Asure Software Inc (ASUR) 2017 Q4 法說會逐字稿

Good morning, and welcome to Asure Software Fourth Quarter and Full Year 2017 Earnings Conference Call.

Joining us today for today's call are Asure's CEO, Pat Goepel; CFO, Kelyn Brannon; and Director of Marketing, Stacy Zellner.

(Operator Instructions)

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

Please proceed.

Thank you, operator, and good morning, everyone.

Before we start, I would like to mention that some of the statements made by the 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 expectations and financial guidance for 2018.

These particular forward-looking statements and all of the statements that may be made on this call are not historical, are subject to 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 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 link available in the Investor Relations section of our website at www.asuresoftware.com.

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

Pat?

Thank you, Stacy, and I'd like to welcome everyone to Asure Software's Fourth Quarter and Full Year 2017 Earnings Call.

We sure appreciate your interest and your continued support, whether you're an employee, client, investor, analyst or valued third-party -- interested party.

This is the first quarter that Cheryl Trbula did not read the script, and I just want to give a shout out to her.

She's recovering and will be back the next quarter, and I want to thank Stacy for filling in.

Q4 and full year 2017 was just a banner year for Asure Software.

When I think back through the year, we did 6 acquisitions.

And it's not just doing deals, but 6 acquisitions that give us scale, product, customers, cross-sell opportunities, and it's really building blocks for the future.

Our goal of -- our intermediate goal or long-term goal when I first started was $100 million company.

That's increasingly becoming something that we're shooting for and will be a reality at some point here.

The financing with Wells Fargo and Goldman Sachs, for us to be able to execute that with those type of partners, is evidence of our growing up, and we're thrilled to have a relationship with them, and they're going to help us grow in the future.

So it's not only this year, but it's also about the next couple.

And then we successfully raised money this year with Roth Capital Partners; and in May, with the timing of the acquisition of iSystems.

So very, very strong year, a lot of activity.

I want to thank all the employees for being able to execute that.

We drove several financial records for the year, revenue, gross profit, cloud revenue, non-GAAP EBITDA.

So really pleased with what we accomplished this year.

We had continued growth across our business, particularly cloud revenue.

Cloud revenue in the model is growing faster and faster.

When I think back 2 years ago, I think we were at 58% of the revenues.

This quarter, we achieved over 75% for the first time in cloud revenue.

And the model is flipping either -- even faster than we originally thought, which is very, very positive.

We exited the fourth quarter, top line grew to $15.3 million, 102% year-over-year increase in cloud revenue.

We had contribution from other types of revenue as well and very, very pleased with that.

And that was despite a large customer pushing.

So we announced in the third quarter that we had won a big deal, a global deal.

And originally, they were going to have a big bang approach to implementation.

They decided to have a phased implementation.

In fact, there was about $0.25 million was billed here in the first quarter or so from that client.

So that implementation is going well, but we expected it originally this year.

Looking at the full year.

Revenue increased 53% to $54.4 million, and cloud revenue increased 91%.

Again, cloud revenue, 91%.

The continued mix of highly valued cloud revenue, we're excited about it.

Our hardware revenue increased 24% as well.

Cloud bookings, which is an indicator in the future, was up 228% year-over-year, 162% compared to the prior year, the full year.

So 228% was the quarter.

We're migrating existing clients to the cloud.

It's been a major initiative for us, and the salespeople and organization have done an excellent job of focusing us for long-term success.

From an expense standpoint, our operating costs were up both sequentially and year-over-year.

This was primarily driven by SG&A cost as well as nonrecurring and noncash expenses related to the acquisitions we completed in May.

When we originally set guidance that we would do about $10 million of acquisitions in all of 2018, we didn't believe that we'd do 3 acquisitions January 1, 2018.

And so with that, there were some infrastructure costs to the tune of about $0.25 million that we thought was prudent in order to get the valuable acquisitions January 2. Also, due to the cloud bookings, commissions was up over planned about the same amount, and that's a high-class problem to have.

It hurts us this quarter.

But obviously, the cloud revenue going forward and the future of the business is very strong.

Despite that, we're able to generate another quarter of solid EBITDA and non-GAAP profitability.

And for the 6 months of the year, there has been a marked increase in EBITDA, and so that was positive.

From a client activity perspective, when I look at our expanded sales infrastructure, now that we have about 50 sales reps or so, we had some outstanding wins, whether it's Fiserv, Rogers, Fannie Mae, StarTek, Cal-Maine.

Really, really great customers.

Good wins.

Very, very positive year for the sales team, and that'll bode well to 2018.

