Agilysys Annual Report 2013

FY2013 Annual Report · Agilysys

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 2013

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For transition period from to

Commission file number 0-5734
AGILYSYS, INC.

(Exact name of registrant as specified in its charter)

State or other jurisdiction of incorporation or organization

(I.R.S. Employer Identification No.)

Ohio

34-0907152

425 Walnut Street, Suite 1800, Cincinnati, Ohio
(Address of principal executive offices)

45,202
(Zip Code)

Registrant's telephone number, including area code: (770) 810-7800
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Shares, without par value

Name of each exchange on which registered
The NASDAQ Stock Market LLC

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes

The aggregate market value of Common Shares held by non-affiliates as of September 30, 2012 was $124,082,511.

As of May 31, 2013, 22,417,165 shares of the registrant's common stock were outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement to be used in connection with its 2013 Annual Meeting of Shareholders are incorporated by
reference into Part III of this Form 10-K.

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AGILYSYS, INC.
Annual Report on Form 10-K
Year Ended March 31, 2013

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PART I

ITEM 1.

ITEM 1A.

ITEM 1B.

ITEM 2.

ITEM 3.

ITEM 4.

Business .......................................................................................................................................................
Risk Factors .................................................................................................................................................
Unresolved Staff Comments ........................................................................................................................
Properties .....................................................................................................................................................
Legal Proceedings........................................................................................................................................
Mine Safety Disclosures ..............................................................................................................................

PART II

ITEM 5.

ITEM 6.

ITEM 7.

ITEM 7A.

ITEM 8.

ITEM 9.

ITEM 9A.

ITEM 9B.

Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities......................................................................................................................................................
Selected Financial Data................................................................................................................................
Management's Discussion and Analysis of Financial Condition and Results of Operations.......................
Quantitative and Qualitative Disclosures about Market Risk......................................................................
Financial Statements and Supplementary Data............................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................
Controls and Procedures ..............................................................................................................................
Other Information ........................................................................................................................................

PART III

ITEM 10.

ITEM 11.

ITEM 12.

ITEM 13.

ITEM 14.

Directors, Executive Officers and Corporate Governance...........................................................................
Executive Compensation .............................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters ...
Certain Relationships and Related Transactions, and Director Independence ............................................
Principal Accountant Fees and Services ......................................................................................................

PART IV

ITEM 15.

Exhibits and Financial Statements ...............................................................................................................

SIGNATURES

Page

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Forward Looking Information

This Annual Report and other publicly available documents, including the documents incorporated herein and therein by reference,
contain, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the
safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by
words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely,"
"may," "should," "will" and similar references to future periods. These statements are not guarantees of future performance and
involve risks, uncertainties, and assumptions that are difficult to predict. These statements are based on management's current
expectations, intentions, or beliefs and are subject to a number of factors, assumptions, and uncertainties that could cause actual results
to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences
or that might otherwise impact the business include the risk factors set forth in Item 1A of this Annual Report. 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.

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Part I

Item 1. Business.

Overview

We are a leading developer and marketer of proprietary enterprise software, services and solutions to the hospitality and retail
industries. We specialize in the development of market-leading point-of-sale (POS), property management, inventory & procurement
and mobile & wireless solutions that are designed to streamline operations, improve efficiency and enhance the guest experience. In
addition, we provide support, maintenance, resold hardware products and software hosting or subscription services. Our customers
include casinos, resorts, hotels, foodservice venues, stadiums, cruise lines, grocery stores, convenience stores, general & specialty
retail businesses and partners. A significant portion of our consolidated revenue is derived from contract support, maintenance
agreements and professional services.

We operate extensively throughout North America, Europe and Asia, with corporate services located in Atlanta, GA, EMEA
headquarters in Cheshire, UK and APAC offices in both Singapore and Hong Kong. We have two operating segments: Hospitality
Solutions Group (HSG) and Retail Solutions Group (RSG). Our principal executive offices are located at 425 Walnut Street, Suite
1800, Cincinnati, Ohio, 45202 and our corporate services are located at 1000 Windward Concourse, Suite 250, Alpharetta, Georgia,
30005.

Reference herein to any particular year or quarter refers to periods within our fiscal year ended March 31. For example, fiscal 2013
refers to the fiscal year ended March 31, 2013.

History and Significant Events

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

In fiscal 2004, we acquired Kyrus Corporation and became the leading provider of IBM retail solutions and services in the
supermarket, chain drug, general retail, and hospitality segments. In that same year, the acquisition of Inter-American Data, Inc.
allowed us to become the leading developer and provider of technology solutions for property and inventory management in the
casino and resort industries.

In calendar 2007, we divested KeyLink Systems and exited the enterprise computer distribution business. We used the proceeds from
that sale to return cash to shareholders and fund a number of acquisitions that broadened our solutions and capabilities portfolios. We
acquired InfoGenesis and Visual One Systems Corp. in calendar 2007, significantly expanding our specialized offerings to the
hospitality industry through enterprise-class, point-of-sale (POS) and software solutions tailored for a variety of applications in cruise,
golf, spa, gaming, lodging, resort, and catering. These offerings feature highly intuitive, secure and robust solutions, easily scalable
across multiple departments or property locations. In fiscal 2008, we began reporting three primary operating segments: Hospitality
Solutions Group (HSG), Retail Solutions Group (RSG) and Technology Solutions Group (TSG).

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

Today, we are focused on providing state-of-the-art, end-to-end solutions that enhance guest experiences and allow our customers to
promote their respective brands. We help our customers win the guest recruitment battle and, in turn, grow revenue, reduce costs and
increase efficiency. This is accomplished by developing and deploying intuitive solutions that increase speed and accuracy, thereby
enabling more effective management, intelligent upselling, reduced shrinkage, improved brand recognition and better control of the
customer relationship. Our strategy is to increase the proportion of revenue we derive from ongoing support and maintenance
agreements, software as a subscription services, cloud applications and professional services.

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Divestiture of Retail Solutions Group (RSG)

On May 31, 2013, we entered into a definitive agreement to sell our Retail Solutions Group business to an affiliate of Clearlake
Capital Group, L.P., for total consideration of $34.6 million in cash, subject to customary closing conditions and expect to recognize a
gain in this transaction. Additionally, we expect to utilize existing net operating losses against our gain. Following completion of the
transaction, which we expect to occur in our fiscal second quarter, our business will be focused exclusively on our Hospitality
Solutions Group and the growth opportunities in this market.

Acquisition of TimeManagement Corporation (TMx)

On June 10, 2013, we acquired the assets of TimeManagement Corporation, a privately-owned Minneapolis-based provider of
enterprise-wide software and service solutions that streamline workforce management environments for hospitality operators.

Products, Support and Professional Services

We are a leading developer and marketer of end-to-end technology solutions for the hospitality and retail industries, including
hardware and software products; support, maintenance and subscription services; and professional services. Areas of specialization are
point-of-sale, property management, inventory and procurement, mobile and wireless solutions designed to streamline operations,
improve efficiency and enhance the guest experience.

To align with our strategic restructuring in fiscal 2012 and enhance transparency into the business, we commenced presenting revenue
and costs of goods sold in three categories:

•
•
•

Products (hardware and software)
Support, maintenance and subscription services
Professional services

Total revenue from continuing operations for these three specific areas of offerings follows:

(In thousands)

Products

Support, maintenance and subscription services

Professional services

Total

Year ended March 31,

2013

2012

2011

123,798 $
77,145

35,197
236,140 $

105,601 $

72,711

30,577

208,889 $

104,769

70,729

27,183

202,681

Products: Products revenue includes resold hardware and proprietary and remarketed software that are deployed as an integral
component of the solutions we provide. Our proprietary product suite is comprised of:

HSG Property Management Systems (“PMS”)

• Agilysys Lodging Management System® (LMS) is web-enabled and runs 24/7 to automate every aspect of hotel operations in
properties of 1,000 rooms or more. Its foundation expands to incorporate modules for sales and catering, activities scheduling,
attraction ticketing and more.

• Agilysys Visual One™ PMS is installed in hotels ranging from 50-1,500 rooms. For complex resorts that require an enterprise-

wide system, Visual One provides an integrated solution with interfaces to leading global distribution systems (GDSs) and other
Agilysys products.

HSG Point-of-Sale

•

Agilysys InfoGenesis™ POS is award-winning point-of-sale software that combines powerful reporting and configuration
capabilities in the back office with a fast, intuitive and easy-to-use terminal application. The flexible system is easy to set up, and
its scalable architecture enables customers to add workstations without having to build out expensive infrastructure. The system's
detailed and high-quality reporting capabilities give insight into sales data and guest purchasing trends. Other features include
packages and prix fixe menus, signature capture and multi-language capability. InfoGenesis POS is available as an on-premise
solution or through a subscription service.

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•

Agilysys InfoGenesis™ Mobile is a mobile POS solution that seamlessly integrates with Agilysys InfoGenesis POS software.
The application is reliable and easy to learn, with a user interface that's simple to use and configure. Users can tap, drag or swipe
using an intuitive multi-touch interface to create and tender checks. Orders are automatically sent to the kitchen, enabling faster
service and increased table turns. InfoGenesis Mobile is a flexible, cost-effective tool to help service teams become more
efficient and productive. Simplified ordering and faster guest service provides a competitive edge in a crowded marketplace.

Agilysys Elevate™, a next generation POS solution, is a web-based system that operates in the cloud for ease of deployment and
remote updates. Users can access data in real time from any location. Leveraging the best of modern interface features, Elevate
delivers a clean, smooth and intuitive user experience. With the software's offline capabilities, including credit card payment
acceptance, data is automatically synchronized once connectivity is restored.

Agilysys Meritage is a POS application that allows guests to browse a media-rich menu and place orders directly from an
Apple® iPad® into the Agilysys InfoGenesis™ POS system for fulfillment and delivery. The solution can operate either as a
standalone system or it can be integrated with InfoGenesis POS software. In its integrated version, it gives management access
to the POS back office, offering rich reporting and configuration capabilities. Meritage may be used purely as a self-service
solution, although it is intended to be complementary to restaurant guests or used for room service. The functionality that allows
communication between the guest and waitstaff enables messaging between the two, which helps staff provide the best possible
guest experience.

Agilysys InfoGenesis™ Normandy mobile POS solution is an order-taking application intended to modernize and extend the
functionality of your current POS software. Designed to operate on mobile handheld devices, InfoGenesis Normandy seamlessly
integrates with both Agilysys InfoGenesis POS and Agilysys InfoGenesis Meritage solutions. The application facilitates
communication between waitstaff and the kitchen or bar by automatically sending orders to each area, enabling faster service
and increased table turns.

• Agilysys MPOS is a handheld point-of-sale solution that integrates with InfoGenesis POS to enable guest service in any location.

• Agilysys eMenu is an online ordering application that enables our customers to capitalize on the popularity of Web and kiosk

ordering while maintaining their existing company brand and workflow.

• Agilysys eCash takes traditional cashless payment and stored value card capabilities and integrates them directly with

InfoGenesis POS, increasing consumers' payment options.

InfoGenesis POS, eMenu and eCash are available through traditional software licensing or via subscription.

RSG Point of Sale NextVision Mobile Application Suite

• NextGateway supports a wide array of feature plug-ins such as store activity reporting, item price information, printer integration,

emailing receipts and options for accessing and sharing local store and enterprise data.

• NextManager uses the Company's new gateway framework to implement store reporting, terminal monitoring and manager alerts.

• NextPosition 3T enables full mobile point-of sale functionality for Toshiba Global Commerce Solutions 4690-based Supermarket

Application and ACE applications.

• NextPosition 3S is a mobile point-of-sale software system available on iOS and Android mobile devices designed to work with
the SAP® Point-of-Sale application 2.3 allowing retailers to extend their fixed point-of-sale and deliver true point-of-service
experience to customers.

HSG Inventory & Procurement

• Agilysys Stratton Warren System (SWS) integrates with all leading financial and POS software products. The software manages

the entire procurement process via e-commerce, from the point of business development to managing enterprise-wide backend
systems and daily operations.

• Agilysys Eatec® provides core purchasing, inventory, recipe, forecasting, production and sales analysis functions and is unique in

offering catering, restaurant, buffet management and nutrition modules in a single web-enabled solution.

• Agilysys EatecTouch is an optional software applet that operates on any Windows®-based POS terminal, providing users with

access to the Eatec application from any terminal location.

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• Agilysys EatecPocket is a Microsoft® Windows® Mobile compatible application designed to work on a handheld wireless

device, enabling users to perform inventory transactions. The software incorporates barcode scanner functionality for mobile
updates of the database.

Eatec and Stratton Warren System solutions are available through traditional software licensing or via subscription.

HSG Document Management

• Agilysys DataMagine™ is a U.S.-patented imaging module and archiving solution that allows users to securely capture and

retrieve documents and system-generated information. DataMagine integrates with all Agilysys products, adding functionality and
increasing benefit to customers.

HSG Activities

• Agilysys GolfPro is a module that offers golf property managers complete pro shop management with tee time scheduling,

member profile/billing, tournament management and Web and e-mail access bundled into one solution.

• Agilysys Spa Management software covers all aspects of running a spa business, from scheduling guests for services to managing

staff schedules. The software also integrates with Agilysys PMS solutions.

• Agilysys LMS ARTS® interfaces with hotel guest data, allowing reservationists to pre-plan activities when booking a guest's

room. The application also places canceled activities back into inventory for resale, resulting in optimum property utilization and
profitability.

• Agilysys Visual One Activities software streamlines the management of all of the amenities and activities a property has to offer.

Staff can easily schedule and personalize reservations for guests; activities then appear on itinerary/confirmations.

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

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

Prior to the divestiture of TSG, we purchased IT products and services from the Hewlett-Packard Company (HP), International
Business Machines Corporation (IBM), Oracle Corporation (Oracle) and other original equipment manufacturers (OEMs), and resold
the components to customers. Operating results from the former TSG business are reported as components of discontinued operations.

In August 2012, Toshiba TEC Corporation acquired IBM's Retail Store Solutions business. Since the completion of the acquisition, we
have maintained a strong relationship with Toshiba TEC and intend to continue to be a leading provider of related solutions and
services in the supermarket, drug chain, general-retail and other hospitality segments.

Segment Reporting

We have two reportable business segments: HSG and RSG. See Note 16 to Consolidated Financial Statements titled Business
Segments for a discussion of our segment reporting.

Hospitality Solutions Group (HSG)
HSG develops, markets and sells property and lodging management, point-of-sale, and inventory and procurement applications to
customers in the hospitality industry, including operators of hotels, casinos, destination resorts, cruise lines and foodservice
management establishments. We offer solutions that provide comprehensive control of the customer's property operations - from
reservations, check in, point-of-sale and other guest-engagement activities to inventory, procurement and document management.

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Retail Solutions Group (RSG)
RSG is one of North America's largest systems integrators retail point-of-sale, self-service and wireless solutions and provides
proprietary business consulting, implementation and hardware maintenance and support services. Additionally, our extensive
experience in the integration of wireless infrastructure with legacy systems enables our customers to capture the promise of today's
mobile technology. Our mobile solutions extend the customer's operations to portable devices, increasing customer satisfaction and
productivity with integrated software that reduces security exposure. We also sell POS and mobile POS (MPOS) solutions to facilitate
the check-out process as well as other self-service capabilities.

RSG's expertise also encompasses a suite of support and professional services including consultation, analysis, design, installation and
implementation, as well as onsite maintenance and ongoing help-desk support. Our comprehensive portfolio of support services
provides total lifecycle management for our customers' in-store solutions to help increase their return on investment and lower their
total cost of ownership.

Representative Agilysys clients include:

Ameristar Casinos, Inc.
AVI Foodsystems, Inc.
Banner Health
Bed Bath & Beyond
Benchmarc Restaurants
BJ's Wholesale Club
Black Rock Resort
Boyd Gaming Corporation
BR Guest Hospitality
The Breakers Palm Beach
The Broadmoor's Ranch at Emerald Valley Oxford Casino
Cannizaro House
Casino del Sol
Charming Charlie

Royal Caribbean Cruises, Ltd.
Royal Caribbean International

Copper Mountain
The Cosmopolitan of Las Vegas
CSU Fullerton Auxiliary Services Corporation Royal Lahaina Resort
Delhaize America
Helzberg Diamonds
Hialeah Park
Ho-Chunk Gaming
The Landmark London Hotel
Maryland Live! Casino
Norwegian Cruise Line

Rudy's Country Store and BBQ
Sands Casino Resort Bethlehem
SAVOR
The Sea Pines Resort
Sephora
Sugar Factory
The Venetian Resort Hotel Casino
Vail Resorts
Valley View Casino & Hotel
Wakefern Food Corp

Pinehurst Resort
Rosen Hotels & Resorts

Industry and Markets

The hospitality and retail industries encompass a wide variety of market sectors and customers. We operate extensively throughout
North America and maintain additional sales and support offices in the United Kingdom, Singapore and Hong Kong. Sales to
customers outside of the United States represent less than 10%.

The hospitality industry is made up of a number of defined markets including lodging, casinos, cruise ships, resorts and spas, franchise
operators, restaurant chains, stadiums, and arenas, among others. The industry is highly fragmented. For example, in the lodging
segment, no single hotel brand accounts for more than 4% of all hotel rooms in the United States. According to Smith Travel Research,
the U.S. lodging industry generated approximately $115 billion in room revenue in calendar 2012, with an average of approximately
61.4% of 4.8 million available rooms occupied. This compares with 58.9% in 2011 and a market-cycle peak occupancy rate of 63.1%
in 2006. Travelers booked a record 1.09 billion U.S. room nights in 2012, up approximately 3% from 2011 and more than the previous
record of 1.03 billion room nights in 2007.

The hospitality industry is economically sensitive. Business and destination resort travel are correlated with the economic conditions
in their respective markets. Competition is intense for consumer spending, and hospitality industry participants are seeking ways to
enhance the experience of their guests. We are seizing this opportunity by providing our customers with guest connectivity and
engagement tools which enable them to enhance their brands and better manage their operations' growth and profitability. In addition
to product solutions that are designed and customized to meet unique facility or multi-facility needs, we also provide an array of
support and subscription options for maintaining systems and professional services for implementation and rollouts.

We have a significant customer base in the commercial casino and gaming sector. According to the American Gaming Association,
over 30% of the U.S. adult population visited a casino at least once in 2012. Amenities in contemporary casinos extend well beyond
gaming to include a variety of entertainment and leisure options as well as modern convention centers and meeting facilities to attract
the business market. International gaming markets are growing rapidly both in size and new jurisdictions. Asian gaming markets
continue to generate robust growth. Gross gaming revenue in Macau exceeds that of the Las Vegas Strip, with a number of the current
and planned properties in the region operated by U.S.-based companies. As the market share leader in providing Property Management
Systems (PMS) to casinos on the Las Vegas Strip, we are well positioned to benefit from these strong and long-standing relationships
8

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as our customer base expands into international markets. Additionally, as modern facilities evolve toward cashless operations and
digital track-and-log of unique guest behavior, we are able to provide the requisite technologies and expertise to satisfy their needs.

We also have expertise in serving the unique needs of Cruise ship operators. According to the Cruise Industry Overview-2012 State of
the Cruise Industry report and Cruise Market Watch, cruise lines continued the growth trends of 2011 in 2012. The worldwide cruise
ship fleet currently stands at 284 ships, up from 270 in 2011 and the current order book, which extends through 2016, includes 20 new
builds. The industry carried over 20 million passengers in 2012, up from 19.3 million passengers in 2011.

Similarly, the modern retail industry is rapidly transitioning to a higher level of engagement with customers. Retailers selling directly
to consumers include softline purveyors (clothing, accessory/shoe and department stores) and hardline purveyors (home improvement,
home furnishings and electronics stores) as well as purveyors of consumer staples such as groceries. Integrating our innovative
technology with marketing is allowing Retail Solutions Group customers to enjoy the benefits of gift cards and loyalty programs.
Other solutions such as mobile POS enable retailers to reduce wait times, increase accuracy and accelerate management reporting. For
rapidly expanding retailers and retailers that are engaged in large store-wide POS technology refreshment, we manage large-scale
implementation and roll-out-including procurement, staging and installation, post-sale service and maintenance contracts-to ensure a
reliable and secure environment.

Customers

Our customers include large, medium-sized and boutique companies, and divisions or departments of large corporations in the
hospitality and retail industries. We concentrate on serving the needs of customers in a range of customer-focused settings where brand
differentiation is important, particularly in the lodging, casino, destination resort, cruise line, foodservice and retail industries where
competition for guest recruitment is intense.

For fiscal 2013, revenue from one RSG customer represented 12.7% of consolidated net revenue.

Seasonality

The HSG and RSG operating units have traditionally experienced seasonal revenue weakness during our fiscal first quarter ending
June 30 and, prior to the sale of TSG, we traditionally experienced a seasonal increase in revenue during our fiscal third quarter ending
December 31. Additionally, the timing of large one-time orders, such as those associated with substantial retail product rollouts,
occasionally creates volatility in our quarterly results.

Competition

Our solutions face a highly competitive market. Competition exists with respect to developing and maintaining relationships with
customers, pricing for products and solutions, and customer support and service. Furthermore, our RSG business segment occasionally
competes with some of our own suppliers.

HSG competes with other full-service providers that sell and service bundled POS and PMS solutions comprised of hardware,
software, support and services. These companies, some of which are much larger than we are, include MICROS Systems, Inc., NCR,
Par Technology, Multi-System, Inc., and Infor. We also compete with software companies like IDeaS Revenue Solutions, POSitouch,
Northwind and Xpient Solutions and, to a lesser extent, hardware vendors such as IBM, HP, Dell, Casio, and Toshiba. In addition, we
compete with PMS systems that are designed and maintained in-house by large hotel chains.

RSG competes in a highly fragmented and regionalized marketplace. We compete primarily with regional integrators, regional and
national value-added resellers, solution providers and niche vendors.

