• Revenue: $29.3 million for Q3 2024, flat compared to the prior year.
• Recurring Revenue: 98% of total revenue, up from 81% in the prior year.
• Net Loss: $3.9 million for Q3 2024, compared to a net loss of $2.2 million in the prior year.
• Gross Margin: Decreased to 67% from 73% in the prior year.
• Non-GAAP Gross Margin: Decreased to 73% from 76% in the prior year.
• EBITDA: $2.2 million for Q3 2024, down from $3 million in the prior year.
• Adjusted EBITDA: $5.4 million for Q3 2024, down from $6.2 million in the prior year.
• Adjusted EBITDA Margin: 19% for Q3 2024, compared to 21% in the prior year.
• Cash and Cash Equivalents: $11.2 million at the end of Q3 2024.
• Debt: $7.5 million at the end of Q3 2024.
• 2024 Revenue Guidance: $119 million to $121 million.
• 2024 Adjusted EBITDA Margin Guidance: 18% to 19%.
• 2025 Revenue Guidance: $134 million to $138 million.
• 2025 Adjusted EBITDA Margin Guidance: 23% to 24%.
• Contracted Backlog: Over $67 million, a 250% increase from the previous year.

• Warning! GuruFocus has detected 5 Warning Sign with ASUR.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Recurring revenue now represents 98% of total revenue, up from 81% in the prior year, indicating a more stable and predictable revenue stream.
• The company achieved a 20% growth in recurring revenue, driven by acquisitions and organic growth.
• Sales bookings increased by 141% compared to the previous year, and the backlog grew by 250%, setting the stage for future growth.
• Asure Software Inc (NASDAQ:ASUR) has successfully acquired 12 companies over the past four quarters, adding approximately $15 million in repetitive revenue.
• The company is expanding its product offerings, including the launch of Asure Pay, a new financial services product, and other solutions like 401k and workmen's compensation for small businesses.

Negative Points

• Third quarter revenue was flat compared to the prior year, primarily due to a $5 million decrease in non-recurring ERTC revenue.
• Net loss for the third quarter increased to $3.9 million from $2.2 million in the prior year period.
• Gross margins decreased to 67% from 73% in the prior year, with non-GAAP gross margins also declining.
• EBITDA for the third quarter decreased to $2.2 million from $3 million in the prior year period, with adjusted EBITDA margin dropping to 19% from 21%.
• The company faced challenges with the timing of large enterprise tax deals and new product introductions, impacting revenue expectations for 2024.

Q & A Highlights

Q: Can you provide more color on the lower revenue for the quarter compared to expectations and the confidence in the 2025 growth guidance? A: Patrick Goepel, CEO, explained that the lower revenue was due to timing issues with large deals and professional services. Despite this, sales bookings were up 141%, and backlog increased by 250%. The company is confident in achieving 13% growth in 2025 due to strong sales momentum and backlog.

Q: How long is the sales cycle for enterprise payroll tax deals, and what visibility do you have on these deals? A: Patrick Goepel, CEO, noted that sales cycles can vary, with some deals taking 90 to 120 days due to contracting processes. The company has integrations with 27 payroll companies, which helps in bringing clients. Eyal Goldstein, President & CRO, added that they work directly with enterprises and through system integrators, providing visibility and revenue opportunities.

Q: What are the underlying assumptions for the FY '25 revenue guidance, including macro conditions and employment growth? A: John Pence, CFO, stated that the guidance assumes a 3.5% terminal interest rate from the Fed, impacting client funds. Employment growth is modeled as flat, with small businesses facing challenges in hiring. The guidance does not include potential acquisitions.

Q: Can you discuss the drivers of margin expansion for FY '25? A: Patrick Goepel, CEO, highlighted that sales growth and backlog will drive margin expansion. The company has added new products and capabilities, increasing per employee per month revenue potential. John Pence, CFO, added that the business is scaling, with top-line growth not requiring significant incremental costs.

Q: How did bookings break down between new and existing clients? A: Patrick Goepel, CEO, mentioned that bookings were approximately 70% new clients and 30% existing clients. The company aims to increase wallet share with existing clients while maintaining strong new client acquisition.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.