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

So Eyal Goldstein has done a nice job of setting us up for success.

Our sales pipeline is strong.

Number of deals in the pipeline is up almost 250%, and what you're also seeing is the backlog.

The backlog was 97% up year-over-year.

That will be effective for revenue growth in '18.

So again, very positive metric.

We partnered -- even in the fourth quarter, Atmospheric Commercial Interiors (sic) [Atmosphere Commercial Interiors], which is one of the largest office furniture dealers in North America; and Steelcase, they've partnered with us around our SmartView product and occupancy sensors.

This will allow us to sell more cloud revenue, especially in the AsureSpace product line.

So again, I -- when I think back and reflect to '17, very, very proud of all the work we did, proud of the milestones we put up, and that'll bode well for the future of Asure.

For some of the financial details, I'd like to turn the conversation now to Kelyn Brannon, who has been with us since October 2, and we're just delighted to have her.

Kelyn?

Thank you, Pat, and good morning, everyone.

It's a pleasure to speak with you today.

Turning to our financial results for the fourth quarter and full year ended December 31, 2017.

Our revenue for the fourth quarter of 2017 increased 59% to $15.3 million from $9.7 million in Q4 of last year.

The increase was driven by 102% increase in cloud revenue, 30% increase in professional services revenue and 11% increase in maintenance and support revenue.

This was offset by a 60% decline in our on-premise software license revenue and a 9% decline in hardware revenue compared to Q4 of last year.

Fiscal 2017 revenue increased 53% to $54.4 million from $35.5 million in fiscal 2016.

This increase was primarily driven by an increase in cloud revenue of 91%, an increase of hardware revenue of 24% and an increase in professional services revenue of 6%.

This was offset by a 37% decrease in on-premise software revenue and a 3% decrease in maintenance and support revenue as compared to fiscal 2016.

Our recurring revenue for the fourth quarter of 2017 as a percentage of total revenue was 84%, an improvement from 73% in the fourth quarter of 2016.

For fiscal 2017, our recurring revenue as a percentage of total revenue was 82% as compared to 74% in fiscal 2016.

Our gross margin for the fourth quarter of 2017 was $11.3 million or 74.1% of total revenue, a 51% increase from the $7.5 million or 77.5% of total revenue in the fourth quarter of 2016.

For fiscal 2017, gross margin was $41.8 million or 76.8% of total revenue compared to $27.4 million or 77.2% of total revenue in fiscal 2016.

Now looking at our profitability metrics.

For the fourth quarter of 2017, EBITDA, excluding onetime items, totaled $3.6 million, an increase of 63% from $2.2 million we reported in Q4 of last year.

EBITDA, excluding onetime items for the full year of 2017, totaled $11.5 million, an improvement from $7.5 million in 2016.

Our GAAP net loss for the fourth quarter of 2017 totaled $1.4 million or a negative $0.12 per share.

This compares to net income of $131,000 or $0.02 per share in Q4 of 2016.

Our GAAP net loss for the full year of 2017 totaled $5.7 million or a negative $0.53 per share.

This compares to a GAAP net loss of $972,000 or a negative $0.15 per share for 2016.

Excluding onetime items, our non-GAAP net income for the fourth quarter of 2017 totaled $529,000 or $0.04 per share.

This compares to a non-GAAP net income, excluding onetime items, of $633,000 or $0.09 per share Q4 of last year.

For the full year of 2017, our non-GAAP net income, excluding onetime items, totaled $17,000 or $0.00 per share as compared to $1.6 million or $0.24 per share for the full year of 2016.

For the fourth quarter of 2017, our non-GAAP net income totaled $2.1 million or $0.17 per share.

This compares to non-GAAP net income of $1.4 million or $0.20 per share in Q4 of 2016.

For the full year of 2017, our non-GAAP net income totaled $5.5 million or $0.50 per share.

This compares to non-GAAP net income of $4.5 million or $0.68 per share in the full year 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 nonrepetitive product lines.

For repetitive products, 1 year's value is included in backlog.

Our backlog totaled $23.6 million, a 17% increase compared to the prior quarter and a 97% increase from Q4 of 2016.

The backlog numbers include unbilled backlog and deferred revenue.

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 $27.8 million in cash and cash equivalents and $78.1 million in debt.

And finally, our deferred revenue at quarter-end totaled $14.2 million, which was up from $10 million in Q4 of last year.

That concludes my prepared remarks.

I will now turn the call back over to Pat.

Pat?

Thanks, Kelyn.

