Summary
Asure Software reported second quarter revenue of $30.4 million, up 49.9% from the prior-year quarter. Recurring revenue reached $23.0 million, up 21% from the prior-year second quarter. Gross profit was $22.0 million, up 79.6%, and gross margin rose to 72.4%, up 12.0 percentage points. On a non-GAAP basis, gross profit was $23.4 million, a 77% margin, compared with $13.4 million and 66% in the prior-year quarter. The company still posted a net loss of $3.8 million, though that loss narrowed from the prior-year quarter. Diluted loss per share was $0.18. Operating loss was $1.5 million, a narrowing from the prior-year quarter, and operating margin was negative 4.8%, up 24.0 percentage points. Management attributed the revenue growth to technology enhancements and targeted sales efforts in its small business HCM and Enterprise Tax businesses.
For the first half of 2023, revenue was $63.5 million, up 42.2%. Gross profit was $46.4 million, up 67.4%, with gross margin of 73.1%, up 11.0 percentage points. Net loss was $3.4 million, a narrowing from the prior-year first half. Diluted loss per share was $0.17. Operating income was $0.5 million, swinging to a profit, and operating margin was 0.8%, up 18.8 percentage points. Adjusted EBITDA was $14.3 million for the first half, up $10.3 million from the prior-year first half. EBITDA was $10.2 million, up $7.7 million.
Cash flow and backlog metrics showed mixed trends. Second quarter operating cash flow was $1.5 million, down 69.5% from the prior-year quarter. Capital expenditures were $0.29 million, up 17.1%. For the first half, operating cash flow was $6.1 million, down 18.5%, while capital expenditures were $1.02 million, up 233.3%. Deferred revenue, current portion only, was $3.29 million at June 30, 2023, up 61.6% from the prior-year quarter. Remaining performance obligations were $23.12 million, down 12.2% from the prior-year quarter. Recurring revenue represented over 80% of total revenue in the first half of 2023, compared to 94% in the first half of 2022.
Management raised its full year 2023 revenue guidance to $118.0 million to $120.0 million, up from the previous range of $111.0 million to $113.0 million. Adjusted EBITDA margin guidance for the full year is now 19% to 20%, compared with the prior 17% to 18%. For the third quarter of 2023, the company introduced revenue guidance of $26.0 million to $27.0 million and adjusted EBITDA guidance of $3.5 million to $4.5 million. The guidance reflects a high level of economic uncertainty in 2023 due to inflationary trends and the potential for a recession of unknown severity.
Operationally, Asure announced a new 401k product bundled with Secure Act 2.0 tax credits, white-labeling Vestwell's 401k platform. It partnered with Amazon Web Services Application Modernization Lab to enhance its HCM SaaS offerings with cloud optimization and artificial intelligence. The company released an HR Benchmark Survey and Report summarizing results from over 2,000 businesses and was added to the Russell 3000 Index. Risks include the expected wind-down of ERTC revenues as the tax credits expire in 2025. The company also faces forward-looking risks such as security breaches, reductions in employment, business failures among clients, and the ability to convert deferred revenue into revenue and cash flow. Seasonality remains a factor, as first quarter revenues and margins are generally higher due to year-end W-2 and ACA form filings.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $30.4M | $33.1M | -8.0% | — | — |
| Gross profit | $22.0M | $24.4M | -9.8% | — | — |
| Gross margin | 72.4% | 73.8% | -1.4 pp | — | — |
| Research & development | $1.3M | $2.0M | -33.0% | — | — |
| Sales & marketing | $8.5M | $7.2M | +18.3% | — | — |
| General & administrative | $10.3M | $10.0M | +3.8% | — | — |
| Total operating expenses | $23.5M | $22.4M | +4.6% | — | — |
| Operating income (loss) | -$1.5M | $2.0M | -174.0% | — | — |
| Operating margin | -4.8% | 5.9% | -10.7 pp | — | — |
| Net income (loss) | -$3.8M | $339.0K | -1210.6% | — | — |
| Net margin | -12.4% | 1.0% | -13.4 pp | — | — |
| Diluted EPS | -$0.18 | $0.02 | -$0.20 | — | — |
Risks
Newly disclosed risk that AI algorithms may be flawed, datasets may be insufficient, poor quality, or biased, and AI-assisted outputs may be deficient or inaccurate. The company is enhancing HCM products with AI and says regulatory requirements may constrain innovative data use, exposing it to legal liability and reputational harm.
MD&A states that growth in professional services, hardware and other revenues for the three and six months ended June 30, 2023 was primarily due to non-recurring ERTC revenues. ERTC revenues are expected to wind down as ERTC tax credits under the CARES Act expire in 2025, which could reduce future revenue growth.
MD&A reports that principal payments on the Senior Credit Facility begin in October 2023 after the interest-only period, with a balloon payment due in October 2025, and two promissory notes mature on September 30, 2023 and September 30, 2026. Operating cash flow for the six months ended June 30, 2023 was down 18.5% from the prior-year YTD and current-quarter operating cash flow was down 69.5% from the prior-year quarter.
Recurring revenue represented over 80% of total revenue in the six months ended June 30, 2023 compared with 94% in the six months ended June 30, 2022, according to MD&A. A lower recurring mix tied to non-recurring ERTC revenues may make revenue less predictable.
MD&A attributes part of the increase in sales and marketing expenses to an increase in accounts receivable reserves. This suggests rising collection risk among the company's largely SMB client base, which could pressure cash flow if economic conditions weaken.
SaaS KPIs
All quarters →Non-GAAP gross margin
Adjusted EBITDA margin
Adjusted EBITDA
Recurring Revenue
EBITDA
EBITDA margin
Non-GAAP gross profit
Summary, forecast, risks and KPIs are extracted from ASURE SOFTWARE INC's SEC filings for Q2 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.