Asure Announces First Quarter 2020 Results
May 07, 2020 at 16:01 PM EDT
AUSTIN, Texas, May 07, 2020 (GLOBE NEWSWIRE) -- Asure (NASDAQ: ASUR), a leading provider of cloud-based Human Capital Management (HCM) software solutions, reported results for the first quarter ended March 31, 2020.
“After the Workspace sale in December, we relaunched our brand and focused on a new vision, mission, and values as a pure-play HCM SaaS company. We were ahead of our plan and very pleased with the first quarter’s progress before the COVID-19 pandemic struck,” said CEO Pat Goepel. “There is nothing more essential than a paycheck during a crisis and Asure quickly responded to the challenge, helping small businesses create safer workplaces, stay compliant with sweeping new legislation, and ensuring their employees got paid. Asure is an essential small business serving 50,000 indirect and 10,000 direct small-business customers and our mission is to help small businesses grow – we are grateful to play such a critical role.”
First Quarter 2020 Key HCM Highlights
Three Months Ended March 31, 2020 Financial Summary
“We began the first quarter with significant progress on our strategic initiatives, but in mid-March the economic backdrop changed dramatically for the small businesses we serve. The COVID-19 pandemic and stay-at-home government mandates caused the demand for the services offered by many small businesses to decline precipitously. These unprecedented circumstances forced the SMBs to pause operations, reduce headcount, or go out of business,” stated Pat Goepel, CEO of Asure. “Still, I’m proud that our employees have continued to deliver excellent service levels during these challenging times. Asure remains committed to helping our 60,000 small business customers navigate quickly evolving payroll and HR complexities while making progresses on our strategic goals.”
“High unemployment at small businesses combined with lower interest rates present substantial financial headwinds. Given the uncertainty of the pandemic, we have taken actions to reduce expenses so we will be able to continue innovating as the economic environment stabilizes. We are committed to provide the resources and financial support necessary to serve our SMBs effectively while ensuring the safety of our people and our community,” said Kelyn Brannon, CFO of Asure.
Asure delivered the following results (HCM only) for its first quarter ended March 31, 2020:
Revenue: Total revenue for the first quarter of 2020 was $18.9 million, a decrease of 7.2% from $20.4 million in the year-ago quarter. Revenue mix for the quarter was comprised primarily of recurring revenue, which represented 97% of total revenue with professional services, hardware and other revenue representing the remaining 3%.
Gross Profit: GAAP gross profit for the first quarter of 2020 was $11.1 million (58.6% margin), a decline from $14.2 million (69.4% margin) in the year-ago period. Non-GAAP HCM gross profit for the first quarter of 2020 was $12.1 million (64.1% margin), a decline from $15.0 million (73.7% margin) in the first quarter of 2019.
Earnings (Loss) per Share: GAAP earnings per share were $(0.11), compared with $(0.22) in the prior year quarter. Non-GAAP HCM earnings per share* were $0.21, as compared with $0.13 in the year-ago quarter.
Non-GAAP HCM EBITDA: Non-GAAP HCM EBITDA was $4.3 million (22.6% margin), representing a decline from $6.1 million (30.1% margin) in the first quarter of 2019.
Recent Business Highlights
Launched COVID-19 Resource Center. This initiative is helping SMBs survive the pandemic and rebound in the aftermath of the pandemic. These resources include disaster-proof payroll with paycards, free emergency HR services, stimulus package for businesses questions answered, and multiple free educational webinars.
Announced Executive and Board Member Changes. Highlights include the appointment of two new board members, each with deep HCM industry experience: Bjorn Reynolds, Founder and CEO of Safeguard Global, and Carl Drew, CFO of Harvard Maintenance.
Asure is withdrawing its previously issued full-year 2020 guidance in light of macroeconomic uncertainties, particularly unemployment, arising from the current COVID-19 crisis. “Our large market opportunity, recurring business and attractive value proposition will help us mitigate the impact of headcount reductions across our customer base,” said Asure’s CFO, Kelyn Brannon. “We continue to analyze the impact the pandemic is having on our customers and plan to return to providing guidance once we have more visibility into the effects of the COVID-19 pandemic on the economy, specifically as unemployment numbers become more predictable.”