I'd like to shift gears to our strategic tuck-in acquisition strategy and provide some detail on the 3 deals we completed in early January this past year.

TelePayroll, Sheakley PaySystems, Savers Administrative Services were all welcomed to the Asure family.

Collectively, these acquisitions are expected to generate approximately $13 million of revenue in aggregate this year.

Let me first talk about TelePayroll, Southern California-based provider of HR payroll and employee benefit services.

Excited about TelePayroll, a firm that delivers its services to more than 1,000 regional companies in Southern California and representing over 50,000 worksite employees.

For 50 years, TelePayroll has provided payroll HCM, human capital management; and benefit services to the employers on the West Coast.

The firm built its business on a customer-centric model that includes dedicated customer support and deep payroll and tax expertise.

We chose them as our regional office because of the experience of the people and the talent, and they certainly haven't disappointed.

They recently were awarded the Top 20 Most Popular Payroll software product by Capterra, and I'll remind you that the payroll product they use was the Evolution product that -- when we bought iSystems in May.

So very consistent with our strategy.

Second acquisition in January was Sheakley PaySystems, a division of the Sheakley Group, which is an Ohio-based provider, workmen's comp, risk management, HR and payroll and employee benefit services.

This acquisition, in particular, solidifies our expansion in the Central United States.

They have a very fine processing center in Nashville and Des Moines.

And so we're excited about Sheakley, and we're excited about the growth opportunity that we can provide going forward.

Again, a very, very talented staff.

And then finally, the third acquisition we completed earlier this year was of Savers Administration, certified third-party administrator specializing in benefit products and services as well as payroll.

Since 1996, Savers Administration has provided employer solutions to hundreds of organization in the Carolinas.

Again, including payroll administration, COBRA and employee benefits administration.

And again, the 2 partners that are with us, really a strategic acquisition from an implementation resource perspective.

They're very knowledgeable about the benefit and the payroll technical marketplace, and we think we'll get a lot of velocity from those acquisitions.

What's important to remember, again, is they were resellers of our technology.

This allows us to quickly and effectively integrate them into our business, realize very meaningful revenue and EBITDA improvements.

This strategy enables us to augment our already solid organic growth.

And this -- individuals, salespeople who have had a banner year, this acquisition strategy is just as important to bring on new customers and become a very efficient, scalable company.

As far as guidance, we're going to turn to our guidance and outlook.

We are increasing our revenue guidance, which we originally provided in January.

We expect to achieve between $79 million and $82 million in revenue, with non-GAAP EBITDA, excluding onetimes, of between $18 million and $20 million.

The large account that did push is already revenuing this year, and we're on track for the implementation of that, so we thought it was prudent to increase that.

The cloud revenue numbers that were so strong are going to implement in '18 as well.

So increasingly confident in the revenue guidance that we have.

Merger and activity -- merger and acquisition activity remains brisk.

We did -- we're fortunate to get and to buy the 3 acquisitions we did in January, so we effectively met that goal that we told you about.

I would say we have several potential deals in the pipeline and that we're looking at definitely consummating more transactions this year, and they are not in our guidance.

So between our financial, operational successes in '17, our continuing accretive acquisitions, we entered '18 with solid momentum and definitely have accelerated the velocity of our cross-selling opportunities in scaling out our business further.

Our execution on this road map will lead us to continued success in '18 and beyond.

Our company has the right growth strategy.

We have significant financial and operational momentum and industry-leading solutions that will power us up to scale our business even further both in the near term and the longer term as well.

To that end, we're well on track of our midterm goal of surpassing $100 million in revenue, with 22% to 25% EBITDA margins, excluding onetime items.

As far as financing, some of you have asked on financing, we expect to have an increased line with our current partners, and I think you'll see that delivered here in '18 as well.

And with that, we're open for your questions and really appreciate your interest.

Operator?

(Operator Instructions) And our first question comes from the line of Richard Baldry from Roth Capital.

Looks like you had upside on the core strategic recurring revenues, where your hardware licenses were a little below where I had.

How do we think about those more volatile nonstrategic revenues in '18?

I think they are volatile.

We do feel, especially with some of the large accounts, sometimes there is delays in the process.

I would say activity on the sales pipeline is very strong.

We -- they will be lumpy from quarter-to-quarter, and it's not an exact science.

But I would say, as far as revenue growth this year in hardware, we had a nice year overall.

Fourth quarter was a little bit light.

I don't -- we're leading with the cloud, and we're also flipping the model to HaaS in a lot of cases, and what I mean by that is Hardware-as-a-Service.

