Asure Software Inc (ASUR) 2017 Q3 法說會逐字稿

Good morning, and welcome to Asure Software's Third Quarter 2017 Earnings Conference Call.

Joining us for today's call are Asure's CEO, Pat Goepel; CFO, Kelyn Brannon; and Director of Human Resources, Cheryl Trbula.

Following their remarks, we will open up the call for your questions.

With that, I would like to turn the call over to Cheryl, who will provide the necessary cautions regarding the forward-looking statement made by management during this call.

Please proceed.

Thank you, operator, and good morning, everyone.

Before we start, I would like to mention 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 or guidance.

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 outcomes.

You are urged to consider the risk factors relating to the company's business contained in our reports on file with the Securities and Exchange Commission.

These risk factors are important, and they could cause actual results to differ materially from expected results.

Finally, I would like to remind everyone that this call will be recorded, and it will be made available for replay via a link available in the Investor Relations section of our website at www.asuresoftware.com.

With that, I would now like to turn the call over to our CEO, Pat Goepel.

Pat?

Thank you, Cheryl, and I'd like to welcome everyone to Asure Software's Third Quarter 2017 Earnings Call.

We certainly appreciate your interest and continued support, whether you're an employee, a client, an analyst or a valued third-party resource.

Third quarter was fantastic.

First of all, some highlights.

We had a record revenue quarter for Asure, and I think that really reflects a continuation of the strong growth and operational momentum we've delivered over the last several quarters, including the acquisitions that we made early in the year and last year.

Notably, our top line grew double digits to a record $15.5 million in the quarter.

This achievement was driven by a 25% sequential and 97% year-over-year increase in cloud revenue.

We also had solid contribution from the hardware revenue for Asure, which was up 48% from Q3 last year.

And cloud revenue, as a percentage -- and we've told people for several years we're transforming to a cloud revenue company, was for the first time over 70% of total revenue in the quarter.

On top of this, our cloud bookings were up 268%.

Eyal Goldstein, as our Chief Revenue Officer, made a strategy change early in the year, where all salespeople sell all products, and it's really paying off for the company.

To be 268% in cloud bookings in the third quarter was fantastic.

We're also migrating some of our maintenance customers to the cloud, and that program has been very successful.

When we do migrate customers from a maintenance pricing to cloud pricing, we get on average about 2.2x revenue for those customers.

And we've had continued success in that program.

Our operating costs were up both sequentially and year-over-year, primarily due to higher SG&A as well as nonrecurring and noncash expenses related to the 2 acquisitions that we completed in May.

What we're doing is centralizing our service model in some of the key areas away from the customer.

And we did have some severance associated with that in addition to a location closing down.

Our compliance spend is also up.

And that compliance -- Kelyn and I will talk about a little bit later, but we have 606 as well as SOC 1, SOC 2. And so those costs have been up in the quarter.

From a client activity perspective, the third quarter was a robust period for us.

We expanded our sales infrastructure, and we were able to get several key wins.

Broadridge Financial, Department of Health and Human Services and Anthem were some big wins for us.

As far as cloud deals with HCM, our human capital management product, we had The Shape of Behavior, Green Bee Services and Cobalt Ventures.

And then we also were able to do well across the pond with companies like easyJet and Global Radio.

And so we welcome them as clients this quarter.

Our sales team is very, very effective in adding new logos to our roster as well as expanding with existing clients.

Our average deal size is up year-over-year, and our customer acquisition costs have been down.

Our pipeline is strong.

And sequentially, our pipeline grew 33%, which should set us well positioned for the fourth quarter, especially in the human capital management area.

Cross-sell opportunities continue as well as the new logo from the expanded sales force.

And then backlog -- and deferred revenue was up about 12% from the prior quarter.

More importantly, 48% from the previous year.

And the backlog is now with deferred at $20.2 million.

From a product perspective, we weren't standing still, and we believe our success in technology innovation is going to drive revenue growth in the future.

We launched 2 new products in the quarter, AsureForce Mobile, which allows employees to punch in via the mobile phone.

