Asure Software Inc (ASUR) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Q1 2010 Asure Software earnings conference call.

My name is Derrick and I'll be your operator today.

At this time, all participants are in listen-only mode.

Later we will be conducting a question-and-answer session.

(Operator Instructions).

I would now like to turn the conference over to your host for today, Ms.

Lisa Flynn.

Please proceed.

Thank you, Derrick.

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 outcome.

You are you urged to consider the risk factors relating to the Company's business contained in our latest periodic reports on file with the Securities 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 have completed our review of the quarter, we will open up the call for questions.

I would now like to turn the call over to Mr.

Pat Goepel, CEO of Asure Software.

Pat?

Thanks, Lisa.

Welcome.

My name is Pat Goepel, CEO of Asure.

We're pleased to report our results today.

We also will provide an update on some significant initiatives and will provide guidance through the rest of the year.

First of all, I want to remind folks of our business strategy.

One, we wanted to simplify the business as we set out last September.

We wanted to provide great products and services for our clients in a [SAS] environment.

We wanted to reduce our cost structure.

We wanted to deliver on a 20/20 plan, where we believe by the fourth quarter we can achieve 20% revenue growth and 20% EBITDA margins.

All of these results -- as we deliver the results, we will also increase our credibility with the public markets.

I'd like to provide an update on several initiatives -- first of all, some of the operational results in the first quarter.

Our key products and services for our clients have led to retention rates in the 92% range for NetSimplicity, in the 94% range for iEmployee.

Those are very, very strong results on keeping our clients.

And with that, what we're doing is we're rolling out new products and services.

On the iEmployee side, time clocks have been increased.

We have biometric time clocks, both for small clients and large clients.

In the NetSimplicity area of the business, we've rolled out or started to announce the public calendar.

We're increasing our integration with Microsoft outlook in a joint partnership.

And we are moving clients to the SAS products and services from a perpetual maintenance and support.

Some of the key wins that we had this quarter, we had several notable names.

Large divisions of CSC or Computer Sciences Corporation, Honeywell over in the UK, Georgia State University, Johnson Controls, GlaxoSmithKline were some notable wins for NetSimplicity.

Chevron on the iEmployee and Mastercraft Tools, due to our partnership with Oasis were wins that we were very proud of.

We also announced in the quarter and just recently that one of our large clients, Ceridian which makes up a little over 20% of our revenue, we're changing the relationship of which we do business.

We're excited about that long-term because those clients now will go to us directly.

By the end of the summer or so, there will not be a client that will be over 2% of our revenue.

We believe that that's very positive for us long-term.

We're in control of our client base.

We're in control of the technology and the services we provide.

And we have a more intimate relationship with the customer so we think that's all good news.

I'd also like to turn for an update on some significant initiatives.

As you know, as of April 1st we've come together with HPI which changes the nature of our real estate.

We had a synthetic lease that was an untenable relationship from a cost perspective.

We've settled with our partner in the bank, HPI, and the financial institution so we are now out of that lease.

And we've signed into a new lease through 2013.

We're very pleased with that outcome.

We've let you know about that in the past couple of quarters, and now that will be behind us.

Dave Scoglio will present the details for the second quarter.

We also -- under the umbrella of simplifying the business, are going to continue to look at our history around the IP or the intellectual property.

I can see in the second quarter or in the future where we look to deal with that, as that will no longer be part of our core structure.

We'll be focusing on the software in the SAS businesses only.

We've also significantly reduced our cost structure and really we're at a stage now where we feel like the underlying cost structure of the organization is a platform for growth.

We're proud that we can grow from here.

The results we have this quarter in the guidance in the second quarter will lead not only to growth in the second quarter, but also into that 20/20 plan that I have mentioned.

For the specific financial results, I'm going to turn it over to Dave Scoglio, our CFO.

Dave's done a great job and he'll let you know the exact results.

Thanks, Pat.

As Pat mentioned, I'm going to take a few minutes to go over the financial results of our first fiscal quarter of 2010.

From a revenue perspective, revenue grew 2% over the comparable period in 2009, excluding our divested Visual Asset Manager or VAM product revenue.

NetSimplicity excluding VAM as well was neutral while iEmployee grew about 5%.

That was driven equally by core software service revenue and related hardware sales.

Gross margin contribution decreased about 6 points over the comparable period in 2009, driven by a higher proportion of hardware sales and some one-time consulting costs.

