Summary
Asure Software posted second quarter revenue of $17.2 million, up 21.6% from the prior-year quarter. Executives said the increase split roughly evenly between organic and inorganic sources. Recurring revenue rose 17.0% year over year, while professional services, hardware and other revenue rose 186.9%, helped by the Employee Retention Tax Credit service launch. Gross profit was $9.9 million for the quarter, up 22.7%, and gross margin reached 57.9%, up 0.5 percentage points from a year earlier. Year-to-date revenue was $36.97 million, up 11.8%, and year-to-date gross profit was $22.44 million, up 16.8%.
Profitability at the operating line moved the other way. The company reported an operating loss of $4.37 million for the quarter, widening from the prior-year quarter, and operating margin was -25.4%, flat with a year earlier. Costs climbed faster than sales. Sales and marketing expenses rose on higher personnel costs, and general and administrative expenses rose on increased personnel, contracting and placement costs. Research and development spending declined slightly. For the six months, the operating loss narrowed to $5.64 million.
The bottom line flipped to a profit. Net income was $3.76 million for the quarter, a swing to a profit from the prior-year quarter, and diluted earnings per share were $0.20. The press release tied the result to PPP loan forgiveness of $8.7 million. Non-GAAP EBITDA was $1.1 million, or 6.2% of revenue, down from the prior-year quarter. Year to date, net income was $2.17 million and diluted earnings per share were $0.11, both swings to a profit.
Cash generation was the weak spot. Operating cash flow was -$0.66 million for the quarter, down from the prior-year quarter, and -$1.90 million for the six months, also down. Capital expenditures were $0.04 million for the quarter, down 87.6% from a year earlier. Deferred revenue was $1.28 million at June 30, 2021, down 66.0%, and remaining performance obligations were $24.80 million, down 9.1%. Management notes that deferred revenue is an obligation to perform future services and can vary with seasonality and billing timing.
Operational momentum held up. Total bookings were up 48% year over year and 51% sequentially. Small business clients filed for nearly $100 million in Employee Retention Tax Credits during the quarter. Asure ended the quarter with $20.3 million in cash and reduced debt by 41% sequentially to $13.4 million, helped by the PPP forgiveness. The company signed a commitment letter with Structural Capital Investments for a $50 million credit facility, expected to close near the end of the third quarter, with a 48 month term and interest at prime plus 5.75% with a floor of 9.0%.
Guidance for the third quarter of 2021 spans $17.0 million to $17.5 million on the top line, non-GAAP EBITDA of $0.8 million to $1.0 million, and non-GAAP EPS of -$0.03 to -$0.01. The outlook reflects the company's current view of the pace of the economic recovery. Management also said plans to grow revenue 20% annually remain unchanged, and noted that first quarters are seasonally strong because of year-end W-2 and ACA form filing revenue.
Risks cluster around the pandemic and the company's cost structure. Asure charges some clients per employee, so headcount reductions at client businesses press on recurring revenue until employment returns to pre-pandemic levels. The filing also flags delayed client implementations and longer sales cycles as possible drags, and says net income may be hurt by continued investment in sales and marketing and research and development. The customer base is broad, with more than 80,000 small and midsized businesses, about 10,000 of them direct and roughly 70,000 through reseller partners.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $17.2M | $19.8M | -13.3% | $14.1M | +21.6% |
| Gross profit | $9.9M | $12.5M | -20.4% | $8.1M | +22.7% |
| Gross margin | 57.9% | 63.1% | -5.1 pp | 57.4% | +0.5 pp |
| Research & development | $1.3M | $1.1M | +19.5% | $1.4M | -2.5% |
| Sales & marketing | $3.6M | $3.6M | +0.3% | $2.8M | +30.8% |
| General & administrative | $6.8M | $6.5M | +5.0% | $5.2M | +31.3% |
| Total operating expenses | $14.3M | $13.8M | +4.0% | $11.7M | +22.5% |
| Operating income (loss) | -$4.4M | -$1.3M | -244.3% | -$3.6M | -22.0% |
| Operating margin | -25.4% | -6.4% | -19.0 pp | -25.4% | -0.1 pp |
| Net income (loss) | $3.8M | -$1.6M | +335.5% | -$3.9M | +195.4% |
| Net margin | 21.9% | -8.1% | +30.0 pp | -27.9% | +49.9 pp |
| Diluted EPS | $0.20 | -$0.08 | +$0.28 | -$0.25 | +$0.45 |
Risks
Because Asure charges many clients on a per-employee basis, pandemic-driven client layoffs and furloughs have reduced headcount and therefore recurring revenue, and management expects recurring revenue in future periods to keep being negatively impacted until client employment returns to pre-pandemic levels. Short-term deferred revenue fell 66.0% to $1.28 million versus $3.77 million in the prior-year quarter and RPO declined 9.1% to $24.8 million, underscoring the pressure on the backlog that converts to future revenue.
Operating cash flow turned negative, with net cash used in operating activities of $1.90 million for the six months ended June 30, 2021 versus $0.35 million used in the prior-year period, and operating cash flow for the quarter fell 121.7%. Liquidity depends on $20.3 million of cash and cash equivalents, cash generated from operations and only $4.5 million available under the Wells Fargo revolver, and the company signed a commitment letter for a new credit facility after quarter end.
The shift from in-person to virtual selling could make prospects less willing to engage by video or teleconference, which management says could impede client acquisition and lengthen sales cycles. New clients already temporarily delayed service implementations at the onset of the pandemic, and the company may see similar client-driven delays again.
Management is deliberately increasing investment in sales and marketing and research and development and explicitly expects net income to be negatively affected as a result. Operating loss widened to $4.37 million in the current quarter from $3.58 million in the prior-year quarter even as revenue rose 21.6%, and sales and marketing and general and administrative expenses each grew roughly 31% year over year.
Recurring revenue includes interest earned on funds held for clients, which are invested in money market funds, demand deposits and fixed income securities until remitted to tax authorities or employees. This revenue stream is directly exposed to changes in interest rates and to the size of client fund balances.
Part of the revenue increase (up 21.6% to $17.17 million in the quarter) came from acquisitions completed in the second half of 2020 rather than organic growth, and management continues to actively explore acquiring additional products or technologies. Integration and realized-benefit risk from these deals remains a factor in future results.
SaaS KPIs
All quarters →Direct Clients
Indirect Clients
Recurring Revenue as % of Total Revenue
Total bookings
Summary, forecast, risks and KPIs are extracted from ASURE SOFTWARE INC's SEC filings for Q2 FY2021 (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.