			66,962			12,843			19.2	%
Gross profit		80,952			73,880			7,072			9.6	%
Gross profit margin		50.4	%		52.5	%
Operating expenses:
Product development		41,463			37,817			3,646			9.6	%
Sales and marketing		19,864			19,646			218			1.1	%
General and administrative		24,374			23,118			1,256			5.4	%
Depreciation of fixed assets		2,574			2,504			70			2.8	%
Amortization of intangibles		2,541			2,567			(26	)		(1.0	)%
Impairments		23,740			—			23,740			100.0	%
Restructuring, severance and other charges		582			1,168			(586	)		(50.2	)%
Legal settlements, net		(125	)		141			(266	)		(188.7	)%
Operating loss	$	(34,061	)	$	(13,081	)	$	(20,980	)		160.4	%
Operating loss percentage		(21.2	)%		(9.3	)%

24

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

	Year ended March 31,
	2020			2019
Net revenue:
Products		27.5	%		27.7	%
Support, maintenance and subscription services		52.1			53.6
Professional services		20.4			18.7
Total net revenue		100.0			100.0
Cost of goods sold:
Products, inclusive of developed technology amortization		22.6			22.6
Support, maintenance and subscription services		12.0			11.3
Professional services		15.0			13.6
Total net cost of goods sold		49.6			47.5
Gross profit		50.4			52.5
Operating expenses:
Product development		25.8			26.9
Sales and marketing		12.4			13.9
General and administrative		15.2			16.4
Depreciation of fixed assets		1.6			1.8
Amortization of intangibles		1.6			1.8
Impairments		14.8			0.0
Restructuring, severance and other charges		0.4			0.8
Legal settlements, net		(0.1	)		0.1
Operating loss		(21.2	)%		(9.3	)%

Net revenue. Total revenue increased $19.9 million, or 14.1%, in fiscal 2020 compared to fiscal 2019. Products revenue increased $5.2 million, or 13.4%, due to increased sales in third-party hardware sales including new customers and expansion with existing customers. Support, maintenance and subscription services revenue increased $8.2 million, or 10.8%, driven by continued growth in subscription-based service revenue, which increased 24.3% in fiscal 2020 compared to fiscal 2019. Professional services revenue increased $6.5 million, or 24.7%, due to ongoing installations and integration of our software solutions for our growing customer base.

Gross profit and gross profit margin. Our total gross profit increased $7.1 million, or 9.6%, in fiscal 2020 and total gross profit margin decreased from 52.5% to 50.4%. Products gross profit increased $0.6 million and gross profit margin decreased slightly from 18.4% to 17.6% due to a higher mix of third party hardware and software and due to certain allowances established against revenues earned in March 2020 related to products that have been or could be returned from customer locations closed in response to COVID-19 guidelines.Support, maintenance and subscription services gross profit increased $4.8 million and gross profit margin decreased 195 basis points to 77.0% due to increased costs associated with hosting our customers. Professional services gross profit increased $1.6 million and gross profit margin decreased slightly from 26.9% to 26.5% after we established allowances against revenues earned in March 2020 due to uncertainties related to COVID-19 conditions.

Operating expenses

Operating expenses, excluding the charges for legal settlements, impairments and restructuring, severance and other charges, increased $5.2 million, or 6.0%, in fiscal 2020 compared with fiscal 2019. As a percent of total revenue, operating expenses have decreased 4.3% in fiscal 2020 compared with fiscal 2019.

Product development. Product development includes all expenses associated with research and development. Product development increased $3.6 million, or 9.6%, during fiscal 2020 as compared to fiscal 2019 primarily due to the reduction of cost capitalization. The products in our rGuest platform for which we had capitalized costs reached general availability by the beginning of the second quarter of fiscal 2019. These products joined our well-established products with the application of agile development practices in a more dynamic development process that involves higher frequency releases of product features and functions. We capitalized $2.0 million of external use software development costs, and $0.3 million of internal use software development costs during fiscal 2019, with the full balance capitalized in Q1 fiscal 2019. We did not capitalize any costs associated with product development during fiscal 2020. Total product development costs, including operating expenses and capitalized amounts, were $41.5 million during fiscal 2020 compared to $40.1 million in fiscal 2019. The $1.4 million increase is mostly due to continued expansion of our R&D teams and infrastructure.

25

Sales and marketing. Sales and marketing increased $0.2 million, or 1.1%, in fiscal 2020 compared with fiscal 2019. The change is due primarily to an increase in our allowance for doubtful accounts due to an increase collection risk of our accounts receivable as of March 31, 2020 as a result of the negative impacts of the COVID-19 pandemic on the operations of our customers, partially offset by a decrease in costs associated with our annual bonus incentive plan that has declined in value due to a significant decrease in target achievements after reduced fourth quarter revenue activity with concentration in March 2020.

General and administrative. General and administrative increased $1.3 million, or 5.4%, in fiscal 2020 compared to fiscal 2019. The change is due primarily to software investments in third-party applications to host our network and infrastructure.

Depreciation of fixed assets. Depreciation of fixed assets increased $0.1 million or 2.8% in fiscal 2020 as compared to fiscal 2019.

Amortization of intangibles. Amortization of intangibles remained consistent in fiscal 2020 as compared to fiscal 2019.

Impairments. Impairments totaled $23.7 million in fiscal 2020. There were no impairments in fiscal 2019. The impairments result from specific capitalized software development costs supporting our rGuest solutions. The impact of the COVID-19 pandemic on the hospitality industry resulted in economic conditions which make it difficult to project future sales and revenue accurately for the related rGuest solutions. After evaluating the Company’s strategy for market development and continued costs to support the software, an impairment charge was required. We have recorded impairment charges to reduce the net realizable value of the related assets to zero.

Restructuring, severance and other charges. Restructuring, severance, and other charges decreased $0.6 million due to a reduction in non-restructuring severance activity during fiscal 2020 compared to fiscal 2019.

Legal settlements. Legal settlements consist of settlements of employment and other business-related matters.

Other (Income) Expenses

	Year ended March 31,						(Unfavorable) favorable
(Dollars in thousands)	2020			2019			$		%
Other (income) expense:
Interest (income)	$	(380	)	$	(339	)	$	41		(12.1	)%
Interest expense		9			10			1		10.0	%
Other expense, net		176			191			15		7.9	%
Total other (income), net	$	(195	)	$	(138	)	$	57		(41.3	)%

Interest income.  Interest income consists of interest earned on short-term investments in certificates of deposit, commercial paper, money market funds and corporate-owned life insurance policies.

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

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

Income Taxes

	Year ended March 31,						(Unfavorable) favorable
(Dollars in thousands)	2020			2019			$		%
Income tax expense	$	201		$	221		$	20		9.0	%
Effective tax rate		(0.6	)%		(1.7	)%

For fiscal 2020, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, state taxes 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 an immaterial reduction in unrecognized tax benefits may occur as a result of the expiration of various statutes of limitations. We are consistently subject to tax audits; due to the nature of examinations in multiple jurisdictions, changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time.

26

Because of our losses in prior periods, we have recorded a valuation allowance offsetting substantially all of our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Because of our losses in prior periods, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences. At March 31, 2020, we had $199.1 million of federal net operating loss carryforwards that expire, if unused, in fiscal years 2031 to 2038, and $24.7 million of federal net operating loss carryforwards that can be carried forward indefinitely. We also had $141.6 million of state net operating loss carryforwards that expire, if unused, in fiscal years 2021 through 2040.

Fiscal2019Compared to Fiscal2018

Net Revenue and Operating Loss

The following table presents our consolidated revenue and operating results for the fiscal years ended March 31, 2019 and 2018:

	Year ended March 31,						Increase (decrease)
(Dollars in thousands)	2019			2018			$			%
Net revenue:
Products	$	39,003		$	33,699		$	5,304			15.7	%
Support, maintenance and subscription services		75,496			69,068			6,428			9.3	%
Professional services		26,343			24,593			1,750			7.1	%
Total net revenue		140,842			127,360			13,482			10.6	%
Cost of goods sold:
Products (inclusive of developed technology amortization)		31,811			26,381			5,430			20.6	%
Support, maintenance and subscription services		15,895			16,688			(793	)		(4.8	)%
Professional services		19,256			19,874			(618	)		(3.1	)%
Total cost of goods sold		66,962			62,943			4,019			6.4	%
Gross profit		73,880			64,417			9,463			14.7	%
Gross profit margin		52.5	%		50.6	%
Operating expenses:
Product development		37,817			27,936			9,881			35.4	%
Sales and marketing		19,646			18,075			1,571			8.7	%
General and administrative		23,118			24,028			(910	)		(3.8	)%
Depreciation of fixed assets		2,504			2,631			(127	)		(4.8	)%
Amortization of intangibles		2,567			1,879			688			36.6	%
Restructuring, severance and other charges		1,168			1,798			(630	)		(35.0	)%
Legal settlements, net		141			150			(9	)		(6.0	)%
Operating loss	$	(13,081	)	$	(12,080	)	$	(1,001	)		8.3	%
Operating loss percentage		(9.3	)%		(9.5	)%

27

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

	Year ended March 31,
	2019			2018
Net revenue:
Products		27.7	%		26.5	%
Support, maintenance and subscription services		53.6			54.2
Professional services		18.7			19.3
Total net revenue		100.0			100.0
Cost of goods sold:
Products (inclusive of developed technology amortization)		22.6			20.7
Support, maintenance and subscription services		11.3			13.1
Professional services		13.6			15.6
Total cost of goods sold		47.5			49.4
Gross profit		52.5			50.6
Operating expenses:
Product development		26.9			21.9
Sales and marketing		13.9			14.2
General and administrative		16.4			18.9
Depreciation of fixed assets		1.8			2.1
Amortization of intangibles		1.8			1.5
Restructuring, severance and other charges		0.8			1.4
Legal settlements, net		0.1			0.1
Operating loss		(9.3	)%		(9.5	)%

Net revenue. Total revenue increased $13.5 million, or 10.6% in fiscal 2019 compared to fiscal 2018. Products revenue increased $5.3 million or 15.7%, due to growth in third-party hardware sales and in on premise software sales, which grew more than 20% compared to the prior year. Support, maintenance and subscription services revenue increased $6.4 million, or 9.3%, driven by growth in customers using our on premise software products that require the payment of support and maintenance along with continued increases in subscription based revenue, which increased 23.5% in fiscal 2019 compared to fiscal 2018. Subscription based revenue comprised 17.7% of total consolidated revenues in 2019 compared to 15.8% in 2018. Professional services revenue increased $1.8 million, or 7.1%, as a result of growth in our customer based including installations of our traditional on premise and subscription based software solutions and increased responses to customer service requests.

Gross profit and gross profit margin. Our total gross profit increased $9.5 million, or 14.7%, in fiscal 2019 and total gross margin increased from 50.6% to 52.5%. Products gross profit decreased $0.1 million and gross profit margin decreased 3.3% to 18.4% primarily as a result of increased developed technology amortization.Support, maintenance and subscription services gross profit increased $7.2 million and gross profit margin increased 310 basis points to 78.9% due to the scalable nature of our infrastructure supporting and hosting customers. Professional services gross profit increased $2.4 million and gross profit margin increased 7.7% to 26.9% due to increased revenue with lower costs from the restructuring of our professional services workforce during the first quarter of 2018 into a more efficient operating structure with limited use of contract labor.

Operating expenses

Operating expenses, excluding legal settlements and restructuring, severance and other charges, increased $11.1 million, or 14.9%, in fiscal 2019 compared with fiscal 2018. As a percent of total revenue, operating expenses have increased 2.3% in fiscal 2019 compared with fiscal 2018.

Product development. Product development includes all expenses associated with research and development. Product development increased $9.9 million, or 35.4%, during fiscal 2019 as compared to fiscal 2018 primarily due to the reduction of cost capitalization. The products in our rGuest platform for which we had capitalized costs reached general availability by the beginning of the second quarter of fiscal 2019. These products join our well-established products with the application of agile development practices in a more dynamic development process that involves higher frequency releases of products features and functions. We capitalized $2.0 million of external use software development costs, and $0.3 million of internal use software development costs during fiscal 2019, with the full balance capitalized in Q1 fiscal 2019. We capitalized approximately $8.9 million in total development costs during fiscal 2018. Total product development costs, including operating expenses and capitalized amount, were $40.1 million during fiscal 2019 compared to $38.4 million in fiscal 2018. The $1.7 million increase is mostly due to continued expansion of our R&D teams and increased compensation expense as a result of bonus earnings.

28

Sales and marketing. Sales and marketing increased $1.6 million, or 8.7%, in fiscal 2019 compared with fiscal 2018. The change is due primarily to anincrease of $1.6 million in incentive compensation related to an increase in sales, revenue and profitability during fiscal 2019.

General and administrative. General and administrative decreased $0.9 million, or 3.8%, in fiscal 2019 compared to fiscal 2018. The change is due primarily to reduced outside professional costs for legal and accounting services.

Depreciation of fixed assets. Depreciation of fixed assets decreased $0.1 million or 5.0% in fiscal 2019 as compared to fiscal 2018.

Amortization of intangibles. Amortization of intangibles increased $0.7 million, or 36.6%, in fiscal 2019 as compared to fiscal 2018 due to our remaining rGuest suite of products being placed into service on June 30, 2018.

Restructuring, severance and other charges. Restructuring, severance, and other charges decreased $1.8 million due to non-recurring 2018 restructuring activities while charges for non-restructuring severance increased $1.2 million, resulting in a net decrease of $0.6 million during fiscal 2019.

Legal settlements. Legal settlements consist of settlements of employment and other business-related matters.

Other (Income) Expenses

	Year ended March 31,						(Unfavorable) favorable
(Dollars in thousands)		2019			2018		$			%
Other (income) expenses
Interest (income)	$	(339	)	$	(98	)	$	241			245.9	%
Interest expense		10			10			—			—	%
Other expense (income), net		191			(391	)		(582	)	nm
Total other (income), net	$	(138	)	$	(479	)	$	(341	)	nm

nm - not meaningful

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

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

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

Income Taxes

	Year ended March 31,						(Unfavorable) favorable
(Dollars in thousands)		2019			2018		$			%
Income tax expense (benefit)	$	221		$	(3,251	)	$	(3,472	)	nm
Effective tax rate		(1.7	)%		(28.0	)%

nm - not meaningful

For fiscal 2019, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state taxes and other U.S. permanent book to tax differences.

The 2018 tax provision results primarily from a reduction in the deferred rate and the ability to offset indefinite lived deferred tax liabilities with certain deferred tax assets due to the passage of the Tax Cuts and Jobs Act ("Tax Act"). The 2018 effective tax rate was different than the statutory rate due primarily to the impact of the Tax Act, recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state tax effects including a benefit of $0.4 million related to a settlement with the California Franchise Tax Board and other U.S. permanent book to tax differences.

29

Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months an immaterial reduction in unrecognized tax benefits may occur 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.

Because of our losses in prior periods, we have recorded a valuation allowance offsetting substantially all of our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Because of our losses in prior periods, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences. At March 31, 2019, we had $210.6 million of federal net operating loss carryforwards of which $199.1 million will expire, if unused, in fiscal years 2031 to 2038.

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 March 31, 2020.

At March 31, 2020, all $46.7 million of our cash on hand was deposited in bank accounts, of which 93% are located in the United States. We believe there is limited credit risk with respect to our cash balances.

While we expect the COVID-19 pandemic will have a significant adverse impact on our results of operations, we cannot presently estimate its financial impact, which we expect will be highly dependent on the severity and duration of the pandemic. As such, due to the uncertainties associated with the COVID-19 pandemic and the indeterminate length of time it will affect the hospitality industry, we have taken certain proactive measures to secure our liquidity position to be able to meet our requirements for the foreseeable future. These measures have included implementing strict cost management measures, such as temporarily halting marketing programs, temporarily eliminating non-essential expenses, including capital expenditures and reducing payroll and related costs through layoffs and furloughs as well as salary and retirement benefit reductions.

In addition, we recently entered into an agreement to sell to MAK Capital One, LLC (“MAK Capital”) $35 million of convertible preferred stock carrying a 5.25% dividend that will be convertible into shares of the Company’s common stock at a price of $20.1676 per share. The transaction is subject to customary closing conditions and is anticipated to close during May 2020. The close of the transaction will add $35 million in preferred stock to the Company’s balance sheet and increase our cash balance by the $35 million investment less estimated closing costs of approximately $1 million.

We believe that cash flow from operating activities, cash on hand of $46.7 million as of March 31, 2020, the additional $34 million in net proceeds from the preferred stock sales and access to capital markets will provide adequate funds to meet our short-and long-term liquidity requirements.

As of March 31, 2020 and March 31, 2019, our total debt was approximately $0.1 million, comprised of finance lease obligations in both periods.

Cash Flow

	Year ended March 31,
(In thousands)	2020				2019			2018
Net cash provided by (used in):
Operating activities	$	10,575		$	7,241		$	6,874
Investing activities		(3,447	)		(5,534	)		(15,085	)
Financing activities		(1,116	)		(767	)		(1,295	)
Effect of exchange rate changes on cash		(130	)		(112	)		194
Cash flows provided by (used in) operations	$	5,882		$	828		$	(9,312	)

Cash flow provided by operating activities.  Cash flows provided by operating activities were $10.6 million in fiscal 2020. The provision of cash was due primarily to our operating loss of $34.1 million adjusted for $46.2 million in non-cash expense including impairment charges, depreciation, amortization, and share based compensation and a decrease of approximately $1.5 million in net operating assets and liabilities.

30

Cash flows provided by operating activities were $7.2 million in fiscal 2019. The provision of cash was due primarily to our operating loss of $13.2 million adjusted for $22.4 million in non-cash expense including depreciation, amortization, and share based compensation and an increase of approximately $2 million in net operating assets and liabilities.

Cash flows provided by operating activities were $6.9 million in fiscal 2018. The provision of cash was due primarily to our operating loss of $12.1 million adjusted for $19.2 million in non-cash expense including depreciation, amortization, and share based compensation.

Cash flow used in investing activities.  Cash flows used in investing activities in fiscal 2020 were $3.4 million due primarily to the purchase of property and equipment, including internal use software.

Cash flows used in investing activities in fiscal 2019 were $5.5 million. This is primarily attributed to $2.2 million in capitalized development costs of proprietary software and $3.3 million for purchase of property and equipment, including internal use software.

Cash flows used in investing activities in fiscal 2018 were $15.1 million. This is primarily attributed to $8.9 million in capitalized development costs of proprietary software and $6.1 million for purchase of property and equipment, including internal use software.

Cash flow used in financing activities. Respectively, in fiscal 2020, 2019, and 2018, the $1.1 million, $0.8 million, and $1.3 million cash flows used in financing activities were primarily comprised of the repurchase of shares to satisfy employee tax withholding and to cover the exercise price of the options.

Investments

Investments in Corporate-Owned Life Insurance Policies

Agilysys invests in corporate-owned life insurance policies for certain former executives, for which some are endorsement split-dollar life insurance arrangements. We entered into agreements with each of the former executives, whereby we must maintain the life insurance policy for a specified amount and split a portion of the policy benefits with their designated beneficiary. Our investment in these corporate-owned life insurance policies were recorded at their cash surrender value, which approximates fair value at the balance sheet date. In the Consolidated Balance Sheets at the balance sheet date, the cash surrender value of $0.9 million for the remaining policies were held in “Other non-current assets,” and the present value of future proceeds owed to those executives' designated beneficiary of $0.1 million, which approximates fair value, were recorded within "Other non-current liabilities" in the Consolidated Balance Sheets at the balance sheet date.

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.

Contractual Obligations

The following table provides aggregate information regarding our contractual obligations as of March 31, 2020.

(In thousands)	Total			2021	2022-2023		2024-2025		Thereafter
Operating leases (1)	$	20,658	$	4,927	$	7,062	$	4,768	$	3,901
Finance leases		57		29		26		2		—
Asset retirement obligation		170		131		25		—		14
Total contractual obligations (2)	$	20,885	$	5,087	$	7,113	$	4,770	$	3,915

(1) Operating lease obligations are presented net of contractually binding sub-lease arrangements. Additional information regarding our operating lease obligations is contained in Note 6, Leases.

(2) At March 31, 2020, we had a $0.6 million liability reserve for unrecognized income tax positions which is not reflected in the table above. The timing of potential cash outflows related to the unrecognized tax positions is not reasonably determinable and therefore, is not scheduled. Substantially all of this reserve is included in Other non-current liabilities. Additional information regarding unrecognized tax positions is provided in Note 9, Income Taxes.

We believe that cash on hand, funds from operations, and access to capital markets will provide adequate funds to finance capital spending and working capital needs and to service our obligations and other commitments arising during the foreseeable future.

31

Critical Accounting Policies

MD&A is based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosure of contingent assets and liabilities. Weregularly evaluate our estimates, including those related to bad debts, inventories, investments, intangible assets, income taxes, restructuring, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Our most significant accounting policies relate to the sale, purchase, and promotion of our products and services. The policies discussed below are considered by management to be critical to an understanding of our Consolidated Financial Statements because their application places the most significant demands on management's judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs.

For all of these policies, management cautions that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment.

Reclassification. Certain prior year balances have been reclassed to conform to the current year presentation. Specifically, we reclassed certain employee benefit obligations from current to non-current liabilities.

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

Revenue recognition under Topic 606

Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master service agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Performance obligations specific to each individual contract are defined within the terms of each order. Each performance obligation is identified based on the goods and services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which we will be entitled and expect to receive in exchange for transferring goods or services to the customer. Typically, our contracts do not provide our customer with any right of return or refund; we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or refund.

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

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

Revenue for hardware sales is recognized when the product is shipped to the customer and when obligations that affect the customer's final acceptance of the arrangement have been fulfilled. Hardware is purchased from suppliers and provided to the end-user customers via drop-ship or from inventory. We are responsible for negotiating the price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and bearing the credit risk if the customer does not pay for the goods. As the principal contact with the customer, we recognize revenue and cost of goods sold when we are notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination or upon installation at the customer site.

Support and maintenance revenue is derived from providing telephone and on-line technical support services, bug fixes, and unspecified software updates and upgrades to customers on a when-and-if-available basis. These services represent a stand-ready obligation that is concurrently delivered and has the same pattern of transfer to the customer; we account for these support and maintenance services as a single performance obligation recognized over the term of the maintenance agreement.

32

Our subscription service revenue is comprised of fees for contracts that provide customers a right to access our software for a subscribed period. We do not provide the customer the contractual right to license the software at any time outside of the subscription period under these contracts. The customer can only benefit from the software and software maintenance when provided the right to access the software. Accordingly, each of the rights to access the software, the maintenance services, and any hosting services is notconsidered a distinct performance obligation in the context of the contract and should be combined into a single performance obligation to be recognized over the contract period. The Company recognizes subscription revenue over a one-month period based on the typical monthly invoicing and renewal cycle in accordance with our customer agreement terms.

Professional services revenues primarily consist of fees for consulting, installation, integration and training and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are being performed. Professional services can be provided by internal or external providers, do not significantly affect the customer’s ability to access or use other provided goods or services, and provide a measure of benefit beyond that of other promised goods or services in the contract. As a result, professional services are considered distinct in the context of the contract and represent a separate performance obligation. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation.

We use the market approach to drive standalone selling price ("SSP") by maximizing observable data points (in the form of recently executed customer contracts) to determine the price customers are willing to pay for the goods and services transferred. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.

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

Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk, as well as historic trends of the entire customer pool. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk we perform periodic credit evaluations of our customers.

Customer credit allowance. We maintain allowances for estimated customer credits. Credits are typically due to the timing or amount of customer invoices processed for specific services, including professional and subscription, and maintenance coverage. In many cases, there has not been clear or timely communication of the need to adjust coverage or service at a location in advance of when we invoice for the associated coverage or service. We will issue a credit after agreeing to the service or coverage adjustment as requested by the customer within the terms of our contract.

Inventories. Our inventories are comprised of finished goods. Inventories are stated at the lower of cost or market, net of related reserves. The cost of inventory is computed using a weighted-average method. Our inventory is monitored to ensure appropriate valuation. Adjustments of inventories to the lower of cost or market, if necessary, are based upon contractual provisions such as turnover and assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional adjustments to inventory valuations may be required. We provide a reserve for obsolescence, which is calculated based on several factors including an analysis of historical sales of products and the age of the inventory. Actual amounts could be different from those estimated.

Income Taxes. Income tax expense includes U.S. and foreign income taxes and is based on reported income before income taxes. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities are determined based on the enacted tax rates expected to apply in the periods in which the deferred tax assets or liabilities are anticipated to be settled or realized.

We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies.

We recorded a valuation allowance of $66.8 million as of March 31, 2020 and $57.9 million as of March 31, 2019, related to substantially all of our deferred income tax assets in jurisdictions where there is uncertainty as to the ultimate realization of a benefit from those assets. In the event that we determine that we would be able to realize our deferred tax assets in the future in excess of our

33

net recorded amount, an adjustment to the tax valuation allowance would decrease tax expense in the period such determination was made.

We recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from uncertain tax positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet this threshold. Interest related to uncertain tax positions is recognized as part of the provision for income taxes and is accrued beginning in the period that such interest would be applicable under relevant tax law until such time that the related tax benefits are recognized. Our income taxes are described further in Note 9, Income Taxes.

Leases. We determine if an arrangement is or contains a lease at inception. Operating leases are presented as Right-of-Use (“ROU”) assets and the corresponding lease liabilities are included in operating lease liabilities – current and operating lease liabilities – non-current on our Consolidated Balance Sheet. Finance leases are included in property and equipment, net and corresponding liabilities are included in finance lease obligations – current and non-current on our Consolidated Balance Sheet. ROU assets represent our right to use the underlying asset and lease liabilities represent our obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.

ROU assets and lease liabilities are recognized at commencement date and determined suing the present value of the remaining lease payments over the lease term. We use an incremental borrowing rate based on estimated rate of interest for collateralized borrowing since our leases do not include an implicit interest rate. The estimated incremental borrowing rate considers market data, actual lease economic environment, and actual lease term at commencement date. The lease term may include options to extend when it is reasonably certain that we will exercise that option. ROU assets include lease payments made, and excludes any incentives received or initial direct costs incurred. Lease expense is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components which we account for as a single lease component. We also have leases which include variable lease payments, which are expensed as incurred. Our variable lease payments are not based on an index or rate and therefore are exclude from the calculation of lease liabilities. We have elected to not recognize short term leases that have a term of twelve months or less as ROU assets or lease liabilities. Our short-term leases are not material and do not have a material impact on our ROU assets or lease liabilities. Additionally, we do not have any covenants, residual value guarantees, or related party transactions associated with our lease agreements.  

Goodwill and Other Indefinite-Lived Intangible Assets. Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies. Goodwill is tested for impairment on an annual basis, or in interim periods if indicators of potential impairment exist. The Company is also required to compare the fair values of other indefinite-lived intangible assets to their carrying amounts at least annually, or when current events and circumstances require an interim assessment. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized.

Restructuring Charges. We recognize restructuring charges when a plan that materially changes the scope of our business, or the manner in which that business is conducted, is adopted and communicated to the impacted parties, and the expenses have been incurred or are reasonably estimable. Our restructuring reserves principally include estimates related to employee separation costs and the consolidation and impairment of facilities that will no longer be used in continuing operations. Actual amounts could be different from those estimated. Facility reserves are calculated using a present value of future minimum lease payments, offset by an estimate for future sublease income provided by external brokers. Present value is calculated using a credit-adjusted risk-free rate with a maturity equivalent to the lease term.

Share-Based Compensation. We have a stock incentive plan under which we may grant non-qualified stock options, incentive stock options, stock-settled stock appreciation rights, time-vested restricted shares, restricted share units, performance-vested restricted shares, and performance shares. Shares issued pursuant to awards under this plan may be made out of treasury or authorized but unissued shares.

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 fair value for stock-settled appreciation right awards tied to a market condition are estimated using the Lattice option pricing model which utilizes a binomial tree to forecast option pricing. Forfeitures of awards are recognized as they occur. Additional information regarding the assumptions used to value share-based compensation awards is provided in Note 13, Share-Based Compensation.

Capitalized Software Development Costs. The capitalization of software development cost for external use 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 Consolidated Statements of Operations.

34

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, which is a range between three and eight years. The amount by which unamortized software costs exceeds the net realizable value, if any, is recognized as a charge to income in the period it is determined. We did not capitalize any software development costs during fiscal 2020. We capitalized approximately $2.0 million and $8.2 million during fiscal 2019 and 2018, respectively. Amortization of developed capitalized software was $12.6 million, $12.6 million and $10.0 million during fiscal 2020, 2019 and 2018, respectively.

During the fourth quarter of fiscal 2020, the world pandemic related to COVID-19 and the resulting global economic environment impacted the expected growth of revenue related to our rGuest suite of products. The unamortized costs exceeded the net realizable value resulting in a charge to income during the fiscal year. Additional information regarding our intangible assets is provided in Note 5, Intangible Assets and Software Development Costs.

Adopted and Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-03, Codification Improvements to Financial Instruments. ASU 2020-03 provides clarifications for questions and comments received regarding how changes to specific guidance related to financial instruments as a result of ASU No. 2016-13 interacts with other areas of the codification. The guidance was effective upon issuance of the ASU and correlates to the adoption of each of the applicable ASUs. Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13 and will apply applicable changes from ASU 2020-03 in the period of adoption.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions previously allowed in the standard and simplifies the accounting for income taxes by providing additional guidance for certain tax situations. The update is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods, with early adoption (including early adoption in any interim period) permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. ASU 2019-04 provides corrections, updates and clarifications to the previously issued updates ASU 2016-13, ASU 2017-12 and ASU 2016-01. Various areas of the codification were impacted from the update. The standard follows the effective dates of the previously issued ASUs, unless an entity has already early adopted the previous ASUs, in which case the effective date will vary according to each specific ASU adoption. Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13, and the other two ASUs affected by ASU 2019-04 are not applicable to us. We are currently reviewing this standard to assess the impact on our future consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 addresses the treatment of implementation costs incurred in a hosting arrangement that is a service contract. The update does not impact the accounting for the service element of a hosting arrangement that is a service contract. The update is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption (includingearly adoption in any interim period) permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 addresses the required disclosures around fair value measurement. The disclosure requirements of the reasons for transfers between Level 1 and Level 2, the policy for timing transfers between levels, and the valuation process for Level 3 measurements have been removed. Certain modifications were made to required disclosures and additional requirements were established. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220). ASU 2018-02 addresses the effect of the change in the U.S. federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We have adopted this standard as of April 1, 2019. While we have elected to reclassify any amount out of other comprehensive income, we do not have any amounts to reclassify and therefore the adoption had no impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires goodwill impairment to be measured as

35

the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. While we are still assessing the impact of this standard, we do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

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

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Unlike Accounting Standard Codification Topic 840 (“Topic 840”), which requires only capital leases to be recognized on the balance sheet, the new guidance requires both types of leases to be recognized on the balance sheet. The most prominent change for lessees is the requirement to recognize both Right-of-Use (ROU) assets and lease liabilities for leases classified as operating leases under Topic 840. We adopted Topic 842 as of April 1, 2019 using the current period adjustment method of adoption. Refer to Note 6, Leases for further details.

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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We have assets, liabilities, and cash flows in foreign currencies creating foreign exchange risk. We sell products and services internationally and enter into transactions denominated in foreign currencies. As a result, we are subject to the variability that arises from exchange rate movements. For the fiscal years 2020, 2019 and 2018, revenue from international operations was 9%, 9% and 8%, respectively of total revenue. The effects of foreign currency on operating results did not have a material impact on our results of operations for the 2020, 2019 and 2018 fiscal years. Fluctuations in the value of other currencies, particularly the Indian Rupee, could materially impact our revenue, expenses, operating profit and net income.

36

Item 8.  Financial Statements and SupplementaryData.

Agilysys, Inc. and Subsidiaries

ANNUAL REPORT ON FORM 10-K

Year EndedMarch 31, 2020

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Reports of Independent Registered Public Accounting Firm - Grant Thornton LLP	38
Consolidated Balance Sheets as of March 31, 2020 and 2019	40
Consolidated Statements of Operations for the years ended March 31, 2020, 2019, and 2018	41
Consolidated Statements of Comprehensive Loss for the years ended March 31, 2020, 2019, and 2018	42
Consolidated Statements of Cash Flows for the years ended March 31, 2020, 2019 and 2018	43
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2020, 2019, and 2018	44
Notes to Consolidated Financial Statements	45
Schedule II - Valuation and Qualifying Accounts for the years ended March 31, 2020, 2019, and 2018	65

37

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Agilysys, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Agilysys, Inc. (an Ohio corporation) and subsidiaries (the “Company”) as of March 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2020, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of March 31, 2020, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated May 22, 2020 expressed an unqualified opinion.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases as of April 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company's auditor since 2016.

Atlanta, Georgia

May 22, 2020

38

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Agilysys, Inc.

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Agilysys, Inc. (an Ohio corporation) and subsidiaries (the “Company”) as of March 31, 2020, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2020, based on criteria established in the 2013 Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended March 31, 2020, and our report dated May 22, 2020 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Atlanta, Georgia

May 22, 2020

39

AGILYSYS, INC.

CONSOLIDATED BALANCE SHEETS

	As of March 31,
(In thousands, except share data)	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	46,653		$	40,771
Accounts receivable, net of allowance for doubtful accounts of $1,634    and $788, respectively		35,869			27,000
Contract assets		2,125			2,921
Inventories		3,887			2,044
Prepaid expenses and other current assets		4,874			6,272
Total current assets		93,408			79,008
Property and equipment, net		12,230			15,838
Operating lease right-of-use assets		13,829			—
Goodwill		19,622			19,622
Intangible assets, net		8,400			8,438
Software development costs, net		—			34,567
Deferred income taxes, non-current		764			443
Other non-current assets		6,309			5,675
Total assets	$	154,562		$	163,591
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	13,403		$	4,718
Contract liabilities		42,244			38,669
Accrued liabilities		9,033			14,406
Operating lease liabilities, current		4,719			—
Finance lease obligations, current		24			22
Total current liabilities		69,423			57,815
Deferred income taxes, non-current		880			861
Operating lease liabilities, non-current		10,617			—
Finance lease obligations, non-current		25			35
Other non-current liabilities		1,860			4,258
Commitments and contingencies (see Note 11)
Shareholders' equity:
Common shares, without par value, at $0.30 stated value; 80,000,000    shares authorized; 31,606,831 shares issued; and 23,609,398    and 23,501,193 shares outstanding at March 31, 2020    and March 31, 2019, respectively		9,482			9,482
Treasury shares, 7,997,433 and 8,105,638 at March 31, 2020    and March 31, 2019, respectively		(2,401	)		(2,433	)
Capital in excess of stated value		5,491			781
Retained earnings		58,984			93,051
Accumulated other comprehensive income (loss)		201			(259	)
Total shareholders' equity		71,757			100,622
Total liabilities and shareholders' equity	$	154,562		$	163,591

See accompanying notes to consolidated financial statements.

