Summary
Asure Software closed fiscal 2022 with fourth quarter revenue of $29.3 million, up 39% from the prior-year quarter, and full-year revenue of $95.8 million, up 26%. Gross profit was $21.1 million in the quarter, up 59.4%, and $62.5 million for the full year, up 34.2%. Gross margin reached 72.2% in the quarter, up 9.4 percentage points from the prior-year quarter, and 65.2% for the full year, up 4.0 percentage points. The quarter produced operating income of $0.42 million, up $3.67 million from the prior-year quarter. The full-year operating loss was $11.31 million, up $1.66 million from the prior year.
Profitability below the operating line stays negative. The fourth quarter net loss was $1.06 million, an improvement of $3.24 million from the prior-year quarter. The full-year net loss was $14.47 million, down $17.66 million from the prior year, a swing to a loss. Diluted earnings per share for the full year was negative $0.72, down $0.88. The company noted the prior year included $18.8 million in extraordinary gains, without which the prior-year net loss would have been $15.7 million. On an adjusted basis, fourth quarter EBITDA was $5.0 million, up $3.5 million, and adjusted EBITDA was $6.0 million, up $3.7 million. Full-year EBITDA was $8.8 million, down $13.5 million, while full-year adjusted EBITDA was $11.8 million, up $4.2 million.
Cash generation and backlog both improved. Fourth quarter operating cash flow was $6.72 million, up 166.3%, and full-year operating cash flow was $13.67 million, up 892.3%. Capital expenditures were $0.13 million in the quarter, up 293.9%, and $2.32 million for the full year, up 1642.9%. Deferred revenue, current portion, stood at $8.46 million, up 125.6%. Remaining performance obligations were $25.03 million, up 5.6%. Recurring revenue was $24.1 million in the quarter, up 25% from the prior-year quarter, and $86.2 million for the full year, up 21%. Recurring revenue represented over 90% of total revenue in 2022, compared to 93% in 2021.
The client base is broad. As of December 31, 2022, Asure had more than 100,000 clients, roughly 15,000 direct and 85,000 indirect through reseller partners. Management pointed to product and partner momentum. Asure launched its Asure Marketplace and announced integrations with ZayZoon for earned wage access, plus H&R Block and TurboTax for electronic W-2 access. Consolidation and standardization efforts helped rein in costs, the company said. The quarter's operating margin was 1.4%, up 16.8 percentage points from the prior-year quarter, while the full-year operating margin was negative 11.8%, up 5.2 percentage points.
Guidance moved higher. For the first quarter of 2023, Asure targets adjusted EBITDA of $6.0 million to $6.5 million. For the full year 2023, it guides to an adjusted EBITDA margin of 15% to 17%, up from a prior range of 14% to 16%, and raised its full-year revenue target. Management framed the outlook around a high level of economic uncertainty, citing recent inflationary trends and the potential for a recession of unknown severity. It also flagged seasonality, noting that first quarter revenue and margins are generally higher than in later quarters because of annual payroll form filings.
The named risks include macroeconomic volatility, competition, changes in tax and regulatory rules, security breaches, interest rate moves and collection of receivables. The company said it believes it has sufficient liquidity as of December 31, 2022 to support operations for the next 12 months, though it may raise capital to fund growth or acquisitions. The full-year net loss and negative operating margin show profitability remains a work in progress, even as revenue, gross margin and operating cash flow all improved.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $29.3M | $21.9M | +33.7% | $21.1M | +38.7% |
| Gross profit | $21.1M | $13.6M | +54.9% | $13.3M | +59.4% |
| Gross margin | 72.2% | 62.3% | +9.8 pp | 62.8% | +9.4 pp |
| Research & development | $1.6M | $1.2M | +32.0% | $1.4M | +12.9% |
| Sales & marketing | $6.0M | $4.8M | +26.7% | $4.3M | +39.5% |
| General & administrative | $9.7M | $8.0M | +21.2% | $7.2M | +34.1% |
| Total operating expenses | $20.7M | $17.4M | +19.4% | $16.4M | +26.6% |
| Operating income (loss) | $420.0K | -$3.7M | +111.3% | -$3.1M | +113.5% |
| Operating margin | 1.4% | -16.9% | +18.4 pp | -14.7% | +16.1 pp |
| Net income (loss) | -$1.1M | -$4.5M | +76.7% | -$4.3M | +75.4% |
| Net margin | -3.6% | -20.7% | +17.1 pp | -20.4% | +16.8 pp |
| Diluted EPS | -$0.05 | -$0.22 | +$0.17 | -$0.22 | +$0.17 |
Risks
A significant portion of tax processing revenues comes from supporting customer filings for Employee Retention Tax Credits under the CARES Act. The company warns the program is expected to expire in 2025 and could be revoked earlier, and it says investors should not expect ERTC filing revenues to continue beyond 2025, with deferred referral partner collections adding collection risk.
The company reported a FY2022 net loss from continuing operations of $(14.5) million and an accumulated deficit of $281.2 million at December 31, 2022, and expects continued operating losses. FY2022 year-to-date net income swung to a loss of $14.47 million, down $17.66 million or 553.1% from prior-year income, per reported figures.
The company had significant turnover in its finance and accounting team, including tax, SEC reporting, treasury and audit functions, causing a lack of institutional knowledge as to financial operations. The filing says failure to retain and integrate replacements could materially affect the business and reliability of financial statements and internal controls.
The Senior Credit Facility with Structural Capital Investments III LP and subordinated notes contain restrictive covenants, including dividend limits and financial maintenance and liquidity tests. Failure to meet debt service or refinance could trigger default, and MD&A reports interest expense and other, net rose to $4,438 in FY2022 from $2,038 in FY2021 due to higher average borrowings.
The company maintains it is not a money service business or money transmitter but has proactively registered in some jurisdictions and adopted an AML compliance program. New or reinterpreted money transmitter or money service business statutes could require more licensing, limit activities, and expose it to civil and criminal fines or loss of licenses.
The HCM solution collects, stores and transmits sensitive client and employee data, including Social Security numbers, payroll and financial data, and HIPAA data for consumer health care administration. A compromise or unauthorized access could disrupt services, damage the brand, reduce revenue, and trigger legal claims and regulatory actions, with cyber liability insurance potentially inadequate.
Asure has acquired and plans to continue acquiring Reseller Partners' businesses and says these deals could prove difficult to integrate, create unknown liabilities, disrupt the business, dilute stockholders, and impair operating results. Goodwill and identifiable intangible assets were approximately 36% of total assets as of December 31, 2022, creating impairment exposure.
Payroll processing involves moving significant funds from client accounts to employees and taxing authorities. Because ACH banking regulations can allow reversals after payments, clients may have insufficient funds, and fraudsters may deliberately underfund payroll obligations, potentially forcing Asure to advance substantial funds and seek short-term liquidity.
MD&A reports working capital decreased $8,913 to $8,093 at December 31, 2022 from $17,006 at December 31, 2021. The company says it may need to raise additional capital to grow software operations and pursue acquisitions, and cannot ensure capital will be available on acceptable terms or at all.
SaaS KPIs
All quarters →Non-GAAP gross margin
Adjusted EBITDA margin
Recurring Revenue
Direct Clients
EBITDA margin
Indirect Clients
Total Clients
Summary, forecast, risks and KPIs are extracted from ASURE SOFTWARE INC's SEC filings for Q4 FY2022 (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.