OREANDA-NEWS. Asure Software, Inc. (NASDAQ:ASUR), a leading provider of Human Capital Management (HCM) and workplace management software, reported results for the second quarter ended June 30, 2016. The company also reported pro forma unaudited results, which included results from the acquisition of Mangrove Software as if it was completed on January 1, 2015.

 
Second Quarter 2016 Financial Summary Actual Results   Pro Forma Results
(in millions except per share data and percentages) Q2 2016 Q2 2015 Change (%)   Q2 2016 Q2 2015 Change (%)
Revenue $    9.7   $   7.2     35 %   $    9.7   $   9.0     8 %
               
Gross Margin $    7.5   $   5.3     42 %   $    7.5   $   6.7     11 %
Gross Margin (as a % of revenue)   77.5 %   73.8 %   5 %     77.5 %   75.2 %   3 %
               
EBITDA (excluding one-time expenses) $    2.6   $   1.4     90 %   $    2.6   $   1.4     87 %
               
Net Income (Loss) $    0.1   $   0.1     43 %   $    0.1   $   (0.5 )   128 %
Net Income (Loss) per Diluted Share, Excluding one-time expenses $    0.15   $   0.04     275 %   $    0.15   $   (0.06 )   350 %
 
Year to Date 2016 Financial Summary Actual Results   Pro Forma Results
(in millions except per share data and percentages) YTD 2016 YTD 2015 Change (%)   YTD 2016 YTD 2015 Change (%)
Revenue $    16.4   $   13.5     21 %   $    18.5   $   17.4     7 %
               
Gross Margin $    12.5   $   10.0     25 %   $    14.2   $   13.1     9 %
Gross Margin (as a % of revenue)   76.2 %   73.8 %   3 %     76.7 %   75.3 %   2 %
               
EBITDA (excluding one-time expenses) $    3.0   $   2.4     28 %   $    3.5   $   2.7     28 %
               
Net Income (Loss) $    (1.4 ) $   (0.4 )   -265 %   $    (0.6 ) $   (1.2 )   46 %
Net Income (Loss) per Diluted Share, Excluding one-time expenses $    0.04   $   -      -     $    0.06   $   (0.13 )   146 %

Second Quarter 2016 Operational Highlights

  • Deepened European market presence through partnership with Payscape, a leading payroll provider based in the UK, who will offer Asure’s time and labor management solutions.
  • Formed a technology partnership with Quora to provide Asure’s clients with real-time analytics to help them optimize and enable change in their workplace environment and workforce.
  • Cloud bookings in the quarter decreased 28% year-over-year due to a large customer win in Q2 2015, while total bookings were up 17% year-over-year.
  • Backlog totaled $2.6 million, a 3% decrease compared to the prior quarter and a 18% decrease from the year-ago quarter. The company continues to expect many enterprise clients to move through the implementation process throughout the rest of fiscal 2016, which will result in conversion from backlog to reported revenue growth.
  • Secured several new wins across a range of industry verticals, including MetLife, Procter & Gamble, Allstate Insurance Company, ECI Electronic Commerce, Rogers Communications, ABM, ExxonMobil, and State Street Corporation.
  • Named the winner of a Bronze Stevie® Award in the Best New Product or Service of the Year category in The 14th Annual American Business Awards

Second Quarter 2016 Financial Results

  • Revenue for the quarter increased 35% to $9.7 million from $7.2 million in the same year-ago quarter. On a pro forma basis, including the results from Mangrove Software as if the acquisition was completed on January 1, 2015, revenue increased 8% to $9.7 million from $9.0 million in the same year-ago quarter.
  • Recurring revenue for the quarter as a percent of total revenue was 72.1%, an improvement from 69.9% in the second quarter of 2015.
  • Cloud revenue increased 58%, hardware revenue increased 22%, on premise software revenue increased 43%, and professional services revenue increased 62% from the second quarter of 2015.
  • Gross margin for the quarter was $7.5 million (77.5% of total revenue), a 42% increase from $5.3 million (73.8% of total revenue) in the second quarter of 2015.
  • EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization)* excluding one-time items* for the quarter was approximately $2.6 million, an increase of 90% compared to $1.4 million in the second quarter of 2015.
  • Net income per share (excluding one-times*) for the second quarter totaled $0.15, compared to net income per share (excluding one-times*) of $0.04 in the second quarter of 2015. On a pro forma basis, including the results from Mangrove Software as if the acquisition was completed on January 1, 2015, net income per share (excluding one-times*) totaled $0.15, an improvement from a net loss per share (excluding one-times*) of $(0.06) in the same year-ago quarter.

