Asure Software Inc (ASUR) 2012 Q2 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Asure Software Corporate Conference Call. My name is Shannon, and I will be coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the today's presentation. As a reminder, today's call is being recorded.

I would now like to turn the conference over to Cheryl Trbula, of Asure Software. Please proceed.

Thank you Shannon, 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 outcome. 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 call's 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, and I'd like to welcome all investors, clients, employees, interested third parties, to the Asure Software second quarter conference call.

We, in short, were very pleased with the second quarter. Highlights of our activities in the second quarter -- first of all, we had total new orders of call bookings that were up 10% year-over-year, and we are definitely making traction in bookings. Evidence of that, in NetSimplicity, we had new orders from AT&T Labs, University of Chicago, the US Department of Treasury, and the University of Tennessee.

In the AsureForce, which is our time and labor management, we are very pleased with the large sales of [Vision-Ease] and Parker Hannifin. We also were thrilled with the new partnership that we announced in a press release of MPAY. MPAY is perhaps the fourth-largest payroll provider in the United States, and they are embedding time and labor management in their small-end solution, or small business solutions. And they're also partnering with us in the mid market. And Chuck Duke over at MPAY, who is the President, is somebody that I've been discussing this partnership for quite some time, and we're just thrilled with the partnership of MPAY. And we think that's going to lead to results for years to come.

From a revenue side, we came in at $4.2 million and our guidance was $4.1 million to $4.2 million. So we're very pleased with the revenue. EBITDA -- one time items of $838 million, and EPS ex one time items of $0.03. And the EBITDA naturally is $838,000, not million. But we're also in the middle of delivering those results.

We closed on an acquisition on PeopleCube in the first week of July. So a lot of our activity was moving forward with the PeopleCube. I will say -- and I'll talk a little bit more about this later -- but the integration efforts are going extraordinarily well. We're very pleased with the culture of the employees, the clients; the synergies are immense and we think that has gone off to a very quick start.

We also in the quarter, I'd like to remind you -- we had a three-for-two stock split on May 1; and we did that because we did hear from you that you'd like to buy more stock and you wanted more stock available. And some of you are saying that the float ultimately should be around 10 million shares. Now we're about 5 million or so, a little bit more than that. And the stock continues to progress. We'll be open to a stock split in the future.

Also, we made great progress organizationally. We had to prepare for the acquisition of PeopleCube, and we did that. We did close India, and in the process of closing that, we took a charge and we thought that was the right thing to do. We're centering around Austin, Texas and the greater Boston area, including Warwick, Rhode Island. We also made great progress this quarter in our products. From an AsureForce perspective, we rolled out our new version, our stats version, version 11. We had clients that signed up. And we also rolled that out to our partner program. So we're excited about that progress, and we think the results will enable us to hit third and fourth quarter where we have a big revenue ramp and we feel very good about the challenge of that revenue ramp.

And then finally, AsureSpace -- we rolled out a panel strategy. Our clients were telling us that they loved their software. They also wanted to embed our software into the panels outside the meeting rooms. And we signed up some clients already on that, and we're excited about the panel strategy that we rolled out.

So a lot of activity second quarter. The results, we're very pleased with. We think it sets us up well for third and fourth quarter as well as 2013. And I'm now going to turn it over to Dave Scoglio to speak to the financial details. Dave?

Thanks Pat. I'm going to take a few minutes here to go over the second quarter financial highlights, and Pat and I will be happy to answer any and all questions during the Q&A period at the end of this morning's call.

In the second quarter, revenue was at $4.205 million, up 73% year-over-year, primarily driven by the acquisitions of Legent and ADI in the fourth quarter. From a sequential perspective, NetSimplicity, ADI, and Legent revenues were up 8%, 2%, and 5% respectively. iEmployee was down 8%, but that was driven by some one-time usage overage charges in the first quarter. So strong results from three out of four divisions.

Recurring revenue as a percentage of overall revenue held strong at 76%. New annual cloud bookings were up 10% year-over-year. This metric represents full-quarter comparative data, and only includes new annual contract revenue excluding multi-year sales. EBITDA, as Pat mentioned, was $838,000 excluding one-time items. This represented an approximate 8% increase sequentially in this metric. Net income excluding one-time items for the second quarter was $0.03 per share. GAAP net income amounted to $0.06 loss per share for the second quarter, driven by $0.10 in one-time items. Gross margin was up 1 point sequentially at 76%. Free cash flow was at $223,000, driven down primarily by costs related to the acquisition of PeopleCube, and slightly higher capital expenditures due to initial upgrades in our cloud infrastructure.

Guidance for the rest of the year was outlined in today's press release and for 2013. 2013 -- we confirmed our previous projections at $31 million in revenue, and free cash flow of $7 million, and $9 million in EBITDA excluding one-time items. In the upcoming third quarter, revenue is guided at $6.9 million to $7.1 million, and EBITDA, excluding one-times, is projected to between $1.1 million and $1.3 million.

