9505

Asure Software (NASDAQ:ASUR) Q1: Beats On Revenue, Provides Optimistic Full Year Guidance


Adam Hejl /
2022/05/09 4:29 pm EDT
Add to Watchlist

Online payroll and human resource software provider Asure (NASDAQ:ASUR) beat analyst expectations in Q1 FY2022 quarter, with revenue up 22.8% year on year to $24.3 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $20.2 million, 1.4% below analyst estimates. Asure Software made a GAAP loss of $3.01 million, down on its loss of $1.59 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) Q1 FY2022 Highlights:

  • Revenue: $24.3 million vs analyst estimates of $23.5 million (3.26% beat)
  • EPS (non-GAAP): $0.11 vs analyst estimates of $0.06 ($0.05 beat)
  • Revenue guidance for Q2 2022 is $20.2 million at the midpoint, below analyst estimates of $20.5 million
  • The company lifted revenue guidance for the full year, from $87.5 million to $89 million at the midpoint, a 1.71% increase
  • Free cash flow of $1.78 million, up 18.9% from previous quarter
  • Gross Margin (GAAP): 63.5%, in line with same quarter last year

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).

HR software benefits from dual trends around costs savings and ease of use. First is 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. Second is the consumerization of business software, whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy to use platforms.

Sales Growth

As you can see below, Asure Software's revenue growth has been strong over the last year, growing from quarterly revenue of $19.8 million, to $24.3 million.

Asure Software Total Revenue

This quarter, Asure Software's quarterly revenue was once again up a very solid 22.8% year on year. Quarter on quarter the revenue increased by $3.22 million in Q1, which was in line with Q4 2021. This steady quarter-on-quarter growth shows the company is able to maintain its steady growth trajectory.

Guidance for the next quarter indicates Asure Software is expecting revenue to grow 17.9% year on year to $20.2 million, slowing down from the 21.6% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 11.3% over the next twelve months.

There are others doing even better than Asure Software. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

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 63.5% in Q1.

Asure Software Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.63 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 Q1 Results

With a market capitalization of $121.4 million Asure Software is among smaller companies, but its more than $12 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Asure Software outperform Wall St’s revenue expectations this quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, Asure stayed on target during Q1. The company is flat on the results and currently trades at $6.07 per share.

Should you invest in Asure Software 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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