Asure Software Inc (ASUR) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to Asure Software's corporate conference call.

My name is Amanda 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 toward the end of today's presentation.

I would now like to turn the call over to Cheryl Trbula of Asure Software.

Please proceed.

Thank you, Amanda and welcome, everyone, to Asure Software's conference call.

Before we start, I would 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 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 have completed our review of the quarter, we will 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.

Thank you, Cheryl and I'd like to welcome everyone to our fourth-quarter call, and our fourth-quarter call is unique in that it's also our annual call for all of 2014 and then we will give preliminary guidance for 2015.

So we have a lot on our agenda today.

We'd like to welcome investors, shareholders, analysts, clients and employees and other interested third parties to our call and I'll begin by covering the fourth quarter and 2014.

Brad Wolfe will deliver the actual results for the quarter and the year and then I will close the call before we have any questions with some comments on 2015 and guidance.

For the fourth quarter and 2014, the fourth quarter was a solid quarter.

We achieved revenue growth -- it was our second highest revenue quarter since I have been here and I was pleased with the continuing improvement.

I do think we were a little bit light in revenue and would like to see those numbers a little bit higher, but a good solid quarter for (technical difficulty) on revenue.

As far as other key indicators, most of them were up and we were pleased with the continuing progress of the business in the fourth quarter.

We are also (technical difficulty) looking to set up for 2015 and expenses a little bit higher in that we are going to grow, so we were on the lower end of the range with the exception of EPS, which we were slightly below.

As far as key sales in the quarter, we had Deutsche Bank, King Saud University.

We had developed a global strategy in 2014.

We were very pleased to hit and succeed with King Saud University, which is an expansion geographically for us.

Dynamex on the AsureForce side was a key sale and we are pleased with that result.

I think you'll see an expansion of the mobile strategy in TimeForce and AsureSpace taking hold and we are excited about the opportunities that that productline will bring us.

We were active on the product front as well in the fourth quarter.

We successfully completed some integration work with Cisco, which we have a big initiative around hoteling in real estate and our story is a much bigger one in the past, and integration with videoconferencing companies like Cisco will have continued improvement on the results going forward.

Finally, in Japan, we had a partnership with DOUMA and we are pleased to open up the Asian market as well.

And for the year in 2014, some of our highlights.

First of all, we refinanced in the first quarter with Wells Fargo.

That will save us about $1.4 million in cash flow through the year, both hard costs, as well as cash flow and payments.

We are very pleased to have that partnership with Wells Fargo.

Just before earnings, we announced that we had some covenant relaxation in amendment for this year and the following year and really we are going to put our efforts towards growth, as well as our strong partnership with Wells Fargo.

Remind everybody we have a deadline of about $14 million currently.

We have a $3 million revolver and a $10 million facility that we could use for acquisitions and we plan on being active in looking for opportunities in the future.

In 2014, after acquisitions, we achieved about 7% organic growth.

We are pleased that we are positive.

We think we've set ourselves up pretty well for next year, so we are pleased to be able to do that and achieve that.

We did that with EBITDA growth of approximately $0.5 million.

Our net income grew $0.18 in 2014, so not only were we growing top line, we are also growing bottom line.

We have 34 salespeople now trained and ready to go and have had some success in the Street.

Our pipeline has gone up dramatically.

That being said, I am not as happy with our close percentage and I think we are going to work hard on some of the cycles of how do we close a little bit better.

And I think as the salesforce matures, I think that will be an end result.

Pipeline is great, but you have to close and our focus will be on that.

We expanded our global footprint in 2014.

I mentioned a partnership in Japan.

I mentioned the offices in the Middle East, as well as Southeast Asia.

We sold $2 million deals in 2014, PSSI and KPMG.

We will continue and are very active in big deals.

I will say we are trending upmarket a little bit in our proposals and our deals.

Those tend to have a little bit longer sales cycles.

We are bullish for 2015, but it does take time.

We have a new salesforce with a new market strategy that is evolving and more comprehensive.

We are in bigger deals.

We think the fruits of that will pay off, but it has taken a little bit longer and we have two anchor accounts, or [iceberg] accounts, to build off of, which we are excited about and that will bode well for the future.

Our mobile development, we launched NowSpace and we have mobile products in both Force and Space, as well as hoteling, which will lead us to success.

We did two acquisitions in 2014, Roomtag and FotoPunch, that were technology acquisitions that will enable us to grow forward.

And finally, we consolidated the Northeast office, which will save us some money going forward and it's a state of the art office that we are very pleased that we can take clients to, as well as a good work environment for the employees.

So a lot happening at Asure, a lot to accomplish.

A lot of work to still do and build a great company and that is what we try to do every day.

With that, I'm going to turn the call over to Brad for very specific results of fourth quarter and the year of 2014.

