AGILYSYS INC Revenue Disclosure

3. Revenue Recognition

For in depth discussion regarding our revenue recognition procedures for our revenue streams, see Note 2, Summary of Significant Accounting Policies.

Disaggregation of Revenue

We derive and report our revenue from the sale of products (proprietary software licenses, third party hardware and operating systems), subscription and maintenance, and professional services. Revenue recognized at a point in time

(products) totaled $41.3 million, $49.1 million, and $43.6 million during fiscal 2025, 2024 and 2023. Subscription, maintenance, and substantially all professional services revenue recognized over time totaled $234.3 million, $188.4 million, and $154.4 million during fiscal 2025, 2024, and 2023.

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 products and professional services. We expect billing and collection of our contract assets to occur within the next twelve months. Payment terms and conditions vary by contract and customer, although terms generally include a requirement to pay within 30 days after invoicing. 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 $55.1 million and $50.9 million during fiscal 2025 and 2024, respectively. During fiscal 2025 and 2024, we transferred from contract assets at the beginning of the period, $2.3 million and $2.2 million, respectively, to accounts receivable because the right to the transaction became unconditional.

Our arrangements are typically for a period of one year or less. As a result, unsatisfied performance obligations as of March 31, 2025 are expected to be satisfied and the allocated transaction price recognized in revenue within a period of 12 months or less.

Assets Recognized from Costs to Obtain a Contract

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

We had $5.8 million and $4.8 million of capitalized sales incentive costs as of March 31, 2025 and 2024, respectively. These balances are included in other non-current assets on our Consolidated Balance Sheets. During fiscal 2025 and 2024, we expensed $4.0 million and $3.9 million, respectively, of sales commissions, which included amortization of capitalized amounts of $1.8 million and $1.6 million, respectively. These expenses are included in operating expenses – sales and marketing in our Consolidated Statement of Operations. All other costs to obtain a contract are not considered incremental and therefore are expensed as incurred.