Asure Software, Inc. (NASDAQ:ASUR)
Q3 2011 Earnings Call
November 08, 2011 11:00 AM ET
Cheryl Trbula – IR
Pat Goepel – CEO
Dave Scoglio – VP and CFO
Mike Chadwick – Private Investor
Good day, ladies and gentlemen, and welcome to the Second Quarter 2010 Asure Software Corporate Conference Call. My name is Mary, and I’ll be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of today’s presentation.
I would now like to turn the conference over to Cheryl Trbula of Asure Software. Please proceed.
Thank you, Mary and welcome, everyone, to Asure Software’s conference call. Before we start, I’d like to mention that some of the statements made by management during this call might include projections, estimates, and other forward-looking information. This will include any discussion of the company’s business outlook. These particular forward-looking statements and all of the statements that may be made on this call that are not historical are subject to a number of risks and uncertainties that could affect their outcomes.
You are urged to consider the risk factors relating to the company’s business contained in our latest periodic reports on file with the Security and Exchange Commission. These risk factors are important, and they could cause actual results to differ materially.
This call is also being recorded on behalf of Asure Software and is copyrighted material. It cannot be recorded or rebroadcast without the company’s expressed permission and your participation implies consent to the call’s recording. After we’ve completed our review of the quarter, we’ll open up the call for questions for the financial analyst community.
I would now like to turn the call over to Pat Goepel, CEO of Asure Software. Pat?
Thanks Cheryl and I’d like Operator: welcome investors, partners, clients, employees and interested parties of Asure software. We hope that you’re pleased with third quarter results in our press released we announced that we have third quarter results of $0.06 per share excluding one-time items, $0.01 all in, if you will, and our EBITDA was 462 including one-time items. So we were very pleased with the financial results and Dave Scoglio will talk about that in greater detail.
But we’re also excited about the progress we made this quarter. Asure is becoming a very predictable business, a very strong business and a business that is starting to get its growth legs underneath it and we’re excited about that. Some activities in the quarter that we’re excited about is, first of all we’d like to welcome the good folks of ADI (inaudible) out of Warwick, Rhode Island.
We made an acquisition on October 1st. A lot of the activity or the due diligence of that acquisition happened in the third quarter and we are very excited to close on October 1st the ADI acquisition. We think this strategic acquisition will help us in the time and attendance marketplace a great deal. We had products and services that we’re addressing the small and middle markets in the white collar environment and now we have products and services that will enable us to serve all marketplaces.
ADI was very strong in the blue and grey collar and they were very strong in the area of clocks and biometric clocks and so we’re excited about offering that complete solution to our clients and our prospects in the marketplace. So that was the significant milestone in the future of Asure and we’d like to welcome all the employees.
Also from a marketplace, we developed a new website, it’s just been launched now and many of the development happened in the third quarter was launched on Monday. You’d be able to see that new website on asuresoftware.com. We’re also been very active in mobile products and mobile product development and our clients have been asking and we think this will solidify many multi-year partnerships with them.
Speaking of clients, we won many clients this quarter and we’re excited about that. First of all, public broadcasting services or PBS was a new client of NetSimplicity this quarter, US Army Reserves, John Hopkins Hospital, California State College as well, Notre Dame High School and Max Properties join iEmployee family and we’re part of those client relationship. Bookings were very strong and iEmployee where we had another quarter of double digit revenue growth, or booking growth especially in the cloud based offerings.
NetSimplicity was the little bit of a tougher compare. We anticipate returning to double digit books in the fourth quarter. Our partnerships with Oasis and Novara yielded results in the third quarter and we’re proud of those partnerships. We also see continued growth in the fourth quarter with both of those partnerships and I’d like to remind investors that we have about 15 partners with the ADI transaction and now we have more products and services to offer them and we’re very excited about those conversations going into the fourth quarter. One of the clients early on that added more business with us was Sun-Maid Raisin and we’re very excited about that client engagement.
