CRI

• Overall Growth & Platform Progress

  • Total Q2 2026 revenue grew 23% YoY, with organic growth of 5% (down 200bps sequentially from Q1 2026 due to seasonality, an improvement of 400bps from Q2 2025's 1% organic growth). A majority of the company's 30,000 direct clients are now migrated to the AsureCentral consolidated platform, in line with prior forecasts, enabling accelerated cross-selling. The number of clients purchasing multiple products increased 6% YoY, with a long-term target of moving from an average of 2 products per client to 4+ products.

• New Product & Strategic Initiatives

  • AsureWorks, the company's administrative services outsourcing (ASO) offering, continues to see strong early traction across target small business segments including hotel chains, restaurants, and HVAC companies. The offering is structured to avoid co-employment risk (unlike traditional PEO models), and generates up to 5x the revenue of a payroll-only client. The company is actively training additional sales reps to support the offering and building out a dedicated team beyond the original pilot.
  • The company hit a key milestone on its Enterprise Payroll Tax Management platform, with 2 million Vensure Employer Solutions employees now live on the platform. The pipeline of enterprise tax opportunities remains robust, though details are limited for competitive reasons.
  • The company's AI agent, Luna, continues to drive improvement: platform adoption grew over 30% QoQ from Q1 2026, user interactions increased 38%, and Luna now supports sentiment analysis for both transcribed voicemail (147,000 processed) and email (196,000 screened). The company is rolling out Luna-powered automation to U.S. payroll, tax, and HR compliance, building on the existing deployment for its Canadian tax solution.

• Sales Force Development

  • The company remains on track to reach a target of 150 full solution sales reps by the end of 2026, deliberately hiring consultative sales professionals capable of selling the full product suite (instead of only transactional point solutions). New reps are ramping faster than historical averages, and the current new logo to existing client expansion split is 47%/53%, an improvement from last quarter, with a long-term target of 35% new logo / 65% base expansion.

• M&A Activity

  • No acquisitions were completed in Q2 2026, but management expects to close a few small tuck-in deals in the second half of 2026, and continues to actively evaluate opportunities. The acquired Lathem hardware business is performing in line with or slightly above expectations, and is in the early stages of transitioning to a hardware-as-a-service (HaaS) model.

• Full year 2026 guidance was updated to revenue of $159 million-$163 million, with adjusted EBITDA margins of 24%-25% (the low end of the margin range was raised from prior guidance, driven by stronger than expected results in the first half of the year).
• Q3 2026 guidance calls for revenue of $38 million-$40 million and adjusted EBITDA of $8 million-$10 million.
• The company continues to expect full-year 2026 positive levered free cash flow in the mid-to-high teens percentage range.
• The HaaS transition for Lathem is expected to create a $600,000 revenue headwind in the first half of 2027, with long-term benefits to recurring revenue and customer value.
• Management reaffirmed the medium-term target of $180 million-$200 million in annual revenue, with adjusted EBITDA margins of 30% or better, with the potential for margins to expand beyond 30% at scale driven by AI-enabled cost efficiencies.

Total company revenue for Q2 2026 was $37.1 million, up 23% year-over-year (YoY). Recurring revenue reached $34 million, an increase of 19% YoY, accounting for 91% of total revenue in the quarter. Professional services, hardware, and other non-recurring revenue was $3.2 million, compared to $1.5 million in Q2 2025, with the increase driven primarily by hardware sales from the acquired Lathem business. Gross profit was $25.1 million, up from $19.9 million YoY; GAAP gross margin was 68% (up 200bps YoY) and non-GAAP gross margin held steady at 73% YoY. GAAP net loss narrowed to $4.4 million from $6.1 million YoY; adjusted EBITDA was $7.7 million, up 48% YoY, with an adjusted EBITDA margin of 21% (up 400bps YoY).

No material new risks or operational failures were discussed on the call. Management noted that forward-looking statements are inherently subject to risks that could cause actual results to differ materially from expectations, and directed investors to review the company's SEC filings for a full list of risk factors. The only specific near-term headwind called out was the $600,000 revenue impact from Lathem's transition to a HaaS model in H1 2027.

Q: How is AI currently driving cost efficiencies and new revenue opportunities, how much progress has been made, and how much opportunity remains? / A: On the revenue side, AI enables trigger and intent data analysis (for example identifying when a client crosses the employee threshold that requires COBRA coverage) to automatically surface cross-sell opportunities for additional products. AI also provides predictive data to identify prospects that are good fits for AsureWorks. On the cost side, Luna already handles routine customer inquiries that would otherwise require agent support, allowing customer service teams to focus on strategic relationship building. Early use cases like proactive identification of at-risk customers via sentiment analysis are improving retention, and management noted the company is still in the early days of AI-driven efficiency gains.

Q: Why does the implied full-year organic growth at guidance midpoint sit below the stated target of double-digit organic growth in the second half? / A: The gap is due to lapping strong non-recurring professional services revenue from large enterprise tax deals in the second half of 2025. Management modeled the expected YoY decline in non-recurring revenue into guidance, and expect recurring organic revenue growth to hit double digits in H2 2026, which is a healthier growth profile. Management is confident in this outcome as the required sales motion is already in place.

Q: Is the company still on track to hit the target of 150 sales reps by end of 2026, and what is the current progress? / A: The company is currently approximately 10 reps below the on-track pace for the year, after recent changes to upskill sales leadership and implement tighter hiring criteria. Management has added recruiters to build the candidate pipeline, and is being selective to hire only reps with the consultative skill set needed to sell the full solution portfolio. Despite the current gap, management remains confident that the 150 rep target will be hit by the end of 2026.

Q: Why was the lower bound of adjusted EBITDA margin guidance raised, and how has the acquired Lathem business performed post-close? / A: The upward adjustment to EBITDA guidance was driven by stronger than expected adjusted EBITDA results in the first half of 2026, with no structural changes to the cost or revenue outlook. Lathem, acquired one year prior, has performed at or above expectations, with customer retention matching pre-acquisition levels and all planned cost savings realized. Cross-sell activity between Lathem's time and attendance products and Asure's core offerings has already started in H2 2026, with further growth expected through 2007 and beyond.