Operating expenses decreased 44% over the comparable period in 2009, which was a reduction from $3.4 million to $1.9 million.

The reductions were largely driven by lower compensation due to head count and rate per head efficiencies, as well as other cost reductions.

I've noted in the press release, we posted a net loss of $188,000 for the current period or about $0.06 per share.

This was a 87% improvement over the comparable period of 2009.

The net loss can be broken down into a few different components.

$85,000 of the net loss is attributed to the negative impact of our former Austin headquarters lease arrangement.

$60,000 was attributable to our core business.

And another $43,000 was related to foreign exchange loss driven by a weakened US dollar in the first fiscal quarter.

Since then our currencies that we have exposure to have actually been rising so we don't expect that to continue.

From a Q1 perspective, that concludes the results for the first fiscal quarter of 2010 and I wanted to take this opportunity to reiterate our 2010 outlook in our press release.

In the second quarter we do have an impact related to solving our Austin headquarters lease arrangement.

While we are projecting a significant impact, which is $0.41 loss per share, as Pat stated, this is a much needed change in our cost structure.

Along with our second quarter projected double-digit revenue growth, compared to 2009 comparable period -- along with freeing up significant expenses related to getting out of that Austin headquarters lease, this will help us materialize our projected profitability in Q3 and beyond as represented in today's press release.

In the press release, we noted that in Q2 we had that $0.41 loss.

Core software business was going to earn between $0.02 and $0.04 per share for a net range -- of a loss of $0.39 to $0.37.

However, in Q3 we have some minor charges related to real estate, but really, we're projecting core software business profitability of $0.05 to $0.10 and then $0.08 to $0.15 in Q4.

At this time, I would like to turn the discussion back to our CEO, Pat Goepel, for closing comments and questions.

In summary I'm very pleased with the position that Asure is in as we look to the future.

One, we are -- have a platform now where we're increasing our revenue growth.

And we're providing guidance, not only to the fourth quarter, but also to the second quarter where we see double-digit revenue growth.

We now -- we have no debt in our financial position.

Also we've greatly simplified the business and eliminated a lot of the surprises that were in the past.

Our NOL's -- and I'd like to remind people that we have some net operating losses and so as we move to profitability, we can take advantage of that for several years to come.

We are forecasting profitability in our core software business right now in the second quarter, in the third quarter, in the fourth quarter and an increasing level of profitability as of that.

We've been EBITDA positive and we thought that was the first milestone.

We've delivered on that.

Now we're moving into net income profitable.

Our clients, we've had some very big names that I spoke of where we're winning business.

We're going to continue to win business and our clients are staying with us in the 90-plus percent and so we're very proud of that.

Also our repetitive revenue in the NetSimplicity business is now up to 60%, which bodes well for the future.

In the iEmployee business, it is 91%.

The nature of this reoccurring revenue -- and in the future where no one customer has more than 2% of our revenue, it should be a very predictable revenue stream, a very predictable profitable stream, and an increasing one at that.

And so we think we've positioned Asure in a very nice place.

We're pleased with our results and we hope you ar as well.

And with that, we will open the line for any questions that anybody might have.

(Operator Instructions).

The first question comes from the line of Mike Chadwick.

Please proceed, sir.

Hi, gentlemen.

Thank you for continued focus on expense control management.

I just have one quick question, regarding the cash balances that you foresee at calendar year-end given the pending HQ lease termination fee.

Can you provide some color on that?

Sure.

Mike, how are you doing?

It is Dave Scoglio.

To answer your question, as of today, after paying the $1.5 million termination fee, I have $633,000 in cash and now free of about $120,000 in exit payments per month.

We're projecting positive net income, positive EBITDA and significant revenue growth to boot.

We're projecting this will be a low and we'll just continue building cash balances as we go forward.

Great.

Thank you very much.

And Mike, as you know, we also have no debt so we feel we're in a pretty good position going forward.

We're going to build cash balances as the operating results come in line with expectations.

Thank you very much.

I'm showing no further questions at this time.

I would like to turn the call back over to Pat Goepel for any closing remarks.

We're -- we want to thank you for your time today.

We're pleased with our results.

We hope you are pleased, too.

We have made significant progress in the last six, seven months at Asure.

We've guided for positive results.

We've let you know what issues that we had to work through.

We have delivered now on those major initiatives and really bolstering our core business.

We're pleased with the results.

And in the future, we see very positive developments ahead for Asure Software.

We thank you for your support and your interest in Asure and we hope you have a great day.

Thank you.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.