At this time, I'd like to turn the discussion back to Pat Goepel, our CEO, for closing comments, and then we'll open it up for questions. Thank you.

Thanks Dave. And just (technical difficulty) quarter, a few thoughts going forward. First of all, the PeopleCube acquisition -- really, we're integrating very well. Very pleased with the acquisition. Very pleased with the leadership, John Anderson who is going to run our AsureSpace division. John was the former CEO and President of PeopleCube. He's now the EVP, and he has built a tremendous culture, has great clients. Clients were enthusiastic of the acquisition. I think the employees have worked very well together.

Mike Kinney, who we're very pleased with as a sales leader, is going to be head of new sales for the AsureSpace division. And we think culturally he's a great fit with John. They're going to drive revenue. On the cost side and the integration side, we've gotten costs out probably faster than we thought we would, which is always good. And we're excited about talking to clients about our combined offerings.

As far as AsureForce -- we're heading into our busy season. We're thrilled with the MPAY partnership. We are active among other partnerships, as well as some acquisitions. And we feel that we're hitting our stride here with the new product. We also feel that we're into selling season. And third and fourth quarter, clients look to sign up because a lot of times they like to make changes for the January 1 payroll season. And time and labor management allows them to do that.

So we do have a lot of work to do, and we're in the trenches every day. Lots of activity going forward, and we're very pleased about our positioning. We've given you the guidance through 2013.

So with that, I'll take any questions that are out there. And Cheryl, if we can turn it over for questions?

(Operator Instructions)

Thomas Pfister with Red Chip Company.

Hello guys. Congratulations on the good quarter, and good to see you guys making good progress. I think you mentioned in a previous earnings call, you guys had possibly a few acquisitions, candidates that you were looking at. Could you give us maybe some color on how your acquisition strategy is here going forward?

Yes well, Thomas thank you for the kind words. And I'll remind you that we did an acquisition the first week of July. This probably won't be a weekly occurrence, but, and I'm teasing you. But what we have in the facility with Deerpath Capital, we have a $5 million facility for future acquisitions. And what I call these are tuck in acquisitions that we'll look for books of business to both the AsureSpace and AsureForce product lines. We also believe that, as you know Thomas, we think we're in great position in both markets.

And we have the ability to gain scale and profitability, as well as revenue growth and we're not going to hesitate to pull the trigger going forward and we'll be opportunistic on the acquisitions. All our acquisitions will be accretive, and we are looking for a bull's-eye in the space that we're currently in. So we're not looking to expand our space that we're playing in right now. We feel that there is plenty of opportunity and plenty of growth and accretive acquisitions out there.

We're going to be cognizant of the organization's ability to absorb. And we think we need a quarter here to absorb PeopleCube and get that on the right footing. But by the same token we'll look and be opportunistic in the future. This, having gone through three acquisitions, I'm very pleased with the ability of the organization to assimilate the acquisitions, and we think we're positioned pretty well going forward. But that's what I'd comment on that.

All right great. Thanks for the color Pat. And just another question for me here, I think you guys may have -- I may have asked this in the past, you guys may have touched on it a little bit. But as far as seasonality goes with your bookings, is typically the second half of the year typically the usually the stronger half so to speak?

In time and labor management Thomas, seasonality there tends to be more bookings in the third and fourth quarters as clients prepare for the first quarter of any payroll changes. So we do see some seasonality with that. In the AsureSpace, bookings are -- we have seen fourth quarter be strong but we've also seen all our quarters be strong. And in fact we've had record SaaS bookings in the first quarter and we had good bookings this quarter. So, not as much seasonality in AsureSpace and AsureForce we will see third and fourth quarter seasonality.

All right. Thanks for the color there. And then just one more question for me here. I think previously you had stated you were looking obviously to expand globally here a little bit and obviously the PeopleCube acquisition helps with that. Can you just give any more color maybe on how you guys are looking at expanding business outside of the US?

Yes Thomas, we have a beach head now where we have an office in, just outside of London. And we have a hosting of clients in Europe right outside of London as well. So our European strategy will be to build on that beach head in London. We have a tremendous partnership in Asia that has gotten some traction for us. And we'll continue to make progress to have a beach head in Asia, and we're going to go where our clients take us. And we'll continue that global expansion, and we think the acquisition of PeopleCube will allow us to do that. But still, lots of work to do.

All right great. Thanks. And that's all the questions I have today, so congratulations again on the good quarter and thanks for taking my questions today.

Great. Thank you Thomas.

(Operator Instructions)

Don Sinsabaugh with Fulcrum Securities.

Hello. Great quarter Pat.

Thanks you Don.