Impact of the COVID-19 Pandemic
Beginning in February 2020, we took proactive measures to ensure the safety of our employees and shore up business continuity processes in light of the increasing risks from COVID-19. We believe that these actions will ensure that our small-business customers continue to receive the same level of service they have come to expect.
Macro Observations. The COVID-19 pandemic has resulted in significant economic and operational headwinds, including higher unemployment and out-of-business rates as well as lower same-store sales, customer fund balances, and interest rates.
Our People. We successfully executed our business resiliency plan while transitioning 98% of our workforce to a work-from-home model. We also made the difficult decision to right size our overall workforce, primarily related to the Workspace Management business sale, and furlough some of our valued personnel. Still, we continued to employ enough of our talented personnel to maintain excellent support levels for our SMB customers.
Small-Business Customers. We launched the COVID-19 Response Center for customer and non-customer small businesses and increased customer engagement. We also redirected development resources to integrate new legislation in our products, including CARES-specific reports designed to help small businesses apply for and receive PPP loan forgiveness.
Financials. We experienced a significant impact to new business bookings and dollar retention. In response, we implemented significant client outreach and expense reduction.
Conference Call Details
Asure management will host a conference call today, Thursday, May 7, 2020, at 4:30pm Eastern time (3:30pm Central time). Asure CEO Pat Goepel and CFO Kelyn Brannon will host the conference call, followed by a question and answer session.
U.S. dial-in: (877) 853-5636
The conference call will be broadcast live and available for replay via the investor relations section of the company's website.
*Non-GAAP Financial Measures. This press release includes information about non-GAAP diluted earnings per share, non-GAAP tax rates, non-GAAP net income, non-GAAP gross profit, and non-GAAP EBITDA (collectively the "non-GAAP financial measures"). These non-GAAP financial measures are measurements of financial performance that are not prepared in accordance with U.S. generally accepted accounting principles and computational methods may differ from those used by other companies. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP.
Non-GAAP EBITDA differs from GAAP net loss in that it excludes items such as interest, tax, depreciation, amortization, stock compensation, and one-time expenses. Asure is unable to predict with reasonable certainty the ultimate outcome of these exclusions without unreasonable effort. Therefore, Asure has not provided guidance for GAAP net loss or a reconciliation of the foregoing forward-looking Non-GAAP EBITDA guidance to GAAP net loss.
Management uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the company's performance.
The primary purpose of using non-GAAP measures is to provide supplemental information that may prove useful to investors and to enable investors to evaluate the company's results in the same way management does.
Management believes that supplementing GAAP disclosure with non-GAAP disclosure provides investors with a more complete view of the company's operational performance and allows for meaningful period-to-period comparisons and analysis of trends in the company's business. Further, to the extent that other companies use similar methods in calculating non-GAAP measures, the provision of supplemental non-GAAP information can allow for a comparison of the company's relative performance against other companies that also report non-GAAP operating results.
Specifically, management is excluding the following items from its non-GAAP earnings per share, as applicable, for the periods presented in the first quarter 2020 financial statements:
Quarterly and annual GAAP income statements for 2019 were recast as if the Workspace Management business, which was sold on December 2, 2019, was sold as of January 1, 2019. Further, the Workspace Management GAAP income statements were recast into income from discontinued operations.
Stock-Based Compensation Expenses. The company's compensation strategy includes the use of stock-based compensation to attract and retain employees and executives. It is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.
Amortization of Purchased Intangibles. The company views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's research and development efforts, trade names, customer lists and customer relationships, and acquired lease intangibles, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
Income Tax Effects and Adjustments. Beginning in first quarter 2018, the company started using a fixed projected non-GAAP tax rate in order to provide better consistency across the interim reporting periods by eliminating the effects of items such as changes in the tax valuation allowance and non-cash tax effects of acquired goodwill and amortization, since each of these can vary in size and frequency. This tax rate could be subject to change for a variety of reasons, such as significant changes in the acquisition activity or fundamental tax law changes in major jurisdictions where the company operates. The company re-evaluates this tax rate on an annual basis or when any significant events that may materially affect this rate occur. The non-GAAP tax rate is currently projected to be approximately zero (0.0) percent.
