Asure Software’s (NASDAQ: ASUR) results from the third quarter of 2023 highlight an underlying business that continues to see strong and healthy growth. During Q3, Asure management made several significant steps to help reduce high-interest debt and further expand its products and services aimed at helping small and medium-sized businesses with improving operational efficiencies while reducing costs.
While Asure’s results continue to surpass its guidance estimates, some in the investment community appear to still be focused on the IRS’s ETRC pause, even though management continues to forecast a strong growth outlook with zero ERTC input. Let’s take a deeper look into Asure’s Q3 2023 financial results to gain a better sense of growth and operational performance.
ASUR: Q3 Revenues Surpass Management Guidance to Reach $29.3 Million or +34% YoY Growth
Leading up to the third quarter 2023 results, Asure Software had previously issued guidance estimating revenues to come in a range between $26 million and $27 million on an adjusted EBITDA range of $3.5 million to $4.5 million. Asure’s actual Q3 2023 results showed even more impressive growth.
Revenue surged 34% year-over-year to $29.3 million, with recurring revenue jumping 19% y/y to $23.8 million. The company’s adjusted EBITDA results also greatly outpaced expectations with a result of $6.2 million, which was an improvement of $4.4 million from the third quarter last year. Gross profit also saw a notable jump of 56% y/y to $21.3 million.
“We are excited to have delivered another strong performance for our Company in the third quarter with 34% organic growth in revenues and robust gains in gross margins versus the same period a year ago, which are the primary result of increased revenues and more efficient operations driven by the consolidation and standardization efforts across the Company,” said Asure Chairman and CEO Pat Goepel.
“We are building on our strong momentum by advancing our technology through leading partnerships as well as launching strategic sales initiatives. As an example, we recently launched an offering that bundles our 401k product with payroll services to help drive new client additions and we have seen good reception in the brief time since this effort was launched. Our focus on areas of differentiation, such as HR Compliance, our best-in-class tax platform, and our Asure Marketplace™, is anticipated to account for an increasing share of our revenue moving forward and is expected to generate high-margin revenue streams during the remainder of 2023 and into 2024.”
Recent Developments & Highlights
Capital Raise and High-Interest Debt Payoff
From the beginning of July to the end of September 2023, Asure remained focused and hard at work continuing to grow and reduce liabilities. Perhaps one of the most notable accomplishments during Q3 was the company’s successful capital raise of $43 million, which would later be used to pay off its high-interest debt with Structural Capital Investments III, LP at an aggregate amount of $30.9 million. The debt payoff is a big accomplishment for the company as it is expected to “substantially enhance” cash flow, be accretive to earnings, and provide further flexibility financially for Asure.
401k Platform
During the quarter, Asure took notable steps to introduce new products and services to its clients. First, the company announced a new 401k product bundled with Secure Act 2.0 tax credits. Using a white-label version of Vestwell’s 401k platform, Asure will be able to process the applicable tax credits on behalf of its SMB clients.
Why is this important to SMBs? Well, the new product provides these smaller businesses with the ability to compete with larger companies by retaining and attracting key talent in the labor force. Furthermore, the 401k product helps SMBs ensure compliance with new state mandates requiring employers to offer retirement benefits. The maximizing of tax credits could also lead to increased use of Asure’s other retirement, payroll, and HR compliance services as well.
“Our alliance with Vestwell perfectly aligns with our dedication to delivering solutions that work as hard as our clients. The Asure 401(k) plan will not only enable our clients to secure their future but also assist in attracting and retaining the best talent, a critical factor for growth. Furthermore, we are excited to be able to help businesses navigate state-mandated retirement plans, as well as the tax credit opportunities afforded by the Secure Act 2.0,” stated Asure CEO and Chairman, Mr. Goepel.
Lendio Launch on Asure Marketplace
In recent news, Asure announced a collaboration to launch Lendio in its integration marketplace. Lendio is a unique funding platform that serves as a one-stop-shop for SMBs looking to obtain different types of financing. Lendio’s platform has helped over 350,000 SMBs access over $13 billion for business financing needs since their inception.
Through the collaboration, Asure clients will now have the ability to effortlessly search, compare, and apply for a wide range of funding options right through the Asure Marketplace. The integration news comes at a critical juncture for SMBs, as current financial challenges from the pandemic have made access to capital more difficult.
“We’re working to create a world where small businesses survive and thrive, and access to capital is a crucial part of that,” said Brock Blake, Lendio CEO and Co-Founder of Lendio. “By being a part of the Asure marketplace, we can reach more businesses and provide them with the financial tools they need to succeed. We’re thrilled to now be part of their platform and available as a resource to their vast customer base.”
Treasury Compliance Services Powered By JP Morgan
For SMBs and providers, payroll can be a complex task in and of itself. Factor in the growing number of compliance and legal aspects associated with payroll and the headache only grows. Asure aims to help SMB owners with streamlining these payroll compliance requirements through its new Treasury Compliance Services. Powered by JP Morgan, the new service is designed to specifically assist regional and niche payroll providers with ensuring proper compliance related to money movement activities laid out by the Money Transmission Modernization Act (MTMA), the Bank Secrecy Act (BSA), and the National Automated Clearing House Association (NACHA). The Treasury Compliance Service is slated for release during the fourth quarter of 2023.
Mr. Pat Goepel emphasizes the service’s streamlined focus: “Our Treasury Compliance Services are designed to simplify the complex requirements payroll providers face in today’s regulatory environment. With this service, we handle the heavy lifting of compliance, so our clients can continue to grow their business and serve their customers without compliance concerns.”
Asure Issues Preliminary Guidance for Q4 2023 & FY 2024
Looking ahead, Asure has released preliminary guidance for the fourth quarter of 2023 and full-year 2024. The estimates take into account the company’s recent business developments and growth trends, as well as continued macroeconomic uncertainty.
For the fourth quarter of 2023, Asure estimates revenue between $25 million and $27 million on an adjusted EBITDA range between $2 million and $3 million. Full-year 2023 guidance remains unchanged from its previously issued revenue range between $118 million and $120 million on adjusted EBITDA margins within 19% to 20%. Full-year 2024 is projected to see revenue between $125 million and $129 million on an adjusted EBITDA margin range of 20% to 21%.
Management says they will continue to evaluate potential acquisition targets in 2024, as the company continues to focus on investing in product development aimed at assisting SMBs with getting the most out of their human capital efforts.
Conclusion
In conclusion, Asure Software’s performance in the third quarter of 2023 is a testament to its robust growth strategy and operational efficiency. The company’s revenues and adjusted EBITDA significantly exceeded management guidance, showcasing a 34% year-over-year growth in revenue and marked improvements in gross profit and operational efficiencies.
These achievements were propelled by strategic initiatives, including the successful capital raise, high-interest debt payoff, and the launch of innovative products like the bundled 401k platform and Treasury Compliance Services. The introduction of Lendio in the Asure Marketplace and the collaboration with JP Morgan further underline Asure’s commitment to enhancing its service offerings.
Looking forward, with the company’s strong momentum, focus on differentiation and ongoing investment in product development, Asure appears well-positioned to maintain its growth trajectory and continue delivering value to its stakeholders amidst a challenging macroeconomic environment. The preliminary guidance for Q4 2023 and FY 2024 reflects a continuation of this positive trend, with management actively exploring acquisition opportunities to further bolster the company’s market position. Overall, Asure Software’s Q3 results and forward-looking strategies paint a picture of a dynamic, growth-oriented company that is adept at navigating market challenges and seizing opportunities for continued success.
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