And so there will be some lumpiness.

I don't think hardware will grow anywhere as fast as a percentage of revenue compared to the cloud, and I think you'll see more of a steady state.

We are embedding sensors into a lot of our clients, and what that does is give clients data to make really good decisions and use our scheduling software.

When we have an integrated client of hardware and software, our retention rate is even higher.

So it's a very valuable resource.

There is some lumpiness, and we're doing some things to make it more and more predictable.

And then if cloud was up about $0.5 million sequentially in a period where you're not doing acquisitions in fourth quarter, so I'd -- the way I think about that, that's something like a $2 million ARR number on a single quarter or $8 million a year, which would argue you're already sort of at a double-digit organic growth.

Is that a fair way to look at it?

Or are there any onetime or moving pieces that we'd also have to think about at the same time?

No.

The -- there'll be some first quarter seasonality with W-2s.

Sometimes, you do get a small amount of adjustment runs in the fourth quarter, but I think the way you kind of described it.

And that's why we're excited about the business is the cloud revenue is repetitive by nature.

And so as you get this train rolling, it rolls through future years because you recognize it 1 month at a time.

There is some noise in the fourth quarter, but generally, the trend is very positive, and you'll see that in '18.

And can you remind us how quickly you expect to be able to get to similar contribution margins from the more recent acquisitions as you've -- we've seen sort of in your tuck-ins in the past, whether that's a quarter, 2 quarters?

Do you feel like now that you've done several of them, you've got that process sort of accelerated or in a very repeatable process?

Yes.

And, Rich, thanks for the question.

On the January acquisitions, why they were pretty strategic in all 3 areas is they brought really strong people.

And from a regional perspective, what they allow us to do is even increase the velocity of small tuck-in acquisitions.

So in some of these cases, our model will be 2 quarters to kind of have a final kind of headcount, final cost taken out.

But why we're so excited is we also have people that are very, very talented that will allow us to do smaller acquisitions without a lot of labor and even increase the target of the 50% EBITDA for those smaller acquisitions.

I think these will be about 10% lower in contribution.

But again, from a scale perspective, it'll pay off for us long term.

And our next question comes from the line of Derrick Wood from Cowen and Company.

Wanted to hit on a couple of other revenue line items.

The on-premise software was down sequentially and professional service.

I'm just curious if that is due to kind of the one client deal pushing or perhaps you're just seeing an accelerated shift from on-prem to cloud.

Yes, no, Derrick, great question.

And it's an -- -- we are flipping the model a little bit faster than originally thought, which is very positive for the business, midterm and long term.

In the quarter it flips, it's not as positive.

But we're not going to go back on that strategy, and it's a high-class problem, and it's a good problem to have.

As far as professional services, dead on to the one large account that pushed.

So unfortunately, we didn't achieve as high as we thought we would in the fourth quarter on that large account.

But the good news is, is they're already well underway of implementing now, and that phased rollout is going very, very strong.

I do think you'll see continual degradation on the on-prem.

This year, we're largely through the transition.

I think when I first started here, we had $6 million or so of on-prem revenue.

This past year was $1.2 million.

So we'll continue to work that down, and it'll become more and more of a predictable business.

As far as professional services, cloud revenue is going to far outpace professional services growth.

We'll have some growth in professional services, but the model is a little bit different, and we definitely are emphasizing the cloud revenue.

That's helpful color.

And I guess, that makes -- kind of walk us through why the -- I mean, it looks like you came in at the lower end of guidance, but you're raising 2018 guidance, and maybe that's due to some of the revenue coming in from this large customer.

But maybe you could walk us through what gives you the confidence to raise guidance.

And since we're pretty far along in Q1, any color you could give us on Q1?

Yes.

Q1, we're focused on the year, not on Q1, and we'll have Q1 in May with the earnings call.

But what I would say is the health of the business is very strong.

As far as guidance, our cloud bookings were really strong, and so that added $200,000-plus in commission expense that we didn't expect, which is very positive long term or midterm.

So the cloud bookings, the deferred revenue, the backlog, those are all really healthy signs coming into the year.

And then the large customer, which was about an $800,000 push, that gave us the confidence to increase guidance.

But the leading metrics were very, very positive.

And on that note, last question, yes, the pipeline, up 250%.

That's quite impressive.

Are you -- can you outline what you're doing to help drive more cross-selling in the installed base?

And it seems like there's a lot opportunity to cross-sell or there's more focus on solution selling with your broader portfolio.

Anything you can highlight in terms of what you want to focus on this year?

Yes.

Thanks, Derrick.