Brad.

Thanks, Pat.

Good morning, everyone.

I'll take a few minutes to go over the 2014 fourth-quarter financial highlights and then we will be happy to answer any questions during the Q&A period at the end of this morning's call.

In the fourth quarter, revenue was at $7.1 million, a 6% increase from the $6.7 million reported for the same quarter last year.

Year-to-date revenue was at $27.2 million, up 7% from $25.5 million reported for the same period of last year.

The year-over-year increase in both fourth quarter and year-to-date revenue is comprised primarily of increases in cloud, hardware and professional services revenue as we continue to emphasize our integrated cloud-based solutions.

As compared to the fourth quarter of 2013, hardware revenue was increased $194,000 or 28%; on-premises software license revenue increased $92,000, or 47%; cloud revenue increased $72,000, or 2%; and maintenance and support revenue increased $30,000, or 2%.

Professional service revenue decreased $19,000, or 2%.

As compared to 2013, year-to-date cloud revenue increased $841,000, or 7%.

Professional services revenue increased $686,000, or 26%.

Hardware revenue increased by $487,000, or 23%; on-premises software license revenue and maintenance and support revenue decreased by $282,000, or 4%.

AsureSpace revenue was $4 million for the fourth quarter, an increase of $187,000, or 5% from the $3.9 million recorded for the fourth quarter of 2013.

This increase was primarily due to an increase in cloud revenue and on-premises software license revenue, offset by a decrease in professional services revenue.

AsureForce revenue for the fourth quarter was $3.1 million, an increase of $183,000, or 6% from the $2.9 million recorded for the fourth quarter of 2013.

This increase was primarily in hardware and professional services revenue offset by a decrease in cloud revenue.

Recurring revenue as a percentage of overall revenue for the quarter was 73% compared to 73% last quarter and 75% for the fourth quarter of 2013.

Gross margin for the quarter was $5.3 million, or 75%, up $205,000, or 4% from the $5.1 million, or 76% year-over-year and down $122,000, or 2% from the previous quarter gross margin of $5.4 million, or 77%.

Year-to-date gross margin was $20.9 million, or 77% as compared to $19 million, or 75% for the same period of last year, an increase of 10%.

EBITDA for the quarter was $1.35 million, excluding one-time items, consistent with the $1.38 million reported in the previous quarter and down from the $1.48 million in the fourth quarter of 2013.

We incurred $145,000 in one-time items this quarter, which were primarily (technical difficulty) relocation expenses.

Year-to-date EBITDA, excluding one-time items, was $5.1 million, up from the $4.8 million reported for the same period of last year.

For the year, we have incurred $796,000 in one-time items, which consisted of the loss on the debt refinancing of $1.4 million, offset by the gain on settlement of notes payable and litigation of $1 million, as well as severance, relocation, legal and (technical difficulty) fees and other one-time expenses.

Diluted net income, excluding one-time items, for the fourth quarter was $0.04 per share.

GAAP net income per share amounted to $0.01 per share.

The per-share difference of $0.03 is due to the one-time items discussed above.

Year-to-date diluted net income, excluding one-time items, was $0.08 per share.

Year-to-date GAAP net loss per share amounted to $0.04 per share.

The per-share difference of $0.12 is due to one-time items.

Cash flow from operations for the quarter was $708,000 and $2.706 million year-to-date.

Capital expenditures were $460,000 for the quarter and $807,000 year-to-date.

For 2015, we expect year-to-date revenue to be $30 million with EBITDA, excluding one-time items of $5.6 million and net income per share, including one-time items, of $0.25.

At this time, I would 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, Brad and I want to thank Brad for his efforts.

Brad joined just in the first week of October and has done a great job digging into Asure and digging into the year-end process and has done a great job and look forward to a fantastic 2015.

For 2015, we have four big initiatives operationally or internally.

One is growing globally.

We are going to our clients actively.

We are no longer defensive in those conversations.

We are actively growing with our business partners and our company partners globally and we think that we can achieve tremendous results looking at this sales process and our client engagement process from a global perspective.

We are now in 80 countries and global is not a novelty.

It's a way of doing business and we feel that we have a great story for them, especially now that we have mobile products.

We have hardware, kiosks or panels.

We have a bring-your-own device strategy, a number of different ways for clients to engage with us that our software and hardware-related to grow globally and it's been very well-received.

So that is one of our big initiatives to grow.

Two, we have an on-premise to on-demand initiative.

And what that means is we are taking some of our legacy products and we are going to sunset or retire them over time and then we're going to go to our clients now that we've built out our SaaS or cloud software to a level of satisfaction for all our clients and encourage the migration and the next generation of our services.

We think the client value proposition is great.

We think the market acceptance is great and it will be a fantastic experience for them.

