Summary
Asure Software opened fiscal 2023 with first-quarter revenue of $33.1 million, up 36% from the prior-year quarter. Gross profit rose 58%, to $24.4 million, and gross margin reached 73.8%, up from 63.6%. Management tied the margin gain to higher revenue and to more efficient operations after consolidation and standardization work trimmed salaries and benefits. Revenue growth was not evenly spread. Professional services, hardware and other revenue grew faster than recurring revenue, helped by non-recurring ERTC filing work, while recurring revenue also benefited from interest earned on client funds and from HR compliance and AsureMarketplace activity. The 10-Q warns that major revenue streams such as Earned Retention Tax Credits will eventually expire.
Profitability swung positive. Operating income was $1.96 million for the quarter, a turn from an operating loss in the prior-year quarter, and operating margin moved to 5.9%, up 14.9 percentage points. Net income was $0.34 million, and diluted earnings per share were $0.02. Both swung to a profit from the prior-year quarter. The dollar amounts are thin for a company of this size, and the GAAP result depends heavily on lines below the operating line. Interest expense on the Structural Capital credit facility remains a drag, and a large amortization charge for acquired intangibles keeps reported profit modest. Operating expenses kept growing, with higher personnel costs, sales commissions and contracting costs absorbing much of the revenue gain.
Cash generation improved. Operating cash flow was $4.59 million for the quarter, up 81.3%, while capital expenditures were $0.73 million, up from the prior-year quarter. Deferred revenue, current portion only, stood at $4.18 million, up 157.2%. Remaining performance obligations were $21.30 million, down 5.1%. That decline is the soft spot in the release. The backlog measure moved the wrong way even as reported revenue grew. The company attributes deferred revenue swings to seasonality, the expiration of initial multi-year contracts and deals billed after implementation rather than in advance of service delivery.
Non-GAAP measures were stronger than the GAAP lines. EBITDA was $6.8 million, up $4.3 million from the prior-year quarter, and Adjusted EBITDA was $8.2 million, up $4.8 million. Non-GAAP gross profit was $25.7 million, a margin of 78%, against a margin of 68% in the prior-year quarter. Management raised its full-year 2023 targets and now points to an Adjusted EBITDA margin of 17% to 18%, up from prior guidance of a 15% to 17% margin. For the second quarter of 2023, the company introduced its own revenue and Adjusted EBITDA guidance.
Operationally, Asure partnered with Harbor Compliance to simplify federal, state and local tax registrations and business licensing, and announced an integration with ZayZoon to deliver on-demand wages to employees of its payroll customers. Chairman and CEO Pat Goepel framed the quarter around targeted sales initiatives and the reception of new AsureMarketplace offerings, and said the company would keep pursuing organic growth and margin expansion while monitoring acquisitions. The caution is that the guidance carries a stated high level of economic uncertainty for 2023, tied to inflation and to the potential for a recession of unknown severity. Named risks include the term loan, interest rates, restrictive debt covenants, collection of receivables and access to additional capital. Seasonality matters too. First-quarter revenue and margins are typically the strongest because W-2 and ACA form filings land in that period, so the remainder of the year tends to be softer on both lines.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $33.1M | $29.3M | +12.9% | $24.3M | +35.9% |
| Gross profit | $24.4M | $21.1M | +15.4% | $15.5M | +57.8% |
| Gross margin | 73.8% | 72.2% | +1.6 pp | 63.5% | +10.3 pp |
| Research & development | $2.0M | $1.6M | +21.9% | $1.8M | +8.7% |
| Sales & marketing | $7.2M | $6.0M | +19.6% | $4.9M | +47.0% |
| General & administrative | $10.0M | $9.7M | +2.4% | $7.5M | +33.0% |
| Total operating expenses | $22.4M | $20.7M | +8.3% | $17.6M | +27.2% |
| Operating income (loss) | $2.0M | $420.0K | +367.4% | -$2.2M | +190.4% |
| Operating margin | 5.9% | 1.4% | +4.5 pp | -8.9% | +14.9 pp |
| Net income (loss) | $339.0K | -$1.1M | +132.1% | -$3.0M | +111.2% |
| Net margin | 1.0% | -3.6% | +4.6 pp | -12.4% | +13.4 pp |
| Diluted EPS | $0.02 | -$0.05 | +$0.07 | -$0.15 | +$0.17 |
Risks
Professional services, hardware and other revenue increased 284% for the three months ended March 31, 2023 from the similar period in 2022, primarily due to growth in non-recurring ERTC revenue. Recurring revenue was over 84% of total revenue in the three months ended March 31, 2023, compared to 94% in the three months ended March 31, 2022, increasing dependence on non-recurring revenue.
Forward-looking statements identify expiration of major revenue streams such as Earned Retention Tax Credits and regulatory pressures on COVID-19 economic relief that change or cause different interpretations of eligibility as risks. MD&A attributes 284% growth in professional services, hardware and other revenue for the three months ended March 31, 2023 from the similar period in 2022 primarily to non-recurring ERTC revenue.
MD&A states first quarter revenues and margins are generally higher than in subsequent quarters because payroll forms such as Form W-2 and Form 1099 are typically processed in the first quarter and many clients are subject to ACA form filing requirements. Results in later quarters may be lower than Q1 2023.
Interest expense, net for the three months ended March 31, 2023 was $1,944 compared to $820 for the three months ended March 31, 2022, and was 6% of revenue versus 3% of revenue, respectively. The increase is primarily due to the credit facility with Structural Capital Investments II LP signed in Q3 2021.
MD&A states the company may need to raise additional capital in the future to grow operations and pursue acquisitions, and cannot assure that it will be able to raise additional capital on acceptable terms, or at all. As of March 31, 2023, principal sources of liquidity included approximately $21,438 of cash, cash equivalents and restricted cash.
SaaS KPIs
All quarters →Non-GAAP gross margin
Adjusted EBITDA margin
Adjusted EBITDA
Direct Clients
EBITDA
EBITDA margin
Indirect Clients
Non-GAAP gross profit
Summary, forecast, risks and KPIs are extracted from ASURE SOFTWARE INC's SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.