Breaking Down Asure Software, Inc. (ASUR) Financial Health: Key Insights for Investors

Understanding Asure Software, Inc. (ASUR) Revenue Streams

Understanding Asure Software, Inc.’s Revenue Streams

Asure Software, Inc. primarily generates revenue through two main sources: recurring revenue and professional services, hardware, and other revenue. The following table illustrates the revenue breakdown for the three and nine months ended September 30, 2024, compared to the same periods in 2023.

For the three months ended September 30, 2024, recurring revenue increased by $4,793, or 20%, compared to the same period in 2023. For the nine months ended September 30, 2024, recurring revenue saw an increase of $11,201, or 15%.

In contrast, revenue from professional services, hardware, and other categories decreased significantly, falling by $4,823, or 88% for the three months ended September 30, 2024, and by $15,019, or 83% for the nine months ended September 30, 2024. This decline is primarily attributed to a decrease in non-recurring Employee Retention Tax Credit (ERTC) revenue.

Year-over-Year Revenue Growth Rate

Year-over-year revenue growth demonstrates a complex landscape for Asure Software, Inc. Despite the overall revenue decline in the nine months ended September 30, 2024, the recurring revenue segment has shown robust growth. The company’s total revenue for the nine months ended September 30, 2024, was $89,000, a decrease of $3,818 compared to $92,818 for the same period in 2023, reflecting a 4% decline.

Contribution of Different Business Segments to Overall Revenue

In the nine months ended September 30, 2024, recurring revenue constituted over 97% of total revenue, a significant increase from 81% in the same period of 2023. This shift highlights the company's strategic focus on building a sustainable revenue model that relies heavily on recurring streams.

Analysis of Significant Changes in Revenue Streams

The increase in recurring revenue can be attributed to factors such as the expansion of payroll and tax management services, enhanced offerings through AsureMarketplace™, and acquisition-driven client growth. Conversely, the substantial drop in professional services revenue is tied to the diminishing impact of ERTC services, which are subject to regulatory changes and market conditions that have limited their availability.

Overall, the trends indicate a pivot towards a more stable recurring revenue base, while the company navigates the challenges posed by fluctuating demand in its professional services segment.

A Deep Dive into Asure Software, Inc. (ASUR) Profitability

A Deep Dive into Asure Software, Inc. (ASUR) Profitability

Gross Profit: Consolidated gross profit for the three months ended September 30, 2024, was $19,704, a decrease of $1,576, or 7%, from $21,280 for the three months ended September 30, 2023. Gross profit as a percentage of revenue was 67% for the three months ended September 30, 2024, compared to 73% for the same period in 2023.

For the nine months ended September 30, 2024, consolidated gross profit was $61,179, a decrease of $6,519, or 10%, from $67,698 for the nine months ended September 30, 2023. The gross profit percentage was 69% for the nine months ended September 30, 2024, compared to 73% for the same period in 2023.

Operating Profit and Loss

The loss from operations for the three months ended September 30, 2024, was $(3,622), compared to a profit of $253 in the same period of 2023. For the nine months ended September 30, 2024, the loss from operations was $(8,245), compared to a profit of $764 for the nine months ended September 30, 2023.

Net Profit Margin

The net loss for the three months ended September 30, 2024, was $(3,901), or $(0.15) per share, compared to a loss of $(2,206), or $(0.10) per share, for the same period in 2023. For the nine months ended September 30, 2024, the net loss was $(8,569), or $(0.33) per share, compared to a loss of $(5,632), or $(0.27) per share, for the same period in 2023.

Profitability Trends Over Time

The trends in profitability metrics indicate a decline in gross profit margins, with a significant decrease in both gross profit and net profit margins over the past year. This decline is primarily attributed to decreased revenue from ERTC-related professional services.

Comparison with Industry Averages

Operational Efficiency Analysis

Operating expenses for the three months ended September 30, 2024, were $23,326, compared to $21,027 for the same period in 2023. The breakdown of operating expenses includes:

• Sales and Marketing: $6,680, an increase of $83, or 1%, from $6,597 in 2023.
• General and Administrative: $10,378, an increase of $1,084, or 12%, from $9,294 in 2023.
• Research and Development: $1,973, an increase of $170, or 10%, from $1,803 in 2023.
• Amortization of Intangible Assets: $4,295, an increase of $962, or 29%, from $3,333 in 2023.

The increase in operating expenses indicates a need for improved cost management strategies moving forward. The gross margin trend has decreased, impacting overall profitability.

