10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2020

or

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

For the transition period from __________ to __________.

Commission file number 0-5734

AGILYSYS, INC.

(Exact name of registrant as specified in its charter)

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

(770) 810-7800

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, without par value	AGYS	NASDAQ

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed be sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

The number of Common Shares of the registrant outstanding as of October 23, 2020 was 23,591,213.

AGILYSYS, INC.

Index

Part I. Financial Information
	Item 1	Financial Statements (Unaudited)	3
		Condensed Consolidated Balance Sheets – September 30, 2020 (Unaudited) and March 31, 2020	3
		Condensed Consolidated Statements of Operations (Unaudited) - Three and Six Months Ended September 30, 2020 and September 30, 2019	4
		Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Three and Six Months Ended September 30, 2020 and September 30, 2019	5
		Condensed Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended September 30, 2020 and September 30, 2019	6
		Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - Three and Six Months Ended September 30, 2020 and September 30, 2019	7
		Notes to Condensed Consolidated Financial Statements (Unaudited)	8
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	27
	Item 4	Controls and Procedures	27
Part II. Other Information
	Item 1	Legal Proceedings	28
	Item 1A	Risk Factors	28
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	28
	Item 3	Defaults Upon Senior Securities	28
	Item 4	Mine Safety Disclosures	28
	Item 5	Other Information	28
	Item 6	Exhibits	29
Signatures			30

2

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2020 Unaudited			March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	85,706		$	46,653
Accounts receivable, net of allowance for expected credit losses    of $1,209 and for doubtful accounts of $1,634, respectively		20,173			35,869
Contract assets		2,475			2,125
Inventories		2,174			3,887
Prepaid expenses and other current assets		5,016			4,874
Total current assets		115,544			93,408
Property and equipment, net		10,108			12,230
Operating lease right-of-use assets		13,023			13,829
Goodwill		19,622			19,622
Intangible assets, net		8,400			8,400
Deferred income taxes, non-current		1,040			764
Other non-current assets		5,977			6,309
Total assets	$	173,714		$	154,562
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	3,176		$	13,403
Contract liabilities		30,755			42,244
Accrued liabilities		7,185			9,033
Operating lease liabilities, current		4,638			4,719
Finance lease obligations, current		23			24
Total current liabilities		45,777			69,423
Deferred income taxes, non-current		889			880
Operating lease liabilities, non-current		9,923			10,617
Finance lease obligations, non-current		14			25
Other non-current liabilities		3,728			1,860
Commitments and contingencies (see Note 8)
Series A convertible preferred stock, no par value		35,459			—
Shareholders' equity:
Common shares, without par value, at $0.30 stated value; 80,000,000    shares authorized; 31,606,831 shares issued; and 23,588,178    and 23,609,398 shares outstanding at September 30, 2020    and March 31, 2020, respectively		9,482			9,482
Treasury shares, 8,018,653 and 7,997,433 at September 30, 2020    and March 31, 2020, respectively		(2,406	)		(2,401	)
Capital in excess of stated value		8,151			5,491
Retained earnings		62,645			58,984
Accumulated other comprehensive income		52			201
Total shareholders' equity		77,924			71,757
Total liabilities and shareholders' equity	$	173,714		$	154,562

See accompanying notes to unaudited condensed consolidated financial statements.

3

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Six Months Ended September 30,
	2020			2019			2020			2019
Net revenue:
Products	$	6,559		$	11,873		$	11,798		$	22,742
Support, maintenance and subscription services		22,304			20,329			42,801			40,411
Professional services		5,497			8,520			9,567			15,958
Total net revenue		34,360			40,722			64,166			79,111
Cost of goods sold:
Products (inclusive of developed technology amortization)		2,950			9,794			5,965			18,417
Support, maintenance and subscription services		4,555			4,654			8,860			8,834
Professional services		3,701			6,057			7,638			11,628
Total cost of goods sold		11,206			20,505			22,463			38,879
Gross profit		23,154			20,217			41,703			40,232
Gross profit margin		67.4	%		49.6	%		65.0	%		50.9	%
Operating expenses:
Product development		8,257			10,778			16,524			20,842
Sales and marketing		2,350			4,890			4,951			9,389
General and administrative		5,217			6,038			10,936			11,911
Depreciation of fixed assets		715			707			1,438			920
Amortization of intangibles		508			614			968			1,292
Severance and other charges		7			190			1,210			421
Legal settlements, net		50			(119	)		50			(119	)
Total operating expense		17,104			23,098			36,077			44,656
Operating income (loss)		6,050			(2,881	)		5,626			(4,424	)
Other (income) expense:
Interest income		(28	)		(114	)		(49	)		(194	)
Interest expense		2			2			3			3
Other expense, net		88			108			194			193
Income (loss) before taxes		5,988			(2,877	)		5,478			(4,426	)
Income tax expense		121			41			128			67
Net income (loss)	$	5,867		$	(2,918	)	$	5,350		$	(4,493	)
Series A convertible preferred stock issuance costs		(94	)		-			(1,031	)		-
Series A convertible preferred stock dividends		(459	)		-			(658	)		-
Net income (loss) attributable to common shareholders	$	5,314		$	(2,918	)	$	3,661		$	(4,493	)
Weighted average shares outstanding - basic		23,424			23,238			23,415			23,225
Net income (loss) per share - basic:	$	0.23		$	(0.13	)	$	0.16		$	(0.19	)
Weighted average shares outstanding - diluted		23,866			23,238			23,849			23,225
Net income (loss) per share - diluted:	$	0.22		$	(0.13	)	$	0.15		$	(0.19	)

See accompanying notes to unaudited condensed consolidated financial statements.

4

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended September 30,						Six Months Ended September 30,
	2020			2019			2020			2019
Net income (loss)	$	5,867		$	(2,918	)	$	5,350		$	(4,493	)
Other comprehensive income (loss), net of tax:
Unrealized foreign currency translation adjustments		(124	)		156			(149	)		61
Total comprehensive income (loss)	$	5,743		$	(2,762	)	$	5,201		$	(4,432	)

See accompanying notes to unaudited condensed consolidated financial statements.

5

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended September 30,
	2020			2019
Operating activities
Net income (loss)	$	5,350		$	(4,493	)
Adjustments to reconcile income (loss) from operations to net cash provided by operating activities
Depreciation		1,438			920
Amortization of intangibles		968			1,292
Amortization of developed technology		—			6,303
Deferred income taxes		(269	)		(239	)
Share-based compensation		2,682			1,827
Changes in operating assets and liabilities		(3,527	)		(4,376	)
Net cash provided by operating activities		6,642			1,234
Investing activities
Capital expenditures		(471	)		(1,940	)
Additional investments in corporate-owned life insurance policies		(2	)		(2	)
Net cash used in investing activities		(473	)		(1,942	)
Financing activities
Repurchase of common shares to satisfy employee tax withholding		(959	)		(1,053	)
Series A convertible preferred stock issuance proceeds, net of issuance costs		33,969			—
Payment of preferred stock dividends		(199	)		—
Principal payments under long-term obligations		(12	)		(12	)
Net cash provided by (used in) financing activities		32,799			(1,065	)
Effect of exchange rate changes on cash		85			(83	)
Net increase (decrease) in cash and cash equivalents		39,053			(1,856	)
Cash and cash equivalents at beginning of period		46,653			40,771
Cash and cash equivalents at end of period	$	85,706		$	38,915

See accompanying notes to unaudited condensed consolidated financial statements.

6

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

	Three Months Ended September 30, 2020
	Common Shares										Capital in						Accumulated
	Issued				In Treasury						excess of						other
(In thousands)	Shares		Stated value		Shares			Stated value			stated value			Retained earnings			comprehensive income (loss)			Total
Balance at June 30, 2020		31,607	$	9,482		(7,994	)	$	(2,399	)	$	6,760		$	57,331		$	176		$	71,350
Share-based compensation		—		—		—			—			1,409			—			—			1,409
Restricted shares issued, net		—		—		(27	)		(8	)		8			—			—			—
Shares issued upon exercise of SSARs		—		—		3			1			(1	)		—			—			—
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares		—		—		(1	)		—			(25	)		—			—			(25	)
Net income		—		—		—			—			—			5,867			—			5,867
Series A convertible preferred stock issuance costs		—		—		—			—			—			(94	)		—			(94	)
Series A convertible preferred stock dividends		—		—		—			—			—			(459	)		—			(459	)
Unrealized translation adjustments		—		—		—			—			—			—			(124	)		(124	)
Balance at September 30, 2020		31,607	$	9,482		(8,019	)	$	(2,406	)	$	8,151		$	62,645		$	52		$	77,924
	Three Months Ended September 30, 2019
	Common Shares										Capital in						Accumulated
	Issued				In Treasury						excess of						other
(In thousands)	Shares		Stated value		Shares			Stated value			stated value			Retained earnings			comprehensive income (loss)			Total
Balance at June 30, 2019		31,607	$	9,482		(7,927	)	$	(2,379	)	$	1,698		$	91,476		$	(354	)	$	99,923
Share-based compensation		—		—		—			—			1,228			—			—			1,228
Restricted shares issued, net		—		—		(24	)		(8	)		8			—			—			—
Shares issued upon exercise of SSARs		—		—		3			1			(1	)		—			—			—
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares		—		—		(1	)		—			(24	)		—			—			(24	)
Net loss		—		—		—			—			—			(2,918	)		—			(2,918	)
Unrealized translation adjustments		—		—		—			—			—			—			156			156
Balance at September 30, 2019		31,607	$	9,482		(7,949	)	$	(2,386	)	$	2,909		$	88,558		$	(198	)	$	98,365
	Six Months Ended September 30, 2020
	Common Shares										Capital in						Accumulated
	Issued				In Treasury						excess of						other
(In thousands)	Shares		Stated value		Shares			Stated value			stated value			Retained earnings			comprehensive income (loss)			Total
Balance at March 31, 2020		31,607	$	9,482		(7,997	)	$	(2,401	)	$	5,491		$	58,984		$	201		$	71,757
Share-based compensation		—		—		—			—			2,835			—			—			2,835
Restricted shares issued, net		—		—		(41	)		(12	)		12			—			—			—
Shares issued upon exercise of SSARs		—		—		28			9			(9	)		—			—			—
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares		—		—		(9	)		(2	)		(178	)		—			—			(180	)
Net income		—		—		—			—			—			5,350			—			5,350
Series A convertible preferred stock issuance costs		—		—		—			—			—			(1,031	)		—			(1,031	)
Series A convertible preferred stock dividends		—		—		—			—			—			(658	)		—			(658	)
Unrealized translation adjustments		—		—		—			—			—			—			(149	)		(149	)
Balance at September 30, 2020		31,607	$	9,482		(8,019	)	$	(2,406	)	$	8,151		$	62,645		$	52		$	77,924
	Six Months Ended September 30, 2019
	Common Shares										Capital in						Accumulated
	Issued				In Treasury						excess of						other
(In thousands)	Shares		Stated value		Shares			Stated value			stated value			Retained earnings			comprehensive income (loss)			Total
Balance at March 31, 2019		31,607	$	9,482		(8,105	)	$	(2,433	)	$	781		$	93,051		$	(259	)	$	100,622
Share-based compensation		—		—		—			—			2,295			—			—			2,295
Restricted shares issued, net		—		—		144			43			(43	)		—			—			—
Shares issued upon exercise of SSARs		—		—		17			5			(5	)		—			—			—
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares		—		—		(5	)		(1	)		(119	)		—			—			(120	)
Net loss		—		—		—			—			—			(4,493	)		—			(4,493	)
Unrealized translation adjustments		—		—		—			—			—			—			61			61
Balance at September 30, 2019		31,607	$	9,482		(7,949	)	$	(2,386	)	$	2,909		$	88,558		$	(198	)	$	98,365

See accompanying notes to unaudited condensed consolidated financial statements.

7

AGILYSYS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Table amounts in thousands, except per share data)

1. Nature of Operations and Financial Statement Presentation

Nature of Operations

Agilysys 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. 

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The outbreak has reached all geographic regions in which we do business, and government authorities around the world have implemented extensive measures attempting to contain the spread and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, closures of non-essential businesses, and social distancing requirements. The global spread of COVID-19 and the actions taken in response have negatively impacted us, our customers, our suppliers and the many communities in which we do business. The overall extent and duration of economic and business disruption is not currently known. In response to these challenges, we quickly adjusted our business policies and practices for employees to work from home and have taken other measures to continue our operations with safety as our priority.

We continuously monitor and assess the impact of the COVID-19 pandemic, including recommendations and orders from government and public health authorities. We are working to help our customers maintain their operations during this difficult time while managing our teams to be prepared for continuously changing demand for our products and services.

See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview— Recent Developments” of this report for a more detailed discussion of the impact of COVID-19 on our business.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include our accounts consolidated with our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on March 31st. References to a particular year refer to the fiscal year ending in March of that year. For example, fiscal 2021 refers to the fiscal year ending March 31, 2021.

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

The Condensed Consolidated Balance Sheet as of September 30, 2020, as well as the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Statements of Shareholders’ Equity for the three months and six months ended September 30, 2020 and 2019, and Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2020 and 2019, are unaudited. However, these financial statements have been prepared on the same basis as those in the audited annual financial statements, except for the recently adopted accounting pronouncements described below. In the opinion of management, all adjustments of a recurring nature necessary to fairly state the results of operations, financial position, and cash flows have been made.

These unaudited interim financial statements should be read together with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended March 31, 2020, filed with the Securities and Exchange Commission (SEC) on May 22, 2020.

8

Use of estimates

Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may 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.

Considering the currently unknown extent and duration of the COVID-19 pandemic, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply to certain of our significant accounting policies. We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts COVID-19 as of September 30, 2020 and through the date of this report. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

2. Summary of Significant Accounting Policies

A detailed description of our significant accounting policies can be found in the audited financial statements for the fiscal year ended March 31, 2020, included in our Annual Report on Form 10-K. We describe our accounting policy for Series A convertible preferred stock further below. There have been no other material changes to our significant accounting policies from those disclosed therein. 

Adopted and Recently Issued Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. By removing the separation model, a convertible debt instrument will be reported as a single liability instrument with no separate accounting for embedded conversion features. This new standard also removes certain settlement conditions that are required for contracts to qualify for equity classification and simplifies the diluted earnings per share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations. The new standard will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We are currently assessing the impact of adopting this standard on our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which affects general principles within Topic 740, Income Taxes, and is meant to simplify and reduce the cost of accounting for income taxes. The new standard will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently reviewing this standard but do not expect it will have a material impact on our 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. We adopted ASU 2018-15 as of April 1, 2020 with no impact on our condensed 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. We adopted ASU 2018-13 as of April 1, 2020 with no impact on our condensed 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 a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. We adopted ASU 2017-04 as of April 1, 2020 with no impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. This new standard requires entities to measure expected credit losses for certain financial assets held at the reporting date using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and

9

reasonable and supportable forecasts. The Company’s financial instruments within the scope of this guidance primarily includes accounts receivable and contract assets. We adopted ASU 2016-13 as of April 1, 2020 under the modified retrospective approach. As a result, comparative information has not been restated and continues to be reported under accounting standards applicable for those periods. The adoption of ASU 2016-13 did not have a material impact on our condensed consolidated financial statements, including accounting policies, given our limited historical write-off activity.

3. Revenue Recognition

Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer purchase order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Performance obligations specific to each individual contract are defined within the terms of each purchase 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 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.

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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.

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 $6.6 million and $11.8 million, and $11.9 million and $22.7 million for the first three and six months ended September 30, 2020 and 2019. Revenue recognized over time (support, maintenance and subscription services and professional services) totaled $27.8 million and $52.4 million, and $28.8 million and $56.4 million for the three and six months ended September 30, 2020 and 2019, respectively.

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 $12.1 million and $10.5 million for the three months ended September 30, 2020 and 2019, respectively, and $30.5 million and $26.0 million for the six months ended September 30, 2020 and 2019, respectively. Because the right to the transaction became unconditional, we transferred to accounts receivable from contract assets at the beginning of the period, $0.2 million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively, and $1.7 million and $2.4 million for the six months ended September 30, 2020 and 2019, respectively.  