And Evolution Advanced HR 2.0.

When we took over the company in May, that was our key initiative was to roll out a product October 2. We did a lot of the work for that product in the quarter, and we announced its successful launch on October 2.

AsureForce Mobile also brings us the goal of building companies for the future.

We start to introduce geo-fencing, which you cannot only tell if the worker punched in, but are they in the area of the building they're supposed to be?

And a lot of our companies have requested that, whether it's home health care, construction, other companies where workers are dispersed regionally or locally in different areas.

As far as HR 2.0, we talked about it at HR Technology.

It got very good reviews.

And the beta customers and customers that we're bringing on, the feedback has been very positive.

We also did a lot of work on the acquisition front.

Associated Data Services out of Birmingham, Alabama, was an acquisition we made October 2 as well.

We did a lot of the work, obviously, in the third quarter.

And so we're very pleased to bring the Birmingham location into the Asure family.

But before I talk a little bit more about the strategic M&A, I'd like to introduce our new CFO, Kelyn Brannon, and she's going to walk through the financials.

For those of you that haven't had yet the pleasure of meeting Kelyn, she is a welcomed addition to the Asure family.

She's sharp, gets along very well with the Asure culture.

And she's had a resume of success in the past, including international CFO of Amazon, taking Arista Networks public, Calypso Technology and Calix.

And I feel over the 8 years, that this is the best I've kind of felt with a CFO in the chair.

Kelyn is going to do great things.

I'm anxious for you to meet her.

She's the right person, the best fit, to lead the financial aspects of Asure's long-term plan as well as short-term.

We're confident she's going to add great value to the organization.

And with that, I'm going to turn the call over to Kelyn.

Thank you, Pat, for the introduction, and good morning, everyone.

It's a pleasure to have this opportunity to speak with you today.

I'm thrilled to be joining Asure's leadership team at such an exciting time in the company's development.

Asure's solid financial and operational momentum, strategic acquisition, industry-leading service offering and an overall market reach have ideally positioned us for success well into the future.

Now turning to our financial results for the third quarter ended September 30, 2017.

Our revenue increased 65% to a record $15.5 million from $9.4 million in Q3 of last year.

The increase was driven by a 97% increase in cloud revenue, 48% increase in hardware revenue, 29% increase in professional services revenue and a 9% increase in maintenance and support revenue.

This was offset by a 21% decline in on-premise software license revenue compared to Q3 of last year.

Our recurring revenue as a percentage of total revenue improved to 80% from 74% in the third quarter of last year.

Our gross margin for the third quarter was $12.1 million or 78.1% of total revenue.

This was an improvement from gross margin of $7.4 million or 78.5% of total revenue in Q3 of last year.

Now looking at our profitability metrics.

EBITDA, excluding onetime items, totaled $4 million, an increase of 73% from $2.3 million we reported in Q3 of last year.

Our GAAP net loss totaled $1.3 million or a negative $0.10 per share.

This compares to net income of $315,000 or $0.05 per share in Q3 of 2016.

Excluding onetime items, our non-GAAP net income for the third quarter of 2017 totaled $301,000 or $0.02 per share.

This compares to net income, excluding onetime items, of $680,000 or $0.10 per share Q3 of last year.

Our non-GAAP net income totaled $1.9 million or $0.15 per share.

This compares to non-GAAP net income of $1.5 million or $0.22 per share in Q3 of 2016.

Now turning to our backlog, which we define as sales bookings that have not yet turned into revenue or deferred revenue, including both repetitive and non-repetitive product line.

For repetitive products, one year's value is included in backlog.

Our backlog totaled $20.2 million, a 12% increase compared to the prior quarter and a 48% increase from Q3 of 2016.

We continue to expect many of our enterprise clients to move through the implementation process this year, which will result in conversion from backlog to reported revenue growth.

Shifting gears to our balance sheet.

At quarter-end, we had $27.5 million in cash and cash equivalents and $76 million in long-term debt.