Great question.

The big focus started 1/1 of '7 -- excuse me, 1/1 of '17 -- or '16, actually -- I'm sorry, 1/1 of '17.

What we did is introduce all the salespeople to all the products.

So prior to that, they sold product-by-product.

And if you wanted Time or if you wanted Payroll or if you wanted Space, you had your individual product sales rep.

Well, what we did in 1/1 of '17 was introduce everybody to the entire solution, and that's really accelerating and paid off.

So it's driving opportunities.

We're getting up a level with the buyer to the C-suite, whether it's the CFO, VP of HR, CFO, IT.

So those folks, what I'd call the 3 departments that drive a lot of decisions, we're going there with our entire solution.

We're actually getting quicker sales cycles because we're selling top-down as opposed to bottom-up, they're bigger sales.

And then the product family, under Joe Karbowski, where we got a common UI or user interface, common, more modern APIs or interfaces and integration.

And then we're acquiring.

And so when we acquire, we acquire these customers.

In payroll, even if they don't buy the whole solution, what they'll do is they'll buy our Time product.

And I think you'll see us come out with a series of metrics over time, no pun intended, around attach rates.

So I think you'll see some of that kind of color as we get into '18 and '19.

And Kelyn is focused on that.

So it's just a very positive story.

And then the other thing and -- I'll speak to, when we acquired Kelyn as the CFO, we did a search 3 years ago, and the person that was second in the CFO, we brought that person back.

We interviewed 10 people, and that person was probably ninth or so out of 10.

And what that speaks to, I think, is we're being able to attract higher-quality people every day because of the momentum in the business.

So that feeds on itself as well.

So it's the right products, the right selling strategy, the right people with more customers, that's leading to this cross-selling success that we're having.

Our next question comes from the line of David Hynes from Canaccord.

Can you hear me all right, Pat?

I can.

Great.

So I want to ask about your last comment in the prepared remarks, which was around financing.

Clearly, there was a good explanation for the EBITDA miss in Q1.

But the numbers are the numbers.

So how do these results impact your conversation with lenders?

Obviously, access to capital is an important part of the go-forward strategy.

So just give us some color around those conversations.

Yes.

And actually, DJ, thanks for the question.

Absolutely, I mean, there is no shortage of people that are willing to lend us money, and the reason being is the model.

While you have a short-term blip, when you pull it up, sales bookings that are strong, deferred revenue that's strong, backlog that's strong and cost control, where we brought in acquisitions quicker than we forecasted, and we sold more, so we paid commission.

Lenders are pretty savvy, and they see through some of that.

And then also, the marked improvement that we've had the second half in year in EBITDA and the historic discipline to get the cost out, and now we're doing 3 more acquisitions in January.

So they're very focused on the long-term success of the business.

Whether we were to go out to bid or what have you, we'd have plenty of options.

But the focus on Wells Fargo and Goldman Sachs, who are really -- have been good partners for us.

They understand the model.

And then Kelyn, specifically, has an awful lot of credibility with the lending market, as well as our 2 partners.

So we feel very confident in that area.

Okay.

Perfect.

That's what I wanted to hear.

I want to ask about the go-forward M&A model.

So you've acquired -- in the deals you did in January, you acquired a few different, I guess what I'd call, regional pods.

Is there a strategy looking ahead to tack on service bureaus in those same regions?

In which case, I think it would be easier to kind of consolidate assets.

Or do you want to add new geos?

Or is it just about being opportunistic based on what the service bureau base affords?

No.

Thanks for the question, DJ.

I think you'll see one more or so regional hub.

We might do 1 or 2 more.

It really is a combination of experienced people, size as well as what's -- what businesses are around it.

And so I think we're not done yet in that area.

But what it does do is it helps facilitate smaller tuck-in acquisitions.

And really, we've had -- we have an identified hub, and we can put that business in there very quickly and efficiently.

So some of it is.

If you think of a airplane traffic controller, you're lining them up on runways, and then you also have to kind of talk to our people and what they can absorb in a quality manner as well.

But we're increasingly confident with the velocity.

We think the acquisitions have gone well.

We're teed up in the marketplace and ready to go.

I think you'll see more of the same.

Yes.

Last question for me, and maybe it's for Kelyn.

So I know you guys only guide annually, and it's already came up.

But I'm going to give you another shot at Q1.

I think it's in everyone's interest to kind of make sure we don't have another miss in Q1.

So anything that you can give us in terms of color on where you expect cloud revenue to be, where you expect full revenue to be?

I mean, there's 2 weeks left in the quarter.

