Asure Software Reports Record Third Quarter 2017 Revenue and Reaffirms Guidance for Full Year

AUSTIN, Texas, Nov. 13, 2017 (GLOBE NEWSWIRE) — Asure Software, Inc. (NASDAQ:ASUR), a leading provider of Human Capital Management (HCM) and workplace management software, reported results for the third quarter ended September 30, 2017.

           
Third Quarter 2017 Financial Summary Actual Results    
  For the three months ended    
           
(in millions except per share data and percentages)   September 30,
2017
 September 30,
2016
Change (%)    
Revenue $   15.5     $ 9.4   65%    
           
Gross Margin $   12.1     $ 7.4   64%    
Gross Margin (as a % of revenue)   78.1%     78.5% -1%    
           
EBITDA  $   2.4     $ 1.9   24%    
Non-GAAP EBITDA, excluding one-time expenses* $   4.0     $ 2.3   73%    
           
Net Income (Loss) $   (1.3 )   $ 0.3   -507%    
           
Net Income (Loss) per  Share $   (0.10 )   $ 0.05   -300%    
Non-GAAP Net Income (Loss) per  Share, excluding one-time expenses*1 $   0.02     $ 0.10   -80%    
Non-GAAP Net Income (Loss) per Share*2 $   0.15     $ 0.22   -32%    
           
Nine Months Ended 2017 Financial Summary Actual Results
   
  For the nine months ended
   
             
(in millions except per share data and percentages)  September 30,
2017

    September 30,
2016
Change (%)    
Revenue $   39.1     $ 25.8   52%    
           
Gross Margin $   30.5     $ 19.9   53%    
Gross Margin (as a % of revenue)   77.9%     77.0% 1%    
           
EBITDA  $   4.3     $ 3.3   31%    
Non-GAAP EBITDA, excluding one-time expenses* $   7.9     $ 5.3   49%    
           
Net Income (Loss) $   (4.2 )   $ (1.1 ) 279%    
           
Net Income (Loss) per  Share $   (0.40 )   $ (0.17 ) 135%    
Non-GAAP Net Income (Loss) per  Share, excluding one-time expenses*1 $   (0.05 )   $ 0.15   -133%    
Non-GAAP Net Income (Loss) per Share*2 $   0.32     $ 0.47   -32%    

* Non-GAAP financial measures are reconciled to GAAP in the tables set forth on page 8 to this earnings release.
   
1 Non-GAAP Net Income (Loss) per Share, excluding one-time expenses, is calculated by combining the Company’s GAAP Net Income (Loss), or earnings per share, with expenses that management believes are one time in nature and are not expected to recur on a dollar or per share basis. These one-time expenses primarily relate to legal and professional services with respect to our acquisition and financing activities and costs associated with severance, recruitment and relocation of employees, as well as purchase accounting adjustments. See the reconciliation table on page 8 for more information as well as a reconciliation of this Non-GAAP measure to Net Income (Loss) per Share.
   
2 Non-GAAP Net Income (Loss) per Share, is calculated by combining the Company’s GAAP Net Income (Loss) or earnings per share, with the one time expense described in Note 1 above, and the following additional items: amortization expense on acquisition-related intangible assets and stock-based compensation expense. See the reconciliation table on page 8 for more information as well as a reconciliation of this Non-GAAP measure to Net Income (Loss) per Share.
   

Third Quarter 2017 Operational Highlights

  • Cloud bookings increased 268% from the third quarter of 2016.
  • Overall pipeline of deals increased approximately 33% from the prior quarter, reflecting the additions of the company’s strategic acquisitions, increased cross-sell opportunities as well as the effectiveness of the expanded sales force.
  • Backlog totaled $20.2 million, a 12% increase compared to the prior quarter and a 48% increase from the year-ago quarter. The company continues to expect many enterprise clients to move through the implementation process in 2017, which will result in conversion of this backlog to reported revenue growth during the year.
  • Secured several new wins across a range of industry verticals, including Anthem and Broadridge Financial. HCM wins included Cobalt Ventures, The Shape of Behavior, and Green Bee Services, among others.
  • Appointed former Calix, Arista Networks, and Amazon International CFO Kelyn Brannon as CFO.