Finally, our deferred revenue at quarter-end totaled $13.5 million, which was up from $9.7 million in Q3 of last year.

That concludes my prepared remarks.

And so I'll now turn the call back over to Pat.

Pat?

Thanks, Kelyn.

And I'd like to briefly shift back to the tuck-in acquisition we completed on October 1 here and then turn to our guidance and business outlook.

ADS.

Our acquisition of ADS in early October is consistent with our vision to deliver a unified SaaS-based human capital management software platform and workplace solution platform to support an evolving mobile workforce.

As a long-standing reseller of human capital management software, ADS provides natural customer and technology synergies between our organizations.

It also extends our footprint in the Southeast market, a region where we've already been very successful and we've benefited from small business expertise of other local services to leverage our payroll and human resource solutions nationally.

We look forward to the integration.

And the integration, I'm pleased to report, has gone very smoothly.

We've begun to realize revenue and EBITDA improvement, similar to what we achieved from our earlier tuck-ins this year, Compass, PSNW and CPI.

Now if I could turn to guidance.

Our performance the first 9 months of the year has given us the confidence to reaffirm our fiscal 2017 guidance, which we increased back in August.

So for fiscal '17, we expect to achieve between $54.25 million in revenue to $56.25 million in revenue with EBITDA, excluding onetime items, of between $12.2 million and $13.5 million.

Our GAAP -- non-GAAP net income per share will be between $0.50 and $0.56, excluding onetime items, and our net loss per share will be between $0.06 and $0.02, excluding onetime items.

Keep in mind that our guidance for fiscal 2017 does not include additional acquisitions.

And I would tell you, M&A activity is brisk, but I do believe we have several deals in the pipeline that will be '18 events, not '17.

And we're looking to consummate transactions early next year.

As far as '18's outlook, we're -- looking ahead we remain focused on our key initiatives [will] continue to drive us forward.

This will include improving our financial visibility, accelerating the velocity of our cross-selling opportunities and scaling our business both organically and through strategic acquisitions.

I talked about acquisition pipeline being strong.

We have good visibility into 2018 both in our organic business and our strategic acquisition pipeline.

From an organic standpoint, we expect to achieve approximately $70 million in revenue, which represents a 24% to 29% improvement over our current 2017 fiscal guidance.

On top of this objective of ours is to complete multiple tuck-in acquisitions, where we already service the technology of service bureaus using our software, which would add $10 million of accretive inorganic revenue in 2018.

As far as the pipeline goes, I anticipate that we'll achieve that $10 million in the first half of 2018.

Although we believe we have the right growth strategy, significant financial and operational momentum, a strong balance sheet and industry-leading solutions to scale our business even further both in the near term but also in the long term as well.

Clearly, we are very, very pleased with our positioning and the progress we're both making financially and operationally.

Our enhanced and refocused sales efforts are allowing us to capitalize on our many opportunities in front of us, [the facts] that are reflected in our robust pipeline and sales performance year-to-date.

Also, I'd like to comment on our management team.

We're now one level or two levels deep in the management team.

I'm very pleased with the management team.

Some of the management team has been here for years.

Others have joined over the last year or so.

We brought Bob Dietz, Web Hill, Kelyn Brannon to the fold.

And these people are making immediate contributions, in addition to Eyal Goldstein, Cheryl Trbula, Joe Karbowski, Christine Bellaire, who have been with us now well over a calendar year, and in some cases, 7 years.

It's the best I've felt about the management team running the business in my 8 years at Asure.

So in summary, our results in the third quarter reflect the increasing demand for our solutions as well as the operational synergies of our strategic plans.

These dynamics have favorably positioned Asure for long term.

I also feel that we're on track to get our midterm goal of surpassing $100 million in revenue with double-digit 20% to 25% EBITDA margins.

And with that, we're ready to take some questions.

(Operator Instructions) And our first question is from the line of Derrick Wood with Cowen and Company.

Pat, you've been working on rebranding the HCM payroll side of the business and on-boarding more executive talent.