40

AGILYSYS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended
	March 31,
(In thousands, except per share data)	2020			2019			2018
Net revenue:
Products	$	44,230		$	39,003		$	33,699
Support, maintenance and subscription services		83,680			75,496			69,068
Professional services		32,847			26,343			24,593
Total net revenue		160,757			140,842			127,360
Cost of goods sold:
Products (inclusive of developed technology amortization)		36,427			31,811			26,381
Support, maintenance and subscription services		19,248			15,895			16,688
Professional services		24,130			19,256			19,874
Total cost of goods sold		79,805			66,962			62,943
Gross profit		80,952			73,880			64,417
Gross profit margin		50.4	%		52.5	%		50.6	%
Operating expenses:
Product development		41,463			37,817			27,936
Sales and marketing		19,864			19,646			18,075
General and administrative		24,374			23,118			24,028
Depreciation of fixed assets		2,574			2,504			2,631
Amortization of intangibles		2,541			2,567			1,879
Impairments		23,740			-			-
Restructuring, severance and other charges		582			1,168			1,798
Legal settlements, net		(125	)		141			150
Total operating expense		115,013			86,961			76,497
Operating loss		(34,061	)		(13,081	)		(12,080	)
Other (income) expense:
Interest income		(380	)		(339	)		(98	)
Interest expense		9			10			10
Other expense (income), net		176			191			(391	)
Loss before taxes		(33,866	)		(12,943	)		(11,601	)
Income tax expense (benefit)		201			221			(3,251	)
Net loss	$	(34,067	)	$	(13,164	)	$	(8,350	)
Weighted average shares outstanding - basic and diluted		23,233			23,037			22,801
Net loss per share - basic and diluted:	$	(1.47	)	$	(0.57	)	$	(0.37	)

See accompanying notes to consolidated financial statements.

41

AGILYSYS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

	Year Ended
	March 31,
(In thousands)	2020			2019			2018
Net loss	$	(34,067	)	$	(13,164	)	$	(8,350	)
Other comprehensive income (loss), net of tax:
Unrealized foreign currency translation adjustments		460			(4	)		(51	)
Total comprehensive loss	$	(33,607	)	$	(13,168	)	$	(8,401	)

See accompanying notes to consolidated financial statements.

42

AGILYSYS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended
	March 31,
(In thousands)	2020			2019			2018
Operating activities
Net loss	$	(34,067	)	$	(13,164	)	$	(8,350	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Impairments		23,740			—			—
(Gain) loss on disposal of property & equipment		(5	)		17			—
Depreciation		2,574			2,504			2,631
Amortization of intangibles		2,541			2,567			1,879
Amortization of developed technology		12,561			12,602			10,016
Deferred income taxes		(356	)		309			(3,085	)
Share-based compensation		5,205			4,376			4,688
Accounts receivable		(8,974	)		(7,536	)		(719	)
Contract assets		794			1,662			—
Inventories		(1,830	)		(50	)		229
Prepaid expense and other current assets		1,545			(1,158	)		1,485
Accounts payable		8,585			(3,512	)		130
Contract liabilities		3,563			4,845			(2,448	)
Accrued liabilities		(4,227	)		5,029			653
Income taxes payable		(153	)		(564	)		(19	)
Other changes, net		(921	)		(686	)		(216	)
Net cash provided by operating activities		10,575			7,241			6,874
Investing activities
Capital expenditures		(3,420	)		(3,318	)		(6,140	)
Capitalized software development costs		—			(2,189	)		(8,918	)
Additional (investments in) corporate-owned life insurance policies		(27	)		(27	)		(27	)
Net cash used in investing activities		(3,447	)		(5,534	)		(15,085	)
Financing activities
Repurchase of common shares to satisfy employee tax withholding		(1,092	)		(647	)		(1,171	)
Principal payments under long-term obligations		(24	)		(120	)		(124	)
Net cash used in financing activities		(1,116	)		(767	)		(1,295	)
Effect of exchange rate changes on cash		(130	)		(112	)		194
Net increase (decrease) in cash and cash equivalents		5,882			828			(9,312	)
Cash and cash equivalents at beginning of period		40,771			39,943			49,255
Cash and cash equivalents at end of period	$	46,653		$	40,771		$	39,943

See accompanying notes to consolidated financial statements.

43

AGILYSYS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

	Common Shares										Capital in						Accumulated
	Issued				In Treasury						excess of						other
(In thousands, except share data)	Shares		Stated value		Shares			Stated value			stated value			Retained earnings			comprehensive income (loss)			Total
Balance at March 31, 2017		31,607	$	9,482		(8,397	)	$	(2,519	)	$	(5,782	)	$	112,692		$	(204	)	$	113,669
Cumulative effect of change in    accounting policy		—		—		—			—			741			(741	)		—			—
Share based compensation		—		—		—			—			4,463			—			—			4,463
Restricted shares issued, net		—		—		213			64			(64	)		—			—			—
Shares issued upon exercise of    stock options and SSARs		—		—		8			2			(2	)		—			—			—
Shares withheld for taxes upon    exercise of stock options, SSARs    or vesting of restricted shares		—		—		(107	)		(33	)		(1,267	)		—			—			(1,300	)
Net loss		—		—		—			—			—			(8,350	)		—			(8,350	)
Unrealized translation adjustment		—		—		—			—			—			—			(51	)		(51	)
Balance at March 31, 2018		31,607	$	9,482		(8,283	)	$	(2,486	)	$	(1,911	)	$	103,601		$	(255	)	$	108,431
Cumulative effect of change in    accounting policy		—		—		—			—			—			2,614			—			2,614
Share based compensation		—		—		—			—			3,971			—			—			3,971
Restricted shares issued, net		—		—		180			54			(54	)		—			—			—
Shares issued upon exercise of    stock options and SSARs		—		—		60			18			(18	)		—			—			—
Shares withheld for taxes upon    exercise of stock options, SSARs    or vesting of restricted shares		—		—		(62	)		(19	)		(1,207	)		—			—			(1,226	)
Net loss		—		—		—			—			—			(13,164	)		—			(13,164	)
Unrealized translation adjustments		—		—		—			—			—			—			(4	)		(4	)
Balance at March 31, 2019		31,607	$	9,482		(8,105	)	$	(2,433	)	$	781		$	93,051		$	(259	)	$	100,622
Share based compensation		—		—		—			—			5,682			—			—			5,682
Restricted shares issued, net		—		—		140			41			(41	)		—			—			—
Shares issued upon exercise of    stock options and SSARs		—		—		21			6			(6	)		—			—			—
Shares withheld for taxes upon    exercise of stock options, SSARs    or vesting of restricted shares		—		—		(53	)		(15	)		(925	)		—			—			(940	)
Net loss		—		—		—			—			—			(34,067	)		—			(34,067	)
Unrealized translation adjustments		—		—		—			—			—			—			460			460
Balance at March 31, 2020		31,607	$	9,482		(7,997	)	$	(2,401	)	$	5,491		$	58,984		$	201		$	71,757

See accompanying notes to consolidated financial statements.

44

Agilysys, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Table amounts in thousands, except per share data)

1. Nature of Operations

Agilysys has been a leader in hospitality software for more than 40 years, delivering innovative guest-centric technology solutions for gaming, hotels, resorts and cruise, corporate foodservice management, restaurants, universities, stadia, airport foodservice and healthcare. Agilysys offers the most comprehensive solutions in the industry, including point of sale (POS), property management systems (PMS), inventory and procurement, payments, and related applications, to manage the entire guest journey.

The Company has just one reportable segment serving the global hospitality industry. Agilysys operates across North America, Europe, Asia-Pacific, and India with headquarters located in Alpharetta, GA.

Reference herein to any particular year or quarter refers to periods within the fiscal year ended March 31. For example, fiscal 2020 refers to the fiscal year ended March 31, 2020.

COVID-19 Pandemic

During the fourth quarter ended March 31, 2020, concerns related to the spread of novel coronavirus (“COVID-19”) began to create global business disruptions as well as disruptions in our operations and cause potential negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on various factors, including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Because an increasing portion of our business is based on a subscription model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time. The COVID-19 pandemic had a significant impact on our business as of March 31, 2020, and the twelve month period then ended. As a result, we recorded impairments of our capitalized software development costs and certain internal use software as of the balance sheet date due to triggering events identified as of year-end. We also increased our allowance for doubtful accounts and our customer credit allowance due to the direct negative impact on our customers as of year-end.

2. Summary of Significant Accounting Policies

Principles of consolidation. The consolidated financial statements include the accounts of Agilysys, Inc. and subsidiaries. Investments in affiliated companies are accounted for by the equity or cost method, as appropriate. All inter-company accounts have been eliminated.

Use of estimates. Preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“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. In particular, the economic disruption related to the COVID-19 pandemic had a material adverse impact on our results for the year ended March 31, 2020, and we expect it to continue to have a material adverse impact on our results. As such, this annual period, as well as upcoming interim periods, are unlikely to be comparable to past performance or indicative of future performance.

Cash and cash equivalents. We consider all highly liquid investments purchased with an original maturity from date of acquisition of three months or less to be cash equivalents. Other highly liquid investments considered cash equivalents with no established maturity date are fully redeemable on demand (without penalty) with settlement of principal and accrued interest on the following business day after instruction to redeem. Such investments are readily convertible to cash with no penalty and can include certificates of deposit, commercial paper, treasury bills, money market funds and other investments.

Allowance for doubtful accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as historic trends of the entire customer pool. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk we perform periodic credit evaluations of our customers.

Customer credit allowance. We maintain allowances for estimated customer credits. Credits are typically due to the timing or amount of customer invoices processed for specific services, including professional and subscription, and maintenance coverage. In many cases, there has not been clear or timely communication of the need to adjust coverage or service at a location in advance of when we

45

invoice for the associated coverage or service. We will issue a credit after agreeing to the service or coverage adjustment as requested by the customer within the terms of our contract.

Inventories. Our inventories are comprised of finished goods. Inventories are stated at the lower of cost or net realizable value, net of related reserves. The cost of inventory is computed using a weighted-average method. Our inventory is monitored to ensure appropriate valuation. Adjustments of inventories to the lower of cost or net realizable value, if necessary, are based upon contractual provisions such as turnover and assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional adjustments to inventory valuations may be required. We provide a reserve for obsolescence, which is calculated based on several factors, including an analysis of historical sales of products and the age of the inventory. Actual amounts could be different from those estimated.

Leases. We determine if an arrangement is or contains a lease at inception. Operating leases are presented as Right-of-Use (“ROU”) assets and the corresponding lease liabilities are included in operating lease liabilities – current and operating lease liabilities – non-current on our Consolidated Balance Sheet. Finance leases are included in property and equipment, net and corresponding liabilities are included in finance lease obligations – current and non-current on our Consolidated Balance Sheet. ROU assets represent our right to use the underlying asset, and lease liabilities represent our obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.

ROU assets and lease liabilities are recognized at commencement date and determined using the present value of the remaining lease payments over the lease term. We use an incremental borrowing rate based on estimated rate of interest for collateralized borrowing since our leases do not include an implicit interest rate. The estimated incremental borrowing rate considers market data, actual lease economic environment, and actual lease term at commencement date. The lease term may include options to extend when it is reasonably certain that we will exercise that option. ROU assets include lease payments made in advance, and excludes any incentives received or initial direct costs incurred. Lease expense is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components which we account for as a single lease component. We also have leases which include variable lease payments, which are expensed as incurred. Our variable lease payments are not based on an index or rate and therefore are excluded from the calculation of lease liabilities. We have elected to not recognize short term leases that have a term of twelve months or less as ROU assets or lease liabilities. Our short-term leases are not material and do not have a material impact on our ROU assets or lease liabilities. Additionally, we do not have any covenants, residual value guarantees, or related party transactions associated with our lease agreements.

Goodwill and Other Indefinite-Lived Intangible Assets. Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies. The carrying amount of goodwill was $19.6 million as of March 31, 2020 and 2019. Goodwill is tested for impairment on an annual basis, or in interim periods if indicators of potential impairment exist. The Company evaluates whether goodwill is impaired by comparing its market capitalization based on its closing stock price (Level 1 input) to the book value of its equity on the annual evaluation date. Based on testing performed, the Company concluded that no impairment of its goodwill has occurred for the years ended March 31, 2020, 2019 and 2018.

The Company is also required to compare the fair values of other indefinite-lived intangible assets to their carrying amounts at least annually, or when current events and circumstances require an interim assessment. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized.

Intangible assets. Purchased intangible assets with finite lives are primarily amortized using the straight-line method over the estimated economic lives of the assets. Our finite-lived intangible assets are amortized over periods between two and eight years. Customer relationships are amortized over estimated useful lives between two and seven years; non-competition agreements are amortized over estimated useful lives between two and eight years; developed technology is amortized over estimated useful lives between three and eight years; supplier relationships are amortized over estimated useful lives between two and eight years.

Long-lived assets. Property and equipment are recorded at cost. Major renewals and improvements are capitalized. Minor replacements, maintenance, repairs, and reengineering costs are expensed as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized.

Depreciation and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under finance leases, which make up less than one percent of total assets, over their estimated useful lives using the straight-line method. The estimated useful lives for depreciation and amortization are as follows: buildings and building improvements - 7 to 30 years; furniture - 7 to 10 years; equipment - 3 to 10 years; software - 3 to 10 years; and leasehold improvements over the shorter of the economic life or the lease term. Internal use software costs are expensed or capitalized depending on the project stage. Amounts capitalized are amortized over the estimated useful lives of the software, ranging from 3 to 10 years, beginning with the project's completion. Depreciation for capitalized project expenditures does not begin until the underlying project is completed.

46

We evaluate the recoverability of our long-lived assets whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the event the carrying value of the assets exceeds the future undiscounted cash flows attributable to such assets. Our long-lived assets and impairments considerations are discussed further in Note 4, Property and Equipment, net.

Foreign currency translation. The financial statements of our foreign operations are translated into U.S. dollars for financial reporting purposes. The assets and liabilities of foreign operations whose functional currencies are not in U.S. dollars are translated at the period-end exchange rates, while revenue and expenses are translated at weighted-average exchange rates during the fiscal year. The cumulative translation effects are reflected as a component of “Accumulated other comprehensive loss” within shareholders' equity in the Consolidated Balance Sheets. Gains and losses on monetary transactions denominated in other than the functional currency of an operation are reflected within “Other (income) expenses, net” in the Consolidated Statements of Operations. Foreign currency gains and losses from changes in exchange rates have not been material to our consolidated operating results.

Revenue recognition. We derive revenue from the sale of products (i.e., software, third party hardware and operating systems), support, maintenance and subscription services and professional services. For the fiscal years 2020, 2019 and 2018, revenue from international operations was 9%, 9% and 8%, respectively of total revenue. Our customer base is highly fragmented.

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

Revenue recognition under Topic 606

Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master service agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Performance obligations specific to each individual contract are defined within the terms of each order. Each performance obligation is identified based on the goods and services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which we will be entitled and expect to receive in exchange for transferring goods or services to the customer. Typically, our contracts do not provide our customer with any right of return or refund; we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or refund.

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

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

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

Support and maintenance revenue is derived from providing telephone and on-line technical support services, bug fixes, and unspecified software updates and upgrades to customers on a when-and-if-available basis. These services represent a stand-ready obligation that is concurrently delivered and has the same pattern of transfer to the customer; we account for these support and maintenance services as a single performance obligation recognized over the term of the maintenance agreement.

Our subscription service revenue is comprised of fees for contracts that provide customers a right to access our software for a subscribed period. We do not provide the customer the contractual right to license the software at any time outside of the subscription period under these contracts. The customer can only benefit from the software and software maintenance when provided the right to access the software. Accordingly, each of the rights to access the software, the maintenance services, and any hosting services is not considered a distinct performance obligation in the context of the contract and should be combined into a single performance

47

obligation to be recognized over the contract period. The Company recognizes subscription revenue over a one-month period based on the typical monthly invoicing and renewal cycle in accordance with our customer agreement terms.

Professional services revenues primarily consist of fees for consulting, installation, integration and training and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are being performed. Professional services can be provided by internal or external providers, do not significantly affect the customer's ability to access or use other provided goods or services, and provide a measure of benefit beyond that of other promised goods or services in the contract. As a result, professional services are considered distinct in the context of the contract and represent a separate performance obligation. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation.

We use the market approach to derive standalone selling price ("SSP") by maximizing observable data points (in the form of recently executed customer contracts) to determine the price customers are willing to pay for the goods and services transferred. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.

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

Comprehensive (loss) income. Comprehensive (loss) income is the total of net (loss) income, as currently reported under GAAP, plus other comprehensive (loss) income. Other comprehensive (loss) income considers the effects of additional transactions and economic events that are not required to be recorded in determining net (loss) income, but rather are reported as a separate statement of comprehensive (loss) income.

Fair value measurements. We measure the fair value of financial assets and liabilities on a recurring or non-recurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. In determining fair value of financial assets and liabilities, we use various valuation techniques. Additional information regarding fair value measurements is provided in Note 14, Fair Value Measurements.

Investments in corporate-owned life insurance policies. Agilysys invests in corporate-owned life insurance policies, for which some are endorsement split-dollar life insurance arrangements. We entered into agreements with certain former executives, whereby we must maintain the life insurance policy for a specified amount and split a portion of the policy benefits with their respective designated beneficiary. Our investment in these corporate-owned life insurance policies were recorded at their cash surrender value, which approximates fair value at the balance sheet date. In the Consolidated Balance Sheets at the balance sheet date, the cash surrender value of $0.9 million for the remaining policies were held in “Other non-current assets,” and the present value of future proceeds owed to those executives' designated beneficiary of $0.1 million, which approximates fair value, were recorded within "Other non-current liabilities." Additional information regarding the investments in corporate-owned life insurance policies is provided in Note 10, Employee Benefit Plans.

Income Taxes. Income tax expense includes U.S. and foreign income taxes and is based on reported income before income taxes. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities are determined based on the enacted tax rates expected to apply in the periods in which the deferred tax assets or liabilities are anticipated to be settled or realized.

We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies.

We recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from uncertain tax positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet this threshold. Interest related to uncertain tax positions is recognized as part of the provision for income taxes and is accrued beginning in the period that such interest would be applicable under relevant tax law until such time that the related tax benefits are recognized. Our income taxes are described further in Note 9, Income Taxes.

Capitalized Software Development Costs. The capitalization of software development cost for external use 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 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

48

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, which is a range between three and eight years. Annually, or more frequent as required by triggering events, an analysis of the net realizable value of the capitalized software is completed and the amount by which unamortized software costs exceeds the net realizable value, if any, is recognized as a charge to income in the period it is determined. See further discussion regarding our capitalized software development costs in Note 5, Intangible Assets and Software Development Costs.

Advertising and Promotion Expense. We expense advertising and promotion expense as incurred. Advertising and promotion expense was $2.7 million, $2.0 million and $2.7 million in fiscal 2020, 2019 and 2018, respectively.

Reclassification. Certain prior year balances have been reclassed to conform to the current year presentation. Specifically, we reclassed certain employee benefit obligations from current to non-current liabilities.

Adopted and Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-03, Codification Improvements to Financial Instruments. ASU 2020-03 provides clarifications for questions and comments received regarding how changes to specific guidance related to financial instruments as a result of ASU No. 2016-13 interacts with other areas of the codification. The guidance was effective upon issuance of the ASU and correlates to the adoption of each of the applicable ASUs. Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13 and will apply applicable changes from ASU 2020-03 in the period of adoption.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions previously allowed in the standard and simplifies the accounting for income taxes by providing additional guidance for certain tax situations. The update is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods, with early adoption (including early adoption in any interim period) permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. ASU 2019-04 provides corrections, updates and clarifications to the previously issued updates ASU 2016-13, ASU 2017-12 and ASU 2016-01. Various areas of the codification were impacted from the update. The standard follows the effective dates of the previously issued ASUs, unless an entity has already early adopted the previous ASUs, in which case the effective date will vary according to each specific ASU adoption. Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13, and the other two ASUs affected by ASU 2019-04 are not applicable to us. We are currently reviewing this standard to assess the impact on our future consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 addresses the treatment of implementation costs incurred in a hosting arrangement that is a service contract. The update does not impact the accounting for the service element of a hosting arrangement that is a service contract. The update is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption (including early adoption in any interim period) permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 addresses the required disclosures around fair value measurement. The disclosure requirements of the reasons for transfers between Level 1 and Level 2, the policy for timing transfers between levels, and the valuation process for Level 3 measurements have been removed. Certain modifications were made to required disclosures and additional requirements were established. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220). ASU 2018-02 addresses the effect of the change in the U.S. federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We have adopted this standard as of April 1, 2019. While we have elected to reclassify any amount out of other comprehensive income, we do not have any amounts to reclassify and therefore the adoption had no impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. While we are

49

still assessing the impact of this standard, we do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

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

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Unlike Accounting Standard Codification Topic 840 (“Topic 840”), which requires only capital leases to be recognized on the balance sheet, the new guidance requires both types of leases to be recognized on the balance sheet. The most prominent change for lessees is the requirement to recognize both Right-of-Use (ROU) assets and lease liabilities for leases classified as operating leases under Topic 840. We adopted Topic 842 as of April 1, 2019 using the current period adjustment method of adoption. Refer to Note 6, Leases for further details.

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. Revenue Recognition

On April 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method applied to those contracts that were not completed as of the adoption date. Results for reporting periods beginning after the adoption date are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under prior guidance. For in depth discussion regarding our revenue recognition procedures for our revenue streams, see Note 2, Summary of Significant Accounting Policies.

Disaggregation of Revenue

We derive and report our revenue from the sale of products (software licenses, third party hardware and operating systems), support, maintenance and subscription services and professional services. Revenue recognized at a point in time (products) totaled $44.2 million, $39.0 million, and $33.7 million during fiscal 2020, 2019 and 2018. Revenue recognized over time (support, maintenance and subscription services and professional services) totaled $116.5 million, $101.8 million, and $93.7 million during fiscal 2020, 2019 and 2018.

Contract Balances

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

Revenue recognized from amounts included in contract liabilities at the beginning of the period was $37.0 million and $33.1 million during fiscal 2020 and 2019. During fiscal 2020 and 2019, we transferred from contract assets at the beginning of the period, $2.8 million and $4.6 million, respectively, to accounts receivable because the right to the transaction became unconditional.

Our arrangements are for a period of one year or less. As a result, unsatisfied performance obligations as of March 31, 2020 are expected to be satisfied and the allocated transaction price recognized in revenue within a period of 12 months or less.

Assets Recognized from Costs to Obtain a Contract

Sales commission expenses that would not have occurred absent the customer contracts are considered incremental costs to obtain a contract. We have elected to take the practical expedient available to expense the incremental costs to obtain a contract as incurred when the expected benefit and amortization period is one year or less. For subscription contracts that are renewed monthly based on an agreement term, we capitalize commission expenses and amortize as we satisfy the underlying performance obligations, generally based on the contract terms and anticipated renewals. For first year support and maintenance service contracts, commission expenses

50

are immaterial and therefore expenses as incurred. Other sales commission expenses are not material or have a period of benefit of one year or less, and are therefore expensed as incurred in line with the practical expedient elected.

As part of our 606 transition adjustments, we capitalized $1.9 million of sales incentive costs incurred in prior periods as of April 1, 2018. We had $3.2 million and $3.3 million of capitalized sales incentive costs as of March 31, 2020 and 2019, respectively. These balances are included in other non-current assets on our Consolidated Balance Sheet. During fiscal 2020 and 2019, we expensed $4.7 million and $4.5 million, respectively, of sales commission, which included amortization of capitalized amounts of $1.4 million and $1.1 million, respectively. These expenses are included in operating expenses – sales and marketing in our Consolidated Statement of Operations. All other costs to obtain a contract are not considered incremental and therefore are expensed as incurred.

Financial Statement Impact of Adoption on Previously Reported Results

We adopted Topic 606 using the modified retrospective method beginning fiscal 2019. The cumulative impact of applying the new guidance to all contracts with customers that were not completed as of April 1, 2018 was recorded as an adjustment to retained earnings as of the adoption date. As a result of applying the modified retrospective method to adopt the new standard, we also impacted accounts receivable, net, contract assets, prepaid expenses and other current assets, other non-current assets, contract liabilities and retained earnings on our Consolidated Balance Sheet as of April 1, 2018.

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

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

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

4. Property and Equipment, Net

Property and equipment at March 31, 2020 and 2019 is as follows:

	Year ended March 31,
(In thousands)		2020			2019
Furniture and equipment	$	14,358		$	11,604
Software		17,136			16,427
Leasehold improvements		7,012			6,981
Project expenditures not yet in use		50			1,014
		38,556			36,026
Accumulated depreciation and amortization		(24,592	)		(20,188	)
Impairments		(1,734	)		—
Property and equipment, net	$	12,230		$	15,838

51

Total depreciation expense on property and equipment was $2.6 million, $2.5 million, and $2.6 million during fiscal 2020, 2019 and 2018, respectively.

The Company capitalizes internal-use software, including software used exclusively in providing services or that is only made available to customers as a software service, as property and equipment under ASC 350-40, Internal-Use Software. Total amortization expense on capitalized internal-use software was $2.5 million, $2.5 million and $1.8 million during fiscal 2020, 2019, and 2018, respectively. The global economic impact of the COVID-19 pandemic triggered management to review property and equipment held by the Company for indicators of impairment. The carrying value of our capitalized costs for internal-use software related to our rGuest Seat solution did not exceed the estimated undiscounted cash flows, and utilizing a market approach, was determined to be fully impaired, resulting in $1.7 million of asset impairment charges in the Consolidated Statement of Operations during the fiscal year ended March 31, 2020.

Assets under financing leases are included in property and equipment categories above and further disclosed with Note 6. Leases.

5. Intangible Assets and Software Development Costs

The following table summarizes our intangible assets and software development costs at March 31, 2020, and 2019:

	2020										2019
	Gross								Net		Gross					Net
	carrying		Accumulated						carrying		carrying		Accumulated			carrying
(In thousands)	amount		amortization			Impairment			amount		amount		amortization			amount
Amortized intangible assets:
Customer relationships	$	10,775	$	(10,775	)	$	-		$	-	$	10,775	$	(10,775	)	$	-
Non-competition agreements		2,700		(2,700	)		—			—		2,700		(2,700	)		—
Developed technology		10,398		(10,398	)		—			—		10,398		(10,398	)		—
Trade names		230		(230	)		—			—		230		(192	)		38
Patented technology		80		(80	)		—			—		80		(80	)		—
		24,183		(24,183	)		—			—		24,183		(24,145	)		38
Trade names		8,400	N/A				—			8,400		8,400	N/A				8,400
Total intangible assets	$	32,583	$	(24,183	)	$	-		$	8,400	$	32,583	$	(24,145	)	$	8,438
(In thousands)
Software development costs	$	67,541	$	(45,535	)	$	(22,006	)	$	-	$	67,541	$	(32,974	)	$	34,567

Indefinite-lived intangible assets, comprised of our purchased trade name InfoGenesis™ as of March 31, 2020 and 2019 are tested for impairment upon identification of impairment indicators or at least annually. An impairment loss is recognized if the carrying amount is greater than fair value. The InfoGenesis™ indefinite-lived purchased trade name impairment testing resulted in a fair value exceeding the carrying amount for the years ending March 31, 2020, 2019 and 2018.

Management compares the unamortized capitalized software development costs for each external use product to its net realizable value by analyzing critical inputs such as costs necessary to bring the software to market, costs necessary to maintain the software, life of the software, and market capacity. As of March 31, 2020, management determined the net realizable value of the remaining capitalized software development costs for certain solutions within out rGuest suite of products no longer exceeded their carrying value, and as a result, recorded non-cash impairment charges of $22.0 million. The impact of the COVID-19 pandemic on the hospitality industry resulted in economic conditions which make it difficult to project future sales and revenue accurately for the related rGuest solutions. After evaluating the Company’s strategy for market development and continued costs to support the software, an impairment charge was required. The amount of impairment recognized during the period reduced the carry value of capitalized software development costs to zero with no remaining amortization expense to be recognized in future periods.

Amortization expense related to software development costs related to assets to be sold, leased, or otherwise marketed was $12.6 million, $12.6 million and $10.0 million for the fiscal years ended March 31, 2020, 2019 and 2018, respectively. These charges are included as Products cost of goods sold within the Consolidated Statements of Operations. Amortization expense relating to other definite-lived intangible assets was $38,000 for the fiscal year end March 31, 2020 and $46,000 for the fiscal years ended March 31, 2019 and 2018. These charges are classified as operating expenses within the Consolidated Statements of Operations.

Capitalized software development costs are carried on our balance sheets at net realizable value, net of accumulated amortization. We did not capitalize any software development costs during fiscal 2020. We capitalized approximately $2.0 million and $8.2 million during fiscal 2019 and 2018, respectively.

52

6. Leases

We adopted Topic 842 on April 1, 2019 using the current period adjustment method of adoption to recognize leases with a duration greater than 12 months on the balance sheet. The impact of adoption on April 1, 2019 was recognition of operating lease liabilities of $16.3 million and related Right-of-Use (“ROU”) assets of $13.8 million. Prior period financial statements have not been restated and therefore the comparative amounts are not presented below or on the Consolidated Balance Sheets as of March 31, 2019. For operating leases with a term greater than 12 months, we have recorded the lease liability at the present value of lease payments over the remaining lease term and the related ROU asset. The remaining lease term has been determined for each lease considering factors such as renewal options, termination options, our Company’s historical practices in exercising such options, and current business knowledge which may impact lease related decisions. The majority of our leases are comprised of real estate leases for our respective offices around the globe. Our finance leases consist of office equipment. We have no residual value guarantees or restrictions or covenants imposed by, or associated with our active leases. Since our current leases do not provide an implicit rate of return, our incremental borrowing rates used to determine the value of lease payments in implementation are estimated as of April 1, 2019, based on collateralized rates for a term similar to each remaining lease term.

We have elected the package of practical expedients permitted under the transition guidance which includes the ability to carryforward the previously determined lease classification (operating or finance), forgo the assessment whether active contracts contain a lease, and whether capitalized costs associated with a lease meet the definition of “initial direct costs” as defined within Topic 842. In the event that any of our leases contain nonlease components, we have elected the practical expedient to account for each separate lease component and the associated nonlease component(s) as a single lease component. We have also elected the accounting policy to forgo applying the guidance of Topic 842 to short term leases (defined as a term of 12 months or less, without a purchase option which we are reasonably certain to exercise).

As of March 31, 2020, we do not have any leases which have not yet commenced. We do not have any related party leases or sublease arrangements. We have variable payments for expenses such as common area maintenance and taxes. We do not have variable payments that are based on an index or rate. As a result, we do not include variable payments in the calculation of the lease liability. Any variable costs are expensed as incurred.

The components of lease expenses for the fiscal 2020 period were as follows:

		Year Ended
(in thousands)	March 31, 2020
Operating leases expense		$	4,193
Finance lease expense:
Amortization of ROU assets			23
Interest on lease liabilities			6
Total finance lease expense			29
Variable lease costs			271
Short term lease expense			88
Total lease expense		$	4,581

53

Other information related to leases for fiscal 2020 was as follows:

	Year Ended
Supplemental cash flow information	March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities    (in thousands):
Operating cash flows for operating leases	$	4,873
Operating cash flows for finance leases		8
Financing cash flows for finance leases		24
ROU assets obtained in exchange for lease obligations (in thousands):
Operating leases	$	2,734
Finance leases		17
Weighted average remaining lease terms
Operating leases		5.04
Finance leases		2.16
Weighted average discount rates
Operating leases		10.37	%
Finance leases		4.38	%

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the Consolidated Balance Sheet as of March 31, 2020:

Year ending (in thousands)	Operating leases			Finance leases
2021	$	4,927		$	29
2022		4,207			21
2023		2,855			5
2024		2,685			2
2025		2,083			—
Thereafter		3,901			—
Total undiscounted future minimum lease payments		20,658			57
Less: difference between undiscounted lease payments and discounted lease    liabilities		(5,322	)		(8	)
Total lease liabilities	$	15,336		$	49

As previously disclosed on our March 31, 2019 Form 10-K and under the previous lease accounting standard, future minimum lease payments under non-cancelable leases as of March 31, 2019 were as follows:

Year ending (in thousands)	Operating leases		Finance leases
2020	$	4,143	$	27
2021		3,945		23
2022		3,166		15
2023		1,916		—
2024		1,770		—
Thereafter		4,497		—
Total lease payments		19,437		65
Less: Amounts representing interest		—		(8	)
Present value of lease liabilities	$	19,437	$	57

54

7. Supplemental Disclosures of Cash Flow Information

Additional information related to the Consolidated Statements of Cash Flows is as follows:

	Year ended March 31,
(In thousands)		2020			2019			2018
Cash (receipts) for interest, net	$	(371	)	$	(329	)	$	(88	)
Cash payments (receipts) for income tax, net		694			409			(227	)
Acquisition of property and equipment under lease obligations		17			—			64
Accrued capital expenditures		187			56			83
Accrued capitalized software development costs		—			—			201
Leasehold improvements acquired under operating lease arrangement		—			62			95

8. Additional Balance Sheet Information

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

(In thousands)	March 31, 2020		March 31, 2019
Accrued liabilities:
Salaries, wages, and related benefits	$	6,945	$	12,443
Other taxes payable		1,649		1,041
Accrued legal settlements		—		15
Severance liabilities		32		46
Professional fees		50		67
Deferred rent		—		273
Other		357		521
Total	$	9,033	$	14,406
Other non-current liabilities:
Uncertain tax positions	$	1,103	$	1,083
Deferred rent and asset retirement obligations		170		2,613
Employee benefit obligations		511		486
Other		76		76
Total	$	1,860	$	4,258

9. Income Taxes

For the year ended March 31, loss before income taxes consisted of the following:

(In thousands)		2020			2019			2018
(Loss) before income taxes
United States	$	(36,373	)	$	(13,621	)	$	(11,926	)
Foreign		2,507			678			325
Total loss before income taxes	$	(33,866	)	$	(12,943	)	$	(11,601	)

For the year ended March 31, income tax expense (benefit) consisted of the following:

(In thousands)		2020			2019			2018
Income tax expense (benefit)
Current:
Federal	$	59		$	54		$	66
State and local		21			(383	)		(446	)
Foreign		463			514			73
Deferred:
Federal		11			79			(2,985	)
State and local		7			277			41
Foreign		(360	)		(320	)		—
Total income tax expense (benefit)	$	201		$	221		$	(3,251	)

55

The following table presents the principal components of the difference between the effective tax rate to the U.S. federal statutory income tax rate for the years ended March 31:

(In thousands)	2020			2019			2018
Income tax benefit at the US Federal statutory rate	$	(7,112	)	$	(2,718	)	$	(3,654	)
Benefit for state taxes		(856	)		(304	)		(642	)
Impact of foreign operations		(514	)		(310	)		38
Indefinite life assets		19			130			335
Change in valuation allowance		8,406			3,302			3,328
Change in liability for unrecognized tax benefits		22			(400	)		40
Impact of Tax Act, net		—			226			(3,287	)
Share-based compensation		(312	)		2			476
Global intangible low-taxed income		460			94			—
Other		88			199			115
Total income tax expense (benefit)	$	201		$	221		$	(3,251	)

We have elected to account for global intangible low-taxed income (GILTI) inclusions in the period in which they are incurred.

