Asure Software (NASDAQ:ASUR) Surprises With Q4 Sales, Guides For 15% Growth Next Year

Adam Hejl /
2022/03/14 4:34 pm EDT

Online payroll and human resource software provider Asure (NASDAQ:ASUR) beat analyst expectations in Q4 FY2021 quarter, with revenue up 28.4% year on year to $21.1 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $23.5 million, 0.25% below analyst estimates. Asure Software made a GAAP loss of $4.3 million, improving on its loss of $5.83 million, in the same quarter last year.

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Asure Software (ASUR) Q4 FY2021 Highlights:

  • Revenue: $21.1 million vs analyst estimates of $20.6 million (2% beat)
  • EPS (non-GAAP): $0.02 vs analyst estimates of -$0.04 ($0.06 beat)
  • Revenue guidance for Q1 2022 is $23.5 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for upcoming financial year 2022 is $87.5 million at the midpoint, in line with analyst expectations and predicting 15% growth (vs 16.7% in FY2021)
  • Free cash flow of $1.5 million, up from negative free cash flow of $101 thousand in previous quarter
  • Gross Margin (GAAP): 62.8%, up from 59.7% same quarter last year

“Asure posted record fourth quarter revenues and non-GAAP EBITDA since we became a pure-play HCM solutions provider”, said CFO John Pence.

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 year, growing from quarterly revenue of $16.4 million, to $21.1 million.

Asure Software Total Revenue

This quarter, Asure Software's quarterly revenue was up a very solid 28.4% year on year, which is above average for the company. On top of that, revenue increased $3.13 million quarter on quarter, a very strong improvement on the $813 thousand increase in Q3 2021, which shows re-acceleration of growth, and is great to see.

Guidance for the next quarter indicates Asure Software is expecting revenue to grow 18.6% year on year to $23.5 million, improving on the 4.51% 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 $87.5 million at the midpoint, growing 15% compared to 16.7% increase in FY2021.

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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 62.8% in Q4.

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 Q4 Results

With a market capitalization of $137.9 million Asure Software is among smaller companies, but its more than $13.4 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 enjoyed seeing Asure Software improve their gross margin materially this quarter. And we were also glad to see good revenue growth. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company currently trades at $7.07 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.

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