Could you give us some guidance on gross margins and SG&A expenses on a going forward basis?

Dave, I'll let you answer that question.

Hello Don, it's Dave Scoglio. So as we continue to expand and meet our revenue targets, we are not looking at any significant SG&A changes. We're really focused around building products and building sales and professional services delivery. So from an SG&A perspective, whatever we get from a PeopleCube perspective, from a post synergy perspective, we'll probably stick pretty close to that for some time.

On a gross margin perspective, I can see that changing a little bit. PeopleCube will bring us some hardware revenue that will have a different, we'll have a different mix but it doesn't have a substantially different gross margin on a product by product basis. And then obviously when we integrate that company, it will have a support and implementation structure that will change those metrics as well. As we look to integrate those teams, we'll continue to look for synergies. But overall Don, I don't see a significant difference in gross margins. It will just be a mix difference.

Very good. Could you give us some color of the balance sheet at the end of the quarter?

Sure. So we had positive cash flow, as I mentioned it was hindered by some of the one time costs, but we had cash flow, ending cash around $1.5 million. We had some significant progress with our debt, where when we took at our new debt with PeopleCube we were able to pay off some of our higher percentage debt, some of our 9% and 15% debt that was complicating our balance sheet. And our P&L in the past, most of that is now gone. We've simplified and we drastically reduced the number of debt holders that we have, which helps as well.

Deferred revenue was slightly down quarter over quarter. We think we can pick that up to positive deferred revenue growth here. Coming next quarter. We had good SaaS bookings year over year. Not enough to change that number drastically quarter over quarter. Really, we've been managing our AR very tightly, Don. We've been in the 30% to 36% range for the last handful of quarters. We'll probably be closer to 30% as we move this business forward. We're -- with a bigger infrastructure from PeopleCube we're looking to make positive changes in working capital management.

Obviously we have to be tighter from a covenants perspective with our new lender. So we're looking for areas of improvement in the balance sheet as we go forward as well. Goodwill and intangibles will be very different next of you see them. We're in the process of managing the purchase price allocations and intangible valuations as it relates to PeopleCube. And then lastly Don, from a shareholders equity perspective, we're at $3.2 million right now. We issued some stock from our PeopleCube acquisition, and we have some one time costs that are pretty heavy related to the acquisition as noted in our 8-K. Those will more than offset, so I don't anticipate any issues with our NASDAQ minimum of $2.5 million.

Okay. And there could be some one time charges this quarter as well?

Don, as we look in third quarter and fourth quarter, the third quarter will have some integration of PeopleCube one-time charges. The fourth quarter we think will be relatively clean. And so we're really looking at the work being done in the second and the third quarter. We'll have some one-time charges. We'd showed you the one-time charges in the second quarter. We think the fourth quarter will be a relatively clean quarter, and we're excited about that to show the investors. And I think the post acquisition balance sheet and earnings with PeopleCube obviously we'll go through a lot of detail in the third quarter call.

Okay. And PeopleCube's revenue retention is in line with the Company?

Yes. No, I think -- great question. And from a PeopleCube perspective, they were in the space of net simplicity. So the meeting room scheduling, they sold to a little bit of larger clients. And as far as revenue, they were on pace to do approximately $10 million or so. There's some deferred revenue adjustments that we'll have to make. But as far as cloud based bookings, they have panel strategy right with us. We're going to a lot of the same clients. So what we're able to get is synergy from a cost side, where we can take out some costs where we have duplication, but then the nice thing about it is now we have products to go to the middle market as well as the large scale customer. And we're excited about that opportunity, because we think that there's some sales synergies. And good news for those clients.

Very good. Great quarter. Thank you.

Thank you. I'm showing no further questions at this time. I would now like to turn the conference back over Pat Goepel for closing remarks.

Yes, just very, very excited about the second quarter. Very promising outlook going forward in the third and fourth quarter as well as next year. Those of you that have been with us three years, it's been quite a journey. I know I reflect back often that first day or so we were about $0.20 a share and we had to go through a lot of turnaround work to get to this point. And we've sold off divisions of businesses and got out of bad contracts tracks all that.

Now, really it is refreshing because it's all about growth, and it's all about the building for the future. And we think we've done some great strides towards that in the last nine months with our acquisitions of ADI, Legent and PeopleCube. And what we're building here really is a cloud based company that is going to be fast growing organically as well as with acquisitions. It's going to be profitable. We think we're in spaces that are nice niche spaces of big markets, and we think we have the ability to grow. And we think we're in the early innings of a long game, and we're in it to win it.

And those of you that have rewarded us with your shareholdership, we think of you every day and we're invested right alongside of you. So I'd like to thank you for the call, and look forward to the next time we get a chance to speak. And if you want to talk to us at all one on one please give us a call and we'd be happy to answer any questions. Thanks again.

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