Our arrangements are for a period of one year or less. As a result, unsatisfied performance obligations as of September 30, 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. Other sales commission expenses have a period of benefit of one year or less and are therefore expensed as incurred in line with the practical expedient elected.

We had $3.1 million and $3.4 million of capitalized sales incentive costs as of September 30, 2020 and 2019, respectively. These balances are included in other non-current assets on our condensed consolidated balance sheets. During the three and six months ended September 30, 2020, we expensed $0.7 million and $1.3 million, respectively, of sales commissions, which included amortization of capitalized amounts of $0.4 million and $0.7 million, respectively. During the comparable periods ending September 30, 2019, we expensed $1.2 million and $2.2 million, respectively, of sales commissions, which included amortization of capitalized amounts of $0.3 million and $0.7 million, respectively. These expenses are included in operating expenses – sales and marketing in our condensed consolidated statement of operations. All other costs to obtain a contract are not considered incremental and therefore are expensed as incurred.

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4. Intangible Assets and Software Development Costs

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

	September 30 and March 31, 2020
	Gross								Net
	carrying		Accumulated			Accumulated			carrying
(In thousands)	amount		amortization			Impairment			amount
Amortized intangible assets:
Customer relationships	$	10,775	$	(10,775	)	$	—		$	—
Non-competition agreements		2,700		(2,700	)		—			—
Developed technology		10,398		(10,398	)		—			—
Trade names		230		(230	)		—			—
Patented technology		80		(80	)		—			—
		24,183		(24,183	)		—			—
Trade names		8,400	N/A				—			8,400
Total intangible assets	$	32,583	$	(24,183	)	$	—		$	8,400
(In thousands)
Software development costs	$	67,541	$	(45,535	)	$	(22,006	)	$	—

As of March 31, 2020, management determined the net realizable value of the remaining 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 for the year ended March 31, 2020. The impact of the COVID-19 pandemic on the hospitality industry resulted in economic conditions that made 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 year ended March 31, 2020 reduced the carry value of capitalized software development costs to zero with no remaining amortization expense to be recognized in future periods.

Amortization expense for software development costs related to assets to be sold, leased, or otherwise marketed was $3.1 million and $6.3 million for the three and six months ended September 30, 2019. These charges are included as costs of goods sold - products in our condensed consolidated statements of operations.

5. Additional Balance Sheet Information

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

	September 30, 2020		March 31, 2020
Accrued liabilities:
Salaries, wages, and related benefits	$	4,793	$	6,945
Other taxes payable		1,835		1,649
Accrued legal settlements		50		—
Severance liabilities		100		32
Professional fees		93		50
Other		314		357
Total	$	7,185	$	9,033
Other non-current liabilities:
Uncertain tax positions	$	1,116	$	1,103
Asset retirement obligations		170		170
Payroll taxes deferred under CARES Act		1,287		—
Employee benefit obligations		1,081		511
Other		74		76
Total	$	3,728	$	1,860

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6. Supplemental Disclosures of Cash Flow Information

Additional information related to the consolidated statements of cash flows is as follows:

	Six Months Ended September 30,
(In thousands)		2020			2019
Cash (receipts) for interest, net	$	(46	)	$	(191	)
Cash payments for income taxes, net		167			247
Cash payments for operating leases		3,002			2,210
Cash payments for finance leases		14			18
Accrued capital expenditures		12			125

7. Income Taxes

The following table compares our income tax expense and effective tax rates for the three and six months ended September 30, 2020 and 2019:

	Three Months Ended September 30,						Six Months Ended September 30,
(Dollars in thousands)	2020			2019			2020			2019
Income tax expense	$	121		$	41		$	128		$	67
Effective tax rate		2.0	%		(1.4	)%		2.3	%		(1.5	)%

For the three and six months ended September 30, 2020, the effective tax rate was different than the statutory tax rate due primarily to the utilization of net operating losses that were offset by decreases in the valuation allowances in the U.S, certain foreign and state tax effects and other U.S. permanent book to tax differences. For the three and six months ended September 30, 2019, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets in the U.S. and certain foreign jurisdictions, which were offset by increases in the valuation allowance, certain foreign and state tax effects and other U.S. permanent book to tax differences.

Because of our losses in prior periods, we have recorded and maintain a valuation allowance offsetting substantially all of our deferred tax assets in the U.S. and certain foreign jurisdictions, as management believes that it is more likely than not that we will not realize the benefits of these deductible differences. 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.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). 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.

8. Commitments and Contingencies

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

On April 6, 2012, Ameranth, Inc. filed a complaint against us in the U.S. District Court of 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. All but one of the patents at issue in the case were invalidated by the U.S. Court of Appeals for the Federal Circuit in 2016. In September 2018, the District Court found the one surviving Ameranth patent invalid and granted summary judgment in favor of the movant co-defendants. 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. Ameranth’s writ of certiorari to the United States Supreme Court was denied in October 2020. Subsequently, Ameranth filed further pleading amendments and discovery requests with the District Court, which were opposed by the defendants.

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We were not a party to the appeal, and it is currently unclear what impact the summary judgement ruling 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.

9. Income (Loss) per Share

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

	Three Months Ended September 30,						Six Months Ended September 30,
(In thousands, except per share data)	2020			2019			2020			2019
Numerator:
Net income (loss)	$	5,867		$	(2,918	)	$	5,350		$	(4,493	)
Series A convertible preferred stock issuance costs		(94	)		—			(1,031	)		—
Series A convertible preferred stock dividends		(459	)		—			(658	)		—
Net income (loss) attributable to common shareholders	$	5,314		$	(2,918	)	$	3,661		$	(4,493	)
Denominator:
Weighted average shares outstanding - basic		23,424			23,238			23,415			23,225
Dilutive SSARs		342			—			329			—
Dilutive unvested restricted shares		100			—			105			—
Weighted average shares outstanding - diluted		23,866			23,238			23,849			23,225
Income (loss) per share - basic:	$	0.23		$	(0.13	)	$	0.16		$	(0.19	)
Income (loss) per share - diluted:	$	0.22		$	(0.13	)	$	0.15		$	(0.19	)
Anti-dilutive stock options, SSARs, restricted shares,    performance shares and preferred shares		2,415			1,494			2,418			1,386

Basic income (loss) per share is computed as net income (loss) attributable to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes 161,042 and 418,854 of restricted shares at September 30, 2020 and 2019, respectively, as these shares were issued but were not vested and therefore, not considered outstanding for purposes of computing basic income (loss) per share at the balance sheet dates.

Diluted income (loss) per share includes the effect of all potentially dilutive securities on earnings per share. We have stock-settled appreciation rights ("SSARs"), unvested restricted shares, unvested performance shares, and preferred 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.

10. Share-based Compensation

We may grant non-qualified stock options, incentive stock options, SSARs, restricted shares, and restricted share units under our shareholder-approved 2016 Stock Incentive Plan ("2016 Plan") for up 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 ("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.

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

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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 SSARs, restricted and performance awards included in the condensed consolidated statements of operations:

	Three Months Ended September 30,				Six Months Ended September 30,
(In thousands)	2020		2019		2020		2019
Product development	$	239	$	672	$	411	$	940
Sales and marketing		34		51		70		113
General and administrative		983		622		2,201		774
Total share-based compensation expense	$	1,256	$	1,345	$	2,682	$	1,827

Stock-Settled Appreciation Rights

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

The following table summarizes the activity during the six months ended September 30, 2020 for SSARs awarded under the 2011 and 2016 Plans:

	Number of Rights			Weighted-Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
(In thousands, except share and per share data)				(per right)		(in years)
Outstanding at April 1, 2020		1,644,888		$	21.07
Exercised		(63,872	)		11.64
Forfeited		(11,430	)		18.65
Expired		(1,522	)		14.22
Outstanding at September 30, 2020		1,568,064		$	21.48		4.4	$	11,674
Exercisable at September 30, 2020		973,110		$	13.82		3.7	$	11,214
Vested and expected to vest at September 30, 2020		1,568,064		$	21.48		4.4	$	11,674

As of September 30, 2020, total unrecognized share-based compensation expense related to unvested SSARs was $3.4 million, which is expected to be recognized over a weighted-average vesting period of 2.0 years.

Restricted Shares

We granted shares to certain of our Directors, executives and key employees, the vesting of which is service-based. The following table summarizes the activity during the six months ended September 30, 2020 for restricted shares awarded under the 2011 and 2016 Plans:

	Number of Shares			Weighted-Average Grant-Date Fair Value
(In thousands, except share and per share data)				(per share)
Outstanding at April 1, 2020		178,462		$	19.89
Forfeited		(17,420	)		19.03
Outstanding at September 30, 2020		161,042		$	19.98

The weighted-average grant date fair value of the restricted shares is determined based upon the closing price of our common shares on the grant date. As of September 30, 2020, total unrecognized share-based compensation expense related to unvested restricted stock was $1.2 million, which is expected to be recognized over a weighted-average vesting period of 1.4 years.

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Performance Shares

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

The following table summarizes the activity during the six months ended September 30, 2020 for the performance shares awarded under the 2016 Plan:

(In thousands, except share and per share data)	Number of Shares
Outstanding at April 1, 2020		30,120
Granted		—
Vested		(6,714	)
Forfeited		(23,406	)
Outstanding at September 30, 2020		—

11. Preferred Stock

Series A Convertible Preferred Stock

On May 22, 2020, we completed the sale of 1,735,457 shares of our preferred stock, without par value, designated as “Series A Convertible Preferred Stock” (the “Convertible Preferred Stock”) to MAK Capital Fund L.P. and MAK Capital Distressed Debt Fund I, LP (the “Holders”) each, in its capacity as a designee of MAK Capital One LLC (the “Purchaser”), pursuant to the terms of the Investment Agreement, dated as of May 11, 2020, between the Company and the Purchaser, for an aggregate purchase price of $35 million. We incurred issuance costs of $1.0 million. We added all issuance costs that were netted against the proceeds upon issuance of the Convertible Preferred Stock to its redemption value. As disclosed in our Annual Report for the fiscal year ended March 31, 2020, Michael Kaufman, the Chairman of the Company’s Board of Directors, is the Chief Executive Officer of MAK Capital One LLC.

Accounting Policy

We classify convertible preferred stock as temporary equity in the condensed consolidated balance sheets due to certain contingent redemption clauses that are at the election of the Holders. We increase the carrying value of the convertible preferred stock to its redemption value (described below) for all undeclared dividends using the interest method.

The Convertible Preferred Stock has the following rights, preferences and restrictions (the Certificate of Amendment included as Exhibit 3.1 to our Current Report on Form 8-K, filed on May 26, 2020, defines all terms not otherwise defined below):

Voting

The Holders will be entitled to one vote for each share of Convertible Preferred Stock upon all matters presented to the common shareholders of the Company, and except as otherwise provided by the Amended Articles of Incorporation of the Company or required by law, the Holders and common shareholders will vote together as one class on all matters. Additionally, certain matters specific to the Convertible Preferred Stock will require the approval of two-thirds of the outstanding Convertible Preferred Stock, voting as a separate class.

Liquidation Preference

Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the purchase price paid by the Purchaser, plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the Holder would have been entitled to receive at such time if the Convertible Preferred Stock were converted into common stock.

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Redemption

On and after the fifth anniversary of the date the Convertible Preferred Stock is initially issued, the Company will have the right, and the Holders will have the right to require the Company, in each case, at the initiating party’s election, to redeem all, but not less than all, of the then-outstanding Convertible Preferred Stock for an amount equal to the Liquidation Preference.

Conversion

Each Holder will have the right, at its option, to convert its Convertible Preferred Stock, in whole or in part, into fully paid and non-assessable shares of common stock at a conversion price equal to $20.1676 per share (as may be adjusted from time to time, as described in the Certificate of Amendment).

Subject to certain conditions, the Company may, at its option, require conversion of all of the outstanding shares of Convertible Preferred Stock to common stock if, at any time after November 22, 2023, the daily volume-weighted average price of the Company’s common stock is at least 150% of the conversion price for at least 20 trading days during the 30 consecutive trading days immediately preceding the date the Company notifies the Holders of the election to convert.

Dividends

The Holders are entitled to dividends on the Liquidation Preference at the rate of 5.25% per annum, payable semi-annually either (i) 50% in cash and 50% in kind as an increase in the then-current Liquidation Preference or (ii) 100% in cash, at the option of the Company. The Holders are not entitled to participate in dividends declared or paid on the common stock on an as-converted basis; however, certain anti-dilution adjustments to the Convertible Preferred Stock may be made in the event of such dividends.

The Convertible Preferred Stock ranks senior to the Company’s common stock with respect to dividends and distributions on liquidation, winding-up and dissolution. Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the Liquidation Preference and (ii) the amount that the Holder would have been entitled to receive at such time if the Convertible Preferred Stock were converted into common stock.

Change in Control Events

Upon certain change of control events involving the Company, the Company has the right, and each Holder has the right, in each case, at the initiating party’s election, to require the Company to repurchase all or a portion of its then-outstanding shares of Convertible Preferred Stock for cash consideration equal to (i) 150% of the then-current Liquidation Preference for a change of control occurring prior to the third anniversary of the date the Convertible Preferred Stock is initially issued, (ii) 125% of the then-current Liquidation Preference for a change of control occurring on or following the third anniversary and prior to the fifth anniversary of the date the Convertible Preferred Stock is initially issued and (iii) 100% of the then-current Liquidation Preference for a change of control occurring on or following the fifth anniversary of the date the Convertible Preferred Stock is initially issued.

Standstill Restrictions

The Purchaser and its affiliates are subject to certain customary standstill provisions that restrict them from, among other actions, acquiring additional securities of the Company if such acquisition would result in the Purchaser beneficially owning in excess of 25% of the outstanding shares of common stock of the Company until the later of the third anniversary of the date the Convertible Preferred Stock is initially issued and the date on which the Purchaser no longer has record or beneficial ownership of common stock and Convertible Preferred Stock that constitute at least 10% of the outstanding common stock.

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

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

—    what factors affect our business;

—    what our earnings and costs were;

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

—    where the earnings came from;

—    how our financial condition was affected; and

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

The MD&A analyzes changes in specific line items in the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows and provides information that management believes is important to assessing and understanding our consolidated financial condition and results of operations. This Quarterly Report on Form 10-Q updates information included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the Securities and Exchange Commission (SEC). This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes that appear in Item 1 of this Quarterly Report as well as our Annual Report for the year ended March 31, 2020. Information provided in the MD&A may include forward-looking statements that involve risks and uncertainties. Many factors could cause actual results to be materially different from those contained in the forward-looking statements. See “Forward-Looking Information” on page 29 of this Quarterly Report, Item 1A "Risk Factors" in Part II of this Quarterly Report, and Item 1A “Risk Factors” in Part I of our Annual Report for the fiscal year ended March 31, 2020 for additional information concerning 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

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The outbreak has reached all geographic regions in which we do business, and government authorities around the world have implemented extensive measures attempting to contain the spread and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, closures of non-essential businesses, and social distancing requirements. The global spread of COVID-19 and the actions taken in response have negatively impacted us, our customers, our suppliers and the many communities in which we do business. The overall extent and duration of economic and business disruption is not currently known. In response to these challenges, we quickly adjusted our business policies and practices for employees to work from home and have taken other measures to continue our operations with safety as our priority.

We continuously monitor and assess the impact of the COVID-19 pandemic, including recommendations and orders from government and public health authorities. We are working to help our customers maintain their operations during this difficult time while managing our teams to be prepared for continuously changing demand for our products and services.

During the first half of our fiscal 2021, revenue was negatively impacted by delays and reduced spending attributed to the impact of the COVID-19 pandemic on our customers’ operational priorities and as a result of various one-time recurring revenue related and other concessions we have given to customers to help them during this time of need. Due to the pandemic, we have seen a reduction or delay in customer contracts, and we have been unable to conduct face-to-face meetings with existing or prospective customers, present in-person demonstrations of our solutions, or host or attend in-person trade shows and conferences. Limitations on access to the facilities of our customers have also impacted our ability to deliver some of our products, complete certain implementations, and provide in-person consulting and training services, negatively impacting our ability to recognize revenue. We continued to experience high recurring revenue renewal rates during the first half of the fiscal year. We also have an expanded product base that includes new products which allow for contactless capabilities and other features which help promote social distancing and guest safety. Despite our strong first half recurring renewal rates and new solution offerings, we cannot predict how the pandemic will impact our results in future periods, including to the extent that customers delay or miss payments, customers defer, reduce, or refrain from placing orders or renewing subscriptions or maintenance arrangements, or travel restrictions and site access restrictions remain necessary.