Environmental Matters

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

Employees

As of May 31, 2013, we had 765 employees. We are not a party to any collective bargaining agreements, have had no strikes or work
stoppages and consider our employee relations to be good.

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Access to Information

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

Item 1A. Risk Factors.

Risks Relating to Our Business

The proposed sale of our RSG business segment creates uncertainty and potential liability for the Company.

On May 31, 2013, we and an affiliate of Clearlake Capital Group, L.P. (“Buyer”), entered into an asset purchase agreement pursuant to
which we agreed to sell certain assets of its RSG business to Buyer for a purchase price of $34.6 million, subject to adjustment based
on final working capital. The closing of the RSG sale is subject to certain conditions and is expected to occur in our fiscal second
quarter, which ends September 30, 2013. There is no assurance that the RSG Sale will close.

The purchase agreement provides that, upon a termination in certain specified circumstances relating to acquisition proposals, we may
become obligated to pay Buyer a termination fee of $2.0 million and reimburse expenses up to $1.3 million.

If we do not close the RSG sale, we will have incurred significant costs for which we will have received little or no benefit, and we
may also incur negative reactions from the financial markets and our shareholders, potential investors, customers and employees. In
addition, completing the RSG sale may divert our management's attention from our existing business. Conversely, if the RSG sale is
closed, we will operate with less revenue, as the RSG business accounted for approximately 58.4% of our revenue in fiscal 2013.

Each of the above described risk factors associated with the RSG sale may adversely affect our cash flow, operating results and
financial condition, and each of these factors may also adversely affect the trading price of common shares.

Continuing challenging global economic conditions could adversely affect our business and financial results.

Global economic conditions continue to be challenging. Our revenue and profitability depend significantly on general economic
conditions and the level of capital available to our customers. Our business trends and revenue growth continue to be affected by the
challenging economic climate. These difficult economic conditions and the uncertainty about future economic conditions may
adversely affect our customers' level of spending, ability to obtain financing for purchases, ability to make timely payments to us and
adoption of new technologies, which could require us to increase our allowance for doubtful accounts, negatively impact our days
sales outstanding, lead to increased price competition and adversely affect our results of operations.

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

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

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

• Managing the length of the development cycle for new products and product enhancements, which has frequently been longer

than we originally expected;

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

and

• Extending the operation of our products and services to new and evolving platforms, operating systems and hardware

products, such as mobile devices.

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

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

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

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

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

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

We are subject to pricing pressures for our products and services which could cause us to lose market share and decrease revenue
and profitability.

We compete for customers based on several factors, including price. In some cases, we may have to reduce our pricing to obtain
business. If we are not able to maintain favorable pricing for our products and services, our profit margin and our profitability could
suffer.

Our cloud-based solutions present execution and competitive risks.

Our solutions offered in the cloud accessible via the web without hardware installation or software downloads present new and
difficult technology challenges. These offerings depend on integration of third-party hardware, software and cloud hosting vendors
working together with our products. As a result, we may be subject to claims if customers experience service disruptions, breaches or
other quality issues related to our cloud-based solutions.

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

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

Hosting of software applications presents increased security risks.

As we expand our software hosting capabilities and offer more of our software applications to our customers on a hosted basis, our
responsibility for data and system security with respect to data held in our hosting centers increases significantly. While we believe
that our current software applications comply with applicable laws and industry security requirements, and while we believe that we
use appropriate security measures to reduce the possibility of unauthorized access or misuse of data in the hosting center, we cannot

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provide absolute assurance that our hosted systems will not be breached, or that all unauthorized access can be prevented. If a security
breach were to occur, a customer, regulatory agency, or other person could seek redress from us, which could adversely affect our
business.

Additionally, as we expand our software hosting capabilities and offer more of our software applications to our customers on a hosted
basis, our potential liability increases significantly. Specifically, an outage in our data centers can affect numerous customers. While
we believe that our data centers have been designed and engineered to reduce the likelihood of outages, we cannot provide assurance
that our hosted systems will not suffer from unanticipated outages or deficient performance. If an unanticipated outage were to occur,
a customer could suffer economic damages and seek redress from us, which could adversely affect our business.

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

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

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

While we do not believe that our products and services infringe any patents or other intellectual property rights, from time to time, we
receive claims that we have infringed the intellectual property rights of others. On April 6, 2012, Ameranth, Inc. filed a complaint
against us for patent infringement in the United States District Court for the Southern District of California alleging that point-of-sale
and property management and other hospitality information technology products sold by us infringe three patents owned by Ameranth.

This lawsuit and any other such claim, with or without merit, could result in costly litigation and distract management from day-to-day
operations. If we are found liable, we could be obligated to pay significant damages or enter into license agreements.

We are subject to litigation, which may be costly.

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

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

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

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

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

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

Our success depends on the skill, experience and dedication of our employees. If we are unable to retain and attract sufficiently
experienced and capable personnel, especially in product development, sales and management, our business and financial results may
suffer. For example, if we are unable to retain and attract a sufficient number of skilled technical personnel, our ability to develop high
quality products and provide high quality customer service may be impaired. Experienced and capable personnel in the technology
industry remain in high demand, and there is continual competition for their talents. When talented employees leave, we may have
difficulty replacing them, and our business may suffer. There can be no assurance that we will be able to successfully retain and attract
the personnel that we need.

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

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

We have encountered risks associated with maintaining large cash balances.

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

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

We review our goodwill and other intangible asset balances for impairment on at least an annual basis. During the fourth quarter of
fiscal 2012, we concluded that certain software developed technology within HSG was no longer available for sale. As a result we
recorded an impairment charge of $9.7 million, which impacted HSG's operations. In fiscal 2011, we recognized non-cash impairment
charges for goodwill and intangible assets totaling $1.0 million. Our future operating results and the market price of our common
stock could be materially adversely affected if we are required to further write down the carrying value of goodwill and/or other
intangible assets associated with any of our reporting units in the future.

We may have exposure to greater than anticipated tax liabilities.

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

Risks Relating to the Industries We Serve

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

Because our customer base is concentrated in the hospitality and retail industries, our business is largely dependent on the health of
those industries. Our sales are dependent in large part on the health of the hospitality and retail industries, which in turn is dependent
on the domestic and international economy. Instabilities or downturns in the hospitality and retail industries could disproportionately
impact our revenue, as clients may exit the industry or delay, cancel or reduce planned expenditures for our products. A general
downturn in the hospitality and retail industries could disproportionately impact our revenue, as clients may exit the industry or delay,
cancel or reduce planned expenditures for our products.

Higher oil and gas prices worldwide could have a material adverse impact on the hospitality industry, and indirectly, on our
business.

Material increases in oil and gas prices tend to reduce discretionary spending by consumers, such as on travel and dining, as well as on
retail spending generally. Reductions in discretionary spending by consumers adversely affect our customers and, indirectly, our
business. Moreover, increases in oil and gas prices also directly adversely affect our customer base in other ways. For example, oil
and gas price increases can result in higher ingredient and food costs for our restaurant customers.

Consolidation in the industries that we serve could adversely affect our business.

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

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

Risks Relating to Our Stock

Our stock price has been volatile, and we expect it will continue to be volatile. For example, during the year ended March 31, 2013,
the trading price of our common stock ranged from a high of $10.05 to a low of $6.81. The volatility of our stock price may be due to
factors other than those specific to our business, such as economic news or other events generally affecting the trading markets.
Additionally, our ownership base has been and may continue to be concentrated in a few shareholders, which could increase the
volatility of our common share price over time.

Our largest shareholder, MAK Capital, currently holds approximately 32% of our common shares, which could impact corporate
policy and strategy, and MAK Capital's interests may differ from those of other shareholders.

Pursuant to the approval by shareholders of a control share acquisition proposal, MAK Capital holds approximately 32% of our
outstanding common shares. As a significant shareholder whose responses could potentially affect the interests of Agilysys and the
other shareholders, our Board may consider MAK Capital's potential response to a particular decision of the Board in considering the
range of possible corporate policies and strategies in the future, potentially influencing corporate policy and strategic planning.

MAK entered into a Voting Trust Agreement with Computershare, as trustee, which provides that, for both strategic and other
transactions requiring at least two-thirds of the voting power to approve, the trustee will vote a certain percentage of MAK Capital's
shares in favor of, against, or abstaining from voting in the same proportion as all other shares voted by shareholders (including MAK
Capital's shares not being voted by the trustee). If the Voting Trust Agreement, as amended, that MAK entered into with
Computershare were to terminate for any reason, MAK Capital would have a level of control that would highly influence the approval
or disapproval of transactions requiring under Ohio law the approval of two-thirds of the outstanding common shares, such as a
business combination, or majority share acquisition involving the issuance of common shares entitling the holders to exercise one-
sixth or more of the voting power of Agilysys, each of which requires approval by two-thirds of the outstanding common shares.
MAK Capital might also be able to initiate or substantially assist any such transaction. Even with the limitations on MAK Capital's
voting power imposed by the Voting Trust Agreement, as amended, it would be more difficult for the other shareholders to approve
such a transaction if MAK Capital opposed it, and MAK Capital's interests may differ from those of other shareholders.

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Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Agilysys' corporate services are located in Alpharetta, Georgia where we lease approximately 23,000 square feet of office space. In
addition, we lease approximately 27,000 square feet of office space in Las Vegas, Nevada, 6,400 square feet of office space in Bellevue,
Washington and 77,500 square feet of warehouse and office space in Taylors, South Carolina. Our major leases contain renewal options
for periods of up to 10 years. We believe that our current facilities and office space are sufficient to meet our needs and do not anticipate
any difficulty securing additional space as needed.

Item 3. Legal Proceedings.

We are involved in legal actions that arise in the ordinary course of business. It is the opinion of management that the resolution of any
current pending litigation will not have a material adverse effect on our financial position or results of operations.

On April 6, 2012, Ameranth, Inc. filed a complaint against us for patent infringement in the United States District Court for the
Southern District of California. The complaint alleges, among other things, that point-of-sale and property management and other
hospitality information technology products, software, components and/or systems sold by us infringe three patents owned by
Ameranth purporting to cover generation and synchronization of menus, including restaurant menus, event tickets, and other products
across fixed, wireless and/or internet platforms as well as synchronization of hospitality information and hospitality software
applications across fixed, wireless and internet platforms. The complaint seeks monetary damages, injunctive relief, costs and
attorneys fees. The parties to the lawsuit are currently engaged in discovery. At this time, we are not able to predict the outcome of
this lawsuit, or any possible monetary exposure associated with the lawsuit. However, we dispute the allegations of wrongdoing and
are vigorously defending ourselves in this matter.

On February 28, 2013 we participated in a mediation that resulted in a tentative agreement to resolve the wage and hour putative class
action lawsuit filed against the company on July 9, 2012, in the United States District Court for the Northern District of California. A
motion for preliminary approval of a proposed settlement in the amount of $1.5 million was filed with the court on June 6, 2013.

Item 4. Mine Safety Disclosures.

Not applicable.

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Part II

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

Our common shares, without par value, are traded on the NASDAQ Stock Market LLC under the symbol “AGYS”. The high and low
sales prices for the common shares for each quarter during the past two fiscal years are presented in the table below.

Fiscal 2013
Fourth quarter
Third quarter
Second quarter
First quarter

Fiscal 2012
Fourth quarter
Third quarter
Second quarter
First quarter

High

Low

$
$
$
$

10.05
8.78
9.05
9.25

High

9.60
9.00
10.00
8.62

$
$
$
$

8.21
7.23
8.00
6.81

6.92
6.50
6.60
4.43

Low

The closing price of the common shares on May 31, 2013, was $11.46 per share. There were 1,947 shareholders of record.

We did not pay dividends in fiscal 2013 or 2012 and are unlikely to do so in the foreseeable future. The current policy of the Board of
Directors is to retain any available earnings for use in the operations of our business.

Shareholder Return Performance Presentation

The following chart compares the value of $100 invested in our common shares, including reinvestment of dividends, with a similar
investment in the Russell 2000 Index (the “Russell 2000”) and with the companies listed in the SIC Code 5045-Computer and
Computer Peripheral Equipment and Software for the period March 31, 2008 through March 31, 2013. The stock price performance
in this graph is not necessarily indicative of the future performance of our common shares.

Comparison of 5 Year Cumulative Total Return

Company Name / Index
Agilysys, Inc.
Russell 2000
Peer Group

INDEXED RETURNS

Fiscal Years Ended March 31,

Base Period
2008
$100.00
$100.00
$100.00

$
$
$

2009

2010

2011

2012

2013

37.86 $
62.50 $
76.86 $

99.47 $
101.72 $
111.20 $

51.12 $
127.96 $
135.01 $

80.07 $
127.71 $
131.87 $

88.53
148.52
117.68

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

Item 6. Selected Financial Data.

The following selected consolidated financial and operating data was derived from our audited consolidated financial statements and
the current and prior period operating results of TSG have been classified within discontinued operations for all periods presented as
discussed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The selected financial
data should be read in conjunction with the Consolidated Financial Statements and Notes thereto, and Item 7 contained in Part II of
this Annual Report.

(In thousands, except per share data)
Operating results

Net revenue

Gross profit

Operating loss

Loss from continuing operations, net of taxes

Income (loss) from discontinued operations, net of taxes

Net (loss) income

Per share data (1)

Basic and diluted

Loss from continuing operations

Income (loss) from discontinued operations

Net (loss) income

Weighted-average shares outstanding - basic and diluted

Balance sheet data at year end

Cash and cash equivalents

Working capital

Total assets (2)

Total debt

Total shareholders’ equity

Year ended March 31,

2013

2012

2011

2010

2009

236,140 $
90,170
(1,111)
(1,298)
—
(1,298) $

208,889 $

202,681 $

193,506 $

220,888

79,836
(41,190)
(34,239)
11,456
(22,783) $

75,639
(21,625)
(22,975)
(32,500)
(55,475) $

74,008
(14,880)
(7,630)
11,177

86,099

(184,371)

(178,644)

(105,490)

3,547 $ (284,134)

(0.06) $
—
(0.06) $

(1.53) $
0.51
(1.02) $

(1.01) $
(1.43)
(2.44) $

(0.34) $
0.49

(7.91)

(4.67)

0.15 $

(12.58)

21,880

22,432

22,785

22,627

22,587

82,931 $
72,121

196,964

687

97,587 $

74,354 $

65,535 $

76,286

204,139

994

83,005

312,398

1,906

88,978

330,449

819

36,451

72,150

374,436

623

113,856

114,438

148,104

198,924

192,717

(1) When a loss is reported, the denominator of diluted earnings per share cannot be adjusted for the dilutive impact of share-based
compensation awards because doing so would be anti-dilutive. In addition, when a loss from continuing operations is reported,
adjusting the denominator of diluted earnings per share would also be anti-dilutive to the loss per share, even if the entity has net
income after adjusting for a discontinued operation. Therefore, for all periods presented, basic weighted-average shares outstanding
were used in calculating the diluted net loss per share.

(2) The decrease in assets from fiscal 2011 to 2012 is due to the sale of TSG.

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Item 7. Managements’ Discussion and Analysis of Financial Condition and Results of Operations.

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

— what factors affect our business;
— what our earnings and costs were;
— why those earnings and costs were different from the year before;
— where the earnings came from;
— how our financial condition was affected; and
— where the cash will come from to fund future operations.

The MD&A analyzes changes in specific line items in the Consolidated Statements of Operations and Consolidated Statements of
Cash Flows and provides information that management believes is important to assessing and understanding our consolidated
financial condition and results of operations. This discussion should read in conjunction with the Consolidated Financial Statements
and related Notes that appear in Item 15 of this Annual Report titled, "Financial Statements and Supplementary Data." 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 3 of this Annual Report and Item 1A “Risk Factors” in Part I of this Annual Report for additional information concerning these
items. Management believes that this information, discussion, and disclosure is important in making decisions about investing in
Agilysys.

Overview

Agilysys is a leading developer and marketer of proprietary enterprise software, services and solutions to the hospitality and retail
industries. We specialize in the development of market-leading point-of-sale (POS), property management, inventory & procurement
and mobile & wireless solutions that are designed to streamline operations, improve efficiency and enhance the guest experience. In
addition, we provide support, maintenance, resold hardware products and software hosting or subscription services. Our customers
include casinos, resorts, hotels, foodservice venues, stadiums, cruise lines, grocery stores, convenience stores, general & specialty
retail businesses and partners. A significant portion of our consolidated revenue is derived from contract support, maintenance
agreements and professional services.

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

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

Our strategic plan specifically focuses on:

•
•

Strong customer focus, with clear and realistic service commitments.
Growing sales of our proprietary offerings: products, support, maintenance and subscription services and professional
services.
Diversifying our customer base across geographies and industries.
Capitalizing on our intellectual property and emerging technology trends.

Revenue - Defined

As required by the SEC, we separately present revenue earned as products revenue, support, maintenance and subscription services
revenue or professional services revenue in our 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

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may be different from those used by other companies and caution should be used when comparing these financial measures to those of
other companies. We use the following terms to describe revenue:

•
•
•

•

Revenue – We present revenue net of sales returns and allowances.
Products revenue – Revenue earned from the sales of hardware equipment and proprietary and remarketed software.
Support, maintenance and subscription services revenue – Revenue earned from the sale of proprietary and remarketed
ongoing support, maintenance and subscription or hosting services.
Professional services revenue – Revenue earned from the delivery of implementation, integration and installation services for
proprietary and remarketed products.

Matters Affecting Comparability

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

Results of Operations

Fiscal 2013 Compared with Fiscal 2012

Net Revenue and Operating Loss

The following table presents our consolidated revenue and operating results for the fiscal years ended March 31, 2013 and 2012:

(Dollars in thousands)
Net revenue:
Products
Support, maintenance and subscription services
Professional services
Total net revenue
Cost of goods sold:
Products, inclusive of developed technology amortization
Support, maintenance and subscription services
Professional services

Total net cost of goods sold

Operating loss
Operating loss percentage

nm - not meaningful.

Year ended March 31,
2013
2012

Increase (decrease)
%

$ 123,798
77,145
35,197
236,140

$ 105,601
72,711
30,577
208,889

96,618
27,760
21,592
145,970
90,170

83,550
25,706
19,797
129,053
79,836

38.2 %

32,680
21,664
27,601
2,674
3,382
120
1,664
1,496
(1,111)

30,309
24,006
32,889
4,602
3,686
9,681
—
15,853
$ (41,190)

(0.5)%

(19.7)%

18,197
4,434
4,620
27,251

13,068
2,054
1,795
16,917
10,334

2,371
(2,342)
(5,288)
(1,928)
(304)
(9,561)
1,664
(14,357)
40,079

17.2 %
6.1 %
15.1 %
13.0 %

15.6 %
8.0 %
9.1 %
13.1 %
12.9 %

7.8 %
(9.8)%
(16.1)%
(41.9)%
(8.2)%
nm
nm
(90.6)%
(97.3)%

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

Net revenue:
Products
Support, maintenance and subscription services
Professional services
Total net revenue
Cost of goods sold:
Products, inclusive of developed technology amortization
Support, maintenance and subscription services
Professional services

Total net cost of goods sold

Gross profit
Operating expenses:
Product development
Sales and marketing
General and administrative
Depreciation of fixed assets
Amortization of intangibles
Asset impairments and related charges
Legal settlements
Restructuring, severance and other charges

Operating loss

Year ended March 31,
2013
2012

52.4 %
32.7
14.9
100.0

50.6 %
34.8
14.6
100.0

40.9
11.8
9.1
61.8
38.2

13.8
9.2
11.7
1.1
1.4
0.1
0.7
0.6
(0.5)%

40.0
12.3
9.5
61.8
38.2

14.5
11.5
15.7
2.2
1.8
4.6
—
7.6
(19.7)%

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The following table presents our revenue and operating results by business segment for the fiscal years ended March 31, 2013 and
2012:

(Dollars in thousands)
Hospitality (HSG)
Revenue from external customers:
Products
Support, maintenance and subscription services
Professional services
Total revenue from external customers
Gross profit
Gross profit margin
Operating income (loss)
Retail (RSG)
Revenue from external customers:
Products
Support, maintenance and subscription services
Professional services
Total revenue from external customers
Gross profit
Gross profit margin
Operating income
Total reportable business segments
Total revenue from external customers
Gross profit
Gross profit margin
Operating income (loss)
Corporate/Other
Operating loss
Total Company
Total revenue from external customers
Gross profit
Gross profit margin
Operating loss

nm - not meaningful.

Year ended March 31,
2013
2012

Increase (decrease)
%
$

$
$

33,517
50,206
14,585
98,308
63,260

64.3%

14,428

90,281
26,939
20,612
137,832
26,910

19.5%

10,840

236,140
90,170

38.2%

25,268

(26,379)

236,140
90,170

38.2%
(1,111)

$
$

25,608
47,612
13,155
86,375
55,354

64.1%
(6,552)

79,993
25,099
17,422
122,514
24,482

20.0%
5,481

208,889
79,836

38.2%
(1,071)

(40,119)

208,889
79,836

38.2%
(41,190)

$
$

7,909
2,594
1,430
11,933
7,906

30.9 %
5.4 %
10.9 %
13.8 %
14.3 %

20,980

(320.2)%

10,288
1,840
3,190
15,318
2,428

12.9 %
7.3 %
18.3 %
12.5 %
9.9 %

5,359

97.8 %

27,251
10,334

26,339

13.0 %
12.9 %

13,740

(34.2)%

27,251
10,334

13.0 %
12.9 %

40,079

(97.3)%

Net revenue. Total net revenue increased $27.3 million, or 13.0%, during fiscal 2013 compared to fiscal 2012. Products revenue
increased $18.2 million, or 17.2%, support and maintenance and subscription services revenue increased $4.4 million, or 6.1%, and
professional services revenue increased $4.6 million, or 15.1%.