Financial Outlook

On a proforma basis, including the company’s acquisition of Mangrove on March 21, 2016 and under the condition that Mangrove and Asure had been combined as a single company on January 1, 2016, Asure management increased its guidance for fiscal 2016 ending December 31:

2016 Financial Guidance Fiscal 2016 (vs. Fiscal 2015)
Revenue $37.75 million to $38.75 million (+0.6% to +0.7% vs. previous guidance and +40.3% to +44.0% vs. YTD 2015 actual)
EBITDA, excluding one-time items $7.75 million to $8.25 million (+3.1% to +3.3% vs. previous guidance and +107.6% to +120.9% vs. YTD 2015 actual )
Net income per share, excluding one-time items $0.22 to $0.30 (+50.0% to +83.3% vs. previous guidance and vs. a loss of $0.17 prior YTD actual)

Management Commentary

“We entered Q2 having just completed the acquisition of Mangrove Software, but exited the quarter as a more complete, unified, and stronger organization,” said Pat Goepel, CEO of Asure Software. “During the quarter, we not only were able to fully integrate Mangrove into our operations, but also began to realize some of the cost-saving synergies and cross-selling activity we forecasted prior to the acquisition. In fact, our HCM solution has already begun to gain traction with some of our existing customers, demonstrating the immediate benefits of having a more well-rounded solution to address the full spectrum of today’s workforce challenges.

“Looking beyond Mangrove, our core workspace and time and labor management solutions continued to drive strong growth during Q2. On a pro-forma basis, revenue was up 8%, gross margin up 11%, and EBITDA excluding one-time expenses up 87%—all over the same year-ago period. We also realized a profit during the quarter, despite a considerable amount of one-time expenses related to the acquisition, which we expect to largely disappear during the third quarter. While our cloud bookings were down year-over-year, due to a significant win we secured in Q2 of last year, our cloud revenue continued to grow appreciably, mainly because of our continued success in migrating our on-premise clients to the cloud.

“To add to that, we experienced a more streamlined backlog conversion process. With the acquisition behind us, we were able to put the right measures in place to more quickly and effectively convert our backlog into realized revenue. In Q2, we experienced some of the fruits of that labor, with backlog decreasing on both a sequential and year-over-year basis. Combining this improved backlog system with a reorganized sales force to focus on larger and more meaningful deals, we believe our sales pipeline is on track to grow at an accelerated rate moving forward.

“Along those lines, we continue to be optimistic about our financial performance for the full year. Because of the strong performance we’ve had so far, along with the fact that we’ve experienced faster-than-expected realization of cost synergies and backlog conversion, we believe it is necessary to raise our full year guidance for 2016.

“Overall, Q2 was a great quarter for us, concluding with the full integration of an acquisition that we feel is truly transformational to how we do business. Going forward, we will continue to execute on our key initiatives, including bringing our HCM customers live, continuing to realize the cost synergies from the acquisition, and using our integrated suite of solutions to secure new wins that can build on our progress and position us to scale even further.”
                                                                                                                                                                                                                               

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

Statements in this press release regarding Asure's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. Such risks and uncertainties could cause actual results to differ from those contained in the forward-looking statements.

ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
 
    June 30,
2016
(Unaudited)		     December 31,
2015		  
Assets            
Current assets:            
Cash and cash equivalents   $ 283     $ 1,158  
Accounts and note receivable, net of allowance for doubtful accounts of $113 and $145 at June 30, 2016 and December 31, 2015, respectively     6,180       4,671  
Inventory     516       784  
Prepaid expenses and other current assets     1,422       1,072  
Total current assets before funds held for clients     8,401       7,685  
Funds held for clients     24,525       -  
Total current assets     32,926       7,685  
Property and equipment, net     2,003       2,212  
Goodwill     26,265       17,436  
Intangible assets, net     13,510       6,026  
Other assets     100       458  
Total assets   $ 74,804     $ 33,817  
Liabilities and stockholders’ equity                
Current liabilities:                
Current portion of notes payable, net of debt issuance cost   $ 4,901     $ 909  
Accounts payable     2,418       2,670  
Accrued compensation and benefits     1,099       715  
Other accrued liabilities     1,489       1,181  
Deferred revenue     9,341       10,803  
Total current liabilities before client fund obligations     19,248       16,278  
Client fund obligations     24,525       -  
Total current liabilities     43,773       16,278  
Long-term liabilities:                
Deferred revenue     1,545       947  
Notes payable, net of debt issuance cost     26,074       12,384  
Other liabilities     363       490  
Total long-term liabilities     27,982       13,821  
Total liabilities     71,755       30,099  
Stockholders’ equity:                
Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding     -       -  
Common stock, $.01 par value; 11,000 shares authorized; 6,901 and 6,674 shares issued, 6,517 and 6,290 shares outstanding at June 30, 2016 and December 31, 2015, respectively     69       67  
Treasury stock at cost, 384 shares at June 30, 2016 and December 31, 2015     (5,017 )     (5,017 )
Additional paid-in capital     280,280       279,649  
Accumulated deficit     (272,321 )     (270,903 )
Accumulated other comprehensive income (loss)     38       (78 )
Total stockholders’ equity     3,049       3,718  
Total liabilities and stockholders’ equity   $ 74,804     $ 33,817  
ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands, except share and per share data)
(Unaudited)
 
