Online payroll and human resource software provider Asure (NASDAQ:ASUR) reported results ahead of analyst expectations in the Q1 FY2023 quarter, with revenue up 35.9% year on year to $33.1 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $25.5 million at the midpoint, 6.65% above what analysts were expecting. Asure Software made a GAAP profit of $339 thousand, improving on its loss of $3.02 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 FY2023 Highlights:
- Revenue: $33.1 million vs analyst estimates of $29.5 million (12.1% beat)
- EPS: $0.02 vs analyst estimates of -$0.05 ($0.07 beat)
- Revenue guidance for Q2 2023 is $25.5 million at the midpoint, above analyst estimates of $23.9 million
- The company lifted revenue guidance for the full year, from $106 million to $112 million at the midpoint, a 5.66% increase
- Free cash flow of $2.7 million, down 58.9% from previous quarter
- Gross Margin (GAAP): 73.8%, up from 63.6% same quarter last year
“Our first quarter results, highlighted by 36% year-over-year revenue growth and strong gains in operating margins, are the result of targeted sales initiatives as well as the positive reception of our increased offerings in AsureMarketplace,” said Asure Chairman and CEO Pat Goepel.
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 two years, growing from quarterly revenue of $19.8 million in Q1 FY2021, to $33.1 million.
This was a standout quarter for Asure Software, with the quarterly revenue up 35.9% year on year, which is above the trend for the company. But the growth did slow down compared to last quarter, as the revenue increased by just $3.77 million in Q1, compared to $7.39 million in Q4 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.
Guidance for the next quarter indicates Asure Software is expecting revenue to grow 25.6% year on year to $25.5 million, improving on the 18.2% 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 3.56% 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 73.8% in Q1.
That means that for every $1 in revenue the company had $0.74 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is around the 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 Q1 Results
With a market capitalization of $279.6 million Asure Software is among smaller companies, but its more than $21.4 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 impressed by how strongly Asure Software outperformed analysts’ revenue expectations this quarter. And we were also glad to see the very optimistic guidance for the next quarter. Zooming out, we think this impressive quarter should have shareholders feeling very positive. The company is up 7.81% on the results and currently trades at $14.49 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.
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.