Amortization of Capitalized Internal-Use Software, Acquisition-Related, and One-Time Expenses. The company’s non-GAAP financial measures exclude amortization of internal-use capitalized software costs and acquisition-related expenses as well as one-time expenses, such as material tax credits, material interest-expense credits, severance, recruitment, proforma adjustments of the impact of post sale HCM restructuring, and relocation.
Asure (NASDAQ: ASUR) sees Human Capital Management (HCM) through the lens of entrepreneurs and executives with an owner’s mentality. We help more than 60,000 small and mid-sized businesses develop their “Human Capital” to get to the next level, stay compliant, and allocate their time, money and technology toward growth. Asure HCM solution includes Asure Payroll & Tax, Asure HR, and Asure Time & Attendance. Our Asure HRServices offering ranges from online compliance tools to a fully outsourced HR department. Visit us at asuresoftware.com.
"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements about our financial results, which may include expected GAAP and non-GAAP financial and other operating and non-operating results, including revenue, net income, diluted earnings per share, operating cash flow growth, operating margin improvement, deferred revenue growth, expected revenue run rate, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles, amortization of debt discount and shares outstanding. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the company's results could differ materially from the results expressed or implied by the forward-looking statements we make.
The risks and uncertainties referred to above include -- but are not limited to -- risks associated with possible fluctuations in the company's financial and operating results; the company's rate of growth and anticipated revenue run rate, including impact of the current environment, the spread of major epidemics (including Coronavirus) and other related uncertainties such as government-imposed travel restrictions, interruptions to supply chains and extended shut down of businesses, the company's ability to convert deferred revenue and unbilled deferred revenue into revenue and cash flow, and ability to maintain continued growth of deferred revenue and unbilled deferred revenue; foreign currency exchange rates; errors, interruptions or delays in the company's services or the company's Web hosting; breaches of the company's security measures; domestic and international regulatory developments, including the adoption of new privacy laws; the financial and other impact of any previous and future acquisitions; the nature of the company's business model, including risks related to government contracts; the company's ability to continue to release, gain customer acceptance of and provide support for new and improved versions of the company's services; successful customer deployment and utilization of the company's existing and future services; changes in the company's sales cycle; competition; various financial aspects of the company's subscription model; unexpected increases in attrition or decreases in new business; the company's ability to realize benefits from strategic partnerships and strategic investments; the emerging markets in which the company operates; unique aspects of entering or expanding in international markets, including the compliance with United States export control laws, the company's ability to hire, retain and motivate employees and manage the company's growth; changes in the company's customer base; technological developments; litigation and any related claims, negotiations and settlements, including with respect to intellectual property matters or industry-specific regulations; unanticipated changes in the company's effective tax rate; factors affecting the company's outstanding convertible notes, term loan, and revolving credit facility; fluctuations in the number of company shares outstanding and the price of such shares; collection of receivables; interest rates; factors affecting the company's deferred tax assets and ability to value and utilize them; the potential negative impact of indirect tax exposure; the risks and expenses associated with the company's real estate and office facilities space; and general developments in the economy, financial markets, credit markets and the impact of current and future accounting pronouncements and other financial reporting standards.
Further information on these and other factors that could affect the company's financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time. These documents are available on the SEC Filings section of the Investor Information section of the company's website at investor.asuresoftware.com
Asure Software assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
© 2020 Asure Software, Inc. All rights reserved.
ASURE SOFTWARE, INC.
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Reconciliation of GAAP to Non-GAAP
*For comparison purposes, excluding non-strategic customer contracts, revenue would have been $19,258 in 1Q19, $16,245 in 2Q19, $16,830 in 3Q19, and $16,628 in 4Q19
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