Asure Software Inc (ASUR) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Asure Software's corporate conference call. My name is Jen and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the ends of today's presentation. I would now like to turn the call over to Cheryl Trabula of Asure Software. Please proceed.

Thank you, Jen 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 other 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 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 express permission and your participation implies consent to the calls recording. After we've completed our review of the quarter, we'll open up the call for questions from the financial analyst community. I would now like to turn the call over to Pat Goepel, CEO of Asure Software. Pat?

Thanks, Cheryl. I'd like to welcome the shareholders, potential shareholders, clients, employees and other interested parties that are on the call today. In the second quarter, Asure produced and really had an outstanding quarter. What we're becoming is a very predictable business and especially in the backdrop of lot of unpredictability in the markets over the last couple of weeks, Asure is really becoming a predictable business. And it's led by the changes that we've made to go to a cloud-based Company sometime around 2 years ago.

The transformation that we've undergone in simplifying our business, the fruits of that have really payed off. Some key metrics that highlight the predictability of the business would be our cash in the quarter was up 48%. Our deferred revenue was up 33% year-over-year and 10% for the quarter. Our client retention rate is in the high 80's. Our recurring revenue is now up to 80% for the business, 95% in the iEmployee business. Our bookings are up 41%, 28% quarter-over-quarter, and we have no debt. That type of result doesn't happen by accident. It's taken us a couple years to simplify the business and go after the predictability. We are excited and proud about the results this quarter.

Our new clients this quarter; ABB, JCPenney, Nike, over in EMEA, an Orange Labs produces the type of client that leads to stability. It also talks a little bit about our increasingly global reach as a client. We've been able to sell clients in Australia, New Zealand, Europe, we're starting to get some traction in the Middle East, in addition to the United States.

What is also leading the change in the results is our products. We're very proud of our products, NetSimplicity just had a release of 861 that went very well. Our customer satisfaction and our customer inquiries are going down, which is a great sign for us to be more profitable in the future, because happy clients will lead to a better bottom-line. Both products are making progress in their quest to be accessible via a mobile devices, or iPads, or client experience; you get our information when you need it.

And finally, we're actively looking to get bigger. We feel that now that the Company is on the right growth trajectory in the way we wanted to grow, we certainly think that there are acquisition opportunities to be available. But more on that a little bit later. Right now, I'd like to pass the phone or the role to Dave Scoglio, our CFO, to give you more color on the actual results in the quarter.

Thanks, Scott. I'm going to take a few minutes to go over the second quarter financial highlights, and at the end of the call we'll be had happy to answer any questions around my comments or Pat's comments as well.

In the second quarter, revenue was at $2.34 million, actually a 7% decline over the comparable period in 2010. However, that decline was primarily driven by lower one-time revenue of around $224,000 difference. But the good news is it was offset by higher recurring revenue of about $32,000. Compared with last quarter, Q1 of 2011, revenue actually increased 3%; and this was driven by a $63,000 increase in recurring revenue. So, for Pat's comments around moving to a cloud-based recurring revenue, we're certainly moving in the right direction there. Overall, Pat talked about our recurring revenue at 80%. This is a slightly increase, about 17 basis points compared with Q1 of '11 and actually up 7 points from the comparable quarter in the 2010.

EBITDA for the second quarter was almost $300,000 which exceeded our high range of our estimates by around 48%. Net income excluding one-time items for the second quarter was about $0.03 per share. And GAAP net income amounted to $0.01 per share versus earnings guidance of negative $0.04 to negative $0.02 per share.

Gross margin in second quarter grew to 82%, a 1% improvement over both the comparable quarter of 2010 and the first quarter of 2011. In Q1 from a total expense standpoint, total expenses excluding the loss on lease amendment from last year of around $1.2 million was down about 1%. And these were driven by reductions in cost of goods sold as evidenced by our higher gross margin. From a balance sheet perspective, we're happy to report 4 straight quarters of improvements in cash and in our quick ratio. As Pat mentioned, cash grew to over $2 million, up 48% from the prior quarter. And our quick ratio now stands at 1.0, up from 0.9 from Q1 2011. Just a year ago, we stood at $837,000 in cash, and a quick ratio of 0.7. Lastly, as Pat mentioned, our strong cloud-based bookings have increased our deferred revenue by about 10% quarter-over-quarter.

Lastly, as outlined in this morning's press release, our outlook for 2011 remains consistent with our prior guidance. In the upcoming third quarter, we're looking at a range of minus $0.01 to a gain of $0.02, with an EBITDA range of $210,000 to $310,000. In the fourth quarter, we're guiding for a net income per share in the range of $0.01 to $0.04 and EBITDA of $290,000 to $410,000.