And it sounds like you talked about some changes from a go-to-market sales standpoint.

Can you just talk about the progress you're making and what kind of impact you've seen in the business over the last few months?

Yes.

Well, I think, from human capital management, one of the things we believe is human capital management, you can't have an effective human capital management strategy without having a very effective workplace strategy as well as an asset strategy.

So we're bringing the 3 products and solutions together into a platform.

We think we're getting traction, as evidenced by our bookings number has been fantastic this quarter.

Our revenue growth has been solid.

We have tuck-in acquisitions pipeline that's very strong.

And together with the salespeople selling all the products into one platform or one solution, we think we can make tremendous progress not only this year but for years to come.

Okay.

And I guess on that -- on the workspace side, it -- from what we've heard, it sounds like maybe there's more favorable competitive conditions out there.

Can you just talk about the win rates or just the overall demand on AsureSpace?

Well, first of all, on the human capital management side, we're very pleased with that.

And I think you'll see us bring more reporting and analytics to the table to continue with that growth.

On AsureSpace, we've been fortunate to win a number of large company multinationals that have been very successful.

When we're in deals, we win greater than 50% at a time and feel that we have a pretty robust pipeline going into '19 -- '18 and '19.

Great, great.

And I guess one for Kelyn.

Really nice to see getting back to positive cash flow in Q3.

Any thoughts about Q4 or even into next year in terms of the trend around cash flow?

Yes -- no, Kelyn has done a great job of bringing cash flow discipline in her short time here at Asure.

Typically, the fourth quarter is a strong cash flow because early in the year we pay all our employer taxes, and we do have a lot of activity around customer starts.

And end of the year is usually a good cash flow quarter for us.

Kelyn and I will have a cash flow forecast the next call through 2018, but she's been on the discipline of cash flow and bringing some good discipline to Asure.

As far as EBITDA and cash flow guidance, we typically believe that it should match EBITDA less our hard interest cost and any equipment capitalization that we have.

That typically has been our guidance, with fourth quarter slightly being favorable due to the factors I mentioned.

And our next question comes from the line of Richard Baldry with Roth Capital.

You're talking about the pipeline of acquisitions could be, call it, completed by the first half of next year, given the -- what you see in your pipeline.

You talked about it -- to make the framework for your $10 million incremental revenue.

Can you talk about, if that happens, do you think you'd see a pause then to integrate those?

Obviously, the pause this quarter, you showed how much EBITDA you can drive out sequentially in sort of a quieter period.

Or do you think that you would just continue to pursue steady-state acquisitions as opportunity arises?

Yes, Rich.

Great question, and thanks for your interest.

I think one of the reasons we did the ADS acquisition in October was to make sure we had a window in acquiring our first iSystems deal.

And we wanted to go through that in a vacuum where we had just the one acquisition.

I think it's giving us confidence that we can do more over time.

What we'll do is absorb the first half of the year.

My guess is, though, there won't be that much of a pause, but we'll continue to make that as a steady state of acquisitions going forward.

Now some of that is subject to demand, market conditions and all that, but the whole idea is for us to get the scale.

When we become a $100 million company with 20%, 25% EBITDA margins and the kind of growth rates that we're starting to get traction, we become more and more attractive to the investment community.

So we're going to continue down that path.

I would say we're less likely to pause.

We did the pause earlier this year because iSystems was new to us.

But now that iSystems isn't new to us, I think you'll see us continue to make these more a matter of course.

And your pro services line had some strength in the quarter.

So I was sort of curious, is that timing issues?

Are there some new offerings within that group as you kind of move to a more centralized service model, to bring more of that in-house versus third parties maybe?

Sort of how repeatable, extensible do you think that is?

No.

I think we benefited from some big installs, the Fannie Mae, in addition to some big space contracts.

I think professional services will continue to have some lumpiness based on projects that we have.

But we have a very senior team of professional services folks and believe that if Eyal keeps driving sales, we'll keep driving backlog and deferred revenue in the area of professional services.

Okay.