Our tax provision includes a provision for income taxes in certain foreign jurisdictions where subsidiaries are profitable, but only a minimal benefit is reflected related to U.S. and certain foreign tax losses due to the uncertainty of the ultimate realization of future benefits from these losses. The fiscal 2020 tax provision results primarily from foreign tax expense. The fiscal 2020 tax provision differs from the statutory rate primarily due to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, state taxes and other U.S. permanent book to tax differences.

The fiscal 2019 tax provision primarily results from foreign tax expense, the reversal of reserves for uncertain tax positions and the completion of our accounting for the Tax Act. The fiscal 2019 effective rate differs from the statutory rate primarily due to the impact of the Tax Act, recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state tax effects.

Deferred tax assets and liabilities as of March 31, are as follows:

(In thousands)	2020			2019
Deferred tax assets:
Accrued liabilities	$	3,059		$	3,944
Allowance for doubtful accounts		331			120
Inventory valuation reserve		—			41
Federal losses and credit carryforwards		47,218			44,811
Foreign losses and credit carryforwards		1,523			1,146
State losses and credit carryforwards		10,911			9,886
Deferred revenue		582			488
Property and equipment and software amortization		163			—
Operating lease liabilities		1,297			—
Goodwill and other intangible assets		4,914			—
Other		88			65
		70,086			60,501
Less: valuation allowance		(66,819	)		(57,852	)
Total		3,267			2,649
Deferred tax liabilities:
Operating lease right-of-use assets		(948	)		—
Property and equipment and software amortization		—			(361	)
Goodwill and other intangible assets		(2,426	)		(2,706	)
Other		(9	)		—
Total		(3,383	)		(3,067	)
Total deferred tax liabilities	$	(116	)	$	(418	)

56

At March 31, 2020, we had $199.1 million of federal net operating loss carryforwards that expire, if unused, in fiscal years 2031 to 2038, and $24.7 million of federal net operating loss carryforwards that can be carried forward indefinitely. Our Hong Kong, Malaysia, and Singapore subsidiaries have $0.4 million, $0.1 million, and $0.3 million of net operating loss carryforwards, respectively. The losses for Hong Kong, Malaysia and Singapore can be carried forward indefinitely. At March 31, 2020, our India subsidiary had $0.8 million of minimum alternative tax credits reported as other noncurrent assets on our Consolidated Balance Sheet. Our India subsidiary operates in a “Special Economic Zone (“SEZ”)”. One of the benefits associated with the SEZ is that the India subsidiary is not subject to regular India income taxes during its first 5 years of operations which includes fiscal 2018 through fiscal 2022. The India subsidiary is then subject to 50% of regular India income taxes during the second five years of operations which includes fiscal 2023 through fiscal 2027. The aggregate value of the benefit of the SEZ during the current fiscal year is $0.8 million.

At March 31, 2020 we also had $141.6 million of state net operating loss carryforwards that expire, if unused, in fiscal years 2021 through 2040.

We recorded valuation allowances related to certain deferred income tax assets due to the uncertainty of the ultimate realization of the future benefits from those assets. At March 31, 2020, the total valuation allowance against deferred tax assets of $66.8 million was comprised of $65.9 million for federal and state deferred tax assets, and $0.9 million associated with deferred tax assets in Hong Kong, Malaysia, Singapore and the Philippines. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some, or all, of the deferred tax assets will not be realized. We have recorded a valuation allowance offsetting substantially all of our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax assets, we will need to generate future taxable income before the expiration of the deferred tax assets governed by the tax code. Because of our losses in current and prior periods, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences. The amount of the valuation allowance, however, could be reduced in the near term. The exact timing will be based on the level of profitability that we are able to achieve and our visibility into future results. Our recorded tax rate may increase in subsequent periods following a valuation release. Any valuation allowance release will not affect the amount of cash paid for income taxes.

The undistributed earnings of our foreign subsidiaries are not subject to U.S. federal and state income taxes unless such earnings are distributed in the form of dividends or otherwise to the extent of current and accumulated earnings and profits. The undistributed earnings of foreign subsidiaries are permanently reinvested and totaled $6.3 million and $3.1 million as of March 31, 2020 and 2019, respectively. We made the determination of permanent reinvestment on the basis of sufficient evidence that demonstrates we will invest the undistributed earnings overseas indefinitely for use in working capital, as well as foreign acquisitions and expansion. The determination of the amount of the unrecognized deferred U.S. income tax liability related to the undistributed earnings is not practicable.

We recorded a liability for unrecognized tax positions. The aggregate changes in the balance of our gross unrecognized tax benefits were as follows for the years ended March 31:

(In thousands)	2020			2019			2018
Balance at April 1	$	580		$	687		$	988
Reductions:
Relating to positions taken during prior year		—			—			(300	)
Relating to lapse in statute		(5	)		(107	)		(1	)
Balance at March 31	$	575		$	580		$	687

As of March 31, 2020, we had a liability of $0.6 million related to uncertain tax positions, the recognition of which would affect our effective income tax rate.

Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months an immaterial reduction in unrecognized tax benefits may occur as a result of the expiration of various statutes of limitations. We are consistently subject to tax audits; due to the nature of examinations in multiple jurisdictions, changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time.

We recognize interest accrued on any unrecognized tax benefits as a component of income tax expense. Penalties are recognized as a component of general and administrative expenses. We recognized interest and penalty expense of less than $0.1 million for the years ended March 31, 2020, 2019 and 2018. As of March 31, 2020 and 2019, we had approximately $0.5 million and $0.5 million, respectively, of interest and penalties accrued in other non-current liabilities on our Consolidated Balance Sheets.

In the U.S. we file consolidated federal and state income tax returns where statutes of limitations generally range from three to five years. Although we have resolved examinations with the IRS through tax year ended March 31, 2010, U.S. federal tax years are open from 2006 forward due to attribute carryforwards. The statute of limitations is open from fiscal year 2013 forward in certain state jurisdictions. We also file income tax returns in international jurisdictions where statutes of limitations generally range from three to seven years. Years beginning after 2009 are open for examination by certain foreign taxing authorities.

57

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act includes provisions addressing the carryback of net operating losses for specific periods, refunds of alternative minimum tax credits, temporary modification to the limitation placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property. Additionally, the CARES Act provides, among other provisions, for the deferral of the employer-paid portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022; the CARES Act also provides for certain employee retention tax credits.

As of March 31, 2020, these provisions are expected to provide us with approximately $0.1 million of additional liquidity during the current year due to the ability to accelerate outstanding alternative minimum tax credit refunds. Due to the net loss position of the Company, we do not anticipate impacts from net loss carryback or deductibility provisions. We are currently deferring the employer-paid portion of social security taxes but do not currently anticipate qualifying for employee retention tax credits at this time.

Separate from the CARES Act, the IRS extended the dates for estimated tax payments for the first and second calendar quarters of 2020 to July 15, 2020. Further, many states are offering similar deferrals of various classes of tax payments. Due to the net loss position of the Company, we do not anticipate material federal or state tax payment deferrals.

Significant uncertainty exists regarding the magnitude and duration of the impact of the COVID-19 pandemic; therefore, we cannot predict at this time the ultimate extent of its impact on our business operations, financial results and resulting effects to income taxes in future periods. See Part II, Item 1A. of this Annual Report for further discussion regarding risks associated with the COVID-19 pandemic.

10. Employee Benefit Plans

Defined Contribution Plans

We maintain 401(k) plans for employees located in the United States meeting certain service requirements. Generally, the plans allow eligible employees to contribute a portion of their compensation, and we match 100% of the first 1% of the employee's pre-tax contributions and 50% of the next 5% of the employee's pre-tax contributions. We may also make discretionary contributions each year for the benefit of all eligible employees under the plans. Agilysys matching contributions were $1.8 million, $1.6 million, and $1.7 million in fiscal 2020, 2019, and 2018, respectively.

We also maintain defined contribution retirement plans for employees located in the United Kingdom and in the Asia Pacific region in accordance with local statutory requirements and business practices.

Defined Benefit Plan

We maintain a defined benefit retirement plan (the “Gratuity Plan”) covering eligible employees of our India subsidiary in accordance with local statutory requirements and business practices. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation, or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment with the Company. The Gratuity Plan is unfunded with obligation amounts recorded in the Consolidated Balance Sheets as “Employee benefit obligations” within “Other non-current liabilities.”

Endorsement Split-Dollar Life Insurance

Agilysys provides certain former executives with life insurance benefits through endorsement split-dollar life insurance arrangements. We entered into agreements with each of the former executives, whereby we must maintain the life insurance policy for a specified amount and split a portion of the policy benefits with their designated beneficiary.

Our investment in these corporate-owned life insurance policies were recorded at their cash surrender value, which approximates fair value at the balance sheet date. In the Consolidated Balance Sheets as of March 31, 2020 and 2019, the cash surrender value of $0.9 million for the remaining policies were held in “Other non-current assets,” and the present value of future proceeds owed to those executives' designated beneficiaries of $0.1 million, which approximates fair value, were recorded within "Other non-current liabilities."

Changes in the cash surrender value of these policies related to gains and losses incurred on these investments are classified within “Other (income) expenses, net” in the accompanying Consolidated Statements of Operations. We recorded a gain of $14,000, $15,000 and $17,000 in fiscal 2020, 2019, and 2018, respectively, related to the corporate-owned life insurance policies.

58

11. Commitments and Contingencies

Legal 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 in the U.S. District Court for the Southern District of California alleging that certain of our products infringe patents owned by Ameranth directed to configuring and transmitting hospitality menus (e.g. restaurant menus) for display on electronic devices, and synchronizing the menu content between the devices. The case against us was consolidated with similar cases brought by Ameranth against more than 30 other defendants. Most of the patents at issue in the case were invalidated by the U.S. Court of Appeals for the Federal Circuit in 2016. Cases against us and our co-defendants remained pending in the District Court with respect to one surviving Ameranth patent. In September 2018, the District Court found that patent invalid, and granted summary judgment in favor of the movant co-defendants. In early 2019, Ameranth appealed the District Court's summary judgment ruling to the U.S. Court of Appeals for the Federal Circuit. In November 2019, the U.S. Court of Appeals for the Federal Circuit affirmed the lower court’s summary judgement with respect to all claims except for two, which were not asserted against Agilysys. Shortly thereafter, Ameranth moved for a rehearing en banc, which was denied in February 2020. Finally, Ameranth filed for writ of certiorari to the United States Supreme Court. The Supreme Court has not yet responded to the writ.

We were not a party to the appeal, and it is currently unclear what impact the summary judgment ruling or writ of certiorari may have on our case. Ameranth seeks monetary damages, injunctive relief, costs and attorneys' fees from us. At this time, we are not able to predict the outcome of this lawsuit. However, we dispute the allegations of wrongdoing and are vigorously defending ourselves in this matter.

12. Loss per Share

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

	Year ended March 31,
(In thousands, except per share data)	2020			2019			2018
Numerator:
Net loss	$	(34,067	)	$	(13,164	)	$	(8,350	)
Denominator:
Weighted average shares outstanding - basic and diluted		23,233			23,037			22,801
Loss per share - basic and diluted:
Net loss per share-basic and diluted	$	(1.47	)	$	(0.57	)	$	(0.37	)
Anti-dilutive stock options, SSARs, restricted shares and performance shares		1,510			1,433			756

Basic earnings (loss) per share is computed as net income available to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes 208,581, 300,437 and 334,817 of restricted shares and performance shares at March 31, 2020, 2019 and 2018, 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.

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

59

13. Share-based Compensation

We may grant non-qualified stock options, incentive stock options, SSARs, restricted shares, and restricted share units under our shareholder-approved 2016 Stock Incentive Plan (the 2016 Plan) for up to 2.0 million common shares, plus 957,575 common shares, the number of shares that were remaining for grant under the 2011 Stock Incentive Plan (the 2011 Plan) as of the effective date of the 2016 Plan, plus the number of shares remaining for grant under the 2011 Plan that are forfeited, settled in cash, canceled or expired. The maximum aggregate number of restricted shares or restricted share units that may be granted under the 2016 Plan is 1.25 million.

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.

For stock options and SSARs, the exercise price must be set at least equal to the closing market price of our common shares on the date of grant. The maximum term of stock option and SSAR awards is seven years from the date of grant. Stock option and SSARs awards vest over a period established by the Compensation Committee of the Board of Directors. SSARs may be granted in conjunction with, or independently from, stock option grants. SSARs granted in connection with a stock option are exercisable only to the extent that the stock option to which it relates is exercisable and the SSARs terminate upon the termination or exercise of the related stock option grants.

Restricted shares and restricted share units, whether time-vested or performance-based, may be issued at no cost or at a purchase price that may be below their fair market value, but are subject to forfeiture and restrictions on their sale or other transfer. Performance-based awards may be conditioned upon the attainment of specified performance objectives and other conditions, restrictions, and contingencies. Restricted shares and restricted share units have the right to receive dividends, or dividend equivalents in the case of restricted share units, if any, upon vesting, subject to the same forfeiture provisions that apply to the underlying awards. Subject to certain exceptions set forth in the 2016 Plan, for awards to employees, no performance-based restricted shares or restricted share units shall be based on a restriction period of less than one year, and any time-based restricted shares or restricted share units shall have a minimum restriction period of three years.

We record compensation expense related to stock options, SSARs, restricted shares, and performance shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date. The fair value of restricted share and performance share awards is based on the closing price of our common shares on the grant date. The fair value of stock option and SSAR 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. During fiscal year 2020, we issued 125,000 SSAR awards which are subject to a market condition. The fair value of these awards is estimated using the Lattice option pricing model which utilizes a binary tree and includes multiple assumptions which include volatility and life of the award to determine an appropriate fair value based on the award grant date.

The following table summarizes the share-based compensation expense for options, SSARs, restricted and performance awards included in the Consolidated Statements of Operations for fiscal 2020, 2019 and 2018:

	Year Ended March 31,
(In thousands)	2020		2019		2018
Product development		2,241		1,478		1,306
Sales and marketing		321		469		371
General and administrative		2,643		2,429		3,011
Total share-based compensation expense		5,205		4,376		4,688

Stock-Settled Stock 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 only in common shares of Agilysys.

We use a Black-Scholes-Merton or a Lattice option pricing model to estimate the fair value of SSARs. The following table summarizes the principal assumptions utilized in valuing SSARs granted in fiscal 2020, 2019 and 2018:

	2020		2019			2018
Risk-free interest rate	1.38%-1.74%			2.68	%	1.74%-1.94%
Expected life (in years)	4.5-5		5			5
Expected volatility	31.7%-32.42%			32.42	%	32.42% - 32.84%
Weighted-average grant date fair value	$	10.01	$	4.72		$	3.36

60

The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury bond whose maturity period approximates the expected life of the SSARs. The expected life is estimated using historical data representing the period of time the awards are expected to be outstanding. The estimated fair value of the SSARs granted is recognized over the vesting period of the awards utilizing the graded vesting method. Under this method, the compensation cost related to unvested amounts begins to be recognized as of the grant date.

The following table summarizes the activity during fiscal 2020 for SSARs awarded under the 2016 and 2011 Plans:

(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, 2019		1,016,643		$	11.22
Granted		691,364			34.72
Exercised		(37,506	)		10.02
Forfeited		(15,838	)		18.09
Cancelled/expired		(9,775	)		10.61
Outstanding at March 31, 2020		1,644,888		$	21.07		4.9	$	5,236
Exercisable at March 31, 2020		959,340		$	11.79		3.9	$	5,130
Vested and expected to vest at March 31, 2020		1,644,888		$	21.07		4.9	$	5,236

The following table presents additional information related to SSARs activity during fiscal 2020, 2019 and 2018:

(In thousands)	2020		2019		2018
Compensation expense	$	1,666	$	943	$	1,869
Total intrinsic value of SSARs exercised	$	519	$	907	$	88
Total fair value of SSARs vesting	$	1,328	$	1,165	$	1,325

As of March 31, 2020, total unrecognized share based compensation expense related to non-vested SSARs was $5.6 million, which is expected to be recognized over the weighted-average vesting period of 2.3 years.

A total of 21,494 shares, net of 6,712 shares withheld to cover the employee’s minimum applicable income taxes, were issued from treasury shares to settle SSARs exercised during the twelve months ended March 31, 2020. The shares withheld were returned to treasury shares.

Restricted Shares

We granted shares to certain of our Directors, executives and key employees under the 2016 and 2011 Plans, the vesting of which is service-based. The following table summarizes the activity during the twelve months ended March 31, 2020 for restricted shares awarded under the 2016 and 2011 Plans:

	Number of Shares			Weighted- Average Grant- Date Fair Value
				(per share)
Outstanding at April 1, 2019		237,146		$	13.46
Granted		223,404			22.72
Vested		(231,677	)		16.60
Forfeited		(50,411	)		17.34
Outstanding at March 31, 2020		178,462		$	19.89

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. During fiscal 2020, a total of 208,151 shares, net of 46,656 shares withheld from the vested restricted shares to cover the employee's minimum applicable income taxes, were issued from treasury. The shares withheld were returned to treasury shares.

61

The following table presents additional information related to restricted stock activity during fiscal years 2020, 2019, and 2018:

(In thousands)	2020		2019		2018
Compensation expense	$	3,385	$	2,803	$	2,594
Total fair value of restricted share vesting	$	4,004	$	4,383	$	4,315

As of March 31, 2020, total unrecognized share based compensation expense related to non-vested restricted stock was $2.1 million, which is expected to be recognized over a weighted-average vesting period of 1.9 years. We do not include restricted stock in the calculation of earnings per share until the shares are vested.

Performance Shares

The following table summarizes the activity during fiscal 2020 for performance shares awarded under the 2016 Plan:

	Number of Shares			Weighted- Average Grant- Date Fair Value
				(per share)
Outstanding at April 1, 2019		63,291		$	14.22
Granted		30,120			22.41
Vested		(23,526	)		22.67
Forfeited		(39,765	)		14.22
Outstanding at March 31, 2020		30,120		$	22.41

Based on the performance goals, management estimates a liability of $153,000 to be settled through the vesting of a variable number of the performance shares subsequent to March 31, 2020. As of March 31, 2020, total share based compensation expense related to performance shares has been fully recognized.

The following table presents additional information related to performance share activity during fiscal 2020, 2019 and 2018:

(In thousands)	2020		2019		2018
Compensation expense	$	153	$	630	$	225
Total fair value of performance share vesting	$	513	$	243		—

Once attainment of the performance goals becomes probable, 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.

14. 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 twelve months ended March 31, 2020.

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:

(In thousands)	31-Mar-20		(Level 1)		(Level 2)		(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	936		—		—	$	936

62

(In thousands)	31-Mar-19		(Level 1)		(Level 2)		(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	895		—		—	$	895

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 Consolidated Statements of Operations.

The following table presents a summary of changes in the fair value of the corporate-owned life insurance Level 3 asset for the fiscal years ended March 31, 2020 and 2019:

	March 31,		March 31,
(In thousands)	2020		2019
Corporate-owned life insurance:
Balance on April 1	$	895	$	853
Unrealized gain relating to instruments held at reporting date		14		15
Purchases, sales, issuances and settlements, net		27		27
Balance on March 31	$	936	$	895

15. Quarterly Results (Unaudited)

Because quarterly reporting of per share data is used independently for each reporting period, the sum of per share amounts for the four quarters in the fiscal year will not necessarily equal annual per share amounts. GAAP prohibits retroactive adjustment of quarterly per share amounts so that the sum of those amounts equals amounts for the full year.

Occasionally, the timing of large one-time orders, such as those associated with significant remarketed product sales around large customer refresh cycles or significant volume rollouts, creates variability in our quarterly results.

	Year ended March 31, 2020
	First			Second			Third			Fourth
(In thousands except per share data)	Quarter			Quarter			Quarter			Quarter			Year
Net revenue	$	38,389		$	40,722		$	41,987		$	39,659		$	160,757
Gross profit		20,014			20,217			21,064			19,657			80,952
Restructuring, severance and other charges		231			190			11			150			582
Legal settlements, net		—			(125	)		—			—			(125	)
Net loss	$	(1,575	)	$	(2,918	)	$	(2,582	)	$	(26,992	)	$	(34,067	)
Net loss Per share data-basic and diluted	$	(0.07	)	$	(0.13	)	$	(0.11	)	$	(1.16	)	$	(1.47	)

	Year ended March 31, 2019
	First			Second			Third			Fourth
(In thousands except per share data)	Quarter			Quarter			Quarter			Quarter			Year
Net revenue	$	34,007		$	34,203		$	36,014		$	36,618		$	140,842
Gross profit		17,889			17,749			18,647			19,595			73,880
Restructuring, severance and other charges		440			448			58			222			1,168
Legal settlements		91			35			—			15			141
Net loss	$	(1,736	)	$	(3,791	)	$	(4,048	)	$	(3,589	)	$	(13,164	)
Net loss Per share data-basic and diluted	$	(0.08	)	$	(0.16	)	$	(0.18	)	$	(0.15	)	$	(0.57	)

63

16. Subsequent Events

COVID-19 has had a significant impact on our business as of and subsequent to our March 31, 2020 fiscal year-end as the travel and hospitality industries including our customers’ businesses suffered an abrupt and steep decline in activity due to property closures, cancelled voyages, cancelled sporting and entertainment events, and many other business operations curtailments. The change in the business environment for our customers resulted in project delays for our professional service teams, our inability to deliver products to closed property locations and a general reduction in sales activity.

We have taken actions to mitigate the impact on our business. During the first quarter of our fiscal 2021, we have reduced discretionary costs, implemented a hiring freeze on non-essential positions and reduced payroll and related costs through layoffs, employee furloughs, employee retirement benefit limitations, and salary decreases for executive team members and certain other employees of the Company.

The extent COVID-19 will impact our business including operations and financial results cannot be reasonably estimated at this time. Many factors will continue to influence the COVID-19 pandemic’s impact on us including its ultimate severity, future government actions in response to COVID-19, and how quickly and to what extent economic conditions return to levels before COVID-19.

In May 2020, the Company announced a $35 million investment from MAK Capital One, LLC (“MAK Capital”), a leading investment management firm who has been a major shareholder of the Company since 2007. MAK Capital will purchase $35 million of convertible preferred stock carrying a 5.25% dividend that will be convertible into shares of the Company’s common stock at a price of $20.1676 per share. The transaction is subject to customary closing conditions and is anticipated to finalize during May 2020. The close of the transaction will add $35 million in preferred stock to the Company’s balance sheet and increase our cash balance by the $35 million investment less estimated closing costs of approximately $1 million.

17. Related Party Transaction

See Note 16. Subsequent Events, for description of the MAK Capital investment in the Company announced in May 2020. Michael Kaufman, the Chairman of the Company’s Board of Directors, is the Chief Executive Officer of MAK Capital.

Schedule II - Valuation and Qualifying Accounts Years ended March 31,2020, 2019 and 2018

(In thousands)	Balance at beginning of year		Charged to costs and expenses			Deductions			Balance at end of year
2020
Deferred tax valuation allowance	$	57,852	$	8,967		$	—		$	66,819
Allowance for doubtful accounts	$	788	$	1,434		$	(588	)	$	1,634
2019
Deferred tax valuation allowance	$	54,260	$	3,592		$	—		$	57,852
Allowance for doubtful accounts	$	900	$	539		$	(651	)	$	788
2018
Deferred tax valuation allowance	$	80,013	$	(25,753	)	$	—		$	54,260
Allowance for doubtful accounts	$	509	$	1,063		$	(672	)	$	900

64

Item 9.  Change in and Disagreements WithAccountants on Accounting and FinancialDisclosures.

None.

Item 9A.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures as of the end of the period covered by this report are effective to ensure that information required to be disclosed by us in reports filed under the Exchange Act of 1934 is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (ii) is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow for timely decisions regarding required disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management's Report on Internal Control Over Financial Reporting

The management of Agilysys, under the supervision of the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision of our CEO and CFO, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of  March 31, 2020 based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that evaluation, management concluded that Agilysys maintained effective internal control over financial reporting as of March 31, 2020.

Grant Thornton LLP, our independent registered public accounting firm, issued their report regarding Agilysys' internal control over financial reporting as of March 31, 2020, which is included elsewhere in this annual report.

Change in Internal Control over Financial Reporting

No changes in our internal control over financial reporting occurred during the last quarter of fiscal 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In response to the COVID-19 pandemic, our workforce began working remotely in March 2020. Our established internal controls continued to operate as they have historically, and the change in the work environment for our employees did not have a material adverse effect on our internal control over financial reporting during the quarter ended March 31, 2020.

Item 9B.    Other Information

None.

65

Part III

Item 10.  Directors, Executive Officers andCorporate Governance.

Information required by this Item as to the Directors of Agilysys, Executive Officers, the Audit Committee, Agilysys' Code of Business Conduct, and the procedures by which shareholders may recommend nominations appearing under the headings “Election of Directors,” “Executive Officers” and “Corporate Governance” in our Proxy Statement to be used in connection with Agilysys' 2020 Annual Meeting of Shareholders (the “ 2020 Proxy Statement”) is incorporated herein by reference. Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by our Directors, executive officers, and holders of more than five percent of Agilysys' equity securities will be set forth in the 2020 Proxy Statement under the heading “Section 16(a) Beneficial Ownership Reporting Compliance.”

We adopted a Code of Business Conduct that applies to all Directors and employees of Agilysys, including the Chief Executive Officer and Chief Financial Officer. The Code is available on our website at http://www.agilysys.com .

Item 11.  Executive Compensation.

The information required by this Item is set forth in our 2020 Proxy Statement under the headings, “Executive Compensation,” “Director Compensation,” “Compensation Committee Report,” and “Corporate Governance,” which is incorporated herein by reference.

Item 12.  Security Ownership of CertainBeneficial Owners and Management and RelatedShareholder Matters.

The information required by this Item is set forth in our 2020 Proxy Statement under the headings “Beneficial Ownership of Common Shares,” and “Equity Compensation Plan Information,” which information is incorporated herein by reference.

Item 13.  Certain Relationships and RelatedTransactions, and DirectorIndependence.

The information required by this item is set forth in our 2020 Proxy Statement under the headings “Corporate Governance” and “Related Person Transactions,” which information is incorporated herein by reference.

Item 14.  Principal Accountant Fees andServices.

The information required by this Item is set forth in our 2020 Proxy Statement under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm,” which information is incorporated herein by reference.

66

PART IV

Item 15.  Exhibits and Financial StatementSchedules.

(a)(1) Financial statements. The following consolidated financial statements are included herein and are incorporated by reference in Part II, Item 8 of this Annual Report:

Report of Grant Thornton LLP, Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of March 31, 2020 and 2019

Consolidated Statements of Operations for the years ended March 31, 2020, 2019, and 2018

Consolidated Statements of Comprehensive Loss for the years ended March 31, 2020, 2019, and 2018

Consolidated Statements of Cash Flows for the years ended March 31, 2020, 2019, and 2018

Consolidated Statements of Shareholders' Equity for the years ended March 31, 2020, 2019, and 2018

Notes to Consolidated Financial Statements

(a)(2) Financial statement schedule. The following financial statement schedule is included herein and is incorporated by reference in Part II, Item 8 of this Annual Report:

Schedule II - Valuation and Qualifying Accounts

All other schedules have been omitted since they are not applicable or the required information is included in the consolidated financial statements or notes thereto.

(a)(3) Exhibits.  Exhibits included herein and those incorporated by reference are listed in the Exhibit Index of this Annual Report.

Item 16.  Form 10-K Summary.

None.

67

Agilysys, Inc.

Exhibit Index

Exhibit No.	Description
**3.1	Amended Articles of Incorporation of Agilysys, Inc.
3.2	Amended Code of Regulations of Agilysys, Inc., which is incorporated by reference to Exhibit 3.2 to Agilysys, Inc.'s Current Report on Form 8-K filed August 14, 2019 (File No. 000-05734).
**4.1	Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
*10.1	The Company's Annual Incentive Plan, which is incorporated herein by reference to Exhibit 10(b) to Agilysys, Inc.'s Definitive Proxy Statement on Schedule 14A filed June 28, 2011 (File No. 000-05734).
*10.2	Indemnification Agreement entered into by and between Agilysys, Inc. and each of its Directors, which is incorporated herein by reference to Exhibit 10(e) to Agilysys, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2018 (File No. 000-05734).
*10.3	Agilysys, Inc. 2011 Stock Incentive Plan, which is incorporated herein by reference to Exhibit 10(a) to Agilysys, Inc.'s Definitive Proxy Statement on Schedule 14A filed June 28, 2011 (File No. 000-05734).
*10.4	Agilysys, Inc. 2016 Stock Incentive Plan, which is incorporated herein by reference to Appendix B to Agilysys, Inc.'s Definitive Proxy Statement on Schedule 14A filed August 15, 2016 (File No. 000-05734).
*10.5	Form of Stock Appreciation Right Agreement, which is incorporated herein by reference to Exhibit 10.3 to Agilysys, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (File No. 000-05734).
*10.6	Form of Directors Restricted Stock Award Agreement, which is incorporated herein by reference to Exhibit 10.1 to Agilysys, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (File No. 000-05734).
*10.7	Form of Restricted Stock Award Agreement, which is incorporated herein by reference to Exhibit 10.2 to Agilysys, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (File No. 000-05734).
*10.8	Form of Executive Employment Agreement, which is incorporated herein by reference to Exhibit 10.1 to Agilysys, Inc.'s Current Report on Form 8-K filed January 31, 2018 (File No. 000-05734).
*10.9	Employment Agreement dated February 10, 2020 by and between Agilysys, Inc. and Ramesh Srinivasan, which is incorporated by reference to Exhibit 10.1 to Agilysys, Inc.’s Current Report on Form 8-K filed February 13, 2020 (File No. 000-05734).
*10.10	SSAR Agreement dated January 3, 2017, by and between Agilysys, Inc. and Ramesh Srinivasan, which is incorporated herein by reference to Exhibit 10(s) to Agilysys, Inc.'s. Annual Report on Form 10-K for the year ended March 31, 2017 (File No. 000-05734).
**10.11	SSAR Agreement dated February 10, 2020, by and between Agilysys, Inc. and Ramesh Srinivasan.
**21	Subsidiaries of the Registrant.
**23.1	Consent of Independent Registered Public Accounting Firm.
**31.1	Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
**31.2	Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
**31.3	Certification of Corporate Controller and Treasurer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
**32	Certification of Chief Executive Officer, Chief Financial Officer and Corporate Controller and Treasurer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
101	The following materials from our annual report on Form 10-K for the year ended March 31, 2020, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2020 and 2019, (ii) Consolidated Statements of Operations for the twelve months ended March 31, 2020, 2019 and 2018, (iii) Consolidated Statements of Comprehensive Income (Loss) for the twelve months ended March 31, 2020, 2019 and 2018, (iv) Consolidated Statements of Cash Flows for the twelve months ended March 31, 2020, 2019 and 2018, and (v) Notes to the Consolidated Financial Statements for the twelve months ended March 31, 2020.
*	Denotes a management contract or compensatory plan or arrangement.
**	Filed herewith

68

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Alpharetta, State of Georgia, on May 22, 2020.

AGILYSYS, INC.
	/s/ Ramesh Srinivasan
	Ramesh Srinivasan
	President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on May 22, 2020.

Signature	Title
/s/ Ramesh Srinivasan	President, Chief Executive Officer and Director
Ramesh Srinivasan	(Principal Executive Officer)
/s/ Anthony S. Pritchett	Chief Financial Officer,
Anthony S. Pritchett	(Principal Financial Officer)
/s/ Chris J. Robertson	Corporate Controller and Treasurer
Chris J. Robertson	(Principal Accounting Officer)
/s/ Michael A. Kaufman	Chairman and Director
Michael A. Kaufman
/s/ Donald A. Colvin	Director
Donald A. Colvin
/s/ Gerald C. Jones	Director
Gerald C. Jones
/s/ John Mutch	Director
John Mutch
/s/ Melvin L. Keating	Director
Melvin L. Keating
/s/ Dana Jones
Dana Jones	Director

69

EX-3.1

Exhibit 3.1

CERTIFICATE OF ADOPTION

OF

AMENDED ARTICLES OF INCORPORATION

OF

PIONEER-STANDARD ELECTRONICS, INC.

Preston B. Heller, Jr., President, and William X. Haase, Secretary of Pioneer-Standard Electronics, Inc., an Ohio corporation, with its principal office located at Cuyahoga County, Ohio, do hereby certify that a special meeting of the holders of the shares of said corporation entitling them to vote on the proposal to adopt Amended Articles of Incorporation as contained in the following resolution, was duly called for such purpose and held on the 17th day of April, 1970, at which meeting a quorum of such shareholders was present in person or by proxy and that by the affirmative vote of the holders of shares entitled under the Articles of Incorporation to exercise two-thirds of the voting power of the corporation on such proposal, the following resolution was adopted:

RESOLUTION

RESOLVED, that the following Amended Articles of Incorporation be, and the same hereby are, adopted to supersede the existing Articles of Incorporation as heretofore amended:

AMENDED ARTICLES OF INCORPORATION

OF

PIONEER-STANDARD ELECTRONICS, INC.