HSG’s revenue increased $11.9 million, or 13.8%, in fiscal 2013 compared to fiscal 2012. The $7.9 million, or 30.9%, increase in
products revenue was the result of a couple of large remarketed product sales, continued organic growth in our proprietary software
licenses and the negative impact in fiscal 2012 of certain errors identified in the manner in which we recognized revenue for certain
software license and professional services arrangements in prior periods. The out of period impact for errors accumulated in fiscal
2012 was approximately $1.2 million. The $2.6 million, or 5.4%, increase in support, maintenance and subscription services was the
result of continued focus on selling subscription based services revenue which is typically recognized over a five year period, and
ongoing support from proprietary products. The $1.4 million, or 10.9%, increase in professional services is due to the growth in
services consistent with growth in our proprietary software licenses.

RSG’s revenue increased $15.3 million, or 12.5%, in fiscal 2013 compared to fiscal 2012. The $10.3 million, or 12.9%, increase in
products revenue as a result of increased hardware sales. The increase in support, maintenance and subscription services revenue of

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$1.8 million, or 7.3%, is the result of additional multi-year support contracts. Professional services revenue increased $3.2 million, or
18.3%, due to the addition of several multi-location, multi-year contracts for certain of our service offerings.

Gross profit and gross profit margin. Our total gross profit increased $10.3 million, or 12.9%, in fiscal 2013 while total gross profit
margin remained at 38.2%. Products gross profit increased $4.7 million and gross profit margin increased 80 basis points to 21.4%.
Support, maintenance and subscription services gross profit increased $2.8 million while gross margin decreased 40 basis points to
64.4%. Professional services gross margin increased $2.8 million and gross profit margin increased 340 basis points to 38.7%.

HSG’s gross profit increased $7.9 million, or 14.3%, in fiscal 2013 while gross profit margin remained relatively flat, increasing 20
basis points to 64.3% in fiscal 2013. Products gross profit margin increased 80 basis points mainly as a result of an increase in
proprietary software sales which carry a higher margin, partially offset by a couple of large lower-margin remarketed products sales
during the last half of fiscal 2013 which negatively impacted our overall margin by 5 basis points. Support, maintenance and
subscription services gross profit margins increased 120 basis points due to economy of scale. Professional services gross profit
margin increased 600 basis points as a result of efficient management of project labor within implementation services.

RSG’s gross profit increased $2.4 million, or 9.9%, in fiscal 2013 while gross profit margin decreased 50 basis points to 19.5% in
fiscal 2013. Products gross profit margin remained the same with incentives from vendors for over-achievements of our goals
offsetting a lower margin large hardware sale. The support gross profit margins decreased due to the mix within remarketed and
proprietary product support. Professional services gross margin had an increase of 210 basis points due to the mix and seasonality
within our offerings.

Operating expenses

Operating expenses, excluding the charges for asset impairments and related charges, legal settlements and restructuring, severance
and other charges, decreased $7.5 million, or 7.8%, in fiscal 2013 compared with fiscal 2012. On a segment basis, HSG decreased
$2.1 million, RSG decreased $2.3 million and Corporate decreased $3.1 million.

Product development. Product development includes all costs associated with research and development. Product development
increased $2.4 million, or 7.8% in fiscal 2013 compared with fiscal 2012. Product development expenses increased $2.5 million in
HSG and decreased $0.1 million in RSG in fiscal 2013 compared to fiscal 2012. This increase in HSG is driven by the continued
investment in internal and external resources to enhance the existing products and the early stage development of our future platforms.
The decrease in RSG is mainly driven by the capitalization of internal labor costs associated with certain proprietary software product
offerings.

Sales and marketing. Sales and marketing decreased $2.3 million, or 9.8% in fiscal 2013 compared with fiscal 2012. Sales and
marketing expenses decreased $0.9 million in HSG and $1.4 million in RSG in fiscal 2013 compared to fiscal 2012. The decrease in
HSG and RSG is associated with the savings realized from the fiscal 2012 restructuring.

General and administrative. General and administrative decreased $5.3 million, or 16.1%, in fiscal 2013 compared to fiscal 2012.
HSG decreased $3.6 million, RSG decreased $0.6 million and Corporate decreased $1.1 million. This is a result of lower employee
related costs created by efficiencies in back-office processes generated through the fiscal 2012 restructuring, offset by an increase in
operating expenses associated with investments in resources to improve operational efficiencies.

Depreciation of fixed assets. Depreciation of fixed assets decreased $1.9 million on a consolidated basis driven by our Corporate
Services facility relocating from Solon, Ohio to Alpharetta, Georgia and the closures of Emeryville, California and Frederick,
Maryland in the fourth quarter of fiscal 2012.

Amortization of intangibles. Amortization of intangibles decreased $0.3 million in fiscal 2013. This decrease is due to certain internal
use software and developed technology reaching their useful lives during fiscal 2013.

Asset Impairments and related charges. During the fourth quarter of 2012, it was determined that certain developed technologies
would no longer be offered for sale. As a result during fiscal 2012, we impaired the entire remaining assets of $8.6 million, and
accrued the costs associated with a transition plan for all of the existing customers off of this platform of $1.1 million. In fiscal 2013,
we recorded in an additional $0.1 million related to the costs associated with this asset impairment.

Legal settlements. During the fourth quarter of fiscal 2013, we recorded $1.7 million in legal settlements related to pending lawsuits.

Restructuring, severance and other charges. Restructuring, severance and other charges decreased $14.4 million in fiscal 2013
compared to fiscal 2012. In fiscal 2012, we announced restructuring actions and recorded $15.9 million in restructuring charges,
primarily comprised of severance and related benefits, and we incurred $4.4 million of accelerated depreciation due to the relocation

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of our previous corporate services in Solon, Ohio location and closing our facilities in Emeryville, California and Frederick, Maryland.
In fiscal 2013, we recorded an additional $1.1 million restructuring charges associated with the remaining severance and related
benefits of the fiscal 2012 restructuring charge. In addition, we recorded $0.3 million in severance costs during the second quarter.
Our restructuring actions are discussed further in Note 4, Restructuring Charges.

Other (Income) Expenses

(Dollars in thousands)
Other (income) expenses:

Interest income
Interest expense
Other expenses (income), net
Total other (income) expenses, net

Year ended March 31,
2013
2012

(Unfavorable) favorable

(14) $
346
139
471

(103) $
978
181
1,056

(89)
632
42
585

(86.4)%
64.6 %
23.2 %
55.4 %

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

Interest expense. Interest expense consists of costs associated with capital leases, loans on corporate-owned life insurance policies and
the amortization of deferred financing fees. Interest expense decreased $0.6 million during fiscal 2013 compared to fiscal 2012
primarily driven by the credit facility we terminated in July 2011 which resulted in immediate expense of approximately $0.4 million
in unamortized deferred financing fees related to the credit facility.

Other expenses, net. In fiscal 2013 compared to fiscal 2012, the decrease of other expenses primarily consists of losses recognized in
connection with our marketable securities (Rabbi Trust), partially offset by movements in foreign currencies relative to the U.S. dollar
and gains related to change in surrender value of company-owned life insurance policies.

Income Taxes

(Dollars in thousands)
Income tax (benefit) expense
Effective tax rate

nm - not meaningful

Year ended March 31,
2013
2012

(284)
18.0%

(8,007)
19.0%

(Unfavorable)
favorable

$
(7,723)

For fiscal 2013, the effective tax rate was different than the statutory rate due primarily to recognition of net operating losses as
deferred tax assets, which were offset by increases in the valuation allowance. Other items affecting the rate include a decrease in
unrecognized tax benefits attributable to the expiration of statute of limitations, foreign and state taxes and other U.S. permanent book
to tax differences.

For fiscal 2012, the effective tax rate was different than the statutory rate due primarily to the intra-period tax allocation rules
associated with the discontinued operations. Other items affecting the rate include a decrease in unrecognized tax benefits attributable
to the expiration of statute of limitations, foreign and state taxes and other U.S. permanent book to tax differences.

Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months a reduction
in unrecognized tax benefits may occur in the range of zero to $0.4 million of tax and zero to $0.2 million of interest based on the
outcome of tax examinations and as a result of the expiration of various statutes of limitations. We are routinely audited; due to the
ongoing nature of current examinations in multiple jurisdictions, other changes could occur in the amount of gross unrecognized tax
benefits during the next 12 months which cannot be estimated at this time.

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Fiscal 2012 Compared to Fiscal 2011

Net Revenue and Operating Loss

The following table presents our consolidated revenue and operating results for the fiscal years ended March 31, 2012 and 2011:

Total net cost of goods sold

Operating loss
Operating loss percentage

nm - not meaningful.

Year ended March 31,
2011
2012

Increase (decrease)
%

$ 105,601
72,711
30,577
208,889

$ 104,769
70,729
27,183
202,681

83,550
25,706
19,797
129,053
79,836

80,090
25,507
21,445
127,042
75,639

38.2 %

37.3 %

30,309
24,006
32,889
4,602
3,686
9,681
15,853
$ (41,190)

27,531
22,212
37,121
3,914
5,122
959
405
$ (21,625)

(19.7)%

(10.7)%

832
1,982
3,394
6,208

3,460
199
(1,648)
2,011
4,197

2,778
1,794
(4,232)
688
(1,436)
8,722
15,448
(19,565)

0.8 %
2.8 %
12.5 %
3.1 %

4.3 %
0.8 %
(7.7)%
1.6 %
5.5 %

10.1 %
8.1 %
(11.4)%
17.6 %
(28.0)%
nm
3,814.3 %
90.5 %

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

Total net cost of goods sold

Operating loss

Year ended March 31,
2011
2012

50.6 %
34.8
14.6
100.0

51.7 %
34.9
13.4
100.0

40.0
12.3
9.5
61.8
38.2

14.5
11.5
15.7
2.2
1.8
4.6
7.6
(19.7)%

39.5
12.6
10.6
62.7
37.3

13.6
11.0
18.3
1.9
2.5
0.5
0.2
(10.7)%

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The following table presents our revenue and operating results by business segment for fiscal years ended March 31, 2012 and 2011:

(Dollars in thousands)
Hospitality (HSG)
Revenue from external customers:
Products
Support, maintenance and subscription services
Professional services
Total revenue from external customers
Gross profit
Gross profit margin
Operating (loss) income
Retail (RSG)
Revenue from external customers:
Products
Support, maintenance and subscription services
Professional services
Total revenue from external customers
Gross profit
Gross profit margin
Operating income
Total reportable business segments
Total revenue from external customers
Gross profit
Gross profit margin
Operating income
Corporate/Other
Operating loss
Total Company
Total revenue from external customers
Gross profit
Gross profit margin
Operating loss

Year ended March 31,
2011
2012

Increase (decrease)
%
$

$
$

25,608
47,612
13,155
86,375
55,354

64.1%
(6,552)

79,993
25,099
17,422
122,514
24,482

20.0%
5,481

208,889
79,836

38.2%
(1,071)

(40,119)

208,889
79,836

38.2%
(41,190)

$
$

35,306
45,053
13,650
94,009
54,669

58.2%
5,836

69,463
25,676
13,533
108,672
20,970

19.3%
3,164

202,681
75,639

37.3%
9,000

(30,625)

202,681
75,639

37.3%
(21,625)

$
$

(9,698)
2,559
(495)
(7,634)
685

(27.5)%
5.7 %
(3.6)%
(8.1)%
1.3 %

(12,388)

(212.3)%

10,530
(577)
3,889
13,842
3,512

15.2 %
(2.2)%
28.7 %
12.7 %
16.7 %

2,317

73.2 %

6,208
4,197

3.1 %
5.5 %

(10,071)

(111.9)%

(9,494)

31.0 %

6,208
4,197

3.1 %
5.5 %

(19,565)

90.5 %

Net revenue. Total net revenue increased $6.2 million or 3.1% during fiscal 2012 compared to fiscal 2011. Products revenue, support,
maintenance and subscription services revenue and professional services revenue increased $0.8 million, $2.0 million and $3.4
million, respectively.

HSG's revenue decreased $7.6 million or 8.1% in fiscal 2012 compared to fiscal 2011. The decrease in products revenue of
approximately $9.7 million was driven by lower volumes in our remarketed products as well as a decline in perpetual software
licenses with a shift in strategy to focus on selling subscription based services revenue which is typically recognized over a five year
period. In addition, products revenue was negatively impacted by the errors identified in the manner in which we recognized revenue
for certain software license and professional services arrangements in prior periods. The out of period impact for errors accumulated
prior to fiscal 2012 was approximately $1.0 million. The $2.6 million or 5.7% increase in support, maintenance and subscription
services in fiscal 2012 was the result of growth in both subscription based revenue and ongoing support from traditional proprietary
products.

RSG's revenue increased $13.8 million or 12.7 % in fiscal 2012 compared to fiscal 2011. The increase in products and professional
services revenue of approximately $10.5 million or 15.2 % and $3.9 million or 28.7%, respectively, are the result of higher volumes
associated with several multi-location, multi-year contracts for remarketed products. We experienced a decline in support,
maintenance and subscription services revenue of approximately $0.6 million or 2.2 % as a result of not renewing certain support
contracts that were less accretive to gross profit than desired.

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Gross profit and gross profit margin. Our total gross profit increased $4.2 million or 5.5% for fiscal 2012 and total gross profit margin
increased 90 basis points. Products gross profit decreased $3.1 million and gross profit margin decreased 300 basis points. Support,
maintenance and subscription services gross profit increased $2.2 million and gross margin percentage increased 90 basis points.
Professional services gross margin increased $5.0 million and gross profit margin increased 1,410 basis points.

HSG's gross profit increased $0.7 million or 1.3% for fiscal 2012 and gross profit margin improved 590 basis points to 64.1% in fiscal
2012 from 58.2% in fiscal 2011. This is primarily due to professional services gross profit margin improvement of 2,070 basis points
as a result of efficient management of project labor within implementation services. In addition, products gross profit margin
improved 80 basis points as a result of selling higher margin opportunities. The support, maintenance and subscription services gross
profit margin declined less than 100 basis points as a result of additional labor resources being dedicated to product enhancement.

RSG's gross profit increased $3.5 million or 16.7% for fiscal 2012 and gross profit margin increased 70 basis points to 20.0% in fiscal
2012 compared with 19.3% in fiscal 2011. This is primarily due to higher professional service margins yielding an improvement of
1,040 basis points as a result of improved labor efficiencies. The support gross profit margins increased approximately 130 basis
points in line with our continued strategic initiatives focused on more profitable revenue streams. Products gross profit margin
declined less than 100 basis points consistent with price compression associated with remarketed products in the market.

Operating expenses

Operating expenses, excluding the one-time charges for asset impairments and related charges and restructuring and related charges,
decreased $0.4 million, or 0.4% in fiscal 2012 compared with fiscal 2011. On a segment basis, HSG and RSG increased $2.1 million
and $0.6 million, respectively, and Corporate decreased $3.1 million.

Product development. Product development includes all costs associated with research and development. Product development
increased $2.8 million or 10.1% in fiscal 2012 compared with fiscal 2011. Product development expenses increased $2.0 million in
HSG and $0.8 million in RSG in fiscal 2012 compared to fiscal 2011. This increase at both segments is driven by the continued
investment in internal resources to enhance the existing products and develop our future platforms as well as at RSG by the
incremental costs associated with employee incentives due to over-achievement of operating unit targets.

Sales and marketing. Sales and marketing increased $1.8 million or 8.1% in fiscal 2012 compared with fiscal 2011. Sales and
marketing expenses increased $1.1 million in HSG and $0.7 million in RSG in fiscal 2012 compared to fiscal 2011. This increase in
HSG is a result of investment in domestic and international sales resources as well, as a one-time specific bad debt expense of $0.4
million. The increase in RSG is associated with employee incentives due to over-achievement of operating unit targets.

General and administrative. General and administrative decreased $4.2 million or 11.4% in fiscal 2012 compared to fiscal 2011.
General and administrative expenses decreased $1.1 million in HSG, $1.2 million in RSG and $1.9 million in Corporate. HSG and
RSG expenses decreased as a result of lower employee related costs created by efficiencies in back-office processes. The Corporate
savings are a result of the restructuring and moving the corporate services from Solon, Ohio to Alpharetta, Georgia as well as certain
one-time professional fees incurred in 2011 that did not repeat in fiscal 2012 associated with the post-implementation efforts of the
Oracle ERP system.

Depreciation of fixed assets. Depreciation of fixed assets increased $0.7 million on a consolidated basis driven by the $0.3 million for
leasehold improvements at our new corporate services offices in Alpharetta, Georgia and $0.3 million for additional depreciation
related to the asset retirement obligation.

Amortization of intangibles. Amortization of intangibles decreased $1.4 million or 28.0% in fiscal 2012. This decrease is due to
certain internal use software reaching their useful lives in fiscal 2011.

Asset impairments and related charges. We recorded asset impairments and related charges of $9.7 million and $1.0 million in fiscal
2012 and fiscal 2011, respectively. During the fourth quarter of 2012, it was determined that certain developed technologies would no
longer be offered for sale. As a result, we have impaired the entire remaining assets of $8.6 million, and accrued the costs associated
with a transition plan for all of the existing customers off of this platform of $1.1 million. In fiscal 2011, we concluded that certain
internally developed software within HSG was no longer being sold. As a result, we recorded an impairment charge of $0.1 million.
Also in fiscal 2011, we concluded that we were no longer using certain indefinite-lived intangible assets related to HSG trade names.
Accordingly, we recorded an impairment charge of $0.9 million.

Restructuring and related charges. We recorded restructuring and related charges of $15.9 million and $0.4 million during fiscal 2012
and 2011, respectively. Under the fiscal 2012 restructuring plan we recorded restructuring charges comprised of primarily $3.5
million of lease termination and related facility closing costs and $8.0 million of severance and related benefits in each segment. In
addition, we incurred accelerated depreciation of $4.4 million of property and equipment that was due to the relocation of our previous

Table of Contents

corporate services in Solon, Ohio to Alpharetta, Georgia, and closing our facilities in Emeryville, California and Frederick, Maryland
in the fourth quarter of fiscal 2012. Our restructuring actions are discussed further in the subsection of this MD&A titled,
Restructuring and Related Charges and in Note 4 to the Consolidated Financial Statements titled, Restructuring and Related Charges.

The restructuring charges recorded in fiscal 2011 consist of settlement costs of $0.4 million related to the payment of an obligation
under Agilysys' nonqualified executive retirement defined benefit pension plan for an executive officer (the “SERP”) who was part of
the fiscal 2009 restructuring actions.

Other (Income) Expenses

(Dollars in thousands)
Other (income) expenses

Interest income
Interest expense
Other expenses (income), net
Total other expenses (income), net

Year ended March 31,
2011
2012

(Unfavorable) favorable

(103) $
978
181
1,056

(73) $

1,297
(2,294)
(1,070) $

30
319
(2,475)
(2,126)

41.1%
24.6%
107.9%
198.7%

Interest income. Interest income increased slightly during fiscal 2012 compared to fiscal 2011 as a result of interest earned from the
investment in treasury notes with the cash proceeds from the sale of TSG during the third quarter of fiscal 2012.

Interest expense. Interest expense consists of costs associated with our Credit Facility, the amortization of deferred financing fees,
loans on corporate-owned life insurance policies, and capital leases. Interest expense decreased $0.3 million in fiscal 2012 compared
to fiscal 2011 due to the termination of the Credit Facility. We terminated the Credit Facility in July 2011 and immediately expensed
approximately $0.4 million in unamortized deferred financing fees related to the former Credit Facility.

Other (income) expenses, net. In fiscal 2012, the $0.2 million of other expense primarily consists of losses recognized as a result of
movements in foreign currencies relative to the U.S. dollar. In fiscal 2011, the $2.3 million in other income primarily included a gain
of $2.1 million recorded on the $2.2 million in proceeds received as a death benefit from certain corporate-owned life insurance
policies.

Income Taxes

(Dollars in thousands)
Income tax (benefit) expense
Effective tax rate

nm - not meaningful

Year ended March 31,
2011
2012

(8,007)
19.0%

2,420
(11.8)%

(Unfavorable) favorable

$
(10,427)

For fiscal 2012 and 2011, the effective tax rate was different than the statutory rate due primarily to the intra-period tax allocation
rules associated with the discontinued operations and recognition of net operating losses as deferred tax assets, which were offset by
increases in the valuation allowance. Other items effecting the rate in the fiscal 2012 include foreign and state taxes, a decrease in
unrecognized tax benefits attributable to expiration of statute of limitations, and other U.S. permanent book to tax differences.

In fiscal 2011, an increase in the valuation allowance was recorded due to the correction of an error. In 2009, we erroneously
considered the tax effect of indefinite-lived intangible assets as a source of future taxable income when we established a valuation
allowance against our U.S. deferred tax assets. During fiscal 2011, we recorded an adjustment to correct this error, increasing income
tax expense by $3.8 million. The adjustment increased our valuation allowance against our U.S. deferred tax asset
Other items effecting the rate in fiscal 2011 include non-taxable life insurance proceeds, a decrease in unrecognized tax benefits
attributable to the expiration of statute of limitations, and other U.S. permanent book to tax differences.

Discontinued Operations

On May 28, 2011, Agilysys entered into a definitive agreement to sell the TSG business for an aggregate purchase price of $64.0
million in cash, subject to a possible downward adjustment based on final working capital, to OnX Enterprise Solutions Limited and
its subsidiary OnX Acquisition LLC (together, “OnX”), a leading IT solutions provider based in Toronto, Canada. In addition to the
purchase agreement, we entered into a transition services agreement with OnX, under which we provided certain transitional

administrative and supportive services to OnX through January 31, 2012. On July 28, 2011, our shareholders approved the sale and the
transaction closed on August 1, 2011, the date on which certain other contingencies specified in the sale agreement were satisfied. The
sale of TSG represented a disposal of a component of an entity. As such, the operating results of TSG, along with the gain on sale,
have been reported as a component of discontinued operations in our Consolidated Statements of Operations for the periods presented.
In addition, the assets and liabilities of the TSG business are classified as discontinued operations in our Consolidated Balance Sheets
for the periods presented.

