Asure Software, Inc. (NASDAQ:ASUR) is a leading provider of cloud-based Human Capital Management (HCM) software solutions, offering a suite of tools that empower businesses of all sizes to streamline their workforce management processes. With a focus on delivering cutting-edge technology and a commitment to customer success, Asure has carved out a unique niche in the competitive HCM market.
Company Background
Asure Software, Inc. (Asure) was founded in 1985 and is headquartered in Austin, Texas. The company provides cloud-based Human Capital Management (HCM) software solutions delivered as Software-as-a-Service (SaaS) for small, medium-sized and enterprise-level businesses.
Over the years, Asure has steadily grown its suite of HCM offerings. In the early days, the company focused on time and attendance software and payroll tax solutions. As the business landscape evolved, Asure expanded into other HCM areas such as recruiting, HR compliance services, and a marketplace of integrated third-party applications.
One of the key milestones for Asure was in 2009 when Pat Goepel joined as CEO. Under his leadership, the company has grown annual revenue from $10 million to over $119 million as of 2023. Goepel has led Asure through several strategic acquisitions to broaden the product portfolio and customer base.
Challenges and Evolution
Asure has faced some challenges over the years, including the expiration of major revenue streams like the Employee Retention Tax Credit (ERTC) program. The company had to pivot its strategy to replace this non-recurring revenue with more valuable recurring revenue. This transition led to changes in the revenue mix, with recurring revenue now making up 98% of total revenue as of Q3 2024, up from 81% in the prior year period.
Despite these challenges, Asure has remained focused on delivering innovative HCM solutions that help businesses of all sizes manage their most valuable asset – their workforce. The company continues to invest in research and development to expand its capabilities and better serve its growing customer base across the United States.
Current Offerings
Today, Asure’s HCM suite, known as Asure HCM, encompasses a diverse range of offerings, including payroll, time and attendance, HR compliance, recruiting, and the innovative AsureMarketplace platform. This integrated approach allows the company to cater to the evolving needs of businesses, providing a one-stop-shop for their workforce management requirements.
Asure’s product segments and offerings include:
Asure Tax Management Solutions: Provides tools and services to help businesses manage their payroll tax obligations.
Asure Time Attendance: Offers time and labor management software to help employers track employee hours and attendance.
Asure Recruiting: Provides applicant tracking and hiring solutions to streamline the recruitment process for small and medium-sized businesses.
Asure HR Compliance: Offers compliance services and tools to help businesses navigate the complexities of human resources regulations.
AsureMarketplace: Integrates Asure’s HCM systems with third-party providers to enhance efficiency, improve accuracy, and extend the range of services offered to employers and their employees.
Financials
Financially, Asure has demonstrated resilience and adaptability. As of the latest reported quarter (Q3 2024), the company’s recurring revenue accounted for 98% of its total revenue, up from 81% in the same period the prior year. This shift in revenue mix underscores Asure’s ability to build a high-value, sustainable business model that is less reliant on one-time, non-recurring revenue streams.
In the third quarter of 2024, Asure reported revenues of $29.3 million, which was flat compared to the prior-year period. However, excluding the impact of reduced ERTC (Employee Retention Tax Credit) revenue, the company’s total revenue and recurring revenue both grew by a robust 20% year-over-year. This performance highlights Asure’s success in diversifying its revenue sources and reducing its reliance on the temporary ERTC program.
For the most recent fiscal year (2023), Asure reported: – Revenue: $119.08 million – Net income: -$9.214 million – Operating Cash Flow (OCF): $18.90 million – Free Cash Flow (FCF): $2.64 million
In the most recent quarter (Q3 2024), the company reported: – Revenue: $29.30 million – Net income: -$3.90 million – Operating Cash Flow (OCF): $1.32 million – Free Cash Flow (FCF): -$9.78 million
The decrease in revenue in Q3 2024 was mainly due to the timing of large enterprise tax deals that were delayed. Despite this, the company’s sales bookings were up 141% year-over-year, and its backlog has grown 35% sequentially and 250% year-over-year, indicating strong future growth potential.
Liquidity
Asure’s liquidity position remains solid, with a current ratio of 1.12 and a quick ratio of 1.11 as of September 30, 2024. The company’s debt-to-equity ratio stands at 0.0452, based on total debt of $10.44 million and stockholders’ equity of $191.66 million. As of September 30, 2024, Asure had cash and cash equivalents of $11.25 million.
It’s worth noting that the company does not have a credit facility or access to a credit line as of September 30, 2024. However, the strong recurring revenue growth and strategic acquisitions suggest a solid financial foundation for future operations and growth.
Growth Strategy
Asure’s acquisition strategy has also been a key driver of its growth. Over the past 12 months, the company has completed 12 acquisitions, adding approximately $15 million in annual recurring revenue (ARR) to its business. These strategic transactions have enabled Asure to expand its geographic reach, enhance its product portfolio, and capture a larger share of the HCM market.
The company’s focus on innovation is another critical component of its success. The recent launch of its AsurePay product, an innovative online banking solution, exemplifies Asure’s ability to identify and address the evolving needs of its client base. AsurePay is designed to provide employees with features such as debit cards, paycheck advances, and fee-free ATM withdrawals, further strengthening the company’s value proposition.
Future Outlook
Looking ahead, Asure has provided guidance for 2024 and 2025 that reflects its confidence in the company’s growth prospects. For the fourth quarter of 2024, Asure is guiding for revenue between $30-32 million and adjusted EBITDA between $6-7 million. For the full year 2024, the company has updated its revenue guidance to $119-121 million, with an adjusted EBITDA margin of 18-19%.
For 2025, Asure has projected revenues of $134-138 million, with an adjusted EBITDA margin of 23-24%. The company expects double-digit organic growth in 2025, despite anticipated headwinds from lower float income.
These guidance figures suggest that Asure is well-positioned to capitalize on the growing demand for comprehensive HCM solutions, as businesses continue to seek out innovative tools to streamline their workforce management processes. The company’s ability to navigate the challenges posed by the ERTC program’s expiration and the broader macroeconomic environment underscores its resilience and adaptability.
Industry Trends
While specific industry CAGR information is not available, Asure has highlighted two powerful trends benefiting the HCM industry: the shift towards cloud-based, subscription-based HCM solutions and the consumerization of business software. These trends align well with Asure’s product offerings and business model, positioning the company to capitalize on evolving market demands.
Conclusion
In the face of a dynamic and competitive HCM market, Asure has distinguished itself through its commitment to innovation, strategic acquisitions, and the delivery of a versatile suite of solutions. As the company continues to expand its footprint and enhance its product offerings, investors will likely keep a close eye on Asure’s ability to maintain its growth trajectory and solidify its position as a leading player in the HCM space. With a strong focus on recurring revenue, a robust product portfolio, and a clear growth strategy, Asure Software appears well-positioned to navigate the challenges and opportunities in the evolving HCM landscape.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.