Asure Software (ASUR)

HR software provider Asure Software (NASDAQ:ASUR) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 23.7% year on year to $36.25 million. The company expects next quarter’s revenue to be around $39 million, coming in 2.3% above analysts’ estimates. Its GAAP loss of $0.19 per share was significantly below analysts’ consensus estimates.

Company Overview

Operating in the often-overlooked smaller metropolitan markets where HR expertise can be scarce, Asure Software (NASDAQ:ASUR) provides cloud-based human capital management software and services that help small and medium-sized businesses manage payroll, taxes, time tracking, and HR compliance.

Modern HR software has two powerful benefits: cost savings and ease of use. For cost savings, businesses large and small much prefer the flexibility of cloud-based, web-browser-delivered software paid for on a subscription basis rather than the hassle and complexity of purchasing and managing on-premise enterprise software. On the usability side, the consumerization of business software creates seamless experiences whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy-to-use platform.

Asure Software competes with larger, national players in the HR software space including ADP, Paychex, UKG, Paylocity, Paycor, Paycom, Ceridian, and newer entrants like Gusto. For its time tracking products, it specifically competes with UKG, Paychex, ADP and Time Simplicity.

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Asure Software grew its sales at a 14.6% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.

Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Asure Software’s recent performance shows its demand has slowed as its annualized revenue growth of 4% over the last two years was below its five-year trend.

This quarter, Asure Software reported robust year-on-year revenue growth of 23.7%, and its $36.25 million of revenue topped Wall Street estimates by 1.6%. Company management is currently guiding for a 26.7% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 16.1% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and indicates its newer products and services will spur better top-line performance.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Asure Software’s billings came in at $35.76 million in Q3, and over the last four quarters, its growth slightly lagged the sector as it averaged 14% year-on-year increases. This performance mirrored its total sales and suggests that increasing competition is causing challenges in acquiring/retaining customers.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Asure Software is extremely efficient at acquiring new customers, and its CAC payback period checked in at 6.3 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.

For software companies like Asure Software, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Asure Software’s gross margin is worse than the software industry average, giving it less room than its competitors to hire new talent that can expand its products and services. As you can see below, it averaged a 67.1% gross margin over the last year. Said differently, Asure Software had to pay a chunky $32.90 to its service providers for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Asure Software has seen gross margins decline by 5.6 percentage points over the last 2 year, which is among the worst in the software space.

Asure Software’s gross profit margin came in at 63.8% this quarter, down 3.4 percentage points year on year. Asure Software’s full-year margin has also been trending down over the past 12 months, decreasing by 1.5 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs.

Asure Software’s expensive cost structure has contributed to an average operating margin of negative 9.6% over the last year. Unprofitable software companies require extra attention because they spend heaps of money to capture market share. As seen in its historically underwhelming revenue performance, this strategy hasn’t worked so far, and it’s unclear what would happen if Asure Software reeled back its investments. Wall Street seems to be optimistic about its growth, but we have some doubts.

Looking at the trend in its profitability, Asure Software’s operating margin might fluctuated slightly but has generally stayed the same over the last two years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Asure Software generated a negative 9.7% operating margin. The company's consistent lack of profits raise a flag.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Asure Software has shown weak cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.5%, subpar for a software business.

Asure Software’s free cash flow clocked in at $1.85 million in Q3, equivalent to a 5.1% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

Asure Software reported $21.52 million of cash and $77.17 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $26.89 million of EBITDA over the last 12 months, we view Asure Software’s 2.1× net-debt-to-EBITDA ratio as safe. We also see its $693,000 of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Asure Software beat analysts’ billings expectations this quarter. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. On the other hand, its full-year revenue guidance missed. Zooming out, we think this was a mixed quarter. The market seemed to be hoping for more, and the stock traded down 1.8% to $8.00 immediately after reporting.

Updated: December 4, 2025 at 9:21 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Asure Software doesn’t pass our quality test. To begin with, its revenue growth was a little slower over the last five years. And while its efficient sales strategy allows it to target and onboard new users at scale, the downside is its operating margin hasn't moved over the last year. On top of that, its operating margins reveal poor profitability compared to other software companies.

Asure Software’s price-to-sales ratio based on the next 12 months is 1.4x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $13.22 on the company (compared to the current share price of $8.24).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.