FIRST. The name of the corporation is Pioneer-Standard Electronics, Inc.

SECOND. The place in the State of Ohio where the principal office of the corporation is to be located is the City of Cleveland, Cuyahoga County.

THIRD. The purposes of the corporation are as follows:

1. To manufacture, produce, process, purchase and sell as distributor, wholesaler, retailer, or otherwise, and to act as agent or broker in the buying, selling, leasing and otherwise dealing in electric, electronic, radio and television equipment, including without limitation of the foregoing, electrical and mechanical instruments, motors, parts, appliances, components and other similar devices and to do and perform all other acts as shall be necessary, incidental or otherwise related to the exercise of the foregoing purposes.

2. To carry on any other lawful business as from time to time determined by the Board of Directors.

3. To purchase, acquire, hold, mortgage, pledge, loan money upon, exchange, rent, sell and otherwise deal in personal property and real estate of every kind, character and description whatsoever and wheresoever situated, and any interest therein; in particular without limiting the generality of the foregoing, to acquire, hold, sell and otherwise deal in any part or all of the shares of stock, notes, bonds, debentures, or any other kind of security of any other corporation which is conducting a business similar to the business of this corporation or otherwise.

4. To apply for, obtain, purchase, take licenses in respect of, or otherwise acquire, and to hold, own, use, grant licenses in respect of, manufacture under, sell, assign, mortgage, pledge, or otherwise dispose of, any and all inventions, devices, processes, and any improvements and modifications thereof, and all Letters Patent of the United States or of any other country, state, territory or locality, and all rights connected therewith or pertaining thereto; any and all copyrights granted by the United States, or any other country, state, territory or locality, and any and all

trademarks, trade names, trade symbols and other indications of origin and ownership granted by or recognized under the laws of the United States or of any other country, state, territory or locality.

5. To acquire all or any part of the good will, rights, property and business of any corporation, association, partnership, firm, trustee, syndicate, combination, organization, or other entity or individual, domestic or foreign, hereto fore or hereafter engaged in any business similar to the business of the corporation, and to pay for the same in cash, or in shares or in obligations of the corporation, or otherwise, and to hold, utilize, enjoy and in any manner dispose of the whole or any part of the rights and property so acquired, and to conduct in the State of Ohio, or in any other state, territory, locality or country, the whole or any part of the business thus acquired, provided such business is not prohibited by the laws of the State of Ohio.

6. To have one or more offices or plants.

7. To do any one or more of the acts or things expressed in this Article Third, either as principal or as agent, for or through the operation or control of any other persons, firm, association, corporation or body politic.

8. In addition to the acts and things herein set forth, to do such other acts and things as are or may be permitted by the General Corporation Law of Ohio and any amendments which may be made thereto and such other acts and things as may be necessary, convenient or expedient to carry out and accomplish any or all of the foregoing purposes.

The foregoing paragraphs of this Article Third shall be construed as expressing independent purposes and powers, which shall not, except as otherwise expressly provided, be limited by reference to or inference from the provisions of any other paragraph; and it is hereby expressly provided that the foregoing enumeration of specific powers shall not be held to limit or restrict in any manner the powers of said corporation and are in furtherance of and in addition to and not in limitation of the general powers conferred upon the corporation by the said General Corporation Law of Ohio.

FOURTH. The authorized number of shares of the corporation is One Million (1,000,000), all of which shall be common shares without par value.

FIFTH. The corporation, when authorized to do so by its Board of Directors, may purchase any of its outstanding shares at such price and upon such terms as may be agreed upon between the corporation and the selling shareholder or shareholders. Any such purchase may be made either in the open market or at private or public sale.

SIXTH. The holders of shares shall have no pre-emptive rights to purchase or to have offered to them for purchase any shares of the corporation.

SEVENTH. The Code of Regulations previously set forth in the Agreement of Consolidation contained in the Certificate of Consolidation filed in the office of the Secretary of the State of Ohio on February 4, 1963, has from time to time thereafter been amended by the shareholders in accordance with Section 1701.11 of the Ohio Revised Code. Such Code of Regulations as so amended is contained in the minutes of the proceedings of the shareholders of the corporation, and such regulations as so amended shall (until hereafter amended by the shareholders, or until new regulations are adopted by the shareholders)he the regulations for the government of the corporation, the conduct of its affairs and the management of its property.

EIGHTH. These Amended Articles of Incorporation supersede the existing Articles of Incorporation as heretofore amended.

IN WITNESS WHEREOF, the said Preston B. Heller, Jr., President, and William X. Haase, Secretary, of Pioneer-Standard Electronics, Inc., acting for and on behalf of said corporation, have hereunto subscribed their names this 24th day of April, 1970.

/s/ Preston B. Heller, Jr.

President

/s/ William X. Haase

Secretary

CERTIFICATE OF ADOPTION

OF

AMENDMENT TO AMENDED ARTICLES OF INCORPORATION

OF

PIONEER-STANDARD ELECTRONICS, INC.

Preston B. Heller, Jr., President, and William X. Haase, Secretary, of Pioneer-Standard Electronics, Inc., an Ohio corporation, with its principal office located in the County of Cuyahoga of the State of Ohio do hereby certify that an annual meeting of the holders of the Shares of said corporation entitling them to vote on the proposal to amend the Amended Articles of Incorporation thereof, as contained in the following resolution, was duly called and notice thereof was duly given, and that said meeting was held on the 28th day of June, 1973, at which meeting a quorum of such shareholders was present in person or by proxy and that by the affirmative vote of the holders of shares entitled under the Articles to exercise two-thirds of the voting power of the corporation on such proposal, following resolution to amend the Amended Articles was adopted:

RESOLUTION

RESOLVED, that article Fourth of the Amended Articles of Incorporation of this Corporation be and it hereby is amended so that it reads as follows:

“FOURTH: The authorized number of shares of the Corporation is 2,000,000, all of which shall be common shares without par value.”

IN WITNESS WHEREOF, the said Preston B. Heller, Jr., President, and William X. Haase, Secretary, of Pioneer-Standard Electronics, Inc., acting for and on behalf of said corporation, have hereunto subscribed their names this 17th day of May, 1974.

/s/ Preston B. Heller, Jr.

President

/s/ William X. Haase

Secretary

CERTIFICATE OF ADOPTION

OF

AMENDMENT TO AMENDED ARTICLES OF INCORPORATION

OF

PIONEER-STANDARD ELECTRONICS, INC.

Preston B. Heller, Jr., President, and William X. Haase, Secretary, of Pioneer-Standard Electronics, Inc., an Ohio corporation, with its principal office located in the County of Cuyahoga of the State of Ohio do hereby certify that an annual meeting of the holders of the shares of said corporation entitling them to vote on the proposal to amend the Amended Articles of Incorporation thereof, as contained in the following resolution, was duly called and notice thereof was duly given, and that said meeting was held on the 28th day of June, 1979, at which meeting a quorum of such shareholders was present in person or by proxy and that by the affirmative vote of the holders of shares entitled under the Articles to exercise two-thirds of the voting power of the corporation on such proposal, the following resolution to amend the Amended Articles was adopted:

RESOLUTION

RESOLVED, that Article Fourth of the Amended Articles of Incorporation of this Corporation be and it hereby is amended so that it reads as follows:

“FOURTH: The authorized number of shares of the Corporation is 5,000,000, all of which shall be common shares without par value.”

IN WITNESS WHEREOF, the said Preston B. Heller, Jr., President, and William X. Haase, Secretary, of Pioneer-Standard Electronics, Inc., acting for and on behalf of said corporation, have hereunto subscribed their names this 10th day of August 1979.

/s/ Preston B. Heller, Jr.

President

/s/ William X. Haase

Secretary

CERTIFICATE OF AMENDMENT

TO

AMENDED ARTICLES OF INCORPORATION

OF

PIONEER-STANDARD ELECTRONICS, INC.

Charter No. 317430

James L. Bayman, President, and John S. Zarka, Secretary, of Pioneer-Standard Electronics, Inc., an Ohio corporation, do hereby certify that a meeting of the Shareholders of Pioneer-Standard Electronics, Inc. was duly called and held on June 28, 1984, at which meeting a quorum of such Shareholders was present in person or by proxy at all times, and that by the affirmative vote of the holders of shares entitling them to exercise two-thirds of the voting power of said corporation, the following resolutions were adopted for the purpose of amending Article FOURTH of the Amended Articles of Incorporation of said corporation:

“RESOLVED, that Article FOURTH of the Company’s Amended Articles of Incorporation be amended to read in its entirety as follows:

FOURTH: The authorized number of shares of the corporation is Twenty Million (20,000,000) shares, all of which shall be Common Shares, without par value.’

BE IT FURTHER RESOLVED, That the President and the Secretary of the Company be and they are hereby authorized and directed to file promptly in the office of the Secretary of State of Ohio an appropriate Certificate of Amendment, and to take such other action as may be appropriate, in order to render effective the foregoing amendment and carry out the purposes of these resolutions.”

IN WITNESS WHEREOF, said James L. Bayman, President, and John S. Zarka, Secretary, of Pioneer-Standard Electronics, Inc., acting for and on behalf of said corporation, have hereunto subscribed their names this 28th day of June, 1984.

/s/ James L. Bayman

James L. Bayman,

President

/s/ John S. Zarka,

John S. Zarka,

Secretary,

CERTIFICATE OF AMENDMENT

TO

AMENDED ARTICLES OF INCORPORATION

OF

PIONEER-STANDARD ELECTRONICS, INC.

Charter No. 317430

James L. Bayman, President, and John S. Zarka, Secretary, of Pioneer-Standard Electronics, Inc., an Ohio corporation, do hereby certify that a meeting of the Shareholders of Pioneer-Standard Electronics, Inc. was duly called and held on June 27, 1985, at which meeting a quorum of such Shareholders was present in person or by proxy at all times, and that by the affirmative vote of the holders of shares entitling them to exercise two-thirds of the voting power of said corporation, the following resolutions were adopted for the purpose of adding a new Article SEVENTH to the Amended Articles of Incorporation of said corporation:

“RESOLVED, that a new Article SEVENTH be added to the Company’s Amended Articles of Incorporation to read in its entirety as follows:

‘SEVENTH.

A. A Business Combination (as hereinafter defined) shall be authorized and approved by the affirmative vote of the holders of not less than eighty percent (80%) of the outstanding shares of the corporation entitled to vote generally in elections of Directors; provided, however, that the eighty percent (80%) voting requirement shall not be applicable if:

1. The Board of Directors of the corporation by affirmative vote, which shall include not less than a majority of the entire number of Continuing Directors (as hereinafter defined), (a) has approved in advance the acquisition of those outstanding shares of the corporation which caused the Interested Party (as hereinafter defined) to become an Interested Party or (b) has approved the Business Combination; or

2. The Business Combination is a merger or consolidation and the cash or Fair Market Value of other consideration to be received per share by holders of the common shares of the corporation in said merger or consolidation is not less than an amount equal to the sum of:

(a) the greatest of (i) the highest per share price, including commissions, paid by the Interested Party for any shares of the same class or series during the two-year period ending on the date of the most recent purchase by the Interested Party of any such shares, or (ii) the highest sales price reported for shares of the same class or series traded on a national securities exchange or in the over-the-counter market during the two-year period preceding the first public announcement of the proposed business transaction; plus

(b) interest on the per share price calculated at the rate of ten percent (10%) per annum, compounded annually from the date the Interested Party first became an Interested Party until the business combination is consummated, less the per share amount of cash dividends payable to holders of record on record dates in the interim up to the amount of such interest.

For purposes of this clause (2), per share amounts will be adjusted for any stock dividend, stock split or similar transaction.

B. For purposes of this Article Seventh:

1. The term “Business Combination” shall mean (a) any merger or consolidation of the corporation or a subsidiary of the corporation with or into an Interested Party, (b) any merger or consolidation of an Interested Party with or into the corporation or a subsidiary, (c) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) in which an Interested Party is involved, of any of the assets either of the corporation (including without limitation any voting securities of a subsidiary) or of a subsidiary having a Fair

Market Value in excess of $2,000,000, (d) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of any Interested Party, (e) the issuance or transfer (in one transaction or a series of transactions) by the corporation or a subsidiary of the corporation to an Interested Party of any securities of the corporation or such subsidiary, which securities have a Fair Market Value of $2,000,000 or more, or (f) any recapitalization, reclassification, merger or consolidation involving the corporation or a subsidiary of the corporation that would have the effect of increasing, directly or indirectly, the Interested Party’s voting power in the corporation or such subsidiary.

2. The term “Interested Party” shall mean and include (a) any individual, corporation, partnership, trust or other person or entity which, together with its “affiliates” and “associates” (as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on May 22, 1935) is or, with respect to a Business Combination, was within two years prior thereto a beneficial owner of shares aggregating ten percent (10%) or more of the aggregate voting power of any class of capital stock of the corporation entitled to vote generally in the election of Directors, and (b) any affiliate or associate of any such individual, corporation, partnership, trust or other person or entity. For the purposes of determining whether a person is an Interested Party, the number of shares deemed to be outstanding shall include shares which the Interested Party or any of its affiliates or associates has the right to acquire (whether immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise, but shall not include any other shares which may be issuable to any other person.

3. The term “Continuing Director” shall mean a director who is not an affiliate of an Interested Party and who was a member of the Board of Directors of the corporation immediately prior to the time that the Interested Party involved in a Business Combination became an Interested Party, and any successor to a Continuing Director who is not such an affiliate and who is nominated to succeed a Continuing Director by a majority of the Continuing Directors in office at the time of such nomination.

4. “Fair Market Value” shall mean the fair market value of the property in question as determined by a majority of the Continuing Directors in good faith.

C. The provisions of this Article Seventh shall be construed liberally to the end that the consideration paid to holders whose shares are acquired by an Interested Party in connection with a merger or consolidation shall not be less favorable than that paid to holders of such shares prior to such merger or consolidation. Nothing contained in this Article Seventh shall be construed to relieve any Interested Party from any fiduciary duties or obligations imposed by law.

D. Notwithstanding any other provision of the Amended Articles of Incorporation or the Amended Code of Regulations of the corporation and notwithstanding the fact that a lesser percentage may be specified by law, these Amended Articles of Incorporation or the Amended Code of Regulations of the corporation, the affirmative vote of the holders of not less than eighty percent (80%) of the then outstanding shares shall be required to amend, alter, change or repeal, or adopt any provisions inconsistent with, this Article Seventh; provided, however, that this paragraph D shall not apply to, and the eighty percent (80%) vote shall not be required for, any amendment, alteration, change or repeal recommended to the shareholders by the Board of Directors of the corporation if the recommendation has been approved by at least two-thirds of the Continuing Directors.

BE IT FURTHER RESOLVED, that current Article SEVENTH of the Company’s Amended Articles of Incorporation be redesignated as Article EIGHTH.

BE IT FURTHER RESOLVED, that the President and the Secretary of the Company be and they are hereby authorized and directed to file promptly in the Office of the Secretary of State of Ohio an appropriate Certificate of Amendment, and to take such other action as may be appropriate, in order to render effective the foregoing amendment and carry out the purposes of these resolutions.”

IN WITNESS WHEREOF, said James L. Bayman, President, and John S. Zarka, Secretary, of Pioneer-Standard Electronics, Inc., acting for and on behalf of said corporation, have hereunto Subscribed their names this 27th day of June, 1985.

/s/ James L. Bayman

James L. Bayman, President

/s/ John S. Zarka

John S. Zarka, Secretary

CERTIFICATE OF AMENDMENT

TO

AMENDED ARTICLES OF INCORPORATION

OF

PIONEER-STANDARD ELECTRONICS, INC.

Charter No, 317430

James L. Bayman, President, and John V. Goodger, Assistant Secretary, of Pioneer-Standard Electronics, Inc., an Ohio corporation, do hereby certify that a meeting of the Shareholders of Pioneer-Standard Electronics, Inc. was duly called and held on July 26, 1994, at which meeting a quorum of such Shareholders was present in person or by proxy at all times, and that by the affirmative vote of the holders of shares entitling them to exercise at least two-thirds of the voting power of said corporation, the following resolutions were adopted for the purpose of amending Article FOURTH of the Amended Articles of Incorporation of said corporation:

RESOLVED, that Article FOURTH of the Amended Articles of Incorporation shall be deleted and replaced by the following:

“FOURTH: The authorized number of shares of the corporation is Forty Million (40,000,000) shares, all of which shall; be Common Shares, without par value.”

IN WITNESS WHEREOF, said James L. Bayman, president, and John V. Goodger, Assistant Secretary, of Pioneer- Standard Electronics, Inc., acting for and on behalf of said corporation, have hereunto subscribed their names this 28th day of July, 1994.

/s/ James L. Bayman

James L. Bayman, President

/s/ John V. Goodger, Assistant

John V. Goodger, Assistant Secretary

RECEIVED

AUG 1 1994

Bob Taft

Secretary of State

CERTIFICATE OF AMENDMENT

TO

AMENDED ARTICLES OF INCORPORATION

OF

PIONEER-STANDARD ELECTRONICS, INC.

Charter No. 317430

James L. Bayman, President, and John V. Goodger, Assistant Secretary, of Pioneer-Standard Electronics, Inc., an Ohio corporation, do hereby certify that a meeting of the Shareholders of Pioneer-Standard Electronics, Inc. was duly called and held on July 23, 1996, at which meeting a quorum of such Shareholders was present in person or by proxy at all times, and that by the affirmative vote of the holders of shares entitling them to exercise at least two-thirds of the voting power of said corporation, the following resolutions were adopted for the purpose of amending Article FOURTH of the Amended Articles of Incorporation of said corporation:

RESOLVED, that Article FOURTH of the Amended Articles of Incorporation shall be deleted and replaced by the following:

“FOURTH: The authorized number of shares of the corporation is Eighty Million (80,000,000) shares, all of which shall be Common Shares, without par value.”

IN WITNESS WHEREOF, said James L. Bayman, President, and John V. Goodger, Assistant Secretary, of Pioneer-Standard Electronics, Inc., acting for and on behalf of said corporation, have hereunto subscribed their names this 29th day of July, 1996.

/s/ James L. Bayman

James L. Bayman, President

/s/ John V. Goodger

John V. Goodger, Assistant Secretary

CERTIFICATE OF AMENDMENT

TO

AMENDED ARTICLES OF INCORPORATION

OF

PIONEER-STANDARD ELECTRONICS, INC.

Charter No. 317430

William A. Papenbrock, Secretary, of Pioneer-Standard Electronics, Inc., an Ohio corporation, does hereby certify that a meeting of the Shareholders of Pioneer-Standard Electronics, Inc. was duly called and held on July 29, 1997, at which meeting a quorum of such Shareholders was present in person or by proxy at all times, and that by the affirmative vote of the holders of shares entitling them to exercise at least two-thirds of the voting power of said corporation, the following resolution was adopted for the purpose of amending Article FOURTH of the Amended Articles of Incorporation of said corporation:

RESOLVED, that Article FOURTH of the Amended Articles of Incorporation shall be deleted and replaced by the following:

“FOURTH: The authorized number of shares of the Corporation is Eighty-Five Million (85,000,000) shares, of which Eighty Million (80,000,000) shall be Common Shares, without par value, and Five Million (5,000,000) shall be Serial Preferred Shares, without par value.

SUBDIVISION A

PROVISIONS APPLICABLE TO SERIAL PREFERRED SHARES

The Serial Preferred Shares may be issued, from time to time, in one or more series, with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereon, as shall be stated and expressed in the resolution or resolutions providing for the issuance of such series as adopted by the Board of Directors. The Board of Directors, in such resolution or resolutions (a copy of which shall be filed and recorded as required by law), is also expressly authorized to fix:

(a) The distinctive serial designations and the division of such shares into series and the number of shares of a particular series, which may be increased or decreased, but not below the number of shares thereof then outstanding, by a certificate made, signed, filed and recorded as required by law;

(b) The annual dividend rate for the particular series, and the date or dates from which dividends on all shares of such series shall be cumulative, if dividends on shares of the particular series shall be cumulative;

(c) The redemption price or prices, if any, for the particular series;

(d) The right, if any, of the holders of a particular series to convert such shares into other classes of shares, and the terms and conditions of such conversions; and

(e) The obligation, if any, of the Corporation to purchase and retire and redeem shares of a particular series as a sinking fund or redemption or purchase account, the terms thereof and the redemption price or prices per share for such series redeemed pursuant to the sinking fund or redemption or purchase account.

All shares of any one series of Serial Preferred Shares shall be alike in every particular and all series shall rank equally and be identical in all respects except insofar as they may vary with respect to the matters which the Board of Directors is hereby expressly authorized to determine in the resolution or resolutions providing for the issuance of any series of the Serial Preferred Shares.

In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, then before any distribution or payment shall have been made to the holders of the Common Shares, the holders of the Serial Preferred Shares of each series shall be entitled to be paid, or to have set apart in trust for payment, an amount from

the net assets of the Corporation equal to that stated and expressed in the resolution or resolutions adopted by the Board of Directors which provide for the issuance of such series, respectively.

The remaining net assets of the Corporation shall be distributed solely among the holders of the Common Shares according to their respective shares.

The holders of Serial Preferred Shares shall be entitled to one vote for each Serial Preferred Share upon all matters presented to the shareholders, and, except as otherwise provided by these Amended Articles of Incorporation or required by law, the holders of Serial Preferred Shares and the holders of Common Shares shall vote together as one class on all matters. No adjustment of the voting rights of holders of Serial Preferred Shares shall be made in the event of an increase or decrease in the number of Common Shares authorized or issued or in the event of a stock split or combination of the Common Shares in the event of a stock dividend on any class of shares payable solely in Common Shares.

The affirmative vote of the holders of at least two-thirds of the Serial Preferred Shares at the time outstanding, given in person or by proxy at a meeting called for the purpose at which the holders of Serial Preferred Shares shall vote separately as a class, shall be necessary to adopt any amendment to the Amended Articles of Incorporation (but so far as the holders of Serial Preferred Shares are concerned, such amendment may be adopted with such vote) which:

(i) changes issued Serial Preferred Shares of all series then outstanding into a lesser number of shares of the Corporation of the same class and series or into the same or a different number of shares of the Corporation of any other class or series; or

(ii) changes the express terms of the Serial Preferred Shares in any manner substantially prejudicial to the holders of all series thereof then outstanding; or

(iii) authorizes shares of any class, or any security convertible into shares of any class, or authorizes the conversion of any security into shares of any class, ranking prior to the Serial Preferred Shares; or

(iv) changes the express terms of issued shares of any class ranking prior to the Serial Preferred Shares in any manner substantially prejudicial to the holders of all series of Serial Preferred Shares then outstanding; and the affirmative vote of the holders of at least two-thirds of the shares of each affected series of Serial Preferred Shares at the time outstanding, given in person or by proxy at a meeting called for the purpose at which the holders of each affected series of Serial Preferred Shares shall vote separately as a series, shall he necessary to adopt any amendment to the Amended Articles of Incorporation (but so far as the holders of each such series of Serial Preferred Shares are concerned, such amendment may be adopted with such vote) which:

(i) changes issued Serial Preferred Shares of one or more but not all series then outstanding into a lesser number of shares of the Corporation of the same series or into the same or a different number of shares of the Corporation of any other class or series; or

(ii) changes the express terms of any series of the Serial Preferred Shares in any manner substantially prejudicial to the holders of one or more but not all series thereof then outstanding; or

(iii) changes the express terms of issued shares of any class ranking prior to the Serial Preferred Shares in any manner substantially prejudicial to the holders of one or more but not all series of Serial Preferred Shares then outstanding.

Whenever reference is made herein to shares “ranking prior to the Serial Preferred Shares,” such reference shall mean and include all shares of the Corporation in respect of which the rights of the holders thereof either as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation are given preference over the rights of the holders of Serial Preferred Shares; whenever reference is made to shares “on a parity with the Serial Preferred Shares,” such reference shall mean and include all shares of the Corporation in respect of which the rights of the holders thereof (i) neither as to the payment of dividends nor as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation are given preference over the rights of the holders of Serial Preferred Shares and (ii) either as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation rank on an equality (except as to the amounts fixed therefor) with the rights of the

holders of Serial Preferred Shares: and whenever reference is made to shares “ranking junior to the Serial Preferred Shares,” such reference shall mean and include all shares of the Corporation in respect of which the rights of the holders thereof both as to the payment of dividends and as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation are junior and subordinate to the rights of the holders of the Serial Preferred Shares.

SUBDIVISION B

PROVISIONS APPLICABLE TO COMMON SHARES

The Common Shares shall be subject to the express terms of the Serial Preferred Shares and of any series thereof. Each Common Share shall be equal to every other Common Share and the holders thereof shall have such rights as are provided by law and, except as otherwise provided herein or as required by law, shall be entitled to one vote for each share held by them upon all matters presented to shareholders.”

IN WITNESS WHEREOF, said William A. Papenbrock, Secretary of Pioneer-Standard Electronics, Inc., acting for and on behalf of said corporation, has hereunto subscribed his name this 1st day of August, 1997.

/s/ William A. Papenbrock

William A. Papenbrock, Secretary

DATE: 09/15/2003 DOCUMENT ID 200325800924 DESCRIPTION DOMESTIC/ FILING 50.00 EXPED 100.00 PENALTY .00 CERT .00 COPY .00

AMENDMENT TO ARTICLES

(AMD)

RECEIPT

This is not a bill. Please do not remit payment.

CALFEE HALTER, ESQ.

1650 FIFTH THIRD CENTER

21 E. STATE STREET

COLUMBUS, OH 43215

STATE OF OHIO

CERTIFICATE

OHIO SECRETARY OF STATE, J. KENNETH BLACKWELL

317430

It is hereby certified that the Secretary of State of Ohio has custody of the business records for

AGILYSYS, INC.

and, that said business records show the filing and recording of:

Document(s):	Document No(s):
DOMESTIC/AMENDMENT TO ARTICLES	200325800924
[SEAL]	Witness my hand and the seal of the
United States of America State of Ohio	Secretary of State at Columbus, Ohio this 15th day of September,
Office of the Secretary of State	A.D. 2003.
	J. Kenneth Blackwell Ohio Secretary of State

PRESCRIBED BY J.KENNETH BLACKWELL

OHIO Secretary of State

Central Ohio: (614) 466-3910

Toll Free: 1-877-SOS-FILE (1-877-767-3453)

[SEAL]

www.state.oh.us/sos

e-mail: busserv@sos state.oh us

Expedite this Form: (Select one)

Mall Form to one of the Following:

[R] Yes PO Box 1390

Columbus, OH 43216

“‘ Requires an additional fee of $100’”

PO Box 1028 ☐ No Columbus, OH 43216

Certificate of Amendment by

Shareholders or Members

(Domestic)

Filing Fee $50 00

(CHECK-ONLY ONE (1) BOX)

(1) Domestic for Profit	PLEASE READ INSTRUCTIONS	(2) Domestic Non-Profit
☐ Amended (122-AMAP)	☒ Amendment (125-AMDS)	☐ Amended (126-AMAN)	☐ Amendment (128-AMD)

Complete the general information In this section for the box checked above.

Name of Corporation	Pioneer-Standard Electronics, Inc.
Charter Number	317430
Name of Officer	Kathryn K. Vanderwist
Title	Assistant Secretary

☐ Please check if additional provisions attached

The above named Ohio corporation, does hereby certify that:

☒ A meeting of the amanded ☒ shareholders ☐ directors (non-profit articles only)

☐ members was duly called and held on September 12, 2003

(Date)

at which meeting a quorum was present in person or by proxy, based upon the quorum present, an affirmative vote was cast which entitled them to exercise 82% as the voting power of the corporation.

☐ In a writing signed by all of the (non-profit amended articles only) ☐ shareholders ☐ directors

☐ members who would be entitled to the notice of a meeting or such other proportion not less than a majority as the articles of regulations or bylaws permit

Clause applies if amended box Is checked.

Resolved, that the following amended articles of incorporations be and the same are hereby adopted to supercede and take the place of the existing articles of incorporation and all amendments thereto

Page 1 of 2 Last Revised: May 2002

All of the following information must be completed If an amended box is checked.

If an amendment box Is checked, complete the areas that apply.

FIRST:	The name of the corporation Is: Agilysys, Inc.
SECOND:	The place in the State of Ohio where its principal office is located in the city of:

(City, village or township) (County)

THIRD: The purposes of the corporation are as follows:

FOURTH:	The number of shares which the corporation is authorized to have outstanding is:
	(Does not apply to box (2))

REQUIRED	Kathryn K.Vanderwist	SEPT. 12, 2003
Must be authenticated	Authorized Representative	Date
(signed) by an authorized representative (See Instructions)	Kathryn K.Vanderwist, Assistant Secretary
	(Print Name)
	[ ] Authorized Representative	[ ] Date
	(Print Name)

Page 2 Of 2 Last Revised: May 2002

DATE:	DOCUMENT ID	DESCRIPTION	FILING	EXPED	PENALTY	CERT	COPY
07/28/2011	201120900162	DOMESTIC/AMENDMENT TO ARTICLES (AMD)	50.00	300.00	.00	.00	5.00

Receipt

This is not a bill. Please do not remit payment.

THOMPSON HINE LLP

CAROL R. RUSSELL, PARALEGAL

41 S HIGH STREET, SUITE 1700

COLUMBUS, OH 43215

STATE OF OHIO CERTIFICATE Ohio Secretary of State, Jon Husted 317430 It is hereby certified that the Secretary of State of Ohio has custody of the business records for AGILYSYS, INC. and, that said business records show the filing and recording of:
Document(s)	Document No(s):
DOMESTIC/AMENDMENT TO ARTICLES	201120900162
	Witness my hand and the seal of the Secretary of State at Columbus, Ohio this 28th day of July, A.D. 2011. Ohio Secretary of State
United States of America State of Ohio Office of the Secretary of State

	Prescribed by:	Expedite this Form: (Select One)
	The Ohio Secretary of State	Mail Form to one of the Following:
	Central Ohio: (614) 466-3910	Yes	PO Box 1390 Columbus, OH 43216
	Toll Free: 1-877-SOS-FILE (1-877-767-3453)
		*** Requires an additional fee of $100 ***
www.sos.state.oh.us e-mail: busserv@sos.state.oh.us		No	PO Box 1329 Columbus, OH 43216

Certificate of Amendment by

Shareholders or Members

(Domestic)

Filing Fee $50.00

(CHECK ONLY ONE (1) BOX)

(1) Domestic for Profit	PLEASE READ INSTRUCTIONS	(2) Domestic Nonprofit
☐ Amended	☑ Amendment	☐ Amended	☐ Amendment
(122-AMAP)	(125-AMDS)	(126-AMAN)	(128-AMD)

Complete the general information in this section for the box checked above.
Name of Corporation	Agilysys, Inc.
Charter Number	317430
Name of Officer	Kathleen A. Weigand
Title	General Counsel, Secretary and SVP-HR
☑ Please check if additional provisions attached. See attached amendment to delete Article EIGHTH in its entirety.
The above named Ohio corporation, does hereby certify that:
☑ A meeting of the	☐ shareholders	☑ directors ( nonprofit only)
☐ members was duly called and held on July 28, 2011
	(Date)
at which meeting a quorum was present in person or by proxy, based upon the quorum present, an affirmative vote was cast which entitled them to exercise 80.35 % as the voting power of the corporation.
☐ In a writing signed by all of the ☐ shareholders ☐ directors (nonprofit amended articles only)
☐ members who would be entitled to the notice of a meeting or such other proportion not less than a majority as the articles of regulations or bylaws permit.

Clause applies if amended box is checked.

Resolved, that the following amended articles of incorporations be and the same are hereby adopted to supercede and take the place of the existing articles of incorporation and all amendments thereto.

Page 1 of 2

All of the following information must be completed if an amended box is checked.
If an amendment box is checked, complete the areas that apply.
FIRST:	The name of the corporation is:
SECOND:	The place in the State of Ohio where its principal office is located is in the City of:
	(city, village or township)	(county)
THIRD:	The purposes of the corporation are as follows:
FOURTH:	The number of shares which the corporation is authorized to have outstanding is:
(Does not apply to box (2))

REQUIRED
Must be authenticated (signed) by an authorized representative	/s/ Kathleen A. Weigand	July 28, 2011
	Authorized Representative	Date
(See Instructions)	Kathleen A. Weigand
	(Print Name)
	General Counsel, Secretary and SVP-HR
	Authorized Representative	Date
	(Print Name)

Page 2 of 2

Provision:

That the current Article EIGHTH of the Amended Articles of Incorporation of Agilysys, Inc. filed on September 12, 2003 be deleted in its entirety.

ATTACHMENT TO CERTIFICATE OF AMENDMENT

TO AMENDED ARTICLES OF INCORPORATION

OF AGILYSYS, INC.

Kyle Badger, Secretary of Agilysys, Inc., an Ohio corporation (the “Corporation”), hereby certifies that the following amendment to the Amended Articles of Incorporation (the “Articles”) of the Corporation was approved and adopted at a meeting of the shareholders of the Corporation duly called and held on August 9, 2019, at which a quorum was present and acting throughout, by the affirmative vote of the holders of common shares entitled to exercise two- thirds of the voting power of the Corporation:

The Articles are hereby amended by adding a new Article EIGHTH to read in full as follows:

EIGHTH: In any election of nominees to the Board at an annual meeting of the shareholders, if the number of nominees for election to the Board is less than or equal to the number of directorships to be filled in such election (an “Uncontested Election”), then each individual nominated shall be elected to the Board if the votes cast “for” such nominee’s election exceeds the votes “against” such nominee’s election. If the number of nominees for election to the Board is greater than the number of directorships to be filled at the annual meeting of shareholders, then the nominees receiving the greatest number of votes cast “for” their election shall be elected to the available number of directorships. Neither abstentions nor “broker non- votes” shall count as votes “for” or “against” a nominee’s election.

EX-4.1

Exhibit 4.1

DESCRIPTION OF REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12
OF THE SECURITIES EXCHANGE ACT OF 1934SECURITIES

Agilysys, Inc. (the “Company”) shares of Common Stock, without par value (the “Common Shares”), are registered under Section 12(b) of the Securities Exchange Act of 1934, as amended.