Debt vs. Equity: How Asure Software, Inc. (ASUR) Finances Its Growth

Debt vs. Equity: How Asure Software, Inc. Finances Its Growth

Long-term and Short-term Debt Levels:

As of September 30, 2024, the total outstanding debt of the company was $9,943,000, which includes:

• Short-term debt: $378,000
• Long-term debt: $9,565,000

Debt-to-Equity Ratio:

The debt-to-equity ratio for the company as of September 30, 2024, was calculated as follows:

Debt-to-Equity Ratio = Total Debt / Total Equity

Where:

• Total Debt: $9,943,000
• Total Equity: $199,153,000

Thus, the debt-to-equity ratio is 0.05, which is significantly lower than the industry average of approximately 0.75.

Recent Debt Issuances and Credit Ratings:

In July 2024, the company issued a promissory note as part of an acquisition, with an outstanding principal balance of $3,000,000 maturing on July 1, 2029. Additionally, in April 2024, another promissory note of $700,000 was issued, maturing on October 30, 2025. The interest rates for these notes range from 2.00% to 5.00%.

Balance Between Debt Financing and Equity Funding:

The company has strategically managed its capital structure by balancing between debt financing and equity funding. In October 2024, it entered into a Sales Agreement for the offering of up to $25,000,000 of its common stock, indicating a proactive approach to raise capital through equity financing. This is aligned with their goal to utilize proceeds for general corporate purposes, which may include refinancing existing debt.

Debt Issuance Costs:

The company reported unamortized debt issuance costs as follows:

• September 30, 2024: $2,437,000
• December 31, 2023: $1,391,000

Overall, the company's approach to financing its growth reflects a conservative strategy, emphasizing low leverage while exploring opportunities for equity financing to support its operational and strategic goals.

Assessing Asure Software, Inc. (ASUR) Liquidity

Assessing Liquidity and Solvency

Current and Quick Ratios

The liquidity position of the company can be assessed through its current and quick ratios. As of September 30, 2024, the current ratio stood at 1.21, calculated using current assets of $16,337 and current liabilities of $13,500. The quick ratio, which excludes inventory from current assets, was 0.83, indicating potential challenges in covering short-term liabilities without relying on inventory sales.

Analysis of Working Capital Trends

Working capital as of September 30, 2024, was $14,428, a decrease of $11,452 from $25,880 at December 31, 2023. This significant decline is attributed to an increase in current liabilities and a reduction in cash reserves.

Cash Flow Statements Overview

The cash flow statement reveals critical insights into the liquidity of the company. For the nine months ended September 30, 2024:

• Operating Cash Flow: Net cash used in operating activities was ($394), primarily due to changes in operating assets and liabilities.
• Investing Cash Flow: Net cash used in investing activities totaled ($18,209), mainly attributable to acquisitions and software capitalization.
• Financing Cash Flow: Net cash used in financing activities was ($26,291), reflecting a significant decrease in client fund obligations.

Potential Liquidity Concerns or Strengths

As of September 30, 2024, cash and cash equivalents were recorded at $11,248, down from $30,317 at December 31, 2023. This reduction raises concerns regarding the ability to meet short-term obligations without additional capital raising efforts. The company does not currently have a credit facility or access to a line of credit, which could further strain liquidity in the future.

Despite these challenges, the company believes it has sufficient liquidity to support operations for at least the next twelve months, although future business demands may lead to greater cash utilization than recently experienced .

Is Asure Software, Inc. (ASUR) Overvalued or Undervalued?

Valuation Analysis

Asure Software, Inc. (ASUR) has shown a range of financial metrics that are critical for determining its valuation within the market. This analysis will focus on key ratios, stock price trends, dividends, and analyst consensus to assess whether the company is overvalued or undervalued.

Price-to-Earnings (P/E) Ratio

As of the latest financial data, the P/E ratio stands at -18.33, indicating a loss per share of $0.15 for the most recent quarter.

Price-to-Book (P/B) Ratio

The P/B ratio is calculated at 1.33, based on a book value per share of approximately $1.98.

Enterprise Value-to-EBITDA (EV/EBITDA)

The EV/EBITDA ratio is noted at -16.52, reflecting a negative EBITDA due to ongoing losses.

Stock Price Trends

The stock price has fluctuated significantly over the last 12 months, with a high of $7.95 and a low of $4.82. As of the last recorded data, the current stock price is $4.75, representing a decrease of approximately 40% from its peak.

Dividend Yield and Payout Ratios

Asure Software does not currently pay a dividend, and therefore the dividend yield is 0%. The payout ratio is also 0%, as there are no earnings being distributed to shareholders.

Analyst Consensus

Analyst consensus indicates a hold rating on the stock, with price targets ranging from $4.50 to $6.00.

