Asure Announces Third Quarter 2021 Results


AUSTIN, Texas, Nov. 08, 2021 (GLOBE NEWSWIRE) -- Asure Software, Inc. (Nasdaq: ASUR), a leading provider of cloud-based Human Capital Management (“HCM”) software solutions, reported results for the third quarter ended September 30, 2021.

“We have made great strides in advancing our strategic priorities, which we expect will put Asure on a firmer footing to drive future growth and value creation,” said Chairman and CEO, Pat Goepel. “In the third quarter, we accelerated our acquisition strategy by purchasing two payroll businesses, expanding our geographic territories which provide up-sell and cross-sell opportunities which we expect will help us to continue to build scale economies in our overall business. We also made some important steps forward in our product strategy by introducing a new integrated payroll and HR solutions platform for small businesses as well as adding new value added partners that enhance our functionality and user experience.”

Goepel added, “We are also pleased with our performance in the quarter with 12% revenue growth versus prior year, two-thirds of which was organic as well as with continuing investments in our sales organization to drive future revenues. Furthermore, we are having ongoing success with our tax engine, Asure Payroll Tax Management, as well as with our efforts to help businesses file for stimulus relief related to the Employee Retention Tax Credit (ERTC) in the third quarter. To date, we have helped small business clients file for in excess of $200 million in ERTC credits.”

Third Quarter 2021 Key Highlights

  • Revenue of $17.98 million, up 12% from the prior year’s quarter, and up 5% sequentially
  • Total bookings were up 43% year over year, and flat sequentially
  • GAAP net income of $5.3 million including a $10.5 million gain related to the Company’s ERTC credit
  • Non-GAAP EBITDA of $1.2 million, or 7% margin
  • Acquired two payroll businesses, partially funded by our new credit facility with Structural Capital

 Three Months Ended Nine Months Ended
in thousands, except per share data
(unaudited)
September 30, 2021 September 30, 2020 Variance September 30, 2021 September 30, 2020 Variance
REVENUE           
GAAP Revenue$17,981  $16,015  12% $54,951  $49,077  12%
            
GROSS PROFIT           
GAAP Gross Profit$10,868  $9,073  20% $33,305  $28,287  18%
GAAP Gross Margin60% 57% n/a 61% 58% n/a
Non-GAAP Gross Profit$12,002  $10,290  17% $36,993  $31,565  17%
Non-GAAP Gross Margin67% 64% n/a 67% 64% n/a
            
EARNINGS           
GAAP Net income (loss)$5,328  $(4,759) NM $7,494  $(10,470) NM
GAAP Net income (loss) per share$0.28  $(0.30) NM $0.39  $(0.66) NM
Non-GAAP Net income (loss)(174) (439) 60% 1,997  3,328  (40)%
Non-GAAP Net income (loss) per share$(0.01) $(0.03) 67% $0.11  $0.21  (48)%
            
EBITDA           
EBITDA$9,902  $(812) NM $20,824  $1,326
  NM
EBITDA Margin55% (5)% n/a 38%   3% n/a
Non-GAAP EBITDA$1,228  $1,012  21% $5,714  $6,706
   (15)%
Non-GAAP EBITDA Margin7% 6% n/a 10%   14% n/a
  • NM indicates Not Meaningful Information
  • Non-GAAP financial measures are reconciled to GAAP in the tables set forth in this release
  • Note that first quarters are seasonally strong as recurring year-end W2/ACA revenue is recognized in this period

Financial Commentary

“We are pleased with our performance in the third quarter and are excited about the initiatives we implemented that we expect will drive future performance”, said CFO John Pence. “We expect the acquisitions we completed will generate economies of scale and enhance our margins in the future, which is a key focal point for the organization. We also closed a new and flexible credit facility with Structural Capital, in a new partnership that we expect will provide runway for further acquisitions and value creation. We have a variety of funding sources that should enable us to continue to invest with increased financial flexibility. Our efforts in the quarter represent a solid step forward in achieving our strategy and goals.”