The following briefly summarizes some of the general terms of the Common Shares and does not purport to be complete. It is subject to and qualified in its entirety by reference to the applicable provisions of the Amended Articles of Incorporation of Agilysys, Inc., as amended (the “Articles”) and the Amended Code of Regulations of Agilysys, Inc. (the “Regulations”), each of which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.1 is a part. We encourage you to read the Articles and the Regulations.

General

The Company is authorized by its Articles to issue 80,000,000 Common Shares. The Articles also authorize the issuance of 5,000,000 shares of serial preferred stock without par value (“preferred stock”). The Common Shares are traded on the Nasdaq Global Market under the ticker symbol “AGYS.”

Dividend Rights

Subject only to any prior rights and preferences of any shares of preferred stock that may in the future be issued and outstanding, the holders of the Common Shares are entitled to receive dividends when, as and if declared by the Company’s board of directors out of legally available funds.

Voting Rights

The holders of Common Shares are entitled to one vote for each Common Share held on all matters presented at the Company’s meetings of shareholders. The holders of Common Shares are entitled to cumulate their votes for the election of directors if the shareholder gives written notice not less than 48 hours before the applicable meeting commences to our Chief Executive Officer or Secretary that the shareholder wants its voting for the election of directors to be cumulative.

Certain Provisions of Our Articles

There are provisions in our Articles that may have the effect of deterring hostile takeovers or delaying or preventing changes in control or changes in management with respect to us.

Under our Articles, certain actions shall require the affirmative vote of 80% of outstanding share entitled to vote generally in the election of directors, unless (1) such action is approved by the board of directors, which shall include not less than a majority of the entire number of Continuing Directors (as defined in our Articles), or (2) the consideration to be received per share by holders of the common shares of the corporation in said merger or consolidation is not less than an amount equal to the sum of: (a) the greatest of (i) the highest per share price paid by the Interested Party (as defined in our Articles) for any shares of the same class or series during the two-year period ending on the date of the most recent purchase by the Interested Party of any such shares, or (ii) the highest sales price reported for shares of the same class or series traded on a national securities exchange or in the over-the-counter market during the two-year period preceding the first public announcement of the proposed business transaction; plus (b) interest on the per share price calculated at the rate of ten percent (10%) per annum, compounded annually from the date the Interested Party first became an Interested Party until the business combination is consummated, less the per share amount of cash dividends payable to holders of record on record dates in the interim up to the amount of such interest.

The actions requiring such approval are:

(a) any merger or consolidation of the corporation or a subsidiary of the corporation with or into an Interested Party (as defined in our Articles) or any merger or consolidation of an Interested Party with or into the corporation or a subsidiary;

(b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) in which an Interested Party is involved, of any of the assets either of the corporation (including without limitation any voting securities of a subsidiary) or of a subsidiary having a fair market value in excess of $2,000,000;

(c) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of any Interested Party;

(d) the issuance or transfer (in one transaction or a series of transactions) by the corporation or a subsidiary of the corporation to an Interested Party of any securities of the corporation or such subsidiary, which securities have a fair market value of $2,000,000 or more; or

(e) any recapitalization, reclassification, merger or consolidation involving the corporation or a subsidiary of the corporation that would have the effect of increasing, directly or indirectly, the Interested Party’s voting power in the corporation or such subsidiary.

Preemptive or Conversion Rights

Holders of Common Shares have no any preemptive right to purchase, have offered for purchase or subscribe for any of the Company’s Common Shares or other securities of any class, whether now or hereafter authorized. There are no conversion rights or redemption or sinking fund provisions with respect to the Common Shares.

EX-10.11

Exhibit 10.11

To:Ramesh Srinivasan

(Name of Recipient)

You are hereby granted, as an officer or employee of Agilysys, Inc. (the “Company”) or a Subsidiary of the Company, a stock-settled stock appreciation right (the “SSAR”) to purchase 600,000 Company Common Shares, without par value (the “Shares”), at a price of $36.60 per share (the “Exercise Price”). This SSAR is granted to you pursuant to the Agilysys, Inc. 2016 Stock Incentive Plan, as amended from time to time (the “Plan”) and is subject to the terms and conditions set forth in the Agreement below.

Date of Grant:  February 10, 2020

Please be sure to consult with your tax or legal advisors before exercising any SSARs hereunder. Please acknowledge your acceptance of the terms of this SSAR by signing on the next page.

STOCK APPRECIATION RIGHT AGREEMENT

THIS AGREEMENT is entered into as of the date of grant set forth above by and between the Company and the Recipient named above. Terms not defined herein have the meanings ascribed to such terms in the Plan.

1.Grant of SSAR.  Effective as of the date of grant set forth above, the Company grants to the Recipient, upon the terms and subject to the conditions set forth hereinafter, the right to gains above the Exercise Price on the number of Shares set forth above.

2.Term.  The term of the SSAR shall be for a period of 4 years and 6 months from the date of grant, and the SSAR shall expire at the close of regular business hours at the Company’s principal office on the last day of the term of the SSAR, or, if earlier, on the applicable expiration date provided for in sections 4 and 5 hereof.

3.Vesting.  Except as otherwise provided herein, the SSAR shall become exercisable with respect to the number of Shares indicated as of the date indicated opposite such number below:

Number of Shares As to Which SSAR May be Exercised	Date as of Which SSAR May be Exercised
125,000	“Performance SSARs” to vest and become exercisable as described below.
13,194	On the first day of each month for 20 months beginning March 1, 2020 and continuing through October 1, 2021 (cumulative 263,880 shares)
13,195	On the first day of each month for 16 months beginning November 1, 2021 and continuing through February 1, 2023 (cumulative 211,120 shares)

1

The Performance SSARs shall be conditioned upon and commence vesting if, and on the date that, the closing price of the Company’s stock has been equal to or higher than $45 per share for 15 business days, and on the following day, they shall vest pro-rata daily until December 31, 2022, regardless of the price performance thereafter, and subject to your continued employment on the vesting date.

4.Exercisability.  To the extent that the SSAR has become exercisable with respect to a number of Shares, as provided herein, the SSAR may thereafter be exercised by the Recipient either as to all or any part of such Shares at any time or from time-to-time prior to expiration or other termination of the SSAR. Except as provided in sections 4 and 5 hereof, the SSAR may not be exercised at any time unless the Recipient shall be an employee of the Company or a Subsidiary (an “Employee”) at such time. So long as the Recipient shall continue to be an Employee, the SSAR shall not be affected by (a) any temporary leave of absence approved in writing by the Company or one of its Subsidiaries, or (b) any change of duties or position (including transfer to or from a Subsidiary).

If the Recipient ceases to be an Employee by reason of his or her Retirement, all Vested SSAR shall remain exercisable, and the Recipient’s right to exercise Vested SSAR shall terminate upon the last day of the term of the SSAR. Non-Vested SSAR shall continue to Vest as provided in section 3, but such SSAR shall be exercisable for two (2) years from the date that such SSAR Vests or, if shorter, until the last day of the term of the SSAR, and the Recipient’s right to exercise such SSAR shall terminate thereafter.

If the Recipient ceases to be an Employee due to his or her Disability, the SSAR shall be deemed Vested with respect to all Shares then subject to the SSAR, and the Recipient’s right to exercise the SSAR shall terminate upon the earlier of the date that is one (1) year from the date of such cessation of employment or the last day of the term of the SSAR.

If the Recipient ceases to be an Employee by reason of his or her termination for Cause, this SSAR shall terminate immediately upon such termination. For purposes of this Agreement, “termination for Cause” shall be as determined in accordance with the Recipient’s employment agreement then in effect.

If the Recipient ceases to be an Employee for any reason other than his or her death, Disability, Retirement, or termination for Cause, the SSAR may be exercised only to the extent Vested as of the date of such cessation pursuant to section 3 hereof and which have not theretofore been exercised. Upon any such cessation of employment, the Recipient’s right to exercise the SSAR shall terminate upon the earlier of the date that is ninety (90) days from the date of such cessation of employment or the last day of the term of the SSAR.

Nothing contained in this Agreement shall confer upon the Recipient any right to continue in the employ of the Company or any of its Subsidiaries, or to limit or interfere in any way with the right of the Company or any such Subsidiary to terminate his or her employment at any time, with or without Cause.

5.Death of Recipient.  If the Recipient dies while an Employee, such person or persons as shall have acquired, by will or by the laws of descent and distribution, the right to exercise the SSAR (the “Personal Representative”) shall be entitled to exercise the SSAR as to all of the Shares then subject to the SSAR. Such exercise rights shall terminate upon the earlier of the date one (1) year from the date of the Recipient’s death or the last day of the term of the SSAR. If, after Retirement, the Recipient dies prior to the last day of the term of the SSAR, the Personal Representative shall be entitled to exercise all unexercised SSAR, and such SSAR shall remain exercisable, for the greater of the remainder of the exercise period (as applicable) or one (1) year from the date of the Recipient’s death, but in no event shall the SSAR be exercisable after the last day of the term of the SSAR. If the Recipient dies during the one (1) year period commencing on the date of his or her termination due to his or her Disability, the Personal Representative shall be entitled to exercise the SSAR, and such SSAR shall remain exercisable until one (1) year from the date of such death, but in no event shall the SSAR be exercisable after the last day of the term of the SSAR.

2

6.Change of Control.  Upon a Change in Control, this SSAR shall become fully exercisable and shall immediately be deemed exercised as to all Shares then subject to the SSAR. The net number of Shares issued to the Recipient pursuant to Section 9 as a result of the deemed exercise (the “Held Shares”) shall be subject to the restrictions set forth in this Section 6 (in addition to any applicable securities law restrictions or other restrictions imposed on Shares generally).

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

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

The Held Shares shall remain subject to the restrictions set forth in this Section 6 and such restrictions shall lapse in the event of (a) the Recipient’s continued employment through the earlier of (i) twelve (12) months after the date of the Change in Control, or (ii) the date the Participant ceases to be an employee with the Company or its successor on account of an involuntary termination of employment by the Company without Cause or on account of a termination for Good Reason (as determined in accordance with the Recipient’s employment agreement in effect immediately prior to the Change in Control), or (b) without regard to the application of this Section 6, the date the Held Shares would vest by reason of a termination of employment or Change in Control under the Recipient’s employment agreement in effect immediately prior to the Change in Control (the “Holding Period”).

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

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

If Common Shares generally are convertible into a right to receive non-equity consideration in connection with the Change in Control, then the Held Shares shall be convertible into the right to receive such non-equity consideration, and the right to receive such non-equity consideration shall be subject to the Holding Period under this Section 6 on the same basis as the Held Shares.

7.Waiver of Terms and Conditions. The Committee also has the power and authority to waive or accelerate the vesting provisions of the SSAR, or to waive or modify the other terms and conditions of and restrictions and limitations on the SSAR, provided such waiver or modification is not materially detrimental to the Recipient or inconsistent with the terms of the Plan and the Recipient’s employment agreement then in effect.

3

8.Method of Exercise.  The SSAR may be exercised by delivery to the Legal Department of the Company a completed notice of exercise in the form prescribed by the Legal Department (obtainable from the Secretary of the Company) by or on behalf of the person entitled to exercise the SSAR, setting forth the number of Shares with respect to which the SSAR is being exercised.The SSAR will be settled in the Company’s Common Shares, net of the Exercise Priceand any required tax withholding.

9.Issuance of Shares.  Upon receipt by the Company prior to expiration of the SSAR of a duly completed notice of exercise and, with respect to any SSAR exercised by any person other than the Recipient, by proof satisfactory to the Committee of the right of such person to exercise the SSAR, and subject to section 9 hereof, the Company shall cause its transfer agent to enter in its books and records on behalf of the Recipient the net number of Shares derived after accounting for the Exercise Price and any required tax withholding. The Recipient or such other person exercising the SSAR shall not have any of the rights of a shareholder with respect to the Shares covered by the SSAR until such Shares are book-entered on behalf of the Recipient or such other person exercising the SSAR, subject to any applicable restrictions under Section 6.

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

11.Investment Representation of Recipient.

(a)The Recipient represents to the Company that the Recipient understands that, unless at the time of exercise of the SSAR a registration statement under the Securities Act of 1933, as amended, is in effect covering the Shares, as a condition to the exercise of the SSAR the Company may require the Recipient to represent that the Recipient is acquiring the Shares for the Recipient’s own account only and not with a view to, or for sale in connection with, any distribution of the Shares.

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

12.Recoupment Right.  The Recipient acknowledges that if the Board of Directors of the Company (including a Committee of the Board) determines that the Company’s financials are restated due directly or indirectly to the fraud, ethical misconduct, intentional misconduct or a breach of fiduciary duty by the Recipient, the Board (or Committee) shall have sole discretion to take such actions, as permitted by law, as it deems necessary to cancel the SSAR and to recover all or a portion of any gains realized in respect of the SSAR, provided such recovery cannot extend back more than three (3) years.

13.Binding Agreement; Transferability.  This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and the heirs, estate and Personal Representatives of the Recipient. The SSAR shall not be transferable other than by will or the laws of descent and distribution, and the SSAR may be exercised during the lifetime of the Recipient only by the Recipient (or such other person as may be permitted to exercise an SSAR on behalf of the Recipient).

14.Employment Agreement and Plan Controls.  This Agreement is subject to the Recipient’s employment agreement then in effect and all of the terms, conditions, and provisions of the Plan as amended from time-to-time, and to such rules, regulations, and interpretations of the Plan as may be adopted by the Committee and in effect from time-to-time. In the event and to the extent of an express conflict or inconsistency among any of this Agreement, the Recipient’s employment agreement then in effect, the provisions of the Plan, and any rules, regulations, and

4

interpretations of the Plan adopted by the Committee, then the following order of priority shall control; (a) the Recipient’s Employment Agreement then in effect, (b) thePlan, (c)any rules, regulations, and interpretations of the Plan adopted by the Committee, and (d) this Agreement; and to the extent that any other document controls this Agreement shall be deemed to be modified accordingly.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed below on its behalf by the executive officer thereunto duly authorized, and the Recipient has hereunto below set his or her hand, all as of the day and year first above written.

(Signature of Recipient)

AGILYSYS, INC.

By:

Kyle C. Badger

Senior Vice President, General Counsel and Secretary

5

EX-21

Exhibit 21

SUBSIDIARIES OF AGILYSYS, INC.

Subsidiaries of Agilysys, Inc.	State or jurisdiction of organization or incorporation
Agilysys NV, LLC	Delaware
Agilysys China Holdings Ltd.	Hong Kong
Agilysys HK Limited	Hong Kong
Agilysys MC Limited	Macau
Agilysys Hospitality Solutions (Shanghai) Co., Ltd.	People’s Republic of China
Agilysys Singapore Pte. Ltd.	Singapore
Agilysys Philippines, Inc.	Philippines
Agilysys UK Ltd.	United Kingdom
Agilysys Technologies India Private Limited	India

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated May 22, 2020, with respect to the consolidated financial statements and internal control over financial reporting included in the Annual Report of Agilysys, Inc. on Form 10-K for the year ended March 31, 2020. We consent to the incorporation by reference of said reports in the Registration Statements of Agilysys, Inc. on Forms S-8 (File No. 333-175909 and File No. 333-217020).

/s/ GRANT THORNTON LLP

Atlanta, Georgia

May 22, 2020

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, Ramesh Srinivasan, certify that:

1. I have reviewed this Annual Report on Form 10-K 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 fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Dated: May 22, 2020

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

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

I, Anthony S. Pritchett, certify that:

1. I have reviewed this Annual Report on Form 10-K 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 fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Dated: May 22, 2020

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

EX-31.3

Exhibit 31.3

CERTIFICATION OF THE CORPORATE CONTROLLER AND TREASURER

I, Chris J. Robertson, certify that:

1. I have reviewed this Annual Report on Form 10-K 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 fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Dated: May 22, 2022

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

EX-32

Exhibit 32

CERTIFICATION

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

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

1.The Annual Report on Form 10-K of the Company for the annual period ended March 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section15(d) of the Securities Exchange Act of 1934; and

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

Dated: May 22, 2020

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

XML

Quarterly Results (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Quarterly Financial Information Disclosure [Abstract]
Net revenue	$ 39,659	$ 41,987	$ 40,722	$ 38,389	$ 36,618	$ 36,014	$ 34,203	$ 34,007	$ 160,757	$ 140,842	$ 127,360
Gross profit	19,657	21,064	20,217	20,014	19,595	18,647	17,749	17,889	80,952	73,880	64,417
Restructuring, severance and other charges	150	11	190	231	222	58	448	440	582	1,168
Legal settlements, net			(125)		15		35	91	(125)	141
Net loss	$ (26,992)	$ (2,582)	$ (2,918)	$ (1,575)	$ (3,589)	$ (4,048)	$ (3,791)	$ (1,736)	$ (34,067)	$ (13,164)	$ (8,350)
Net loss per share (in dollars per share)	$ (1.16)	$ (0.11)	$ (0.13)	$ (0.07)	$ (0.15)	$ (0.18)	$ (0.16)	$ (0.08)	$ (1.47)	$ (0.57)	$ (0.37)

XML

Nature of Operations

12 Months Ended

Mar. 31, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Nature of Operations

1. Nature of Operations

Agilysys has been a leader in hospitality software for more than 40 years, delivering innovative guest-centric technology solutions for gaming, hotels, resorts and cruise, corporate foodservice management, restaurants, universities, stadia, airport foodservice and healthcare. Agilysys offers the most comprehensive solutions in the industry, including point of sale (POS), property management systems (PMS), inventory and procurement, payments, and related applications, to manage the entire guest journey.

The Company has just one reportable segment serving the global hospitality industry. Agilysys operates across North America, Europe, Asia-Pacific, and India with headquarters located in Alpharetta, GA.

Reference herein to any particular year or quarter refers to periods within the fiscal year ended March 31. For example, fiscal 2020 refers to the fiscal year ended March 31, 2020.

COVID-19 Pandemic

During the fourth quarter ended March 31, 2020, concerns related to the spread of novel coronavirus (“COVID-19”) began to create global business disruptions as well as disruptions in our operations and cause potential negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on various factors, including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Because an increasing portion of our business is based on a subscription model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time. The COVID-19 pandemic had a significant impact on our business as of March 31, 2020, and the twelve month period then ended. As a result, we recorded impairments of our capitalized software development costs and certain internal use software as of the balance sheet date due to triggering events identified as of year-end. We also increased our allowance for doubtful accounts and our customer credit allowance due to the direct negative impact on our customers as of year-end.

XML

Loss per Share - Amounts Used in Computing (Loss) Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Numerator:
Net loss	$ (26,992)	$ (2,582)	$ (2,918)	$ (1,575)	$ (3,589)	$ (4,048)	$ (3,791)	$ (1,736)	$ (34,067)	$ (13,164)	$ (8,350)
Denominator:
Weighted average shares outstanding - basic and diluted									23,233	23,037	22,801
Loss per share - basic and diluted:
Net loss per share (in dollars per share)	$ (1.16)	$ (0.11)	$ (0.13)	$ (0.07)	$ (0.15)	$ (0.18)	$ (0.16)	$ (0.08)	$ (1.47)	$ (0.57)	$ (0.37)
Anti-dilutive stock options, SSARs, restricted shares and performance shares									1,510	1,433	756

XML

Income Taxes (Details Textual) - USD ($) $ in Thousands		12 Months Ended
	Mar. 27, 2020	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Operating Loss Carryforwards [Line Items]
Income Tax Holiday, Aggregate Dollar Amount		$ 800
Regular corporate income tax rate in India		50.00%
Valuation allowance		$ 66,819	$ 57,852
Undistributed earnings of foreign subsidiaries		6,300	3,100
Unrecognized tax benefits that would impact effective tax rate		600
Interest and penalty expense (benefit)		100	100	$ 100
Interest and penalties accrued		500	$ 500
CARES Act [Member]
Operating Loss Carryforwards [Line Items]
Tax credit carryforward, description	the CARES Act provides, among other provisions, for the deferral of the employer-paid portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022; the CARES Act also provides for certain employee retention tax credits.
Percentage of deferral of the employer-paid portion of social security taxes due in December 31, 2021	50.00%
Percentage of deferral of the employer-paid portion of social security taxes due in December 31, 2022	50.00%
Additional liquidity during the current year		100
Federal and State Deferred Tax Assets [Member]
Operating Loss Carryforwards [Line Items]
Valuation allowance		65,900
Deferred Tax Assets in Hong Kong [Member]
Operating Loss Carryforwards [Line Items]
Valuation allowance		900
INDIA
Operating Loss Carryforwards [Line Items]
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax		800
Federal [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards		199,100
Operating loss carryforwards, not subject to expiration		24,700
Foreign Tax Authority [Member] | Hong Kong [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards		400
Foreign Tax Authority [Member] | Malaysia [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards		100
Foreign Tax Authority [Member] | Singapore [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards		300
State and Local Jurisdiction [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards		$ 141,600

XML

Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Net revenue:
Total net revenue	$ 160,757	$ 140,842	$ 127,360
Cost of goods sold:
Total cost of goods sold	79,805	66,962	62,943
Gross profit	$ 80,952	$ 73,880	$ 64,417
Gross profit margin	50.40%	52.50%	50.60%
Operating expenses:
Product development	$ 41,463	$ 37,817	$ 27,936
Sales and marketing	19,864	19,646	18,075
General and administrative	24,374	23,118	24,028
Depreciation of fixed assets	2,574	2,504	2,631
Amortization of intangibles	2,541	2,567	1,879
Impairments	23,740
Restructuring, severance and other charges	582	1,168	1,798
Legal settlements, net	(125)	141	150
Total operating expense	115,013	86,961	76,497
Operating loss	(34,061)	(13,081)	(12,080)
Other (income) expense:
Interest income	(380)	(339)	(98)
Interest expense	9	10	10
Other expense (income), net	176	191	(391)
Loss before taxes	(33,866)	(12,943)	(11,601)
Income tax expense (benefit)	201	221	(3,251)
Net loss	$ (34,067)	$ (13,164)	$ (8,350)
Weighted average shares outstanding - basic and diluted	23,233	23,037	22,801
Net loss per share - basic and diluted:	$ (1.47)	$ (0.57)	$ (0.37)
Products
Net revenue:
Total net revenue	$ 44,230	$ 39,003	$ 33,699
Cost of goods sold:
Total cost of goods sold	36,427	31,811	26,381
Support, maintenance and subscription services
Net revenue:
Total net revenue	83,680	75,496	69,068
Cost of goods sold:
Total cost of goods sold	19,248	15,895	16,688
Professional services
Net revenue:
Total net revenue	32,847	26,343	24,593
Cost of goods sold:
Total cost of goods sold	$ 24,130	$ 19,256	$ 19,874

XML

Income Taxes (Tables)

12 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Schedule of income from continuing operations before income taxes

For the year ended March 31, loss before income taxes consisted of the following:

(In thousands)		2020			2019			2018
(Loss) before income taxes
United States	$	(36,373	)	$	(13,621	)	$	(11,926	)
Foreign		2,507			678			325
Total loss before income taxes	$	(33,866	)	$	(12,943	)	$	(11,601	)

Schedule of income tax (benefit) expense

For the year ended March 31, income tax expense (benefit) consisted of the following:

(In thousands)		2020			2019			2018
Income tax expense (benefit)
Current:
Federal	$	59		$	54		$	66
State and local		21			(383	)		(446	)
Foreign		463			514			73
Deferred:
Federal		11			79			(2,985	)
State and local		7			277			41
Foreign		(360	)		(320	)		—
Total income tax expense (benefit)	$	201		$	221		$	(3,251	)

Schedule of effective income tax rate reconciliation

The following table presents the principal components of the difference between the effective tax rate to the U.S. federal statutory income tax rate for the years ended March 31:

(In thousands)	2020			2019			2018
Income tax benefit at the US Federal statutory rate	$	(7,112	)	$	(2,718	)	$	(3,654	)
Benefit for state taxes		(856	)		(304	)		(642	)
Impact of foreign operations		(514	)		(310	)		38
Indefinite life assets		19			130			335
Change in valuation allowance		8,406			3,302			3,328
Change in liability for unrecognized tax benefits		22			(400	)		40
Impact of Tax Act, net		—			226			(3,287	)
Share-based compensation		(312	)		2			476
Global intangible low-taxed income		460			94			—
Other		88			199			115
Total income tax expense (benefit)	$	201		$	221		$	(3,251	)

Schedule of deferred tax assets and liabilities

Deferred tax assets and liabilities as of March 31, are as follows:

(In thousands)	2020			2019
Deferred tax assets:
Accrued liabilities	$	3,059		$	3,944
Allowance for doubtful accounts		331			120
Inventory valuation reserve		—			41
Federal losses and credit carryforwards		47,218			44,811
Foreign losses and credit carryforwards		1,523			1,146
State losses and credit carryforwards		10,911			9,886
Deferred revenue		582			488
Property and equipment and software amortization		163			—
Operating lease liabilities		1,297			—
Goodwill and other intangible assets		4,914			—
Other		88			65
		70,086			60,501
Less: valuation allowance		(66,819	)		(57,852	)
Total		3,267			2,649
Deferred tax liabilities:
Operating lease right-of-use assets		(948	)		—
Property and equipment and software amortization		—			(361	)
Goodwill and other intangible assets		(2,426	)		(2,706	)
Other		(9	)		—
Total		(3,383	)		(3,067	)
Total deferred tax liabilities	$	(116	)	$	(418	)

Schedule of unrecognized tax benefits rollforward

We recorded a liability for unrecognized tax positions. The aggregate changes in the balance of our gross unrecognized tax benefits were as follows for the years ended March 31:

(In thousands)	2020			2019			2018
Balance at April 1	$	580		$	687		$	988
Reductions:
Relating to positions taken during prior year		—			—			(300	)
Relating to lapse in statute		(5	)		(107	)		(1	)
Balance at March 31	$	575		$	580		$	687

XML

Quarterly Results (Unaudited) (Tables)

12 Months Ended

Mar. 31, 2020

Quarterly Financial Information Disclosure [Abstract]

Schedule of quarterly financial information

Occasionally, the timing of large one-time orders, such as those associated with significant remarketed product sales around large customer refresh cycles or significant volume rollouts, creates variability in our quarterly results.

	Year ended March 31, 2020
	First			Second			Third			Fourth
(In thousands except per share data)	Quarter			Quarter			Quarter			Quarter			Year
Net revenue	$	38,389		$	40,722		$	41,987		$	39,659		$	160,757
Gross profit		20,014			20,217			21,064			19,657			80,952
Restructuring, severance and other charges		231			190			11			150			582
Legal settlements, net		—			(125	)		—			—			(125	)
Net loss	$	(1,575	)	$	(2,918	)	$	(2,582	)	$	(26,992	)	$	(34,067	)
Net loss Per share data-basic and diluted	$	(0.07	)	$	(0.13	)	$	(0.11	)	$	(1.16	)	$	(1.47	)

	Year ended March 31, 2019
	First			Second			Third			Fourth
(In thousands except per share data)	Quarter			Quarter			Quarter			Quarter			Year
Net revenue	$	34,007		$	34,203		$	36,014		$	36,618		$	140,842
Gross profit		17,889			17,749			18,647			19,595			73,880
Restructuring, severance and other charges		440			448			58			222			1,168
Legal settlements		91			35			—			15			141
Net loss	$	(1,736	)	$	(3,791	)	$	(4,048	)	$	(3,589	)	$	(13,164	)
Net loss Per share data-basic and diluted	$	(0.08	)	$	(0.16	)	$	(0.18	)	$	(0.15	)	$	(0.57	)

XML

Loss Per Share

12 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Loss per Share

12. Loss per Share

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

	Year ended March 31,
(In thousands, except per share data)	2020			2019			2018
Numerator:
Net loss	$	(34,067	)	$	(13,164	)	$	(8,350	)
Denominator:
Weighted average shares outstanding - basic and diluted		23,233			23,037			22,801
Loss per share - basic and diluted:
Net loss per share-basic and diluted	$	(1.47	)	$	(0.57	)	$	(0.37	)
Anti-dilutive stock options, SSARs, restricted shares and performance shares		1,510			1,433			756

Basic earnings (loss) per share is computed as net income available to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes 208,581, 300,437 and 334,817 of restricted shares and performance shares at March 31, 2020, 2019 and 2018, 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.

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

XML

Additional Balance Sheet Information

12 Months Ended

Mar. 31, 2020

Balance Sheet Related Disclosures [Abstract]

Additional Balance Sheet Information

8. Additional Balance Sheet Information

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

(In thousands)	March 31, 2020		March 31, 2019
Accrued liabilities:
Salaries, wages, and related benefits	$	6,945	$	12,443
Other taxes payable		1,649		1,041
Accrued legal settlements		—		15
Severance liabilities		32		46
Professional fees		50		67
Deferred rent		—		273
Other		357		521
Total	$	9,033	$	14,406
Other non-current liabilities:
Uncertain tax positions	$	1,103	$	1,083
Deferred rent and asset retirement obligations		170		2,613
Employee benefit obligations		511		486
Other		76		76
Total	$	1,860	$	4,258

XML

Property and Equipment, Net

12 Months Ended

Mar. 31, 2020

Property Plant And Equipment [Abstract]

Property and Equipment, Net

4. Property and Equipment, Net

Property and equipment at March 31, 2020 and 2019 is as follows:

	Year ended March 31,
(In thousands)		2020			2019
Furniture and equipment	$	14,358		$	11,604
Software		17,136			16,427
Leasehold improvements		7,012			6,981
Project expenditures not yet in use		50			1,014
		38,556			36,026
Accumulated depreciation and amortization		(24,592	)		(20,188	)
Impairments		(1,734	)		—
Property and equipment, net	$	12,230		$	15,838

Total depreciation expense on property and equipment was $2.6 million, $2.5 million, and $2.6 million during fiscal 2020, 2019 and 2018, respectively.

The Company capitalizes internal-use software, including software used exclusively in providing services or that is only made available to customers as a software service, as property and equipment under ASC 350-40, Internal-Use Software. Total amortization expense on capitalized internal-use software was $2.5 million, $2.5 million and $1.8 million during fiscal 2020, 2019, and 2018, respectively. The global economic impact of the COVID-19 pandemic triggered management to review property and equipment held by the Company for indicators of impairment. The carrying value of our capitalized costs for internal-use software related to our rGuest Seat solution did not exceed the estimated undiscounted cash flows, and utilizing a market approach, was determined to be fully impaired, resulting in $1.7 million of asset impairment charges in the Consolidated Statement of Operations during the fiscal year ended March 31, 2020.

Assets under financing leases are included in property and equipment categories above and further disclosed with Note 6. Leases.

XML

Property and Equipment, Net (Tables)

12 Months Ended

Mar. 31, 2020

Property Plant And Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment at March 31, 2020 and 2019 is as follows:

	Year ended March 31,
(In thousands)		2020			2019
Furniture and equipment	$	14,358		$	11,604
Software		17,136			16,427
Leasehold improvements		7,012			6,981
Project expenditures not yet in use		50			1,014
		38,556			36,026
Accumulated depreciation and amortization		(24,592	)		(20,188	)
Impairments		(1,734	)		—
Property and equipment, net	$	12,230		$	15,838

XML

Subsequent Events

12 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

16. Subsequent Events

COVID-19 has had a significant impact on our business as of and subsequent to our March 31, 2020 fiscal year-end as the travel and hospitality industries including our customers’ businesses suffered an abrupt and steep decline in activity due to property closures, cancelled voyages, cancelled sporting and entertainment events, and many other business operations curtailments. The change in the business environment for our customers resulted in project delays for our professional service teams, our inability to deliver products to closed property locations and a general reduction in sales activity.

We have taken actions to mitigate the impact on our business. During the first quarter of our fiscal 2021, we have reduced discretionary costs, implemented a hiring freeze on non-essential positions and reduced payroll and related costs through layoffs, employee furloughs, employee retirement benefit limitations, and salary decreases for executive team members and certain other employees of the Company.

The extent COVID-19 will impact our business including operations and financial results cannot be reasonably estimated at this time. Many factors will continue to influence the COVID-19 pandemic’s impact on us including its ultimate severity, future government actions in response to COVID-19, and how quickly and to what extent economic conditions return to levels before COVID-19.

In May 2020, the Company announced a $35 million investment from MAK Capital One, LLC (“MAK Capital”), a leading investment management firm who has been a major shareholder of the Company since 2007. MAK Capital will purchase $35 million of convertible preferred stock carrying a 5.25% dividend that will be convertible into shares of the Company’s common stock at a price of $20.1676 per share. The transaction is subject to customary closing conditions and is anticipated to finalize during May 2020. The close of the transaction will add $35 million in preferred stock to the Company’s balance sheet and increase our cash balance by the $35 million investment less estimated closing costs of approximately $1 million.

XML

Fair Value Measurements (Details 1) - Cash Surrender Value [Member] - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Balance at beginning of period	$ 895	$ 853
Unrealized gain relating to instruments held at reporting date	14	15
Purchases, sales, issuances and settlements, net	27	27
Balance at end of period	$ 936	$ 895

XML

Share-based Compensation - Additional Information Related to Restricted Shares (Details) - Restricted Stock [Member] - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Compensation expense	$ 3,385	$ 2,803	$ 2,594
Total fair value of restricted share vesting	$ 4,004	$ 4,383	$ 4,315

XML

Share-based Compensation - Principal Assumptions Utilized in Valuing SSARs Granted (Details) - Stock Settled Stock Appreciation Rights (SSARS) [Member] - $ / shares	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-free interest rate, minimum	1.38%		1.74%
Risk-free interest rate		2.68%
Risk-free interest rate, maximum	1.74%		1.94%
Expected life (in years)		5 years	5 years
Expected volatility,minimum	31.70%		32.42%
Expected volatility		32.42%
Expected volatility, maximum	32.42%		32.84%
Weighted average grant date fair value (in dollars per share)	$ 10.01	$ 4.72	$ 3.36
Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected life (in years)	4 years 6 months
Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected life (in years)	5 years

XML

Intangible Assets and Software Development Costs (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Finite Lived Intangible Assets [Line Items]
Non-cash impairment charge	$ 22,000
Amortization of developed technology	12,561	$ 12,602	$ 10,016
Amortization of intangibles	2,541	2,567	1,879
Capitalized software development costs		2,000	8,200
Developed Technology Internal [Member]
Finite Lived Intangible Assets [Line Items]
Amortization of intangibles	$ 38,000	$ 46,000	$ 46,000

XML

Leases - Maturities of Operating and Finance Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Apr. 01, 2019	Mar. 31, 2019
Operating leases
2021	$ 4,927
2022	4,207
2023	2,855
2024	2,685
2025	2,083
Thereafter	3,901
Total undiscounted future minimum lease payments	20,658
Less: difference between undiscounted lease payments and discounted lease liabilities	(5,322)
Total lease liabilities	15,336	$ 16,300
Finance leases
2021	29
2022	21
2023	5
2024	2
Total undiscounted future minimum lease payments	57
Less: difference between undiscounted lease payments and discounted lease liabilities	(8)
Total lease liabilities	$ 49
Operating leases
2020			$ 4,143
2021			3,945
2022			3,166
2023			1,916
2024			1,770
Thereafter			4,497
Total lease payments			19,437
Finance leases
2020			27
2021			23
2022			15
Total lease payments			65
Less: Amounts representing interest			(8)
Present value of lease liabilities			$ 57

XML

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Principles of consolidation

Principles of consolidation. The consolidated financial statements include the accounts of Agilysys, Inc. and subsidiaries. Investments in affiliated companies are accounted for by the equity or cost method, as appropriate. All inter-company accounts have been eliminated.

