Asure Software, Inc. (NASDAQ:ASUR) Q2 2021 Earnings Conference Call August 9, 2021 4:30 PM ET Company Participants Cheryl Trbula - Vice President-Human Resources Pat Goepel - Chairman & Chief Executive Officer John Pence - Chief Financial Officer Conference Call Participants Joshua Reilly - Needham Eric Martinuzzi - Lake Street Richard Baldry - ROTH Capital Jeff Van Rhee - Craig Hallum Vincent Colicchio - Barrington Research Operator Good afternoon. And welcome to Asure's Second Quarter 2021 Earnings Confer ...

Asure Software, Inc. (NASDAQ:ASUR) Q1 2021 Results Conference Call May 10, 2021 4:30 PM ET Company Participants Cheryl Trbula - Vice President-Human Resources Pat Goepel - Chairman & Chief Executive Officer John Pence - Chief Financial Officer Conference Call Participants Richard Baldry - ROTH Capital Eric Martinuzzi - Lake Street Derrick Wood - Cowen and Company Vincent Colicchio - Barrington Research Operator Good afternoon, and welcome to Asure's First Quarter 2021 Earnings Conference Call. Joining us fo ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated financial statements for Asure Software, Inc., including the balance sheets, statements of comprehensive loss, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, investments, intangible assets, debt, revenue recognition, leases, share-based compensation, and net loss per share for the periods ended March 31, 2021, and December 31, 2020 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity as of March 31, 2021, and December 31, 2020 Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------- | :---------------------------- | :------------------------------- | | Total Assets | $441,103 | $513,927 | | Total Liabilities | $296,452 | $368,274 | | Total Stockholders' Equity | $144,651 | $145,653 | - Total assets decreased by **$72,824 thousand** from December 31, 2020, to March 31, 2021, primarily driven by a decrease in funds held for clients[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section outlines the company's financial performance, including revenue, gross profit, and net loss, for the three months ended March 31, 2021, and 2020 Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Total Revenue | $19,802 | $18,947 | | Gross Profit | $12,492 | $11,107 | | Loss from Operations | $(1,269) | $(1,513) |\ | Net Loss | $(1,598) | $(1,767) | | Basic and Diluted Net Loss Per Share | $(0.08) | $(0.11) | - Total revenue increased by **$855 thousand (4.5%)** year-over-year, while net loss decreased by **$169 thousand**, indicating improved operational efficiency[14](index=14&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section details the changes in the company's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit, for the periods presented Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------ | :------------- | :---------------- | | Total Stockholders' Equity | $144,651 | $145,653 | | Common Stock Outstanding (shares)| 19,021 | 18,970 | | Additional Paid-in Capital | $420,561 | $419,827 | | Accumulated Deficit | $(271,552) | $(269,954) | - Stockholders' equity slightly decreased by **$1,002 thousand** from December 31, 2020, to March 31, 2021, primarily due to net loss and other comprehensive loss, partially offset by stock issued and share-based compensation[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2021, and 2020 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net Cash Used in Operating Activities | $(1,235) | $(3,403) | | Net Cash Provided by Investing Activities | $65,158 | $24,806 | | Net Cash Used in Financing Activities | $(68,210) | $(29,449) | | Net Decrease in Cash and Cash Equivalents | $(4,287) | $(8,046) | | Cash and Cash Equivalents at End of Period | $24,290 | $20,780 | - Net cash used in operating activities significantly decreased from **$(3,403) thousand** in Q1 2020 to **$(1,235) thousand** in Q1 2021, indicating improved operational cash management. Investing activities provided substantial cash, primarily due to changes in funds held for clients[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures regarding the significant accounting policies, estimates, and specific financial statement line items [NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION](index=8&type=section&id=NOTE%201%20%E2%80%93%20THE%20COMPANY%20AND%20BASIS%20OF%20PRESENTATION) Asure Software, Inc. is a cloud-based Human Capital Management (HCM) software solutions provider for small and mid-sized companies, offering Payroll, Tax Services, Time & Attendance, and HR Services. The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and U.S. GAAP, with management's opinion that they contain all necessary adjustments for fair presentation - Asure Software, Inc. provides cloud-based Human Capital Management (HCM) software solutions, including Payroll, Tax Services, Time & Attendance, and HR Services, primarily for small and mid-sized businesses[23](index=23&type=chunk)[24](index=24&type=chunk) - The company's product strategy addresses HR complexity, capital allocation, and team building, with offerings delivered nationwide from its Austin, Texas principal office and various processing hubs[24](index=24&type=chunk) [NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%202%20%E2%80%93%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the significant accounting policies, including the use of estimates in financial