We continue to conduct 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 continue to delay or reduce sales and harm productivity and collaboration. In addition, during the first half of our fiscal 2021, we reduced discretionary costs, implemented a hiring freeze on non-essential positions and reduced payroll and related

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costs through layoffs, employee furloughs, employee retirement benefit limitations, and salary decreases for executive team members and certain other employees of the Company. Such actions may have an adverse impact on us, particularly those actions that remain in place for an extended period.

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.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. We plan to continue deferring the timing of employer payroll tax payments as permitted by the CARES Act. We deferred $1.3 million in employer payroll tax payments under the CARES Act as of September 30, 2020. The CARES Act did not have a material impact on our consolidated results of operations as of and for the six months ended September 30, 2020.

MAK Capital Investment

In May 2020, we 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. The transaction resulted in the issuance of 1,735,457 preferred shares which added $35 million in preferred stock to the Company’s balance sheet and increased our cash balance by the $35 million investment less closing costs of $1.0 million. The 5.25% dividends will accumulate and increase the liquidation preference of the preferred stock for any undeclared amounts.

Our Business

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. 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.

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

Our strategic plan specifically focuses on:

• Putting the customer first with world class support and services

• Accelerating our product development

• Improving organizational efficiency and teamwork

• Developing our employees and leaders

• Growing revenue by improving the breadth and depth of our product set

• 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.

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Revenue - Defined

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

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

• Products revenue – Revenue earned from the sales of 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.

Results of Operations

Second Fiscal Quarter 2021 Compared to Second Fiscal Quarter 2020

Net Revenue and Operating Income (Loss)

The following table presents our consolidated revenue and operating results for the three months ended September 30, 2020 and 2019:

	Three months ended
	September 30,						Increase (decrease)
	2020			2019			$			%
Net revenue:
Products	$	6,559		$	11,873		$	(5,314	)		(44.8	)%
Support, maintenance and subscription services		22,304			20,329			1,975			9.7
Professional services		5,497			8,520			(3,023	)		(35.5	)
Total net revenue		34,360			40,722			(6,362	)		(15.6	)
Cost of goods sold:
Products (inclusive of developed technology amortization)		2,950			9,794			(6,844	)		(69.9	)
Support, maintenance and subscription services		4,555			4,654			(99	)		(2.1	)
Professional services		3,701			6,057			(2,356	)		(38.9	)
Total cost of goods sold		11,206			20,505			(9,299	)		(45.3	)
Gross profit	$	23,154		$	20,217		$	2,937			14.5	%
Gross profit margin		67.4	%		49.6	%
Operating expenses:
Product development	$	8,257		$	10,778		$	(2,521	)		(23.4	)%
Sales and marketing		2,350			4,890			(2,540	)		(51.9	)
General and administrative		5,217			6,038			(821	)		(13.6	)
Depreciation of fixed assets		715			707			8			1.1
Amortization of intangibles		508			614			(106	)		(17.3	)
Severance and other charges		7			190			(183	)		(96.3	)
Legal settlements, net		50			(119	)		169		nm
Operating income (loss)	$	6,050		$	(2,881	)	$	8,931			310.0	%
Operating income (loss) percentage		17.6	%		(7.1	)%

nm - not meaningful

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The following table presents the percentage relationship of our condensed consolidated statement of operations line items to our consolidated net revenues for the periods presented:

	Three months ended
	September 30,
	2020			2019
Net revenue:
Products		19.1	%		29.2	%
Support, maintenance and subscription services		64.9			49.9
Professional services		16.0			20.9
Total net revenue		100.0	%		100.0	%
Cost of goods sold:
Products		8.6	%		24.1	%
Support, maintenance and subscription services		13.3			11.4
Professional services		10.7			14.9
Total cost of goods sold		32.6	%		50.4	%
Gross profit		67.4	%		49.6	%
Operating expenses:
Product development		24.0	%		26.5	%
Sales and marketing		6.8			12.0
General and administrative		15.2			14.8
Depreciation of fixed assets		2.2			1.7
Amortization of intangibles		1.5			1.5
Severance and other charges		0.0			0.5
Legal settlements, net		0.1			(0.3	)
Operating income (loss)		17.6	%		(7.1	)%

Net revenue. Total net revenue decreased $6.4 million, or 15.6%, during the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020. Products revenue decreased $5.3 million, or 44.8%, due to lower sales combined with delayed deliveries resulting from customer restrictions including temporary site closures in response to the COVID-19 pandemic. Support, maintenance and subscription services revenue increased $2.0 million, or 9.7%, compared to the second quarter of fiscal 2020 driven by continued growth in subscription-based service revenue, which increased 23.9% during the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020. Professional services revenue decreased $3.0 million, or 35.5%, due to lower sales combined with delayed installations and integration of our software solutions resulting from travel and customer restrictions including temporary site closures in response to the COVID-19 pandemic.

Gross profit and gross profit margin. Our total gross profit increased $2.9 million, or 14.5%, for the second quarter of fiscal 2021 and total gross profit margin increased from 49.6% to 67.4% driven by changes in the composition of revenue by category. Products gross profit increased $1.5 million, or 73.6%, compared to the second quarter of fiscal 2020 and products gross profit margin increased from 17.5% to 55.0% due to the absence of software development cost amortization during the second quarter of fiscal 2021 and a higher proportion of proprietary software sales over third party products. Support, maintenance and subscription services gross profit increased $2.1 million and gross profit margin increased 247 basis points to 79.6%. The margin increase is the result of increased revenue on a relatively flat cost base. Professional services gross profit decreased $0.7 million due to the drop in demand for professional services while gross profit margin increased from 28.9% to 32.7% due to a slightly larger decrease in the percentage of professional services costs compared to professional services revenue as a result of employee furloughs and layoffs, temporary salary reductions, lower incentive pay and employee benefits.

Operating expenses

Operating expenses, excluding legal settlements, severance and other charges, decreased $6.0 million, or 26.0%, during the second quarter of fiscal 2021 compared with the second quarter of fiscal 2020.

Product development. Product development decreased $2.5 million, or 23.4%, in the second quarter of fiscal 2021 due to employee furloughs, temporary salary reductions, lower incentive pay and employee benefits, lower recruiting fees, and significantly reduced travel and outside service expenses due to employees working from home.

Sales and marketing. Sales and marketing decreased $2.5 million, or 51.9%, in the second quarter of fiscal 2021 compared with the second quarter of fiscal 2020 due to temporary reductions in salaries and employee benefits, furloughs, and reduced commission expense

21

due to lower sales levels. The decrease also includes the impact of significantly reduced travel, the absence of in-person trade shows and conference activity, and the ability to conduct more business remotely.

General and administrative. General and administrative decreased by $0.8 million, or 13.6%, in the second quarter of fiscal 2021 compared with the second quarter of fiscal 2020 due to employee furloughs, temporary salary reductions, lower incentive pay and employee benefits offset by an increase in share-based compensation.

Severance and other charges. Severance, and other charges decreased $0.2 million in the second quarter of fiscal 2021 due to reduced severance activity.

Other (Income) Expenses

	Three months ended
	September 30,						(Unfavorable) favorable
(Dollars in thousands)	2020			2019			$			%
Other (income) expense:
Interest income	$	(28	)	$	(114	)	$	(86	)		(75.4	)%
Interest expense		2			2			0		nm
Other expense, net		88			108			20		nm
Total other (income) expense, net	$	62		$	(4	)	$	(66	)	nm

nm - not meaningful

Interest income. Interest income consists of interest earned on cash equivalents including short-term investments in certificates of deposit, commercial paper, treasury bills and money market funds.

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

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

Income Taxes

	Three months ended
	September 30,						(Unfavorable) favorable
(Dollars in thousands)	2020			2019			$			%
Income tax expense	$	121		$	41		$	(80	)	nm
Effective tax rate		2.0	%		(1.4	)%

nm - not meaningful

For the three months ended September 30, 2020, the effective tax rate was different than the statutory tax rate due primarily to the utilization of net operating losses that were offset by decreases in the valuation allowances in the U.S, certain foreign and state tax effects and other U.S. permanent book to tax differences. For the three months ended September 30, 2019, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets in the U.S. and certain foreign jurisdictions, which were offset by increases in the valuation allowance, certain foreign and state tax effects and other U.S. permanent book to tax differences.

Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months 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 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.

22

Because of our losses in prior periods, we have recorded a valuation allowance offsetting substantially all of our deferred tax assets in the U.S. and certain foreign jurisdictions, as management believes that it is more likely than not that we will not realize the benefits of these deductible differences. 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.

Results of Operations

First Half Fiscal 2021 Compared to First Half Fiscal 2020

Net Revenue and Operating Income (Loss)

The following table presents our consolidated revenue and operating results for the six months ended September 30, 2020 and 2019:

	Six Months Ended September 30,						Increase (decrease)
	2020			2019			$			%
Net revenue:
Products	$	11,798		$	22,742		$	(10,944	)		(48.1	)%
Support, maintenance and subscription services		42,801			40,411			2,390			5.9
Professional services		9,567			15,958			(6,391	)		(40.0	)
Total net revenue		64,166			79,111			(14,945	)		(18.9	)
Cost of goods sold:
Products		5,965			18,417			(12,452	)		(67.6	)
Support, maintenance and subscription services		8,860			8,834			26			0.3
Professional services		7,638			11,628			(3,990	)		(34.3	)
Total cost of goods sold		22,463			38,879			(16,416	)		(42.2	)
Gross profit	$	41,703		$	40,232		$	1,471			3.7	%
Gross profit margin		65.0	%		50.9	%
Operating expenses:
Product development	$	16,524		$	20,842		$	(4,318	)		(20.7	)%
Sales and marketing		4,951			9,389			(4,438	)		(47.3	)
General and administrative		10,936			11,911			(975	)		(8.2	)
Depreciation of fixed assets		1,438			920			518			56.3
Amortization of intangibles		968			1,292			(324	)		(25.1	)
Restructuring, severance and other charges		1,210			421			789			187.4
Legal settlements, net		50			(119	)		169		nm
Operating income (loss)	$	5,626		$	(4,424	)	$	10,050			227.2	%
Operating income (loss) percentage		8.8	%		(5.6	)%

nm - not meaningful

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The following table presents the percentage relationship of our condensed consolidated statement of operations line items to our consolidated net revenues for the periods presented:

	Six Months Ended
	September 30,
Net revenue:	2020			2019
Products		18.4	%		28.7	%
Support, maintenance and subscription services		66.7			51.1
Professional services		14.9			20.2
Total net revenue		100.0	%		100.0	%
Cost of goods sold:
Products		9.3	%		23.3	%
Support, maintenance and subscription services		13.8			11.1
Professional services		11.9			14.7
Total cost of goods sold		35.0	%		49.1	%
Gross profit		65.0	%		50.9	%
Operating expenses:
Product development		25.8	%		26.4	%
Sales and marketing		7.7			11.9
General and administrative		17.0			15.1
Depreciation of fixed assets		2.2			1.2
Amortization of intangibles		1.5			1.6
Restructuring, severance and other charges		1.9			0.5
Legal settlements, net		0.1			(0.2	)
Operating income (loss)		8.8	%		(5.6	)%

Net revenue. Total net revenue decreased $14.9 million, or 18.9%, during the first half of fiscal 2021 compared to the first half of fiscal 2020. Products revenue decreased $10.9 million, or 48.1%, due to lower sales combined with delayed deliveries resulting from customer restrictions including temporary site closures in response to the COVID-19 pandemic. Support, maintenance and subscription services revenue increased $2.4 million, or 5.9%, compared to the first half of fiscal 2020 driven by continued growth in subscription-based service revenue, which increased 16.4% during the first half of fiscal 2021 compared to the first half of fiscal 2020. The growth rate in our support, maintenance and subscription services is significantly lower than we have reported in recent periods due to one-time COVID-19 related financial relief we provided to certain customers during the first half of fiscal 2021 to help them as they deal with temporary site closures during the period. Professional services revenue decreased $6.4 million, or 40.0%, due to lower sales combined with delayed installations and integration of our software solutions resulting from travel and customer restrictions including temporary site closures in response to the COVID-19 pandemic.

Gross profit and gross profit margin. Our total gross profit increased $1.5 million, or 3.7%, for the first half of fiscal 2021 and total gross profit margin increased from 50.9% to 65.0% driven by changes in the composition of revenue by category. Products gross profit increased $1.5 million, or 34.9%, compared to the second half of fiscal 2020 and products gross profit margin increased from 19.0% to 49.4% due to the absence of software development cost amortization during the first half of fiscal 2021 along with a higher proportion of proprietary software sales over third party products. Support, maintenance and subscription services gross profit increased $2.4 million and gross profit margin increased 116 basis points to 79.3%. The margin increase is the result of increased revenue on a relatively flat cost base. Professional services gross profit decreased $2.4 million and gross profit margin decreased from 27.1% to 20.2% due to the drop in demand for professional services resulting from travel and customer restrictions including temporary site closures in response to the COVID-19 pandemic.

Operating expenses

Operating expenses, excluding legal settlements, severance and other charges, decreased $9.5 million, or 21.5%, during the first half of fiscal 2021 compared with the first half of fiscal 2020.

Product development. Product development decreased $4.3 million, or 20.7%, in the first half of fiscal 2021 due to employee furloughs and layoffs, temporary salary reductions, lower incentive pay and employee benefits, lower recruiting fees, and significantly reduced travel and outside service expenses due to employees working from home.

Sales and marketing. Sales and marketing decreased $4.4 million, or 47.3%, in the first half of fiscal 2021 compared with the first half of fiscal 2020 due to temporary reductions in salaries and employee benefits, furloughs, layoffs, and reduced commission expense due to lower sales levels. The decrease also includes the impact of significantly reduced travel, the absence of in-person trade shows and conference activity, and the ability to conduct more business remotely.

24

General and administrative. General and administrative decreased by $1.0 million, or 8.2%, in the first half of fiscal 2021 compared with the first half of fiscal 2020 due to employee furloughs and layoffs, temporary salary reductions, lower incentive pay and employee benefits offset by an increase in share-based compensation.

Severance and other charges. Severance, and other charges increased $0.8 million in the first half of fiscal 2021 due to severance charges resulting from layoffs.

Other (Income) Expenses

	Six Months Ended September 30,						(Unfavorable) favorable
(Dollars in thousands)	2020			2019			$			%
Other (income) expense:
Interest income	$	(49	)	$	(194	)	$	(145	)		(74.7	)%
Interest expense		3			3			0		nm
Other expense, net		194			193			(1	)	nm
Total other expense, net	$	148		$	2		$	(146	)	nm

nm - not meaningful

Interest income. Interest income consists of interest earned on cash equivalents including short-term investments in certificates of deposit, commercial paper, treasury bills and money market funds.

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

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

Income Taxes

	Six months ended
	September 30,						(Unfavorable) favorable
(Dollars in thousands)	2020			2019			$			%
Income tax expense	$	128		$	67		$	(61	)	nm
Effective tax rate		2.3	%		(1.5	)%

nm - not meaningful

For the six months ended September 30, 2020, the effective tax rate was different than the statutory tax rate due primarily to the utilization of net operating losses that were offset by decreases in the valuation allowances in the U.S, certain foreign and state tax effects and other U.S. permanent book to tax differences. For the six months ended September 30, 2019, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets in the U.S. and certain foreign jurisdictions, which were offset by increases in the valuation allowance, certain foreign and state tax effects and other U.S. permanent book to tax differences.

Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months 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 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.

Liquidity and Capital Resources

Overview

Our operating cash requirements consist primarily of working capital needs, operating expenses, capital expenditures, payments on indebtedness outstanding, which primarily consists of lease obligations and preferred stock dividends.