And when I look at your guidance for adjusted EBITDA, if I pick the midpoint of it, it would go up about another $1 million sequentially from $4 million to around $5 million.

The range, I think, is $4.3 million to $5.6 million.

So can you talk about -- is that largely about continuing to realize the synergies of existing acquisitions?

Is it more about Associated Data Services coming into the model as well?

Or sort of a little bit of both?

A little bit of both.

We had a goal to take $4 million annually of synergies out.

We couldn't get them all out in the third quarter.

We anticipate we have a few more in the fourth quarter.

And then we also think that we can drive some success going forward with revenue growth.

And the last would be, you are showing some positive internal cash generation.

Given the scale up in EBITDA you're seeing, it seems like that's sustainable.

So what would your thoughts be on how to balance sort of adding cash to the balance sheet short term in periods where you're not doing acquisitions?

Or would you feel like in those periods between acquisitions that your best thing is to take down your debt sort of quickly and maybe that will be more variable quarter-to-quarter?

Yes.

I think, Rich, from our perspective, we're all coin-operated.

I mean, I'll just remind you that management owns 25% to 30% of the shares.

We're all in comp stock, so it's one size fits all.

We're all in it together.

We'll make determinations.

When the debt market is relatively cheap, we'll look at our stock price, and we'll look at debt level.

But I would anticipate the cash will go for acquisitions.

And I don't think we'll necessarily take down debt.

What I think you'll see is we'll grow EBITDA into a debt framework that becomes more and more attractive.

And maybe the last thing.

Can you talk a bit more about the organic growth engine?

So as you're bringing in these companies and realizing the synergies, how much do you feel like you're really pushing to the bottom line versus allowing some of it to stay in sort of the demand-generation engine that you could view as sort of discretionary?

But -- and then how you feel about their performance out on the street?

You talked about them now being able to sell pretty much everything, and that's been helping on the booking side.

So where you feel about the maturity of the group you have now, where you see it heading into 2018?

Yes, I think -- no, I appreciate it, Rich.

And what I would say is, first of all, Eyal's done a great job.

And it's a tale of 2 cities.

The sales reps that have been here over a couple years, we're very pleased with their performance.

We're bringing on salespeople now that have had less than 6 months or less than a year.

And that's always a training opportunity.

We're bringing in some really sharp people because we're able to attract them as our businesses continue to grow.

But a lot of them will contribute, we hope, in '18.

And the jury is still out because they're relatively new.

We feel good about the talent we're attracting and think that selling the whole solution is absolutely the right strategy going forward.

And we anticipate to have very good sales growth into '18.

So -- and then as far as some of the acquisitions, we sent out the model May 22.

We feel good about the bottom line performance of the model.

And then on the top line performance, clearly, we're able to cross-sell and grow revenue.

And we think that will ultimately continue with this acquisition strategy.

So thank you, Rich.

And our next question comes from the line of David Hynes with Canaccord.

So 2 quick questions on the M&A front.

As I think about kind of handicapping the risks in your strategy and with your intermediate-term targets, I mean, how much are you controlling the pace of the SBO acquisitions?

And how much of it is just being opportunistic when sellers are ready to transact?

And then, the second question on the M&A front.

Now that you've done ADS in the iSystems ecosystem, any difference in the margin profile you think you can drive between the iSystems deals and the Mangrove deals?

Short answer, no to the difference.

I mean, we feel that the model is the model which is the same.

So we feel good about that.

As far as controlling the pace, we think communication is the key.

We look at life events.

We look at different service (inaudible) desires of where they want to be and where they want to go and where they are in life.

And typically, we have a good kind of communication pipeline, and then we'll schedule acquisitions that are appropriate.

Some are opportunistic, but most are pretty strategic.

They know we're out there.

We know they're there.

We're a logical fit.

And it's been going along very well.

And I think, in handicapping it, we've been pretty good, maybe not as good as your golf handicap, DJ, but we think we have pretty good visibility.

Got it.

Let me try it another way.