Use of estimates

Use of estimates. Preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“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. In particular, the economic disruption related to the COVID-19 pandemic had a material adverse impact on our results for the year ended March 31, 2020, and we expect it to continue to have a material adverse impact on our results. As such, this annual period, as well as upcoming interim periods, are unlikely to be comparable to past performance or indicative of future performance.

Cash and cash equivalents

Cash and cash equivalents. We consider all highly liquid investments purchased with an original maturity from date of acquisition of three months or less to be cash equivalents. Other highly liquid investments considered cash equivalents with no established maturity date are fully redeemable on demand (without penalty) with settlement of principal and accrued interest on the following business day after instruction to redeem. Such investments are readily convertible to cash with no penalty and can include certificates of deposit, commercial paper, treasury bills, money market funds and other investments.

Allowance for doubtful accounts

Allowance for doubtful accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as historic trends of the entire customer pool. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk we perform periodic credit evaluations of our customers.

Customer credit allowance

Customer credit allowance. We maintain allowances for estimated customer credits. Credits are typically due to the timing or amount of customer invoices processed for specific services, including professional and subscription, and maintenance coverage. In many cases, there has not been clear or timely communication of the need to adjust coverage or service at a location in advance of when we invoice for the associated coverage or service. We will issue a credit after agreeing to the service or coverage adjustment as requested by the customer within the terms of our contract.

Inventories

Inventories. Our inventories are comprised of finished goods. Inventories are stated at the lower of cost or net realizable value, net of related reserves. The cost of inventory is computed using a weighted-average method. Our inventory is monitored to ensure appropriate valuation. Adjustments of inventories to the lower of cost or net realizable value, if necessary, are based upon contractual provisions such as turnover and assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional adjustments to inventory valuations may be required. We provide a reserve for obsolescence, which is calculated based on several factors, including an analysis of historical sales of products and the age of the inventory. Actual amounts could be different from those estimated.

Leases

Leases. We determine if an arrangement is or contains a lease at inception. Operating leases are presented as Right-of-Use (“ROU”) assets and the corresponding lease liabilities are included in operating lease liabilities – current and operating lease liabilities – non-current on our Consolidated Balance Sheet. Finance leases are included in property and equipment, net and corresponding liabilities are included in finance lease obligations – current and non-current on our Consolidated Balance Sheet. ROU assets represent our right to use the underlying asset, and lease liabilities represent our obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.

ROU assets and lease liabilities are recognized at commencement date and determined using the present value of the remaining lease payments over the lease term. We use an incremental borrowing rate based on estimated rate of interest for collateralized borrowing since our leases do not include an implicit interest rate. The estimated incremental borrowing rate considers market data, actual lease economic environment, and actual lease term at commencement date. The lease term may include options to extend when it is reasonably certain that we will exercise that option. ROU assets include lease payments made in advance, and excludes any incentives received or initial direct costs incurred. Lease expense is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components which we account for as a single lease component. We also have leases which include variable lease payments, which are expensed as incurred. Our variable lease payments are not based on an index or rate and therefore are excluded from the calculation of lease liabilities. We have elected to not recognize short term leases that have a term of twelve months or less as ROU assets or lease liabilities. Our short-term leases are not material and do not have a material impact on our ROU assets or lease liabilities. Additionally, we do not have any covenants, residual value guarantees, or related party transactions associated with our lease agreements.

Goodwill and Other Indefinite-Lived Intangible Assets

Goodwill and Other Indefinite-Lived Intangible Assets. Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies. The carrying amount of goodwill was $19.6 million as of March 31, 2020 and 2019. Goodwill is tested for impairment on an annual basis, or in interim periods if indicators of potential impairment exist. The Company evaluates whether goodwill is impaired by comparing its market capitalization based on its closing stock price (Level 1 input) to the book value of its equity on the annual evaluation date. Based on testing performed, the Company concluded that no impairment of its goodwill has occurred for the years ended March 31, 2020, 2019 and 2018.

The Company is also required to compare the fair values of other indefinite-lived intangible assets to their carrying amounts at least annually, or when current events and circumstances require an interim assessment. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized.

Intangible assets

Intangible assets. Purchased intangible assets with finite lives are primarily amortized using the straight-line method over the estimated economic lives of the assets. Our finite-lived intangible assets are amortized over periods between two and eight years. Customer relationships are amortized over estimated useful lives between two and seven years; non-competition agreements are amortized over estimated useful lives between two and eight years; developed technology is amortized over estimated useful lives between three and eight years; supplier relationships are amortized over estimated useful lives between two and eight years.

Long-lived assets

Long-lived assets. Property and equipment are recorded at cost. Major renewals and improvements are capitalized. Minor replacements, maintenance, repairs, and reengineering costs are expensed as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized.

Depreciation and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under finance leases, which make up less than one percent of total assets, over their estimated useful lives using the straight-line method. The estimated useful lives for depreciation and amortization are as follows: buildings and building improvements - 7 to 30 years; furniture - 7 to 10 years; equipment - 3 to 10 years; software - 3 to 10 years; and leasehold improvements over the shorter of the economic life or the lease term. Internal use software costs are expensed or capitalized depending on the project stage. Amounts capitalized are amortized over the estimated useful lives of the software, ranging from 3 to 10 years, beginning with the project's completion. Depreciation for capitalized project expenditures does not begin until the underlying project is completed.

We evaluate the recoverability of our long-lived assets whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the event the carrying value of the assets exceeds the future undiscounted cash flows attributable to such assets. Our long-lived assets and impairments considerations are discussed further in Note 4, Property and Equipment, net.

Foreign currency translation

Foreign currency translation. The financial statements of our foreign operations are translated into U.S. dollars for financial reporting purposes. The assets and liabilities of foreign operations whose functional currencies are not in U.S. dollars are translated at the period-end exchange rates, while revenue and expenses are translated at weighted-average exchange rates during the fiscal year. The cumulative translation effects are reflected as a component of “Accumulated other comprehensive loss” within shareholders' equity in the Consolidated Balance Sheets. Gains and losses on monetary transactions denominated in other than the functional currency of an operation are reflected within “Other (income) expenses, net” in the Consolidated Statements of Operations. Foreign currency gains and losses from changes in exchange rates have not been material to our consolidated operating results.

Revenue recognition

Revenue recognition. We derive revenue from the sale of products (i.e., software, third party hardware and operating systems), support, maintenance and subscription services and professional services. For the fiscal years 2020, 2019 and 2018, revenue from international operations was 9%, 9% and 8%, respectively of total revenue. Our customer base is highly fragmented.

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

Revenue recognition under Topic 606

Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master service agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Performance obligations specific to each individual contract are defined within the terms of each order. Each performance obligation is identified based on the goods and services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which we will be entitled and expect to receive in exchange for transferring goods or services to the customer. Typically, our contracts do not provide our customer with any right of return or refund; we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or refund.

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

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

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

Support and maintenance revenue is derived from providing telephone and on-line technical support services, bug fixes, and unspecified software updates and upgrades to customers on a when-and-if-available basis. These services represent a stand-ready obligation that is concurrently delivered and has the same pattern of transfer to the customer; we account for these support and maintenance services as a single performance obligation recognized over the term of the maintenance agreement.

Our subscription service revenue is comprised of fees for contracts that provide customers a right to access our software for a subscribed period. We do not provide the customer the contractual right to license the software at any time outside of the subscription period under these contracts. The customer can only benefit from the software and software maintenance when provided the right to access the software. Accordingly, each of the rights to access the software, the maintenance services, and any hosting services is not considered a distinct performance obligation in the context of the contract and should be combined into a single performance obligation to be recognized over the contract period. The Company recognizes subscription revenue over a one-month period based on the typical monthly invoicing and renewal cycle in accordance with our customer agreement terms.

Professional services revenues primarily consist of fees for consulting, installation, integration and training and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are being performed. Professional services can be provided by internal or external providers, do not significantly affect the customer's ability to access or use other provided goods or services, and provide a measure of benefit beyond that of other promised goods or services in the contract. As a result, professional services are considered distinct in the context of the contract and represent a separate performance obligation. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation.

We use the market approach to derive standalone selling price ("SSP") by maximizing observable data points (in the form of recently executed customer contracts) to determine the price customers are willing to pay for the goods and services transferred. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.

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

Comprehensive (loss) income

Comprehensive (loss) income. Comprehensive (loss) income is the total of net (loss) income, as currently reported under GAAP, plus other comprehensive (loss) income. Other comprehensive (loss) income considers the effects of additional transactions and economic events that are not required to be recorded in determining net (loss) income, but rather are reported as a separate statement of comprehensive (loss) income.

Fair value measurements

Fair value measurements. We measure the fair value of financial assets and liabilities on a recurring or non-recurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. In determining fair value of financial assets and liabilities, we use various valuation techniques. Additional information regarding fair value measurements is provided in Note 14, Fair Value Measurements.

Investments in corporate-owned life insurance policies

Investments in corporate-owned life insurance policies. Agilysys invests in corporate-owned life insurance policies, for which some are endorsement split-dollar life insurance arrangements. We entered into agreements with certain former executives, whereby we must maintain the life insurance policy for a specified amount and split a portion of the policy benefits with their respective designated beneficiary. Our investment in these corporate-owned life insurance policies were recorded at their cash surrender value, which approximates fair value at the balance sheet date. In the Consolidated Balance Sheets at the balance sheet date, the cash surrender value of $0.9 million for the remaining policies were held in “Other non-current assets,” and the present value of future proceeds owed to those executives' designated beneficiary of $0.1 million, which approximates fair value, were recorded within "Other non-current liabilities." Additional information regarding the investments in corporate-owned life insurance policies is provided in Note 10, Employee Benefit Plans.

Income Taxes

Income Taxes. Income tax expense includes U.S. and foreign income taxes and is based on reported income before income taxes. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities are determined based on the enacted tax rates expected to apply in the periods in which the deferred tax assets or liabilities are anticipated to be settled or realized.

We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies.

We recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from uncertain tax positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet this threshold. Interest related to uncertain tax positions is recognized as part of the provision for income taxes and is accrued beginning in the period that such interest would be applicable under relevant tax law until such time that the related tax benefits are recognized. Our income taxes are described further in Note 9, Income Taxes.

Capitalized Software Development Costs

Capitalized Software Development Costs. The capitalization of software development cost for external use 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 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, which is a range between three and eight years. Annually, or more frequent as required by triggering events, an analysis of the net realizable value of the capitalized software is completed and the amount by which unamortized software costs exceeds the net realizable value, if any, is recognized as a charge to income in the period it is determined. See further discussion regarding our capitalized software development costs in Note 5, Intangible Assets and Software Development Costs.

Advertising and Promotion Expense

Advertising and Promotion Expense. We expense advertising and promotion expense as incurred. Advertising and promotion expense was $2.7 million, $2.0 million and $2.7 million in fiscal 2020, 2019 and 2018, respectively

Reclassification

Reclassification. Certain prior year balances have been reclassed to conform to the current year presentation. Specifically, we reclassed certain employee benefit obligations from current to non-current liabilities

Adopted and Recently Issued Accounting Pronouncements

Adopted and Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-03, Codification Improvements to Financial Instruments. ASU 2020-03 provides clarifications for questions and comments received regarding how changes to specific guidance related to financial instruments as a result of ASU No. 2016-13 interacts with other areas of the codification. The guidance was effective upon issuance of the ASU and correlates to the adoption of each of the applicable ASUs. Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13 and will apply applicable changes from ASU 2020-03 in the period of adoption.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions previously allowed in the standard and simplifies the accounting for income taxes by providing additional guidance for certain tax situations. The update is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods, with early adoption (including early adoption in any interim period) permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. ASU 2019-04 provides corrections, updates and clarifications to the previously issued updates ASU 2016-13, ASU 2017-12 and ASU 2016-01. Various areas of the codification were impacted from the update. The standard follows the effective dates of the previously issued ASUs, unless an entity has already early adopted the previous ASUs, in which case the effective date will vary according to each specific ASU adoption. Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13, and the other two ASUs affected by ASU 2019-04 are not applicable to us. We are currently reviewing this standard to assess the impact on our future consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 addresses the treatment of implementation costs incurred in a hosting arrangement that is a service contract. The update does not impact the accounting for the service element of a hosting arrangement that is a service contract. The update is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption (including early adoption in any interim period) permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 addresses the required disclosures around fair value measurement. The disclosure requirements of the reasons for transfers between Level 1 and Level 2, the policy for timing transfers between levels, and the valuation process for Level 3 measurements have been removed. Certain modifications were made to required disclosures and additional requirements were established. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220). ASU 2018-02 addresses the effect of the change in the U.S. federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We have adopted this standard as of April 1, 2019. While we have elected to reclassify any amount out of other comprehensive income, we do not have any amounts to reclassify and therefore the adoption had no impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. While we are still assessing the impact of this standard, we do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

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

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Unlike Accounting Standard Codification Topic 840 (“Topic 840”), which requires only capital leases to be recognized on the balance sheet, the new guidance requires both types of leases to be recognized on the balance sheet. The most prominent change for lessees is the requirement to recognize both Right-of-Use (ROU) assets and lease liabilities for leases classified as operating leases under Topic 840. We adopted Topic 842 as of April 1, 2019 using the current period adjustment method of adoption. Refer to Note 6, Leases for further details.

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.

XML

Quarterly Results (Unaudited)

12 Months Ended

Mar. 31, 2020

Quarterly Financial Information Disclosure [Abstract]

Quarterly Results (Unaudited)

15. Quarterly Results (Unaudited)

Because quarterly reporting of per share data is used independently for each reporting period, the sum of per share amounts for the four quarters in the fiscal year will not necessarily equal annual per share amounts. GAAP prohibits retroactive adjustment of quarterly per share amounts so that the sum of those amounts equals amounts for the full year.

Occasionally, the timing of large one-time orders, such as those associated with significant remarketed product sales around large customer refresh cycles or significant volume rollouts, creates variability in our quarterly results.

	Year ended March 31, 2020
	First			Second			Third			Fourth
(In thousands except per share data)	Quarter			Quarter			Quarter			Quarter			Year
Net revenue	$	38,389		$	40,722		$	41,987		$	39,659		$	160,757
Gross profit		20,014			20,217			21,064			19,657			80,952
Restructuring, severance and other charges		231			190			11			150			582
Legal settlements, net		—			(125	)		—			—			(125	)
Net loss	$	(1,575	)	$	(2,918	)	$	(2,582	)	$	(26,992	)	$	(34,067	)
Net loss Per share data-basic and diluted	$	(0.07	)	$	(0.13	)	$	(0.11	)	$	(1.16	)	$	(1.47	)

	Year ended March 31, 2019
	First			Second			Third			Fourth
(In thousands except per share data)	Quarter			Quarter			Quarter			Quarter			Year
Net revenue	$	34,007		$	34,203		$	36,014		$	36,618		$	140,842
Gross profit		17,889			17,749			18,647			19,595			73,880
Restructuring, severance and other charges		440			448			58			222			1,168
Legal settlements		91			35			—			15			141
Net loss	$	(1,736	)	$	(3,791	)	$	(4,048	)	$	(3,589	)	$	(13,164	)
Net loss Per share data-basic and diluted	$	(0.08	)	$	(0.16	)	$	(0.18	)	$	(0.15	)	$	(0.57	)

XML

Share-based Compensation - Restricted Shares Rollforward (Details) - Restricted Stock [Member]	12 Months Ended
	Mar. 31, 2020 $ / shares shares
Activity Related to Restricted Shares Awarded by the Company
Number of Shares, Outstanding at beginning of period | shares	237,146
Number of Shares, Granted | shares	223,404
Number of Shares, Vested | shares	(231,677)
Number of Shares, Forefeited | shares	(50,411)
Number of Shares, Outstanding at end of period | shares	178,462
Weighted Average Grant-Date Fair Value, Outstanding at beginning of period | $ / shares	$ 13.46
Weighted Average Grant Date Fair Value, Granted | $ / shares	22.72
Weighted Average Grant Date Fair Value, Vested | $ / shares	16.60
Weighted Average Grant Date Fair Value, Forefeited | $ / shares	17.34
Weighted Average Grant-Date Fair Value, Outstanding at end of period | $ / shares	$ 19.89

XML

Share-based Compensation (Details) - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based Payment Arrangement, Noncash Expense	$ 5,205	$ 4,376	$ 4,688
Product development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Summary of share-based compensation expense for options	2,241	1,478	1,306
Selling and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Summary of share-based compensation expense for options	321	469	371
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Summary of share-based compensation expense for options	$ 2,643	$ 2,429	$ 3,011

XML

Fair Value Measurements (Details) - Fair Value, Recurring [Member] - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019
Assets:
Corporate-owned life insurance — non-current	$ 936	$ 895
Fair Value Inputs Level 3 [Member]
Assets:
Corporate-owned life insurance — non-current	$ 936	$ 895

XML

Leases (Details Textual) - USD ($) $ in Thousands	Mar. 31, 2020	Apr. 01, 2019
Leases [Abstract]
Operating lease liability	$ 15,336	$ 16,300
Operating lease right-of-use assets	$ 13,829	$ 13,800

XML

Supplemental Disclosures of Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Supplemental Cash Flow Elements [Abstract]
Cash (receipts) for interest, net	$ (371)	$ (329)	$ (88)
Cash payments (receipts) for income tax, net	694	409	(227)
Acquisition of property and equipment under lease obligations	17		64
Accrued capital expenditures	$ 187	$ 56	83
Accrued capitalized software development costs			$ 201
Leasehold improvements acquired under operating lease arrangement	—	62	95

XML

Subsequent Events (Details Textual) - MAK Capital One, LLC [Member] - Subsequent Event [Member]	1 Months Ended
	May 31, 2020 USD ($) $ / shares
Subsequent Event [Line Items]
Investment from major shareholder	$ 35,000,000
Fresh start adjustment, increase (decrease), preferred stock	35,000,000
Increase in cash from investment	35,000,000
Estimated closing cost	$ 1,000,000
Common stock [Member]
Subsequent Event [Line Items]
Price per share | $ / shares	$ 20.1676
Convertible Preferred Stock [Member]
Subsequent Event [Line Items]
Stock issued during period, value, conversion of convertible securities	$ 35,000,000
Preferred stock, dividend percentage	5.25%

XML

Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent	$ (34,067)	$ (13,164)	$ (8,350)
Other comprehensive income (loss), net of tax:
Unrealized foreign currency translation adjustments	460	(4)	(51)
Total comprehensive loss	$ (33,607)	$ (13,168)	$ (8,401)

XML

Document and Entity Information - USD ($)

12 Months Ended

Mar. 31, 2020

May 20, 2020

Cover [Abstract]

Document Type

10-K

Amendment Flag

false

Document Period End Date

Mar. 31, 2020

Document Fiscal Year Focus

2020

Document Fiscal Period Focus

FY

Entity Registrant Name

AGILYSYS INC

Entity Central Index Key

0000078749

Entity Current Reporting Status

Yes

Current Fiscal Year End Date

--03-31

Entity Filer Category

Accelerated Filer

Entity Common Stock, Shares Outstanding

23,400,816

Entity Shell Company

false

Entity Small Business

false

Entity Emerging Growth Company

false

Title of 12(b) Security

Common Shares, without par value

Trading Symbol

AGYS

Security Exchange Name

NASDAQ

Document Annual Report

true

Document Transition Report

false

Entity Interactive Data Current

Yes

Entity File Number

0-5734

Entity Incorporation, State or Country Code

OH

Entity Tax Identification Number

34-0907152

Entity Address, Address Line One

1000 Windward Concourse

Entity Address, Address Line Two

Suite 250

Entity Address, City or Town

Alpharetta

Entity Address, State or Province

GA

Entity Address, Postal Zip Code

30005

City Area Code

770

Local Phone Number

810-7800

Entity Voluntary Filers

No

Entity Well-known Seasoned Issuer

No

Entity Public Float

$ 375,276,893

Documents Incorporated by Reference [Text Block]

Portions of the registrant's definitive Proxy Statement to be used in connection with its 2020 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K

XML

Summary of Significant Accounting Policies

12 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of consolidation. The consolidated financial statements include the accounts of Agilysys, Inc. and subsidiaries. Investments in affiliated companies are accounted for by the equity or cost method, as appropriate. All inter-company accounts have been eliminated.

Use of estimates. Preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“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. In particular, the economic disruption related to the COVID-19 pandemic had a material adverse impact on our results for the year ended March 31, 2020, and we expect it to continue to have a material adverse impact on our results. As such, this annual period, as well as upcoming interim periods, are unlikely to be comparable to past performance or indicative of future performance.

Cash and cash equivalents. We consider all highly liquid investments purchased with an original maturity from date of acquisition of three months or less to be cash equivalents. Other highly liquid investments considered cash equivalents with no established maturity date are fully redeemable on demand (without penalty) with settlement of principal and accrued interest on the following business day after instruction to redeem. Such investments are readily convertible to cash with no penalty and can include certificates of deposit, commercial paper, treasury bills, money market funds and other investments.

Allowance for doubtful accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as historic trends of the entire customer pool. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk we perform periodic credit evaluations of our customers.

Customer credit allowance. We maintain allowances for estimated customer credits. Credits are typically due to the timing or amount of customer invoices processed for specific services, including professional and subscription, and maintenance coverage. In many cases, there has not been clear or timely communication of the need to adjust coverage or service at a location in advance of when we invoice for the associated coverage or service. We will issue a credit after agreeing to the service or coverage adjustment as requested by the customer within the terms of our contract.

Inventories. Our inventories are comprised of finished goods. Inventories are stated at the lower of cost or net realizable value, net of related reserves. The cost of inventory is computed using a weighted-average method. Our inventory is monitored to ensure appropriate valuation. Adjustments of inventories to the lower of cost or net realizable value, if necessary, are based upon contractual provisions such as turnover and assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional adjustments to inventory valuations may be required. We provide a reserve for obsolescence, which is calculated based on several factors, including an analysis of historical sales of products and the age of the inventory. Actual amounts could be different from those estimated.

Leases. We determine if an arrangement is or contains a lease at inception. Operating leases are presented as Right-of-Use (“ROU”) assets and the corresponding lease liabilities are included in operating lease liabilities – current and operating lease liabilities – non-current on our Consolidated Balance Sheet. Finance leases are included in property and equipment, net and corresponding liabilities are included in finance lease obligations – current and non-current on our Consolidated Balance Sheet. ROU assets represent our right to use the underlying asset, and lease liabilities represent our obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.

ROU assets and lease liabilities are recognized at commencement date and determined using the present value of the remaining lease payments over the lease term. We use an incremental borrowing rate based on estimated rate of interest for collateralized borrowing since our leases do not include an implicit interest rate. The estimated incremental borrowing rate considers market data, actual lease economic environment, and actual lease term at commencement date. The lease term may include options to extend when it is reasonably certain that we will exercise that option. ROU assets include lease payments made in advance, and excludes any incentives received or initial direct costs incurred. Lease expense is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components which we account for as a single lease component. We also have leases which include variable lease payments, which are expensed as incurred. Our variable lease payments are not based on an index or rate and therefore are excluded from the calculation of lease liabilities. We have elected to not recognize short term leases that have a term of twelve months or less as ROU assets or lease liabilities. Our short-term leases are not material and do not have a material impact on our ROU assets or lease liabilities. Additionally, we do not have any covenants, residual value guarantees, or related party transactions associated with our lease agreements.

Goodwill and Other Indefinite-Lived Intangible Assets. Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies. The carrying amount of goodwill was $19.6 million as of March 31, 2020 and 2019. Goodwill is tested for impairment on an annual basis, or in interim periods if indicators of potential impairment exist. The Company evaluates whether goodwill is impaired by comparing its market capitalization based on its closing stock price (Level 1 input) to the book value of its equity on the annual evaluation date. Based on testing performed, the Company concluded that no impairment of its goodwill has occurred for the years ended March 31, 2020, 2019 and 2018.

The Company is also required to compare the fair values of other indefinite-lived intangible assets to their carrying amounts at least annually, or when current events and circumstances require an interim assessment. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized.

Intangible assets. Purchased intangible assets with finite lives are primarily amortized using the straight-line method over the estimated economic lives of the assets. Our finite-lived intangible assets are amortized over periods between two and eight years. Customer relationships are amortized over estimated useful lives between two and seven years; non-competition agreements are amortized over estimated useful lives between two and eight years; developed technology is amortized over estimated useful lives between three and eight years; supplier relationships are amortized over estimated useful lives between two and eight years.

Long-lived assets. Property and equipment are recorded at cost. Major renewals and improvements are capitalized. Minor replacements, maintenance, repairs, and reengineering costs are expensed as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized.

Depreciation and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under finance leases, which make up less than one percent of total assets, over their estimated useful lives using the straight-line method. The estimated useful lives for depreciation and amortization are as follows: buildings and building improvements - 7 to 30 years; furniture - 7 to 10 years; equipment - 3 to 10 years; software - 3 to 10 years; and leasehold improvements over the shorter of the economic life or the lease term. Internal use software costs are expensed or capitalized depending on the project stage. Amounts capitalized are amortized over the estimated useful lives of the software, ranging from 3 to 10 years, beginning with the project's completion. Depreciation for capitalized project expenditures does not begin until the underlying project is completed.

We evaluate the recoverability of our long-lived assets whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the event the carrying value of the assets exceeds the future undiscounted cash flows attributable to such assets. Our long-lived assets and impairments considerations are discussed further in Note 4, Property and Equipment, net.

Foreign currency translation. The financial statements of our foreign operations are translated into U.S. dollars for financial reporting purposes. The assets and liabilities of foreign operations whose functional currencies are not in U.S. dollars are translated at the period-end exchange rates, while revenue and expenses are translated at weighted-average exchange rates during the fiscal year. The cumulative translation effects are reflected as a component of “Accumulated other comprehensive loss” within shareholders' equity in the Consolidated Balance Sheets. Gains and losses on monetary transactions denominated in other than the functional currency of an operation are reflected within “Other (income) expenses, net” in the Consolidated Statements of Operations. Foreign currency gains and losses from changes in exchange rates have not been material to our consolidated operating results.

Revenue recognition. We derive revenue from the sale of products (i.e., software, third party hardware and operating systems), support, maintenance and subscription services and professional services. For the fiscal years 2020, 2019 and 2018, revenue from international operations was 9%, 9% and 8%, respectively of total revenue. Our customer base is highly fragmented.

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

Revenue recognition under Topic 606

Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master service agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Performance obligations specific to each individual contract are defined within the terms of each order. Each performance obligation is identified based on the goods and services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which we will be entitled and expect to receive in exchange for transferring goods or services to the customer. Typically, our contracts do not provide our customer with any right of return or refund; we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or refund.

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

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

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

Support and maintenance revenue is derived from providing telephone and on-line technical support services, bug fixes, and unspecified software updates and upgrades to customers on a when-and-if-available basis. These services represent a stand-ready obligation that is concurrently delivered and has the same pattern of transfer to the customer; we account for these support and maintenance services as a single performance obligation recognized over the term of the maintenance agreement.

Our subscription service revenue is comprised of fees for contracts that provide customers a right to access our software for a subscribed period. We do not provide the customer the contractual right to license the software at any time outside of the subscription period under these contracts. The customer can only benefit from the software and software maintenance when provided the right to access the software. Accordingly, each of the rights to access the software, the maintenance services, and any hosting services is not considered a distinct performance obligation in the context of the contract and should be combined into a single performance obligation to be recognized over the contract period. The Company recognizes subscription revenue over a one-month period based on the typical monthly invoicing and renewal cycle in accordance with our customer agreement terms.

Professional services revenues primarily consist of fees for consulting, installation, integration and training and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are being performed. Professional services can be provided by internal or external providers, do not significantly affect the customer's ability to access or use other provided goods or services, and provide a measure of benefit beyond that of other promised goods or services in the contract. As a result, professional services are considered distinct in the context of the contract and represent a separate performance obligation. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation.

We use the market approach to derive standalone selling price ("SSP") by maximizing observable data points (in the form of recently executed customer contracts) to determine the price customers are willing to pay for the goods and services transferred. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.

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

Comprehensive (loss) income. Comprehensive (loss) income is the total of net (loss) income, as currently reported under GAAP, plus other comprehensive (loss) income. Other comprehensive (loss) income considers the effects of additional transactions and economic events that are not required to be recorded in determining net (loss) income, but rather are reported as a separate statement of comprehensive (loss) income.

Fair value measurements. We measure the fair value of financial assets and liabilities on a recurring or non-recurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. In determining fair value of financial assets and liabilities, we use various valuation techniques. Additional information regarding fair value measurements is provided in Note 14, Fair Value Measurements.

Investments in corporate-owned life insurance policies. Agilysys invests in corporate-owned life insurance policies, for which some are endorsement split-dollar life insurance arrangements. We entered into agreements with certain former executives, whereby we must maintain the life insurance policy for a specified amount and split a portion of the policy benefits with their respective designated beneficiary. Our investment in these corporate-owned life insurance policies were recorded at their cash surrender value, which approximates fair value at the balance sheet date. In the Consolidated Balance Sheets at the balance sheet date, the cash surrender value of $0.9 million for the remaining policies were held in “Other non-current assets,” and the present value of future proceeds owed to those executives' designated beneficiary of $0.1 million, which approximates fair value, were recorded within "Other non-current liabilities." Additional information regarding the investments in corporate-owned life insurance policies is provided in Note 10, Employee Benefit Plans.

Income Taxes. Income tax expense includes U.S. and foreign income taxes and is based on reported income before income taxes. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities are determined based on the enacted tax rates expected to apply in the periods in which the deferred tax assets or liabilities are anticipated to be settled or realized.

We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies.

We recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from uncertain tax positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet this threshold. Interest related to uncertain tax positions is recognized as part of the provision for income taxes and is accrued beginning in the period that such interest would be applicable under relevant tax law until such time that the related tax benefits are recognized. Our income taxes are described further in Note 9, Income Taxes.

Capitalized Software Development Costs. The capitalization of software development cost for external use 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 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, which is a range between three and eight years. Annually, or more frequent as required by triggering events, an analysis of the net realizable value of the capitalized software is completed and the amount by which unamortized software costs exceeds the net realizable value, if any, is recognized as a charge to income in the period it is determined. See further discussion regarding our capitalized software development costs in Note 5, Intangible Assets and Software Development Costs.

Advertising and Promotion Expense. We expense advertising and promotion expense as incurred. Advertising and promotion expense was $2.7 million, $2.0 million and $2.7 million in fiscal 2020, 2019 and 2018, respectively.

Reclassification. Certain prior year balances have been reclassed to conform to the current year presentation. Specifically, we reclassed certain employee benefit obligations from current to non-current liabilities.

Adopted and Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-03, Codification Improvements to Financial Instruments. ASU 2020-03 provides clarifications for questions and comments received regarding how changes to specific guidance related to financial instruments as a result of ASU No. 2016-13 interacts with other areas of the codification. The guidance was effective upon issuance of the ASU and correlates to the adoption of each of the applicable ASUs. Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13 and will apply applicable changes from ASU 2020-03 in the period of adoption.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions previously allowed in the standard and simplifies the accounting for income taxes by providing additional guidance for certain tax situations. The update is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods, with early adoption (including early adoption in any interim period) permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. ASU 2019-04 provides corrections, updates and clarifications to the previously issued updates ASU 2016-13, ASU 2017-12 and ASU 2016-01. Various areas of the codification were impacted from the update. The standard follows the effective dates of the previously issued ASUs, unless an entity has already early adopted the previous ASUs, in which case the effective date will vary according to each specific ASU adoption. Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13, and the other two ASUs affected by ASU 2019-04 are not applicable to us. We are currently reviewing this standard to assess the impact on our future consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 addresses the treatment of implementation costs incurred in a hosting arrangement that is a service contract. The update does not impact the accounting for the service element of a hosting arrangement that is a service contract. The update is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption (including early adoption in any interim period) permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 addresses the required disclosures around fair value measurement. The disclosure requirements of the reasons for transfers between Level 1 and Level 2, the policy for timing transfers between levels, and the valuation process for Level 3 measurements have been removed. Certain modifications were made to required disclosures and additional requirements were established. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220). ASU 2018-02 addresses the effect of the change in the U.S. federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We have adopted this standard as of April 1, 2019. While we have elected to reclassify any amount out of other comprehensive income, we do not have any amounts to reclassify and therefore the adoption had no impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. While we are still assessing the impact of this standard, we do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

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

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Unlike Accounting Standard Codification Topic 840 (“Topic 840”), which requires only capital leases to be recognized on the balance sheet, the new guidance requires both types of leases to be recognized on the balance sheet. The most prominent change for lessees is the requirement to recognize both Right-of-Use (ROU) assets and lease liabilities for leases classified as operating leases under Topic 840. We adopted Topic 842 as of April 1, 2019 using the current period adjustment method of adoption. Refer to Note 6, Leases for further details.

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.