Our repetitive revenue transformation is continuing with about 80% topline revenue now on a repetitive revenue basis and our deferred revenue is up very strongly and we’re very proud of that metric and that transformation of the business. So that's going to bode well as we have a discussion about next quarter and next year and we’ll do that after Dave Scoglio talks more specifically about this quarter. Our cash and collection metrics were very strong and Dave will expand on that as well.
And finally visibility that continued earnings is getting much clear for us. We’re going to talk about 2012 guidance and we’re excited about the topline growth that the acquisition and the organic growth is bringing us. So from an investor perspective, I hope you feel really good about the Asure story. We are continuing to build upon it and grow and we’re very, very proud of where we’re at and we think the best news is yet to come for Asure software.
With that, I’ll the discussion over to Dave Scoglio our CFO who will talk about the very specific results we had this quarter and Dave, why don't you take it from here?
Thanks Pat. I am going to take a few minutes to go over the third quarter financial results and I’ll be happy to answer any and all questions, during the Q&A session at the end of the call.
In the third quarter revenue at 2.5 million grew by 3% over the last quarter driven by higher recurring revenue particularly our cloud based revenue stream. Both iEmployee and NetSimplicity posted increases sequentially at 2 and 4% respectively. As Pat mentioned recurring revenue was flat at 80% sequentially and grew by 8% compared to the comparable quarter of 2010.
Pat talked a little bit about NetSimplicity cloud bookings and iEmployee cloud bookings, iEmployee did post strong sequential growth at 24% and from a total bookings perspective, iEmployee was positive both sequentially and compared to 2010 third quarter at 39 and 22% respectively.
As Pat mentioned, EBITDA excluding one-time items was at 462,000. All in we were at 302,000 which was a 28% improvement over a year ago. Gross margin increased by 5% to 81% in the third quarter versus the comparable quarter of 2010 and declined by 1% sequentially due to much higher hardware revenue this quarter which amounted to almost double that of last quarter.
From an expense basis, we were down slightly around 44 basis points over a year ago. And this is really due to the management team’s continued focus on cost control in a post turnaround environment.
On a balance sheet we have additional gains a well. We’re happy to report our fifth straight quarter of improvements in quick ratio and cash. Cash grew to over 2.7 million up 35% from last quarter and our quick ratio grew 5 basis points sequentially. Both metrics I just presented are excluding ADI acquisition funding that we received on the last day of the quarter for a ten one close.
Additionally deferred revenue as Pat mentioned grew 13% sequentially and 36% over a year ago. As outlined in this morning’s press release we have updated our earnings guidance. We are forecasting profitability for both the fourth quarter and the full year of 2011. We expect Q4 EBITDA excluding one-time items to fall within the range of 540 to 630,000 up from previous guidance of 290 to 410,000. Q4 revenue with the addition of ADI time is expected to fall between 3.53 and 3.63 million.
Lastly as Pat mentioned, we’ll be presenting at many upcoming investor conferences and the full presentation is available on today’s 8-K filings.
At this time I’d like to turn discussion back to our CEO Pat Goepel for closing comments and questions.
Thanks Dave and hope the investors and interested parties are pleased with the fourth quarter and some of the positive momentum that we’re obtaining. I’d also like to highlight a few things in addition to what Dave spoke about. One is we’re guiding for a fourth quarter that's going to be positive all in and what's significant about that is we’re also guiding that for the year a share would be positive. This is significant milestone, as a management team and an investor and a board member I take the positive momentum and the results are being positive and earnings to heart and we’ve driven to this result really over the last two years and we’re proud to put a stake in the ground that we’re going to make it and that sets us up very well for next year. We’re going to integrate the acquisition of ADI in the fourth quarter. We’ve given that guidance. We’ve been on several partnership calls and we’re really excited about top line growth and we want to grow topline growth as a small cap company. We know that as your first stake is profitability and fixing the business model, we think we’ve achieved that. Now we’re really going after growth and the early wins of the ADI transaction are apparent and we’re excited about building on that for the future.