Upon the close of the transaction, the aggregate purchase price of $64.0 million was reduced by the payment of agreed-upon fees of
$3.3 million for severance costs, $2.4 million for transaction fees, $1.3 million for third-party services in support of the transition and
$1.2 million for a working capital adjustment resulting in net proceeds received by us of $55.8 million. Additional information
regarding the discontinued operations is provided in Note 3 to the Consolidated Financial Statements titled, Discontinued Operations.

Restructuring and Related Charges

We recognize restructuring charges when a plan that materially changes the scope of our business or the manner in which that business
is conducted is adopted and communicated to the impacted parties, and the expenses have been incurred or are reasonably estimable.
In addition, we assess the property and equipment associated with the related facilities for impairment. The remaining useful lives of
property and equipment associated with the related operations are re-evaluated based on the respective restructuring plan, resulting in
the acceleration of depreciation and amortization of certain assets.

Fiscal 2012 Restructuring Activity

In the first quarter of fiscal 2012, we announced restructuring actions, including the relocation of our corporate services from Solon,
Ohio to Alpharetta, Georgia, designed to better align those services with our operating units and reduce costs following the sale of
TSG. These restructuring actions were mostly completed by March 31, 2012 and impacted approximately 130 employees. To date, we
have recorded $12.0 million in restructuring charges, of which $1.1 million was recorded in the fiscal 2013, related to the fiscal 2012
restructuring activity. These charges were primarily comprised of severance and related benefits. On a segment basis, these
restructuring costs totaled $2.6 million, $0.6 million, and $8.8 million for HSG, RSG and Corporate/Other, respectively. As of
March 31, 2013, we had a remaining liability of approximately $0.4 million recorded for fiscal 2012 restructuring activity. As a result
of taking these restructuring actions, we realized between $14.0 million and $16.0 million in cost savings, of which approximately half
was recognized in the fiscal 2012 run rate. The remaining savings have been realized during fiscal 2013.

Fiscal 2009 Restructuring Activity

During fiscal 2009, we took steps to realign our cost and management structure. Since 2009, as previously disclosed, we have incurred
charges totaling approximately $19.0 million related to the fiscal 2009 restructuring activity. As of March 31, 2013, we had a
remaining liability of approximately $0.2 million recorded for fiscal 2009 restructuring activity. We expect to incur minimal additional
restructuring charges during fiscal 2014 for ongoing facility obligations.

Liquidity and Capital Resources

Overview

Our operating cash requirements consist primarily of working capital needs, operating expenses, capital expenditures, and payments of
principal and interest on indebtedness outstanding, which primarily consists of lease and rental obligations at March 31, 2013. We
believe that cash flow from operating activities, cash on hand of $82.9 million as of March 31, 2013 and access to capital markets will
provide adequate funds to meet our short-and long-term liquidity requirements.

As of March 31, 2013 and March 31, 2012, our total debt was approximately $0.7 million and $0.8 million, respectively, comprised of
capital lease obligations in both periods.

At March 31, 2013, 100% of our cash and cash equivalents were deposited in bank accounts. Therefore, we believe that credit risk is
limited with respect to our cash and cash equivalents balances.

Revolving Credit Facility

As previously reported, we executed a Loan and Security Agreement dated May 5, 2009, the Credit Facility, with Bank of America,
N.A., as agent for the lenders. Our obligations under the Credit Facility were secured by our assets (as defined in the Credit Facility).
The Credit Facility provided $50 million of credit for borrowings and letters of credit and would mature May 5, 2012. On July 29,
2011, we terminated the Credit Facility in conjunction with the sale of TSG.

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Cash Flow

(In thousands)
Net cash (used in) provided by continuing operations:
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
Cash flows (used in) provided by continuing operations
Net operating and investing cash flows (used in) provided by discontinued operations
Net (decrease) increase in cash and cash equivalents

Year ended March 31,
2012

2011

2013

$ (10,705) $
(3,053)
(877)
(21)
(14,656)
—

$ (14,656) $

5,301
60,339
(15,413)
5
50,232
(26,999)
23,233

(8,914)
(4,796)
(608)
403
(13,915)
22,734
8,819

Cash flow used in operating activities from continuing operations. Cash flows used in operating activities were $10.7 million in fiscal
2013. The use of cash included $13.2 million of non-recurring payments; $6.3 million for BEP and SERP payments and $6.9 million
in restructuring payments. Also contributing to the use of cash is the increase in accounts receivable of $13.3 million due to the timing
of annual support billings, a change in payment terms and large remarketed sales and an increase in deferred revenue of $2.6 million.
This is offset by the increase in adjustments to net loss of $12.2 million related to legal settlements, depreciation and amortization and
stock based compensation. Additional offsets to the use of cash include an increase in accounts payable of $4.3 million related to the
purchase of products to support the large remarketed product sales and a decrease in inventory of $3.5 million.

The $5.3 million in cash provided by operating activities in fiscal 2012 was comprised of $34.2 million in losses from continuing
operations, offset by $ 32.8 million in non-cash adjustments to the net loss from continuing operations, and a $6.7 million benefit from
changes in operating assets and liabilities. Significant non-cash adjustments to the losses from continuing operations were $9.7 million
in asset impairments and related charges, $10.5 million in depreciation and amortization expenses, $10.0 million in restructuring and
related charges, net of payments and $2.9 million in share-based compensation expense. Significant changes in operating assets and
liabilities primarily consisted of a $6.0 million increase in accounts payable, a $4.4 million increase in deferred revenue, a $4.8 million
increase in inventories and a $1.5 million increase in income taxes payable. Included in the changes to operating assets and liabilities
was the payment of $5.0 million for employee related benefit plans. The improvement driven by deferred revenue is the result of
increased sales in ongoing maintenance, support and subscription revenue, mainly within the HSG operating segment. The benefit
from taxes payable (receivable) was primarily the result of a $1.0 million income tax refund received during fiscal 2012.

The $8.9 million in cash used in operating activities in fiscal 2011 was comprised of $23.0 million in losses from continuing
operations and $2.1 million of changes to operating assets and liabilities, partially offset by $16.2 million in non-cash adjustment to
the loss from continuing operations. Significant non-cash adjustments to the loss from continuing operations were $11.2 million in
depreciation and amortization, $4.4 million in deferred income taxes and $2.8 million in share-based compensation, partially offset by
$2.1 million gain on redemption of corporate-owned life insurance policies. Significant changes in operating assets and liabilities
consisted of a $20.5 million decrease in accounts payable and a $2.5 million decrease in accrued liabilities. This is offset by a $10.3
million decrease in accounts receivable, a $7.6 million increase in income taxes payable (receivable) and a $2.9 increase in deferred
revenue. The movement in accounts receivable and in accounts payable is primarily is a result of settling intercompany balances
between continuing operations and discontinued operations. The $7.6 million benefit in income taxes was primarily a result of income
tax refunds received during fiscal 2011.

Cash flow (used in) provided by investing activities from continuing operations. In fiscal 2013, the $3.1 million in cash used in
investing activities was primarily comprised of $3.0 million used for the purchase of property and equipment and $4.4 million for the
development of proprietary software, offset by $4.3 million in funds from the marketable securities (Rabbi Trust). The $3.0 million in
capital expenditures was primarily used for capitalized product development technology, leasehold improvements and computer
equipment. The funds from the Rabbi Trust were used to settle employee benefit obligations.

In fiscal 2012, the $60.3 million in cash provided by investing activities was primarily comprised of $55.8 million in net proceeds
received from the sale of TSG and $9.2 million in proceeds from our investment in marketable securities, which were used to settle
employee benefit obligations, partially offset by $4.9 million used for the purchase of software, property and equipment. The $4.9
million in capital expenditures was primarily capitalized product development expense and the build out of corporate facilities space
in Alpharetta, Georgia.

In fiscal 2011, the $4.8 million in cash used in investing activities was primarily comprised of $16.0 million in proceeds received from
the redemption of certain corporate-owned life insurance policies, which were offset by $1.1 million of additional investments in
corporate-owned life insurance policies, $13.7 million of additional investments in marketable securities, and $6.1 million for the

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purchase of software, property and equipment. The proceeds from the redemption of certain corporate-owned life insurance policies
was used to settle employee benefit plan obligations during fiscal 2011 and the remainder was invested in marketable securities. The
$6.1 million in capital expenditures in fiscal 2011 primarily consisted of amounts capitalized with respect to our development of
enhancements related to the property management software, Guest360™ and additional costs related to the implementation of the
Oracle ERP software.

Cash flow used in financing activities from continuing operations. During fiscal 2013, the $0.9 million used in financing activities
was primarily comprised of payments on capital lease obligations and the repurchase of shares to satisfy employee tax withholding
related to equity awards.

The $15.4 million used in financing activities was comprised of $13.2 million for repurchases of our common shares, $1.4 million for
the repurchases of our common shares to satisfy employee tax withholding on the vesting or exercise of stock compensation awards
and $1.0 million for payments on capital lease obligations.

The $0.6 million in cash used in financing activities in fiscal 2011 represented $0.4 million in principal payments on capital lease
obligations and $0.2 million related to shares withheld for income taxes on the vesting or exercise of stock compensation awards.

Investments

Investments in Corporate-Owned Life Insurance Policies and Marketable Securities

Agilysys invests in corporate-owned life insurance policies and marketable securities primarily to satisfy future obligations of certain
employee benefit plans. Certain of these corporate-owned life insurance policies were held in a Rabbi Trust and were classified within
“Other non-current assets” in the Consolidated Balance Sheets. Our investment in corporate-owned life insurance policies was
recorded at their cash surrender value, which approximates fair value, at the balance sheet date. In additions, certain of these
corporate-owned life insurance policies are endorsement split-dollar life insurance arrangements. We entered into a separate agreement
with each of the former executives covered by these arrangements whereby we split a portion of the policy benefits with the former
executive's designated beneficiary.

In fiscal 2012 and 2011, Agilysys' investment in marketable equity securities were held within the Rabbi Trust and classified as
available for sale. However, these investments were restricted by the terms of the Rabbi Trust agreement and could only be used to
satisfy the benefit obligations of our nonqualified benefit plans or to satisfy the obligations of our general creditors under an
insolvency. The benefit obligations were fulfilled in April 2012 and the Rabbi Trust was subsequently closed. Additional information
regarding the investments in corporate-owned life insurance policies and marketable securities is provided in Note 11, Employee
Benefit Plans, in our Consolidated Financial Statements.

Off-Balance Sheet Arrangements

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

Contractual Obligations

The following table provides aggregate information regarding our contractual obligations as of March 31, 2013.

(In thousands)
Operating leases (1)
Restructuring liabilities
Capital leases
Asset retirement obligation
Total contractual obligations

Total

2014

2015-2016

2017-2018

Thereafter

13,093 $
584
806
744
15,227 $

3,547 $
584
378
30
4,539 $

5,619 $
—
389
314
6,322 $

2,223 $
—
39
400
2,662 $

1,704
—
—
—
1,704

(1) Operating lease obligations are presented net of contractually binding sub-lease arrangements. Additional information regarding

our operating lease obligations is contained in Note 12, Commitments and Contingencies.

At March 31, 2013, we had a $4.2 million liability reserve for unrecognized income tax positions which is not reflected in the
table above. The timing of potential cash outflows related to the unrecognized tax positions is not reasonably determinable and
therefore, is not scheduled. Substantially all of this reserve is included in Other non-current liabilities. Additional information
regarding unrecognized tax positions is contained in Note 10, Income Taxes.

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

Critical Accounting Policies

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

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

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

Revenue recognition. We derive revenue from the sale of products (i.e., server, storage, and point of sale hardware, and software),
support, maintenance and subscription services and professional services. Revenue is recorded in the period in which the goods are
delivered or services are rendered and when the following criteria are met: persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the sales price to the customer is fixed or determinable, and collection is reasonably assured.
We reduce revenue for estimated discounts, sales incentives, estimated customer returns, and other allowances. Discounts are offered
based on the volume of products and services purchased by customers. 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.

We frequently enter into multiple-element arrangements with customers including hardware, software, professional consulting services
and maintenance support services. For arrangements involving multiple deliverables, when deliverables include software and non-
software products and services, we evaluate and separate each deliverable to determine whether it represents a separate unit of
accounting based on the following criteria: (a) the delivered item has value to the customer on a stand-alone basis; and (b) if the
contract includes a general right of return relative to the delivered item, delivery or performance of the undelivered items is considered
probable and substantially in our control.

For arrangements entered into or materially modified after April 1, 2011, consideration is allocated to each unit of accounting based on
the unit's relative selling prices. In such circumstances, we use a hierarchy to determine the selling price to be used for allocating
revenue to each deliverable: (i) vendor-specific objective evidence of selling price (VSOE), (ii) third-party evidence of selling price
(TPE), and (iii) best estimate of selling price (BESP). VSOE generally exists only when we sell the deliverable separately and is the
price actually charged by us for that deliverable. VSOE is established for our software maintenance services and we use TPE or BESP
to establish selling prices for our non-software related services. BESP is primarily used for elements that are not consistently priced
within a narrow range or TPE is not available. We determine BESP for a deliverable by considering multiple factors including product
class, geography, average discount, and management's historical pricing practices. Amounts allocated to the delivered hardware and
software elements are recognized at the time of sale provided the other conditions for revenue recognition have been met. Amounts
allocated to the undelivered maintenance and other services elements are recognized as the services are provided or on a straight-line
basis over the service period. In certain instances, customer acceptance is required prior to the passage of title and risk of loss of the
delivered products. In such cases, revenue is not recognized until the customer acceptance is obtained. Delivery and acceptance

generally occur in the same reporting period. For arrangements entered into prior to April 1, 2011, we have not applied BESP. In such
arrangements, if we have the requisite evidence of selling price for the undelivered elements but not for the delivered elements, we
apply the residual method to allocate arrangement consideration.

In situations where our solutions contain software that is more than incidental, revenue related to the software and software-related
elements is recognized in accordance with authoritative guidance on software revenue recognition. For the software and software-
related elements of such transactions, revenue is allocated based on the relative fair value of each element, and fair value is determined
by VSOE. If we cannot objectively determine the fair value of any undelivered element included in such multiple-element
arrangements, we defer revenue until all elements are delivered and services have been performed, or until fair value can objectively
be determined for any remaining undelivered elements. When the fair value of a delivered element has not been established, but fair
value exists for the undelivered elements, we use the residual method to recognize revenue. Under the residual method, the fair value
of the undelivered elements is deferred and the remaining portion of the arrangement fee is allocated to the delivered elements and is
recognized as revenue.

Revenue recognition for complex contractual arrangements, especially those with multiple elements, requires a significant level of
judgment and is based upon a review of specific contracts, past experience, the selling price of undelivered elements when sold
separately, creditworthiness of customers, international laws and other factors. Changes in judgments about these factors could impact
the timing and amount of revenue recognized between periods.

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. A majority of our hardware sales involves shipment directly from its suppliers
to the end-user customers. In these transactions, 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.

We offer proprietary software as well as remarketed software for sale to our customers. We offer our customers the right to license the
software under a variety of models. Our customers can license our software under a perpetual model for an upfront fee or a
subscription model. For subscription arrangements, we allow customers the right to use software, receive unspecified products as well
as unspecified upgrades and enhancements and entitle the customer to receive hosting services for a specified term. The subscription
revenue is generally recognized ratably over the term of the arrangement, typically three to five years. Revenue from subscription
service arrangements is included in Support, maintenance and subscription services in the Consolidated Statements of Operations. A
majority of our software sales do not require significant production, modification, or customization at the time of shipment (physically
or electronically) to the customer. Substantially all of our software license arrangements do not include acceptance provisions. As
such, revenue from both proprietary and remarketed software sales is typically recognized when the software has been shipped. For
software delivered electronically, delivery is considered to have occurred when the customer either takes possession of the software
via downloading or has been provided with the requisite codes that allow for immediate access to the software based on the U.S.
Eastern time zone time stamp.

We also offer proprietary and third-party services to our customers. Proprietary services generally include: consulting, installation,
integration and training. Many of our software arrangements include consulting services sold separately under consulting engagement
contracts. When the arrangements qualify as service transactions, consulting revenue from these arrangements are accounted for
separately from the software revenue. The significant factors considered in determining whether the revenue should be accounted for
separately include the nature of the services (i.e., consideration of whether the services are essential to the functionality of the
software), degree of risk, availability of services from other vendors, timing of payments, and the impact of milestones or other
customer acceptance criteria on revenue realization. If there is significant uncertainty about the project completion or receipt of
payment for consulting services, the revenue is deferred until the uncertainty is resolved.

For certain long-term proprietary service contracts with fixed or “not to exceed” fee arrangements, we estimate proportional
performance using the hours incurred as a percentage of total estimated hours to complete the project consistent with the percentage-
of-completion method of accounting. Accordingly, revenue for these contracts is recognized based on the proportion of the work
performed on the contract. If there is no sufficient basis to measure progress toward completion, the revenue is recognized when final
customer acceptance is received. Adjustments to contract price and estimated service hours are made periodically, and losses expected
to be incurred on contracts in progress are charged to operations in the period such losses are determined. The aggregate of collections
on uncompleted contracts in excess of related revenue is shown as a current liability.

collection of revenue, significant modification or customization of the software, or provisions that tie the payment for the software to
the performance of consulting services.

We also offer proprietary and third-party support to our customers. Support generally includes: support and maintenance of software
and hardware products and subscription services. Revenue relating to proprietary support services is recognized evenly over the
coverage period of the underlying agreement within support, maintenance and subscription revenue. In instances where we offer third-
party support contracts to our customer, the supplier is the primary obligor in the transaction although we bear credit risk in the event
of nonpayment by the customer. Since we are acting as an agent or broker with respect to such sales transactions, we report revenue at
the time of the sale, only in the amount of the “commission” (equal to the selling price less the cost of sale) received rather than
reporting revenue in the full amount of the selling price with separate reporting of the cost of sale.

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

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

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

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

We recorded a valuation allowance of $79.2 million as of March 31, 2013 and $78.7 million as of March 31, 2012, related to
substantially all of our deferred income tax assets in jurisdictions where there is uncertainty as to the ultimate realization of a benefit
from those assets. In the event that we determine that we would be able to realize our deferred tax assets in the future in excess of our
net recorded amount, an adjustment to the tax valuation allowance would decrease tax expense in the period such determination was
made.

We recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from uncertain tax
positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate
settlement. No tax benefits are recognized for positions that do not meet this threshold. Interest related to uncertain tax positions is
recognized as part of the provision for income taxes and is accrued beginning in the period that such interest would be applicable
under relevant tax law until such time that the related tax benefits are recognized. Our income taxes are described further in Note 10 to
Consolidated Financial Statements titled, Income Taxes.

Goodwill and Long-Lived Assets. Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired
companies. Goodwill is subject to impairment testing at least annually, unless it is determined after a qualitative assessment that it is
more likely than not that the fair value of the reporting unit is greater than its carrying amount. Goodwill is measured for impairment
on an annual basis, or in interim periods if indicators of potential impairment exist.

For fiscal 2013, we conducted a qualitative assessment (“Step Zero Analysis”) to determine whether it would be necessary to perform
the two-step goodwill impairment test. It was determined based on the Step Zero Analysis that it is more likely than not that the fair
value of the HSG business segment exceeded its carrying amount as of February 1, 2013.

In prior years, we conducted our annual goodwill impairment test on February 1st of each fiscal year. The fair values of the reporting
units for fiscal 2012 were estimated using a combination of an income approach and a market approach, weighted 80% and 20%,
respectively.

The income approach is based on projected future debt-free cash flow that is discounted to present value using factors that consider
the timing and risk of the future cash flows. This approach is appropriate because it provides a fair value estimate based upon the
reporting unit's expected long-term operating and cash flow performance. The income approach is based on a reporting unit's
projection of operating results and cash flows that is discounted using a weighted-average cost of capital. The projection is based upon
our best estimate of projected economic and market conditions over the related period including growth rates, estimate of future
expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value
growth rates, terminal value margin rates, future capital expenditures, and changes in future working capital requirements based on
management projections.

The market approach is based on direct transactional evidence, or where such transactional evidence does not exist, the observed
earnings and revenue trading multiples, or “equity value,” or “enterprise value” of comparable “peer group” companies is used. The
reporting units are assessed based on qualitative and quantitative comparisons against the peer group, including size, expected growth,
profitability, and product diversification. This approach provides that if the respective reporting unit is comparable to the peer group,
then a similar multiple of equity value is a reasonable indication of the value of the reporting unit.

We believe this methodology provides reasonable estimates of a reporting unit's fair value and that this estimate is consistent with how
a market participant would view the reporting unit's fair value. Fair value computed by this methodology is arrived at using a number
of factors, including projected future operating results and business plans, economic projections, anticipated future cash flows,
comparable marketplace data within a consistent industry grouping, and the cost of capital. We weigh the income approach more
heavily than the market approach in its analysis because management believes that there is not a strong comparability with the peer
group companies, and therefore, the income approach provides a better measure of fair value. There are inherent uncertainties,
however, related to these factors and to management's judgment in applying them to this analysis. Nonetheless, we believe that this
method provides a reasonable approach to estimate the fair value of its reporting units. Our goodwill and long-lived assets are
described further in Note 6 to Consolidated Financial Statements titled, Goodwill and Intangible Assets.

