Asure Announces First Quarter 2023 Results
Reports First Quarter Revenues of
Raises 2023 Financial Targets and Guidance
First Quarter 2023 Financial Highlights
- Revenue of
$33.1 million, up 36% from prior-year’s first quarter
- Recurring revenue of
$28.0 million, up 22% from prior-year’s first quarter
- Net income of
$0.3 million, a $3.4 millionimprovement from prior-year’s first quarter
- EBITDA(1) of
$6.8 million, up $4.3 millionfrom prior-year’s first quarter
- Adjusted EBITDA(1) of
$8.2 million, up $4.8 millionfrom prior-year’s first quarter
- Gross profit of
$24.4 million, up 58% from prior-year’s first quarter
- Non-GAAP(1) gross profit of
$25.7 million(margin of 78%) versus $16.7 millionand 68% in prior-year’s first quarter
Recent Business Highlights
- Partnered with Harbor Compliance to simplify federal, state, and local tax registrations and business licensing. This initiative, which is enabled by AsureMarketplace, is expected to alleviate our customers’ administrative burdens by providing a solution for seamless tax payroll registration and compliance with multi-state entity registration requirements.
- Announced integration with ZayZoon to deliver on-demand wages to employees of Asure’s payroll customers. This collaboration enables employees of small businesses to access their earned wages instantly, while promoting financial wellness and providing their employers a distinct competitive advantage for recruitment and retention.
“Our first quarter results, highlighted by 36% year-over-year revenue growth and strong gains in operating margins, are the result of targeted sales initiatives as well as the positive reception of our increased offerings in AsureMarketplace,” said
“Financially, we are focused on the dual objectives of organic growth and margin expansion while also monitoring potential acquisitions as market conditions and opportunities arise. As an essential partner for small- and mid-sized businesses, we are committed to providing superior solutions so that our clients can maximize their focus on their core businesses. Over the last year, we have made meaningful progress against that operating plan. Looking ahead, we see significant runway to address a growing end market with a comprehensive set of HCM solutions.”
Asure Increases 2023 Guidance Ranges; Introduces Second Quarter 2023 Guidance
The Company is providing the following guidance for the second quarter and full year 2023 based on first quarter results and recent business trends. This guidance is offered with the knowledge that there is a high level of economic uncertainty in 2023 due to recent inflationary trends and the potential for a recession of unknown severity.
Updated Guidance for 2023
|Revenue||$||111.0M - 113.0M||$||25.0M - 26.0M|
|Adjusted EBITDA(1)||17% - 18%||$||2.5M - 3.5M|
Previous Guidance for 2023
|Revenue||$||105.0M - 107.0M|
|Adjusted EBITDA(1)||15% - 17%|
(1) These figures do not adhere to GAAP and are defined on page 3 of this press release.
Management uses GAAP, non-GAAP and adjusted measures when planning, monitoring, and evaluating the Company’s performance. The primary purpose of using non-GAAP and adjusted measures are to provide supplemental information that may prove useful to investors and to enable investors to evaluate the Company’s results in the same way management does.
Management believes that supplementing GAAP disclosures with non-GAAP and adjusted disclosures provides investors with a more complete view of the Company’s operational performance and allows for meaningful period-to-period comparisons and analysis of trends in the Company’s business. Further, to the extent that other companies use similar methods in calculating adjusted financial measures, the provision of supplemental non-GAAP and adjusted information can allow for a comparison of the Company’s relative performance against other companies that also report non-GAAP and adjusted operating results.
Management has not provided a reconciliation of guidance of GAAP to non-GAAP or adjusted disclosures because management is unable to predict the nature and materiality of non-recurring expenses without unreasonable effort.
Management’s projections are based on management’s current beliefs and assumptions about the Company's business, and the industry and the markets in which it operates; there are known and unknown risks and uncertainties associated with these projections. There can be no assurance that our actual results will not differ from the guidance set forth above. The Company assumes no obligation to update publicly any forward-looking statements, including its 2023 earnings guidance, whether as a result of new information, future events or otherwise. Please refer to the “Use of Forward-Looking Statements” disclosures on page 4 of this press release.