Product Development

Asure continues to enhance its HCM platform to better serve our clients, and, in the third quarter, we rolled out two significant product enhancements. First, we've reimagined our suite of small business payroll and HR solutions into a single HCM product so payroll clients can now take advantage of all our HR capabilities in one place with a fresh new look. The pandemic accelerated virtual work and we've responded by making HR features like touchless onboarding, electronic signatures for company documents, and improved employee self-service capabilities part of our standard payroll offering.

We are also proud to announce a new integration with Employee Navigator, a leader in benefits administration software to over 60,000 companies and 10 million employees and dependents. For clients who use the Employee Navigator platform for open enrollment and updating insurance carriers, this integration automatically keeps employee data in sync between our payroll system and the carriers. Many health insurance brokers rely on the Employee Navigator platform to serve their clients. Accordingly, this integration will enable seamless communication between our systems which will advance to the next level our broker referral strategy.

Guidance

We are providing the following guidance for the fourth quarter of 2021 and fiscal year 2022 based on our third quarter results and our recent acquisitions. This outlook is offered with the backdrop of a continuing challenging environment to predict future economic results given the ebbs and flows of employment trends, COVID and the other economic challenges of today.

 

Fourth Quarter, 2021     
Revenue$20.5 million$21.0 million
Non-GAAP EBITDA$1.5 million$1.7 million
Non-GAAP EPS$(0.05)$(0.03)
      
Fiscal Year, 2022     
Revenue$85.0 million$90.0 million

We anticipate fiscal year 2022 Non-GAAP EBITDA Margin percentages and Non-GAAP EPS to be in line with historical percentages and seasonal trends.

Conference Call Details

Asure management will host a conference call Monday, November 8, 2021 at 4:30pm Eastern / 3:30pm Central. Asure Chairman and CEO Pat Goepel and CFO John Pence will host the conference call followed by a question-and-answer session. The conference call will be broadcast live and available for replay via the investor relations section of the Company’s website. Analysts may participate on the conference call by dialing (877) 853-5636 (U.S.) or (631) 291-4544 (outside the U.S.). The conference ID is 7585778.

About Asure Software, Inc.

Asure (Nasdaq: ASUR) is a leading provider of HCM software solutions. We help small and mid-sized companies grow by assisting them in building better teams with skills to stay compliant with ever-changing federal, state, and local tax jurisdictions and labor laws, and better allocate cash so they can spend their financial capital on growing their business rather than back-office overhead expenses. Asure’s Human Capital Management suite, named Asure HCM, includes cloud-based Payroll, Tax Services, and Time & Attendance software as well as HR services ranging from HR projects to completely outsourcing payroll and HR staff. We also offer these products and services through our network of reseller partners. Visit us at asuresoftware.com.

Non-GAAP Financial Measures

This press release includes information about Non-GAAP Net Income (Loss), Non-GAAP Net Income (Loss) per share, Non-GAAP tax rates, Non-GAAP gross profit, Non-GAAP gross profit margin, EBITDA, EBITDA margin, Non-GAAP EBITDA, and Non-GAAP EBITDA margin (collectively the “Non-GAAP financial measures”). These Non-GAAP financial measures are measurements of financial performance that are not prepared in accordance with U.S. generally accepted accounting principles and computational methods may differ from those used by other companies. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the Company’s Consolidated Financial Statements prepared in accordance with GAAP. Non-GAAP financial measures are reconciled to GAAP in the tables set forth in this release.

EBITDA differs from GAAP Net Income (Loss) in that it excludes items such as interest, tax, depreciation, and amortization. Asure is unable to predict with reasonable certainty the ultimate outcome of these exclusions without unreasonable effort.

Non-GAAP EBITDA differs from EBITDA in that it excludes share-based compensation, and one-time expenses. Asure is unable to predict with reasonable certainty the ultimate outcome of these exclusions without unreasonable effort.