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

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

We record compensation expense related to stock options, stock-settled stock appreciation rights, restricted shares, and performance
shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date. The fair value
of restricted share and performance share awards is based on the closing price of our common shares on the grant date. The fair value
of stock option and stock-settled appreciation right awards is estimated on the grant date using the Black-Scholes-Merton option
pricing model, which includes assumptions regarding the risk-free interest rate, dividend yield, life of the award, and the volatility of
our common shares. Additional information regarding the assumptions used to value share-based compensation awards is provided in
Note 14 to the accompanying Consolidated Financial Statements titled, Share-Based Compensation.

Capitalized Software Development Costs. We capitalize certain costs related to the development of computer software. Capitalization
of these costs begins when a detail program design or working model has been produced as evidenced by the completion of design,
planning, coding and testing, such that the product meets its design specifications and has thereby established technological feasibility.
Capitalization of these costs ends when the resulting product is available for general release to the public. Amortization of the
capitalized software is classified within products cost of goods sold in the Consolidated Statements of Operations. For each capitalized
software product, the annual amortization is equal to the greater of: (i) the amount computed using the ratio that the software product’s
current fiscal year gross revenue bears to the total current fiscal year and anticipated future gross revenues for that product or (ii) the
amount computed based on straight-line method over the remaining estimated economic life of the product, which is a range between
three and eight years. The amount by which unamortized software costs exceeds the net realizable value, if any, is recognized as a
charge to income in the period it is determined. We capitalized approximately $5.1 million, $2.5 million and $1.7 million during fiscal

2013, 2012 and 2011, respectively. Amortization of capitalized software was $0.8 million, $1.6 million and $1.7 million during fiscal
2013, 2012 and 2011, respectively.

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

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

In July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other-Testing Indefinite-Lived Intangible Assets for
Impairment, to allow entities to use a qualitative approach to test indefinite-lived intangible assets for impairment. ASU 2012-02
permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an
indefinite-lived intangible asset is less than its carrying value. If it is concluded that this is the case, it is then necessary to perform the
currently prescribed quantitative impairment test by comparing the fair value of the indefinite-lived intangible asset with its carrying
value. Otherwise, the quantitative impairment test is not required. This guidance is effective for fiscal years beginning after
September 15, 2012 and early adoption is permitted. ASU No. 2012-02 is not expected to have a material impact on our consolidated
financial statements or related disclosures.

In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which modifies the
disclosure requirements for offsetting financial instruments and derivative instruments. The update requires an entity to disclose
information about offsetting and related arrangements and the effect of those arrangements on its financial position. We adopted this
guidance on January 1, 2013, and it did not have impact on our consolidated financial statements or related disclosures.

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income, which amends certain provisions in ASC 220 Comprehensive Income. These provisions require the disclosure of significant
amounts that are reclassified out of other comprehensive income into net income in its entirety during the reporting period. These provisions
are effective for fiscal and interim periods beginning after December 15, 2012. We adopted this guidance as of April 1, 2013 and we do
not expect it to have a material impact on our consolidated financial statements or related disclosures.

Management continually evaluates the potential impact, if any, of all recent accounting pronouncements on its financial position,
results of operations, cash flows, or related disclosures and, if significant, makes the appropriate disclosures required by such new
accounting pronouncements.

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

We have assets, liabilities, and cash flows in foreign currencies creating foreign exchange risk. We sell products and services
internationally and enter into transactions denominated in foreign currencies. As a result, we are subject to the variability that arises
from exchange rate movements. For the fiscal years 2013, 2012 and 2011, revenue from international operations was 4%, 5% and 6%,
respectively of total revenue. The effects of foreign currency on operating results did not have a material impact on our results of
operations for the 2013, 2012 and 2011 fiscal years. At March 31, 2013, a hypothetical 10% weakening of the U.S. dollar would not
materially affect our financial statements.

We believe that inflation has had a nominal effect on our results of operations in fiscal years 2013, 2012 and 2011 and do not expect
inflation to be a significant factor in fiscal 2014.

Table of Contents

Until July 2011, we maintained a $50.0 million Loan and Security Agreement with Bank of America, N.A., as lender, dated May 5,
2009 (“Credit Facility”). We terminated the Credit Facility in July 2011 in conjunction with the sale of TSG. As a result of the
proceeds that we received from the sale of TSG, we determined that we no longer required the liquidity provided by the Credit
Facility. As a result of the termination of the Credit Facility, we expensed approximately $0.4 million in unamortized deferred
financing fees that related to the Credit Facility during the second quarter of fiscal 2012.

Item 8. Financial Statements and Supplementary Data.

Agilysys, Inc. and Subsidiaries

ANNUAL REPORT ON FORM 10-K

Year Ended March 31, 2013
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP
Report of Independent Registered Public Accounting Firm - Ernst & Young LLP
Consolidated Balance Sheets as of March 31, 2013 and 2012
Consolidated Statements of Operations for the years ended March 31, 2013, 2012, and 2011
Consolidated Statements of Comprehensive Loss for the years ended March 31, 2013, 2012, and 2011
Consolidated Statements of Cash Flows for the years ended March 31, 2013, 2012 and 2011
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2013, 2012 and 2011
Notes to Consolidated Financial Statements
Schedule II - Valuation and Qualifying Accounts for the years ended March 31, 2013, 2012 and 2011

Page
40
40
42
43
44
45
46
47
76

Report of Independent Registered Public Accounting Firm

To Board of Directors and Shareholders
of Agilysys, Inc. and Subsidiaries:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, cash flows and
shareholders' equity listed in the accompanying index present fairly, in all material respects, the financial position of Agilysys, Inc. and
its subsidiaries at March 31, 2013 and March 31, 2012, and the results of their operations and their cash flows for the two years in the
period ended March 31, 2013 in conformity with accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the accompanying index present fairly, in all material respects, the
information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2013, based on
criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in Management's Report on Internal Control over Financial Reporting. Our responsibility is to express
opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial
reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.

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

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

/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
June 14, 2013

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
of Agilysys, Inc. and Subsidiaries

We have audited the accompanying consolidated statement of operations, comprehensive loss, shareholders' equity, and cash flows of
Agilysys, Inc. and Subsidiaries for the year ended March 31, 2011. Our audits also included the accompanying financial statement schedule
listed in the index at Item 15(a)(2) for the year ended March 31, 2011. These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of their operations
and their cash flows of Agilysys, Inc. and Subsidiaries for the year ended March 31, 2011, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related financial statement schedule for the year ended March 31, 2011, when considered
in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/S/ Ernst & Young LLP

Cleveland, Ohio
June 14, 2011,
except for the effects of reclassifications
and discontinued operations described in
Notes 2 and 3, as to which the date is
June 12, 2012

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(In thousands, except share data)

ASSETS
Current assets:

AGILYSYS, INC.
CONSOLIDATED BALANCE SHEETS

As of March 31,

2013

2012

Cash and cash equivalents
Accounts receivable, net of allowances of $887 and $632, respectively
Inventories
Prepaid expenses
Other current assets
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Other non-current assets

Total assets

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:

Accounts payable
Deferred revenue
Accrued liabilities
Capital lease obligations, current

Total current liabilities

Deferred income taxes, non-current
Capital lease obligations, non-current
Other non-current liabilities
Commitments and contingencies (see Note 12)
Shareholders' equity:

Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized;
31,606,831 shares issued; and 22,145,915 and 21,875,850 shares outstanding at March 31,
2013 and 2012, respectively

Treasury shares, 9,460,916 and 9,730,981 at March 31, 2013 and 2012, respectively
Capital in excess of stated value
Retained earnings
Accumulated other comprehensive (loss) income

Total shareholders' equity
Total liabilities and shareholders' equity

82,931
45,626
12,239
4,081
884
145,761
15,543
14,128
17,288
4,244
196,964

30,177
25,676
17,481
306
73,640
4,002
381
5,085

9,482
(2,838)
(14,267)
122,578
(1,099)
113,856
196,964

97,587
32,531
15,710
2,975
5,492
154,295
16,504
15,198
14,135
4,007
204,139

24,938
28,441
23,983
647
78,009
5,135
347
6,210

9,482

(2,919)
(16,032)
123,876
31
114,438
204,139

See accompanying notes to consolidated financial statements.

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AGILYSYS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)
Net revenue:
Products
Support, maintenance and subscription services
Professional services

Total net revenue

Cost of goods sold:
Products, inclusive of developed technology amortization
Support, maintenance and subscription services
Professional services

Total net cost of goods sold

Gross profit
Gross profit margin
Operating expenses:
Product development
Sales and marketing
General and administrative
Depreciation of fixed assets
Amortization of intangibles
Asset impairments and related charges
Legal settlements
Restructuring, severance and other charges
Operating loss
Other (income) expenses:
Interest income
Interest expense
Other expenses (income), net
Loss before income taxes
Income tax (benefit) expense
Loss from continuing operations
Income (loss) from discontinued operations, net of taxes
Net loss

Weighted average shares outstanding - basic and diluted

Net (loss) income per share - basic and diluted:
Loss from continuing operations
Income (loss) from discontinued operations
Net loss per share

Year ended March 31,
2012

2011

2013

$ 123,798
77,145
35,197
236,140

96,618
27,760
21,592
145,970
90,170

105,601
72,711
30,577
208,889

83,550
25,706
19,797
129,053
79,836

104,769
70,729
27,183
202,681

80,090
25,507
21,445
127,042
75,639

38.2%

37.3%

32,680
21,664
27,601
2,674
3,382
120
1,664
1,496
(1,111)

(14)
346
139
(1,582)
(284)
(1,298)
—
(1,298)

21,880

(0.06)
—

(0.06)

30,309
24,006
32,889
4,602
3,686
9,681
—
15,853
(41,190)

(103)
978
181
(42,246)
(8,007)
(34,239)
11,456
(22,783)

22,432

(1.53)
0.51
(1.02)

27,531
22,212
37,121
3,914
5,122
959
—
405
(21,625)

(73)
1,297
(2,294)
(20,555)
2,420
(22,975)
(32,500)
(55,475)

22,785

(1.01)
(1.43)
(2.44)

See accompanying notes to consolidated financial statements.

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AGILYSYS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)
Net loss
Other comprehensive loss, net of tax:

Unrealized foreign currency translation adjustments
Unrealized (loss) gain on sale of securities

Total comprehensive loss

2013

Year ended March 31,
2012
(22,783) $

(1,298) $

(1,126)
(4)
(2,428) $

76
(4)

(22,711) $

2011
(55,475)

565
714
(54,196)

See accompanying notes to consolidated financial statements.

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(In thousands)

AGILYSYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating activities
Net loss
Less: Income (loss) from discontinued operations

Loss from continuing operations

Adjustments to reconcile loss from continuing operations to net cash used in operating
activities
Restructuring, severance and other charges
Payments for restructuring, severance and other charges
Legal settlements
Asset impairments and related charges
Depreciation
Amortization
Share-based compensation
Deferred income taxes
Gain on redemption of corporate-owned life insurance policies
Changes in operating assets and liabilities:

Accounts receivable
Inventories
Prepaid expense
Accounts payable
Deferred revenue
Accrued liabilities
Income taxes (receivable) payable
Other changes, net

Net cash (used in) provided by operating activities from continuing operations
Net cash (used in) provided by operating activities from discontinued operations
Net cash (used in) provided by operating activities
Investing activities
Proceeds from sale of marketable securities
Proceeds from sale of TSG
Additional investments in marketable securities
Capital expenditures
Capitalized software development costs
Additional (investments in) proceeds from corporate-owned life insurance policies
Net cash (used in) provided by investing activities from continuing operations
Net cash used in investing activities from discontinued operations
Net cash (used in) provided by investing activities
Financing activities
Principal payments under long-term obligations
Exercise of employee stock options
Repurchase of common shares to satisfy employee tax withholding
Repurchase of common shares
Proceeds from borrowings under credit facility
Principal payments under credit facility
Net cash used in financing activities from continuing operations
Net cash used in financing activities from discontinued operations
Net cash used in financing activities
Effect of exchange rate changes on cash
Cash flows (used in) provided by continuing operations
Cash flows (used in) provided by discontinued operations
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

Year ended March 31,
2012

2011

2013

(1,298) $
—
(1,298)

(22,783) $
11,456
(34,239)

(55,475)
(32,500)
(22,975)

1,496
(6,924)
1,664
120
2,674
4,207
2,057
(170)
—

(13,252)
3,462
(1,175)
4,333
(2,617)
(4,019)
(303)
(960)
(10,705)
—
(10,705)

4,347
—
—
(2,940)
(4,352)
(108)
(3,053)
—
(3,053)

(666)
67
(278)
—
—
—
(877)
—
(877)
(21)
(14,656)
—
(14,656)
97,587
82,931

15,853
(5,896)
—
9,681
4,602
5,910
2,896
62
(46)

(621)
(4,789)
(121)
5,994
4,418
(24)
1,464
157
5,301
(26,999)
(21,698)

9,237
55,840
(53)
(2,335)
(2,585)
235
60,339
—
60,339

(1,001)
210
(1,449)
(13,173)
—
—
(15,413)
—
(15,413)
5
50,232
(26,999)
23,233
74,354
97,587

405
(1,610)
—
959
3,914
7,343
2,812
4,449
(2,065)

10,256
(859)
(609)
(20,477)
2,865
(2,499)
7,562
1,615
(8,914)
23,697
14,783

161
—
(13,731)
(3,427)
(2,650)
14,851
(4,796)
(914)
(5,710)

(370)
—
(238)
—
15,235
(15,235)
(608)
(49)
(657)
403
(13,915)
22,734
8,819
65,535
74,354

See accompanying notes to consolidated financial statements.

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AGILYSYS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Common Shares

Capital in

excess of

Accumulated

other

Issued

In Treasury

stated

Retained

comprehensive

(In thousands, except share data)

Stated value Shares

Stated value

value

earnings

loss

Total

Balance at March 31, 2010

31,607 $

9,482

(8,675) $

(2,602) $

(8,770) $ 202,134 $

(1,320) $ 198,924

Non-cash share based compensation
expense

Restricted shares issued

Shares issued upon exercise of stock
options and SSARs

Shares withheld for taxes upon exercise
of stock options, SSARs or vesting of
restricted shares

Net loss

Unrealized translation adjustment

Net actuarial gains and prior service
cost on define pension plans, net of
$467 in taxes

Balance at March 31, 2011

Purchase of treasury shares

Non-cash share based compensation
expense

Restricted shares issued

Shares issued upon exercise of stock
options and SSARs

Shares withheld for taxes upon exercise
of stock options, SSARs or vesting of
restricted shares

Net loss

Unrealized translation adjustment

Unrealized loss on securities

—

— $

—

2,553

110 $

33 $

1,028 $

(6)

(42)

(12)

(226)

—

— $

—

— $

2,553

1,061

—

(238)

—

— (55,475)

—

565

714

31,607 $

9,482

(8,584) $

(2,575) $

(5,421) $ 146,659 $

(41) $ 148,104

—

(1,600)

(481)

(12,692)

—

130

595

—

179

2,368

1,050

(272)

(81)

(1,368)

—

— (22,783)

—

— (13,173)

—

2,368

1,089

210

—

(1,449)

— (22,783)

(4)

Balance at March 31, 2012

31,607 $

9,482

(9,731) $

(2,919) $ (16,032) $ 123,876 $

31 $ 114,438

Non-cash share based compensation
expense

Restricted shares issued

Shares issued upon exercise of stock
options and SSARs

Shares withheld for taxes upon exercise
of stock options, SSARs or vesting of
restricted shares

Net loss

Unrealized translation adjustment

Unrealized loss on securities

—

203

108

—

2,057

(61)

(42)

(12)

(266)

—

(1,298)

—

(1,126)

(4)

2,057

—

(278)

(1,298)

(1,126)

(4)

Balance at March 31, 2013

31,607 $

9,482

(9,462) $

(2,838) $ (14,267) $ 122,578 $

(1,099) $ 113,856

See accompanying notes to consolidated financial statements.

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Agilysys, Inc. and Subsidiaries

Notes to Consolidated Financial Statements
(Table amounts in thousands, except per share data)

1. Nature of Operations

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

Our principal executive offices are located at 425 Walnut Street, Suite 1800, Cincinnati, Ohio, 45202; and our corporate services are
located at 1000 Windward Concourse, Suite 250, Alpharetta, Georgia, 30005. We operate extensively throughout North America, with
additional sales and support offices in the United Kingdom and Asia. Agilysys has two operating segments: Hospitality Solutions Group
(HSG) and Retail Solutions Group (RSG).

On May 31, 2013, we entered into a definitive agreement to sell our Retail Services Group business to an affiliate of Clearlake Capital
Group, L.P., for total consideration of $34.6 million in cash, subject to customary closing conditions and expect to realize a gain in this
transaction. Additionally, we expect to utilize existing net operating losses against our gain. Following completion of the transaction,
which we expect to occur in our fiscal second quarter, our business will be focused exclusively on our Hospitality Solutions Group
and the growth opportunities in this market. We have reviewed the requirements for held-for-sale and discontinued operations
presentation and have determined that the RSG business did not qualify for this presentation at March 31, 2013.

Reference herein to any particular year or quarter refers to periods within the fiscal year ended March 31. For example, fiscal 2013 refers
to the fiscal year ended March 31, 2013.

2. Summary of Significant Accounting Policies

Principles of consolidation. The consolidated financial statements include the accounts of Agilysys, Inc. and subsidiaries. Investments
in affiliated companies are accounted for by the equity or cost method, as appropriate. All inter-company accounts have been
eliminated. Unless otherwise indicated, amounts in Notes to Consolidated Financial Statements refer to continuing operations.

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

Cash and cash equivalents. We consider all highly liquid investments purchased with an original maturity of three months or less to be
cash equivalents. Other highly liquid investments considered cash equivalents with no established maturity date are fully redeemable
on demand (without penalty) with settlement of principal and accrued interest on the following business day after instruction to
redeem. Such investments are readily convertible to cash with no penalty.

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

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

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Goodwill. Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies. Goodwill is
subject to impairment testing at least annually, unless it is determined after a qualitative assessment that it is more likely than not that
the fair value of the reporting unit is greater than its carrying amount. Goodwill is measured for impairment on an annual basis, or in
interim periods if indicators of potential impairment exist.

We believe this methodology provides reasonable estimates of a reporting unit's fair value and that this estimate is consistent with how
a market participant would view the reporting unit's fair value. Fair value computed by this methodology is arrived at using a number
of factors, including projected future operating results and business plans, economic projections, anticipated future cash flows,
comparable marketplace data within a consistent industry grouping, and the cost of capital. We weigh the income approach more
heavily than the market approach in its analysis because management believes that there is not a strong comparability with the peer
group companies, and therefore, the income approach provides a better measure of fair value. There are inherent uncertainties,
however, related to these factors and to management's judgment in applying them to this analysis. Nonetheless, we believe that this
method provides a reasonable approach to estimate the fair value of its reporting units. Additional information regarding our goodwill
and impairment analyses is provided in Note 6, Goodwill and Intangible Assets, and Note 15, Fair Value Measurements.

Intangible assets. Purchased intangible assets with finite lives are primarily amortized using the straight-line method over the
estimated economic lives of the assets. Purchased intangible assets relating to customer relationships and supplier relationships are
being amortized using an accelerated or straight-line method, which reflects the period the asset is expected to contribute to the future
cash flows. Our finite-lived intangible assets are being amortized over periods between two and eight years. We have an indefinite-
lived intangible asset relating to purchased trade names. The indefinite-lived intangible asset is not amortized; rather, it is tested for
impairment at least annually by comparing the carrying amount of the asset with the fair value. An impairment loss is recognized if the
carrying amount is greater than fair value. The income approach using “the relief from royalty method” was used to value the trade
names as of February 1, 2013, resulting in a fair value measurement that exceeded the carrying amount.

Customer relationships are amortized over estimated useful lives between two and seven years; non-competition agreements are
amortized over estimated useful lives between two and eight years; developed technology is amortized over estimated useful lives
between three and eight years; supplier relationships are amortized over estimated useful lives between two and eight years.
Additional information regarding our intangible assets and impairment analyses is provided in Note 6, Goodwill and Intangible Assets,
and Note 15, Fair Value Measurements.

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

Depreciation and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under
capital leases, which make up less than one percent of total assets, over their estimated useful lives using the straight-line method. The
estimated useful lives for depreciation and amortization are as follows: buildings and building improvements - 7 to 30 years;

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furniture - 7 to 10 years; equipment - 3 to 10 years; software - 3 to 10 years; and leasehold improvements over the shorter of the
economic life or the lease term. Internal use software costs are expensed or capitalized depending on the project stage. Amounts
capitalized are amortized over the estimated useful lives of the software, ranging from 3 to 10 years, beginning with the project's
completion. Capitalized project expenditures are not depreciated until the underlying project is completed.

We evaluate the recoverability of our long-lived assets whenever changes in circumstances or events may indicate that the carrying
amounts may not be recoverable. An impairment loss is recognized in the event the carrying value of the assets exceeds the future
undiscounted cash flows attributable to such assets.

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

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If an arrangement does not qualify for separate accounting of the software and consulting services, then the software revenue is
recognized together with the consulting services using the percentage-of-completion or completed contract method of accounting.
Contract accounting is applied to arrangements that include: milestones or customer-specific acceptance criteria that may affect the
collection of revenue, significant modification or customization of the software, or provisions that tie the payment for the software to
the performance of consulting services.

Comprehensive (loss) income. Comprehensive (loss) income is the total of net (loss) income, as currently reported under GAAP, plus
other comprehensive (loss) income. Other comprehensive (loss) income considers the effects of additional transactions and economic

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events that are not required to be recorded in determining net (loss) income, but rather are reported as a separate statement of
comprehensive (loss) income.

Fair value measurements. We measure the fair value of financial assets and liabilities on a recurring or non-recurring basis. Financial
assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared.
Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event
occurs. In determining fair value of financial assets and liabilities, we use various valuation techniques. Additional information
regarding fair value measurements is provided in Note 15, Fair Value Measurements.