At September 30, 2020, 100% of our cash and cash equivalents, of which 97% were located in the United States, were deposited in bank accounts. We believe credit risk is limited with respect to our cash and cash equivalents balances.

25

The MAK Capital investment increased our cash balance by $34.0 million after closing costs of $1.0 million. As described above under Recent Developments and further in Note 11 to the condensed consolidated financial statements, the transaction resulted in the issuance of 1,735,457 preferred shares with an annual dividend rate of 5.25%.

Our liquidity could be negatively impacted by a decrease in demand for our products and services, including the impact of changes in customer buying behavior due to circumstances over which we have no control, including, but not limited to, the effects of the COVID-19 pandemic. If we require additional funding, for operating needs, a business acquisition or otherwise, we may need access to more capital, which could involve borrowings under a credit facility.

As of September 30, 2020, and March 31, 2020, our total debt was approximately $0.1 million, comprised of finance lease obligations in both periods.

We believe that cash flow from operating activities, cash on hand of $85.7 million as of September 30, 2020 and access to capital markets will provide adequate funds to meet our short- and long-term liquidity requirements.

Cash Flow

	Six Months Ended September 30,
(In thousands)	2020			2019
Net cash provided by (used in):
Operating activities	$	6,642		$	1,234
Investing activities		(473	)		(1,942	)
Financing activities		32,799			(1,065	)
Effect of exchange rate changes on cash		85			(83	)
Net increase (decrease) in cash and cash equivalents	$	39,053		$	(1,856	)

Cash flow provided by operating activities. Cash flow provided by operating activities was $6.6 million in the first six months of fiscal 2021. The provision of cash was due primarily to the addition of $4.7 million in non-cash expense including depreciation, amortization, and share-based compensation, to our operating income of $5.4 million offset by a decrease of $3.5 million in net operating assets and liabilities.

Cash flow used in investing activities. Consists primarily of property and equipment purchases.

Cash flow provided by (used in) financing activities. During the first six months of fiscal 2021, the $32.8 million provided by financing activities consisted primarily of $34.0 million in preferred stock issuance proceeds from the MAK Capital investment, net of issuance costs, offset by $1.0 million related to the repurchase of shares to satisfy employee tax withholding on share-based compensation and $0.2 million in preferred stock dividends. During the first six months of fiscal 2020, the $1.1 million used in financing activities was primarily related to the repurchase of shares to satisfy employee tax withholding on share-based compensation.

Contractual Obligations

As of September 30, 2020, there were no significant changes to our contractual obligations as presented in our Annual Report for the year ended March 31, 2020.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

A detailed description of our significant accounting policies is included in our Annual Report for the year ended March 31, 2020. Other than as described in Note 2 to the condensed consolidated financial statements, there have been no material changes in our significant accounting policies and estimates since March 31, 2020.

26

Forward-Looking Information

This Quarterly Report and other publicly available documents, including the documents incorporated herein and therein by reference, contain, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions, or beliefs and are subject to a number of factors, assumptions, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in Item 1A in Part II of this Quarterly Report and Item IA of our Annual Report for the fiscal year ended March 31, 2020. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events, or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk affecting us, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our Annual Report for the fiscal year ended March 31, 2020. There have been no material changes in our market risk exposures since March 31, 2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, that occurred during the six months ended September 30, 2020, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Due to the COVID-19 pandemic, a significant number of our employees are now working from home. The design of our financial reporting processes, systems, and controls allows for remote execution with accessibility to secure data.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer, Chief Financial Officer and Corporate Controller and Treasurer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be achieved. Further, the design of a control system must reflect the impact of resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the possibility that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors. Additionally, controls can be circumvented by individual acts, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all possible future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

27

PART II. OTHER INFORMATION

Item 1.     Legal Proceedings

None.

Item 1A. Risk Factors

Other than as described below, there have been no material changes in the risk factors included in our Annual Report for the fiscal year ended March 31, 2020 that may materially affect our business, results of operations, or financial condition.

The full extent to which the COVID-19 pandemic will adversely affect our business and results of operations cannot be predicted at this time. See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview— Recent Developments” of this report for a more detailed discussion of the impact of COVID-19 on our business.

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

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

None.

28

Item 6.    Exhibits

3.1	Amended Code of Regulations of Agilysys, Inc., effective as of October 9, 2020.
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
31.3	Rule 13a-14(a)/15d-14(a) Certification of Corporate Controller and Treasurer.
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.
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SIGNATURE

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

AGILYSYS, INC.

Date:	October 28, 2020	/s/ William David Wood III
		William David Wood III
		Chief Financial Officer
		(Principal Financial Officer and Duly Authorized Officer)

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EX-3.1

Exhibit 3.1

AGILYSYS, INC.

AMENDED CODE OF REGULATIONS

ARTICLE I - MEETINGS OF SHAREHOLDERS

Annual Meetings

Section 1. The annual meeting of the shareholders of the Corporation shall be held in the principal office of the Corporation or at such other place within or without the State of Ohio as the Directors shall determine, at such date and time and month of each year as shall be designated by the Board of Directors; provided, however, that the Board of Directors may determine that the annual meeting of the shareholders will not be held at any physical place, but instead may be held solely by means of communications equipment in the manner set forth in Section 9 of this Article I. Upon due notice, there may also be considered and acted upon at an annual meeting any matter which could properly be considered and acted upon at a special meeting.

Special Meetings

Section 2. Special meetings of the shareholders shall be called by the Chairman of the Board; the President; the Secretary; pursuant to a resolution of the Board of Directors; or upon the written request of two (2) Directors, and shall be held at such times and places, within or outside of the State of Ohio, as shall be specified in the call thereof; provided, however, that the Board of Directors may determine that any special meeting of the shareholders will not be held at any physical place, but instead may be held solely by means of communications equipment in the manner set forth in Section 9 of this Article I.

Notice of Meetings

Section 3. A written notice of each annual and special meeting, stating the time, place and purposes thereof, and the means, if any, by which shareholders can be present and vote at the meeting through the use of communications equipment, shall be given to each shareholder of record entitled to notice of the meeting in writing by personal delivery, by mail, by overnight delivery service or by any other means of communication authorized by the shareholder to whom notice is given not less than seven (7) days, and not more than sixty (60) days before any such meeting, by or at the direction of the President, Chairman of the Board or Secretary, directed to the last known address of each such shareholder aforesaid as it appears on the records of the Corporation. All notices with respect to any shares to which persons are jointly entitled may be given to that one of such persons who is named first upon the books of the Corporation, and notice so given shall be sufficient notice to all other persons jointly entitled to said shares. Notice may be waived in writing by any shareholder either before or after such meeting, and shall be waived by the attendance of any shareholder at any such meeting without protesting, prior to or at the commencement of the meeting, the lack of proper notice.

Quorum

Section 4. Except as otherwise provided by law, the Articles of Incorporation, or these Regulations, a quorum at all meetings of shareholders shall consist of the holders of record of a majority of shares entitled to vote thereat, present in person or by proxy.

Adjournment

Section 5. If less than a quorum shall be in attendance at the time for which any meeting of the shareholders shall have been called, the meeting may be adjourned from time to time by a majority of the voting shares present in person or by proxy and entitled to vote, without any notice other than by announcement at the meeting of the time and place to which it adjourned, until a quorum shall attend. At any adjourned meeting at which a quorum shall attend, any business may be transacted which might have been transacted if the meeting had been held as originally called.

Proxies

Section 6. Any person entitled to attend a shareholders’ meeting, to vote thereat, or to execute consents, waivers, or releases, may be represented at such meeting or an adjourned meeting thereof and vote thereat, and execute consents, waivers and releases, and exercise any of his other rights by proxy or proxies.

Order of Business

Section 7. (a) The Chairman of the Board, or such other officer of the Corporation as may be designated by the Board of Directors, will call meetings of the shareholders to order and will preside at the meetings. Unless otherwise determined by the Board of Directors prior to the meeting, the presiding officer will determine the order of business at the meeting and have the authority to regulate the conduct of the meeting and to establish rules and procedures for the orderly conduct of the meeting.

(b) At an annual meeting of the shareholders, only such business as is properly brought before the meeting will be considered. To be properly brought before an annual meeting, business must be a proper matter for shareholder action and be (i) specified in the notice of the meeting (or any supplement to that notice), (ii) brought before the meeting by the presiding officer or by or at the direction of the Board of Directors, or (iii) properly requested by a shareholder to be brought before the meeting in accordance with subsection (c) of this Section 7 for proposals regarding business other than nomination of a person for election as a Director or, Section 1(c) of Article II herein for business regarding nomination of a person for election as a Director.

(c) For business to be properly requested by a shareholder to be brought before an annual meeting of the shareholders, the shareholder must (i) be a shareholder of the Corporation of record at the time notice of the business is given and at the time of the meeting, (ii) be entitled to vote at the meeting, and (iii) have given timely written notice of the business to the Secretary. To be timely, a shareholder’s notice must be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation not less than ninety (90) days nor more than one-hundred twenty (120) days prior to the anniversary of the previous year’s annual meeting; provided, however, that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, to be timely, notice by the shareholder must be delivered not later than the close of business on the later of the ninetieth (90^th) day prior to such annual meeting or the tenth calendar day following the day on which public disclosure of the date of such annual meeting is first made. In no event shall the adjournment or postponement of an annual meeting commence a new time period (or extend the time period) for the giving of a shareholder’s notice. As to each matter the shareholder proposes to bring before an annual meeting, a shareholder’s notice must set forth:

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(A) a description in reasonable detail of the business proposed to be brought before the meeting and the reason for conducting the business at the meeting;

(B) the text of the proposal or business (including the text of any resolutions proposed for consideration and, if the business includes a proposal to amend these Regulations or the Articles of Incorporation of the Corporation, the language of the proposed amendment);

(C) the name and address, as they appear on the Corporation’s books, or, if different, the current name and address, of the shareholder proposing such business and of the beneficial owner, if any, on whose behalf the proposal is made;

(D) the class and number of shares that are owned of record or beneficially by the shareholder and by any such beneficial owner as of the date of the notice;

(E) a representation that the shareholder or any such beneficial owner is a holder of record or beneficially of the shares entitled to vote at the meeting and intends to remain so through the date of the meeting;

(F) a description of any material interest that the shareholder or any such beneficial owner may have in the business;

(G) a description of any agreement, arrangement or understanding between or among the shareholder and any such beneficial owner and any other persons (including their names) in connection with the proposal of such business;

(H) a description of any agreement, arrangement or understanding (including, without limitation, any derivative or short positions, profit interests, options, hedging transactions, borrowed or loaned shares, warrants, convertible securities or stock appreciation rights) in effect as of the date of the shareholder’s notice pursuant to which the shareholder, any such beneficial owner or any other person directly or indirectly has other economic interests in the shares of the Corporation;

(I) a representation that the shareholder intends to appear in person or by proxy at the meeting to propose such business; and

(J) a representation whether the shareholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding shares required to approve the proposal and/or otherwise to solicit proxies from shareholders in support of the proposal.

Notwithstanding the foregoing provisions of this Section 7(c), in order for a shareholder to submit a proposal for inclusion in the Corporation’s proxy statement for an annual meeting of shareholders, the shareholder must comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, including Rule 14a-8 (or any comparable successor rule or regulation), and the rules and regulations thereunder. The provisions of this Section 7(c) will not be deemed to prevent a shareholder from submitting proposals for inclusion in the Corporation’s proxy statement pursuant to those rules and regulations.

(d) At a special meeting of shareholders, only such business may be transacted or considered as is properly brought before the special meeting. To be properly brought before a special meeting, business

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must be (i) specified in the notice of the meeting (or any supplement to that notice) or (ii) brought before the meeting by the presiding officer or by or at the direction of the Board of Directors.

(e) The determination of whether any business sought to be brought before an annual meeting or special meeting of the shareholders is properly brought in accordance with this Section 7 will be made by the presiding officer of the meeting. If the presiding officer determines that any business is not properly brought before the meeting, he or she will so declare to the meeting, and the business will not be considered or acted upon.

Voting

Section 8. In all cases, except as otherwise provided by law, the Articles of Incorporation, or these Regulations, the affirmative vote of a majority of the voting shares present in person or by proxy and entitled to vote on any matter properly brought before a meeting of the shareholders will be the act of the shareholders.

Participation in a Meeting of the Shareholders by Means of Communications Equipment

Section 9.  The Board of Directors may authorize shareholders of the Corporation and the proxyholders of such shareholders who are not physically present at a meeting of shareholders to attend the meeting by use of communications equipment that enables the shareholder or proxyholder an opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting and to speak or otherwise participate in the proceedings contemporaneously with those physically present, if any. Any shareholder using communications equipment will be deemed present in person at the meeting whether the meeting is to be held at a designated place or solely by means of communications equipment.  The Board of Directors may adopt guidelines and procedures for the use of communications equipment in connection with a meeting of shareholders to permit the Corporation to verify that a person is a shareholder of the Corporation or the proxyholder of such a shareholder and to maintain a record of any vote or other action.

ARTICLE II - DIRECTORS

Number, Term of Office

Section 1. (a) The number of Directors may be fixed or changed by the Board of Directors of the Company; provided, however, that the total number of Directors shall not be less than three (3) or more than nine (9) members. All Directors shall be elected each year under the voting standards set forth in Article VIII of the Company’s Articles of Incorporation, and the Directors shall hold office for a term of one year and until their respective successors are elected and qualified. In case of any increase in the authorized number of Directors, any additional Directors provided for and elected shall hold office for a term which shall coincide with the full term or the remainder of the term, as the case may be.

(b) At a meeting of shareholders at which Directors are to be elected, only persons properly nominated as candidates will be eligible for election as Directors. Candidates may only be properly nominated by (i) the Board of Directors, (ii) by a qualifying shareholder under any rule promulgated under the Securities Exchange Act of 1934 (or any comparable successor rule or regulation), in accordance with all applicable requirements thereof, or (iii) by a shareholder in accordance with subsection (c) of this Section 1.

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(c) For a shareholder to properly nominate a candidate for election as a Director at a meeting of the shareholders, the shareholder must (i) be a shareholder of the Corporation of record at the time the notice of the nomination is given and at the time of the meeting, (ii) be entitled to vote at the meeting in the election of Directors, and (iii) have given timely written notice of the nomination to the Secretary. To be timely, a shareholder’s notice must be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation, in the case of an annual meeting, not less than ninety (90) days nor more than one-hundred twenty (120) days prior to the anniversary of the previous year’s annual meeting; provided, however, that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, to be timely, notice by the shareholder must be delivered not later than the close of business on the later of the ninetieth (90^th) day prior to such annual meeting or the tenth calendar day following the day on which public disclosure of the date of such annual meeting is first made. In the case of a special meeting, timely notice must be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10^th) day after the date of such meeting is first publicly disclosed. In no event shall the adjournment or postponement of an annual or special meeting commence a new time period (or extend the time period) for the giving of a shareholder’s notice. A shareholder’s notice must set forth, as to each candidate:

(A) the name, age, business address and residence address of the candidate;

(B) the principal occupation or employment of the candidate;

(C) the class and number of shares that are owned of record or beneficially by the candidate;

(D) all of the information about the candidate required to be disclosed in a proxy statement complying with the rules and regulations of the Securities and Exchange Commission used in connection with the solicitation of proxies for the election of the candidate as a Director;

 (E) the written consent of the candidate to serve as a Director if elected and a representation that the candidate (i) does not and will not have any undisclosed voting commitments or other arrangements with respect to his actions as a Director and (ii) will comply with these Regulations and all other publicly disclosed corporate governance, conflict of interest, confidentiality and share ownership and trading policies and guidelines of the Corporation;

(F) the name and address, as they appear on the Corporation’s books, or, if different, the current name and address, of the shareholder making such nomination and of the beneficial owner, if any, on whose behalf the nomination is made;

(G) the class and number of shares that are owned of record or beneficially by the shareholder and by any such beneficial owner as of the date of the notice;

(H) a representation that the shareholder or any such beneficial owner is a holder of record or beneficially of the shares entitled to vote at the meeting and intends to remain so through the date of the meeting;

(I) a description of any agreement, arrangement or understanding between or among the shareholder and any such beneficial owner and any other persons (including their names) with respect to such nomination;

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(J) a description of any agreement, arrangement or understanding (including, without limitation, any derivative or short positions, profit interests, options, hedging transactions, borrowed or loaned shares, warrants, convertible securities or stock appreciation rights) in effect as of the date of the shareholder’s notice pursuant to which the shareholder, any such beneficial owner or any other person directly or indirectly has other economic interests in the shares of the Corporation;

(K) a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; and

(L) a representation whether the shareholder intends to deliver a proxy statement and/or form of proxy to holders of the Corporation’s outstanding common shares and/or otherwise to solicit proxies from shareholders in support of the nomination.