I just want to make sure that we're going to nail Q1 and set this thing up for success next year.

Yes, no, DJ, I appreciate it.

I appreciate our needs for quarters and all that kind of thing, but I'm building a business that's a legacy opportunity for me, and it's a legacy opportunity for all the employees, shareholders alike.

If you get too focused on a quarter, I appreciate that, but we have 3 acquisitions that we've done.

We also have intangible and goodwill.

You have 606.

You just have a lot of moving parts.

And what I don't want to do is just give you a number to satisfy a number, or I don't want to lowball anything.

What I want to do is just be very prudent about it.

And to me, this is a multiyear expansion opportunity to build scale.

We understand we have to be accountable, and we are accountable.

Nobody lives this thing more than I and the employees.

We're very accountable.

But what I would say is, right now, you'll -- we're focused on the annual guidance.

We're focused on the business, and we're not going to get into a quarter right now.

Yes.

Okay.

Yes, I mean, 82% recurring revenue, we should be able to get pretty close.

So all right.

Fair enough.

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

Yes.

It's kind of a follow-up to an earlier question, just about the grand vision here.

If we were going to rise up and look at U.S.A, you've now got obviously there with the TelePayroll acquisition, you've got your big footprint in Southern California, the company is headquartered in Austin, you picked up operations in Nashville.

What -- let's fast-forward to 2 or 3 years out now, what does Asure look like?

Is it 3 regions?

And we mine those regions for penetrating the installed base as well as acquisitions?

Or is it just kind of "We'll take them as they come."?

Yes, no, thank you for the question.

First of all, when you think back at the opportunity we have, we have a big opportunity.

We have, call it, 150 resellers.

We're going to be thoughtful about that.

First of all, we want to encourage them to grow.

So acquisition isn't the only option here.

We view that as almost a partner for life.

We want to grow them early.

We want the ability to help them grow with world-class products and cross-selling opportunities.

And then if they have a life event and they want to cash out, whether it's retirement or divorce or whatever, we want to be the first call there for them.

So we have a strategy around that, and I wouldn't focus on -- I'm not looking to define, "Is it going to be 3 hubs or 4 or 5 even, for that matter." What I'm looking for is high quality business partners, high quality talent that allows me to grow, grow and grow.

And then with that growth, becomes very high profit margin as we get the benefits of scale.

So it's some strategy, and it's some kind of opportunistic of what employees we need, what regions we need.

We do centralize some of the back office.

I think you'll see us centralize on AWS or Amazon cloud.

I think you'll see us centralize some of the back-office functions.

But customers do appreciate the regional expertise that's out there, and we want to take advantage of high quality shops that are out there and then make them partners.

And when we do that, we're going to succeed.

As a couple of years roll out, I think we have opportunities.

And having run a couple billion-dollar divisions of this space, I think there's opportunities to get tighter with the model.

But right now, we're not going to be so rigid we miss out on some of the opportunities.

Okay.

The next question is kind of a 2-parter, and maybe it's more of a comment than a question.

But Kelyn, is there any -- I know you're not looking for things to do.

But the SG&A, can we get that broken out in future reports between the sales and marketing and the G&A?

The answer to that is yes.

We're -- I'm in the midst of -- as I think I've mentioned to -- on the last call, we're cleaning up our infrastructure here from an ERP perspective and the data.

And Pat and I are determined to get to, whether I break it out between sales and marketing, R&D and G&A or I think about our operational group and where that sits and gets disclosed.

But the answer to that is, yes, we will.

Okay.

Because my follow-up is you've got some exciting -- excitement going on in your department this quarter between GDPR and ASC 606 and the new tax law.

Is there anything we should be specifically allocating here in Q1 as far as maybe bumping up OpEx assumptions?

I think the answer to that is yes, we still have some activities going on with items such as 606, finishing up those memos.

And I have a concerted effort in place for getting the data cleaned up and getting a new ERP system in.

I would not anticipate, from a G&A perspective, a significant increase in Q1.

What I will say is that, in the Q1 call, I plan to give more guidance around infrastructure spend that we would be looking at in the back half of the year.

So happy to do that on the Q1 call.

I think you're going to see an impact more mid- to late year for spend around infrastructure.

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

This is [Rashiva Lekinti] for Mike Latimore, actually, Michael.

I have a couple of questions.

How is the pipeline for workspace management?

I'm sorry.

For what management?

I'm sorry, workspace.

Workspace?

Pipeline is very strong.

I think we're -- this -- our SmartView product, which allows us to help companies track their occupancy, has been very strong.