Investments in corporate-owned life insurance policies and marketable securities. Agilysys invests in corporate-owned life insurance
policies and marketable securities primarily to satisfy future obligations of our employee benefit plans, including a benefit
equalization plan (“BEP”) and supplemental executive retirement plan (“SERP”). Certain of these corporate-owned life insurance
policies were held in a Rabbi Trust and were classified within “Other non-current assets” in the Consolidated Balance Sheets. Our
investment in corporate-owned life insurance policies were recorded at their cash surrender value, which approximates fair value, at
the balance sheet date. All obligations related to our employee benefit plans, BEP and SERP, were fulfilled in April 2012 with funds
held in the Rabbi Trust.

Certain of these corporate-owned life insurance policies are endorsement split-dollar life insurance arrangements. We entered into a
non-cancelable separate agreement with each of the former executives covered by these arrangements whereby we must maintain the
life insurance policy for the specified amount and split a portion of the policy benefits with the former executive's designated
beneficiary.

Our investment in marketable equity securities are held within the Rabbi Trust and classified as available for sale. However, these
investments are restricted by the terms of the Rabbi Trust agreement and may only be used to satisfy the benefit obligations of our
nonqualified benefit plans or to satisfy the obligations of our general creditors under an insolvency. The Rabbi Trust was liquidated
upon the funding of BEP and SERP in April 2012.

Additional information regarding the investments in corporate-owned life insurance policies and marketable securities is provided in
Note 11, Employee Benefit Plans.

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

Capitalized Software Development Costs. The capitalization of software development cost begins when a product’s technological
feasibility has been established. Capitalization ends when the resulting product is available for general market release. Amortization
of the capitalized software is classified within products cost of goods sold in the Consolidated Statements of Operations. For each

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capitalized software product, the annual amortization is equal to the greater of: (i) the amount computed using the ratio that the
software product’s current fiscal year gross revenue bears to the total current fiscal year and anticipated future gross revenues for that
product or (ii) the amount computed based on straight-line method over the remaining estimated economic life of the product, which is
a range between three and eight years. The amount by which unamortized software costs exceeds the net realizable value, if any, is
recognized as a charge to income in the period it is determined. We capitalized approximately $5.1 million, $2.5 million and $1.7
million during fiscal 2013, 2012 and 2011, respectively. Amortization of capitalized software was $0.8 million, $1.6 million and $1.7
million during fiscal 2013, 2012 and 2011, respectively.

Adopted and Recently Issued Accounting Pronouncements.

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

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

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

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income, which amends certain provisions in ASC 220 Comprehensive Income. These provisions require the disclosure of significant
amounts that are reclassified out of other comprehensive income into net income in its entirety during the reporting period. These
provisions are effective for fiscal and interim periods beginning after December 15, 2012. We adopted this guidance as of April 1,
2013 and we do not expect it to have a material impact on our consolidated financial statements or related disclosures.

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

3. Discontinued Operations

Sale of Assets and Operations of TSG – Fiscal 2012

In 2011, we sold our TSG business for an aggregate purchase price of $62.8 million in cash to OnX Enterprise Solutions Limited and
its subsidiary OnX Acquisition LLC (together, “OnX”), a leading IT solutions provider based in Toronto, Canada. In addition to the
purchase agreement, we entered into a transition services agreement (“TSA”) with OnX, under which we provided certain transitional
administrative and supportive services to OnX through January 31, 2012. In July 2011, our shareholders approved the sale and the
transaction closed on August 1, 2011, the date on which certain other contingencies specified in the sale agreement were satisfied. The
sale of TSG represented a disposal of a component of an entity. As such, the operating results of TSG have been reported as a
component of discontinued operations in the Consolidated Statements of Operations for the periods presented.

Components of Results of Discontinued Operations

For fiscal 2012 and 2011, the income from discontinued operations was comprised of the following:

(In thousands)
Discontinued operations:
Net revenue

Loss from operations of TSG
Gain on sale of TSG
Income (loss) on sale of TSG
Income tax expense (benefit)
Income (loss) from discontinued operations

Year ended March 31,

2012

2011

123,807

474,051

(1,781) $
19,486
17,705
6,249
11,456

(32,732)
—
(32,732)
(232)
(32,500)

There was no activity related to Discontinued Operations in fiscal 2013.

4. Restructuring Charges

Fiscal 2012 Restructuring Activity

In the first quarter of fiscal 2012, we announced restructuring actions, including the relocation of our corporate services from Solon,
Ohio to Alpharetta, Georgia, designed to better align those services with our operating units and reduce costs following the sale of
TSG. These restructuring actions were mostly completed by March 31, 2012 and impacted approximately 130 employees. To date, we
have recorded $12.0 million in restructuring charges, of which $1.1 million was recorded in fiscal 2013, related to the fiscal 2012
restructuring activity. These charges were primarily comprised of severance and related benefits. On a segment basis, these
restructuring costs totaled $2.6 million, $0.6 million, and $8.8 million for HSG, RSG and Corporate/Other, respectively. As of
March 31, 2013, we had a remaining liability of approximately $0.4 million recorded for fiscal 2012 restructuring activity.

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Fiscal 2009 Restructuring Activity

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

(In thousands)
Fiscal 2012 Restructuring Plan:
Severance and employment costs
Facilities costs
Fiscal 2009 Restructuring Plan:
Facilities costs
Total restructuring costs

(In thousands)
Fiscal 2012 Restructuring Plan:
Severance and employment costs
Facilities costs
Fiscal 2009 Restructuring Plan:
Severance and employment costs
Facilities costs
Total restructuring costs

(In thousands)
Fiscal 2009 Restructuring Plan:
Severance and employment costs
Facilities costs
SERP
Total restructuring costs

Balance at

March 31,
2012

Provision

Payments

Balance at
March 31,
2013

5,507
297

495
6,299

1,149
(57)

(4)
1,088

(6,306) $
(240)

(257)
(6,803) $

350
—

234
584

Balance at
March 31,
2011

Provision

Payments

—
—

289
444
733

7,688
3,231

308
235
11,462

(2,181)
(2,934)

(597)
(184)
(5,896)

Balance at
March 31,
2012

5,507
297

—
495
6,299

Balance at
March 31,
2010

1,289
649
—
1,938

Provision

Payments and
Settlements

Balance at
March 31,
2011

(35)
57
383
405

(965)
(262)
(383)
(1,610)

289
444
—
733

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

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5. Property and Equipment, Net

Property and equipment at March 31, 2013 and 2012 is as follows:

(In thousands)

Furniture and equipment

Software

Leasehold improvements

Project expenditures not yet in use

Accumulated depreciation and amortization

Property and equipment, net

Year ended March 31,

2013

2012

13,451

17,259

5,337

1,446

37,493
(21,950)
15,543

13,273

17,224

4,754

173

35,424
(18,920)
16,504

Total depreciation expense on property and equipment was $2.7 million, $9.0 million, and $3.9 million during fiscal 2013, 2012, and
2011, respectively. Total amortization expense on capitalized internal-use software was $2.2 million, $2.5 million and $3.9 million
during fiscal 2013, 2012, and 2011, respectively.

Assets under capital leases are included in property and equipment categories above. Total assets under capital leases at March 31,
2013 and 2012 are as follows:

(In thousands)

Capital leases

Less accumulated depreciation

Assets under capital lease, net

6. Goodwill and Intangible Assets

Year ended March 31,

2013

2012

2,627
(2,073)
554

2,500
(920)
1,580

Agilysys allocates the cost of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess
of the cost over the fair value of the identified net assets acquired is recorded as goodwill.

Goodwill

Agilysys tests goodwill for impairment at the reporting unit level upon identification of impairment indicators, or at least annually. A
reporting unit is the operating segment or one level below the operating segment (depending on whether certain criteria are met).
Goodwill was allocated to our reporting units that are anticipated to benefit from the synergies of the business combinations
generating the underlying goodwill. As discussed in Note 16, Agilysys has two operating segments.

We conducted our annual goodwill impairment test on February 1, 2013 and 2012. As a result of this analysis, we concluded that no
impairment indicators existed.

The changes in the carrying amount of goodwill for the years ended March 31, 2013 and 2012 are as follows:

(In thousands)

Balance at March 31, 2011

Accumulated impairment losses as of March 31, 2011

Impact of foreign currency translation

Balance at March 31, 2012

Impact of foreign currency translation

Balance at March 31, 2013

HSG

RSG

Total

135,298 $
(120,087)
15,211
(13)
15,198
(1,070)
14,128

24,912 $
(24,912)
—

—

— $

—
— $

160,210
(144,999)
15,211
(13)
15,198
(1,070)
14,128

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Intangible Assets

The following table summarizes our intangible assets at March 31, 2013, and 2012:

(In thousands)
Amortized intangible assets:

Customer relationships

Non-competition agreements

Developed technology

Patented technology

Project expenditures not yet in use

Accumulated impairment

Unamortized intangible assets:

Trade names
Accumulated impairment

Gross
carrying
amount

2013

Accumulated
amortization

Net
carrying
amount

Gross
carrying
amount

2012

Accumulated
amortization

Net
carrying
amount

12,475 $

2,910

19,876

5,786

(9,493)

31,634

10,100
(900)

9,200

(10,880) $
(2,422)
(10,164)
(80)
—

—
(23,546)

N/A
N/A

N/A
(23,546) $

1,595

12,475 $

488

9,712

—

5,786
(9,493)
8,088

10,100
(900)
9,200

2,910

19,578

945
(9,493)
26,495

10,100
(900)
9,200

17,288

35,695 $

(9,979) $
(2,162)
(9,339)
(80)
—

—
(21,560)

N/A
N/A

N/A
(21,560) $

2,496

748

10,239

—

945

(9,493)

4,935

10,100
(900)

9,200

14,135

Total intangible assets

40,834 $

During the fourth quarter of 2012, it was determined that Guest 360™, a property management solution system, would no longer be
offered to our customers. As a result, we have impaired the entire remaining assets, $8.1 million of intangibles and $0.5 million of
fixed assets, as well as the known costs associated with a transition plan for all of the existing customers off of this platform, of $1.1
million. In fiscal 2013, we recorded in an additional $0.1 million related to the costs associated with this asset impairment. These
charges were classified within “Asset impairments and related charges” in the Consolidated Statements of Operations.

During the second quarter of fiscal 2011, we concluded that certain software developed technology within HSG was no longer being
sold. As a result we recorded an impairment charge of $0.1 million, which impacted HSG. During the fourth quarter of fiscal 2011, we
concluded that it was no longer using certain indefinite-lived intangible assets related to an HSG trade name. Accordingly, we
recorded an impairment charge of $0.9 million, which impacted HSG. The total impairment charges recorded with respect to
intangible assets during fiscal 2011 of 1.0 million were classified within “Asset impairments and related charges” in our Consolidated
Statements of Operations.

Amortization expense relating to intangible assets was $1.2 million for the fiscal years ended March 31, 2013, 2012 and 2011.
Amortization expense relating to developed technology software intangible assets, including Guest 360™ for the fiscal years ended
March 31, 2013, 2012 and 2011 was $0.8 million, $1.7 million and $1.8 million, respectively, and is included in Products cost of
goods sold.

The following table summarizes our remaining estimated amortization expense relating to intangible assets.

(In thousands)

Fiscal year ending March 31,

2014

2015

2016

2017

2018

Total

Estimated

Amortization

Expense

1,161

982

2,302

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7. Financing Arrangements

The following is a summary of long-term obligations at March 31, 2013, and 2012:

(In thousands)

Capital lease obligations

Less: current maturities

Long -term capital lease obligations

Capital Leases

2013

2012

687 $
(306)
381 $

994
(647)
347

Agilysys leases certain equipment under capital leases expiring in various years through fiscal 2017. The assets and liabilities under
capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets
are depreciated over the shorter of their related lease terms or their estimated productive lives.

Assets recorded under capital leases were $2.6 million and $2.5 million, as of March 31, 2013 and 2012, respectively. Accumulated
depreciation related to assets recorded under capital leases was $2.1 million and $0.9 million as of March 31, 2013 and 2012,
respectively. Depreciation of assets under capital leases is included in depreciation expense.

Minimum future lease payments under capital leases as of March 31, 2013, are as follows:

(In thousands)

Fiscal year ending March 31,

2014

2015

2016

2017

Total minimum lease payments

Less: amount representing interest

Present value of minimum lease payments

Amount

378

262

127

806
(119)
687

Interest rates on capitalized leases vary from 3.3% to 35.6% and are imputed based on the lower of our incremental borrowing rate at
the inception of each lease or the lessor's implicit rate of return.

Revolving Credit Agreement

On May 5, 2009, Agilysys executed a Loan and Security Agreement (the “Credit Facility”) with Bank of America, N.A., as agent for
the lenders from time to time party thereto, which replaced a previous credit facility that was terminated on January 20, 2009. The
Credit Facility provided $50.0 million of credit (which could be increased to $75.0 million by a $25.0 million “accordion provision”)
for borrowings and letters of credit maturing May 5, 2012.

In July 2011, we terminated the Credit Facility in conjunction with the sale of TSG. As a result of the proceeds we received from the
sale of TSG, we determined that we no longer required the liquidity provided by the Credit Facility. In addition, as a result of the
termination of the Credit Facility, we expensed approximately $0.4 million in unamortized deferred financing fees that related to the
Credit Facility in fiscal 2012.

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8. Supplemental Disclosures of Cash Flow Information

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

(In thousands)

Cash payment for interest

Cash payments (refunds) from income tax, net

Acquisition of property and equipment under lease obligations

Asset retirement obligation

Year ended March 31,

2013

2012

2011

342

211

409

—

446
(1,434)
273

744

686
(8,579)
2,323

—

9. Additional Balance Sheet Information

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

(In thousands)
Other non-current assets:
Corporate owned life insurance policies
Other
Total
Accrued liabilities:
Salaries, wages, and related benefits
BEP obligations (1)
SERP obligations (1)
Other taxes payable
Accrued legal settlements
Restructuring liabilities
Professional fees
Income taxes payable
Other
Total
Other non-current liabilities:
Income taxes payable/uncertain tax positions
Deferred rent
Restructuring liabilities
Other
Total

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

10. Income Taxes

2013

2012

3,673
571
4,244

10,118
—
—
2,363
1,664
584
701
631
1,420
17,481

2,469
2,367
—
249
5,085

3,458
549
4,007

7,397
2,948
3,323
1,976
—
5,447
1,700
322
870
23,983

3,135
2,013
852
210
6,210

For the year ended March 31, income from continuing operations before income taxes consisted of the following:

(In thousands)

Loss before income taxes

United States

Foreign

Total loss from continuing operations before income taxes

2013

2012

2011

(2,089)
507
(1,582)

(42,946)
700
(42,246)

(21,664)
1,109
(20,555)

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

(In thousands)

Income tax (benefit) expense

Current:

Federal

State and local

Foreign

Deferred:

Federal

State and local

Foreign

Total income tax (benefit) expense

2013

2012

2011

(230)
28

61
(263)
26
(284)

(8,133)
31

10
(9)
(8,007)

(2,022)
(250)
243

3,874

575

—

2,420

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

(In thousands)

Income tax benefit at the statutory rate of 35%

Provision (benefit) for state taxes

Impact of foreign operations

Nontaxable proceeds

Indefinite life assets

Officer life insurance

Change in valuation allowance

Change in liability for unrecognized tax benefits

Meals and entertainment

Other

(Benefit) expense for income taxes

2013

(428)
(14)
31

—
(203)
(75)
500
(230)
154
(19)
(284)

2012
(14,786)
73

2011

(7,194)
18

279

—

104

8,345
(1,536)
177
(735)
(8,007)

200
(723)
72
(117)
9,431
(311)
628

416

2,420

Our tax provision includes a provision for income taxes in certain foreign jurisdictions where subsidiaries are profitable, but only a
minimal benefit is reflected related to U.S. and certain foreign tax losses due to the uncertainty of the ultimate realization of future
benefits from these losses. The 2013 tax benefit differs from the statutory rate primarily due to the recognition of net operating losses
as deferred tax assets were offset by increases in the valuation allowance. Other items effecting the rate in the current year include
foreign and state taxes, a decrease in unrecognized tax benefits attributable to expiration of statute of limitations, and other U.S.
permanent book to tax differences.

The 2012 tax benefit differs from the statutory rate primarily due to the intra-period tax allocation rules associated with the
discontinued operations and recognition of net operating losses as deferred tax assets were offset by increases in the valuation
allowance. Other items effecting the rate in the current year include foreign and state taxes, a decrease in unrecognized tax benefits
attributable to expiration of statute of limitations, and other U.S. permanent book to tax differences.

The 2011 tax provision differs from the statutory rate primarily due to the intra-period tax allocation rules associated with the
discontinued operations and recognition of net operating losses as deferred tax assets were offset by increases in the valuation
allowance. Other items effecting the rate in 2011 non-taxable life insurance proceeds, a decrease in unrecognized tax benefits
attributable to expiration of statute of limitations, and other U.S. permanent book to tax differences.

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

(In thousands)

Deferred tax assets:

Accrued liabilities

Allowance for doubtful accounts

Inventory valuation reserve

Restructuring reserve

Federal losses and credit carryforwards

Foreign net operating losses

State losses and credit carryforwards

Deferred compensation

Deferred revenue

Goodwill and other intangible assets

Other

Less: valuation allowance

Total

Deferred tax liabilities:

Property and equipment & software amortization

Indefinite-lived goodwill & intangible assets

Total

Total deferred tax liabilities

2013

2012

6,824 $
273

330

206

59,289

331

9,947

—

4,463

1,036

82,772
(79,165)
3,607

3,627

3,844

7,471
(3,864) $

4,433

180

437

1,228

54,047

332

12,149

2,908

6,090

130

81,953
(78,682)
3,271

3,261

4,043

7,304
(4,033)

At March 31, 2013, we had $168.8 million of a federal net operating loss carryforward that expires, if unused, in fiscal year 2031 to
2033. Included in this net operating loss is $1.1 million of excess income tax benefit related to restricted stock and the exercise of
stock options. Our Hong Kong subsidiary has $2.0 million of net operating loss carryforwards that can be carried forward indefinitely.
At March 31, 2013 we also had $176.6 million of state net operating loss carryforwards that expire, if unused, in fiscal years 2014
through 2033.

We recorded valuation allowances related to certain deferred income tax assets due to the uncertainty of the ultimate realization of the
future benefits from those assets. At March 31, 2013, the total valuation allowance against deferred tax assets of $79.2 million was
mainly comprised of a valuation allowance of $78.9 million for federal and state deferred tax assets, and a valuation allowance of $0.3
million associated with deferred tax assets in Hong Kong that, in all likelihood, will not be realized. The $0.5 million valuation
allowance increase for fiscal 2013 is attributable to the increase in U.S. net operating losses. In assessing the realizability of deferred
tax assets, management considers whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those
temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of
available carryback and carryforward periods), projected taxable income, and tax planning strategies in making this assessment. In
order to fully realize the deferred tax assets, we will need to generate future taxable income before the expiration of the deferred tax
assets governed by the tax code. Based on the level of historical taxable income over the periods for which the deferred tax assets are
deductible, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences.

We did not provide taxes on undistributed earnings of foreign subsidiaries of approximately $1.7 million as such earnings are intended
to be reinvested indefinitely. Quantification of the deferred tax liabilities, if any, associated with these undistributed earnings is not
practicable.

We use the with-and-without approach for ordering tax benefits derived from the share-based payment awards. Using the with-and-
without approach, actual income taxes payable for the period are compared to the amount of tax payable that would have been
incurred absent the deduction for employee share-based payments in excess of the amount of compensation cost recognized for
financial reporting. As a result of this approach, tax net operating loss carryforwards not generated from share-based payments in
excess of cost recognized for financial reporting are considered utilized before the current period's share-based deduction. We did not
recognize any tax benefits during 2013, 2012 and 2011 for stock-based compensation.

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

(In thousands)

Balance at April 1

Additions:

Relating to positions taken during current year

Relating to positions taken during prior year

Reductions:

Relating to tax settlements

Relating to positions taken during prior year

Relating to lapse in statute

Balance at March 31

2013

2012

2011

2,873

4,123

4,456

1,624

—

—
(249)
4,248

(293)
(47)
(958)
2,873

879

260

(678)
(164)
(630)
4,123

As of March 31, 2013, we had a liability of $4.2 million related to uncertain tax positions, the recognition of which would affect our
effective income tax rate.

Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months a reduction
in unrecognized tax benefits may occur in the range of zero to $0.4 million based on the outcome of tax examinations and as a result
of the expiration of various statutes of limitations. We are routinely audited and are currently under examination in multiple state
jurisdictions, other changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be
estimated at this time.

We recognize interest accrued on any unrecognized tax benefits as a component of income tax expense. Penalties are recognized as a
component of general and administrative expenses. We recognized interest and penalty expense or (benefit) of $0.1 million, less than
$(0.1) million and $0.1 million for the years ended March 31, 2013, 2012 and 2011, respectively. As of March 31, 2013 and 2012, we
had approximately $1.3 million of interest and penalties accrued.

In the U.S. we file consolidated federal and state income tax returns where statutes of limitations generally range from three to five
years. Although we have resolved examinations with the IRS through tax year ended March 31, 2010, U.S. federal tax years are open
from 2006 forward due to attribute carryforwards. The statute of limitations is open from 2000 forward in certain state jurisdictions.
We also file income tax returns in international jurisdictions where statutes of limitations generally range from three to seven years.
Years beginning after 2007 are open for examination by certain foreign taxing authorities.

11. Employee Benefit Plans

401(k) Plan

We maintain profit-sharing and 401(k) plans for employees meeting certain service requirements. Generally, the plans allow eligible
employees to contribute a portion of their compensation, and we match $1.00 for every $1.00 on the first 1% of the employee's pre-tax
contributions and $0.50 for every $1.00 up to the next 5% of the employee's pre-tax contributions. We may also make discretionary
contributions each year for the benefit of all eligible employees under the plans. Total profit sharing and Agilysys matching
contributions were $1.8 million, $1.7 million, and $0.4 million in fiscal 2013, 2012, and 2011, respectively.