The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent Director of the Corporation. Notwithstanding the foregoing provisions of this Section 1(c), in order for a shareholder to submit a nominee for inclusion in the Corporation’s proxy statement for an annual meeting of shareholders, the shareholder must comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. The provisions of this Section 1(c) will not be deemed to prevent a shareholder from submitting a nominee for inclusion in the Corporation’s proxy statement pursuant to those rules and regulations.

(d) The determination of whether any nomination sought to be brought before any meeting of the shareholders is properly made in accordance with this Section 1 will be made by the presiding officer of the meeting. If the presiding officer determines that one or more of the candidates has not been nominated in accordance with this Section 1, he or she will so declare to the meeting, and the candidates will not be considered or voted upon.

Annual Meetings

 Section 2. The Board of Directors shall meet immediately following the adjournment of the annual meeting of shareholders at the place of the annual shareholders’ meeting or at such time and place as may be designated in writing by a majority of all the Directors, for the purpose of electing officers or otherwise, and no notice of such meeting need be given to the Directors in order legally to constitute the meeting; provided, that a majority of the whole Board shall be present.

Meetings

Section 3. Meetings of the Board of Directors may be called by the Chairman of the Board, the President (or in his absence by a Vice President) or any two (2) Directors on written notice to each Director, given by personal delivery, by mail, by overnight delivery service or by any other means of communication authorized by the Director to whom notice is given at least two (2) days before the time of such meeting. Notice of any such meeting may be waived by any Director, however, before or after the meeting by writing and shall be deemed to be waived by any Director who shall attend such meeting in person without protesting, prior to or at the commencement of the meeting, the lack of proper notice. Any meeting of the Board of Directors shall be a legal meeting without notice having been given, if attended by all the members of the Board.

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Quorum

Section 4. At all meetings of the Board of Directors, a majority of the whole authorized number of Directors shall constitute a quorum for the transaction of business, except that a majority of the Directors then in office shall constitute a quorum for purposes of filling a vacancy in the Board.

Resignation

Section 5. Any Director may resign at any time by delivering a signed written notice thereof to the Secretary of the Corporation, which resignation shall take effect at the time of said delivery or at such other time as may be specified in said notice.

Removal

Section 6. All the Directors or any individual Director may be removed from office, with or without cause, by a majority vote of the holders of the voting power entitled to elect Directors in place of those to be removed; provided, that unless all the Directors are to be removed, no Director shall be removed without cause if the number of shares voted against his removal would be sufficient to elect at least one Director if cumulatively voted at an election of all the Directors.

Vacancies

Section 7. Vacancies in the Board of Directors, whether caused by the death or resignation or removal of a Director, or by an increase in the authorized number of Directors, or otherwise, may be filled for the unexpired term by a vote of a majority of the remaining Directors, though less than a majority of the whole authorized number of Directors.

Board Committees

Section 8. (a) The Board of Directors may from time to time appoint certain of its members (but not less than three (3)) to act as a Committee or Committees of Directors, and, subject to the provisions of this Section, may delegate to any such Committee any of the authority of the Board, however conferred, other than that of filling vacancies among the Directors or in any Committee of Directors. The Board of Directors may likewise appoint one or more Directors as alternate members of any such Committee, who may take the place of any absent member or members at any meeting of such Committee. Each such member and each such alternate shall serve in such capacity at the pleasure of the Board of Directors.

(b) In particular, the Board of Directors may create an Executive Committee in accordance with the provisions of this Section. If created, the Executive Committee shall possess and may exercise all of the powers of the Board in the management and control of the business of the Corporation during the intervals between meetings of the Board subject to provisions of this Section. The chairman of the Executive Committee shall be determined by the Board of Directors from time to time. All action taken by the Executive Committee shall be reported in writing to the Board of Directors at its first meeting thereafter.

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(c) Each such Committee shall serve at the pleasure of the Board of Directors, shall act only in the intervals between meetings of the Board and shall be subject to the control and direction of the Board. Each Committee shall keep regular minutes of its proceedings and shall report the same to the Board when required.

(d) An act or authorization of any act by any such Committee within the authority delegated to it shall be effective for all purposes as the act or authorization of the Board of Directors. In every case the affirmative vote of a majority of its members at a meeting, or the written consent of all of the members of any such Committee without a meeting, shall be necessary for the taking or approval of any action.

(e) Each such Committee may prescribe such rules as it shall determine for calling and holding meetings and its method of procedure, subject to the provisions of this Section and any rules prescribed by the Board of Directors.

Compensation

Section 9. The compensation of the Directors shall be such as the Board of Directors may from time to time determine. On resolution of the Board of Directors, a fixed sum for expenses of attendance may be allowed for attendance at each meeting. Members of the Executive Committee or other Committee of the Board may be allowed such compensation and such expenses for attending committee meetings as the Board of Directors may determine.

ARTICLE III - OFFICERS

Composition

Section 1. The officers of the Corporation shall include a Chairman of the Board (who shall be a Director), a President, a Secretary, a Treasurer and such other officers as required by law or that the Board of Directors may determine to be necessary or appropriate. The Board may also appoint such other subordinate officers, employees and agents as it shall deem necessary.

Duties

Section 2. The Chairman of the Board shall preside at all meetings of the Board of Directors. The Chairman of the Board or the President shall sign the minutes of the shareholders’ and Directors’ meetings. The Chairman of the Board shall perform the duties and exercise the powers of the President in case of the President’s disability or absence from the office of the Corporation. The Chairman of the Board shall have such other powers and duties as may be prescribed by the Board of Directors. All other officers shall have the authority and shall perform the duties that are customarily incident to their respective offices or are specified from time to time by the Board of Directors and, as appropriate, shall have the authority to delegate the performance of their duties. Any subordinate officer, employee or agent appointed by the Board shall have such authority and shall perform such duties as from time to time shall be prescribed by the Board.

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Election and Term of Office

Section 3. The said officers shall be elected by the Board of Directors by a majority ballot and shall hold office for one (1) year and until their respective successors are elected and qualified, but shall be subject to the power of removal hereinafter provided.

Removal

Section 4. Any officer elected or appointed by the Board of Directors may be removed at any time either with or without cause by the affirmative vote of two-thirds of the Board of Directors. Any other officer or employee of the Corporation may be removed at any time by vote of the Board of Directors, or by any committee or superior officer upon whom such power of removal may be conferred by the Board of Directors.

Compensation

Section 5. The compensation of the officers of the Corporation shall be fixed from time to time by the Board of Directors.

Bond

Section 6. All or any of said officers shall, if the Board of Directors so determines, furnish bonds for the faithful performance of their duties in such amount or amounts as the Board of Directors may require, upon terms, provisions and conditions and with surety or sureties to the satisfaction of the said Board.

ARTICLE IV - SEAL

Section 1. The Seal of the Corporation shall be circular, with the words and figures “SEAL, AGILYSYS, INC., OHIO,” or words and figures of similar import inscribed thereon.

ARTICLE V - SHARES

Certificates

Section 1. Ownership of shares of the Corporation shall be evidenced by certificates or through the issuance of book-entry or non-certificated shares. The Board may designate at its discretion at any time that some or all of the shares of the Corporation may be evidenced through the issuance of book-entry or non-certificated shares. Those certificates issued evidencing share ownership shall bear a distinguishing number, the signature of the President and of the Secretary or the Treasurer, and such recitals as may be required by law. The certificates for shares, if any, shall be of such tenor and design as the Board of Directors may adopt from time to time.

Transfers

 Section 2. The shares may be transferred on the books of the Corporation by the registered holders thereof, or by their attorneys legally constituted in writing or their legal representatives, by surrender of

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the certificate or certificates therefore for cancellation and a written assignment of the shares evidenced thereby. The Board of Directors may, from time to time, appoint such Transfer Agents or Registrars of shares as it may deem advisable, and may define their powers and duties. The Board of Directors shall have authority to make such other rules and regulations as it deems expedient concerning the issuance, registration and transfer of certificates for shares.

Substituted Certificates

Section 3. The Board of Directors may order a new certificate or certificates for shares to be issued in place of any certificate or certificates alleged to have been lost, stolen or destroyed, but in every such case the owner of the lost, stolen or destroyed certificate or certificates shall first make an affirmation of that fact and cause to be given to the Corporation, if so requested, a bond, with surety or sureties satisfactory to the Corporation in such sum as said Board of Directors may in its discretion deem sufficient, as indemnity against any loss or liability that the Corporation may incur by reason of the issuance of such new certificates; provided, the Board of Directors may, in its discretion, refuse to issue such new certificate save upon the order of some court having jurisdiction in such matters.

Closing of Transfer Books

Section 4. The share transfer books of the Corporation may be closed by order of the Board of Directors for a period not exceeding sixty (60) days prior to any meeting of the shareholders, and for a period not exceeding sixty (60) days prior to the payment of any dividend. The times during which the books may be closed shall, from time to time, be fixed by the Board of Directors.

ARTICLE VI - NOTICES

Notice by Mail

Section 1. Whenever, under the provisions of these Regulations, notice is permitted to be given to any shareholder or Director by mail, it may be given by depositing the same in the post office or letter box, in a postpaid sealed wrapper, addressed to the shareholder or Director, at such address as appears on the books of the Corporation; and such notice shall be deemed to be given at the time when the same shall be thus deposited in the mail.

ARTICLE VII - INDEMNIFICATION

Section 1. Each person who is or was a Director, Officer, Employee or Agent of the Corporation, or is or was serving at the request of the Corporation as a Director, Officer, Employee, Trustee or Agent of another corporation, domestic or foreign, non-profit or for profit, partnership, joint venture, trust or other enterprise, shall be indemnified by the Corporation as follows:

(a) If such person was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the Corporation, by reason of his being or having been such Director, Officer, Trustee, Agent or Employee, such person shall be indemnified against expenses, including attorney’s fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be

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in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, he had no reasonable cause to believe his conduct was unlawful; provided the termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contenders or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding shall also not create a presumption that the person had reasonable cause to believe that his conduct was unlawful; or

(b) If such person was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of his having been such Director, Officer, Trustee, Agent or Employee, such person shall be indemnified against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of either (i) any claim, issue or matter to which such person is adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless, and only to the extent that, the Court of Common Pleas or the court in which such action or suit was brought determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the Court of Common Pleas or such other court shall deem proper or (ii) any action or suit involving a Director in which the only liability asserted against such director is pursuant to Section 1701.95 of the Ohio Revised Code.

Section 2. To the extent that such a Director, Officer, Trustee, Agent or Employee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Paragraph (a) or (b) of Section 1 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses, including attorney’s fees, actually and reasonably incurred by him in connection with the action, suit or proceeding.

Section 3. In all cases in which the Director, Officer, Trustee, Agent or Employee may be entitled to indemnification under Paragraphs (a) or (b) of Section 1 of this Article, any indemnification, unless ordered by a court, shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, Officer, Trustee, Employee or Agent is proper in the circumstances because he has met the standards of conduct set forth in Paragraph (a) or (b) of Section I of this Article, whichever is applicable. Such determination shall be made as follows:

(a) By a majority vote of a quorum of the Corporation’s Directors who were not and are not parties to or threatened with any such action, suit or proceeding; or

(b) if such a quorum is not obtainable or if a majority of a quorum of disinterested Directors so directs, in a written opinion by independent legal counsel other than an attorney or a firm having associated with it an attorney who has been retained by or who has performed services for the Corporation or any person to be indemnified within the past five (5) years; or

(c) By the shareholders; or

(d) By the Court of Common Pleas or the court in which such action, suit or proceeding was brought.

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Any determination made by the disinterested Directors under Paragraph (a) or by independent legal counsel under Paragraph (b) of Section 3 of this Article shall be promptly communicated to the person who threatened or brought the action or suit by or in the right of the Corporation, if the expenses for which indemnification has been sought were incurred in an action or suit by or in the right of the Corporation.

Section 4. In the case of an action, suit or proceeding involving a Director, unless the only liability asserted against such Director in a proceeding referred to in paragraphs (a) or (b) of Section I of this Article is pursuant to Section 1701.95 of the Ohio Revised Code, the Corporation shall pay expenses, including attorney’s fees, incurred by a Director in defending such an action, suit or proceeding as they are incurred in advance of the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the Director in which such Director agrees to both (i) repay such amount if it is proven by clear and convincing evidence in a court of competent jurisdiction that his action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to the Corporation or undertaken with reckless disregard to the best interests of the Corporation, and (ii) reasonably cooperate with the Corporation concerning the action, suit or proceeding.

Section 5. The Corporation may pay expenses, including attorney’s fees incurred in defending any action, suit or proceeding referred to in Paragraph (a) or (b) of Section 1 of this Article as they are incurred in advance of the final disposition of such action, suit or proceeding, as authorized by the Directors in the specific case upon receipt of an undertaking by or on behalf of the Trustee, Director, Officer, Employee or Agent to repay such amount if it ultimately is determined that he is not entitled to be indemnified by the Corporation as authorized in this Article.

Section 6. The rights of indemnification herein authorized shall be severable, shall not be deemed exclusive of, and shall be in addition to, any other rights granted to those seeking indemnification under the Articles of Incorporation or any agreement, vote of shareholders or disinterested Directors, or otherwise, both as to actions in the official capacity of the person seeking indemnity, and as to actions in another capacity while holding such office and shall continue as to a person who has ceased to be a Director, Officer, Trustee, Agent or Employee and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 7. The Corporation may purchase and maintain insurance or furnish similar protection, including but not limited to, trust funds, letters of credit or self-insurance, on behalf of or for any person who is or was a Director, Officer, Employee or Agent of the Corporation, or is or was serving at the request of the Corporation as a Director, Officer, Trustee, Employee or Agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under this Article. Insurance may be purchased from or maintained with a person in which the Corporation has a financial interest.

Section 8. The Corporation’s authority to indemnify persons pursuant to paragraphs (a) and (b) of Section 1 of this Article does not limit the payment of expenses as they are incurred, indemnification, insurance or other protection that may be provided pursuant to Sections 5, 6, and 7 of this Article; paragraphs (a) and (b) of Section I of this Article do not create any obligation to repay or return payments made by the Corporation pursuant to Sections 5, 6, or 7 of this Article.

12

Section 9. As used in this Article, references to “Corporation” include all constituent corporations in a consolidation or merger and the new or surviving corporation, so that any person who is or was aDirector, Officer, Employee or Agent of such a constituent corporation, or is or was serving at the request of such constituent corporation as a Director, Officer, Trustee, Employee or Agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust or other enterprise shall stand in the same position under this Article with respect to the new or surviving corporation as he would if he had served the new or surviving corporation in the same capacity.

Section 10. The provisions of this Article shall apply to actions, suits and proceedings, whether civil (including, but not limited to, actions by or in the right of the Corporation), criminal, administrative or investigative, commenced or threatened after the adoption of this Article, whether arising from acts or omissions to act occurring before or after its adoption.

Section 11. Notwithstanding the foregoing, the Corporation shall, to the extent permitted by the Ohio Revised Code, as amended from time to time, indemnify and reimburse all persons whom it may indemnify and reimburse pursuant thereto. The indemnification provided for in this Article shall not be deemed exclusive of any other rights to which those entitled to receive indemnification or reimbursement hereunder may be entitled under the Articles of the Corporation, agreement, vote of shareholders or disinterested directors or otherwise.