    FOR THE
THREE MONTHS ENDED
June 30,		     FOR THE
SIX MONTHS ENDED
June 30,		  
    2016     2015     2016     2015  
Revenues:                        
Cloud revenue   $ 5,389     $ 3,417     $ 9,251     $ 6,788  
Hardware revenue     1,275       1,047       1,968       1,632  
Maintenance and support revenue     1,192       1,541       2,431       3,107  
On premise software license revenue     458       321       598       487  
Professional services revenue     1,350       833       2,138       1,477  
Total revenues     9,664       7,159       16,386       13,491  
Cost of sales     2,176       1,879       3,906       3,531  
Gross margin     7,488       5,280       12,480       9,960  
                                 
Operating expenses                                
Selling, general and administrative     5,480       3,612       9,807       7,061  
Research and development     645       743       1,456       1,481  
Amortization of intangible assets     626       504       1,003       1,009  
Total operating expenses     6,751       4,859       12,266       9,551  
                                 
Income from operations     737       421       214       409  
                                 
Other income (loss)                                
Interest income     -       -       10       -  
Loss on lease termination     -       -       -       (110 )
Foreign currency gain (loss)     1       3       2       (8 )
Interest expense and other     (560 )     (279 )     (852 )     (561 )
Interest expense- amortization of original issue discount (OID)     -       (8 )     -       (16 )
Acquisition costs     -       -       (706 )     -  
Total other loss, net     (559 )     (284 )     (1,546 )     (695 )
                                 
Income (loss) from operations before income taxes     178       137       (1,332 )     (286 )
Income tax provision     (42 )     (42 )     (86 )     (102 )
Net income (loss)   $ 136     $ 95     $ (1,418 )   $ (388 )
Other comprehensive income (loss)                                
Foreign currency gain (loss)     81       (41 )     116       (35 )
Other comprehensive income (loss)   $ 217       54     $ (1,302 )   $ (423 )
                                 
Basic and diluted net income (loss) per share                                
Basic   $ 0.02     $ 0.02     $ (0.23 )   $ (0.06 )
Diluted   $ 0.02     $ 0.02     $ (0.23 )   $ (0.06 )
Weighted average basic and diluted shares                                
Basic     6,294,000       6,066,000       6,292,000       6,061,000  
Diluted     6,429,000       6,231,000       6,292,000       6,061,000  
ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 
    FOR THE
SIX MONTHS ENDED
JUNE 30,		  
    2016     2015  
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net loss   $ (1,418 )   $ (388 )
Adjustments to reconcile net loss to net cash (used in) provided by operations:                
Depreciation and amortization     1,706       1,553  
Provision for doubtful accounts     10       40  
Share-based compensation     106       98  
Other     -       26  
Changes in operating assets and liabilities:                
Accounts receivable     (1,059 )     96  
Inventory     268       (143 )
Prepaid expenses and other assets     86       (922 )
Accounts payable     (316 )     572  
Accrued expenses and other long-term obligations     397       (196 )
Deferred revenue     (864 )     126  
Net cash (used in) provided by operating activities     (1,084 )     862  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Acquisitions net of cash acquired     (12,000 )     -  
Purchases of property and equipment     (24 )     (989 )
Disposals of property and equipment     -       18  
Collection of note receivable     64       -  
Net change in funds held for clients     (8,106 )     -  
Net cash used in investing activities     (20,066 )     (971 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from notes payable     15,335       2,500  
Payments on notes payable     (3,274 )     (2,875 )
Payments on amendment of senior notes payable     -       (75 )
Debt financing fees     (438 )     -  
Payments on capital leases     (106 )     (97 )
Net proceeds from exercise of stock options     528       585  
Net change in client fund obligations     8,106       -  
Net cash provided by financing activities     20,151       38  
                 