Conference Call Details
Asure management will host a conference call
Asure (Nasdaq: ASUR) is a leading provider of
Non-GAAP and Adjusted Financial Measures
This press release includes information about non-GAAP gross profit, non-GAAP sales and marketing expense, non-GAAP general and administrative expense, non-GAAP research and development expense, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin. These non-GAAP and adjusted financial measures are measurements of financial performance that are not prepared in accordance with
Non-GAAP gross profit differs from gross profit in that it excludes amortization, share-based compensation, and one-time items.
Non-GAAP sales and marketing expense differs from sales and marketing expense in that it excludes share-based compensation and one-time items.
Non-GAAP general and administrative expense differs from general and administrative expense in that it excludes share-based compensation and one-time items.
Non-GAAP research and development expense differs from research and development expense in that it excludes share-based compensation and one-time items.
EBITDA differs from net income (loss) in that it excludes items such as interest, income taxes, depreciation, and amortization. Asure is unable to predict with reasonable certainty the ultimate outcome of these exclusions without unreasonable effort.
Adjusted EBITDA differs from EBITDA in that it excludes share-based compensation, other income (expense), net and one-time expenses. Asure is unable to predict with reasonable certainty the ultimate outcome of these exclusions without unreasonable effort.
All adjusted and non-GAAP measures presented as “margin” are computed by dividing the applicable adjusted financial measure by total revenue.
Specifically, as applicable to the respective financial measure, management is adjusting for the following items when calculating non-GAAP and adjusted financial measures as applicable for the periods presented. No additional adjustments have been made for potential income tax effects of the adjustments based on the Company’s current and anticipated de minimis effective federal tax rate, resulting from the Company’s continued losses for federal tax purposes and its tax net operating loss balances.
Share-Based Compensation Expenses. The Company’s compensation strategy includes the use of share-based compensation to attract and retain employees and executives. It is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, share-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.
Depreciation. The Company excludes depreciation of fixed assets. Also included in the expense is the depreciation of capitalized software costs.
Amortization of Purchased Intangibles. The Company views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company’s research and development efforts, trade names, customer lists and customer relationships, and acquired lease intangibles, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
Interest Expense, Net. The Company excludes accrued interest expense, the amortization of debt discounts and deferred financing costs.
Income Taxes. The Company excludes income taxes, both at the federal and state levels.
One-Time Expenses. The Company’s adjusted financial measures exclude the following costs to normalize comparable reporting periods, as these are generally non-recurring expenses that do not reflect the ongoing operational results. These items are typically not budgeted and are infrequent and unusual in nature.
Settlements, Penalties and Interest. The Company excludes legal settlements, including separation agreements, penalties and interest that are generally one-time in nature and not reflective of the operational results of the business.
Acquisition and Transaction Related Costs. The Company excludes these expenses as they are transaction costs and expenses that are generally one-time in nature and not reflective of the underlying operational results of our business. Examples of these types of expenses include legal, accounting, regulatory, other consulting services, severance and other employee costs.
Other non-recurring Expenses. The Company excludes these as they are generally non-recurring items that are not reflective of the underlying operational results of the business and are generally not anticipated to recur. Some examples of these types of expenses, historically, have included write-offs or impairments of assets, demolition of office space and cybersecurity consultants.
Other (Expense) Income, Net. The Company’s adjusted financial measures exclude Other (Expense) Income, Net because it includes items that are not reflective of the underlying operational results of the business, such as loan forgiveness, adjustments to contingent liabilities and credits earned as part of the CARES Act, passed by
Use of Forward-Looking Statements
This press release contains forward-looking statements about our financial results, which may include expected or projected
The risks and uncertainties referred to above include—but are not limited to—risks associated with possible fluctuations in the Company’s financial and operating results; the Company’s rate of growth and anticipated revenue run rate, including impact of the current environment; the spread of major pandemics or epidemics; interruptions to supply chains and extended shut down of businesses; political unrest, including the current issues between
The forward-looking statements, including the financial guidance and 2023 outlook, contained in this press release represent the judgment of the Company as of the date of this press release, and the Company expressly disclaims any intent, obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in the Company’s expectations with regard to these forward looking statements or any change in events, conditions or circumstances on which any such statements are based.