At this time I'd like to turn the discussion back to our CEO, Pat Goepel, for closing comments and questions. Additionally, if there are any questions that you do not want to present in this call, my number is at the bottom of today's press release, and you can reach me any time and I'll be happy to share any public information with you about the Company. Thank you.

Thanks, Dave. I hope you're as excited as we are about the results. It reflects the progress we've made over the last 2 years in the business. It also speaks well to a platform of growth that we have going forward. I'd like to remind everybody of the Asure story. First of all, we're a publicly traded Company, as you know. We do have net operating losses, and what that means to investors is as we become more and more profitable, those profits are sheltered from taxes. We have approximately $150 million of net operating losses going forward. We do have now over $2 million in cash and no debt. We've formed an acquisition committee that we announced a couple quarters ago. I will say, we've been very active with the committee and very active in pursuing acquisitions that fit on our platform, and we hope to have continued progress in that area going forward.

As far as employees, recently, we announced a new VP of Sales, Mike Kinney. I want to say we're very pleased with Mike. Our sales staffing is up to speed now in the quarter, and we expect big results from Mike's sales team. In addition, we brought on Stephen Rodriguez, who is an experienced executive. And I like to call him as an impact player and he's been very active in helping moving the business going forward. So, we have a management team in addition to a Board of Directors that is quite comfortable operating in growing environments, profitable environments, and bigger environments. And I think that will speak well to the future, as we continue to move the business forward.

That's all I have for today. I, again, thank you for your confidence in Asure. Hope you're pleased with the results, and look forward to many conversations moving forward. With that, are there any questions for today?

(Operator Instructions)

Is there a question?

Our first question comes from Mike Chadwick, a private investor.

Congratulations on a solid quarter. I had a quick question regarding the comments around a potential acquisition and M&A activity. Can you just kind of provide a little bit more color in terms of the ideal size, product offering, and potentially profitability levels of an ideal acquisition candidate?

Yes. Thanks, Mike. Very thoughtful question. We've spent a lot of time with the board and really honing on. First of all, in acquisition, we're looking for accretive acquisitions. We're looking for acquisitions that help build shareholder value. So with that, cloud-based companies or companies that have the ability to be cloud-based companies is in our core competency. So we're looking at software companies and cloud-based companies. We're looking for companies that get us bigger and have growth trajectories or have profit potential into the business.

As you know, we have two lines of businesses, IEmployee and NetSimplicity, that really are around scheduling people and the scheduling of meeting rooms and assets. I'd be a home run if they were in those areas, because we feel like that there is synergies now that we have a platform for growth, and we feel like we have the ability to add clients to our story. But that doesn't necessarily happen. We're open to considering all acquisitions that have shareholder value.

As far as size, we have $2 million. We've been active in getting the appropriate financing. So I would see an acquisition that certainly we're limited by our size, but by the same token we definitely want something that helps us make an impact.

Okay. All right. My question would have to do with in terms of financing the acquisition, has there been any thought at all in terms of long-term shareholders and potentially looking at something along the lines of a rights offering to potentially raise some funding, but at the same time allow long-term shareholders the opportunity to maintain their equity interests?

Yes. I will say little bit on that, Mike. Is that we do feel -- and I've spoken about the predictability of the business. We feel that our cash growth, which now is over $2 million, is becoming very predictable, and we feel that our stock is undervalued, quite frankly. Because of the predictability of business, because we have no debt, because we start to have cash, the cloud-based revenues in talking to some of the people that are looking to give us financing, that's a bankable asset. So, we would finance an acquisition more in a traditional loan measure, as opposed to giving up equity; because we feel, quite frankly, that our equity is undervalued. Now, if it's the right deal, right place, maybe that story is different. And certainly, we would want long-term shareholders and people that are interested in the Asure story to feel good and ride along with us. So as the Board will carefully take that under consideration on all thoughts. But our primary focus is to finance an acquisition, make it accretive, and really continue to build out the Asure story.

That's great. I appreciate the answers. And I think everything I've seen at this point, I'm quite pleased with. So thank you.

Well, thank you, Mike. And thanks for your support.

(Operator Instructions) And I'm showing no further questions at this time.

Great. Well, I thank you for your time today. We hope you're pleased with the results. We know we're pleased with our journey, and we are excited about the possibilities in the future. Have a great day.

Ladies and gentleman, thank you for your participation in today's conference. This concludes the presentation. Thank you, and have a great day.