ARTICLE VIII - FISCAL YEAR

The fiscal year of the Corporation shall be determined by the Directors of the Corporation.

ARTICLE IX - AMENDMENTS

These Regulations may be amended or repealed or new Regulations adopted at any meeting of shareholders by the affirmative vote of the holders of record of shares entitling them to exercise two-thirds of the voting power of the Corporation on such proposal, or may be adopted without a meeting by the written consent of the holders of shares entitling them to exercise two-thirds of the voting power on such proposal. These Regulations may also be amended by the Directors to the extent permitted by the Ohio General Corporation Law.

October 9, 2020

13

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, Ramesh Srinivasan, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: October 28, 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, William David Wood III, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: October 28, 2020

By:	/s/ William David Wood III
	William David Wood III
	Chief Financial Officer
	(Principal Financial Officer)

EX-31.3

Exhibit 31.3

CERTIFICATION OF THE CORPORATE CONTROLLER AND TREASURER

I, Chris J. Robertson, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: October 28, 2020

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

EX-32

Exhibit 32

CERTIFICATION

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

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

1. The Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2020 (the “ Report ”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

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

Date: October 28, 2020                 

By:	/s/ Ramesh Srinivasan
	Ramesh Srinivasan
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ William David Wood III
	William David Wood III
	Chief Financial Officer
	(Principal Financial Officer)
	/s/ Chris J. Robertson
	Chris J. Robertson
	Corporate Controller and Treasurer
	(Principal Accounting Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Sep. 30, 2020	Oct. 23, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2020
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
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		23,591,213
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	false
Trading Symbol	AGYS
Title of 12(b) Security	Common Shares, without par value
Security Exchange Name	NASDAQ
Document Quarterly 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

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Mar. 31, 2020
Current assets:
Cash and cash equivalents	$ 85,706	$ 46,653
Accounts receivable, net of allowance for expected credit losses of $1,209 and for doubtful accounts of $1,634, respectively	20,173	35,869
Contract assets	2,475	2,125
Inventories	2,174	3,887
Prepaid expenses and other current assets	5,016	4,874
Total current assets	115,544	93,408
Property and equipment, net	10,108	12,230
Operating lease right-of-use assets	13,023	13,829
Goodwill	19,622	19,622
Intangible assets, net	8,400	8,400
Deferred income taxes, non-current	1,040	764
Other non-current assets	5,977	6,309
Total assets	173,714	154,562
Current liabilities:
Accounts payable	3,176	13,403
Contract liabilities	30,755	42,244
Accrued liabilities	7,185	9,033
Operating lease liabilities, current	4,638	4,719
Finance lease obligations, current	23	24
Total current liabilities	45,777	69,423
Deferred income taxes, non-current	889	880
Operating lease liabilities, non-current	9,923	10,617
Finance lease obligations, non-current	14	25
Other non-current liabilities	3,728	1,860
Commitments and contingencies (see Note 8)
Shareholders' equity:
Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 31,606,831 shares issued; and 23,588,178 and 23,609,398 shares outstanding at September 30, 2020 and March 31, 2020, respectively	9,482	9,482
Treasury shares, 8,018,653 and 7,997,433 at September 30, 2020 and March 31, 2020, respectively	(2,406)	(2,401)
Capital in excess of stated value	8,151	5,491
Retained earnings	62,645	58,984
Accumulated other comprehensive income	52	201
Total shareholders' equity	77,924	71,757
Total liabilities and shareholders' equity	173,714	$ 154,562
Series A Convertible Preferred Stock [Member]
Liabilities Noncurrent:
Series A convertible preferred stock, no par value	$ 35,459

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2020	Mar. 31, 2020
Allowance for doubtful accounts receivable	$ 1,209	$ 1,634
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	23,588,178	23,609,398
Treasury shares	8,018,653	7,997,433
Series A Convertible Preferred Stock [Member]
Preferred Stock, No Par Value

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Net revenue:
Total net revenue	$ 34,360	$ 40,722	$ 64,166	$ 79,111
Cost of goods sold:
Total cost of goods sold	11,206	20,505	22,463	38,879
Gross profit	$ 23,154	$ 20,217	$ 41,703	$ 40,232
Gross Profit Ratio	67.40%	49.60%	65.00%	50.90%
Operating expenses:
Product development	$ 8,257	$ 10,778	$ 16,524	$ 20,842
Sales and marketing	2,350	4,890	4,951	9,389
General and administrative	5,217	6,038	10,936	11,911
Depreciation of fixed assets	715	707	1,438	920
Amortization	508	614	968	1,292
Severance and other charges	7	190	1,210	421
Legal settlements, net	50	(119)	50	(119)
Total operating expense	17,104	23,098	36,077	44,656
Operating income (loss)	6,050	(2,881)	5,626	(4,424)
Other (income) expense:
Interest income	(28)	(114)	(49)	(194)
Interest expense	2	2	3	3
Other expense, net	88	108	194	193
Income (loss) before taxes	5,988	(2,877)	5,478	(4,426)
Income tax expense	121	41	128	67
Net income (loss)	5,867	(2,918)	5,350	(4,493)
Series A convertible preferred stock issuance costs	(94)		(1,031)
Series A convertible preferred stock dividends	(459)		(658)
Net income (loss) attributable to common shareholders	$ 5,314	$ (2,918)	$ 3,661	$ (4,493)
Weighted average shares outstanding - basic	23,424	23,238	23,415	23,225
Net income (loss) per share - basic:	$ 0.23	$ (0.13)	$ 0.16	$ (0.19)
Weighted average shares outstanding - diluted	23,866	23,238	23,849	23,225
Net income (loss) per share - diluted:	$ 0.22	$ (0.13)	$ 0.15	$ (0.19)
Products
Net revenue:
Total net revenue	$ 6,559	$ 11,873	$ 11,798	$ 22,742
Cost of goods sold:
Total cost of goods sold	2,950	9,794	5,965	18,417
Support, maintenance and subscription services
Net revenue:
Total net revenue	22,304	20,329	42,801	40,411
Cost of goods sold:
Total cost of goods sold	4,555	4,654	8,860	8,834
Professional services
Net revenue:
Total net revenue	5,497	8,520	9,567	15,958
Cost of goods sold:
Total cost of goods sold	$ 3,701	$ 6,057	$ 7,638	$ 11,628

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ 5,867	$ (2,918)	$ 5,350	$ (4,493)
Other comprehensive income (loss), net of tax:
Unrealized foreign currency translation adjustments	(124)	156	(149)	61
Total comprehensive income (loss)	$ 5,743	$ (2,762)	$ 5,201	$ (4,432)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Operating activities
Net income (loss)	$ 5,867	$ (2,918)	$ 5,350	$ (4,493)
Adjustments to reconcile income (loss) from operations to net cash provided by operating activities
Depreciation	715	707	1,438	920
Amortization of intangibles	508	614	968	1,292
Amortization of developed technology		3,100		6,303
Deferred income taxes			(269)	(239)
Share-based compensation	1,256	1,345	2,682	1,827
Changes in operating assets and liabilities			(3,527)	(4,376)
Net cash provided by operating activities			6,642	1,234
Investing activities
Capital expenditures			(471)	(1,940)
Additional investments in corporate-owned life insurance policies			(2)	(2)
Net cash used in investing activities			(473)	(1,942)
Financing activities
Repurchase of common shares to satisfy employee tax withholding			(959)	(1,053)
Series A convertible preferred stock issuance proceeds, net of issuance costs			33,969
Payment of preferred stock dividends			(199)
Principal payments under long-term obligations			(12)	(12)
Net cash provided by (used in) financing activities			32,799	(1,065)
Effect of exchange rate changes on cash			85	(83)
Net increase (decrease) in cash and cash equivalents			39,053	(1,856)
Cash and cash equivalents at beginning of period			46,653	40,771
Cash and cash equivalents at end of period	$ 85,706	$ 38,915	$ 85,706	$ 38,915

XML

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - 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, 2019	$ 100,622	$ 9,482	$ (2,433)	$ 781	$ 93,051	$ (259)
Beginning balance (in shares) at Mar. 31, 2019		31,607	(8,105)
Share-based compensation	2,295			2,295
Restricted shares issued, net			$ 43	(43)
Restricted shares issued, net (in shares)			144
Shares issued upon exercise of SSARs			$ 5	(5)
Shares issued upon exercise of SSARs (in shares)			17
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares	(120)		$ (1)	(119)
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares (in shares)			(5)
Net income (loss)	(4,493)				(4,493)
Unrealized translation adjustments	61					61
Ending balance at Sep. 30, 2019	98,365	$ 9,482	$ (2,386)	2,909	88,558	(198)
Ending balance (in shares) at Sep. 30, 2019		31,607	(7,949)
Beginning balance at Jun. 30, 2019	99,923	$ 9,482	$ (2,379)	1,698	91,476	(354)
Beginning balance (in shares) at Jun. 30, 2019		31,607	(7,927)
Share-based compensation	1,228			1,228
Restricted shares issued, net			$ (8)	8
Restricted shares issued, net (in shares)			(24)
Shares issued upon exercise of SSARs			$ 1	(1)
Shares issued upon exercise of SSARs (in shares)			3
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares	(24)			(24)
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares (in shares)			(1)
Net income (loss)	(2,918)				(2,918)
Unrealized translation adjustments	156					156
Ending balance at Sep. 30, 2019	98,365	$ 9,482	$ (2,386)	2,909	88,558	(198)
Ending balance (in shares) at Sep. 30, 2019		31,607	(7,949)
Beginning balance at Mar. 31, 2020	71,757	$ 9,482	$ (2,401)	5,491	58,984	201
Beginning balance (in shares) at Mar. 31, 2020		31,607	(7,997)
Share-based compensation	2,835			2,835
Restricted shares issued, net			$ (12)	12
Restricted shares issued, net (in shares)			(41)
Shares issued upon exercise of SSARs			$ 9	(9)
Shares issued upon exercise of SSARs (in shares)			28
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares	(180)		$ (2)	(178)
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares (in shares)			(9)
Net income (loss)	5,350				5,350
Series A convertible preferred stock issuance costs	(1,031)				(1,031)
Series A convertible preferred stock dividends	(658)				(658)
Unrealized translation adjustments	(149)					(149)
Ending balance at Sep. 30, 2020	77,924	$ 9,482	$ (2,406)	8,151	62,645	52
Ending balance (in shares) at Sep. 30, 2020		31,607	(8,019)
Beginning balance at Jun. 30, 2020	71,350	$ 9,482	$ (2,399)	6,760	57,331	176
Beginning balance (in shares) at Jun. 30, 2020		31,607	(7,994)
Share-based compensation	1,409			1,409
Restricted shares issued, net			$ (8)	8
Restricted shares issued, net (in shares)			(27)
Shares issued upon exercise of SSARs			$ 1	(1)
Shares issued upon exercise of SSARs (in shares)			3
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares	(25)			(25)
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares (in shares)			(1)
Net income (loss)	5,867				5,867
Series A convertible preferred stock issuance costs	(94)				(94)
Series A convertible preferred stock dividends	(459)				(459)
Unrealized translation adjustments	(124)					(124)
Ending balance at Sep. 30, 2020	$ 77,924	$ 9,482	$ (2,406)	$ 8,151	$ 62,645	$ 52
Ending balance (in shares) at Sep. 30, 2020		31,607	(8,019)

XML

Nature of Operations and Financial Statement Presentation

6 Months Ended

Sep. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Nature of Operations and Financial Statement Presentation

1. Nature of Operations and Financial Statement Presentation

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. 

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The outbreak has reached all geographic regions in which we do business, and government authorities around the world have implemented extensive measures attempting to contain the spread and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, closures of non-essential businesses, and social distancing requirements. The global spread of COVID-19 and the actions taken in response have negatively impacted us, our customers, our suppliers and the many communities in which we do business. The overall extent and duration of economic and business disruption is not currently known. In response to these challenges, we quickly adjusted our business policies and practices for employees to work from home and have taken other measures to continue our operations with safety as our priority.

We continuously monitor and assess the impact of the COVID-19 pandemic, including recommendations and orders from government and public health authorities. We are working to help our customers maintain their operations during this difficult time while managing our teams to be prepared for continuously changing demand for our products and services.

See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview— Recent Developments” of this report for a more detailed discussion of the impact of COVID-19 on our business.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include our accounts consolidated with our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on March 31st. References to a particular year refer to the fiscal year ending in March of that year. For example, fiscal 2021 refers to the fiscal year ending March 31, 2021.

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

The Condensed Consolidated Balance Sheet as of September 30, 2020, as well as the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Statements of Shareholders’ Equity for the three months and six months ended September 30, 2020 and 2019, and Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2020 and 2019, are unaudited. However, these financial statements have been prepared on the same basis as those in the audited annual financial statements, except for the recently adopted accounting pronouncements described below. In the opinion of management, all adjustments of a recurring nature necessary to fairly state the results of operations, financial position, and cash flows have been made.

These unaudited interim financial statements should be read together with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended March 31, 2020, filed with the Securities and Exchange Commission (SEC) on May 22, 2020.

Use of estimates

Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may 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.

Considering the currently unknown extent and duration of the COVID-19 pandemic, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply to certain of our significant accounting policies. We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts COVID-19 as of September 30, 2020 and through the date of this report. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

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Summary of Significant Accounting Policies

6 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

A detailed description of our significant accounting policies can be found in the audited financial statements for the fiscal year ended March 31, 2020, included in our Annual Report on Form 10-K. We describe our accounting policy for Series A convertible preferred stock further below. There have been no other material changes to our significant accounting policies from those disclosed therein. 

Adopted and Recently Issued Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. By removing the separation model, a convertible debt instrument will be reported as a single liability instrument with no separate accounting for embedded conversion features. This new standard also removes certain settlement conditions that are required for contracts to qualify for equity classification and simplifies the diluted earnings per share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations. The new standard will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We are currently assessing the impact of adopting this standard on our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which affects general principles within Topic 740, Income Taxes, and is meant to simplify and reduce the cost of accounting for income taxes. The new standard will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently reviewing this standard but do not expect it will have a material impact on our 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. We adopted ASU 2018-15 as of April 1, 2020 with no impact on our condensed 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. We adopted ASU 2018-13 as of April 1, 2020 with no impact on our condensed 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 a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. We adopted ASU 2017-04 as of April 1, 2020 with no impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. This new standard requires entities to measure expected credit losses for certain financial assets held at the reporting date using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and

reasonable and supportable forecasts. The Company’s financial instruments within the scope of this guidance primarily includes accounts receivable and contract assets. We adopted ASU 2016-13 as of April 1, 2020 under the modified retrospective approach. As a result, comparative information has not been restated and continues to be reported under accounting standards applicable for those periods. The adoption of ASU 2016-13 did not have a material impact on our condensed consolidated financial statements, including accounting policies, given our limited historical write-off activity.

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Revenue Recognition

6 Months Ended

Sep. 30, 2020

Revenue From Contract With Customer [Abstract]

Revenue Recognition

3. Revenue Recognition

Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer purchase order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Performance obligations specific to each individual contract are defined within the terms of each purchase 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 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 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.

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 $6.6 million and $11.8 million, and $11.9 million and $22.7 million for the first three and six months ended September 30, 2020 and 2019. Revenue recognized over time (support, maintenance and subscription services and professional services) totaled $27.8 million and $52.4 million, and $28.8 million and $56.4 million for the three and six months ended September 30, 2020 and 2019, respectively.

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 $12.1 million and $10.5 million for the three months ended September 30, 2020 and 2019, respectively, and $30.5 million and $26.0 million for the six months ended September 30, 2020 and 2019, respectively. Because the right to the transaction became unconditional, we transferred to accounts receivable from contract assets at the beginning of the period, $0.2 million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively, and $1.7 million and $2.4 million for the six months ended September 30, 2020 and 2019, respectively.  

Our arrangements are for a period of one year or less. As a result, unsatisfied performance obligations as of September 30, 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. Other sales commission expenses have a period of benefit of one year or less and are therefore expensed as incurred in line with the practical expedient elected.

