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Asure Software (NASDAQ:ASUR) Delivers Impressive Q3, Provides Optimistic Guidance For Next Quarter


Kayode Omotosho /
2021/11/08 4:22 pm EST
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Online payroll and human resource software provider Asure (NASDAQ:ASUR) reported Q3 FY2021 results topping analyst expectations, with revenue up 12.2% year on year to $17.9 million. Guidance for next quarter's revenue was surprisingly good, $20.7 million at the midpoint, 15.5% above what analysts were expecting. Asure Software made a GAAP profit of $5.32 million, improving on its loss of $4.75 million, in the same quarter last year.

Is now the time to buy Asure Software? Access our full analysis of the earnings results here, it's free.

Asure Software (ASUR) Q3 FY2021 Highlights:

  • Revenue: $17.9 million vs analyst estimates of $17.2 million (4.24% beat)
  • EPS (non-GAAP): -$0.01 vs analyst estimates of -$0.02 ($0.01 beat)
  • Revenue guidance for Q4 2021 is $20.7 million at the midpoint, above analyst estimates of $17.9 million
  • Free cash flow was negative $0.1 million, compared to free cash flow of negative $0.7 million in previous quarter
  • Gross Margin (GAAP): 60.4%, up from 56.6% same quarter last year

“We have made great strides in advancing our strategic priorities, which we expect will put Asure on a firmer footing to drive future growth and value creation,” said Chairman and CEO, Pat Goepel.

Created from the merger of two small workforce management companies in 2007, Asure (NASDAQ:ASUR) provides cloud based payroll and HR software for small and medium-sized businesses (SMBs).

Asure benefits from the SaaS-ification of businesses, large and small, who much prefer the flexibility of cloud-based, web-browser delivered software paid for on a subscription basis than the hassle and expense of purchasing and managing on-premise enterprise software.

Sales Growth

As you can see below, Asure Software's revenue growth has been slow over the last year, growing from quarterly revenue of $16 million, to $17.9 million.

Asure Software Total Revenue

This quarter, Asure Software's quarterly revenue was up 12.2% year on year, which is above average for the company. On top of that, revenue increased $0.8 million quarter on quarter, a strong improvement on the $2.63 million decrease in Q2 2021, and a sign of acceleration of growth, which is very nice to see indeed.

Analysts covering the company are expecting the revenues to grow 5.87% over the next twelve months, although estimates are likely to change post earnings.

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Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Asure Software's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 60.4% in Q3.

Asure Software Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.60 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from Asure Software's Q3 Results

With a market capitalization of $190.3 million Asure Software is among smaller companies, but its more than $11.5 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

We were impressed by the very optimistic revenue guidance Asure Software provided for the next quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, revenue growth is overall a bit slower these days. Zooming out, we think this was a great quarter and shareholders will likely feel excited about the results. The company is flat on the results and currently trades at $9.72 per share.

Asure Software may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.