Effect of foreign exchange rates     124       (36 )
                 
Net decrease in cash and cash equivalents     (875 )     (107 )
Cash and cash equivalents at beginning of period     1,158       320  
Cash and cash equivalents at end of period   $ 283     $ 213  
                 
SUPPLEMENTAL INFORMATION:                
Cash paid for:                
Interest   $ 456     $ 586  
                 
Non-cash Investing and Financing Activities:                
Note receivable from customer     -       601  
Subordinated notes payable – Mangrove acquisition     6,000       -  

*Non-GAAP Financial Measures
This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission: EBITDA and GAAP Net Income/(Loss) excluding one-time items. These supplemental financial measures are not required by GAAP, nor is the presentation of this financial information intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with Asure's earnings results as determined in accordance with GAAP. However, for the reasons described below, management uses these non-GAAP measures to evaluate the performance of Asure's business. Asure's management believes that it is important to provide investors with these same tools, together with reconciliation to GAAP, for evaluating the performance of Asure's business, as it may provide additional insight into Asure's financial results. See the “Reconciliation of GAAP Net Income/(Loss) to Earnings Before Interest, Taxes, Depreciation, Amortization and Stock Compensation Expense (EBITDA)” and the “Reconciliation of GAAP Net Income/(Loss) to Net Earnings Excluding One-Time Items” tables included in this press release for further information regarding these non-GAAP financial measures. In addition, these measures are presented because management believes they are frequently used by securities analysts, investors and others in the evaluation of companies. EBITDA is calculated by adding income taxes, interest expense, depreciation and amortization and stock compensation expense to net earnings. EBITDA is not defined under GAAP and should not be considered in isolation or as a substitute for net earnings and other consolidated earnings data prepared in accordance with GAAP or as a measure of Asure's profitability.

Net Earnings Excluding One-Time Items is calculated by combining the company’s GAAP Net Earnings, or earnings per share, with items that are one time in nature and are not expected to recur on a dollar or per share basis.

Free Cash Flow is computed by subtracting capital expenditures from cash flow from operations, each as determined in accordance with GAAP and as reflected in the statement of cash flows.

Non-GAAP Revenue is computed by adding back the deferred revenue fair market valuation to GAAP revenue.

Reconciliation of GAAP Net Earnings to Earnings Before Interest, Taxes, Depreciation, Amortization and Stock Compensation Expense (EBITDA) and EBITDA Excluding One-time items.

FOR THE THREE MONTHS ENDED
    
 
$000s June 30,
2016		 June 30,
2015
Net Income (loss) 136 95
Interest and amortization of OID 560 287
Tax  42 42
Depreciation 259 158
Amortization 732 610
Stock Compensation  67 12
EBITDA 1,796 1,253
One-time items  831 132
EBITDA excluding one-time items 2,627 1,385
FOR THE SIX MONTHS ENDED      
         
$000s   June 30,
2016		   June 30,
2015
Net Loss   (1,418 )   (388 )
Interest and amortization of OID   852     577  
Tax   86     102  
Depreciation   490     332  
Amortization   1,216     1,221  
Stock Compensation   106     98  
EBITDA   1,332     1,942  
One-time items   1,683     415  
EBITDA excluding one-time items   3,015     2,357  

Reconciliation of GAAP Net Earnings to Net Earnings Excluding One-time items

FOR THE THREE MONTHS ENDED    
$000s June 30,
2016		 June 30,
2015
Net Income (loss) 136 95
Legal & Professional Services 175 10
Severance, Recruitment & Relocation 584 -
Other one-time items (net) 72 122
Sub-total excluding Taxes 831 132
Sub-total one-time items 831 132
Net Income (loss) excluding one-time items 967 227
FOR THE SIX MONTHS ENDED            
             
$000s June 30,
2016		 June 30,
2015
Net Loss   (1,418 )   (388 )
Legal & Professional Services   857     18  
Severance, Recruitment & Relocation   722     55  
Other one-time items (net)   104     342  
Sub-total excluding Taxes   1,683     415  
Sub-total one-time items   1,683     415  
Net Income excluding one-time items   265     27