Asure Software (NASDAQ:ASUR) Surprises With Q3 Sales, Stock Soars

Jabin Bastian /
2022/11/07 4:20 pm EST

Online payroll and human resource software provider Asure (NASDAQ:ASUR) announced better-than-expected results in the Q3 FY2022 quarter, with revenue up 21.8% year on year to $21.9 million. Guidance for next quarter's revenue was $23.7 million at the midpoint, which is 1.78% above the analyst consensus. Asure Software made a GAAP loss of $4.53 million, down on its profit of $5.32 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 FY2022 Highlights:

  • Revenue: $21.9 million vs analyst estimates of $21.2 million (3.25% beat)
  • EPS (non-GAAP): -$0.01 vs analyst estimates of -$0.04
  • Revenue guidance for Q4 2022 is $23.7 million at the midpoint, above analyst estimates of $23.3 million
  • Free cash flow was negative $3.82 million, down from positive free cash flow of $4.7 million in previous quarter
  • Gross Margin (GAAP): 62.3%, up from 60.4% 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 mediocre over the last two years, growing from quarterly revenue of $16 million in Q3 FY2020, to $21.9 million.

Asure Software Total Revenue

This quarter, Asure Software's quarterly revenue was up a very solid 21.8% year on year, which is above the trend for the company. On top of that, revenue increased $1.6 million quarter on quarter, a strong improvement on the $4.03 million decrease in Q2 2022, and a sign of acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates Asure Software is expecting revenue to grow 12.4% year on year to $23.7 million, slowing down from the 28.5% 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 8.01% over the next twelve months.

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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 62.3% in Q3.

Asure Software Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.62 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 $133.9 million Asure Software is among smaller companies, but its more than $10.8 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We enjoyed seeing Asure Software’s improve their gross margin materially this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 6.41% on the results and currently trades at $6.97 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.

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