We had $3.1 million and $3.4 million of capitalized sales incentive costs as of September 30, 2020 and 2019, respectively. These balances are included in other non-current assets on our condensed consolidated balance sheets. During the three and six months ended September 30, 2020, we expensed $0.7 million and $1.3 million, respectively, of sales commissions, which included amortization of capitalized amounts of $0.4 million and $0.7 million, respectively. During the comparable periods ending September 30, 2019, we expensed $1.2 million and $2.2 million, respectively, of sales commissions, which included amortization of capitalized amounts of $0.3 million and $0.7 million, respectively. These expenses are included in operating expenses – sales and marketing in our condensed consolidated statement of operations. All other costs to obtain a contract are not considered incremental and therefore are expensed as incurred.

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Intangible Assets and Software Development Costs

6 Months Ended

Sep. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets and Software Development Costs

4. Intangible Assets and Software Development Costs

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

	September 30 and March 31, 2020
	Gross								Net
	carrying		Accumulated			Accumulated			carrying
(In thousands)	amount		amortization			Impairment			amount
Amortized intangible assets:
Customer relationships	$	10,775	$	(10,775	)	$	—		$	—
Non-competition agreements		2,700		(2,700	)		—			—
Developed technology		10,398		(10,398	)		—			—
Trade names		230		(230	)		—			—
Patented technology		80		(80	)		—			—
		24,183		(24,183	)		—			—
Trade names		8,400	N/A				—			8,400
Total intangible assets	$	32,583	$	(24,183	)	$	—		$	8,400
(In thousands)
Software development costs	$	67,541	$	(45,535	)	$	(22,006	)	$	—

As of March 31, 2020, management determined the net realizable value of the remaining 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 for the year ended March 31, 2020. The impact of the COVID-19 pandemic on the hospitality industry resulted in economic conditions that made 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 year ended March 31, 2020 reduced the carry value of capitalized software development costs to zero with no remaining amortization expense to be recognized in future periods.

Amortization expense for software development costs related to assets to be sold, leased, or otherwise marketed was $3.1 million and $6.3 million for the three and six months ended September 30, 2019. These charges are included as costs of goods sold - products in our condensed consolidated statements of operations.

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Additional Balance Sheet Information

6 Months Ended

Sep. 30, 2020

Balance Sheet Related Disclosures [Abstract]

Additional Balance Sheet Information

5. Additional Balance Sheet Information

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

	September 30, 2020		March 31, 2020
Accrued liabilities:
Salaries, wages, and related benefits	$	4,793	$	6,945
Other taxes payable		1,835		1,649
Accrued legal settlements		50		—
Severance liabilities		100		32
Professional fees		93		50
Other		314		357
Total	$	7,185	$	9,033
Other non-current liabilities:
Uncertain tax positions	$	1,116	$	1,103
Asset retirement obligations		170		170
Payroll taxes deferred under CARES Act		1,287		—
Employee benefit obligations		1,081		511
Other		74		76
Total	$	3,728	$	1,860

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Supplemental Disclosures of Cash Flow Information

6 Months Ended

Sep. 30, 2020

Supplemental Cash Flow Elements [Abstract]

Supplemental Disclosures of Cash Flow Information

6. Supplemental Disclosures of Cash Flow Information

Additional information related to the consolidated statements of cash flows is as follows:

	Six Months Ended September 30,
(In thousands)		2020			2019
Cash (receipts) for interest, net	$	(46	)	$	(191	)
Cash payments for income taxes, net		167			247
Cash payments for operating leases		3,002			2,210
Cash payments for finance leases		14			18
Accrued capital expenditures		12			125

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Income Taxes

6 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

The following table compares our income tax expense and effective tax rates for the three and six months ended September 30, 2020 and 2019:

	Three Months Ended September 30,						Six Months Ended September 30,
(Dollars in thousands)	2020			2019			2020			2019
Income tax expense	$	121		$	41		$	128		$	67
Effective tax rate		2.0	%		(1.4	)%		2.3	%		(1.5	)%

For the three and six months ended September 30, 2020, the effective tax rate was different than the statutory tax rate due primarily to the utilization of net operating losses that were offset by decreases in the valuation allowances in the U.S, certain foreign and state tax effects and other U.S. permanent book to tax differences. For the three and six months ended September 30, 2019, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets in the U.S. and certain foreign jurisdictions, which were offset by increases in the valuation allowance, certain foreign and state tax effects and other U.S. permanent book to tax differences.

Because of our losses in prior periods, we have recorded and maintain a valuation allowance offsetting substantially all of our deferred tax assets in the U.S. and certain foreign jurisdictions, as management believes that it is more likely than not that we will not realize the benefits of these deductible differences. 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.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). 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.

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Commitments and Contingencies

6 Months Ended

Sep. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitments and Contingencies

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

On April 6, 2012, Ameranth, Inc. filed a complaint against us in the U.S. District Court of 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. All but one of the patents at issue in the case were invalidated by the U.S. Court of Appeals for the Federal Circuit in 2016. In September 2018, the District Court found the one surviving Ameranth patent invalid and granted summary judgment in favor of the movant co-defendants. 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. Ameranth’s writ of certiorari to the United States Supreme Court was denied in October 2020. Subsequently, Ameranth filed further pleading amendments and discovery requests with the District Court, which were opposed by the defendants.

We were not a party to the appeal, and it is currently unclear what impact the summary judgement ruling 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.

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Income (Loss) Per Share

6 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Income (Loss) Per Share

9. Income (Loss) per Share

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

	Three Months Ended September 30,						Six Months Ended September 30,
(In thousands, except per share data)	2020			2019			2020			2019
Numerator:
Net income (loss)	$	5,867		$	(2,918	)	$	5,350		$	(4,493	)
Series A convertible preferred stock issuance costs		(94	)		—			(1,031	)		—
Series A convertible preferred stock dividends		(459	)		—			(658	)		—
Net income (loss) attributable to common shareholders	$	5,314		$	(2,918	)	$	3,661		$	(4,493	)
Denominator:
Weighted average shares outstanding - basic		23,424			23,238			23,415			23,225
Dilutive SSARs		342			—			329			—
Dilutive unvested restricted shares		100			—			105			—
Weighted average shares outstanding - diluted		23,866			23,238			23,849			23,225
Income (loss) per share - basic:	$	0.23		$	(0.13	)	$	0.16		$	(0.19	)
Income (loss) per share - diluted:	$	0.22		$	(0.13	)	$	0.15		$	(0.19	)
Anti-dilutive stock options, SSARs, restricted shares,    performance shares and preferred shares		2,415			1,494			2,418			1,386

Basic income (loss) per share is computed as net income (loss) attributable to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes 161,042 and 418,854 of restricted shares at September 30, 2020 and 2019, respectively, as these shares were issued but were not vested and therefore, not considered outstanding for purposes of computing basic income (loss) per share at the balance sheet dates.

Diluted income (loss) per share includes the effect of all potentially dilutive securities on earnings per share. We have stock-settled appreciation rights ("SSARs"), unvested restricted shares, unvested performance shares, and preferred 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.

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Share-based Compensation

6 Months Ended

Sep. 30, 2020

Share Based Compensation [Abstract]

Share-based Compensation

10. Share-based Compensation

We may grant non-qualified stock options, incentive stock options, SSARs, restricted shares, and restricted share units under our shareholder-approved 2016 Stock Incentive Plan ("2016 Plan") for up 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 ("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.

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

	Three Months Ended September 30,				Six Months Ended September 30,
(In thousands)	2020		2019		2020		2019
Product development	$	239	$	672	$	411	$	940
Sales and marketing		34		51		70		113
General and administrative		983		622		2,201		774
Total share-based compensation expense	$	1,256	$	1,345	$	2,682	$	1,827

Stock-Settled Appreciation Rights

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

The following table summarizes the activity during the six months ended September 30, 2020 for SSARs awarded under the 2011 and 2016 Plans:

	Number of Rights			Weighted-Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
(In thousands, except share and per share data)				(per right)		(in years)
Outstanding at April 1, 2020		1,644,888		$	21.07
Exercised		(63,872	)		11.64
Forfeited		(11,430	)		18.65
Expired		(1,522	)		14.22
Outstanding at September 30, 2020		1,568,064		$	21.48		4.4	$	11,674
Exercisable at September 30, 2020		973,110		$	13.82		3.7	$	11,214
Vested and expected to vest at September 30, 2020		1,568,064		$	21.48		4.4	$	11,674

As of September 30, 2020, total unrecognized share-based compensation expense related to unvested SSARs was $3.4 million, which is expected to be recognized over a weighted-average vesting period of 2.0 years.

Restricted Shares

We granted shares to certain of our Directors, executives and key employees, the vesting of which is service-based. The following table summarizes the activity during the six months ended September 30, 2020 for restricted shares awarded under the 2011 and 2016 Plans:

	Number of Shares			Weighted-Average Grant-Date Fair Value
(In thousands, except share and per share data)				(per share)
Outstanding at April 1, 2020		178,462		$	19.89
Forfeited		(17,420	)		19.03
Outstanding at September 30, 2020		161,042		$	19.98

The weighted-average grant date fair value of the restricted shares is determined based upon the closing price of our common shares on the grant date. As of September 30, 2020, total unrecognized share-based compensation expense related to unvested restricted stock was $1.2 million, which is expected to be recognized over a weighted-average vesting period of 1.4 years.

Performance Shares

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

The following table summarizes the activity during the six months ended September 30, 2020 for the performance shares awarded under the 2016 Plan:

(In thousands, except share and per share data)	Number of Shares
Outstanding at April 1, 2020		30,120
Granted		—
Vested		(6,714	)
Forfeited		(23,406	)
Outstanding at September 30, 2020		—

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Preferred Stock

6 Months Ended

Sep. 30, 2020

Equity [Abstract]

Preferred Stock

11. Preferred Stock

Series A Convertible Preferred Stock

On May 22, 2020, we completed the sale of 1,735,457 shares of our preferred stock, without par value, designated as “Series A Convertible Preferred Stock” (the “Convertible Preferred Stock”) to MAK Capital Fund L.P. and MAK Capital Distressed Debt Fund I, LP (the “Holders”) each, in its capacity as a designee of MAK Capital One LLC (the “Purchaser”), pursuant to the terms of the Investment Agreement, dated as of May 11, 2020, between the Company and the Purchaser, for an aggregate purchase price of $35 million. We incurred issuance costs of $1.0 million. We added all issuance costs that were netted against the proceeds upon issuance of the Convertible Preferred Stock to its redemption value. As disclosed in our Annual Report for the fiscal year ended March 31, 2020, Michael Kaufman, the Chairman of the Company’s Board of Directors, is the Chief Executive Officer of MAK Capital One LLC.

Accounting Policy

We classify convertible preferred stock as temporary equity in the condensed consolidated balance sheets due to certain contingent redemption clauses that are at the election of the Holders. We increase the carrying value of the convertible preferred stock to its redemption value (described below) for all undeclared dividends using the interest method.

The Convertible Preferred Stock has the following rights, preferences and restrictions (the Certificate of Amendment included as Exhibit 3.1 to our Current Report on Form 8-K, filed on May 26, 2020, defines all terms not otherwise defined below):

Voting

The Holders will be entitled to one vote for each share of Convertible Preferred Stock upon all matters presented to the common shareholders of the Company, and except as otherwise provided by the Amended Articles of Incorporation of the Company or required by law, the Holders and common shareholders will vote together as one class on all matters. Additionally, certain matters specific to the Convertible Preferred Stock will require the approval of two-thirds of the outstanding Convertible Preferred Stock, voting as a separate class.

Liquidation Preference

Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the purchase price paid by the Purchaser, plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the Holder would have been entitled to receive at such time if the Convertible Preferred Stock were converted into common stock.

Redemption

On and after the fifth anniversary of the date the Convertible Preferred Stock is initially issued, the Company will have the right, and the Holders will have the right to require the Company, in each case, at the initiating party’s election, to redeem all, but not less than all, of the then-outstanding Convertible Preferred Stock for an amount equal to the Liquidation Preference.

Conversion

Each Holder will have the right, at its option, to convert its Convertible Preferred Stock, in whole or in part, into fully paid and non-assessable shares of common stock at a conversion price equal to $20.1676 per share (as may be adjusted from time to time, as described in the Certificate of Amendment).

Subject to certain conditions, the Company may, at its option, require conversion of all of the outstanding shares of Convertible Preferred Stock to common stock if, at any time after November 22, 2023, the daily volume-weighted average price of the Company’s common stock is at least 150% of the conversion price for at least 20 trading days during the 30 consecutive trading days immediately preceding the date the Company notifies the Holders of the election to convert.

Dividends

The Holders are entitled to dividends on the Liquidation Preference at the rate of 5.25% per annum, payable semi-annually either (i) 50% in cash and 50% in kind as an increase in the then-current Liquidation Preference or (ii) 100% in cash, at the option of the Company. The Holders are not entitled to participate in dividends declared or paid on the common stock on an as-converted basis; however, certain anti-dilution adjustments to the Convertible Preferred Stock may be made in the event of such dividends.

The Convertible Preferred Stock ranks senior to the Company’s common stock with respect to dividends and distributions on liquidation, winding-up and dissolution. Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the Liquidation Preference and (ii) the amount that the Holder would have been entitled to receive at such time if the Convertible Preferred Stock were converted into common stock.

Change in Control Events

Upon certain change of control events involving the Company, the Company has the right, and each Holder has the right, in each case, at the initiating party’s election, to require the Company to repurchase all or a portion of its then-outstanding shares of Convertible Preferred Stock for cash consideration equal to (i) 150% of the then-current Liquidation Preference for a change of control occurring prior to the third anniversary of the date the Convertible Preferred Stock is initially issued, (ii) 125% of the then-current Liquidation Preference for a change of control occurring on or following the third anniversary and prior to the fifth anniversary of the date the Convertible Preferred Stock is initially issued and (iii) 100% of the then-current Liquidation Preference for a change of control occurring on or following the fifth anniversary of the date the Convertible Preferred Stock is initially issued.

Standstill Restrictions

The Purchaser and its affiliates are subject to certain customary standstill provisions that restrict them from, among other actions, acquiring additional securities of the Company if such acquisition would result in the Purchaser beneficially owning in excess of 25% of the outstanding shares of common stock of the Company until the later of the third anniversary of the date the Convertible Preferred Stock is initially issued and the date on which the Purchaser no longer has record or beneficial ownership of common stock and Convertible Preferred Stock that constitute at least 10% of the outstanding common stock.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Adopted and Recently Issued Accounting Pronouncements

Adopted and Recently Issued Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. By removing the separation model, a convertible debt instrument will be reported as a single liability instrument with no separate accounting for embedded conversion features. This new standard also removes certain settlement conditions that are required for contracts to qualify for equity classification and simplifies the diluted earnings per share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations. The new standard will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We are currently assessing the impact of adopting this standard on our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which affects general principles within Topic 740, Income Taxes, and is meant to simplify and reduce the cost of accounting for income taxes. The new standard will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently reviewing this standard but do not expect it will have a material impact on our 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. We adopted ASU 2018-15 as of April 1, 2020 with no impact on our condensed 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. We adopted ASU 2018-13 as of April 1, 2020 with no impact on our condensed 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 a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. We adopted ASU 2017-04 as of April 1, 2020 with no impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. This new standard requires entities to measure expected credit losses for certain financial assets held at the reporting date using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and

reasonable and supportable forecasts. The Company’s financial instruments within the scope of this guidance primarily includes accounts receivable and contract assets. We adopted ASU 2016-13 as of April 1, 2020 under the modified retrospective approach. As a result, comparative information has not been restated and continues to be reported under accounting standards applicable for those periods. The adoption of ASU 2016-13 did not have a material impact on our condensed consolidated financial statements, including accounting policies, given our limited historical write-off activity.