And we've had some delighted customers that have had some good word-of-mouth.

Or they started with one location, now they're starting to go either worldwide or make it a standard, and then they're bringing in our scheduling product to even give it more color.

So demand is high.

And then the team has done a very, very nice job.

What I would also say on workspace is some people -- because we had some really impressive names, Procter & Gamble, HSBC and the like, some people think it's a large-account product only.

What I would say, it's increasingly coming down.

And the concept of business hoteling is getting very strong throughout the business.

And then also, we're of the belief that you can't have a human capital management strategy without a human space strategy, and we're seeing increasing velocity and interest in our cross-selling solutions.

Great.

And what was the organic revenue growth and bookings growth in 4Q?

Bookings was in the release.

The number -- let me just...

The organic number.

Bookings Q4 over Q4 '16 was up about 54%.

And the organic revenue growth?

We -- what we indicate around that, and we're going to be providing more clarity on that in 2018, is that our organic growth remains relatively stable around that 10% range.

But later in the year, more color on that.

But we feel really good about the organic growth.

And there's -- as we break out, as we get a common ERP, getting data out with much more precision, we're going to share that as we go.

And our next question comes from the line of Jeff Van Rhee from Craig-Hallum.

Great.

Several for me.

Maybe -- just Q2 has the large customer and just give a refresher.

When they were signed -- just to clarify, was this originally expected to be a prem cloud, some semblance of size?

And just how you were envisioning it originally playing out through the P&L in terms of revenue impact and what it looks like now?

Just a little more cleanup on that.

Yes, no, it was a 2-combo deal.

It was, I think, in the second or third quarter.

Third quarter, early third quarter.

It's hardware and software.

And originally, they wanted to go to a big bang approach.

There is some standards around the financial institution.

There's some standards around testing of hardware, et cetera, just to get through their process.

It's also a global client.

And to get through their process and rollout, what they decided is to do a phased approach as opposed to a bigger bang.

So when you do a phased approach -- and like I said, the first quarter, we've implemented about 20% or so of the deal and feel really -- that we have a really good partnership.

We feel it's a good mix of hardware and software, and we think they're going to be a client for a long time to come.

So the original kind of big bang approach that we didn't model all the revenue, but we modeled, call it, 2/3 of it or so, didn't happen, but it'll happen in '18.

And just to be clear, that was to be a premise deal?

No, it was not to be a premise deal.

It was cloud and hardware.

The hardware professional services would have been more of a onetime nature, but the cloud is recurring revenue.

Yes.

Got it.

Okay.

Great.

And then the infrastructure investments that you specifically referred to in the quarter, can you give a little more clarity on specifically where you're putting that money to work?

What I would just say -- and I'm not going to get too granular here because I don't want us to miss the story.

The story really is the 3 acquisitions all were done January 2. So if you want to take cost out or if you plan to take cost out and you're adding $10 million -- or $13 million of revenue and a fair amount of complexity, would you take those costs out and then rehire them a month later or 2 later, you wouldn't.

So I don't want to get too deep into it, but we thought it was the right decision to make sure we were ready to integrate and receive $13 million of business all on January 2.

Okay.

And then with respect to the cross-selling.

Any particular call-outs in areas where you're seeing notable momentum with respect to the cross-selling opportunity?

Well, payroll -- so first of all, I think we have probably now sold, what I'll call, the whole-meal deal probably about 12 times or so, which is increasingly good momentum.

What I would say is if we don't get the whole-meal deal, a lot of times payroll and time is a logical first step.

Payroll and benefits, our COBRA and FSA are starting to be on the uptake as well.

Space and HR seem to really work together well.

So we're in the early innings of the game, but those are the areas that we see success so far.

Got it.

And then I know in prior quarters you had given the sequential growth in pipeline.

Just an update on what it was this quarter.

And while you're on that, just with respect to bookings.

It looks like a great number year-over-year.

Do you have any reference sequentially?

I -- just with seasonality, we didn't this time -- I mean, sequentially, we're up, and we're up well over double digits, but I don't have the breakout of that.

That's on pipeline you're talking about?

Well, you can talk pipeline, bookings, backlog, deferred revenue.

They're all up sequentially as well.

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

My questions, most of them were asked.

Just on the 2017 acquisitions, can you give us some color in terms of -- have you been able to maintain -- retain all of the key employees that you'd like to retain?

We've been able to retain everyone that we wanted to and really delighted with the talent levels in all 3 acquisitions.

They're every bit as talented as we hoped for in the courting process.