So we actively have an initiative internally to grow with our clients.

Three, we are also incorporating mobile as part of our solutions and whether that is Apple or Android operating systems, we are really working hard to get mobile devices in our clients' hands so they can use our software and get everybody in the Company using our software and we think that is going to pay off for more revenue per client and client satisfaction.

And then, finally, internally, we have straight-through processing.

Brad is personally leading this one where what we are looking for is the key data in once and that it never has to be key data again and we're using salesforce.com and Great Plains as our sales operating system and our finance operating system and we are going through the process where we don't have to re-key.

Today, we do have some re-keying opportunities and we feel that there is ultimately quite a bit of efficiency to get to a straight-through processing model and so we are going after that internally.

So internally, we have a really -- couple of growth initiatives, as well as (technical difficulty) initiative and then one what I would call a business model initiative that has us set up for the future.

And then finally, one non-organic initiative is I am on the hunt for acquisitions and looking to grow the Company both organically and via acquisition.

And if we found the right acquisition that is in the spot where we could acquire more customers and put them on our platform, we think that would be tremendous value to our shareholders.

So we are actively looking at that.

Brad mentioned the guidance.

I think guidance for a young company and a small company is always kind of an art and a science and I think sometimes I've been aggressive in the past.

I think you do want to set a tone that you want to grow aggressively.

We set guidance at a little over 10% growth, $5.6 million EBITDA, which we are growing at the same EBITDA percentage, but we are putting more and more money into growth and then $0.25 a share on the bottom line, which we think we are comfortable with that guidance going forward, that is an improvement, but also if we can grow faster in some of the initiatives or grow faster with acquisition, that we can add to it through the year and we will update that on a quarterly basis.

So we covered a lot today.

We covered fourth quarter, the year 2014 and a preliminary look at 2015.

I am delighted at this point to entertain and answer any questions that you may have.

With that, operator, if we could take questions.

(Operator Instructions).

Jeff Houston, Barrington Research.

To start off with, you mentioned that the pipeline is strong, but closing needs to be improved a bit due to the newer salesforce and moving upstream to bigger deals.

Could you provide some more color on the pipeline?

What is the mix between Force and Space with seven-figure deals and we are pretty far along here in the first quarter, has there been any progress on closing any more deals in either of those two productlines?

Yes, I think a couple things.

One, we consciously, with our acquisitions and with the building out of our products, we have gone upmarket and I think we hired people usually in the January timeframe.

We trained them, I think, pretty well and Mike Kinney personally takes responsibility.

He has done a nice job of getting in training classes, but I think what we have found is we have a pretty good sales funnel.

What I think the move from the midmarket to slightly upmarket, or more comprehensive solutions, whether that's mobile, the integrated hardware with panel, as well as the cloud, what we are finding is that sales cycle (technical difficulty) extra 30 days or so.

And then I think what we are also finding is purchasing departments have gotten more involved and there's more signoff to process.

So what I would say is the first quarter seasonally is usually not a very strong quarter for us.

Historically we go up by quarter.

I think you will see that we will have a really strong first half of the year.

What I would say is first quarter we are in that last week where we have several deals.

Whether they fall into the first quarter, second-quarter, don't know yet.

But what I would say is half of the year looks strong.

I think AsureSpace and Space with the concept of this hoteling, hoteling is gaining really a lot of traction quickly.

We are bidding on that and we have several big deals in the pipeline, as well as several very, very strong interested partners in hoteling.

So we are excited about that opportunity.

On AsureForce, I think our cloud activity has been very brisk and we are very pleased with the pipeline in that area, but we do have to close and I would say that first half of the year, we are going to really focus on that and in the second half of the year, we think we will see continued improvement.

And so that's kind of where we are on sales.

Good.

That kind of leads into my next question about how we should think about growth and profitability trending throughout the year.

It sounds like possibly it's going to be a bit more back-end-loaded?

I think over the last couple of years, I think you can see our results that typically the first quarter is the lightest on the revenue in the fourth quarter; third and fourth quarter are the strongest.

I think you will see a very similar pattern than years past.

I do think that's just kind of the flow of our business.

But that being said, I think we will have continual improvement throughout the year.

I think we have visibility to a better year already than we had last year, so we feel really good about that.

And then if we have a chance for an outstanding year as some of these clients that are in the pipeline mature into sales and revenue opportunities.

And just kind of -- we had two $1 million sales in the history of our Company.

They both happened last year.

The pipeline for that is tenfold, especially compared to where it was last year.

That being said, it does take time to close those and we are relatively early in the cycle, so I don't want to pound the table that everything is great and everything is going to happen in the first quarter, but what I would say is we feel very strong about our opportunity to grow and our opportunity to improve on the business in 2015.

Great.