CONDENSED CONSOLIDATED BALANCE SHEETS
|Cash and cash equivalents||$||21,438||$||17,010|
|Accounts receivable, net||14,762||12,123|
|Prepaid expenses and other current assets||5,075||10,304|
|Total current assets before funds held for clients||41,493||39,688|
|Funds held for clients||223,465||203,588|
|Total current assets||264,958||243,276|
|Property and equipment, net||11,944||11,439|
|Intangible assets, net||63,024||66,594|
|Operating lease assets, net||6,531||7,065|
|Other assets, net||6,376||5,523|
|LIABILITIES AND STOCKHOLDERS’EQUITY|
|Current portion of notes payable||$||5,418||$||4,106|
|Accrued compensation and benefits||4,391||5,791|
|Operating lease liabilities, current||1,671||1,860|
|Other accrued liabilities||5,013||3,728|
|Contingent purchase consideration||2,886||2,955|
|Total current liabilities before client fund obligations||25,305||29,095|
|Client fund obligations||225,462||206,088|
|Total current liabilities||250,767||235,183|
|Deferred tax liability||1,430||1,503|
|Notes payable, net of current portion||30,478||30,795|
|Operating lease liabilities, noncurrent||6,098||6,459|
|Total long-term liabilities||38,866||39,659|
|Additional paid-in capital||436,907||433,586|
|Accumulated other comprehensive income||(2,002||)||(2,483||)|
|Total stockholders’ equity||149,211||145,066|
|Total liabilities and stockholders’ equity||$||438,844||$||419,908|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts)
|Three Months Ended
|Professional services, hardware and other||5,108||1,329|
|Cost of Sales||8,664||8,869|
|Sales and marketing||7,200||4,897|
|General and administrative||9,956||7,485|
|Research and development||1,979||1,821|
|Amortization of intangible assets||3,302||3,432|
|Total operating expenses||22,437||17,635|
|Income (Loss) from operations||1,963||(2,171||)|
|Interest expense, net||(1,944||)||(820||)|
|Other income, net||83||4|
|Income (Loss) from operations before income taxes||102||(2,987||)|
|Income tax (benefit) expense||(237||)||30|
|Net income (loss)||339||(3,017||)|
|Other comprehensive gain (loss):|
|Unrealized gain (loss) on marketable securities||481||(1,063||)|
|Comprehensive income (loss)||$||820||$||(4,080||)|
|Basic and diluted earnings (loss) per share|
|Weighted average basic and diluted shares|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|Three Months Ended
|Cash flows from operating activities:|
|Net income (loss)||$||339||$||(3,017||)|
|Adjustments to reconcile income (loss) to net cash provided by (used in) operations:|
|Depreciation and amortization||4,789||4,754|
|Amortization of operating lease assets||307||430|
|Amortization of debt financing costs and discount||169||164|
|Non-cash interest expense||982||—|
|Net amortization of premiums and accretion of discounts on available-for-sale securities||(14||)||118|
|Provision for doubtful accounts||652||(48||)|
|(Recovery of) provision for deferred income taxes||(73||)||22|
|Net realized gains on sales of available-for-sale securities||(453||)||(203||)|
|Loss (gain) on disposals of fixed assets||160||1|
|Change in fair value of contingent purchase consideration||(69||)||—|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other assets||4,850||2,756|
|Operating lease right-of-use assets||—||2|
|Accrued expenses and other long-term obligations||(123||)||(345||)|
|Operating lease liabilities||(219||)||(476||)|
|Net cash provided by operating activities||4,588||2,530|
|Cash flows from investing activities:|
|Acquisition of intangible asset||—||(1,970||)|
|Purchases of property and equipment||(726||)||(55||)|
|Software capitalization costs||(1,158||)||(691||)|
|Purchases of available-for-sale securities||(10,189||)||(4,504||)|
|Proceeds from sales and maturities of available-for-sale securities||5,426||501|