And so when you think about what we're trying to accomplish in our growth rates, to get valuable employees is so critical.

So -- but we are able to retain everybody.

And I think part of -- they see it as an opportunity as well because there's -- we harmonize the benefits, we give them access to the employee stock purchase plan.

There's a lot of positives.

And then culturally, we try to really assess if they're a good fit upfront.

And so far, very, very strong in those areas.

And then your -- the SMB product upgrade.

Could you explain to us how that's helping you win in the market?

I think version 2.0 for us was a key release because the iSystems was a very strong payroll product.

They were a little bit light in HR.

And our cross-selling component of space, HR, time, payroll, benefits is dependent on a strong HR product.

And so very, very happy with the release.

We've met with a lot of the resellers here this past month, and the feedback has been very positive, the uptake.

I think you're going to see good revenue growth this year in that product, specifically.

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

First, I guess, a question for Kelyn.

Kelyn, you mentioned that, obviously on the first quarter call, you're going to be detailing more on sort of some incremental expenses in the back half of the year.

I guess, first, are those already included in sort of the guidance expectations for '18 on EBITDA here?

And then secondly, I guess, as you're working through the 606 transition, would you expect any of these incremental expenses in the back half to be offset by a potential benefit from the adoption of 606?

So to deal with the question of some infrastructure investments, yes, the majority of those costs are baked in absolutely into our $18 million to $20 million kind of EBITDA guidance.

I would say, as far as 606, I'd refer back to my comments in Q3, where I indicated that we have adopted the modified retrospective.

We don't expect any material impact on our top line revenue.

And that any type of opportunity -- or any type of impact would be through commission expense, but we don't have a huge -- commission expense is not -- it's significant.

But as you know, our strategy both with the 50 sales reps or so that we have, unlike a very, very large company with a large sales organization, it won't have the same material impact from a 606 perspective on commission expense.

Got it.

And then I guess, just a follow-up here for Pat.

Pat, you mentioned obviously you had met with a lot of the resellers and service bureaus in association with what's sort of the update there.

Can you give -- tell us or what sense you had from those discussions about what the competitive dynamics of the market are for those service bureaus and if they're seeing any sort of changes there as well as any, perhaps, larger competitors kind of moving downmarket more into their space?

Thanks, Ryan.

I think -- just in general, I think people feel that the competitive landscape, in general, there's more opportunity.

And the reason there's more opportunity is the traditional, call it, the 2 big ones from a service bureau perspective, ADP and Paychex, have opportunities to go, let's say, $1 in payroll and then maybe $1 beyond payroll.

So they're expanding in the benefit area.

They're expanding in HR.

They're expanding in those areas.

The newer technology providers, the -- what I'll call the Ps, Paylocity, Paycor, Paycom, clearly are taking share from ADP and Paychex and are focused on -- as well on a broader kind of offering than payroll.

And so this has been a really good fit.

Because when we took over the iSystems company, we're able to come out now with multiple products and higher tech products, cloud-based products, really the suite from hire to retire and then including space management.

So they have so much more capability now than they had, call it, a year ago.

And so it's been a -- it really gives them an ability to compete even at a higher level.

So we're excited about that.

As far as the competitive landscape, I think, in general, we're seeing that SaaS adoption is absolutely increasing.

It's driving growth.

The newer entrants, I think, are gaining share, and the previous entrants are focused more on a -- beyond payroll solution, so they're able to grow while also giving up some share.

And I am currently seeing no further questions.

At this time, this concludes our question-and-answer session.

I now like to turn the call back to Mr. Goepel for his closing remarks.

Thank you, and I really -- sorry for the long call today, but I think it was an important call today.

We had a lot to unpack.

Any -- if we were light on EBITDA, I take this stuff very seriously, but we're investing in growth, and we're investing in a company that's going to be built to last.

And I'm very, very proud of what we did this year.

I'm really excited for the future.

We are building a company that's going to be great.

We're hiring the right people.

Our employees are giving it their all every day.

I want to thank them, our clients, our great partners.

Excited about the opportunities going forward.

And then the -- from a strategy perspective, whether it's financial partners as well as companies that already use our technology that will become part of Asure, we feel we're right on track to do something special.

So I appreciate your interest in Asure.

And I'd just remind you, I came here 8.5 years ago.

I've never sold a share.

This is a legacy opportunity for me.

And I'm more excited today than I've been in the 8.5 years at Asure, and I assure you, I wake up excited every day.

Thanks for your time.

Bye now.

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

This concludes today's program, and you may all disconnect.

Everyone, have a great day.