Asure Software, Inc. Q2 FY2025 earnings call

• Revenue for second quarter was $30.1 million, up 7% year-over-year, with 10% growth excluding ERTC. - Acquired Lathem Time Corporation on July 1, 2025, which has a 14,000-client base and fits well with Asure's focus on growing companies. The combination of Lathem with Asure's existing time and attendance business is expected to drive scale and increased attach rates. - Payroll Tax Management product continues to have momentum with new clients going live daily. - AsurePay initiative is making good progress with thousands of cards ordered and activated. - HR Compliance faced headwinds due to ERTC-related bundling in 2023, but the headwind is expected to lessen in the second half of 2025. - Cross-selling efforts are showing good results with attach rates increasing by 400 basis points year-over-year. - Plan to integrate acquired point solutions to improve client experience and drive higher attach rates and organic growth.

Second quarter total revenue was $30.1 million, increasing by 7% compared to the prior year period. Excluding ERTC revenues, it was up 10%. Recurring revenues for the second quarter grew 6% versus the prior year to $28.6 million, which was 95% of total revenue. Payroll Tax Management product continued momentum, and the acquisition of Lathem Time Corporation is expected to bring additional high-margin revenue. Recurring revenues were 95% of total revenue in the quarter, and attach rates for human capital management products improved by 400 basis points versus the prior year second quarter.

• Increased full-year 2025 revenue guidance to $138 million to $142 million from prior guidance of $134 million to $138 million, with adjusted EBITDA margins of 22% to 24% (previously 23% to 24%). This includes the impact of the Lathem Time acquisition. - Q3 2025 revenue guidance is $35 million to $37 million, with adjusted EBITDA expected to be between $7 million and $9 million. - Anticipate the business to generate positive cash flow this year and potentially achieve 30% adjusted EBITDA margins in the fourth quarter and GAAP profitability.

No specific risks detailed in the transcript, but forward-looking statements mention that actual results could differ materially from current expectations due to various factors, as indicated by words like 'expects', 'believes', and 'may' used in forward-looking statements.

Q: On Payroll Tax Management, where is the business in terms of revenue and status of big deals?

A: Backlog progress is good with some phased installs, no deals lost from backlog. Tax business continues to make progress with a couple of decent deals expected in Q3.

Q: Talk to us about the growth rate of Lathem and impact on revenue outlook?

A: Lathem client base matches Asure's focus, they have 10% growth, purchase price is about 2.5x revenue, and they open doors to cross-sell opportunities like AsurePay, payroll, and HR.

Q: Penetration of time and attendance solutions within existing base?

A: Attach rates are increasing, Lathem's self-install and same-day install capabilities, along with earned wage access, are expected to drive higher attach rates. There's a good overlap with Asure's client base, and they aim to increase the attach rate of time and attendance solutions.

Q: Core payroll unit growth and HR Compliance headwind lessening?

A: Core payroll units are growing around 5% when excluding HR Compliance headwind. HR Compliance headwind is lessening as the ERTC cohort rolls off, and monthly sales are increasing with more sales than losses.

Q: Revenue synergies with Lathem and margin outlook?

A: Revenue synergies with Lathem are expected in 2026 and beyond. Margin outlook has a near-term decrement due to Lathem's revenue profile and model changes, but long-term margin upside is expected.

Q: Cost synergies with Lathem and near-term appetite for acquisitions?

A: Cost synergies are expected with redundancies and G&A consolidation, and Lathem is expected to be a higher adjusted EBITDA contributor. Asure remains acquisitive with room for more acquisitions after the Lathem deal, though they will focus on integration for a while.