XML

Employee Benefit Plans - Endorsement Split-Dollar Life Insurance (Details Textual) - USD ($)	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Compensation And Retirement Disclosure [Abstract]
Present value of future proceeds to be received under corporate life insurance policies, liability	$ 100,000	$ 100,000
Aggregate cash surrender value of underlying life insurance, net of policy loans	900,000	900,000
Gain (loss) recognized on corporate-owned life insurance policies	$ 14,000	$ 15,000	$ 17,000

XML

Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019
Deferred tax assets:
Accrued liabilities	$ 3,059	$ 3,944
Allowance for doubtful accounts	331	120
Inventory valuation reserve		41
Federal losses and credit carryforwards	47,218	44,811
Foreign losses and credit carryforwards	1,523	1,146
State losses and credit carryforwards	10,911	9,886
Deferred revenue	582	488
Property and equipment and software amortization	163
Operating lease liabilities	1,297
Goodwill and other intangible assets	4,914
Other	88	65
Deferred tax assets, gross	70,086	60,501
Less: valuation allowance	(66,819)	(57,852)
Total	3,267	2,649
Deferred tax liabilities:
Operating lease right-of-use assets	(948)
Property and equipment and software amortization		(361)
Goodwill and other intangible assets	(2,426)	(2,706)
Other	(9)
Total	(3,383)	(3,067)
Total deferred tax liabilities	$ (116)	$ (418)

XML

Loss per Share (Tables)

12 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

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

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

	Year ended March 31,
(In thousands, except per share data)	2020			2019			2018
Numerator:
Net loss	$	(34,067	)	$	(13,164	)	$	(8,350	)
Denominator:
Weighted average shares outstanding - basic and diluted		23,233			23,037			22,801
Loss per share - basic and diluted:
Net loss per share-basic and diluted	$	(1.47	)	$	(0.57	)	$	(0.37	)
Anti-dilutive stock options, SSARs, restricted shares and performance shares		1,510			1,433			756

XML

Summary of Significant Accounting Policies (Textual) (Details) - USD ($)	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Significant Accounting Policies [Line Items]
Goodwill	$ 19,622,000	$ 19,622,000
Goodwill impairment loss	$ 0	$ 0	$ 0
Capital lease assets as a percentage of total assets	1.00%
Revenues from international operations	9.00%	9.00%	8.00%
Aggregate cash surrender value of underlying life insurance, net of policy loans	$ 900,000	$ 900,000
Present value of future proceeds to be received under corporate life insurance policies, liability	100,000	100,000
Marketing and advertising expense	$ 2,700,000	$ 2,000,000	$ 2,700,000
Minimum [Member]
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	2 years
Minimum [Member] | Building and Building Improvements [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	7 years
Minimum [Member] | Furniture [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	7 years
Minimum [Member] | Equipment [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	3 years
Minimum [Member] | Software and Software Development Costs [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	3 years
Minimum [Member] | Customer Relationships [Member]
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	2 years
Minimum [Member] | Non-competition Agreements [Member]
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	2 years
Minimum [Member] | Developed Technology Rights [Member]
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	3 years
Minimum [Member] | Supplier Relationships [Member]
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	2 years
Maximum [Member]
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	8 years
Maximum [Member] | Building and Building Improvements [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	30 years
Maximum [Member] | Furniture [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	10 years
Maximum [Member] | Equipment [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	10 years
Maximum [Member] | Software and Software Development Costs [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	10 years
Maximum [Member] | Customer Relationships [Member]
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	7 years
Maximum [Member] | Non-competition Agreements [Member]
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	8 years
Maximum [Member] | Developed Technology Rights [Member]
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	8 years
Maximum [Member] | Supplier Relationships [Member]
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	8 years

XML

Supplemental Disclosures of Cash Flow Information

12 Months Ended

Mar. 31, 2020

Supplemental Cash Flow Elements [Abstract]

Supplemental Disclosures of Cash Flow Information

7. Supplemental Disclosures of Cash Flow Information

Additional information related to the Consolidated Statements of Cash Flows is as follows:

	Year ended March 31,
(In thousands)		2020			2019			2018
Cash (receipts) for interest, net	$	(371	)	$	(329	)	$	(88	)
Cash payments (receipts) for income tax, net		694			409			(227	)
Acquisition of property and equipment under lease obligations		17			—			64
Accrued capital expenditures		187			56			83
Accrued capitalized software development costs		—			—			201
Leasehold improvements acquired under operating lease arrangement		—			62			95

XML

Revenue Recognition

12 Months Ended

Mar. 31, 2020

Revenue From Contract With Customer [Abstract]

Revenue Recognition

3. Revenue Recognition

On April 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method applied to those contracts that were not completed as of the adoption date. Results for reporting periods beginning after the adoption date are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under prior guidance. For in depth discussion regarding our revenue recognition procedures for our revenue streams, see Note 2, Summary of Significant Accounting Policies.

Disaggregation of Revenue

We derive and report our revenue from the sale of products (software licenses, third party hardware and operating systems), support, maintenance and subscription services and professional services. Revenue recognized at a point in time (products) totaled $44.2 million, $39.0 million, and $33.7 million during fiscal 2020, 2019 and 2018. Revenue recognized over time (support, maintenance and subscription services and professional services) totaled $116.5 million, $101.8 million, and $93.7 million during fiscal 2020, 2019 and 2018.

Contract Balances

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

Revenue recognized from amounts included in contract liabilities at the beginning of the period was $37.0 million and $33.1 million during fiscal 2020 and 2019. During fiscal 2020 and 2019, we transferred from contract assets at the beginning of the period, $2.8 million and $4.6 million, respectively, to accounts receivable because the right to the transaction became unconditional.

Our arrangements are for a period of one year or less. As a result, unsatisfied performance obligations as of March 31, 2020 are expected to be satisfied and the allocated transaction price recognized in revenue within a period of 12 months or less.

Assets Recognized from Costs to Obtain a Contract

Sales commission expenses that would not have occurred absent the customer contracts are considered incremental costs to obtain a contract. We have elected to take the practical expedient available to expense the incremental costs to obtain a contract as incurred when the expected benefit and amortization period is one year or less. For subscription contracts that are renewed monthly based on an agreement term, we capitalize commission expenses and amortize as we satisfy the underlying performance obligations, generally based on the contract terms and anticipated renewals. For first year support and maintenance service contracts, commission expenses are immaterial and therefore expenses as incurred. Other sales commission expenses are not material or have a period of benefit of one year or less, and are therefore expensed as incurred in line with the practical expedient elected.

As part of our 606 transition adjustments, we capitalized $1.9 million of sales incentive costs incurred in prior periods as of April 1, 2018. We had $3.2 million and $3.3 million of capitalized sales incentive costs as of March 31, 2020 and 2019, respectively. These balances are included in other non-current assets on our Consolidated Balance Sheet. During fiscal 2020 and 2019, we expensed $4.7 million and $4.5 million, respectively, of sales commission, which included amortization of capitalized amounts of $1.4 million and $1.1 million, respectively. These expenses are included in operating expenses – sales and marketing in our Consolidated Statement of Operations. All other costs to obtain a contract are not considered incremental and therefore are expensed as incurred.

Financial Statement Impact of Adoption on Previously Reported Results

We adopted Topic 606 using the modified retrospective method beginning fiscal 2019. The cumulative impact of applying the new guidance to all contracts with customers that were not completed as of April 1, 2018 was recorded as an adjustment to retained earnings as of the adoption date. As a result of applying the modified retrospective method to adopt the new standard, we also impacted accounts receivable, net, contract assets, prepaid expenses and other current assets, other non-current assets, contract liabilities and retained earnings on our Consolidated Balance Sheet as of April 1, 2018.

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

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

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

XML

Commitments and Contingencies

12 Months Ended

Mar. 31, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

11. Commitments and Contingencies

Legal 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 in the U.S. District Court for the Southern District of California alleging that certain of our products infringe patents owned by Ameranth directed to configuring and transmitting hospitality menus (e.g. restaurant menus) for display on electronic devices, and synchronizing the menu content between the devices. The case against us was consolidated with similar cases brought by Ameranth against more than 30 other defendants. Most of the patents at issue in the case were invalidated by the U.S. Court of Appeals for the Federal Circuit in 2016. Cases against us and our co-defendants remained pending in the District Court with respect to one surviving Ameranth patent. In September 2018, the District Court found that patent invalid, and granted summary judgment in favor of the movant co-defendants. In early 2019, Ameranth appealed the District Court's summary judgment ruling to the U.S. Court of Appeals for the Federal Circuit. In November 2019, the U.S. Court of Appeals for the Federal Circuit affirmed the lower court’s summary judgement with respect to all claims except for two, which were not asserted against Agilysys. Shortly thereafter, Ameranth moved for a rehearing en banc, which was denied in February 2020. Finally, Ameranth filed for writ of certiorari to the United States Supreme Court. The Supreme Court has not yet responded to the writ.

We were not a party to the appeal, and it is currently unclear what impact the summary judgment ruling or writ of certiorari may have on our case. Ameranth seeks monetary damages, injunctive relief, costs and attorneys' fees from us. At this time, we are not able to predict the outcome of this lawsuit. However, we dispute the allegations of wrongdoing and are vigorously defending ourselves in this matter.

XML

Intangible Assets and Software Development Costs (Tables)

12 Months Ended

Mar. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

The following table summarizes our intangible assets and software development costs at March 31, 2020, and 2019:

	2020										2019
	Gross								Net		Gross					Net
	carrying		Accumulated						carrying		carrying		Accumulated			carrying
(In thousands)	amount		amortization			Impairment			amount		amount		amortization			amount
Amortized intangible assets:
Customer relationships	$	10,775	$	(10,775	)	$	-		$	-	$	10,775	$	(10,775	)	$	-
Non-competition agreements		2,700		(2,700	)		—			—		2,700		(2,700	)		—
Developed technology		10,398		(10,398	)		—			—		10,398		(10,398	)		—
Trade names		230		(230	)		—			—		230		(192	)		38
Patented technology		80		(80	)		—			—		80		(80	)		—
		24,183		(24,183	)		—			—		24,183		(24,145	)		38
Trade names		8,400	N/A				—			8,400		8,400	N/A				8,400
Total intangible assets	$	32,583	$	(24,183	)	$	-		$	8,400	$	32,583	$	(24,145	)	$	8,438
(In thousands)
Software development costs	$	67,541	$	(45,535	)	$	(22,006	)	$	-	$	67,541	$	(32,974	)	$	34,567

XML

Related Party Transaction

12 Months Ended

Mar. 31, 2020

Related Party Transactions [Abstract]

Related Party Transaction

17. Related Party Transaction

See Note 16. Subsequent Events, for description of the MAK Capital investment in the Company announced in May 2020. Michael Kaufman, the Chairman of the Company’s Board of Directors, is the Chief Executive Officer of MAK Capital.

XML

Share-based Compensation

12 Months Ended

Mar. 31, 2020

Share Based Compensation [Abstract]

Share-based Compensation

13. Share-based Compensation

We may grant non-qualified stock options, incentive stock options, SSARs, restricted shares, and restricted share units under our shareholder-approved 2016 Stock Incentive Plan (the 2016 Plan) for up to 2.0 million common shares, plus 957,575 common shares, the number of shares that were remaining for grant under the 2011 Stock Incentive Plan (the 2011 Plan) as of the effective date of the 2016 Plan, plus the number of shares remaining for grant under the 2011 Plan that are forfeited, settled in cash, canceled or expired. The maximum aggregate number of restricted shares or restricted share units that may be granted under the 2016 Plan is 1.25 million.

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.

For stock options and SSARs, the exercise price must be set at least equal to the closing market price of our common shares on the date of grant. The maximum term of stock option and SSAR awards is seven years from the date of grant. Stock option and SSARs awards vest over a period established by the Compensation Committee of the Board of Directors. SSARs may be granted in conjunction with, or independently from, stock option grants. SSARs granted in connection with a stock option are exercisable only to the extent that the stock option to which it relates is exercisable and the SSARs terminate upon the termination or exercise of the related stock option grants.

Restricted shares and restricted share units, whether time-vested or performance-based, may be issued at no cost or at a purchase price that may be below their fair market value, but are subject to forfeiture and restrictions on their sale or other transfer. Performance-based awards may be conditioned upon the attainment of specified performance objectives and other conditions, restrictions, and contingencies. Restricted shares and restricted share units have the right to receive dividends, or dividend equivalents in the case of restricted share units, if any, upon vesting, subject to the same forfeiture provisions that apply to the underlying awards. Subject to certain exceptions set forth in the 2016 Plan, for awards to employees, no performance-based restricted shares or restricted share units shall be based on a restriction period of less than one year, and any time-based restricted shares or restricted share units shall have a minimum restriction period of three years.

We record compensation expense related to stock options, SSARs, restricted shares, and performance shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date. The fair value of restricted share and performance share awards is based on the closing price of our common shares on the grant date. The fair value of stock option and SSAR 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. During fiscal year 2020, we issued 125,000 SSAR awards which are subject to a market condition. The fair value of these awards is estimated using the Lattice option pricing model which utilizes a binary tree and includes multiple assumptions which include volatility and life of the award to determine an appropriate fair value based on the award grant date.

The following table summarizes the share-based compensation expense for options, SSARs, restricted and performance awards included in the Consolidated Statements of Operations for fiscal 2020, 2019 and 2018:

	Year Ended March 31,
(In thousands)	2020		2019		2018
Product development		2,241		1,478		1,306
Sales and marketing		321		469		371
General and administrative		2,643		2,429		3,011
Total share-based compensation expense		5,205		4,376		4,688

Stock-Settled Stock 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 only in common shares of Agilysys.

We use a Black-Scholes-Merton or a Lattice option pricing model to estimate the fair value of SSARs. The following table summarizes the principal assumptions utilized in valuing SSARs granted in fiscal 2020, 2019 and 2018:

	2020		2019			2018
Risk-free interest rate	1.38%-1.74%			2.68	%	1.74%-1.94%
Expected life (in years)	4.5-5		5			5
Expected volatility	31.7%-32.42%			32.42	%	32.42% - 32.84%
Weighted-average grant date fair value	$	10.01	$	4.72		$	3.36

The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury bond whose maturity period approximates the expected life of the SSARs. The expected life is estimated using historical data representing the period of time the awards are expected to be outstanding. The estimated fair value of the SSARs granted is recognized over the vesting period of the awards utilizing the graded vesting method. Under this method, the compensation cost related to unvested amounts begins to be recognized as of the grant date.

The following table summarizes the activity during fiscal 2020 for SSARs awarded under the 2016 and 2011 Plans:

(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, 2019		1,016,643		$	11.22
Granted		691,364			34.72
Exercised		(37,506	)		10.02
Forfeited		(15,838	)		18.09
Cancelled/expired		(9,775	)		10.61
Outstanding at March 31, 2020		1,644,888		$	21.07		4.9	$	5,236
Exercisable at March 31, 2020		959,340		$	11.79		3.9	$	5,130
Vested and expected to vest at March 31, 2020		1,644,888		$	21.07		4.9	$	5,236

The following table presents additional information related to SSARs activity during fiscal 2020, 2019 and 2018:

(In thousands)	2020		2019		2018
Compensation expense	$	1,666	$	943	$	1,869
Total intrinsic value of SSARs exercised	$	519	$	907	$	88
Total fair value of SSARs vesting	$	1,328	$	1,165	$	1,325

As of March 31, 2020, total unrecognized share based compensation expense related to non-vested SSARs was $5.6 million, which is expected to be recognized over the weighted-average vesting period of 2.3 years.

A total of 21,494 shares, net of 6,712 shares withheld to cover the employee’s minimum applicable income taxes, were issued from treasury shares to settle SSARs exercised during the twelve months ended March 31, 2020. The shares withheld were returned to treasury shares.

Restricted Shares

We granted shares to certain of our Directors, executives and key employees under the 2016 and 2011 Plans, the vesting of which is service-based. The following table summarizes the activity during the twelve months ended March 31, 2020 for restricted shares awarded under the 2016 and 2011 Plans:

	Number of Shares			Weighted- Average Grant- Date Fair Value
				(per share)
Outstanding at April 1, 2019		237,146		$	13.46
Granted		223,404			22.72
Vested		(231,677	)		16.60
Forfeited		(50,411	)		17.34
Outstanding at March 31, 2020		178,462		$	19.89

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. During fiscal 2020, a total of 208,151 shares, net of 46,656 shares withheld from the vested restricted shares to cover the employee's minimum applicable income taxes, were issued from treasury. The shares withheld were returned to treasury shares.

The following table presents additional information related to restricted stock activity during fiscal years 2020, 2019, and 2018:

(In thousands)	2020		2019		2018
Compensation expense	$	3,385	$	2,803	$	2,594
Total fair value of restricted share vesting	$	4,004	$	4,383	$	4,315

As of March 31, 2020, total unrecognized share based compensation expense related to non-vested restricted stock was $2.1 million, which is expected to be recognized over a weighted-average vesting period of 1.9 years. We do not include restricted stock in the calculation of earnings per share until the shares are vested.

Performance Shares

The following table summarizes the activity during fiscal 2020 for performance shares awarded under the 2016 Plan:

	Number of Shares			Weighted- Average Grant- Date Fair Value
				(per share)
Outstanding at April 1, 2019		63,291		$	14.22
Granted		30,120			22.41
Vested		(23,526	)		22.67
Forfeited		(39,765	)		14.22
Outstanding at March 31, 2020		30,120		$	22.41

Based on the performance goals, management estimates a liability of $153,000 to be settled through the vesting of a variable number of the performance shares subsequent to March 31, 2020. As of March 31, 2020, total share based compensation expense related to performance shares has been fully recognized.

The following table presents additional information related to performance share activity during fiscal 2020, 2019 and 2018:

(In thousands)	2020		2019		2018
Compensation expense	$	153	$	630	$	225
Total fair value of performance share vesting	$	513	$	243		—

Once attainment of the performance goals becomes probable, 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.

XML

Intangible Assets and Software Development Costs - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount	$ 24,183	$ 24,183
Accumulated amortization	(24,183)	(24,145)
Net carrying amount		38
Total intangible assets, gross carrying amount	32,583	32,583
Total intangible assets, accumulated amortization	(24,183)	(24,145)
Intangible assets, net	8,400	8,438
Finite lived software development costs gross	67,541	67,541
Finite lived software development costs accumulated amortization	(45,535)	(32,974)
Finite lived software development costs accumulated impairment	(22,006)
Finite lived software development costs net		34,567
Trade Names [Member]
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount, excluding accumulated impairment	230	230
Accumulated amortization, excluding accumulated impairment	(230)	(192)
Net carrying amount, excluding accumulated impairment		38
Gross carrying amount, excluding accumulated impairment	8,400	8,400
Carrying amount, excluding accumulated impairment	8,400	8,400
Customer Relationships [Member]
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount, excluding accumulated impairment	10,775	10,775
Accumulated amortization, excluding accumulated impairment	(10,775)	(10,775)
Non-competition Agreements [Member]
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount, excluding accumulated impairment	2,700	2,700
Accumulated amortization, excluding accumulated impairment	(2,700)	(2,700)
Developed Technology Rights [Member]
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount, excluding accumulated impairment	10,398	10,398
Accumulated amortization, excluding accumulated impairment	(10,398)	(10,398)
Patented Technology [Member]
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount, excluding accumulated impairment	80	80
Accumulated amortization, excluding accumulated impairment	$ (80)	$ (80)

XML

Leases - Other Information (Details) $ in Thousands	12 Months Ended
	Mar. 31, 2020 USD ($)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$ 4,873
Operating cash flows for finance leases	8
Financing cash flows for finance leases	24
ROU assets obtained in exchange for lease obligations:
Operating leases	2,734
Finance leases	$ 17
Weighted average remaining lease terms
Operating leases	5 years 14 days
Finance leases	2 years 1 month 28 days
Weighted average discount rates
Operating leases	10.37%
Finance leases	4.38%

XML

Income Taxes - Schedule of Income From Continuing Operations Before Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
(Loss) before income taxes
United States	$ (36,373)	$ (13,621)	$ (11,926)
Foreign	2,507	678	325
Total loss before income taxes	$ (33,866)	$ (12,943)	$ (11,601)

XML

Share-based Compensation - Performance Shares Rollforward (Details) - Performance Shares [Member]	12 Months Ended
	Mar. 31, 2020 $ / shares shares
Performance shares awarded by the Company
Number of Shares, Outstanding at beginning of period | shares	63,291
Number of Shares, Granted | shares	30,120
Number of Shares, Vested | shares	(23,526)
Number of Shares, Forefeited | shares	(39,765)
Number of Shares, Outstanding at end of period | shares	30,120
Weighted Average Grant-Date Fair Value, Outstanding at beginning of period | $ / shares	$ 14.22
Weighted Average Grant Date Fair Value, Granted | $ / shares	22.41
Weighted Average Grant Date Fair Value, Vested | $ / shares	22.67
Weighted Average Grant Date Fair Value, Forefeited | $ / shares	14.22
Weighted Average Grant-Date Fair Value, Outstanding at end of period | $ / shares	$ 22.41

XML

Share-based Compensation - SSARs Rollforward (Details) - Stock Settled Stock Appreciation Rights (SSARS) [Member] $ / shares in Units, $ in Thousands	12 Months Ended
	Mar. 31, 2020 USD ($) $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Rights Outstanding at Beginning of Period | shares	1,016,643
Number of Rights Granted | shares	691,364
Number of Rights Exercised | shares	(37,506)
Number of Rights, Forfeited | shares	(15,838)
Number of Rights Expired | shares	(9,775)
Number of Rights Outstanding at End of Period | shares	1,644,888
Number of Rights Exercisable at End of Period | shares	959,340
Number of Rights Vested and expected to vest at March 31, 2020 | shares	1,644,888
Weighted Average Exercise Price Outstanding at Beginning of Period | $ / shares	$ 11.22
Weighted Average Exercise Price, Granted | $ / shares	34.72
Weighted Average Exercise Price, Exercised | $ / shares	10.02
Weighted Average Exercise Price, Forfeited | $ / shares	18.09
Weighted Average Exercise Price, Expired | $ / shares	10.61
Weighted Average Exercise Price Outstanding at End of Period | $ / shares	21.07
Weighted Average Exercise Price, Exercisable at End of Period | $ / shares	11.79
Weighted Average Exercise Price, Exercisable at End of Period | $ / shares	$ 21.07
Remaining Contractual Term Outstanding at End of Period	4 years 10 months 24 days
Remaining Contractual Term Exercisable at End of Period	3 years 10 months 24 days
Share Based Compensation Arrangement By Share Based Payment Award Vested And Expected To Vest Outstanding Remaining Contractual Term	4 years 10 months 24 days
Aggregate Intrinsic Value Outstanding at End of Period | $	$ 5,236
Aggregate Intrinsic Value Exercisable at End of Period | $	5,130
Aggregate Intrinsic Value Exercisable at End of Period, Vested and expacted | $	$ 5,236

XML

Loss per Share (Details Textual) - shares	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Incremental common shares attributable to restricted shares (in shares)	208,581	300,437	334,817

XML

Consolidated Statements of Shareholders' Equity Statement - USD ($) shares in Thousands, $ in Thousands	Total	Common stock [Member]	Treasury stock [Member]	Capital in excess of stated value [Member]	Retained Earnings [Member]	Accumulated other comprehensive income (loss) [Member]
Beginning balance at Mar. 31, 2017	$ 113,669	$ 9,482	$ (2,519)	$ (5,782)	$ 112,692	$ (204)
Beginning balance (in shares) at Mar. 31, 2017		31,607	8,397
Cumulative effect of change in accounting policy				741	(741)
Share based compensation	4,463			4,463
Restricted shares issued, net			$ 64	(64)
Restricted shares issued, net (in shares)			213
Shares issued upon exercise of stock options and SSARs			$ 2	(2)
Shares issued upon exercise of stock options and SSARs (in shares)			8
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares	(1,300)		$ (33)	(1,267)
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares (in shares)			(107)
Net loss	(8,350)				(8,350)
Unrealized translation adjustments	(51)					(51)
Ending balance at Mar. 31, 2018	108,431	$ 9,482	$ (2,486)	(1,911)	103,601	(255)
Ending balance (in shares) at Mar. 31, 2018		31,607	8,283
Cumulative effect of change in accounting policy	2,614				2,614
Share based compensation	3,971			3,971
Restricted shares issued, net			$ 54	(54)
Restricted shares issued, net (in shares)			180
Shares issued upon exercise of stock options and SSARs			$ 18	(18)
Shares issued upon exercise of stock options and SSARs (in shares)			60
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares	(1,226)		$ (19)	(1,207)
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares (in shares)			(62)
Net loss	(13,164)				(13,164)
Unrealized translation adjustments	(4)					(4)
Ending balance at Mar. 31, 2019	100,622	$ 9,482	$ (2,433)	781	93,051	(259)
Ending balance (in shares) at Mar. 31, 2019		31,607	8,105
Share based compensation	5,682			5,682
Restricted shares issued, net			$ 41	(41)
Restricted shares issued, net (in shares)			140
Shares issued upon exercise of stock options and SSARs			$ 6	(6)
Shares issued upon exercise of stock options and SSARs (in shares)			21
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares	(940)		$ (15)	(925)
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares (in shares)			(53)
Net loss	(34,067)				(34,067)
Unrealized translation adjustments	460					460
Ending balance at Mar. 31, 2020	$ 71,757	$ 9,482	$ (2,401)	$ 5,491	$ 58,984	$ 201
Ending balance (in shares) at Mar. 31, 2020		31,607	7,997

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 1,634	$ 788
Common stock, stated value	$ 0.30	$ 0.30
Common stock, shares authorized	80,000,000	80,000,000
Common stock, shares issued	31,606,831	31,606,831
Common stock, shares outstanding	23,609,398	23,501,193
Treasury shares	7,997,433	8,105,638

XML

Income Taxes - Schedule of Unrecognized Tax Benefits Rollforward (Details) - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Unrecognized tax benefits, beginning of period	$ 580	$ 687	$ 988
Reductions:
Relating to positions taken during prior year	0	0	(300)
Relating to lapse in statute	(5)	(107)	(1)
Unrecognized tax benefits, end of period	$ 575	$ 580	$ 687

XML

Income Taxes - Schedule of Income Tax (Benefit) Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Current:
Federal	$ 59	$ 54	$ 66
State and local	21	(383)	(446)
Foreign	463	514	73
Deferred:
Federal	11	79	(2,985)
State and local	7	277	41
Foreign	(360)	(320)	0
Total income tax expense (benefit)	$ 201	$ 221	$ (3,251)

XML

Income Taxes

12 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

For the year ended March 31, loss before income taxes consisted of the following:

(In thousands)		2020			2019			2018
(Loss) before income taxes
United States	$	(36,373	)	$	(13,621	)	$	(11,926	)
Foreign		2,507			678			325
Total loss before income taxes	$	(33,866	)	$	(12,943	)	$	(11,601	)

For the year ended March 31, income tax expense (benefit) consisted of the following:

(In thousands)		2020			2019			2018
Income tax expense (benefit)
Current:
Federal	$	59		$	54		$	66
State and local		21			(383	)		(446	)
Foreign		463			514			73
Deferred:
Federal		11			79			(2,985	)
State and local		7			277			41
Foreign		(360	)		(320	)		—
Total income tax expense (benefit)	$	201		$	221		$	(3,251	)

The following table presents the principal components of the difference between the effective tax rate to the U.S. federal statutory income tax rate for the years ended March 31:

(In thousands)	2020			2019			2018
Income tax benefit at the US Federal statutory rate	$	(7,112	)	$	(2,718	)	$	(3,654	)
Benefit for state taxes		(856	)		(304	)		(642	)
Impact of foreign operations		(514	)		(310	)		38
Indefinite life assets		19			130			335
Change in valuation allowance		8,406			3,302			3,328
Change in liability for unrecognized tax benefits		22			(400	)		40
Impact of Tax Act, net		—			226			(3,287	)
Share-based compensation		(312	)		2			476
Global intangible low-taxed income		460			94			—
Other		88			199			115
Total income tax expense (benefit)	$	201		$	221		$	(3,251	)

We have elected to account for global intangible low-taxed income (GILTI) inclusions in the period in which they are incurred.

Our tax provision includes a provision for income taxes in certain foreign jurisdictions where subsidiaries are profitable, but only a minimal benefit is reflected related to U.S. and certain foreign tax losses due to the uncertainty of the ultimate realization of future benefits from these losses. The fiscal 2020 tax provision results primarily from foreign tax expense. The fiscal 2020 tax provision differs from the statutory rate primarily due to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, state taxes and other U.S. permanent book to tax differences.

The fiscal 2019 tax provision primarily results from foreign tax expense, the reversal of reserves for uncertain tax positions and the completion of our accounting for the Tax Act. The fiscal 2019 effective rate differs from the statutory rate primarily due to the impact of the Tax Act, recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state tax effects.

Deferred tax assets and liabilities as of March 31, are as follows:

(In thousands)	2020			2019
Deferred tax assets:
Accrued liabilities	$	3,059		$	3,944
Allowance for doubtful accounts		331			120
Inventory valuation reserve		—			41
Federal losses and credit carryforwards		47,218			44,811
Foreign losses and credit carryforwards		1,523			1,146
State losses and credit carryforwards		10,911			9,886
Deferred revenue		582			488
Property and equipment and software amortization		163			—
Operating lease liabilities		1,297			—
Goodwill and other intangible assets		4,914			—
Other		88			65
		70,086			60,501
Less: valuation allowance		(66,819	)		(57,852	)
Total		3,267			2,649
Deferred tax liabilities:
Operating lease right-of-use assets		(948	)		—
Property and equipment and software amortization		—			(361	)
Goodwill and other intangible assets		(2,426	)		(2,706	)
Other		(9	)		—
Total		(3,383	)		(3,067	)
Total deferred tax liabilities	$	(116	)	$	(418	)

At March 31, 2020, we had $199.1 million of federal net operating loss carryforwards that expire, if unused, in fiscal years 2031 to 2038, and $24.7 million of federal net operating loss carryforwards that can be carried forward indefinitely. Our Hong Kong, Malaysia, and Singapore subsidiaries have $0.4 million, $0.1 million, and $0.3 million of net operating loss carryforwards, respectively. The losses for Hong Kong, Malaysia and Singapore can be carried forward indefinitely. At March 31, 2020, our India subsidiary had $0.8 million of minimum alternative tax credits reported as other noncurrent assets on our Consolidated Balance Sheet. Our India subsidiary operates in a “Special Economic Zone (“SEZ”)”. One of the benefits associated with the SEZ is that the India subsidiary is not subject to regular India income taxes during its first 5 years of operations which includes fiscal 2018 through fiscal 2022. The India subsidiary is then subject to 50% of regular India income taxes during the second five years of operations which includes fiscal 2023 through fiscal 2027. The aggregate value of the benefit of the SEZ during the current fiscal year is $0.8 million.

At March 31, 2020 we also had $141.6 million of state net operating loss carryforwards that expire, if unused, in fiscal years 2021 through 2040.

We recorded valuation allowances related to certain deferred income tax assets due to the uncertainty of the ultimate realization of the future benefits from those assets. At March 31, 2020, the total valuation allowance against deferred tax assets of $66.8 million was comprised of $65.9 million for federal and state deferred tax assets, and $0.9 million associated with deferred tax assets in Hong Kong, Malaysia, Singapore and the Philippines. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some, or all, of the deferred tax assets will not be realized. We have recorded a valuation allowance offsetting substantially all of our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax assets, we will need to generate future taxable income before the expiration of the deferred tax assets governed by the tax code. Because of our losses in current and prior periods, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences. The amount of the valuation allowance, however, could be reduced in the near term. The exact timing will be based on the level of profitability that we are able to achieve and our visibility into future results. Our recorded tax rate may increase in subsequent periods following a valuation release. Any valuation allowance release will not affect the amount of cash paid for income taxes.

The undistributed earnings of our foreign subsidiaries are not subject to U.S. federal and state income taxes unless such earnings are distributed in the form of dividends or otherwise to the extent of current and accumulated earnings and profits. The undistributed earnings of foreign subsidiaries are permanently reinvested and totaled $6.3 million and $3.1 million as of March 31, 2020 and 2019, respectively. We made the determination of permanent reinvestment on the basis of sufficient evidence that demonstrates we will invest the undistributed earnings overseas indefinitely for use in working capital, as well as foreign acquisitions and expansion. The determination of the amount of the unrecognized deferred U.S. income tax liability related to the undistributed earnings is not practicable.

We recorded a liability for unrecognized tax positions. The aggregate changes in the balance of our gross unrecognized tax benefits were as follows for the years ended March 31:

(In thousands)	2020			2019			2018
Balance at April 1	$	580		$	687		$	988
Reductions:
Relating to positions taken during prior year		—			—			(300	)
Relating to lapse in statute		(5	)		(107	)		(1	)
Balance at March 31	$	575		$	580		$	687

As of March 31, 2020, we had a liability of $0.6 million related to uncertain tax positions, the recognition of which would affect our effective income tax rate.

Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months an immaterial reduction in unrecognized tax benefits may occur as a result of the expiration of various statutes of limitations. We are consistently subject to tax audits; due to the nature of examinations in multiple jurisdictions, changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time.

We recognize interest accrued on any unrecognized tax benefits as a component of income tax expense. Penalties are recognized as a component of general and administrative expenses. We recognized interest and penalty expense of less than $0.1 million for the years ended March 31, 2020, 2019 and 2018. As of March 31, 2020 and 2019, we had approximately $0.5 million and $0.5 million, respectively, of interest and penalties accrued in other non-current liabilities on our Consolidated Balance Sheets.

In the U.S. we file consolidated federal and state income tax returns where statutes of limitations generally range from three to five years. Although we have resolved examinations with the IRS through tax year ended March 31, 2010, U.S. federal tax years are open from 2006 forward due to attribute carryforwards. The statute of limitations is open from fiscal year 2013 forward in certain state jurisdictions. We also file income tax returns in international jurisdictions where statutes of limitations generally range from three to seven years. Years beginning after 2009 are open for examination by certain foreign taxing authorities.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act includes provisions addressing the carryback of net operating losses for specific periods, refunds of alternative minimum tax credits, temporary modification to the limitation placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property. Additionally, the CARES Act provides, among other provisions, for the deferral of the employer-paid portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022; the CARES Act also provides for certain employee retention tax credits.

As of March 31, 2020, these provisions are expected to provide us with approximately $0.1 million of additional liquidity during the current year due to the ability to accelerate outstanding alternative minimum tax credit refunds. Due to the net loss position of the Company, we do not anticipate impacts from net loss carryback or deductibility provisions. We are currently deferring the employer-paid portion of social security taxes but do not currently anticipate qualifying for employee retention tax credits at this time.

