Online payroll and human resource software provider Asure (NASDAQ:ASUR) reported Q4 FY2022 results topping analyst expectations, with revenue up 38.7% year on year to $29.3 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $29.5 million at the midpoint, 11.1% above what analysts were expecting. Asure Software made a GAAP loss of $1.06 million, improving on its loss of $4.3 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) Q4 FY2022 Highlights:
- Revenue: $29.3 million vs analyst estimates of $23.8 million (23.3% beat)
- EPS (non-GAAP): $0.17 vs analyst estimates of $0.0 ($0.17 beat)
- Revenue guidance for Q1 2023 is $29.5 million at the midpoint, above analyst estimates of $26.6 million
- Management's revenue guidance for upcoming financial year 2023 is $106 million at the midpoint, beating analyst estimates by 6.28% and predicting 10.6% growth (vs 25.4% in FY2022)
- Free cash flow of $5.58 million, up from negative free cash flow of $2.41 million in previous quarter
- Gross Margin (GAAP): 72.2%, up from 62.8% 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.
As you can see below, Asure Software's revenue growth has been strong over the last two years, growing from quarterly revenue of $16.4 million in Q4 FY2020, to $29.3 million.
This was a standout quarter for Asure Software, with the quarterly revenue up 38.7% year on year, which is above the trend for the company. On top of that, revenue increased $7.39 million quarter on quarter, a very strong improvement on the $1.6 million increase in Q3 2022, and a sign of re-acceleration of growth.
Guidance for the next quarter indicates Asure Software is expecting revenue to grow 21.2% year on year to $29.5 million, in line with the 22.9% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $106 million at the midpoint, growing 10.6% compared to 26% increase in FY2022.
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.
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 72.2% in Q4.
That means that for every $1 in revenue the company had $0.72 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is around the lower average of what we typically see in SaaS businesses. Gross margin has a major impact on a company’s ability to invest in developing new products and sales & marketing, which may ultimately determine the winner in a competitive market so it is important to track.
Key Takeaways from Asure Software's Q4 Results
With a market capitalization of $221 million Asure Software is among smaller companies, but its more than $17 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 were very impressed by the strong improvements in Asure Software’s gross margin, trickling down to free cash flow. And we were also excited to see that the strong guidance. Zooming out, we think this impressive quarter should have shareholders feeling very positive. The company is up 5.25% on the results and currently trades at $11.82 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.