ASURE SOFTWARE INC Q1 FY2025 earnings call

• Pat mentioned first quarter revenues were strong at $34.9 million, up 10% y-o-y, with strong performance from Payroll Tax Management and contributions from other offerings. Investments in technology and new products have led to growth. The Payroll Tax Management product has momentum, with partnerships like Strata and deals with large clients ramping up. AsurePay is being rolled out with positive trends. The growth strategy includes organic, enhanced organic, and inorganic methods, and a new credit agreement provides capital for acquisitions. Contracted revenue backlog has gone up 339% y-o-y to $82 million. - John discussed first quarter financial results, noting revenues excluding ERTC were up 13% y-o-y, recurring revenues were 95% of total revenue, gross profit increased, and adjusted EBITDA was $7.3 million. Talked about tax and benefits businesses with growth potential, balance sheet status, and the new $60 million credit facility drawn down $20 million in April.

First quarter revenues were $34.9 million, an increase of 10% versus the first quarter prior year. Recurring revenues for the first quarter grew 10% versus the prior year to $33.2 million and were 95% of total revenue in the quarter. The Payroll Tax Management product has continued its momentum, and there were contributions from the Payroll, Benefits and Market Place offerings. Float revenue was down slightly relative to prior year, but increases in average fund balances and the laddered investment portfolio mitigated most of that impact. Gross profit for the first quarter increased 9% to $24.6 million versus $22.6 million in the prior year first quarter, and gross margins for the first quarter were relatively consistent with the prior year period at 71%. Non-GAAP gross margins for the first quarter were also consistent with the first quarter of the prior year at 75%.

• Reiterated 2025 full-year revenue guidance of $134 million to $138 million with adjusted EBITDA margins of 23% to 24%, excluding potential acquisitions. - Guided second quarter 2025 revenues to be in the range of $30 million to $32 million and adjusted EBITDA to be between $5 million and $6 million. - Anticipates revenue growth will accelerate in the second half of 2025 as existing solutions gain traction and new solutions are introduced, with cost structure expected to be relatively flat going forward.

• Forward-looking statements involve risks, and actual results could differ materially from current expectations. Factors causing such differences can be found in filings with the SEC.

Q: What are you seeing in terms of productivity now that you've put in place some dedicated sales teams for some of the different product areas? And when might that make a difference in the business?

A: Pat mentioned having sales specialists drive attach rates, with an example of a client going from a $4,000 annual customer to close to a $120,000 customer after adding multiple products. Progress is good but early.

Q: How much progress have you made on maintaining HR compliance with customers who had the ERTC and HR compliance bundle?

A: Pat and John discussed that after the ERTC period, the cohort attached to HR compliance had lower retention rates initially, but now lapped the compare and starting to see more customers retained, with traditional growth expected to return in the second half.

Q: Any slowdown in pipeline based on economic uncertainty given you serve service oriented SMBs?

A: Pat said pipeline has been up, MQLs and SQLs are up, sales productivity good, though deals may have lengthened a bit but no abnormal signs yet.

Q: Talk about your product roadmap and how you're thinking about that from an organic and an inorganic standpoint?

A: John mentioned products like Broker Record, applicant tracking, and AsurePay with potential, and Pat talked about build partner buy strategy, internal technology investments like client lifecycle management for operational efficiency.

Q: On the acquisitions and the M&A vision, how should we be thinking about this with the new credit facility?

A: Pat said second half of the year acquisition cadence expected to ramp up, new credit facility gives flexibility, pipeline is good.

Q: What are the primary drivers of your expectations for accelerated year-over-year revenue growth in the back half of the year?

A: Pat mentioned ERTC cohort growth in second half, contracted backlog growing, cross sell attach rates increasing, and partner deals ramping up.

Q: Can you provide more color on the Canada tax product? For example, is there an early pipeline? What does competition look like?

A: Pat said there are existing clients from Strata and Venture with Canada tax needs, strong pipeline, and new engagements were strong in first quarter with good pipeline and close rate.