Third Quarter 2017 Financial Results

  • Revenue increased 65% to a record $15.5 million from $9.4 million in the same year-ago quarter.
  • Recurring revenue as a percent of total revenue was 80%, an improvement from 74% in the third quarter of 2016.
  • Cloud revenue increased 97% and hardware revenue increased 48% from the third quarter of 2016.
  • Gross margin was $12.1 million (78.1% of total revenue), a 64% increase from $7.4 million (78.5% of total revenue) in the third quarter of 2016.
  • Non-GAAP EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) *excluding one-time items* totaled approximately $4.0 million, an improvement from $2.3 million in the third quarter of 2016.
  • Non-GAAP Net income per share (excluding one-time items*) totaled $0.02 (based on 12.6 million shares), compared to non-GAAP net income per share (excluding one-time items*) of $0.10 (based on 6.5 million shares) in the third quarter of 2016.
  • Non-GAAP net income per share totaled $0.15, compared to non-GAAP net income per share of $0.22 in the third quarter of 2016.
  • Deferred revenue increased 39% to $13.5 million from $9.7 million in the same year ago quarter.   

Fiscal 2017 Financial Guidance

Asure management reaffirmed its financial guidance for fiscal 2017 ending December 31, 2017:

2017 Financial Guidance Fiscal 2017
Revenue $54.25 million to $56.25 million
Non-GAAP EBITDA, excluding one-time items $12.2 million to $13.5 million
Non-GAAP Net Income (Loss) per Share, excluding one-time items $(0.06) to $(0.02)
Non-GAAP Net Income per Share $0.50 to $0.56

For fiscal 2017, Asure expects to achieve between $54.25 million and $56.25 million in revenue, with Non-GAAP EBITDA, excluding one-time items, of between $12.2 million and $13.5 million, Non-GAAP net loss per share, excluding one-time items, of between $(0.06) and $(0.02), and non-GAAP net income per share of between $0.50 and $0.56.

For fiscal 2018, Asure reaffirmed its objective to reach double-digit organic revenue growth with multiple “tuck-in” acquisitions each of approximately $2.0 million of revenue and a purchase price of approximately two times revenue. In addition, Asure seeks to reach between $70.0 million and $80.0 million of revenue in 2018, with non-GAAP EBITDA, excluding one-time items, of between $16.0 million and $20.0 million.

Management Commentary

“The third quarter marked another record revenue quarter for Asure,” said company CEO, Pat Goepel. “This achievement was driven by continued growth across our entire business, especially in cloud revenue, which was up 25% sequentially and 97% year-over-year. In fact, cloud revenue as a percentage of total revenue surpassed 70% for the first time in company history. On top of this, our cloud bookings increased 268% from Q3 last year, demonstrating our continued success in selling to new clients and migrating existing clients to the cloud.”

Asure CFO Kelyn Brannon added: “Our continued execution on our cloud sales initiative helped produce solid gross margins and recurring revenue, along with another quarter of solid EBITDA and non-GAAP profitability. Additionally, our strong cash position as well as our investments in infrastructure and processes has increased the operating leverage of our business model. Overall, our results in the third quarter reflect the increasing demand for our solutions as well as the cost and operational synergies from the strategic acquisitions we have completed this year.”

Goepel continued: “Looking ahead, our performance in the first nine months of the year has given us the confidence to reaffirm our fiscal 2017 guidance, which we increased in August. We remain focused on the key initiatives that will continue to drive us forward, including accelerating the velocity of our cross-selling opportunities and scaling our business further. Along that line, we have good visibility into 2018, both in our organic business and strategic acquisition pipeline. From an organic standpoint, we expect to achieve $70 million in revenue, which represents 24% to 29% improvement over our current fiscal 2017 guidance. On top of this, another objective of ours is to complete multiple ‘tuck-in’ acquisitions of service bureaus already using our software next year, which would add $10 million of accretive inorganic revenue. Altogether, we believe we have the right growth strategy, significant financial and operational momentum, a strong balance sheet, and industry-leading solutions to scale our business even further, both in the near-term and over the longer run as well.” 

Conference Call Details

Asure management will host a conference call today (Monday, November 13, 2017) at 11:00 a.m. Eastern time (10:00 a.m. Central time) to discuss these financial results and outlook. Asure CEO Pat Goepel and CFO Kelyn Brannon will host the presentation, followed by a question and answer period.

U.S. dial-in: 877-853-5636
International dial-in: 631-291-4544
Conference ID: 7199429

Please call the conference telephone number ten minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 949-574-3860.

The conference call will be broadcasted live and available for replay via the investor section of the company’s website.