For next year, we did have a stake in the ground of 15.5 million in revenue, 2.8 million in EBITDA. So we feel good about that guidance. We also feel that from a product perspective, we’re enhancing our mobile applications, our cloud based applications. We see the move to the cloud as the long-term vision of Asure and we feel like we’re making great progress and we will continue to make great progress in 2012 towards that goal.
Finally, I’d like to remind people that we have net operating losses that go out to year 2029. There is significant well over a $100 million. So we get profitable, we grow under the current environment tax free and we think that's a very positive aspect to the Asure story.
Dave mentioned that I would be out at some investor conferences. Redship is the 9th in New York and the SRA stock conference which is the gross stock story in San Francisco will allow us to have some West Coast visibility and we’ll be there on the 15th of November and many of the investors that I have talked to wanted opportunities to talk with management because they are excited about the story and I think the first two years we really spent a lot of time, fixing the business, getting the business right and now as we look towards the fourth quarter in 2012 we are going to tell our story to the small cap investors and the growth investors because we have a good story to tell.
So Pat, I want to thank all the employees that worked very hard at Asure every day. They’ve been part of a (inaudible) and the results are really starting to pay off and I thank them and their families for their tireless efforts. From a client perspective, we have great clients and I am excited that they’ve hung with us in a transition and they’re reaping the rewards of great client service and we really have a partnership with our clients.
I am excited about the acquisition. It gives us a new story to tell and our prospects for Asure are bright. At this point in time I am going to turn it over for questions to see what questions we have and I want to thank you for your interest in Asure.
(Operator Instructions). We do have a question from Mike Chadwick who is a private investor.
Mike Chadwick – Private Investor
In terms of the ADI acquisition, after reconciling out the payments and so forth, can you share with us what the current cash balance is at Asure as of today?
We don't usually give those kinds of updates Mike. We don't usually do that Mike.
Mike Chadwick – Private Investor
Okay, in terms of the NOLs, I am not sure if you can answer that as well, you mentioned 100 million NOL Pat roughly and so I was just wondering if you can disclose at this point what the expected impact of the NOLs was from the ADI acquisition and how much we might have remaining?
First of all the NOL impact, we have done some cash flow models and we feel that the net asset of the NOL is roughly 8 to 10 million going out in to the future. We’ve posted five year plans back in January at the Sidoti conference. We have a long way to go to still use up those NOLs. That being said, we feel that we’re positive and we’ve announced guidance already of 2.8 million, we’ll have further refined guidance next quarter as we talked to net income and we get through some valuation and depreciation as it relates to net income. So we feel at 2011, the fourth quarter I agree with you third quarter was a significant stake in the ground. We also feel that 2012, we’ll start using those NOLs and as we continue to grow we want to use some more each and every year. But we have plenty of NOLs left. As far as losing any NOLs, they run off in various years, but it was important to note that the way we structured the deal, we didn’t lose any NOLs based on this acquisition.
On the cash aspect, what I would say is Mike, while we don't release a specific number; I am very encouraged by the cash flow as a result of the ADI addition. ADI we bought that company to be accretive and to be cash flow positive on its own and you’ve seen the metrics around the cash flow. I’ll remind you that if you look at the last five quarters, we were 100 changed, 200 changed, 300 changed, 650 and now close to 700. So we’ve been increasing our cash flow each quarter, there is no reason to think we can’t continue to do that both with the acquisition and without. So we’ve taken on depth for the first time but our cash remains very strong.
If there are no further questions, I’d now like to turn the conference back over to the speakers for any additional remarks.
Thank you for your time today. We really appreciate the opportunity to tell the Asure story. We feel really good about the position we’re in and we thank you for your help in getting there. We are going to tell our story out in New York and San Francisco. Also I am available if you want to have an investor call. We’re excited about Asure story and to our employees, clients, partners. We want to thank you for helping us get to this point and we want to thank you in advance for the company that this will be. So that's it today, thanks so much. Bye now.
Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. Thank you and have a great day.
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