Summary
Asure Software posted third quarter revenue of $29.3 million, up 34% from the prior-year quarter. Year-to-date revenue was $92.8 million, up 39.5%. Gross profit for the quarter reached $21.3 million, up 56%, and gross margin climbed to 72.5% from 62.3%. The company swung to operating income of $0.25 million after an operating loss in the same quarter last year. Net loss narrowed to $2.2 million from $4.5 million, and diluted loss per share was $0.10 against $0.22. For the nine months, net loss narrowed to $5.6 million from $13.4 million, with diluted loss per share of $0.27 against $0.67.
Cash generation improved. Operating cash flow was $5.7 million in the quarter, versus negative $0.5 million a year earlier. Year-to-date operating cash flow was $11.8 million, up 70.1%. Capital expenditures were $0.34 million, down 81.7% from $1.88 million. Deferred revenue was $3.4 million, down 18.7% from $4.2 million. Remaining performance obligations were $18.9 million, down 28.7% from $26.5 million. The company said it has no credit facility or line of credit at present.
Non-GAAP results showed gross profit of $22.3 million and a gross margin of 76%, compared with $14.8 million and 68% a year earlier. Adjusted EBITDA was $6.2 million, an increase of $4.4 million, and EBITDA was $3.0 million, up $1.7 million. Asure completed an equity offering of 3,333,333 shares plus 500,000 shares from the underwriters' over-allotment option, raising net proceeds of about $43 million. It also paid off roughly $30.9 million of debt held by Structural Capital Investments III, LP. Management highlighted a new 401k product bundled with Secure Act 2.0 tax credits, the launch of Lendio in the Asure Marketplace, and Treasury Compliance Services powered by J.P. Morgan.
Guidance covers the fourth quarter of 2023 and the full fiscal year 2024. For the fourth quarter of 2023, adjusted EBITDA is guided to $2.0 million to $3.0 million, and management said the midpoint of its revenue range would equal roughly 19% growth over the prior year. The full fiscal year 2023 adjusted EBITDA margin guidance is 19% to 20%. For the full fiscal year 2024, the company issued preliminary revenue guidance with an adjusted EBITDA margin of 20% to 21%. Management said the 2024 outlook reflects a mix of organic and inorganic performance plus the possible effects of the IRS measures against fraudulent employee retention tax credit claims.
The biggest identified risk sits in the ERTC business. The IRS announced a moratorium on processing new ERTC claims through the end of 2023, which could delay processing and collections on previously filed claims. Guidance assumes no further IRS or government action in 2024 beyond that moratorium, which is expected to expire on December 31, 2023. ERTC revenue is expected to wind down as the credits expire in 2025. Management also flagged high economic uncertainty, inflationary trends, and the potential for a recession of unknown severity. Asure serves mostly small and medium-sized businesses, more than 100,000 of them, with about 15,000 direct clients and 85,000 indirect clients through Reseller Partners.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $29.3M | $30.4M | -3.6% | $21.9M | +33.9% |
| Gross profit | $21.3M | $22.0M | -3.4% | $13.6M | +55.9% |
| Gross margin | 72.5% | 72.4% | +0.2 pp | 62.3% | +10.2 pp |
| Research & development | $1.8M | $1.3M | +36.1% | $1.2M | +46.6% |
| Sales & marketing | $6.6M | $8.5M | -22.5% | $4.8M | +38.8% |
| General & administrative | $9.3M | $10.3M | -10.1% | $8.0M | +15.8% |
| Total operating expenses | $21.0M | $23.5M | -10.4% | $17.4M | +21.2% |
| Operating income (loss) | $253.0K | -$1.5M | +117.4% | -$3.7M | +106.8% |
| Operating margin | 0.9% | -4.8% | +5.6 pp | -16.9% | +17.8 pp |
| Net income (loss) | -$2.2M | -$3.8M | +41.4% | -$4.5M | +51.3% |
| Net margin | -7.5% | -12.4% | +4.9 pp | -20.7% | +13.2 pp |
| Diluted EPS | -$0.10 | -$0.18 | +$0.08 | -$0.22 | +$0.12 |
Risks
The company generates a significant portion of tax processing revenue from supporting customers filing for Employee Retention Tax Credits. The IRS announced on September 14, 2023 a moratorium on processing new ERTC claims until at least December 31, 2023, and the program is expected to expire in 2025; earlier expiration or revocation would adversely affect revenue.
Non-recurring ERTC revenues drove professional services, hardware and other revenues up 183% for the three months ended September 30, 2023 and up 296% for the nine months ended September 30, 2023. Recurring revenue represented over 80% of total revenue in the nine months ended September 30, 2023, down from 93% in the prior-year period, so a wind-down of ERTC could disproportionately reduce total revenue.
The company has deferred payment arrangements with some customers and referral partners under which collections are expected upon the customer's future receipt of its tax credit. This creates risk in collecting amounts in the future, and sales and marketing expenses for the nine months ended September 30, 2023 increased partly due to an increase in accounts receivable reserves.
Tax authorities could challenge the validity of a business's ERTC filing, challenge the company's calculations, or find other deficiencies, exposing the company to uncertain penalties or damages. This risk is tied to the ERTC filing services that are a significant revenue source.
As of September 30, 2023 the company had cash, cash equivalents and restricted cash of $32.8 million and working capital of $31.6 million, but it terminated its credit facility with Structural on September 12, 2023 and currently has no credit facility or line of credit. It may need to raise additional capital, and cannot assure it can do so on acceptable terms.
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 Q3 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.