About Asure Software  

Asure Software, Inc., (NASDAQ:ASUR), headquartered in Austin, Texas, offers intuitive and innovative solutions designed to help organizations of all sizes and complexities build companies of the future. The company’s cloud platforms enable more than 80,000 clients worldwide to better manage their people and space in a mobile, digital, multi-generational, and global workplace. Asure Software’s offerings include a fully-integrated HCM platform, flexible benefits and compliance administration, HR consulting, and time and labor management as well as a full suite of workspace management solutions for conference room scheduling, desk sharing programs, and real estate optimization. For more information, please visit www.asuresoftware.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:

Statements in this press release regarding Asure’s business and financial performance which are not historical facts are “forward-looking statements” that involve various risks and uncertainties, including those descried in our filings and reports with the Securities and Exchange Commission. Such risks and uncertainties could cause actual results to differ materially from those contained in the forward-looking statements. In particular, there is no assurance that Asure will achieve any particular level of revenues or income, consummate any additional acquisitions or successfully integrate any future acquired businesses.

Company Contact:
Kelyn Brannon, CFO
Asure Software, Inc.
888-323-8835
kelyn.brannon@asuresoftware.com

Investor Relations Contact:
Matt Glover
Liolios Group, Inc.
949-574-3860
ASUR@liolios.com

             
ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
             
    September 30,
2017
(Unaudited)
    December 31,
2016
 
Assets            
Current assets:            
Cash and cash equivalents   $ 27,464     $ 12,767  
Accounts and note receivable, net of allowance for doubtful accounts of $592 and $338
at September 30, 2017 and December 31, 2016, respectively
    13,887       8,108  
Inventory     781       487  
Prepaid expenses and other current assets     1,899       1,256  
Total current assets before funds held for clients     44,031       22,618  
Funds held for clients     23,217       22,981  
Total current assets     67,248       45,599  
Restricted cash     200        
Property and equipment, net     2,763       1,878  
Goodwill     75,855       26,259  
Intangible assets, net     34,046       12,048  
Other assets     2,225       39  
Total assets   $ 182,337     $ 85,823  
Liabilities and stockholders’ equity                
Current liabilities:                
Current portion of notes payable, net of debt issuance cost and debt discount   $ 8,724     $ 5,455  
Accounts payable     1,581       1,576  
Accrued compensation and benefits     1,812       1,192  
Other accrued liabilities     1,115       936  
Deferred revenue     12,065       9,252  
 Total current liabilities before client fund obligations     25,297       18,411  
Client fund obligations     23,217       22,981  
Total current liabilities     48,514       41,392  
Long-term liabilities:                
Deferred revenue     1,450       769  
Notes payable, net of current portion of debt issuance cost and debt discount     66,980       24,581  
Other liabilities     1,009       835  
Total long-term liabilities     69,439       26,185  
Total liabilities     117,953       67,577  
Stockholders’ equity:                
Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding            
Common stock, $.01 par value; 22,000 shares authorized; 12,805 and 8,901 shares issued, 12,421 and 8,517 shares outstanding at September 30, 2017 and December 31, 2016, respectively     128       89  
Treasury stock at cost, 384 shares at September 30, 2017 and December 31, 2016     (5,017 )     (5,017 )
Additional paid-in capital     345,383       295,044  
Accumulated deficit     (276,052 )     (271,875 )
Accumulated other comprehensive (loss) income     (58 )     5  
Total stockholders’ equity     64,384       18,246  
Total liabilities and stockholders’ equity   $ 182,337     $ 85,823  
                 

             
ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands, except share and per share data)
(Unaudited)
 
    FOR THE
THREE MONTHS ENDED
September 30,
    FOR THE
NINE MONTHS ENDED
September 30,
 
    2017     2016     2017     2016  
Revenues:                        
Cloud revenue   $ 11,062     $ 5,630     $ 27,724     $ 14,881  
Hardware revenue     1,003       676       3,651       2,644  
Maintenance and support revenue     1,178       1,078       3,276       3,509  
On premise software license revenue     599       754       1,049       1,352  
Professional services revenue     1,685       1,302       3,434       3,440  
Total revenues     15,527       9,440       39,134       25,826  
Cost of sales     3,396       2,026       8,660       5,932  
Gross margin     12,131       7,414       30,474       19,894  
                                 
Operating expenses                                
Selling, general and administrative     9,459       5,046       25,286       15,559  
Research and development     883       761       2,488       2,217  
Amortization of intangible assets     1,341       625       3,230       1,628  
Total operating expenses     11,683       6,432       31,004       19,404  
                                 
Income (loss) from operations     448       982       (530 )     490  
                                 
Other income (loss)                                
Interest expense and other     (1,644 )     (620 )     (3,279 )     (1,460 )
Total other loss     (1,644 )     (620 )     (3,279 )     (1,460 )
                                 
Income (loss) from operations before income taxes     (1,196 )     362       (3,809 )     (970 )
Income tax provision     (85 )     (47 )     (368 )     (133 )
Net income (loss)   $ (1,281 )   $ 315     $ (4,177 )   $ (1,103 )
Other comprehensive income (loss)                                
Foreign currency gain (loss)     (6 )     26       (63 )     142  
Other comprehensive income (loss)   $ (1,287 )     341     $ (4,240 )   $ (961 )
                                 