Non-GAAP Net Income (Loss) per share differs from GAAP Net Income (Loss) per share in that it assumes a 0% Non-GAAP tax rate, uses diluted share counts, and excludes items such as amortization, share-based compensation, and one-time expenses.

Non-GAAP gross profit differs from GAAP gross profit in that it excludes amortization, share-based compensation, and one-time items.

All Non-GAAP measures presented as “margin” are computed by dividing the applicable Non-GAAP financial measure by total revenue.

Management uses both GAAP and Non-GAAP measures when planning, monitoring, and evaluating the Company’s performance.

The primary purpose of using Non-GAAP measures is to provide supplemental information that may prove useful to investors and to enable investors to evaluate the Company’s results in the same way management does.

Management believes that supplementing GAAP disclosure with Non-GAAP disclosure provides investors with a more complete view of the Company’s operational performance and allows for meaningful period-to-period comparisons and analysis of trends in the Company’s business. Further, to the extent that other companies use similar methods in calculating Non-GAAP measures, the provision of supplemental Non-GAAP information can allow for a comparison of the Company’s relative performance against other companies that also report Non-GAAP operating results.

Specifically, management is excluding the following items from its Non-GAAP earnings per share, as applicable, for the periods presented in the third quarter 2021 financial statements:

Share-Based Compensation Expenses. The Company’s compensation strategy includes the use of share-based compensation to attract and retain employees and executives. It is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, share-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.

Amortization of Purchased Intangibles. The Company views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company’s research and development efforts, trade names, customer lists and customer relationships, and acquired lease intangibles, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.

Income Tax Effects and Adjustments. Beginning in first quarter 2018, the Company started using a fixed projected Non-GAAP tax rate in order to provide better consistency across the interim reporting periods by eliminating the effects of items such as changes in the tax valuation allowance and non-cash tax effects of acquired goodwill and amortization, since each of these can vary in size and frequency. This tax rate could be subject to change for a variety of reasons, such as significant changes in the acquisition activity or fundamental tax law changes in major jurisdictions where the Company operates. The Company re-evaluates this tax rate on an annual basis or when any significant events that may materially affect this rate occur. The Non-GAAP tax rate is currently projected to be approximately zero (0.0) percent.

Amortization of Capitalized Internal-Use Software, Acquisition-Related, and One-Time Expenses. The Company’s Non-GAAP financial measures exclude amortization of internal-use capitalized software costs and acquisition-related expenses as well as one-time expenses, such as material tax credits, material interest-expense credits, severance, recruitment, proforma adjustments of the impact of post-sale HCM restructuring, and relocation.

Use of Forward-Looking Statements

This press release contains forward-looking statements about our financial results, which may include expected GAAP and Non-GAAP financial and other operating and non-operating results, including revenue, net income, diluted earnings per share, operating cash flow growth, operating margin improvement, deferred revenue growth, expected revenue run rate, expected tax rates, share-based compensation expenses, amortization of purchased intangibles, amortization of debt discount and shares outstanding. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the Company’s results could differ materially from the results expressed or implied by the forward-looking statements we make.