Benefit Equalization Plan (”BEP”)

Previously, Agilysys provided the BEP for certain covered employees. The BEP was a non-qualified defined contribution plan, which
provides for employee deferrals and employer retirement deferrals so that the total retirement deferrals equal amounts that would have
been contributed to our 401(k) plan if it were not for limitations imposed by income tax regulations. The benefit obligation related to
the BEP was $2.7 million at March 31, 2012. Due to limitations imposed by income tax regulations, account balances were distributed
to remaining participants in April 2012.

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Supplemental Executive Retirement Plan (”SERP”)

Previously, Agilysys provided the SERP for certain former officers of Agilysys. The SERP was a non-qualified defined benefit pension
plan designed to provide retirement benefits for the plan participants. The projected benefit obligation recognized by Agilysys related
to the SERP was $3.3 million and $5.7 million, at March 31, 2012 and 2011, respectively. The accumulated benefit obligation related
to the SERP was $3.3 million and $5.7 million, at March 31, 2012, and 2011, respectively. The annual expense for the SERP was $0.1
million and $0.5 million, in fiscal 2012 and 2011, respectively.

On March 25, 2011, we terminated the SERP. As a result of the termination, the SERP incurred a non-cash curtailment charge of
$37,000, which is included within “General, and administrative” in the Consolidated Statements of Operations. In addition, the plan
incurred a curtailment gain of $1.2 million, which reduced the projected benefit obligation to an amount equal to the accumulated
benefit obligation at March 31, 2011. Of the $1.2 million curtailment gain, $0.8 million was due to the reduction in service for a
current officer of Agilysys and $0.4 million was due to the change in the discount rate from the Moody's Aa long-term corporate bond
yield as shown in the table above to the applicable IRS interest rate of 2.16% for plan termination liabilities.

The significant assumptions used to determine the projected benefit obligation, accumulated benefit obligation, and the annual
expense for the SERP as of the March 31st measurement date are presented below:

Discount rate
Rate of annual compensation increases

Year ended March 31,
2012
4.22%
3.00%

2011
5.30%
3.00%

The discount rate represents the Moody's Aa long-term corporate bond yield as of the our fiscal year-end, which management believes
reflects a rate of return on high-quality fixed-income investments currently available and expected to be available during the period to
maturity of the SERP obligations. For the fiscal year ended March 31, 2012, the discount rate and rate of annual compensation
increases in the table above were used to value the projected benefit obligation, accumulated benefit obligation, and the annual
expense prior to considering the effect of the plan curtailment discussed above.

A former officer of Agilysys who was part of the restructuring actions taken in the third quarter of fiscal 2009 was eligible for early
retirement and elected to receive his benefit of approximately $2.5 million in the form of a lump sum distribution in December 2011.
Due to limitations imposed by income tax regulations, the remaining SERP obligations of $3.2 million, along with the additional
service credit obligation related to the SERP of $0.1 million, was distributed to participants in April 2012.

A former officer received a lump sum distribution in fiscal 2011 and we funded this payment with certain death benefit proceeds from
corporate-owned life insurance policies. In conjunction with this distribution, we incurred non-cash settlement charges of $0.4 million,
which are included within “Restructuring charges” in the Consolidated Statements of Operations.

In conjunction with the BEP and SERP obligations, Agilysys invested in corporate-owned life insurance policies primarily to satisfy
future obligations of these plans. These corporate-owned life insurance policies were held in a Rabbi Trust and were classified within
“Other current assets” and “Other non-current assets” in the Consolidated Balance Sheets. The investment in corporate-owned life
insurance policies was recorded at the cash surrender value, which approximates fair value, at the balance sheet date. In fiscal 2011,
we surrendered the company-owned life insurance policies held within the Rabbi Trust, receiving proceeds of $13.7 million, which
was equal to their net cash surrender value on the surrender date. These proceeds were re-invested in marketable equity securities,
which were also held within the Rabbi Trust and are intended to satisfy the future obligations of the BEP and SERP. Also in fiscal
2011, we recorded $2.2 million in proceeds as a death benefit from the corporate-owned life insurance policies and recognized a gain
of $2.1 million, which is classified within “Other (income) expenses, net” in the Consolidated Statements of Operations. At March 31,
2012 and 2011, the marketable securities held in the Rabbi trust had a fair value of $4.4 million and $13.7 million, respectively.

Endorsement Split-Dollar Life Insurance

Agilysys provides certain former executives with life insurance benefits through endorsement split-dollar life insurance arrangements.
We entered into a separate agreement with each of the former executives covered by these arrangements whereby we must maintain
the life insurance policy for the specified amount and split a portion of the policy benefits with the former executive's designated
beneficiary. In fiscal 2012, we received $0.3 million for the redemption of several of the corporate-owned life insurance policies. The
expense related to these benefit obligations is based on estimates developed by management by evaluating actuarial information and
including assumptions with respect to discount rates and mortality. The expense associated with these benefits was classified within
“General, and administrative” in our Consolidated Statements of Operations. The related liability, which was $0.2 million at March 31,
2013 and 2012, respectively, was recorded within “Other non-current liabilities” in our Consolidated Balance Sheets. The aggregate

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cash surrender value of the underlying corporate-owned split-dollar life insurance contracts, which were classified within “Other non-
current assets” in our Consolidated Balance Sheets, was $3.7 million (net of policy loans of $0.2 million) and $3.5 million million (net
of policy loans of $0.2 million) at March 31, 2013 and 2012, respectively.

Changes in the cash surrender value of these policies related to gains and losses incurred on these investments are classified within
“Other (income) expenses, net” in the accompanying Consolidated Statements of Operations. We recorded a gain of $0.1 million in
fiscal 2013, a gain of $0.4 million in fiscal 2012 and a loss of $0.2 million in fiscal 2011 related to the corporate-owned life insurance
policies.

12. Commitments and Contingencies

Operating Leases

We lease certain facilities and equipment under non-cancelable operating leases which expire at various dates through fiscal 2022 and
require us to pay a portion of the related operating expenses such as maintenance, property taxes, and insurance. Certain facilities and
equipment leases contain renewal options for periods up to ten years. In most cases, management expects that in the normal course of
business, leases will be renewed or replaced by other leases. Certain facilities leases have free or escalating rent payment provisions.
Rent expense under such leases is recognized on a straight-line basis over the lease term.

The following is a schedule by year of future minimum rental payments required under operating leases, excluding the related
operating expenses, which have initial or remaining non-cancelable lease terms in excess of a year as of March 31, 2013:

(In thousands)
Fiscal year ending March 31,
2014
2015
2016
2017
2018
Thereafter
Total minimum lease payments

Amount

3,547
2,923
2,696
1,265
958
1,704
13,093

Total minimum future rental payments have been reduced by $0.1 million of sublease rentals estimated to be received in the future under
non-cancelable subleases. Rental expense for all non-cancelable operating leases amounted to $3.3 million, $4.1 million, and $5.3 million
for fiscal 2013, 2012, and 2011, respectively.

Asset Retirement Obligations

An asset retirement obligation liability represents the estimated costs to bring certain office buildings that we lease back to their original
condition after the termination of the lease. In instances where our lease agreements either contain make-whole provisions or subject us
to remediation costs, we establish an asset retirement obligation liability with a corresponding leasehold improvement asset. The asset
retirement obligation is included in “Accrued liabilities” and “Other non-current liabilities” in the Consolidated Balance Sheets. As of
March 31, 2013, the current and long-term portion of the asset retirement obligation liability was $30,000 and $0.7 million, respectively.
As of March 31, 2012, the current and long-term portion of the asset retirement obligation was $0.2 million and $0.5 million, respectively.

Legal Contingencies

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

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applications across fixed, wireless and internet platforms. The complaint seeks monetary damages, injunctive relief, costs and
attorneys fees. The parties to the lawsuit are currently engaged in discovery. At this time, we are not able to predict the outcome of
this lawsuit, or any possible monetary exposure associated with the lawsuit. However, we dispute the allegations of wrongdoing and
are vigorously defending ourselves in this matter.

13. (Loss) Earnings per Share

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

(In thousands, except per share data)
Numerator:

Loss from continuing operations - basic and diluted

Income (loss) from discontinued operations - basic and diluted

Net loss - basic and diluted

Denominator:

Weighted average shares outstanding - basic and diluted

(Loss) earnings per share - basic and diluted:

Loss from continuing operations

Income (loss) from discontinued operations

Net loss per share

Year ended March 31,

2013

2012

2011

(1,298)
—
(1,298) $

(34,239)
11,456
(22,783) $

(22,975)
(32,500)
(55,475)

21,880

22,432

22,785

(0.06) $
—
(0.06) $

(1.53) $
0.51
(1.02) $

(1.01)
(1.43)
(2.44)

Anti-dilutive stock options, SSARs, restricted shares and performance shares

1,781

2,449

3,852

Basic earnings (loss) per share is computed as net income available to common shareholders divided by the weighted average basic
shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes, 139,767, 48,558 and 84,738
of restricted shares and performance shares at March 31, 2013, 2012 and 2011, respectively, as these shares were issued but were not
vested and, therefore, not considered outstanding for purposes of computing basic earnings per share at the balance sheet dates.

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

14. Share-based Compensation

We may grant non-qualified stock options, incentive stock options, stock-settled stock appreciation rights, restricted shares, and
restricted share units for up to 3.0 million common shares under our 2011 Stock Incentive Plan (“the 2011 Plan”). The maximum
number of shares subject to stock options or SSARs that may be granted to an individual in a calendar year is 800,000 shares, and the
maximum number of shares subject to restricted shares or restricted share units that may be granted to an individual in a calendar year
is 400,000 shares. The maximum aggregate number of restricted shares or restricted share units that may be granted under the 2011
Plan is 1.0 million.

For stock options and SSARs, the exercise price must be set at least equal to the closing market price of our common shares on the date
of grant. The maximum term of stock option and SSAR awards is seven years from the date of grant. Stock option and SSARs awards
vest over a period established by the Compensation Committee of the Board of Directors. SSARs may be granted in conjunction with,

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or independently from, a stock option granted under the 2011 Plan. SSARs granted in connection with a stock option are exercisable only
to the extent that the stock option to which it relates is exercisable and the SSARs terminate upon the termination or exercise of the related
stock option.

Restricted shares and restricted share units, whether time-vested or performance-based, may be issued at no cost or at a purchase price
that may be below their fair market value, but are subject to forfeiture and restrictions on their sale or other transfer. Performance-based
awards may be conditioned upon the attainment of specified performance objectives and other conditions, restrictions, and contingencies.
Restricted shares and restricted share units have the right to receive dividends, or dividend equivalents in the case of restricted share
units, if any, subject to the same forfeiture provisions that apply to the underlying awards. Subject to certain exceptions set forth in the
2011 Plan, for awards to employees, no performance-based restricted shares or restricted share units shall be based on a restriction period
of less than one year, and any time-based restricted shares or restricted share units shall have a minimum restriction period of three years.

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

We may distribute authorized but unissued shares or treasury shares to satisfy share option and appreciation right exercises or
restricted share and performance share awards.

As discussed in Note 10, Income Taxes, in fiscal 2013, 2012 and 2011, we were in a net operating loss position for U.S. federal income
taxes. Therefore, we did not recognize and will not recognize an income tax benefit related to stock options or SSARs exercised until
that tax benefit can be realized.

The following table summarizes the share-based compensation expense for options, SSARs, restricted and performance awards
included in the Consolidated Statements of Operations for fiscal 2013, 2012 and 2011:

(In thousands)
Product development
Sales and marketing
General and administrative
Total share-based compensation expense

Stock Options

Year ended March 31,
2012

2011

2013

612
180
1,265
2,057

257
244
2,395
2,896

155
197
2,460
2,812

The following table summarizes the activity during fiscal 2013 for stock options awarded under the 2006 Plan:

(In thousands, except share and per share data)

Outstanding at April 1, 2012

Granted
Exercised
Cancelled/expired
Outstanding and exercisable at March 31, 2013

Number
of
Options

Weighted-
Average
Exercise
Price
(per share)

Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
Value

971,001
—
(66,667)
(154,834)
749,500

13.52
—
2.51
14.76
14.25

3.1

353

The aggregate intrinsic value in the table above represents the total pre-tax difference between the $9.94 closing price of our common
shares on March 28, 2013 over the exercise price of the stock option, multiplied by the number of stock options outstanding and exercisable.

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The following table presents additional information related to stock option activity during the fiscal years ended March 31, 2013, 2012
and 2011:

(In thousands)
Compensation expense
Proceeds from stock options exercised
Total intrinsic value of stock options exercised
Total fair value of stock options vesting

2013

2012

2011

$
$
$
$

— $
67 $
382 $
— $

— $
210 $
2,070 $
— $

150
—
158
532

The fiscal 2011 expense included $26,000 for the accelerated vesting of stock option expense due to a change in control provision contained
in the original award agreements that was triggered by MAK Capital and its affiliates reaching 20% ownership in Agilysys during the
first quarter of fiscal 2011. As a result, we do not have any remaining unrecognized stock based compensation expense related to non-
vested stock options.

A total of 46,519 shares, net of 11,660 shares withheld to cover the applicable exercise price of the award and 8,488 shares withheld
to cover the employee's minimum applicable income taxes, were issued from treasury shares to settle stock options exercised during
fiscal 2013.

Stock-Settled Stock Appreciation Rights

Stock-Settled Appreciation Rights (“SSARs”) are rights granted to an employee to receive value equal to the difference in the price of
our common shares on the date of the grant and on the date of exercise. This value is settled in common shares of Agilysys.

We use a Black-Scholes-Merton option pricing model to estimate the fair value of SSARs. The following table summarizes the principal
assumptions utilized in valuing SSARs granted in fiscal 2013, 2012 and 2011:

Risk-free interest rate
Expected life (in years)
Expected volatility
Weighted average grant date fair value

2013
0.67%-0.89%
5.0
81.03%-83.77%
$4.92

2012
0.83%-2.09%
4.5
80.75%-82.20%
$4.73

2011
0.96%-1.94%
4.5
76.66%-81.92%
$3.94

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

The following table summarizes the activity during fiscal 2013 for SSARs awarded under the 2011 Plan and the 2006 Plan:

(In thousands, except share and per share data)

Outstanding at April 1, 2012

Granted
Exercised
Forfeited

Outstanding at March 31, 2013
Exercisable at March 31, 2013

Number
of Rights

606,834
326,794
(183,948)
(66,561)
683,119
419,121

$
$

Weighted-
Average
Exercise
Price
(per right)

Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
Value

6.91
7.58
6.56
7.43
7.27
7.05

7.4
6.3

$
$

1,826
1,211

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The following table presents additional information related to SSARs activity during fiscal 2013, 2012 and 2011:

(In thousands)
Compensation expense
Total intrinsic value of SSARs exercised
Total fair value of SSARs vesting

2013

2012

2011

$
$
$

944 $
373 $
778 $

1,872 $
1,871 $
3,197 $

1,718
189
1,708

The compensation expense recorded in fiscal 2012 included $1.4 million for the accelerated vesting of SSARs expense due to a
change in control provision contained in the 2006 Plan that was triggered by the announcement of the sale of TSG on May 31, 2011.
As of March 31, 2013, total unrecognized stock based compensation expense related to non-vested SSARs was $0.9 million, which is
expected to be recognized over a weighted-average vesting period of 1.8 years.

A total of 29,134 shares, net of 13,553 shares withheld to cover the employee’s minimum applicable income taxes, were issued from
treasury shares to settle SSARs exercised during the twelve months ended March 31, 2013. The shares withheld were returned to
treasury shares.

Restricted Shares

We granted shares to certain of our Directors, executives and key employees under the 2011 Plan, the vesting of which is service-
based. The following table summarizes the activity during the twelve months ended March 31, 2013 for restricted shares awarded
under the 2011 Plan:

Outstanding at April 1, 2012

Granted
Vested
Forfeited

Outstanding at March 31, 2013

Weighted-
Average
Grant-
Date Fair
Value
(per share)

7.80
7.88
7.78
7.42
7.99

Number
of Shares

48,558
198,165
(111,941)
(12,743)
122,039

The weighted-average grant date fair value of the restricted shares is determined based upon the closing price of our common shares
on the grant date. During the fiscal 2013, a total of 102,987 net of 8,954 shares were withheld from the vested restricted shares to
cover the employee's minimum applicable income taxes. The shares withheld were returned to treasury shares.

The following table presents additional information related to restricted stock activity during fiscal years 2013, 2012, and 2011:

(In thousands)
Compensation expense
Total fair value of restricted share vesting

2013

2012

2011

$
$

1,059 $
1,099 $

920 $
976 $

770
633

Compensation expense related to restricted share awards is recognized ratably over the restriction period based upon the closing
market price of our common shares on the grant date. The fiscal 2012 compensation expense included $0.1 million for the accelerated
vesting of restricted stock expense due to a change in control provision contained in the 2006 Plan that was triggered by the
announcement of the sale of TSG on May 31, 2011. As of March 31, 2013, total unrecognized stock based compensation expense
related to non-vested restricted stock was $0.7 million, which is expected to be recognized over a weighted-average vesting period of
1.9 years. We do not include restricted stock in the calculation of earnings per share until the shares are vested.

Performance Shares

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

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The following table summarizes the activity during fiscal 2013 for performance shares awarded under the 2011 Plan:

Outstanding at April 1, 2012

Granted

Outstanding at March 31, 2013

Number
of
Shares

Weighted-
Average
Grant-
Date Fair
Value
(per share)

— $

17,728
17,728

—
8.64
8.64

The weighted-average grant date fair value of the performance shares is determined based upon the closing price of our common
shares on the grant date and assumed that performance goals would be met at target.

The following table presents additional information related to performance share activity during the fiscal 2013, 2012, and 2011:

(In thousands)
Compensation expense
Total fair value of performance share vesting

2013

2012

2011

$
$

54 $
— $

104 $
337

174
814

Once attainment of the performance goals becomes probable, compensation expense related to performance share awards is
recognized over the vesting period based upon the closing market price of our common shares on the grant date. The fiscal 2012
compensation expense included $0.2 million for the accelerated vesting of performance share expense due to a change in control
provision contained in the 2006 Plan that was triggered by the announcement of the sale of TSG on May 31, 2011.

Compensation expense related to performance share awards is recognized ratably over the vesting period based upon the closing
market price of our common shares on the grant date. As of March 31, 2013, total unrecognized stock based compensation expense
related to non-vested performance shares was $0.1 million, which is expected to be recognized over a weighted-average vesting period
of 1.1 years.

15. Fair Value Measurements

We estimate the fair value of financial instruments using available market information and generally accepted valuation
methodologies. We assess the inputs used to measure fair value using a three-tier hierarchy. The hierarchy indicates the extent to
which pricing inputs used in measuring fair value are observable in the market. Level 1 inputs include unadjusted quoted prices for
identical assets or liabilities and are the most observable. Level 2 inputs include unadjusted quoted prices for similar assets and
liabilities that are either directly or indirectly observable, or other observable inputs such as interest rates, foreign currency
exchange rates, commodity rates, and yield curves. Level 3 inputs are not observable in the market and include our own judgments
about the assumptions market participants would use in pricing the asset or liability. The use of observable and unobservable inputs
is reflected in the hierarchy assessment disclosed in the tables below.

There were no significant transfers between Levels 1, 2, and 3 during the twelve months ended March 31, 2013.

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

Fair value measurement used

Active
markets
for
identical
assets or
liabilities
(Level 1)

Quoted
prices in
similar
instruments
and
observable
inputs
(Level 2)

Active
markets for
unobservable
inputs
(Level 3)

Recorded
value
as of
March 31, 2013

(In thousands)
Assets:

Corporate-owned life insurance — non-
current

3,673

— $

3,673

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(In thousands)
Assets:

Available for sale restricted marketable
securities — current

Corporate-owned life insurance — non-
current
Liabilities:

BEP —current

Fair value measurement used
Quoted
prices in
similar
instruments
and
observable
inputs
(Level 2)

Active
markets
for
identical
assets or
liabilities
(Level 1)

Recorded
value
as of
March 31, 2012

4,408

— $

3,458

2,948

—

2,948

Active
markets for
unobservable
inputs
(Level 3)

—

3,458

—

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

The recorded value of the corporate-owned life insurance policies is adjusted to the cash surrender value of the policies obtained
from the third party life insurance providers, which are not observable in the market, and therefore, are classified within Level 3 of
the fair value hierarchy. Changes in the cash surrender value of these policies are recorded within “Other expenses (income), net”
in the Consolidated Statements of Operations.