Basic and diluted net income (loss) per share                                
Basic   $ (0.10 )   $ 0.05     $ (0.40 )   $ (0.17 )
Diluted   $ (0.10 )   $ 0.05     $ (0.40 )   $ (0.17 )
Weighted average basic and diluted shares                                
Basic     12,418,000       6,534,000       10,355,000       6,383,000  
Diluted     12,418,000       6,548,000       10,355,000       6,383,000  
                                 

       
ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
       
    FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
 
    2017     2016  
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net loss   $ (4,177 )   $ (1,103 )
Adjustments to reconcile net loss to net cash used in operations:                
Depreciation and amortization     4,344       2,686  
Provision for doubtful accounts     320       50  
Share-based compensation     363       166  
Other           94  
Changes in operating assets and liabilities:                
Accounts receivable     (4,450 )     (1,678 )
Inventory     (287 )     169  
Prepaid expenses and other assets     (471 )     124  
Accounts payable     (569 )     (189 )
Accrued expenses and other long-term obligations     881       951  
Deferred revenue     1,963       (2,000 )
 Net cash used in operating activities     (2,083 )     (730 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Acquisitions net of cash acquired     (45,472 )     (12,000 )
Purchases of property and equipment     (942 )     (128 )
Software capitalization costs     (804 )      
Collection of note receivable           223  
Net change in funds held for clients     8,867       4,155  
 Net cash used in investing activities     (38,351 )     (7,750 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from notes payable     45,777       16,823  
Payments on notes payable     (8,098 )     (5,173 )
Debt financing fees     (1,433 )     (438 )
Payments on capital leases     (131 )     (158 )
Net proceeds from issuance of common stock     27,820       561  
Net change in client fund obligations     (8,812 )     (4,155
 Net cash provided by financing activities     55,123       7,460  
                 
Effect of foreign exchange rates     8       151  
                 
Net increase (decrease) in cash and cash equivalents     14,697       (869 )
Cash and cash equivalents at beginning of period     12,767       1,158  
Cash and cash equivalents at end of period   $ 27,464     $ 289  
                 
SUPPLEMENTAL INFORMATION:                
Cash paid for:                
Interest   $ 2,180     $ 817  
                 
Non-cash Investing and Financing Activities:                
Subordinated notes payable –acquisitions     8,165       6,000  
Equity issued in connection with acquisitions     21,825        
                 

*Non-GAAP Financial Measures
This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission: EBITDA and GAAP Net Income (Loss) excluding one-time expenses. These supplemental financial measures are not required by GAAP, nor is the presentation of this financial information intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the expenses associated with Asure’s earnings results as determined in accordance with GAAP. However, for the reasons described below, management uses these non-GAAP measures to evaluate the performance of Asure’s business. Asure’s management believes that it is important to provide investors with these same tools, together with reconciliation to GAAP, for evaluating the performance of Asure’s business, as it may provide additional insight into Asure’s financial results. See the “Reconciliation of GAAP Net Income (Loss) to Net Income (Loss) Before Interest, Taxes, Depreciation, Amortization and Stock Compensation Expense (EBITDA)” and the “Reconciliation of GAAP Net Income/(Loss) to Net Income (Loss) Excluding One-Time Expenses” tables included in this press release for further information regarding these non-GAAP financial measures. In addition, these measures are presented because management believes they are frequently used by securities analysts, investors and others in the evaluation of companies. 

EBITDA is calculated by adding income taxes, interest expense, depreciation and amortization and stock compensation expense to net earnings. EBITDA is not defined under GAAP and should not be considered in isolation or as a substitute for net earnings and other consolidated earnings data prepared in accordance with GAAP or as a measure of Asure’s profitability.

Non-GAAP Net Income (Loss) Excluding One-Time Expenses is calculated by combining the company’s GAAP Net Income (Loss), or earnings per share, with expenses that management believes are one time in nature and are not expected to recur on a dollar or per share basis. These one-time expenses primarily relate to legal and professional services with respect to our acquisition and financing activities and costs associated with severance, recruitment and relocation of employees, as well as purchase accounting adjustments.

Non-GAAP Net Income (Loss) is calculated by combining the company’s GAAP Net Income (Loss), or earnings per share, with the one-time expenses that are excluded in the company’s Non-GAAP Net Income (Loss) Excluding One-Time Expenses, and also excluding the impact of the following: amortization expense on acquisition-related intangible assets and  stock-based compensation expense., We have revised our non-GAAP Net Income (Loss) to include acquisition-related amortization, as we believe this will more accurately reflect how we analyze our operations and provide information needed by investors to gain additional insight into our financial results. These expenses have been included in the non-GAAP Net Income (Loss) for all periods presented.