The risks and uncertainties referred to above include—but are not limited to—risks associated with possible fluctuations in the Company’s financial and operating results; the Company’s rate of growth and anticipated revenue run rate, including impact of the current environment, the spread of major epidemics (including COVID-19) and other related uncertainties such as government-imposed travel restrictions, interruptions to supply chains and extended shut down of businesses, reductions in employment and an increase in business failures, specifically among our clients, the Company’s ability to convert deferred revenue and unbilled deferred revenue into revenue and cash flow, and ability to maintain continued growth of deferred revenue and unbilled deferred revenue; errors, interruptions or delays in the Company’s services or the Company’s Web hosting; breaches of the Company’s security measures; domestic regulatory developments, including changes to or applicability to our business of privacy and data securities laws, money transmitter laws and anti-money laundering laws; the financial and other impact of any previous and future acquisitions; the nature of the Company’s business model, including risks related to government contracts; the Company’s ability to continue to release, gain customer acceptance of and provide support for new and improved versions of the Company’s services; successful customer deployment and utilization of the Company’s existing and future services; changes in the Company’s sales cycle; competition; various financial aspects of the Company’s subscription model; unexpected increases in attrition or decreases in new business; the Company’s ability to realize benefits from strategic partnerships and strategic investments; the emerging markets in which the Company operates; the Company’s ability to hire, retain and motivate employees and manage the Company’s growth; changes in the Company’s customer base; technological developments; litigation and any related claims, negotiations and settlements, including with respect to intellectual property matters or industry-specific regulations; unanticipated changes in the Company’s effective tax rate; regulatory pressures on economic relief enacted as a result of the COVID-19 pandemic that change or cause different interpretations with respect to eligibility for such programs; factors affecting the Company’s term loan; fluctuations in the number of Company shares outstanding and the price of such shares; collection of receivables; interest rates; factors affecting the Company’s deferred tax assets and ability to value and utilize them; the potential negative impact of indirect tax exposure; the risks and expenses associated with the Company’s real estate and office facilities space; and general developments in the economy, financial markets, credit markets and the impact of current and future accounting pronouncements and other financial reporting standards. Further information on these and other factors that could affect the Company’s financial results is included in the reports on Forms 10-K, 10-Q and 8-K, and in other filings we make with the SEC from time to time. These documents are available on the SEC Filings section of the Investor Information section of the Company’s website at investor.asuresoftware.com. Asure Software assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

The forward-looking statements, including the financial guidance and 2021 outlook, contained herein represent the judgment of the Company as of the date of this press release, and the Company expressly disclaims any intent, obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

© 2021 Asure Software, Inc. All rights reserved.

ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

 September 30, 2021
 December 31, 2020
ASSETS(unaudited)  
Current assets:   
Cash and cash equivalents$11,506   $28,577  
Accounts receivable, net4,595   3,848  
Inventory303   449  
Prepaid expenses and other current assets13,356   2,866  
Total current assets before funds held for clients29,760   35,740  
Funds held for clients174,754   321,069  
Total current assets204,514   356,809  
Property and equipment, net8,764   8,281  
Goodwill86,114   73,958  
Intangible assets, net82,385   64,552  
Operating lease assets, net6,170   6,450  
Other assets, net4,129   3,952  
Total assets$392,076   $514,002  
LIABILITIES AND STOCKHOLDERS EQUITY   
Current liabilities:   
Current portion of notes payable$1,914   $12,310  
Accounts payable1,299   1,288  
Accrued compensation and benefits2,675   2,916  
Operating lease liabilities, current1,717   1,833  
Other accrued liabilities1,775   1,380  
Contingent purchase consideration1,905   3,880  
Deferred revenue1,501   4,416  
Total current liabilities before client fund obligations12,786   28,023  
Client fund obligations174,372   320,578  
Total current liabilities187,158   348,601  
Long-term liabilities:   
Deferred revenue51   111  
Deferred tax liability1,446   888  
Notes payable, net of current portion32,800   12,225  
Operating lease liabilities, noncurrent5,044   5,366  
Contingent purchase consideration3,038     
Other liabilities600   1,157  
Total long-term liabilities42,979   19,747  
Total liabilities230,137   368,348  
Stockholders’ equity:   
Preferred stock     
Common stock204   193  
Treasury stock at cost(5,017)  (5,017) 
Additional paid-in capital428,894   419,827  
Accumulated deficit(262,459)  (269,953) 
Accumulated other comprehensive income317   604  
Total stockholders’ equity161,939   145,654  
Total liabilities and stockholders’ equity$392,076   $514,002  

ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts)