Kind of what -- the opportunities you're pursuing now, I mean, what kind of yield do you need to see to get to that $10 million in acquired revenue next year?

I mean, when you say yield, I think we've been pretty transparent.

I mean, when we work on an LOI, we get it closed.

So that's, I don't know, 80% close rate based on our history.

And we have good visibility into the first half of the year.

So we're pretty focused.

Perfect.

And then maybe we could hear from Kelyn.

You're 5 to 6 weeks into your tenure.

It would be great to get kind of your high-level lay of the land.

What's impressed you so far about what you've seen at Asure?

And where do you think you could see room for operational improvements as you look forward over the next year or 2?

Well, I'd tell you that what excites me about Asure and what's been demonstrated in the 5 weeks I'm here is just, as we talked about, just the industry-leading products that we have, the size of the TAM that we're operating in and its CAGR growth of 10%.

The leadership team here reminds me a lot, although smaller, as the leadership team I worked with at Arista.

So I'm excited to have these very experienced partners.

So there's nothing that's popped up that's made me not want to be here.

I think on the operational side, and I think one of the reasons Pat brought me in is as we're doing these acquisitions, we want to make sure that we're prepared on the infrastructure side to be able to scale, right?

Combined with also now growing up and becoming an accelerated filer, hopefully, soon to be a large accelerated filer.

And so my focus for probably the next 6 to 9 months will be focused on the kind of back end and the infrastructure here.

So as we make these acquisitions, we can get them in very quickly, get the synergies and drop to that 50% margin that we drive to get out of these acquisitions.

Our next question is from the line of Eric Martinuzzi with Lake Street.

I wanted to ask you about the product penetration in the installed base.

One of the things that I like to see is that land and expand.

And I'm wondering if you're measuring internally, if there's any kind of metrics where you could give us a year-ago x percent of the installed base had more than one product compared to today.

Eric, I don't have a real good metric on that.

I'm -- in '19, I think you'll see -- in '18 and '19, I think you'll see us come out with attach rates and a little bit in a cohort analysis.

Right now, we're not quite there just with the plethora of acquisitions that we've done.

But I would say anecdotally a couple things.

Time and Attendance goes with payroll very well.

We're selling those 2 products together, and over 50% now of our pursuits are human capital management deals.

Space and HR go together pretty well.

And we're getting about a 15% to 20% attach rate in those type of sales.

So those are some early metrics.

We're spending some calories here with our COBRA and FSA integration effort with payroll.

And we're out selling those to get better attach rates.

So I think you'll see more metrics to come here in '18 and '19 as we get our arms around the data and around the simplicity of merging the data with these acquisitions.

Okay.

And then shifting to the cost side.

The expenses for -- operating expenses on a GAAP basis for Q3 were $11.7 million.

You did pick up a small acquisition.

I know you also mentioned some of the payroll tax impact here in Q4.

But what's the correct way to be thinking about operating expenses for Q4?

So I think we'll drop about $400,000 or so in operating expenses.

And then we'll probably have a natural hiring of probably 200 or so.

So it's probably somewhere in that area or so.

Okay.

And then the DSO, we see this a lot with companies that are growing via acquisition.

But the DSO has crept up.

If I look back kind of a year ago, you guys were running in the mid-60s.

And then 9 months year-to-date, we're over 80 days on the DSO.

What's -- what are you targeting there?

I do expect it will come down with the exception of acquisitions, but what are you targeting on the DSO?

So I'll let Kelyn speak right after me, but I do want to remind you, first of all, cash is very important to all of us.

And on the DSO, the one change we did make in Q2 of this year is we went to more of an evergreen strategy, which allowed us to post a little bit earlier.

So apples to apples, that effect was, if I remember correctly, about $4 million or so.

So if you strip that out, our DSO isn't a million miles from where it's been in the past, and it allows us ultimately to collect cash quicker.

But Kelyn's focus and some of her background -- I'll let her talk about it.

But she has been very, very strong, even in these first 5 weeks of bringing disciplined cash focus.

That's exactly right.