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

The following table presents a summary of changes in the fair value of the Level 3 assets and liabilities for the fiscal years ended
March 31, 2013 and 2012:

(In thousands)
Corporate-owned life insurance:
Balance on April 1
Realized gains
Unrealized gain relating to instruments held at reporting date
Purchases, sales, issuances and settlements, net
Balance on March 31

Level 3 assets and
liabilities

2013

2012

3,458
—
107
108
3,673

3,323
46
371
(282)
3,458

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

Fair value measurement used

Active
markets
for
identical
assets or
liabilities

Quoted
prices in
similar
instruments
and
observable
inputs

Active
markets for
unobservable
inputs

(Level 1)

(Level 2)

(Level 3)

Recorded
value as
of
March 31,
2013

14,128
17,288

584

196

— $
—

— $

—

— $
—

14,128
17,288

— $

—

584

196

Fair value measurement used

Active
markets
for
identical
assets or
liabilities

Quoted
prices in
similar
instruments
and
observable
inputs

Active
markets for
unobservable
inputs

(Level 1)

(Level 2)

(Level 3)

Recorded
value as
of
March 31,
2012

15,198
14,135

3,323
5,447
196
852

— $
—

— $
—
—
—

— $
—

— $
—
—
—

15,198
14,135

3,323
5,447
196
852

(In thousands)
Assets:

Goodwill
Intangible assets

Liabilities:

Restructuring liabilities — current

Other employee benefit plan obligations — non-current

(In thousands)
Assets:

Goodwill
Intangible assets

Liabilities:

SERP obligations — current
Restructuring liabilities — current
Other employee benefit plans obligations — non-current
Restructuring liabilities — non-current

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

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

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

Table of Contents

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

The following table presents a summary of changes in the fair value of the Level 3 assets and liabilities for fiscal years ended
March 31, 2013 and 2012:

(In thousands)

Balance at April 1, 2012

Foreign currency translation adjustments

Realized losses

Amortization

Provisions

Goodwill

$ 15,198
(1,070)
—

—

Activity, payments and other charges (net)
Balance at March 31, 2013

—
$ 14,128

Level 3 assets and liabilities
Year ended March 31, 2013

Intangible
assets

SERP
obligations

Other
employee
benefit
plans
obligations

Restructuring
liabilities

14,135

3,323

196

6,299

—
(120)
(1,986)
—

5,259
17,288

—

—
(3,323)

— $

—

—
(1)
195

—

1,088
(6,803)
584

Level 3 assets and liabilities
Year ended March 31, 2012

Intangible
assets

SERP
obligations

Other
employee
benefit
plans
obligations

Restructuring
liabilities

22,535

5,675

421

(In thousands)

Balance at April 1, 2011

Foreign currency translation adjustments

Realized losses

Amortization

Provisions

Activity, payments and other charges (net)

Goodwill

$ 15,211
(13)
—

—

—
(7,875)
(1,532)
—

1,007

Balance at March 31, 2012

$ 15,198

14,135

—

733

—

—
(2,352)
3,323

—
(225)
196

11,462
(5,896)
6,299

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

16. Business Segments

Description of Business Segments

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

We allocate certain general and administrative costs related to the accounts payable, legal, payroll, and benefits functional departments
to the reportable business segments in order to provide a better reflection of the costs needed to operate the business segments.

HSG develops, markets and sells property and lodging management, point-of-sale, and inventory and procurement applications to
customers in the hospitality industry, including operators of hotels, casinos, destination resorts, cruise lines and foodservice

Table of Contents

management establishments. We offer solutions that provide comprehensive control of the customer's property operations - from
reservations, check in, point-of-sale and other guest-engagement activities to inventory, procurement and document management.

RSG is one of North America's largest systems integrators retail point-of-sale, self-service and wireless solutions and provides
proprietary business consulting, implementation and hardware maintenance and support services. Additionally, our extensive
experience in the integration of wireless infrastructure with legacy systems enables our customers to capture the promise of today's
mobile technology. Our mobile solutions extend the customer's operations to portable devices, increasing customer satisfaction and
productivity with integrated software that reduces security exposure. We also sell POS and mobile POS (MPOS) solutions to facilitate
the check-out process as well as other self-service capabilities.

Measurement of Segment Operating Results and Segment Assets

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

For the fiscal year ended March 31, 2013, revenue from one RSG customer represented 12.7% of consolidated net revenue.

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

The following tables present segment profit and related information for each of our reportable segments for the fiscal years ended
March 31, 2013, 2012 and 2011.

Table of Contents

(In thousands)
Fiscal Year Ended March 31, 2013

Total revenue:

Products

Support, maintenance and subscription services

Professional services

Elimination of intersegment revenue

Revenue from external customers

Gross profit
Gross profit margin

Operating income (loss)

Interest expense, net

Other expenses, net
Income (loss) before income taxes

Other charges:

Depreciation of fixed assets and amortization of
intangibles

Asset impairments and related charges

Legal settlements

Restructuring, severance and other charges

Fiscal Year Ended March 31, 2012

Total revenue:

Products

Support, maintenance and subscription services

Professional services

Elimination of intersegment revenue

Revenue from external customers

Gross profit
Gross profit margin

Operating (loss) income

Interest expense, net

Other expenses, net

(Loss) income before income taxes

Other charges:

Depreciation of fixed assets and amortization of
intangibles

Asset impairments and related charges

Restructuring, severance and other charges

Reportable Segments

Corporate/

HSG

RSG

Other

Consolidated

— $

123,798

33,517

50,235

14,610
(54)
98,308

63,260

64.3%

90,281

28,003

20,622
(1,074)
137,832

26,910

19.5%

14,428

10,840

—

—
14,428

—

—
10,840

616

—

— $

2,663

120

— $

871

—

78,238

35,232

(1,128)

— $

236,140

— $

90,170

38.2%

(1,111)

332

139
(1,582)

(26,379) $
332

139
(26,850) $

2,777

— $

1,664

625

6,056

120

1,664

1,496

25,608

79,993

— $

105,601

47,611

13,156

—

86,375

55,354

64.1%

(6,552)
—

—
(6,552)

2,766

9,681

2,289

25,938

17,422
(839)
122,514

24,482

20.0%

5,481

—

5,481

—

73,549

30,578

(839)

— $

208,889

— $

79,836

38.2%

(40,119) $
875

181
(41,175) $

(41,190)

875

181

(42,246)

728

— $

606

4,794

— $

8,288

9,681

12,958

15,853

Table of Contents

(In thousands)
Fiscal Year Ended March 31, 2011

Total revenue:

Products

Support, maintenance and subscription services

Professional services

Elimination of intersegment revenue

Revenue from external customers

Gross profit
Gross profit margin

Operating income (loss)

Interest expense, net

Other expenses (income), net

Income (loss) before income taxes

Other charges:

Depreciation of fixed assets and amortization of
intangibles

Asset impairments and related charges

Restructuring, severance and other charges

Enterprise-Wide Disclosures

Reportable Segments

Corporate/

HSG

RSG

Other

Consolidated

35,306

45,053

13,742
(92)
94,009

54,669

58.2%

69,463

26,146

13,539
(476)
108,672

20,970

19.3%

— $

104,769

—

71,199

27,281

(568)

— $

202,681

— $

75,639

37.3%

5,836

3,164

—

5,836

3,164

(30,625) $
1,224
(2,294)
(29,555) $

(21,625)

1,224

(2,294)

(20,555)

2,605

959

—

445

—

— $

5,986

9,036

— $

405

959

405

Our assets are primarily located in the United States of America. Further, revenue attributable to our international operations accounted
for approximately 4%, 5%, and 6% of total revenue for fiscal 2013, 2012, and 2011, respectively.

Table of Contents

17. Quarterly Results (Unaudited)

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

Prior to the sale of TSG, we traditionally had experienced a seasonal increase in sales during our fiscal third quarter ending
December 31. The HSG and RSG operating units have traditionally experienced a seasonal decrease in revenue during our fiscal first
quarter ending June 30. Although we are unable to predict whether uneven sales patterns will continue over the long term, we believe
this particular pattern is moderating as a result of exiting the TSG business. For example, third-quarter revenue from continuing
operations was 28%, 25% and 29% of annual revenue for fiscal years 2013, 2012 and 2011, respectively. In addition, occasionally the
timing of large one-time orders such as those associated with substantial retail product rollouts will create volatility in our quarterly
results.

(In thousand except per share data)
Net revenue
Gross profit
Asset impairments and related charges
Legal settlements
Restructuring, severance and other charges
Net (loss) income
Per share data:
Net (loss) income per share-basic
Net (loss) income per share-diluted

(In thousands except per share data)
Net revenue
Gross profit
Asset impairments and related charges
Restructuring, severance and other charges
Loss from continuing operations
Income (loss) from discontinued operations
Net (loss) income
Per share data-basic and diluted:
Loss from continuing operations
Income (loss) from discontinued operations
Net (loss) income

Year ended March 31, 2013

First

quarter

Second

quarter

Third

quarter

Fourth

Quarter

51,646 $
20,378
208
—
1,125
(1,793) $

54,246 $
22,081
—
—
430
(351) $

67,211 $
23,449
—
—
(31)
516 $

63,037 $
24,262
(88)
1,664
(28)
330 $

Year
236,140
90,170
120
1,664
1,496
(1,298)

(0.08) $
(0.08) $

(0.02) $
(0.02) $

0.02 $
0.02 $

0.02
0.01 $

(0.06)
(0.06)

Year ended March 31, 2012

First

quarter

Second

quarter

Third

quarter

Fourth

Quarter

52,591
18,088
—
2,346
(6,879)
651
(6,228) $

52,685
20,988
—
3,688
(3,554)
10,487
6,933 $

51,582
19,932
—
4,558
(5,774)
(735)
(6,509) $

52,031
20,828
9,681
5,261
(18,032)
1,053
(16,979) $

Year
208,889
79,836
9,681
15,853
(34,239)
11,456
(22,783)

(0.30) $
0.03 $
(0.27) $

(0.16) $
0.46 $
0.30 $

(0.26) $
(0.03) $
(0.29) $

(0.83)
0.05
(0.78) $

(1.53)
0.51
(1.02)

$
$

$
$
$

Table of Contents

18. Subsequent Event

Divestiture of Retail Solutions Group (RSG)

On May 31, 2013, we entered into a definitive agreement to sell our Retail Solutions Group business to an affiliate of Clearlake
Capital Group L.P., for total consideration of $34.6 million in cash, subject to customary closing conditions and expect to recognize a
gain in this transaction. Additionally, we expect to utilize existing net operating losses against our gain. Following completion of the
transaction, which we expect to occur in our fiscal second quarter, our business will be focused exclusively on our Hospitality
Solutions Group and the growth opportunities in this market.

Acquisition of TimeManagement Corporation (TMx)

Schedule II - Valuation and Qualifying Accounts Years ended March 31, 2013, 2012 and 2011

(In thousands)
2013
Allowance for doubtful accounts
2012
Allowance for doubtful accounts
2011
Allowance for doubtful accounts

Balance at

Charged to

beginning of

year

costs and

expenses

Deductions

Balance at

end of

year

632 $

423 $

(168) $

661 $

226 $

(255) $

1,223 $

172 $

(734) $

887

632

661

Item 9. Change in and Disagreements With Accountants on Accounting and Financial Disclosures.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Management's Report on Internal Control Over Financial Reporting

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

PricewaterhouseCoopers LLP, our independent registered public accounting firm, issued their report regarding Agilysys' internal
control over financial reporting as of March 31, 2013, which is included elsewhere herein.

Change in Internal Control over Financial Reporting

No changes in our internal control over financial reporting occurred during the last quarter of fiscal 2013 that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Part III

Item 10. Directors, Executive Officers and Corporate Governance.

Information required by this Item as to the Directors of Agilysys, Executive Officers, the Audit Committee, Agilysys' Code of Business
Conduct, and the procedures by which shareholders may recommend nominations appearing under the headings “Election of Directors,”
“Executive Officers” and “Corporate Governance” in our Proxy Statement to be used in connection with Agilysys' 2013 Annual Meeting
of Shareholders (the “2013 Proxy Statement”) is incorporated herein by reference. Information with respect to compliance with Section
16(a) of the Securities Exchange Act of 1934 by our Directors, executive officers, and holders of more than five percent of Agilysys'
equity securities will be set forth in the 2013 Proxy Statement under the heading “Section 16 (a) Beneficial Ownership Reporting
Compliance.”

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

Item 11. Executive Compensation.

The information required by this Item is set forth in our 2013 Proxy Statement under the headings, “Executive Compensation,” “Director
Compensation,” “Compensation Committee Report,” and “Corporate Governance,” which is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.

The information required by this Item is set forth in our 2013 Proxy Statement under the headings “Beneficial Ownership of Common
Shares,” and “Equity Compensation Plan Information,” which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is set forth in our 2013 Proxy Statement under the headings “Corporate Governance” and “Related
Person Transactions,” which information is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.

The information required by this Item is set forth in our 2013 Proxy Statement under the heading “Ratification of Appointment of
Independent Registered Public Accounting Firm,” which information is incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

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

Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of March 31, 2013 and 2012

Consolidated Statements of Operations for the years ended March 31, 2013, 2012, and 2011

Consolidated Statements of Comprehensive Loss for the years ended March 31, 2013, 2012, and 2011

Consolidated Statements of Cash Flows for the years ended March 31, 2013, 2012, and 2011

Consolidated Statements of Shareholders' Equity for the years ended March 31, 2013, 2012, and 2011

Notes to Consolidated Financial Statements

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

Schedule II - Valuation and Qualifying Accounts

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

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

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Agilysys, Inc. has duly caused
this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of
Cincinnati, State of Ohio, on June 14, 2013.

AGILYSYS, INC.

/s/ James H. Dennedy
James H. Dennedy

President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following
persons on behalf of the Registrant and in the capacities indicated as of June 14, 2013.

Signature

Title

/s/ James H. Dennedy
James H. Dennedy

/s/ Robert R. Ellis
Robert. R. Ellis

/s/ Janine K. Seebeck
Janine K. Seebeck

/s/ Keith M. Kolerus
Keith M. Kolerus

/s/ R. Andrew Cueva
R. Andrew Cueva

/s/ Gerald C. Jones
Gerald C. Jones

/s/ Robert A. Lauer
Robert A. Lauer

/s/ Robert G. McCreary, III
Robert G. McCreary, III

/s/ John Mutch
John Mutch

President, Chief Executive Officer and Director
(Principal Executive Officer)

Senior Vice President, Chief Operating Officer,
Chief Financial Officer and Treasurer
(Principal Financial Officer)

Vice President and Controller
(Principal Accounting Officer and Duly Authorized Officer)

Chairman and Director

Director

Agilysys, Inc.

Exhibit Index

Exhibit No.
3(a)

3(b)

*10(a)

*10(b)

*10(c)

*10(d)

*10(e)

*10(f)

*10(g)

*10(h)

*10(i)

*10(j)

*10(k)

10(l)

*10(m)

*10(n)

*10(o)

*10(p)

*10(q)

*10(r)

Description
Amended Articles of Incorporation of Agilysys, Inc., which is incorporated by reference to Exhibit 3(a) to Agilysys,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (File No. 000-05734).
Amended Code of Regulations of Agilysys, Inc., which is incorporated by reference to Exhibit 3(ii) to Agilysys,
Inc.'s Current Report on Form 8-K filed January 31, 2012 (File No. 000-05734).
The Company's Annual Incentive Plan, which is incorporated herein by reference to Exhibit 10(b) to Agilysys, Inc.'s
Definitive Proxy Statement on Schedule 14A filed June 28, 2011 (File No. 000-05734).
Pioneer-Standard Electronics, Inc. Supplemental Executive Retirement Plan, which is incorporated herein by
reference to Exhibit 10(o) to Agilysys, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2000 (File
No. 000-05734).
Pioneer-Standard Electronics, Inc. Benefit Equalization Plan, which is incorporated herein by reference to Exhibit 10
(p) to Agilysys, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2000 (File No. 000-05734).
Amendment to the Pioneer-Standard Electronics, Inc. Supplemental Executive Retirement Plan dated January 29,
2002, which is incorporated herein by reference to Exhibit 10(x) to Agilysys, Inc.'s Annual Report on Form 10-K for
the year ended March 31, 2002 (File No. 000-05734).
Employment Agreement dated June 30, 2003 between Martin F. Ellis and Pioneer-Standard Electronics (n/k/a
Agilysys, Inc.), which is incorporated by reference to Exhibit 10(gg) to Agilysys, Inc.'s Annual Report on Form 10-K
for the year ended March 31, 2004 (File No. 000-05734).
Change of Control Agreement dated June 30, 2003 by and between Martin F. Ellis and Pioneer-Standard Electronics
(n/k/a Agilysys, Inc.), which is incorporated by reference to Exhibit 10(hh) to Agilysys, Inc.'s Annual Report on
Form 10-K for the year ended March 31, 2004 (File No. 000-05734).
Forms of Amended and Restated Indemnification Agreement entered into by and between Agilysys, Inc. and each of
its Directors and Executive Officers, which are incorporated herein by reference to Exhibit 99(b) to Agilysys, Inc.'s
Annual Report on Form 10-K for the year ended March 31, 1994 (File No. 000-05734).
Amendment No. 1 to Change of Control Agreement dated June 30, 2003 between Agilysys, Inc. and Martin F. Ellis,
effective May 31, 2005, which is incorporated by reference to Exhibit 10.1 to Agilysys, Inc.'s Current Report on
Form 8-K filed June 6, 2005 (File No. 000-05734).
Non-Competition Agreement between Agilysys, Inc. and Martin F. Ellis, effective May 31, 2005, which is
incorporated by reference to Exhibit 10.2 to Agilysys, Inc.'s Current Report on Form 8-K filed June 6, 2005 (File
No. 000-05734).
Amendment to Change of Control Agreement and Non-Competition Agreement by and between Agilysys, Inc. and
Martin F. Ellis dated December 31, 2008, which is incorporated herein by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed January 7, 2009 (File No. 000-05734).
Settlement Agreement by and among Agilysys, Inc. and the Ramius Group dated March 11, 2009, which is
incorporated herein by reference to Exhibit 10.1 to Agilysys, Inc.'s Current Report on Form 8-K filed March 17, 2009
(File No. 000-05734).
Loan and Security Agreement among Agilysys, Inc., Agilysys NV, LLC, Agilysys NJ, Inc. and Bank of America,
N.A., as agent for the Lenders dated May 5, 2009, which is incorporated herein by reference to Exhibit 10.1 to the
Company's current report on Form 8-K filed May 6, 2009 (File No. 000-05734).
Employment Agreement by and between Agilysys, Inc. and Kathleen A. Weigand effective March 4, 2009, which is
incorporated herein by reference to Exhibit 10(mm) to Agilysys, Inc.'s Annual Report on Form 10-K for the year
ended March 31, 2009 (File No. 000-05734).
Retention Agreement by and between Agilysys, Inc. and Kathleen A. Weigand effective March 9, 2009, which is
incorporated herein by reference to Exhibit 10(nn) to Agilysys, Inc.'s Annual Report on Form 10-K for the year
ended March 31, 2009 (File No. 000-05734).
Agilysys, Inc. 2006 Stock Incentive Plan, as Amended and Restated Effective May 20, 2010, which is incorporated
herein by reference to Exhibit 10(mm) to Agilysys, Inc.'s Annual Report on Form 10-K for the year ended March 31,
2010 (File No. 000-05734).
Agilysys, Inc. 2011 Stock Incentive Plan, which is incorporated herein by reference to Exhibit 10(a) to Agilysys,
Inc.'s Definitive Proxy Statement on Schedule 14A filed June 28, 2011 (File No. 000-05734).
Form of Stock Appreciation Right Agreement, which is incorporated herein by reference to Exhibit 10(pp) to
Agilysys, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2010 (File No. 000-05734).
Form of Directors Restricted Stock Award Agreement, which is incorporated herein by reference to Exhibit 10(qq) to
Agilysys, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2010 (File No. 000-05734).

*10(s)

*10(t)

*10(u)

10(v)

*10(w)
*10(x)
*10(y)
*10(z)

*10(aa)

*10(bb)

**10(cc)
**10(dd)
10(ee)

**21
**23.1
**23.2
**31.1
**31.2
**32.1
**32.2
99(a)

Employment Agreement by and between Agilysys, Inc. and Anthony Mellina, effective November 15, 2009, which is
incorporated herein by reference to Exhibit 10(b) to Agilysys, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2010 (File No. 000-05734).
Employment Agreement by and between Agilysys, Inc. and Henry R. Bond, effective October 18, 2010, which is
incorporated herein by reference to Exhibit 10(a) to Agilysys, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2010 (File No. 000-05734).
Form of Restricted Stock Award Agreement, which is incorporated herein by reference to Exhibit 10(c) to Agilysys,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (File No. 000-05734).
Stock and Asset Purchase Agreement among Agilysys Inc., Agilysys Technology Solutions Group, LLC, OnX
Acquisition LLC and OnX Enterprise Solutions Limited, dated as of May 28, 2011, which is incorporated herein by
reference to Exhibit 2.1 to Agilysys, Inc.'s Current Report on Form 8-K filed May 31, 2011 (File No. 000-05734).
Amendment to the Agilysys, Inc. Supplemental Executive Retirement Plan, effective March 25, 2011.
Amendment to the Agilysys, Inc. Benefits Equalization Plan, effective March 31, 2011.
Separation Agreement by and between Agilysys, Inc. and Martin F. Ellis, dated as of May 31, 2011.
Employment Agreement by and between Agilysys, Inc. and Robert R. Ellis, effective October 10, 2011, which is
incorporated herein by reference to Exhibit 10(a) to Agilysys, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2011 (File No. 000-05734) .
Employment Agreement by and between Agilysys, Inc. and Kyle C. Badger, effective October 31, 2011, which is
incorporated herein by reference to Exhibit 10(b) to Agilysys, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2011 (File No. 000-05734).
Employment Agreement by and between Agilysys, Inc. and James Dennedy, effective April 1, 2012, which
incorporated by reference to Exhibit 10(bb) to Agilysys, Inc.'s Annual Report on Form 10-K for the year ended
March 31, 2012 (File No. 000-5734).
Employment Agreement by and between Agilysys, Inc. and Janine Seebeck, effective November 7, 2011.
Employment Agreement by and between Agilysys, Inc. and Larry Steinberg, dated April 10, 2012.
Asset Purchase Agreement by and between Agilysys, Inc. and Kyrus Solutions, Inc., dated May 31, 2013, which is
incorporated by reference to Exhibit 1.01 to Agilysys, Inc.'s Current Report on Form 8-K filed June 4, 2013 (File No.
000-05734).
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Consent of Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
Certificate of Insurance Policy, effective November 1, 1997, between Chubb Group of Insurance Companies and
Pioneer-Standard Electronics, Inc., which is incorporated herein by reference to Exhibit 99(a) to the Company's
Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 000-05734).

*
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Denotes a management contract or compensatory plan or arrangement.
Filed herewith