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Intangible Assets and Software Development Costs (Tables)

6 Months Ended

Sep. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

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

	September 30 and March 31, 2020
	Gross								Net
	carrying		Accumulated			Accumulated			carrying
(In thousands)	amount		amortization			Impairment			amount
Amortized intangible assets:
Customer relationships	$	10,775	$	(10,775	)	$	—		$	—
Non-competition agreements		2,700		(2,700	)		—			—
Developed technology		10,398		(10,398	)		—			—
Trade names		230		(230	)		—			—
Patented technology		80		(80	)		—			—
		24,183		(24,183	)		—			—
Trade names		8,400	N/A				—			8,400
Total intangible assets	$	32,583	$	(24,183	)	$	—		$	8,400
(In thousands)
Software development costs	$	67,541	$	(45,535	)	$	(22,006	)	$	—

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Additional Balance Sheet Information (Tables)

6 Months Ended

Sep. 30, 2020

Balance Sheet Related Disclosures [Abstract]

Schedule of Additional information related to the Condensed Consolidated Balance Sheets

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

	September 30, 2020		March 31, 2020
Accrued liabilities:
Salaries, wages, and related benefits	$	4,793	$	6,945
Other taxes payable		1,835		1,649
Accrued legal settlements		50		—
Severance liabilities		100		32
Professional fees		93		50
Other		314		357
Total	$	7,185	$	9,033
Other non-current liabilities:
Uncertain tax positions	$	1,116	$	1,103
Asset retirement obligations		170		170
Payroll taxes deferred under CARES Act		1,287		—
Employee benefit obligations		1,081		511
Other		74		76
Total	$	3,728	$	1,860

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Supplemental Disclosures of Cash Flow Information (Tables)

6 Months Ended

Sep. 30, 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:

	Six Months Ended September 30,
(In thousands)		2020			2019
Cash (receipts) for interest, net	$	(46	)	$	(191	)
Cash payments for income taxes, net		167			247
Cash payments for operating leases		3,002			2,210
Cash payments for finance leases		14			18
Accrued capital expenditures		12			125

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Income Taxes (Tables)

6 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Effective tax rates from continuing operations

The following table compares our income tax expense and effective tax rates for the three and six months ended September 30, 2020 and 2019:

	Three Months Ended September 30,						Six Months Ended September 30,
(Dollars in thousands)	2020			2019			2020			2019
Income tax expense	$	121		$	41		$	128		$	67
Effective tax rate		2.0	%		(1.4	)%		2.3	%		(1.5	)%

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Income (Loss) Per Share (Tables)

6 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

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

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

	Three Months Ended September 30,						Six Months Ended September 30,
(In thousands, except per share data)	2020			2019			2020			2019
Numerator:
Net income (loss)	$	5,867		$	(2,918	)	$	5,350		$	(4,493	)
Series A convertible preferred stock issuance costs		(94	)		—			(1,031	)		—
Series A convertible preferred stock dividends		(459	)		—			(658	)		—
Net income (loss) attributable to common shareholders	$	5,314		$	(2,918	)	$	3,661		$	(4,493	)
Denominator:
Weighted average shares outstanding - basic		23,424			23,238			23,415			23,225
Dilutive SSARs		342			—			329			—
Dilutive unvested restricted shares		100			—			105			—
Weighted average shares outstanding - diluted		23,866			23,238			23,849			23,225
Income (loss) per share - basic:	$	0.23		$	(0.13	)	$	0.16		$	(0.19	)
Income (loss) per share - diluted:	$	0.22		$	(0.13	)	$	0.15		$	(0.19	)
Anti-dilutive stock options, SSARs, restricted shares,    performance shares and preferred shares		2,415			1,494			2,418			1,386

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Share-based Compensation (Tables)

6 Months Ended

Sep. 30, 2020

Share Based Compensation [Abstract]

Summary of share-based compensation expense for options

The following table summarizes the share-based compensation expense for SSARs, restricted and performance awards included in the condensed consolidated statements of operations:

	Three Months Ended September 30,				Six Months Ended September 30,
(In thousands)	2020		2019		2020		2019
Product development	$	239	$	672	$	411	$	940
Sales and marketing		34		51		70		113
General and administrative		983		622		2,201		774
Total share-based compensation expense	$	1,256	$	1,345	$	2,682	$	1,827

Activity related SSARs award

The following table summarizes the activity during the six months ended September 30, 2020 for SSARs awarded under the 2011 and 2016 Plans:

	Number of Rights			Weighted-Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
(In thousands, except share and per share data)				(per right)		(in years)
Outstanding at April 1, 2020		1,644,888		$	21.07
Exercised		(63,872	)		11.64
Forfeited		(11,430	)		18.65
Expired		(1,522	)		14.22
Outstanding at September 30, 2020		1,568,064		$	21.48		4.4	$	11,674
Exercisable at September 30, 2020		973,110		$	13.82		3.7	$	11,214
Vested and expected to vest at September 30, 2020		1,568,064		$	21.48		4.4	$	11,674

Activity related to restricted shares awarded by the Company

The following table summarizes the activity during the six months ended September 30, 2020 for restricted shares awarded under the 2011 and 2016 Plans:

	Number of Shares			Weighted-Average Grant-Date Fair Value
(In thousands, except share and per share data)				(per share)
Outstanding at April 1, 2020		178,462		$	19.89
Forfeited		(17,420	)		19.03
Outstanding at September 30, 2020		161,042		$	19.98

Performance shares awarded

The following table summarizes the activity during the six months ended September 30, 2020 for the performance shares awarded under the 2016 Plan:

(In thousands, except share and per share data)	Number of Shares
Outstanding at April 1, 2020		30,120
Granted		—
Vested		(6,714	)
Forfeited		(23,406	)
Outstanding at September 30, 2020		—

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Revenue Recognition - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Total net revenue	$ 34,360	$ 40,722	$ 64,166	$ 79,111
Revenue recognized	12,100	10,500	30,500	26,000
Transfers to accounts receivable	200	400	1,700	2,400
Capitalized contract cost, net	3,100	3,400	3,100	3,400
Capitalized Contract Cost, Amortization	400	300	700	700
Sales Commissions and Fees	700	1,200	1,300	2,200
Products
Disaggregation of Revenue [Line Items]
Total net revenue	6,559	11,873	11,798	22,742
Support, Maintenance, Subscription Services, And Professional Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenue	$ 27,800	$ 52,400	$ 28,800	$ 56,400

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Intangible Assets and Software Development Costs - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Mar. 31, 2020
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount	$ 24,183
Accumulated amortization	(24,183)
Accumulated Impairment	0
Net carrying amount	0
Total intangible assets, gross carrying amount	32,583
Total intangible assets, accumulated amortization	(24,183)
Total intangible assets, accumulated impairment	0
Intangible assets, net	8,400	$ 8,400
Finite lived software development costs gross	67,541
Finite lived software development costs accumulated amortization	(45,535)
Finite lived software development costs accumulated impairment	(22,006)
Finite lived software development costs net	0
Trade Names
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount, excluding accumulated impairment	230
Accumulated amortization, excluding accumulated impairment	(230)
Accumulated impairment	0
Net carrying amount, excluding accumulated impairment	0
Gross carrying amount, excluding accumulated impairment	8,400
Accumulated amortization, excluding accumulated impairment	0
Accumulated impairment excluding goodwill	0
Carrying amount, excluding accumulated impairment	8,400
Customer Relationships
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount, excluding accumulated impairment	10,775
Accumulated amortization, excluding accumulated impairment	(10,775)
Accumulated impairment	0
Net carrying amount, excluding accumulated impairment	0
Noncompete Agreements
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount, excluding accumulated impairment	2,700
Accumulated amortization, excluding accumulated impairment	(2,700)
Accumulated impairment	0
Net carrying amount, excluding accumulated impairment	0
Developed Technology Rights
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount, excluding accumulated impairment	10,398
Accumulated amortization, excluding accumulated impairment	(10,398)
Accumulated impairment	0
Net carrying amount, excluding accumulated impairment	0
Patented Technology
Schedule Of Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross carrying amount, excluding accumulated impairment	80
Accumulated amortization, excluding accumulated impairment	(80)
Accumulated impairment	0
Net carrying amount, excluding accumulated impairment	$ 0

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Intangible Assets and Software Development Costs (Details Textual) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Mar. 31, 2020
Goodwill And Intangible Assets Disclosure [Abstract]
Non-cash impairment charge			$ 22,000
Amortization of developed technology	$ 3,100	$ 6,303

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Additional Balance Sheet Information (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Mar. 31, 2020
Current liabilities:
Salaries, wages, and related benefits	$ 4,793	$ 6,945
Other taxes payable	1,835	1,649
Accrued legal settlements	50
Severance liabilities	100	32
Professional fees	93	50
Other	314	357
Total	7,185	9,033
Liabilities Noncurrent:
Uncertain tax positions	1,116	1,103
Asset retirement obligations	170	170
Payroll taxes deferred under CARES Act	1,287
Employee benefit obligations	1,081	511
Other	74	76
Total	$ 3,728	$ 1,860

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Supplemental Disclosures of Cash Flow Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Supplemental Cash Flow Elements [Abstract]
Cash (receipts) for interest, net	$ (46)	$ (191)
Cash payments for income taxes, net	167	247
Cash payments for operating leases	3,002	2,210
Cash payments for finance leases	14	18
Accrued capital expenditures	$ 12	$ 125

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Tax Disclosure [Abstract]
Income tax expense	$ 121	$ 41	$ 128	$ 67
Effective tax rate	2.00%	(1.40%)	2.30%	(1.50%)

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Income Taxes (Details Textual) - CARES Act [Member]	Mar. 27, 2020
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
Percentage of deferral of employer-paid portion of social security taxes due in December 31, 2021	50.00%
Percentage of deferral of employer-paid portion of social security taxes due in December 31, 2022	50.00%

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Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Numerator:
Net income (loss)	$ 5,867	$ (2,918)	$ 5,350	$ (4,493)
Series A convertible preferred stock issuance costs	(94)		(1,031)
Series A convertible preferred stock dividends	(459)		(658)
Net income (loss) attributable to common shareholders	$ 5,314	$ (2,918)	$ 3,661	$ (4,493)
Denominator:
Weighted average shares outstanding - basic	23,424	23,238	23,415	23,225
Dilutive SSARs	342		329
Dilutive unvested restricted shares	100		105
Weighted average shares outstanding - diluted	23,866	23,238	23,849	23,225
Net income (loss) per share - basic:	$ 0.23	$ (0.13)	$ 0.16	$ (0.19)
Net income (loss) per share - diluted:	$ 0.22	$ (0.13)	$ 0.15	$ (0.19)
Earnings Per Share, Diluted [Abstract]
Anti-dilutive stock options, SSARs, restricted shares, performance shares and preferred shares	2,415	1,494	2,418	1,386

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Income (Loss) Per Share (Details Textual) - shares	6 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Earnings Per Share [Abstract]
Incremental common shares attributable to restricted shares (in shares)	161,042	418,854

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Share-based Compensation (Details Textual) $ in Millions	6 Months Ended
	Sep. 30, 2020 USD ($) shares
Restricted Stock [Member]
Stock Based Compensation (Textual) [Abstract]
Weighted-average vesting period	1 year 4 months 24 days
Unrecognized stock based compensation expense related to unvested restricted stock | $	$ 1.2
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 unvested SSARs | $	$ 3.4
Weighted-average vesting period	2 years
Two Thousand and Sixteen Stock Incentive Plan [Member]
Stock Based Compensation (Textual) [Abstract]
Shares authorized under 2016 Stock incentive plan	2,000,000.0
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

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Share-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based Payment Arrangement, Noncash Expense	$ 1,256	$ 1,345	$ 2,682	$ 1,827
Product development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Summary of share-based compensation expense for options	239	672	411	940
Selling and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Summary of share-based compensation expense for options	34	51	70	113
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Summary of share-based compensation expense for options	$ 983	$ 622	$ 2,201	$ 774

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Share-based Compensation (Details 2) - Stock Settled Stock Appreciation Rights (SSARS) [Member] $ / shares in Units, $ in Thousands	6 Months Ended
	Sep. 30, 2020 USD ($) $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Rights Outstanding at Beginning of Period | shares	1,644,888
Number of Rights Exercised | shares	(63,872)
Number of Rights, Forfeited | shares	(11,430)
Number of Rights Expired | shares	(1,522)
Number of Rights Outstanding at End of Period | shares	1,568,064
Number of Rights Exercisable at End of Period | shares	973,110
Number of Rights Vested and expected to vest at June 30, 2020 | shares	1,568,064
Weighted Average Exercise Price Outstanding at Beginning of Period | $ / shares	$ 21.07
Weighted Average Exercise Price, Exercised | $ / shares	11.64
Weighted Average Exercise Price, Forfeited | $ / shares	18.65
Weighted Average Exercise Price, Expired | $ / shares	14.22
Weighted Average Exercise Price Outstanding at End of Period | $ / shares	21.48
Weighted Average Exercise Price, Exercisable at End of Period | $ / shares	13.82
Weighted Average Exercise Price, Exercisable at End of Period | $ / shares	$ 21.48
Remaining Contractual Term Outstanding at End of Period	4 years 4 months 24 days
Remaining Contractual Term Exercisable at End of Period	3 years 8 months 12 days
Share Based Compensation Arrangement By Share Based Payment Award Vested And Expected To Vest Outstanding Remaining Contractual Term	4 years 4 months 24 days
Aggregate Intrinsic Value Outstanding at End of Period | $	$ 11,674
Aggregate Intrinsic Value Exercisable at End of Period | $	11,214
Aggregate Intrinsic Value Exercisable at End of Period, Vested and expacted | $	$ 11,674

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Share-based Compensation (Details 3)	6 Months Ended
	Sep. 30, 2020 $ / shares shares
Restricted Stock [Member]
Activity Related to Restricted Shares Awarded by the Company
Number of Shares Outstanding at Beginning of Period	178,462
Forfeited, Number of Shares	(17,420)
Number of Shares Outstanding at End of Period	161,042
Weighted Average Grant-Date Fair Value, Outstanding at Beginning of Period | $ / shares	$ 19.89
Forfeited, Weighted Average Grant-Date Fair Value | $ / shares	19.03
Weighted Average Grant-Date Fair Value, Outstanding at End of Period | $ / shares	$ 19.98
Performance Shares [Member]
Activity Related to Restricted Shares Awarded by the Company
Number of Shares Outstanding at Beginning of Period	30,120
Forfeited, Number of Shares	(23,406)
Vested, Number of Options	(6,714)

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Preferred Stock - (Details Textual) $ / shares in Units, $ in Millions		6 Months Ended
	May 22, 2020 USD ($) shares	Sep. 30, 2020 Day $ / shares
Class Of Stock [Line Items]
Trading days | Day		20
Consecutive trading days | Day		30
Minimum percentage of common stock price to conversion price		150.00%
Debt Instrument, Convertible, Earliest Date		Nov. 22, 2023
Preferred stock, dividend percentage		5.25%
Dividends declaration and payment terms		The Holders are entitled to dividends on the Liquidation Preference at the rate of 5.25% per annum, payable semi-annually either (i) 50% in cash and 50% in kind as an increase in the then-current Liquidation Preference or (ii) 100% in cash, at the option of the Company.
Change of Control Event Description		Upon certain change of control events involving the Company, the Company has the right, and each Holder has the right, in each case, at the initiating party’s election, to require the Company to repurchase all or a portion of its then-outstanding shares of Convertible Preferred Stock for cash consideration equal to (i) 150% of the then-current Liquidation Preference for a change of control occurring prior to the third anniversary of the date the Convertible Preferred Stock is initially issued, (ii) 125% of the then-current Liquidation Preference for a change of control occurring on or following the third anniversary and prior to the fifth anniversary of the date the Convertible Preferred Stock is initially issued and (iii) 100% of the then-current Liquidation Preference for a change of control occurring on or following the fifth anniversary of the date the Convertible Preferred Stock is initially issued
Preferred stock convertible percentage of outstanding common stock		10.00%
Percentage of owning in excess of outstanding share of common stock		25.00%
Common Stock [Member]
Class Of Stock [Line Items]
Price per share | $ / shares		$ 20.1676
Convertible Preferred Stock [Member]
Class Of Stock [Line Items]
Voting right description		The Holders will be entitled to one vote for each share of Convertible Preferred Stock upon all matters presented to the common shareholders of the Company
MAK Capital One, LLC [Member] | Convertible Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock issued | shares	1,735,457
Preferred stock issued, value | $	$ 35.0
Payments of stock issuance costs | $	$ 1.0