Summary
Asure Software reported third-quarter fiscal 2021 revenue of $17.98 million, up 12.3% from $16.02 million in the prior-year quarter. Gross profit rose 19.8% to $10.87 million, and gross margin improved to 60.4% from 56.7%, a gain of 3.8 percentage points. The quarter still produced an operating loss of $4.07 million, but that loss narrowed from $4.68 million in the prior-year quarter. Net income swung to $5.33 million from a net loss of $4.76 million. Diluted earnings per share came in at $0.28, compared with a loss of $0.30 per share a year earlier.
Year-to-date results through September 30, 2021 show revenue of $54.95 million, up 12.0% from $49.08 million in the prior-year period. Gross profit increased 17.7% to $33.30 million. The operating loss for the nine months widened slightly to $9.71 million from $9.59 million, but net income swung to $7.49 million from a prior-year loss of $10.47 million. Diluted EPS for the nine months was $0.39 versus a loss of $0.66 per share. Operating cash flow weakened. The quarter generated $0.75 million in operating cash flow, down from $2.65 million a year earlier, and the nine-month figure was negative $1.14 million compared with $2.30 million. Capital expenditures were just $0.01 million in the quarter, down from $0.31 million.
Balance-sheet-related metrics showed some pressure. Deferred revenue was $1.50 million at September 30, 2021, down 58.1% from $3.58 million a year earlier. Remaining performance obligations were $23.94 million, down 2.4% from $24.54 million. Operating margin for the quarter was negative 22.7%, though that was an improvement of 6.5 percentage points from the prior-year quarter. Year-to-date operating margin was negative 17.7%, an improvement of 1.9 percentage points. Year-to-date gross margin was 60.6%, up 3.0 percentage points.
Operationally, Asure stayed busy. The company acquired two payroll businesses on September 30, 2021, expanding its geographic territories and creating up-sell and cross-sell opportunities. It rolled out a new integrated payroll and HR platform for small businesses and added an integration with Employee Navigator, which reaches more than 60,000 companies and 10 million employees and dependents. Total bookings rose 43% year over year and were flat sequentially. Revenue growth was two-thirds organic and one-third inorganic. The ERTC service remained a bright spot, and Asure said it had helped small business clients file for more than $200 million in ERTC credits to date. Non-GAAP EBITDA was $1.2 million, or a 7% margin.
Guidance points to a seasonally different fourth quarter. For the fourth quarter of 2021, Asure guided revenue to a range of $20.5 million to $21.0 million, non-GAAP EBITDA of $1.5 million to $1.7 million, and non-GAAP EPS of $(0.05) to $(0.03). For fiscal year 2022, management guided revenue to a range of $85.0 million to $90.0 million and said non-GAAP EBITDA margin percentages and non-GAAP EPS should be in line with historical percentages and seasonal trends. The company framed the outlook against a challenging environment for predicting economic results.
Risks remain. The pandemic continues to disrupt client operations, and Asure charges some clients on a per-employee basis. Headcount reductions can hurt recurring revenue, and management expects that pressure to persist until employment levels recover. The company also cited inflation and supply chain disruptions as uncertainties. It faces execution risk from integrating the two payroll acquisitions, converting deferred revenue into revenue and cash flow, and achieving profitability for the remainder of fiscal 2021. Competition, changes in the sales cycle, and regulatory developments also appear in the risk list.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $18.0M | $17.2M | +4.7% | $16.0M | +12.3% |
| Gross profit | $10.9M | $9.9M | +9.3% | $9.1M | +19.8% |
| Gross margin | 60.4% | 57.9% | +2.5 pp | 56.6% | +3.8 pp |
| Research & development | $1.5M | $1.3M | +12.1% | $1.8M | -16.6% |
| Sales & marketing | $3.9M | $3.6M | +7.6% | $3.6M | +9.1% |
| General & administrative | $7.0M | $6.8M | +2.7% | $5.9M | +17.8% |
| Total operating expenses | $14.9M | $14.3M | +4.4% | $13.7M | +8.7% |
| Operating income (loss) | -$4.1M | -$4.4M | +6.8% | -$4.7M | +12.9% |
| Operating margin | -22.6% | -25.4% | +2.8 pp | -29.2% | +6.6 pp |
| Net income (loss) | $5.3M | $3.8M | +41.6% | -$4.8M | +212.0% |
| Net margin | 29.6% | 21.9% | +7.7 pp | -29.7% | +59.3 pp |
| Diluted EPS | $0.28 | $0.20 | +$0.08 | -$0.30 | +$0.58 |
Risks
Asure completed two asset acquisitions on September 30, 2021 for aggregate purchase prices of $24.15 million and $14.75 million, funded with cash, promissory notes, and stock consideration. The filing warns these and future acquisitions may be difficult to integrate, create unknown or unforeseen liabilities, dilute stockholders, and adversely affect operating results and financial condition.
The filing states ability to make scheduled payments on or refinance indebtedness under the Senior Credit Facility with Structural Capital Investments III LP and subordinated promissory notes depends on future performance. Operating cash flow was -$1.14 million for the nine months ended September 30, 2021, down 149.8% from $2.30 million for the prior-year period, and if cash flow is insufficient, Asure may need to sell assets, restructure debt, or obtain equity on onerous or dilutive terms.
MD&A states the pandemic disrupted client operations and caused significant layoffs and furloughs since late March 2020; because Asure charges on a per-employee basis for certain services, decreases in client headcounts negatively impacted recurring revenue during 2020. It expects recurring revenue in future periods to continue to be negatively impacted by headcount reductions until employment levels across its client base return to pre-pandemic levels.
MD&A reports approximately $10.5 million was recognized in Interest (expense) income, net for the Employee Retention Tax Credit as of September 30, 2021, which materially contributed to net income. Changes in eligibility or interpretations of COVID-19 economic relief programs could adversely affect future results.
The agreement with Structural Capital Investments III LP contains restrictive covenants, including restrictions on paying dividends, leverage ratios, financial maintenance tests, and stringent regulatory compliance requirements. These covenants limit available borrowings and flexibility and may place Asure at a disadvantage versus competitors with fewer restrictions.
MD&A warns that if clients and prospects are not willing or available to engage by video conference and teleconference, the shift from in-person to virtual sales meetings could negatively affect sales efforts, impede client acquisition, and lengthen sales cycles.
MD&A states uncertainties and challenges remain, including the effects of COVID-19, inflation and supply chain disruptions, and there can be no assurance that Asure can successfully grow its revenues or achieve profitability during the remainder of fiscal year 2021.
SaaS KPIs
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Summary, forecast, risks and KPIs are extracted from ASURE SOFTWARE INC's SEC filings for Q3 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.