Separate from the CARES Act, the IRS extended the dates for estimated tax payments for the first and second calendar quarters of 2020 to July 15, 2020. Further, many states are offering similar deferrals of various classes of tax payments. Due to the net loss position of the Company, we do not anticipate material federal or state tax payment deferrals.

Significant uncertainty exists regarding the magnitude and duration of the impact of the COVID-19 pandemic; therefore, we cannot predict at this time the ultimate extent of its impact on our business operations, financial results and resulting effects to income taxes in future periods. See Part II, Item 1A. of this Annual Report for further discussion regarding risks associated with the COVID-19 pandemic.

XML

Intangible Assets and Software Development Costs

12 Months Ended

Mar. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets and Software Development Costs

5. Intangible Assets and Software Development Costs

The following table summarizes our intangible assets and software development costs at March 31, 2020, and 2019:

	2020										2019
	Gross								Net		Gross					Net
	carrying		Accumulated						carrying		carrying		Accumulated			carrying
(In thousands)	amount		amortization			Impairment			amount		amount		amortization			amount
Amortized intangible assets:
Customer relationships	$	10,775	$	(10,775	)	$	-		$	-	$	10,775	$	(10,775	)	$	-
Non-competition agreements		2,700		(2,700	)		—			—		2,700		(2,700	)		—
Developed technology		10,398		(10,398	)		—			—		10,398		(10,398	)		—
Trade names		230		(230	)		—			—		230		(192	)		38
Patented technology		80		(80	)		—			—		80		(80	)		—
		24,183		(24,183	)		—			—		24,183		(24,145	)		38
Trade names		8,400	N/A				—			8,400		8,400	N/A				8,400
Total intangible assets	$	32,583	$	(24,183	)	$	-		$	8,400	$	32,583	$	(24,145	)	$	8,438
(In thousands)
Software development costs	$	67,541	$	(45,535	)	$	(22,006	)	$	-	$	67,541	$	(32,974	)	$	34,567

Indefinite-lived intangible assets, comprised of our purchased trade name InfoGenesis™ as of March 31, 2020 and 2019 are tested for impairment upon identification of impairment indicators or at least annually. An impairment loss is recognized if the carrying amount is greater than fair value. The InfoGenesis™ indefinite-lived purchased trade name impairment testing resulted in a fair value exceeding the carrying amount for the years ending March 31, 2020, 2019 and 2018.

Management compares the unamortized capitalized software development costs for each external use product to its net realizable value by analyzing critical inputs such as costs necessary to bring the software to market, costs necessary to maintain the software, life of the software, and market capacity. As of March 31, 2020, management determined the net realizable value of the remaining capitalized software development costs for certain solutions within out rGuest suite of products no longer exceeded their carrying value, and as a result, recorded non-cash impairment charges of $22.0 million. The impact of the COVID-19 pandemic on the hospitality industry resulted in economic conditions which make it difficult to project future sales and revenue accurately for the related rGuest solutions. After evaluating the Company’s strategy for market development and continued costs to support the software, an impairment charge was required. The amount of impairment recognized during the period reduced the carry value of capitalized software development costs to zero with no remaining amortization expense to be recognized in future periods.

Amortization expense related to software development costs related to assets to be sold, leased, or otherwise marketed was $12.6 million, $12.6 million and $10.0 million for the fiscal years ended March 31, 2020, 2019 and 2018, respectively. These charges are included as Products cost of goods sold within the Consolidated Statements of Operations. Amortization expense relating to other definite-lived intangible assets was $38,000 for the fiscal year end March 31, 2020 and $46,000 for the fiscal years ended March 31, 2019 and 2018. These charges are classified as operating expenses within the Consolidated Statements of Operations.

Capitalized software development costs are carried on our balance sheets at net realizable value, net of accumulated amortization. We did not capitalize any software development costs during fiscal 2020. We capitalized approximately $2.0 million and $8.2 million during fiscal 2019 and 2018, respectively.

XML

Additional Balance Sheet Information (Tables)

12 Months Ended

Mar. 31, 2020

Balance Sheet Related Disclosures [Abstract]

Schedule of Additional information related to the Condensed Consolidated Balance Sheets

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

(In thousands)	March 31, 2020		March 31, 2019
Accrued liabilities:
Salaries, wages, and related benefits	$	6,945	$	12,443
Other taxes payable		1,649		1,041
Accrued legal settlements		—		15
Severance liabilities		32		46
Professional fees		50		67
Deferred rent		—		273
Other		357		521
Total	$	9,033	$	14,406
Other non-current liabilities:
Uncertain tax positions	$	1,103	$	1,083
Deferred rent and asset retirement obligations		170		2,613
Employee benefit obligations		511		486
Other		76		76
Total	$	1,860	$	4,258

XML

Fair Value Measurements (Tables)

12 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value on a recurring basis

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:

(In thousands)	31-Mar-20		(Level 1)		(Level 2)		(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	936		—		—	$	936

(In thousands)	31-Mar-19		(Level 1)		(Level 2)		(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	895		—		—	$	895

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

The following table presents a summary of changes in the fair value of the corporate-owned life insurance Level 3 asset for the fiscal years ended March 31, 2020 and 2019:

	March 31,		March 31,
(In thousands)	2020		2019
Corporate-owned life insurance:
Balance on April 1	$	895	$	853
Unrealized gain relating to instruments held at reporting date		14		15
Purchases, sales, issuances and settlements, net		27		27
Balance on March 31	$	936	$	895

XML

Property and Equipment, Net - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 38,556	$ 36,026
Accumulated depreciation and amortization	(24,592)	(20,188)
Impairments	(1,734)
Property and equipment, net	12,230	15,838
Furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	14,358	11,604
Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	17,136	16,427
Leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	7,012	6,981
Project expenditures not yet in use [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 50	$ 1,014

XML

Employee Benefit Plans - Defined Contribution Plans (Details Textual) - 401(k) Plan [Member] - USD ($) $ in Millions	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan, matching contribution cost recognized	$ 1.8	$ 1.6	$ 1.7
100% on first 1% [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan, employer matching contributions, percent of one dollar match for employee percentage match	100.00%
50% up to next 5% [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan, employer matching contributions, percent of one dollar match for employee percentage match	50.00%

XML

Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Income Tax Disclosure [Abstract]
Income tax benefit at the US Federal statutory rate	$ (7,112)	$ (2,718)	$ (3,654)
Benefit for state taxes	(856)	(304)	(642)
Impact of foreign operations	(514)	(310)	38
Indefinite life assets	19	130	335
Change in valuation allowance	8,406	3,302	3,328
Change in liability for unrecognized tax benefits	22	(400)	40
Impact of Tax Act, net		226	(3,287)
Share-based compensation	(312)	2	476
Global intangible low-taxed income	460	94
Other	88	199	115
Total income tax expense (benefit)	$ 201	$ 221	$ (3,251)

XML

Share-based Compensation (Details Textual)	12 Months Ended
	Mar. 31, 2020 USD ($) shares
Restricted Stock [Member]
Stock Based Compensation (Textual) [Abstract]
Unrecognized stock based compensation expense related to non-vested restricted stock | $	$ 2,100,000
Weighted-average vesting period	1 year 10 months 24 days
Stock Settled Stock Appreciation Rights (SSARS) [Member]
Stock Based Compensation (Textual) [Abstract]
Numer of shares issued	125,000
Stock Settled Stock Appreciation Rights (SSARS) [Member]
Stock Based Compensation (Textual) [Abstract]
Unrecognized stock based compensation expense related to non-vested restricted stock | $	$ 5,600,000
Weighted-average vesting period	2 years 3 months 18 days
Shares issued from treasury shares, net of shares withheld to cover applicable exercise price of award and to cover employee's minimum applicable income taxes (in shares)	21,494
Shares withheld to cover the employee's minimum applicable income taxes (in shares)	6,712
Restricted Shares and Restricted Share Units [Member]
Stock Based Compensation (Textual) [Abstract]
Shares issued from treasury shares, net of shares withheld to cover applicable exercise price of award and to cover employee's minimum applicable income taxes (in shares)	208,151
Shares withheld to cover the employee's minimum applicable income taxes (in shares)	46,656
Performance Shares [Member]
Stock Based Compensation (Textual) [Abstract]
Deferred Compensation Liability, Current and Noncurrent | $	$ 153,000
Two Thousand and Sixteen Stock Incentive Plan [Member]
Stock Based Compensation (Textual) [Abstract]
Shares authorized under 2016 Stock incentive plan	2,000,000
Two Thousand and Sixteen Stock Incentive Plan [Member] | Restricted Stock [Member]
Stock Based Compensation (Textual) [Abstract]
Shares available for grant	1,250,000
2011 Stock Incentive Plan [Member]
Stock Based Compensation (Textual) [Abstract]
Shares available for grant	957,575

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Operating activities
Net loss	$ (34,067)	$ (13,164)	$ (8,350)
Adjustments to reconcile net loss to net cash provided by operating activities:
Impairments	23,740
(Gain) loss on disposal of property & equipment	(5)	17
Depreciation	2,574	2,504	2,631
Amortization of intangibles	2,541	2,567	1,879
Amortization of developed technology	12,561	12,602	10,016
Deferred income taxes	(356)	309	(3,085)
Share-based compensation	5,205	4,376	4,688
Accounts receivable	(8,974)	(7,536)	(719)
Contract assets	794	1,662
Inventories	(1,830)	(50)	229
Prepaid expense and other current assets	1,545	(1,158)	1,485
Accounts payable	8,585	(3,512)	130
Contract liabilities	3,563	4,845	(2,448)
Accrued liabilities	(4,227)	5,029	653
Income taxes payable	(153)	(564)	(19)
Other changes, net	(921)	(686)	(216)
Net cash provided by operating activities	10,575	7,241	6,874
Investing activities
Capital expenditures	(3,420)	(3,318)	(6,140)
Capitalized software development costs		(2,189)	(8,918)
Additional (investments in) corporate-owned life insurance policies	(27)	(27)	(27)
Net cash used in investing activities	(3,447)	(5,534)	(15,085)
Repurchase of common shares to satisfy employee tax withholding	(1,092)	(647)	(1,171)
Principal payments under long-term obligations	(24)	(120)	(124)
Net cash used in financing activities	(1,116)	(767)	(1,295)
Effect of exchange rate changes on cash	(130)	(112)	194
Net increase (decrease) in cash and cash equivalents	5,882	828	(9,312)
Cash and cash equivalents at beginning of period	40,771	39,943	49,255
Cash and cash equivalents at end of period	$ 46,653	$ 40,771	$ 39,943

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019
Current assets:
Cash and cash equivalents	$ 46,653	$ 40,771
Accounts receivable, net of allowance for doubtful accounts of $1,634 and $788, respectively	35,869	27,000
Contract assets	2,125	2,921
Inventories	3,887	2,044
Prepaid expenses and other current assets	4,874	6,272
Total current assets	93,408	79,008
Property and equipment, net	12,230	15,838
Operating lease right-of-use assets	13,829
Goodwill	19,622	19,622
Intangible assets, net	8,400	8,438
Software development costs, net		34,567
Deferred income taxes, non-current	764	443
Other non-current assets	6,309	5,675
Total assets	154,562	163,591
Current liabilities:
Accounts payable	13,403	4,718
Contract liabilities	42,244	38,669
Accrued liabilities	9,033	14,406
Operating lease liabilities, current	4,719
Finance lease obligations, current	24	22
Total current liabilities	69,423	57,815
Deferred income taxes, non-current	880	861
Operating lease liabilities, non-current	10,617
Finance lease obligations, non-current	25	35
Other non-current liabilities	1,860	4,258
Commitments and contingencies (see Note 11)
Shareholders' equity:
Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 31,606,831 shares issued; and 23,609,398 and 23,501,193 shares outstanding at March 31, 2020 and March 31, 2019, respectively	9,482	9,482
Treasury shares, 7,997,433 and 8,105,638 at March 31, 2020 and March 31, 2019, respectively	(2,401)	(2,433)
Capital in excess of stated value	5,491	781
Retained earnings	58,984	93,051
Accumulated other comprehensive income (loss)	201	(259)
Total shareholders' equity	71,757	100,622
Total liabilities and shareholders' equity	$ 154,562	$ 163,591

XML

Schedule II - Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Deferred Tax Valuation Allowance [Member]
Valuation And Qualifying Accounts Disclosure [Line Items]
Balance at beginning of year	$ 57,852	$ 54,260	$ 80,013
Charged to costs and expenses	8,967	3,592	(25,753)
Balance at end of year	66,819	57,852	54,260
Allowance for Doubtful Accounts [Member]
Valuation And Qualifying Accounts Disclosure [Line Items]
Balance at beginning of year	788	900	509
Charged to costs and expenses	1,434	539	1,063
Deductions	(588)	(651)	(672)
Balance at end of year	$ 1,634	$ 788	$ 900

XML

Employee Benefit Plans

12 Months Ended

Mar. 31, 2020

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plans

10. Employee Benefit Plans

Defined Contribution Plans

We maintain 401(k) plans for employees located in the United States meeting certain service requirements. Generally, the plans allow eligible employees to contribute a portion of their compensation, and we match 100% of the first 1% of the employee's pre-tax contributions and 50% of the next 5% of the employee's pre-tax contributions. We may also make discretionary contributions each year for the benefit of all eligible employees under the plans. Agilysys matching contributions were $1.8 million, $1.6 million, and $1.7 million in fiscal 2020, 2019, and 2018, respectively.

We also maintain defined contribution retirement plans for employees located in the United Kingdom and in the Asia Pacific region in accordance with local statutory requirements and business practices.

Defined Benefit Plan

We maintain a defined benefit retirement plan (the “Gratuity Plan”) covering eligible employees of our India subsidiary in accordance with local statutory requirements and business practices. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation, or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment with the Company. The Gratuity Plan is unfunded with obligation amounts recorded in the Consolidated Balance Sheets as “Employee benefit obligations” within “Other non-current liabilities.”

Endorsement Split-Dollar Life Insurance

Agilysys provides certain former executives with life insurance benefits through endorsement split-dollar life insurance arrangements. We entered into agreements with each of the former executives, whereby we must maintain the life insurance policy for a specified amount and split a portion of the policy benefits with their designated beneficiary.

Our investment in these corporate-owned life insurance policies were recorded at their cash surrender value, which approximates fair value at the balance sheet date. In the Consolidated Balance Sheets as of March 31, 2020 and 2019, the cash surrender value of $0.9 million for the remaining policies were held in “Other non-current assets,” and the present value of future proceeds owed to those executives' designated beneficiaries of $0.1 million, which approximates fair value, were recorded within "Other non-current liabilities."

Changes in the cash surrender value of these policies related to gains and losses incurred on these investments are classified within “Other (income) expenses, net” in the accompanying Consolidated Statements of Operations. We recorded a gain of $14,000, $15,000 and $17,000 in fiscal 2020, 2019, and 2018, respectively, related to the corporate-owned life insurance policies.

XML

Leases

12 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

6. Leases

We adopted Topic 842 on April 1, 2019 using the current period adjustment method of adoption to recognize leases with a duration greater than 12 months on the balance sheet. The impact of adoption on April 1, 2019 was recognition of operating lease liabilities of $16.3 million and related Right-of-Use (“ROU”) assets of $13.8 million. Prior period financial statements have not been restated and therefore the comparative amounts are not presented below or on the Consolidated Balance Sheets as of March 31, 2019. For operating leases with a term greater than 12 months, we have recorded the lease liability at the present value of lease payments over the remaining lease term and the related ROU asset. The remaining lease term has been determined for each lease considering factors such as renewal options, termination options, our Company’s historical practices in exercising such options, and current business knowledge which may impact lease related decisions. The majority of our leases are comprised of real estate leases for our respective offices around the globe. Our finance leases consist of office equipment. We have no residual value guarantees or restrictions or covenants imposed by, or associated with our active leases. Since our current leases do not provide an implicit rate of return, our incremental borrowing rates used to determine the value of lease payments in implementation are estimated as of April 1, 2019, based on collateralized rates for a term similar to each remaining lease term.

We have elected the package of practical expedients permitted under the transition guidance which includes the ability to carryforward the previously determined lease classification (operating or finance), forgo the assessment whether active contracts contain a lease, and whether capitalized costs associated with a lease meet the definition of “initial direct costs” as defined within Topic 842. In the event that any of our leases contain nonlease components, we have elected the practical expedient to account for each separate lease component and the associated nonlease component(s) as a single lease component. We have also elected the accounting policy to forgo applying the guidance of Topic 842 to short term leases (defined as a term of 12 months or less, without a purchase option which we are reasonably certain to exercise).

As of March 31, 2020, we do not have any leases which have not yet commenced. We do not have any related party leases or sublease arrangements. We have variable payments for expenses such as common area maintenance and taxes. We do not have variable payments that are based on an index or rate. As a result, we do not include variable payments in the calculation of the lease liability. Any variable costs are expensed as incurred.

The components of lease expenses for the fiscal 2020 period were as follows:

		Year Ended
(in thousands)	March 31, 2020
Operating leases expense		$	4,193
Finance lease expense:
Amortization of ROU assets			23
Interest on lease liabilities			6
Total finance lease expense			29
Variable lease costs			271
Short term lease expense			88
Total lease expense		$	4,581

Other information related to leases for fiscal 2020 was as follows:

	Year Ended
Supplemental cash flow information	March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities    (in thousands):
Operating cash flows for operating leases	$	4,873
Operating cash flows for finance leases		8
Financing cash flows for finance leases		24
ROU assets obtained in exchange for lease obligations (in thousands):
Operating leases	$	2,734
Finance leases		17
Weighted average remaining lease terms
Operating leases		5.04
Finance leases		2.16
Weighted average discount rates
Operating leases		10.37	%
Finance leases		4.38	%

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the Consolidated Balance Sheet as of March 31, 2020:

Year ending (in thousands)	Operating leases			Finance leases
2021	$	4,927		$	29
2022		4,207			21
2023		2,855			5
2024		2,685			2
2025		2,083			—
Thereafter		3,901			—
Total undiscounted future minimum lease payments		20,658			57
Less: difference between undiscounted lease payments and discounted lease    liabilities		(5,322	)		(8	)
Total lease liabilities	$	15,336		$	49

As previously disclosed on our March 31, 2019 Form 10-K and under the previous lease accounting standard, future minimum lease payments under non-cancelable leases as of March 31, 2019 were as follows:

Year ending (in thousands)	Operating leases		Finance leases
2020	$	4,143	$	27
2021		3,945		23
2022		3,166		15
2023		1,916		—
2024		1,770		—
Thereafter		4,497		—
Total lease payments		19,437		65
Less: Amounts representing interest		—		(8	)
Present value of lease liabilities	$	19,437	$	57

Leases

6. Leases

We adopted Topic 842 on April 1, 2019 using the current period adjustment method of adoption to recognize leases with a duration greater than 12 months on the balance sheet. The impact of adoption on April 1, 2019 was recognition of operating lease liabilities of $16.3 million and related Right-of-Use (“ROU”) assets of $13.8 million. Prior period financial statements have not been restated and therefore the comparative amounts are not presented below or on the Consolidated Balance Sheets as of March 31, 2019. For operating leases with a term greater than 12 months, we have recorded the lease liability at the present value of lease payments over the remaining lease term and the related ROU asset. The remaining lease term has been determined for each lease considering factors such as renewal options, termination options, our Company’s historical practices in exercising such options, and current business knowledge which may impact lease related decisions. The majority of our leases are comprised of real estate leases for our respective offices around the globe. Our finance leases consist of office equipment. We have no residual value guarantees or restrictions or covenants imposed by, or associated with our active leases. Since our current leases do not provide an implicit rate of return, our incremental borrowing rates used to determine the value of lease payments in implementation are estimated as of April 1, 2019, based on collateralized rates for a term similar to each remaining lease term.

We have elected the package of practical expedients permitted under the transition guidance which includes the ability to carryforward the previously determined lease classification (operating or finance), forgo the assessment whether active contracts contain a lease, and whether capitalized costs associated with a lease meet the definition of “initial direct costs” as defined within Topic 842. In the event that any of our leases contain nonlease components, we have elected the practical expedient to account for each separate lease component and the associated nonlease component(s) as a single lease component. We have also elected the accounting policy to forgo applying the guidance of Topic 842 to short term leases (defined as a term of 12 months or less, without a purchase option which we are reasonably certain to exercise).

As of March 31, 2020, we do not have any leases which have not yet commenced. We do not have any related party leases or sublease arrangements. We have variable payments for expenses such as common area maintenance and taxes. We do not have variable payments that are based on an index or rate. As a result, we do not include variable payments in the calculation of the lease liability. Any variable costs are expensed as incurred.

The components of lease expenses for the fiscal 2020 period were as follows:

		Year Ended
(in thousands)	March 31, 2020
Operating leases expense		$	4,193
Finance lease expense:
Amortization of ROU assets			23
Interest on lease liabilities			6
Total finance lease expense			29
Variable lease costs			271
Short term lease expense			88
Total lease expense		$	4,581

Other information related to leases for fiscal 2020 was as follows:

	Year Ended
Supplemental cash flow information	March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities    (in thousands):
Operating cash flows for operating leases	$	4,873
Operating cash flows for finance leases		8
Financing cash flows for finance leases		24
ROU assets obtained in exchange for lease obligations (in thousands):
Operating leases	$	2,734
Finance leases		17
Weighted average remaining lease terms
Operating leases		5.04
Finance leases		2.16
Weighted average discount rates
Operating leases		10.37	%
Finance leases		4.38	%

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the Consolidated Balance Sheet as of March 31, 2020:

Year ending (in thousands)	Operating leases			Finance leases
2021	$	4,927		$	29
2022		4,207			21
2023		2,855			5
2024		2,685			2
2025		2,083			—
Thereafter		3,901			—
Total undiscounted future minimum lease payments		20,658			57
Less: difference between undiscounted lease payments and discounted lease    liabilities		(5,322	)		(8	)
Total lease liabilities	$	15,336		$	49

As previously disclosed on our March 31, 2019 Form 10-K and under the previous lease accounting standard, future minimum lease payments under non-cancelable leases as of March 31, 2019 were as follows:

Year ending (in thousands)	Operating leases		Finance leases
2020	$	4,143	$	27
2021		3,945		23
2022		3,166		15
2023		1,916		—
2024		1,770		—
Thereafter		4,497		—
Total lease payments		19,437		65
Less: Amounts representing interest		—		(8	)
Present value of lease liabilities	$	19,437	$	57

XML

Revenue Recognition - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018	Apr. 01, 2018
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 39,659	$ 41,987	$ 40,722	$ 38,389	$ 36,618	$ 36,014	$ 34,203	$ 34,007	$ 160,757	$ 140,842	$ 127,360
Revenue recognized									37,000	33,100
Transfers to accounts receivable									2,800	4,600
Capitalized contract cost, net	$ 3,200				$ 3,300				3,200	3,300		$ 1,900
Sales commissions and fees									4,700	4,500
Capitalized contract cost, amortization									1,400	1,100
Products [Member]
Disaggregation Of Revenue [Line Items]
Total net revenue									44,230	39,003	33,699
Support, Maintenance, Subscription Services, and Professional Services [Member]
Disaggregation Of Revenue [Line Items]
Total net revenue									$ 116,500	$ 101,800	$ 93,700

XML

Supplemental Disclosures of Cash Flow Information (Tables)

12 Months Ended

Mar. 31, 2020

Supplemental Cash Flow Elements [Abstract]

Schedule of supplemental cash flow information

Additional information related to the Consolidated Statements of Cash Flows is as follows:

	Year ended March 31,
(In thousands)		2020			2019			2018
Cash (receipts) for interest, net	$	(371	)	$	(329	)	$	(88	)
Cash payments (receipts) for income tax, net		694			409			(227	)
Acquisition of property and equipment under lease obligations		17			—			64
Accrued capital expenditures		187			56			83
Accrued capitalized software development costs		—			—			201
Leasehold improvements acquired under operating lease arrangement		—			62			95

XML

Share-based Compensation (Tables)

12 Months Ended

Mar. 31, 2020

Share Based Compensation [Abstract]

Summary of share-based compensation expense for options

The following table summarizes the share-based compensation expense for options, SSARs, restricted and performance awards included in the Consolidated Statements of Operations for fiscal 2020, 2019 and 2018:

	Year Ended March 31,
(In thousands)	2020		2019		2018
Product development		2,241		1,478		1,306
Sales and marketing		321		469		371
General and administrative		2,643		2,429		3,011
Total share-based compensation expense		5,205		4,376		4,688

Schedule of principal assumptions utilized in valuing SSARs

We use a Black-Scholes-Merton or a Lattice option pricing model to estimate the fair value of SSARs. The following table summarizes the principal assumptions utilized in valuing SSARs granted in fiscal 2020, 2019 and 2018:

	2020		2019			2018
Risk-free interest rate	1.38%-1.74%			2.68	%	1.74%-1.94%
Expected life (in years)	4.5-5		5			5
Expected volatility	31.7%-32.42%			32.42	%	32.42% - 32.84%
Weighted-average grant date fair value	$	10.01	$	4.72		$	3.36

Activity related SSARs award

The following table summarizes the activity during fiscal 2020 for SSARs awarded under the 2016 and 2011 Plans:

(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, 2019		1,016,643		$	11.22
Granted		691,364			34.72
Exercised		(37,506	)		10.02
Forfeited		(15,838	)		18.09
Cancelled/expired		(9,775	)		10.61
Outstanding at March 31, 2020		1,644,888		$	21.07		4.9	$	5,236
Exercisable at March 31, 2020		959,340		$	11.79		3.9	$	5,130
Vested and expected to vest at March 31, 2020		1,644,888		$	21.07		4.9	$	5,236

The following table presents additional information related to SSARs activity during fiscal 2020, 2019 and 2018:

(In thousands)	2020		2019		2018
Compensation expense	$	1,666	$	943	$	1,869
Total intrinsic value of SSARs exercised	$	519	$	907	$	88
Total fair value of SSARs vesting	$	1,328	$	1,165	$	1,325

Activity related to restricted shares awarded by the Company

The following table summarizes the activity during the twelve months ended March 31, 2020 for restricted shares awarded under the 2016 and 2011 Plans:

	Number of Shares			Weighted- Average Grant- Date Fair Value
				(per share)
Outstanding at April 1, 2019		237,146		$	13.46
Granted		223,404			22.72
Vested		(231,677	)		16.60
Forfeited		(50,411	)		17.34
Outstanding at March 31, 2020		178,462		$	19.89

Restricted stock award activity

The following table presents additional information related to restricted stock activity during fiscal years 2020, 2019, and 2018:

(In thousands)	2020		2019		2018
Compensation expense	$	3,385	$	2,803	$	2,594
Total fair value of restricted share vesting	$	4,004	$	4,383	$	4,315

Performance shares awarded

The following table summarizes the activity during fiscal 2020 for performance shares awarded under the 2016 Plan:

	Number of Shares			Weighted- Average Grant- Date Fair Value
				(per share)
Outstanding at April 1, 2019		63,291		$	14.22
Granted		30,120			22.41
Vested		(23,526	)		22.67
Forfeited		(39,765	)		14.22
Outstanding at March 31, 2020		30,120		$	22.41

Schedule of additional information related to performance share activity

The following table presents additional information related to performance share activity during fiscal 2020, 2019 and 2018:

(In thousands)	2020		2019		2018
Compensation expense	$	153	$	630	$	225
Total fair value of performance share vesting	$	513	$	243		—

XML

Schedule II - Valuation and Qualifying Accounts

12 Months Ended

Mar. 31, 2020

Valuation And Qualifying Accounts [Abstract]

Schedule II - Valuation and Qualifying Accounts

Schedule II - Valuation and Qualifying Accounts Years ended March 31,2020, 2019 and 2018

(In thousands)	Balance at beginning of year		Charged to costs and expenses			Deductions			Balance at end of year
2020
Deferred tax valuation allowance	$	57,852	$	8,967		$	—		$	66,819
Allowance for doubtful accounts	$	788	$	1,434		$	(588	)	$	1,634
2019
Deferred tax valuation allowance	$	54,260	$	3,592		$	—		$	57,852
Allowance for doubtful accounts	$	900	$	539		$	(651	)	$	788
2018
Deferred tax valuation allowance	$	80,013	$	(25,753	)	$	—		$	54,260
Allowance for doubtful accounts	$	509	$	1,063		$	(672	)	$	900

XML

Fair Value Measurements

12 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

14. 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 twelve months ended March 31, 2020.

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:

(In thousands)	31-Mar-20		(Level 1)		(Level 2)		(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	936		—		—	$	936

(In thousands)	31-Mar-19		(Level 1)		(Level 2)		(Level 3)
Assets:
Corporate-owned life insurance — non-current	$	895		—		—	$	895

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 Consolidated Statements of Operations.

The following table presents a summary of changes in the fair value of the corporate-owned life insurance Level 3 asset for the fiscal years ended March 31, 2020 and 2019:

	March 31,		March 31,
(In thousands)	2020		2019
Corporate-owned life insurance:
Balance on April 1	$	895	$	853
Unrealized gain relating to instruments held at reporting date		14		15
Purchases, sales, issuances and settlements, net		27		27
Balance on March 31	$	936	$	895

XML

Leases (Tables)

12 Months Ended

Mar. 31, 2020

Leases [Abstract]

Schedule of lease expenses and other information

The components of lease expenses for the fiscal 2020 period were as follows:

		Year Ended
(in thousands)	March 31, 2020
Operating leases expense		$	4,193
Finance lease expense:
Amortization of ROU assets			23
Interest on lease liabilities			6
Total finance lease expense			29
Variable lease costs			271
Short term lease expense			88
Total lease expense		$	4,581

Other information related to leases for fiscal 2020 was as follows:

	Year Ended
Supplemental cash flow information	March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities    (in thousands):
Operating cash flows for operating leases	$	4,873
Operating cash flows for finance leases		8
Financing cash flows for finance leases		24
ROU assets obtained in exchange for lease obligations (in thousands):
Operating leases	$	2,734
Finance leases		17
Weighted average remaining lease terms
Operating leases		5.04
Finance leases		2.16
Weighted average discount rates
Operating leases		10.37	%
Finance leases		4.38	%

Schedule of future minimum lease payments, finance leases

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the Consolidated Balance Sheet as of March 31, 2020:

Year ending (in thousands)	Operating leases			Finance leases
2021	$	4,927		$	29
2022		4,207			21
2023		2,855			5
2024		2,685			2
2025		2,083			—
Thereafter		3,901			—
Total undiscounted future minimum lease payments		20,658			57
Less: difference between undiscounted lease payments and discounted lease    liabilities		(5,322	)		(8	)
Total lease liabilities	$	15,336		$	49

Schedule of future minimum lease payments, operating leases

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the Consolidated Balance Sheet as of March 31, 2020:

Year ending (in thousands)	Operating leases			Finance leases
2021	$	4,927		$	29
2022		4,207			21
2023		2,855			5
2024		2,685			2
2025		2,083			—
Thereafter		3,901			—
Total undiscounted future minimum lease payments		20,658			57
Less: difference between undiscounted lease payments and discounted lease    liabilities		(5,322	)		(8	)
Total lease liabilities	$	15,336		$	49

Schedule of future minimum lease payments, finance leases, under previous lease accounting standard

As previously disclosed on our March 31, 2019 Form 10-K and under the previous lease accounting standard, future minimum lease payments under non-cancelable leases as of March 31, 2019 were as follows:

Year ending (in thousands)	Operating leases		Finance leases
2020	$	4,143	$	27
2021		3,945		23
2022		3,166		15
2023		1,916		—
2024		1,770		—
Thereafter		4,497		—
Total lease payments		19,437		65
Less: Amounts representing interest		—		(8	)
Present value of lease liabilities	$	19,437	$	57

Schedule of future minimum lease payments, operating leases, under previous lease accounting standard

As previously disclosed on our March 31, 2019 Form 10-K and under the previous lease accounting standard, future minimum lease payments under non-cancelable leases as of March 31, 2019 were as follows:

Year ending (in thousands)	Operating leases		Finance leases
2020	$	4,143	$	27
2021		3,945		23
2022		3,166		15
2023		1,916		—
2024		1,770		—
Thereafter		4,497		—
Total lease payments		19,437		65
Less: Amounts representing interest		—		(8	)
Present value of lease liabilities	$	19,437	$	57

XML

Additional Balance Sheet Information (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019
Current liabilities:
Salaries, wages, and related benefits	$ 6,945	$ 12,443
Other taxes payable	1,649	1,041
Accrued legal settlements		15
Severance liabilities	32	46
Professional fees	50	67
Deferred rent		273
Other	357	521
Total	9,033	14,406
Other non-current liabilities:
Uncertain tax positions	1,103	1,083
Deferred rent and asset retirement obligations	170	2,613
Employee benefit obligations	511	486
Other	76	76
Total	$ 1,860	$ 4,258

XML

Property and Equipment, Net (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Property, Plant and Equipment [Line Items]
Depreciation, including accelerated depreciation related to restructuring reserve	$ 2,600	$ 2,500	$ 2,600
Asset impairment charges	23,740
Purchased for Internal-Use Software [Member]
Property, Plant and Equipment [Line Items]
Amortization of capitalized software	2,500	$ 2,500	$ 1,800
Purchased for Internal-Use Software [Member] | COVID-19 [Member]
Property, Plant and Equipment [Line Items]
Asset impairment charges	$ 1,700

XML

Leases - Components of Lease Expense (Details) $ in Thousands	12 Months Ended
	Mar. 31, 2020 USD ($)
Leases [Abstract]
Operating leases expense	$ 4,193
Amortization of ROU assets	23
Interest on lease liabilities	6
Total finance lease expense	29
Variable lease costs	271
Short term lease expense	88
Total lease expense	$ 4,581

XML

Share-based Compensation - Additional Information Related to Performance Shares (Details) - Performance Shares [Member] - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Compensation expense	$ 153	$ 630	$ 225
Total fair value of restricted share vesting	$ 513	$ 243

XML

Share-based Compensation - Additional Information Related to SSARs (Details) - Stock Settled Stock Appreciation Rights (SSARS) [Member] - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Summary of share-based compensation expense for options	$ 1,666	$ 943	$ 1,869
Total intrinsic value of SSARs exercised	519	907	88
Total fair value of SSARs vesting	$ 1,328	$ 1,165	$ 1,325