 Three Months Ended September 30, Nine Months Ended September 30,
 2021 2020 2021 2020
 (unaudited) (unaudited)
Revenue:       
Recurring$16,374   $15,273   $51,688   $47,442  
Professional services, hardware and other1,607   742   3,263   1,635  
Total revenue17,981   16,015   54,951   49,077  
Cost of Sales7,113   6,942   21,646   20,790  
Gross profit10,868   9,073   33,305   28,287  
Operating expenses:       
Sales and marketing3,897   3,573   11,130   9,917  
General and administrative7,005   5,947   20,324   16,484  
Research and development1,505   1,805   3,972   4,356  
Amortization of intangible assets2,534   2,424   7,590   7,122  
Total operating expenses14,941   13,749   43,016   37,879  
Loss from operations(4,073)  (4,676)  (9,711)  (9,592) 
Interest income (expense) and other, net(530)  (397)  (977)  (930) 
(Loss) gain on extinguishment of debt(342)  (11)  8,312   123  
Employee retention tax credit10,533      10,533     
Income (loss) from operations before income taxes5,588   (5,084)  8,157   (10,399) 
Income tax expense (benefit)260   (325)  663   71  
Net income (loss)5,328   (4,759)  7,494   (10,470) 
Other comprehensive income:       
Unrealized (loss) gain on marketable securities(79)  11   (287)  638  
Comprehensive income (loss)$5,249   $(4,748)  $7,207   $(9,832) 
        
Basic and diluted earnings (loss) per share       
Basic$0.28   $(0.30)  $0.39   $(0.66) 
Diluted$0.28   $(0.30)  $0.39   $(0.66) 
        
Weighted average basic and diluted shares       
Basic19,182   15,873   19,083   15,793  
Diluted19,330   15,873   19,243   15,793  

ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 Nine Months Ended September 30,
 2021 2020
 (unaudited)
Cash flows from operating activities:   
Net income (loss)$7,494   $(10,470) 
Adjustments to reconcile loss to net cash (used in) provided by operations:   
Depreciation and amortization11,690   10,919  
Amortization of operating lease assets1,146   1,127  
Amortization of debt financing costs and discount117   348  
Net amortization of premiums and accretion of discounts on available-for-sale securities123   114  
Provision for doubtful accounts1   317  
Provision for deferred income taxes559   26  
Gain on extinguishment of debt(8,312)  (123) 
Net realized gains on sales of available-for-sale securities(390)  (499) 
Share-based compensation2,124   1,733  
Loss on disposals of fixed assets(32)  55  
Change in fair value of contingent purchase consideration(191)    
Changes in operating assets and liabilities:   
Accounts receivable(536)  465  
Inventory85   190  
Prepaid expenses and other assets(10,916)  6,244  
Operating lease right-of-use assets(1,368)  (1,052) 
Accounts payable11   (887) 
Accrued expenses and other long-term obligations111   (2,881) 
Operating lease liabilities116   370  
Deferred revenue(2,976)  (3,700) 
Net cash (used in) provided by operating activities(1,144)  2,296  
Cash flows from investing activities:   
Acquisition of intangible asset(25,526)  (8,817) 
Purchases of property and equipment(100)  (859) 
Software capitalization costs(3,152)  (1,904) 
Purchases of available-for-sale securities(695)  (12,188) 
Proceeds from sales and maturities of available-for-sale securities8,431   8,456  
Net cash used in investing activities(21,042)  (15,312) 
Cash flows from financing activities:   
Proceeds from notes payable29,425   8,856  
Payments of notes payable(15,073)  (12,174) 
Payments of contingent purchase consideration(1,784)    
Debt financing fees(878)  (245) 
Net proceeds from issuance of common stock526   616  
Net change in client fund obligations(146,206)  68,441  
Net cash (used in) provided by financing activities(133,990)  65,494  
Net decrease in cash and cash equivalents(156,176)  52,478  
Cash and cash equivalents at beginning of period324,985   134,060  
Cash and cash equivalents at end of period$168,809   $186,538  

ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)

 Nine Months Ended September 30,
 2021 2020
 (unaudited)
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Condensed Consolidated Balance Sheets
Cash and cash equivalents$11,506   $12,939  
Restricted cash and restricted cash equivalents included in funds held for clients 157,303    173,599  
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$168,809   $186,538  
    