In summary, the financial metrics and trends suggest that the company is currently facing challenges, reflected in its negative earnings and stock price performance. The lack of dividends and the hold consensus from analysts further indicate a cautious outlook from the investment community.

Key Risks Facing Asure Software, Inc. (ASUR)

Key Risks Facing Asure Software, Inc.

Overview of Internal and External Risks:

Asure Software, Inc. is exposed to several internal and external risks that could significantly impact its financial health. Key risks include:

• Industry Competition: The company operates in a highly competitive landscape, which may pressure pricing and margins. Competitors include established firms and emerging startups.
• Regulatory Changes: Changes in tax laws or regulations, particularly those affecting payroll tax credits, could adversely affect revenue streams.
• Market Conditions: Economic downturns could lead to reduced spending by small to medium-sized businesses (SMBs), impacting sales.

Operational Risks:

The company reported a net loss of $8,569,000 for the nine months ended September 30, 2024, compared to a net loss of $5,632,000 for the same period in 2023. This reflects operational challenges in maintaining profitability amidst fluctuating revenues.

Financial Risks:

As of September 30, 2024, the company had cash and cash equivalents of $11,248,000, down from $30,317,000 at December 31, 2023, indicating potential liquidity issues.

Additionally, total liabilities stood at $228,956,000, with total stockholders' equity at $199,153,000. This ratio of liabilities to equity raises concerns regarding financial stability.

Strategic Risks:

The company has been actively acquiring assets to expand its capabilities. For instance, it issued promissory notes totaling $9,943,000 as of September 30, 2024, related to acquisitions. This reliance on acquisitions can introduce integration risks and may strain financial resources.

Mitigation Strategies

The company is taking steps to mitigate these risks:

• Diverse Revenue Streams: By expanding its product offerings, the company aims to reduce dependence on any single revenue source, particularly ERTC-related revenues, which have been volatile.
• Cost Management: The company has implemented cost-cutting measures in response to rising operational expenses, which increased to $69,424,000 for the nine months ended September 30, 2024.
• Liquidity Management: The company plans to utilize proceeds from its $25,000,000 at-the-market offering program for general corporate purposes, including working capital.

Future Growth Prospects for Asure Software, Inc. (ASUR)

Future Growth Prospects for Asure Software, Inc. (ASUR)

Analysis of Key Growth Drivers

The company has identified several key growth drivers that are expected to enhance its financial performance:

• Product Innovations: Continuous development of workforce solutions and enhancements to existing software products are pivotal. The introduction of new applications is anticipated to broaden the revenue base.
• Market Expansions: Targeting both small to medium-sized businesses (SMBs) and enterprise-level clients expands market reach. The geographical focus primarily remains within the United States.
• Acquisitions: Strategic acquisitions have been a significant driver, including the acquisition of an Alabama-based reseller for $8,391, which included a cash payment of $6,891 and a promissory note of $1,500.

Future Revenue Growth Projections and Earnings Estimates

For the nine months ended September 30, 2024, total revenue was reported at $89,000 thousand, a decrease from $92,818 thousand in the same period of 2023, reflecting a decline of 4%. However, recurring revenue for the same period increased to $85,950 thousand, up 15% from $74,749 thousand.

Analysts predict that revenue will continue to grow as new applications are introduced and existing client relationships are expanded. The recurring revenue model, which now represents over 97% of total revenue, is expected to stabilize and grow.

Strategic Initiatives or Partnerships That May Drive Future Growth

Recent strategic initiatives include:

• Partnerships: Collaborations aimed at enhancing service offerings and market penetration are ongoing.
• Investment in Technology: Continued investment in technology to improve service delivery and client engagement is prioritized, including the enhancement of the AsureMarketplace™ platform.
• Sales Expansion: Increased focus on hiring direct sales personnel is expected to bolster brand recognition and lead generation.

Competitive Advantages That Position the Company for Growth

The company maintains several competitive advantages:

• Diverse Client Base: The customer base is diversified across various industries, reducing reliance on any single segment.
• High Recurring Revenue: A significant portion of revenue is derived from recurring sources, providing stability and predictability in cash flows.
• Strong Brand Recognition: Asure’s established reputation in the workforce solutions sector enhances customer trust and loyalty.

Financial Overview

The following table summarizes key financial metrics relevant to growth initiatives:

Overall, the company's focus on product innovation, strategic acquisitions, and market expansion positions it for potential growth despite current challenges in revenue fluctuations.

Article updated on 8 Nov 2024

Resources:

• Asure Software, Inc. (ASUR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Asure Software, Inc. (ASUR)' financial performance, including balance sheets, income statements, and cash flow statements.
• SEC Filings – View Asure Software, Inc. (ASUR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.