ASURE SOFTWARE INC Q3 FY2022 earnings

Asure Software reported third quarter revenue of $21.90 million, up 21.8% from the prior-year quarter. The top line reached $66.54 million for the nine months ended September 30, 2022, up 21.1% year over year. Gross profit rose faster than revenue. Third quarter gross profit was $13.65 million, up 25.6%, and year-to-date gross profit was $41.37 million, up 24.2%. Gross margin expanded to 62.3% in the quarter, a gain of 1.9 percentage points. Year-to-date gross margin was 62.2%, up 1.6 percentage points. Management attributed the margin expansion to higher revenue and more efficient operations.

Profitability remained pressured. The company posted an operating loss of $3.71 million in the third quarter, an improvement from the prior-year operating loss, with the loss narrowing 9.0%. Operating margin was -16.9%, up 5.7 percentage points from the prior-year quarter. On a year-to-date basis, the operating loss was $11.73 million, and the loss widened 20.8% from the prior-year period. Year-to-date operating margin was -17.6%, flat compared with the prior-year period. The bottom line swung to a third quarter net loss of $4.53 million from net income in the prior-year quarter, a decline of 185.1%. Diluted loss per share was $0.22. For the nine months, net loss was $13.41 million and diluted loss per share was $0.67. The prior-year quarter benefited from a tax credit that did not repeat. On a non-GAAP basis, the third quarter net loss was $0.1 million, compared with a non-GAAP net loss of $0.4 million in the prior-year quarter. EBITDA was $1.3 million, down from $9.9 million a year earlier, while Adjusted EBITDA rose to $2.1 million from $1.2 million. Total bookings were up 91% year over year.

Cash generation was mixed. Operating cash flow was -$0.52 million in the third quarter, down 169.5% from the prior-year quarter. For the nine months ended September 30, 2022, operating cash flow was $6.96 million, up 708.1% from the prior-year period. Capital expenditures were $1.88 million in the third quarter, up 13342.9% year over year. Year-to-date capital expenditures were $2.19 million, up 2088.0%. Deferred revenue, current portion, was $4.17 million at September 30, 2022, up 178.0% from a year earlier. Remaining performance obligations were $26.51 million, up 10.7% from the prior-year quarter. The company noted that deferred revenue can vary with seasonality, multi-year contract timing, and billing arrangements. MD&A also flagged that lower client headcount and pandemic-related factors had hurt recurring revenue, while higher sales, marketing, and research and development spending weighed on operating results.

Guidance points to continued revenue growth but leaves room for uncertainty. For the fourth quarter of 2022, Asure guided revenue to $23.5 million to $24.0 million, with adjusted EBITDA of $3.0 million to $3.5 million and non-GAAP EPS of negative $0.01 to positive $0.01. Full-year 2022 revenue guidance is $90.0 million to $90.5 million, adjusted EBITDA of $10.5 million to $11.0 million, and non-GAAP EPS of $0.05 to $0.07. For 2023, the company introduced preliminary guidance of $98.0 million to $102.0 million in revenue and an adjusted EBITDA margin of 14% to 16%. Management said the fourth quarter revenue guidance implies year-over-year growth of 11% to 14%, virtually all organic. It described high economic uncertainty in 2023 because of inflation and the potential for a recession of unknown severity.

Risks named in the filing include client headcount reductions, business failures, the ability to convert deferred revenue, competition, longer sales cycles, security breaches, regulatory changes, interest rate moves, and receivables collection. Recent business moves include an Equifax integration for employment and income verifications, expanded ERTC tax filing technology for CPA firms, 401(k) integrations with more than 80 providers, and a PrismHR partnership covering more than 80,000 organizations. Asure serves more than 80,000 small business customers, about 15,000 direct and roughly 65,000 through reseller partners.