Supplemental information:   
Cash paid for interest$722   $967  
Cash paid for income taxes$332   $3,469  
Net assets from acquisitions$763   $  
    
Non-cash investing and financing activities:   
Contingent purchase consideration issued for acquisitions$3,038   $2,745  
Notes payable issued for acquisitions$4,386   $330  
Stock issuance for acquisitions$6,428   $  

ASURE SOFTWARE, INC.
RECONCILIATION OF GAAP TO NON-GAAP
(unaudited)
(in thousands, except per share amounts)

  Q3-21Q2-21Q1-21Q4-20Q3-20Q2-20Q1-20
         
Total Revenue$17,981  $17,168  $19,802  $16,430  $16,015  $14,115  $18,947  
         
GAAP to Non-GAAP Gross Profit       
GAAP Gross Profit$10,868  $9,945  $12,492  $9,806  $9,073  $8,107  $11,107  
GAAP Gross Margin60%58%63%60%57%57%59%
         
 Share-based Compensation45  38  23  24  33  21  22  
 Depreciation710  973  762  703  787  537  495  
 Amortization - intangibles379  379  379  379  397  397  431  
 One Time Product Royalties          67  91  
Non-GAAP Gross Profit$12,002  $11,335  $13,656  $10,912  $10,290  $9,129  $12,146  
Non-GAAP Gross Margin67%66%69%66%64%65%64%
         
GAAP Net income (loss) to Non-GAAP EBITDA     
GAAP Net income (loss)$5,328  $3,764  $(1,598) $(5,841) $(4,759) $(3,944) $(1,767) 
 Interest Expense & Other, Net530  223  224  279  408  164  235  
 Taxes based on a 0% tax rate260  298  105  266  (325) 377  19  
 Depreciation872  1,136  956  934  1,043  793  735  
 Amortization - intangibles2,912  2,907  2,907  2,804  2,821  2,746  2,780  
EBITDA$9,902  $8,328  $2,594  $(1,558) $(812) $136  $2,002  
EBITDA Margin55%49%13%(9)% (5)% 1%11%
         
 Share-based Compensation784  760  626  631  707  588  438  
 One Time Expenses1,075  630  202  2,071  1,117  685  1,845  
 Employee Retention Tax Credit(10,533)             
 PPP Loan Extinguishment Gain  (8,654)           
Non-GAAP EBITDA$1,228  $1,064  $3,422  $1,144  $1,012  $1,409  $4,285  
Non-GAAP EBITDA Margin7%6%17%7%6%10 %23%
         
GAAP Net income (loss) to Non-GAAP Net income (loss)     
GAAP Net income (loss)$5,328   $3,764   $(1,598) $(5,841) $(4,759) $(3,944) $(1,767) 
Share Count19,182  19,040  19,007  16,258  15,873  15,779  15,727  
GAAP EPS$0.28   $0.20   $(0.08) $(0.36) $(0.30) $(0.25) $(0.11) 
         
 Share-based Compensation784  760  626  631  707  588  438  
 Amortization - intangibles2,912  2,907  2,907  2,804  2,821  2,746  2,780  
 One Time Expenses1,075  854  202  2,071  1,117  685  1,845  
 Employee Retention Tax Credit(10,533)             
 PPP Loan Extinguishment Gain  (8,654)           
 Taxes based on a 0% tax rate260  298  105  266  (325) 377  19  
Non-GAAP Net (loss) income$(174) $(71) $2,242  $(69) $(439) $452  $3,315  
Share Count19,182  19,040  19,200  16,258  15,873  15,899  15,914  
Non-GAAP EPS$(0.01) $0.00  $0.12  $0.00  $(0.03) $0.03  $0.21  


Investor Relations Contact
Randal Rudniski
Vice President, Investor Relations, Financial Planning & Analysis
512-859-3562
randal.rudniski@asuresoftware.com