So one of the first things I always look at is a company's operating cycle and being able to have the data for that.

And so what we're doing is that there's a real focus on our aging, on our processes around our billing and collecting.

And I think, again, what Pat said, we're not too far away to (inaudible) the change for the evergreen contract, and I would see us moving back to those targets, if not improving, going forward.

And when we come out with 2018, I can provide some guidance around how I think about DSO, DPO and cash to collection.

And our next question comes from the line of Vincent Colicchio with Barrington Research.

Yes, Pat.

Could you help us with the organic growth rate in the quarter?

And if you don't have, maybe a pro forma rate?

Yes, we're looking for, like, 10%, 11% in the quarter.

And there's some noise in those numbers just because with the acquisitions, you have to back out royalty.

And you have some cross-sell component in there.

But that's about where we're running at.

We all -- we will have kind of that as the headline metric in '18, as Kelyn gets into the chair and we're centralizing some of our financial systems to be able to get at that number a little bit quicker.

Clearly, the sales growth has helped that number quite a bit.

And then some of the large deals in Space has helped that number quite a bit.

And the gross margin level matched last quarter sequentially.

It's a relatively high level.

I think you were asked last quarter if it was sustainable.

Do you just -- I think you said you think it is.

Do you still feel the same way?

Yes, I think it is.

I think some of it ties to hardware as well.

But our gross margin, we feel, is -- we feel pretty good about it.

And we feel we're right where we said we're going to be.

And then on Anthem and Broadridge Financial, just wondering if you've got land-and-expand opportunities there.

Anthem, for sure, we do.

We've been at a couple locations, and the data has been very positive.

And I think they will continue to grow with us in other opportunities.

Broadridge, we'll see as we go.

They're more a centralization strategy as opposed to a location strategy.

Clearly, we'll hope to earn the right to offer more products going forward.

But in the case of Anthem, I do think you'll see other location opportunities.

And our next question is from the line of Ryan MacDonald with Dougherty & Company.

First off, for you Pat.

Obviously, it's maybe more of a fleeting issue now.

But with your presence in the Southeast, did you see any impact from the hurricanes during third quarter that we might expect to transition over into the fourth quarter?

Yes, Ryan, it's a real small impact.

We did close Tampa for 2 days with the hurricane.

We switched over our service calls to another location.

I was very pleased with our people, they did -- made the right calls.

We did incur probably $40,000 in cost in doing that.

That won't be in the fourth quarter.

But it's a relatively small number.

And as far as growth, we're going to nationalize our human capital management business, and we'll continue to expand.

But we didn't see anything.

It was relatively minor.

Got it.

Got it.

And then I guess looking forward into 2018, when you think about sort of the M&A strategy and your goals for additional -- bringing in additional service bureaus, is there an area or specific regions that you're looking to focus on that you're perhaps looking to expand your footprint into that maybe you don't have as much penetration into as you'd like right now?

Since my competitors sometimes listen to these calls, Ryan, I'm not going to mention that too much.

But I would just say, I'm a pretty transparent guy.

I mean we're going to nationalize our footprint and continue to grow it.

And we'll tell you when they happen.

Okay.

And then just one last one for me.

I guess as you look at the pipeline, particularly on the HCM side, what's sort of the general mix there, I guess, maybe quantitatively or qualitatively, on the mix between sort of expansions within the existing base or bringing on net new customers?

And then how is Evolution HR tracking versus the Asure HCM offering?

Yes, just -- on our land and expand or our cross-sell opportunity versus our new logos, we're roughly 50-50.

So 50% of our SMBs come from current customers that have expanded capabilities and about 50% are new logos.

So that's kind of where we are.

And then the second part of your question, we're very pleased with our mid-market strategy, and we're very pleased with the small market strategy.

We have big-time product development efforts going on in both and feel that our win rates are starting to recognize the product efforts.

So we'll continue to drive both platforms in '18.

And I think we're very optimistic in continued sales growth.

And our next question is from the line of Mike Latimore with Northland Capital.