Guidance

Reconciliation of GAAP Net Income (Loss) to EBITDA Excluding One-time Expenses:

         
Net Income (Loss) (5,400) to (5,600)  
Interest 4,800 to 5,000  
Tax 700 to 800  
Depreciation 1,000 to 1,200  
Amortization 5,800 to 6,000  
Stock Compensation 600 to 700  
EBITDA   7,500  to    8,100  
  One-time expenses   4,700  to    5,400  
EBITDA excluding one-time expenses   12,200  to    13,500  
           


Reconciliation of GAAP Net Income (Loss) to Net Income (Loss) Excluding One-Time Expenses and non-GAAP Net Income per share

  Fiscal 2017  
Net loss per share $   (0.50 )  to  $   (0.51
One time items per share $ 0.44   to $ 0.49  
Net Income (loss) per share, excluding one time items $   (0.06 )  to  $   (0.02 )
Stock based compensation per share $ 0.05   to $ 0.05  
Amortization expense on acquisition-related intangible assets per share $ 0.51   to $ 0.53  
Non GAAP Net Income per share $   0.50    to  $   0.56  
         


Reconciliation of GAAP Net Income (Loss) to Net Income (Loss) Before Interest, Taxes, Depreciation, 
Amortization and Stock Compensation Expense (EBITDA) and Non-GAAP EBITDA Excluding One-time Expenses.

FOR THE THREE MONTHS ENDED

$000s September 30,
2017
September 30,
2016
Net Income (Loss) (1,281)   315
Interest 1,654   529
Tax  85   47
Depreciation  344   249
Amortization    1,447   731
Stock Compensation  138   60
EBITDA  2,387   1,931
  One-time expenses   1,582   365
Non-GAAP EBITDA excluding one-time expenses 3,969   2,296

 FOR THE NINE MONTHS ENDED

     
$000s September 30,
2017
September 30,
2016
Net Loss (4,177)   (1,103)  
 Interest 3,358   1,376  
 Tax  368   133  
 Depreciation  795   739  
 Amortization 3,549   1,947  
 Stock Compensation 363   166  
EBITDA 4,256   3,258  
  One-time expenses   3,666   2,048  
Non-GAAP EBITDA excluding one-time expenses 7,922   5,306  
         


Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss) Excluding One-time Expenses

FOR THE THREE MONTHS ENDED
$000s September 30, 
  2017   
  September 30,
2016
Net Income (Loss) (1,281)     315
Legal & Professional Services 906     136
Severance, Recruitment & Relocation 567     88
Other one-time items (net) 109     141
 Sub-total excluding Taxes 1,582     365
Sub-total one-time expenses 1,582     365
Non-GAAP Net Income (Loss) excluding one-time expenses 301     680

FOR THE NINE MONTHS ENDED  
$000s September 30, 
2017 
  September 30,
2016
 
Net Income (Loss) (4,177)   (1,103)  
Legal & Professional Services 2,484   982  
Severance, Recruitment & Relocation 859   809  
Other one-time items (net) 323   257  
 Sub-total excluding Taxes 3,666   2,048  
Sub-total one-time expenses 3,666   2,048  
Non-GAAP Net Income (Loss) excluding one-time expenses (511)   945  
         


Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)

FOR THE THREE MONTHS ENDED
$000s
 
September 30, 
2017 
    September 30,
2016 
Net Income (Loss)   (1,281)     315
 Amortization expense on acquisition-related intangible assets   1,447     731
 One-time expenses   1,582     365
 Stock compensation     138      60
Sub-total Non-GAAP Items   3,167     1,156
Non-GAAP Net Income (Loss)   1,886     1,471
Weighted-average shares of common stock outstanding   12,599     6,548
Non-GAAP Net Income (Loss) per Share   $0.15     $0.22

FOR THE NINE MONTHS ENDED
$000s    

     

September 30, 
2017
    September 30,
2016
 
Net Income (Loss)   (4,177)     (1,103)  
 Amortization expense on acquisition-related intangible assets   3,549     1,947  
 One-time expenses   3,666     2,048  
 Stock compensation     363       166  
Sub-total Non-GAAP Items   7,578     4,161  
Non-GAAP Net Income (Loss)   3,401     3,058  
Weighted-average shares of common stock outstanding   10,558     6,481  
Non-GAAP Net Income (Loss) per Share   $0.32     $0.47