|Net cash used in investing activities||(6,647||)||(6,719||)|
|Cash flows from financing activities:|
|Payments of notes payable||(232||)||—|
|Net proceeds from issuance of common stock||1,988||—|
|Net change in client fund obligations||19,372||21,296|
|Net cash provided by in financing activities||21,128||21,296|
|Net increase in cash and cash equivalents||19,069||17,107|
|Cash and cash equivalents at beginning of period||164,042||198,743|
|Cash and cash equivalents at end of period||$||183,111||$||215,850|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
|Three Months Ended
|Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Consolidated Balance Sheets|
|Cash and cash equivalents||$||21,438||$||12,054|
|Restricted cash and restricted cash equivalents included in funds held for clients||161,673||203,796|
|Total cash, cash equivalents, restricted cash, and restricted cash equivalents||$||183,111||$||215,850|
|Cash paid for interest||$||1,038||$||684|
|Cash paid for income taxes||$||82||$||(14||)|
|Non-cash investing and financing activities:|
|Notes payable issued for acquisitions||$||—||$||411|
RECONCILIATION OF NON-GAAP AND ADJUSTED FINANCIAL MEASURES
|Gross Profit to non-GAAP Gross Profit|
|Amortization - intangibles||268||298||296||296||296||354||379||379|
|Settlements, penalties & interest||4||3||38||—||1||—||2||9|
|Non-GAAP Gross Profit||$||25,712||$||22,345||$||14,879||$||13,407||$||16,654||$||14,344||$||12,004||$||11,344|
|Non-GAAP Gross Margin||77.8||%||76.3||%||67.9||%||66.0||%||68.4||%||67.9||%||66.8||%||66.1||%|
|Sales and Marketing Expense to non-GAAP Sales and Marketing Expense|
|Sales and Marketing Expense||$||7,200||$||6,022||$||4,752||$||4,589||$||4,897||$||4,318||$||3,897||$||3,622|
|Settlements, penalties & interest||11||—||—||14||—||—||—||16|
|Non-GAAP Sales and Marketing Expense||$||7,065||$||5,929||$||4,662||$||4,511||$||4,833||$||4,050||$||3,677||$||3,385|
|General and Administrative Expense to non-GAAP General and Administrative Expense|
|General and Administrative Expense||$||9,956||$||9,720||$||8,023||$||8,696||$||7,485||$||7,396||$||7,005||$||6,821|
|Settlements, penalties & interest||102||34||15||283||59||93||369||320|
|Acquisition and transaction costs||—||—||—||638||—||34||151||7|
|Other non-recurring expenses||—||—||—||58||49||63||75||—|
|Non-GAAP General and Administrative Expense||$||8,502||$||8,877||$||7,269||$||6,948||$||6,632||$||6,577||$||5,767||$||5,884|
|Research and Development Expense to non-
|Research and Development Expense||$||1,979||$||1,627||$||1,230||$||1,472||$||1,821||$||1,438||$||1,505||$||1,343|
|Settlements, penalties & interest||—||25||3||—||—||—||—||6|
(1)Note that first quarters are seasonally strong as recurring year-end W2/ACA revenue is recognized in this period.
RECONCILIATION OF NON-GAAP AND ADJUSTED FINANCIAL MEASURES (cont.)
|GAAP Net (Loss) Income to Adjusted EBITDA|
|GAAP Net (Loss) Income||$||339||$||(1,056||)||$||(4,533||)||$||(5,860||)||$||(3,017||)||$||(4,301||)||$||5,328||$||3,764|
|Interest expense, net||1,944||1,429||1,122||1,068||816||1,061||530||223|
|Amortization - intangibles||3,570||3,648||3,646||3,649||3,729||3,711||2,912||2,907|
|One Time Expenses|
|Settlements, penalties & interest||117||62||56||297||60||93||371||351|
|Acquisition and transaction costs||—||—||—||638||—||34||151||7|
|Other non-recurring expenses||—||—||—||58||49||63||75||—|
|Other (income) expense, net||(83||)||139||(399||)||(1,130||)||—||(150||)||(10,191||)||(8,654||)|
|Adjusted EBITDA Margin||24.8||%||20.5||%||8.2||%||2.8||%||14.1||%||11.0||%||6.1||%||4.6||%|
(1) Note that first quarters are seasonally strong as recurring year-end W2/ACA revenue is recognized in this period.
|Investor Relations Contact|
|Vice President, Financial Planning & Analysis and Investor Relations|
Source: Asure Software, Inc