Agilysys, Inc. (AGYS) Cash Flow Statement

The OCF/NI ratio has been violently unstable on a quarterly basis, ranging from -0.89 in 2026Q1 to 6.92 in 2025Q4, which suggests reported net income is a poor standalone proxy for cash generation at this company. That instability, however, traces largely to working capital timing rather than accrual-quality deterioration, since cumulative operating cash flow of roughly $148M over the ten quarters vastly exceeds cumulative net income of approximately $72M. Importantly, stock-based compensation of $6.3M in 2027Q2 represents about 42% of operating cash flow, a non-cash add-back that flatters OCF conversion and warrants monitoring as dilution rather than true cash earnings power.

The FCF margin band has widened materially, from single digits in 2025Q2 and 2026Q1 to consistently positive double digits over the last four quarters, which implies the recurring-revenue mix shift is now translating into durable cash generation rather than just accounting margin expansion. Trailing four-quarter FCF of roughly $78M against trailing net income near $50M suggests an underlying conversion profile structurally stronger than headline GAAP earnings imply, though the swing quarters highlight that trajectory quality is uneven. Investors should note that FCF margins above 40% in 2026Q4 and 2025Q4 appear to reflect year-end working capital release timing rather than sustainable run-rate economics, so the more relevant benchmark is the mid-to-high teens margin observed in the two most recent quarters.

2027Q2 capex of $356K against $2.1M of depreciation suggests the company is not even spending at the rate of asset consumption, which in a pure hardware model would signal underinvestment, but in this software-led model more likely reflects a legitimately asset-light delivery architecture. The practical implication is that substantially all free cash flow is discretionary, leaving management unusually unconstrained in choosing between buybacks, acquisitions, and balance-sheet build. The one caveat is that depreciation includes amortization of acquired intangibles from deals such as Book4Time, so the depreciation-to-capex gap is not purely a maintenance-capex question and warrants a closer look at the fixed-asset and intangible rollforwards.

The pattern of large positive swings in Q2 and Q4 followed by reversals in Q1 appears consistent with milestone-based professional services billing and year-end customer payment cycles, which would make the cash flow profile inherently lumpy even as the subscription base smooths the underlying trend. This matters for valuation because the company's near-absence of net debt means the balance sheet is effectively absorbing these swings as cash accumulation, leaving no visible financing signal to alert investors to collection stress. Given the reported professional services revenue of $19.6M in the prior quarter, the durability of that segment's billing-to-cash timing is a key variable for forecasting, and investors should track whether sequential working capital reversals stay symmetric or begin trending toward net draws.