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Asure Software (NASDAQ:ASUR) Reports Q2 In Line With Expectations But Full Year Guidance Underwhelms


Radek Strnad /
2022/08/08 4:32 pm EDT
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Online payroll and human resource software provider Asure (NASDAQ:ASUR) reported results in line with analyst expectations in Q2 FY2022 quarter, with revenue up 18.2% year on year to $20.3 million. However, guidance for the next quarter was less impressive, coming in at $21.2 million at the midpoint, being 0.02% below analyst estimates. Asure Software made a GAAP loss of $5.86 million, down on its profit of $3.76 million, in the same quarter last year.

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Asure Software (ASUR) Q2 FY2022 Highlights:

  • Revenue: $20.3 million vs analyst estimates of $20.2 million (small beat)
  • EPS (non-GAAP): -$0.04 vs analyst estimates of -$0.07 (42.8% beat)
  • Revenue guidance for Q3 2022 is $21.2 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $89 million at the midpoint
  • Free cash flow of $3.58 million, up 101% from previous quarter
  • Gross Margin (GAAP): 60.3%, up from 57.9% same quarter last year

“Our second quarter performance showed strong current sales momentum which gives me confidence that our solutions are resonating with clients, said Chairman and CEO, Pat Goepel. “We have continued to invest in our sales force, introduced innovative solutions and have improved the experience of our existing offerings.

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 $17.1 million, to $20.3 million.

Asure Software Total Revenue

This quarter, Asure Software's quarterly revenue was once again up 18.2% year on year. But the revenue actually decreased by $4.03 million in Q2, compared to $3.22 million increase in Q1 2022.However, Asure Software's sales do seem to have a seasonal pattern to them, and since management is guiding for revenue to rebound in the coming quarter we wouldn't be too concerned.

Guidance for the next quarter indicates Asure Software is expecting revenue to grow 18.1% year on year to $21.2 million, improving on the 12.2% 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 11.2% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. 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 60.3% in Q2.

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. This would be considered a low gross margin for a SaaS company and it has dropped significantly from the previous quarter, which is probably the opposite of what shareholders would like it to do.

Key Takeaways from Asure Software's Q2 Results

With a market capitalization of $103.7 million Asure Software is among smaller companies, but its more than $14.5 million in cash and positive free cash flow over the last twelve months give us confidence that Asure Software has the resources it needs to pursue a high growth business strategy.

We struggled to find many strong positives in these results. On the other hand, it was less good to see the pretty significant deterioration in gross margin and the revenue guidance for the full year missed expectations. Overall, this quarter's results were not the best we've seen from Asure Software. The company is flat on the results and currently trades at $5.18 per share.

Asure Software may have had a tough quarter, but does that actually create an opportunity to 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.