Then last question from me is looking -- you mentioned mergers and acquisitions a couple times in the dialogue.

What type of acquisitions are you looking at?

What spaces?

Is it mostly customer acquisitions and how big of a deal would you consider?

We feel very strongly, Jeff, about our platform strategy of what we've built out the last couple years and our Petri dish, if you will, has been the business that we currently have and we are migrating clients to the cloud and selling cloud and have done a good job overall of continuing to grow our cloud business internally.

So we feel that we are ready to add more clients to that platform.

Brad's initiative with straight-through processing will help us as well.

A year ago, we went out and consolidated our back-end cloud environment and did a great job in doing that.

Now we are going to consolidate our back-end finance area with salesforce.com where we have a straight-through order entry process.

So we are ready to take on more business in the current businesses that we are at.

I don't think you'll see a third leg to the stool.

I think AsureForce and AsureSpace is kind of where we are at, so we are looking for those type of customers to add to our platform.

I'm not necessarily looking for a technology acquisition at this point.

We think we did that and we are a better company for that with FotoPunch and Roomtag.

So we're looking for clients.

As far as size, I think a little bit bigger than historical.

So historically, we have taken a couple small acquisitions and added them.

I think we'd like to get a little bigger, but really we are going to look at the fit, but a $5 million to $10 million or maybe even a $15 million acquisition if we found the right one that would be accretive and in the same business that we're in, we think that would be a home run for us financially as well as strategically.

Great.

Thank you.

(Operator Instructions).

[Mohan Fakat], BellSouth Capital.

I have a couple of questions.

So do you have the churn for 2014 versus 2013?

The retention rate?

Yes, the retention rate.

Yes, collectively, we are about 91% on our retention rate.

Okay.

And is it an improving trend from 2013 or was it around the same last year around?

Yes, about the same rates of retention, maybe slightly up on the cloud business and perhaps slightly down, maybe a percentage point on the on-premise business.

Okay.

The next question was price increases for 2014.

Is that something that you can disclose?

Across the board, what kind of price increases did you bring on the recurring side of the revenue?

(multiple speakers)

Yes, our average price increase is at 4%.

Slightly lower on the cloud business and slightly higher on the legacy business.

Okay.

And how do you compare versus the industry on the growth, the industry for that Force and Space (inaudible), the rate at which they are growing and compare that to how Asure has done during the last couple of years versus how it is done in 2014.

So a couple things.

Organic growth we are continuing improving slightly.

We are not growing at the pace I want to grow, Mohan.

And I think the key for us is to deliver that in 2015 and my initiatives are grow, grow, grow because I think operationally I've got the platform now where I want it, but I've got to grow as a company and that's our focus.

As far as the industry, I think if I look at the industry, whether it's IDC, or Gartner, etc., I think we are growing at about the industry average, but I think with our lead in technology, I don't want to grow at an average.

I want to grow at a faster clip than the average and I think there's great opportunity for us and our challenge is to capture that opportunity.

Okay.

And you referred to the salesforce being ready and to take on the growth initiatives you have in place.

Do you have the number of salesforce employees who are under 18 months versus those who have been around for much longer?

Yes, I would say roughly, Mohan, and you are asking me a question, I am just kind of giving you off the cuff, but I would say about half is -- well, probably about 60% is under 18 months in their tenure.

Okay.

That's most of the questions I had.

I had one more question on the depreciation and amortization on the cash flow statement.

Was $2.821 million and in the P&L, it was $1.999 million.

So I was trying to reconcile how the difference came about.

So, Brad, if you could help me out there.

I suspect you're looking at depreciation, the other one is depreciation and amortization combined.

Yes, yes.

Okay, so the P&L doesn't have depreciation and amortization together?

It has only amortization?

The P&L that you are looking at should have them combined together.

I would have to look -- (multiple speakers)

Yes, we can look at it.

That was a housekeeping question.

That's all the questions I had.

(multiple speakers).

We can touch on that other question later.

Thanks, guys.

Look forward to future conversations.

Thank you.

I'm showing no further questions at this time.

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

Yes, I would like to thank everybody for joining the call today.

I hope you are pleased with the results and we thank you for coming along in our ride.

Also what we did announce was I would take up to a 10% position; plan on doing that.

I am in the quiet period right now, so it's hard for me to do that, but second quarter I think you will see that.

I invest alongside of you and I assure you I take our improvement and our Company very seriously.

So I thank you for your investment and we will continue to deliver good results and we are looking for the breakthrough that we think we have if we can maximize our opportunities.

So that is our focus this year is to grow and we think if we grow, your investment will grow quite nicely as well.

So that's our focus and we thank you for your investment and thank you for your time today.

Goodbye.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude today's program.

You may all disconnect.

Everyone have a great day.