In terms of the -- just the bookings, how much of the bookings came from the, say the workspace category in the quarter?

Mike, I don't have it quite broken out that way, but I would say probably in the area of 60% or so came from space, 44% or something like that or 40% HCM and Force, something like that.

60-40.

Yes.

And you mentioned Fannie Mae's deployment.

I guess how are the big deployments going beyond that?

HSBC, Procter & Gamble, that sort of thing?

They're going very well.

I mean, large deployments do have variability in them.

Sometimes, that variability is, is it a '17 install versus an '18 install?

Some locations are dependent on a new building in the area space.

And then sometimes, we're at the mercy of a new building schedule or an opening, if you will.

So -- and then, we are starting to learn a little bit about different country's import-export rules around sensors, et cetera.

So we have some variability, but we believe that variability is all understood in our guidance.

Got it.

And then on the acquisition pipeline.

You talked about $10 million of potential acquired revenue.

Is that a mix of Mangrove and iSystems service growth or more skewed to one or the other?

Yes.

I think we're very focused on both.

We believe the -- both models give us opportunities.

Just by sheer number, there's probably 9x the iSystems service bureaus than the Mangrove, and our pipeline probably reflects that just based on the numbers.

But as far as -- there's a lot of attributes, whether it's numbers, quality, regions that we look at, and we feel that there's opportunities in both bases.

And just last.

Do you expect kind of the normal hardware seasonality in the fourth quarter?

I think hardware should track up in the fourth quarter like it traditionally does.

(Operator Instructions) And our next question is from the line of [David Flamholz with GS Trading].

Could you talk about the Xyster Consulting partnership?

And also, can you talk about the kind of WeWork phenomenon?

WeWork now has a $20 billion market cap.

And if Asure is involved in that WeWork space?

Yes, thanks, David, and thanks for the question.

On WeWork, we've seen them a couple times and would love to partner with them.

We think we can bring some technology to the table to help them.

They've decided to go it alone.

Now maybe we can revisit that over time.

As far as WeWork, they have a phenomenal value proposition in their business; they've done very, very well.

They made some decisions to own real estate, as I understand it.

We have not wanted to go into that area.

We believe our strength is core technology companies.

So I'm not as versed on WeWork as probably some investors are that study and own the stock.

I just have a lot of respect for them.

They've done an outstanding job based on market value.

We're focused on our strategy, and we think that we've come a long way, and we'll continue to grow nicely.

And we think we're pursuing those opportunities.

As far as consulting, we have a little bit of a small business consulting arm that we're taking nationally.

We think it will help drive some software opportunities for us.

And typically, when we deploy software, some of the first questions are, well, strategically, "Can you help us consult what we should put in the software?" So we think that there will be a natural evolution there that will help us greatly as we get deployments in our strategy.

So that's kind of my thoughts on that.

All right.

And David, does that answer your question?

Yes.

Thank you very much.

And with that, ladies and gentlemen, we conclude our question-and-answer session.

I'd like to turn the call back over to Mr. Goepel for his closing remarks.

Yes.

Just some headline takeaways.

First of all, we're welcoming Kelyn and think she's going to do an outstanding job.

As far as the quarter, we're really pleased with the record revenue growth.

And the guidance, our strategy is working.

Visibility, we have good visibility in '18 both organic and inorganic.

And then, our quest to be a $100 million company, we think, is in reach over the midterm here.

So we can see it.

We've come a million miles from when we first started 8 years ago, when we were an orphan public company that -- with $0.10 a share.

If you invested with us back then, you had a very good return.

But I'll tell you, 8 years later, I've never been more excited about the company and its growth prospects going forward.

I think we have the right people, the right place with the right strategy at the right time.

And I'm very thankful to be in this position.

I'm very thankful to have investors and employees and clients that we have because I think that will propel us going forward.

Until next time.

Thank you.

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

I would like to remind everyone that a recording of today's call will be available for replay via a link available in the Investors section of the company's website.

This concludes Asure's Third Quarter 2017 Earnings Call.

Thank you, and have a great day.