Asure Software (Ticker: ASUR), a provider of cloud-based human capital management software solutions, held its third quarter 2024 earnings conference call. In the conference call, which featured key executives including CEO Pat Goepel and CFO John Pence, the company showed significant increases in recurring revenue and strong growth in its backlog, although third-quarter revenue remained flat at $29.3 million year-over-year.
Asure also announced the introduction of AsurePay and updated its revenue guidance for the next few years, expressing confidence in its growth strategy despite facing some market challenges.
main points
- Third quarter revenue remained flat at $29.3 million, while total recurring revenue increased 20% and now represents 98% of total revenue.
- Asure has completed 12 acquisitions over the past year, generating $15 million in recurring revenue.
- Updated 2024 revenue guidance from $119 million to $121 million, with adjusted EBITDA margin of 18%-19%.
- Initial 2025 revenue guidance was set at $134 million to $138 million, with an adjusted EBITDA margin of 23%-24%.
- Backlog increased 250% year-on-year, indicating strong future growth potential.
- Announced plans to introduce new small business solutions with AsurePay.
company outlook
- Asure targets organic and inorganic revenue growth and is considering potential debt financing in 2025.
- In fiscal 2025, we expect margin expansion driven by a 141% increase in sales and a 250% increase in backlog.
- By 2025, we expect free cash flow conversion to be in the mid-$20 million range.
negative highlights
- Small businesses are struggling with workforce access issues, impacting same-store sales.
- We lowered our fiscal 2024 revenue guidance from $126 million to $120 million due to product launch delays and corporate tax transaction delays.
- Interest rate headwinds, expected to have an impact of $1 million per quarter by 2025, are expected to impact float earnings.
positive highlights
- The share of recurring sales in total sales increased from 81% to 98% compared to the previous year.
- Average monthly sales per employee increased from $40 to approximately $165.
- Management expressed confidence about achieving its revenue target of $30 million to $32 million in the fourth quarter.
What is lacking
- Non-recurring ERTC revenue decreased by $5 million, contributing to flat overall third quarter revenue.
- Many of the more than 50 tax transactions that had been anticipated were delayed.
Q&A Highlights
- The company plans to reach its goal of 130 sales representatives by the end of the year.
- The leverage ratio for future acquisitions is considered a comfortable level of approximately 2x.
- Currently, 70% of reservations come from new customers, and we plan to shift this to existing customers by 2025.
In conclusion, Asure Software’s third quarter 2024 earnings call showed the company navigating a complex market through strategic acquisitions and product innovation. Although it faces some headwinds, Asure’s strong recurring revenue base and robust backlog growth support its optimistic outlook for future profitability and expansion.
InvestingPro Insights
Asure Software’s latest earnings call shows a company in a transition period filled with both challenges and opportunities. InvestingPro data provides additional context on a company’s financial health and market performance.
According to the latest data, Asure Software has a market capitalization of $210.61 million, which puts it in the small-cap segment of the Software industry. The company’s trailing-12-month revenue was $115.29 million, roughly in line with management’s updated 2024 guidance of $119 million to $121 million.
One of the most notable InvestingPro tips is “Asure Software has more cash than debt.” This financial strength supports management’s confidence in pursuing organic growth and potential acquisitions, as discussed in the earnings call. It could also act as a buffer against the interest rate headwinds mentioned.
Another related InvestingPro tip is, “Net income is expected to increase this year.” This is consistent with the company’s positive outlook and forecast for adjusted EBITDA margin growth in 2024 and 2025. The expected earnings growth could be a key factor in improving the negative P/E ratio, currently at -28.67, and improving investor sentiment.
According to InvestingPro data, the six-month price total return is quite high at 32.98%, reflecting the market’s optimism about Asure’s strategic direction. This significant price increase, noted in another InvestingPro tip, is consistent with the company’s reported 250% year-over-year backlog increase, suggesting that investors are pricing in their expectations of future sales growth.
Asure Software has “impressive gross margins,” according to an InvestingPro tip, with its most recent data showing a gross margin of 69.9%. However, the company has not currently been profitable in the last 12 months. This highlights the importance of management’s efforts to translate high margins into net profits through increased recurring revenue and improved operating efficiencies.
For investors who want a more comprehensive analysis InvestingPro offers additional tips and insights beyond those mentioned here. The platform offers a total of 14 tips on Asure Software, providing a broader perspective on the company’s financial health and market position.
This article was translated with the help of artificial intelligence. Please refer to the Terms of Use for further details.