statement preparation, the impact of the COVID-19 pandemic on business operations and financial prospects, and the adoption of recent accounting pronouncements (ASU 2018-13, ASU 2018-15, ASU 2019-12) which had no material impact. It also confirms no material legal proceedings and clarifies that accumulated other comprehensive income consists of unrealized gains/losses on available-for-sale securities - The COVID-19 pandemic has negatively impacted the company's business, financial condition, results of operations, and growth prospects, primarily due to client headcount reductions affecting recurring revenue[30](index=30&type=chunk)[31](index=31&type=chunk) - Recent accounting pronouncements (ASU 2018-13, ASU 2018-15, ASU 2019-12) adopted by the company had no material impact on its financial statements[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - As of March 31, 2021, the company was not a party to any material pending legal proceedings[35](index=35&type=chunk) [NOTE 3 – INVESTMENTS AND FAIR VALUE MEASUREMENTS](index=10&type=section&id=NOTE%203%20%E2%80%93%20INVESTMENTS%20AND%20FAIR%20VALUE%20MEASUREMENTS) This note outlines the company's investments, primarily funds held for clients in available-for-sale securities (government and commercial bonds) and money market funds. It details the fair value measurements using a three-tier hierarchy (Level 1, 2, 3) and provides a breakdown of amortized cost, unrealized gains/losses, and aggregate estimated fair value for these investments as of March 31, 2021, and December 31, 2020. The company also discusses the contingent purchase consideration for a 2020 acquisition, valued using a Monte Carlo simulation **Funds Held for Clients - Available-for-Sale Securities (in thousands):** | Category | March 31, 2021 | December 31, 2020 | | :------------------------ | :------------- | :---------------- | | Certificates of deposit | $7,284 | $7,574 | | Corporate debt securities | $9,103 | $9,711 | | Municipal bonds | $7,353 | $7,633 | | US Government agency securities | $493 | $501 | | Asset-backed securities | — | $500 | | **Total** | **$24,233** | **$25,919** | **Fair Value Hierarchy of Financial Assets (March 31, 2021, in thousands):** | Asset Category | Total Carrying Value | Level 1 (Quoted Prices) | Level 2 (Observable Inputs) | Level 3 (Unobservable Inputs) | | :------------------------ | :------------------- | :---------------------- | :-------------------------- | :---------------------------- | | Cash equivalents (Money market funds) | $3,301 | $3,301 | — | — | | Funds held for clients (Money market funds) | $1,082 | $1,082 | — | — | | Available-for-sale securities | $24,233 | — | $24,233 | — | | **Total Assets** | **$28,616** | **$4,383** | **$24,233** | **—** | **Fair Value Hierarchy of Financial Liabilities (March 31, 2021, in thousands):** | Liability Category | Total Carrying Value | Level 1 (Quoted Prices) | Level 2 (Observable Inputs) | Level 3 (Unobservable Inputs) | | :------------------------ | :------------------- | :---------------------- | :-------------------------- | :---------------------------- | | Contingent purchase consideration | $3,880 | — | — | $3,880 | | **Total Liabilities** | **$3,880** | **—** | **—** | **$3,880** | - The company acquired certain assets of a payroll tax business in July 2020 for **$4,250 thousand** cash, with additional contingent consideration based on trailing twelve-month revenue, valued using a Monte Carlo simulation[43](index=43&type=chunk) [NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS](index=13&type=section&id=NOTE%204%20%E2%80%93%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill remained constant at $73,958 thousand as of March 31, 2021, with no impairment identified. Intangible assets, primarily customer relationships and developed technology, decreased slightly due to amortization. Amortization expense for the three months ended March 31, 2021, was $2,528 thousand for operating expenses and $379 thousand for cost of sales **Goodwill and Intangible Assets (in thousands):** | Asset Category | March 31, 2021 | December 31, 2020 | | :------------------------ | :------------- | :---------------- | | Goodwill | $73,958 | $73,958 | | Intangible Assets, Net | $61,646 | $64,552 | **Intangible Assets Amortization Expense (in thousands):** | Period | Operating Expenses | Cost of Sales | | :------------------------ | :----------------- | :------------ | | Three Months Ended March 31, 2021 | $2,528 | $379 | | Three Months Ended March 31, 2020 | $2,349 | $431 | - The weighted average amortization period for intangible assets is **8.6 years** as of March 31, 2021, with significant future estimated amortization expenses through 2025 and thereafter[51](index=51&type=chunk)[55](index=55&type=chunk) [NOTE 5 – NOTES PAYABLE](index=14&type=section&id=NOTE%205%20%E2%80%93%20NOTES%20PAYABLE) The company's total notes payable decreased to $22,932 thousand as of March 31, 2021, from $24,913 thousand at December 31, 2020. This includes subordinated notes, a PPP Loan from Pinnacle Bank (expected to be forgiven), and a Term Loan from Wells Fargo. The PPP loan payments are deferred pending SBA forgiveness decisions. The company maintains a Senior Credit Facility with Wells Fargo, which includes term loans and a revolver, and expects to remain in compliance with financial covenants **Outstanding Debt (in thousands):** | Debt Type | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Subordinated Notes Payable | $4,263 | $6,182 | | PPP Loan – Pinnacle Bank | $8,856 | $8,856 | | Term Loan – Wells Fargo | $9,813 | $9,875 | | **Total Notes Payable** | **$22,932** | **$24,913** | | Short-term Notes Payable | $12,024 | $12,388 | | Long-term Notes Payable | $10,908 | $12,525 | - The PPP Loan of **$8,856 thousand** is expected to be forgiven, with payments deferred until the SBA makes a decision on the forgiveness application[57](index=57&type=chunk)[67](index=67&type=chunk) - The Senior Credit Facility with Wells Fargo includes **$10,000 thousand** in term loans and a **$5,000 thousand** revolver, with no amount outstanding on the revolver as of March 31, 2021[67](index=67&type=chunk)[128](index=128&type=chunk) [NOTE 6 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION](index=16&type=section&id=NOTE%206%20%E2%80%93%20CONTRACTS%20WITH%20CUSTOMERS%20AND%20REVENUE%20CONCENTRATION) Receivables from contracts with customers, net of allowance, increased to $3,873 thousand at March 31, 2021. Deferred commission costs also increased, while deferred revenue recognized from the beginning balance was $3,406 thousand for Q1 2021. The company expects to recognize approximately $24,563 thousand of revenue from remaining performance obligations, with no single customer representing 10% or more of consolidated revenue **Customer Contract Metrics (in thousands):** | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Accounts Receivable, net | $3,873 | $3,354 | | Deferred Commission Costs | $4,128 | $3,792 | - Revenue of **$3,406 thousand** was recognized from deferred revenue balance for the three months ended March 31, 2021[71](index=71&type=chunk) - Approximately **$24,563 thousand** of revenue is expected to be recognized from remaining performance obligations, with **65%** anticipated within the next 12 months[72](index=72&type=chunk) [NOTE 7 – LEASES](index=17&type=section&id=NOTE%207%20%E2%80%93%20LEASES) The company has operating leases for office space, with a weighted average discount rate of 8% and a remaining lease term of five years as of March 31, 2021. Net rent expense for Q1 2021 was $559 thousand. Future minimum lease commitments total $8,727 thousand, with $1,854 thousand due in the remainder of 2021 **Operating Lease Costs (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Operating lease cost | $570 | $552 | | Sublease income | $(11) | $(48) | | **Net rent expense** | **$559** | **$504** | - The weighted average discount rate for operating leases is **8%** and the weighted average remaining lease term is **five years** as of March 31, 2021[75](index=75&type=chunk) **Future Minimum Lease Commitments (in thousands):** | Year | Amount | | :------------------------ | :----- | | 2021 (remainder) | $1,854 | | 2022 | $1,949 | | 2023 | $1,256 | | 2024 | $1,037 | | 2025 | $828 | | Thereafter | $1,803 | | **Total minimum lease payments** | **$8,727** | [NOTE 8 – SHARE-BASED COMPENSATION](index=18&type=section&id=NOTE%208%20%E2%80%93%20SHARE-BASED%20COMPENSATION) The company operates under the 2018 Incentive Award Plan, with 1,008,506 shares available for grant as of March 31, 2021. Share-based compensation expense for Q1 2021 was $626 thousand, an increase from $438 thousand in Q1 2020. The company issued 307,500 employee stock options in Q1 2021 and had 388,273 outstanding restricted stock units **Share-Based Compensation (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Share-based compensation expense | $626 | $438 | - As of March 31, 2021, **1,008,506 shares** were available for grant under the 2018 Incentive Award Plan[82](index=82&type=chunk) - The company issued **307,500 employee stock options** with a weighted average exercise price of **$7.53** during Q1 2021, vesting over three years[82](index=82&type=chunk) [NOTE 9 – NET LOSS PER SHARE](index=18&type=section&id=NOTE%209%20%E2%80%93%20NET%20LOSS%20PER%20SHARE) Basic and diluted net loss per share for the three months ended March 31, 2021, was $(0.08), an improvement from $(0.11) in the prior year. Approximately 1,854,000 stock options and restricted stock units were excluded from diluted EPS computation as their inclusion would have been anti-dilutive **Net Loss Per Share:** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(1,598) | $(1,767) | | Weighted-average shares outstanding | 19,007,000 | 15,727,000 | | Basic and diluted loss per share | $(0.08) | $(0.11) | - Approximately **1,854,000 stock options** and restricted stock units were excluded from diluted EPS calculation for Q1 2021 due to their anti-dilutive effect[84](index=84&type=chunk)[85](index=85&type=chunk) [NOTE 10 – SUBSEQUENT EVENTS](index=19&type=section&id=NOTE%2010%20%E2%80%93%20SUBSEQUENT%20EVENTS) The company evaluated subsequent events through the filing date of this Form 10-Q and determined there were no subsequent events requiring disclosure - No subsequent events were identified that required reporting after March 31, 2021, through the filing date of the Form 10-Q[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2021, compared to the prior year. It includes an overview of the business, the impact of the COVID-19 pandemic, detailed analysis of revenue, gross profit, operating expenses, and liquidity and capital resources. The company highlights its focus on cloud-based HCM solutions for SMBs and ongoing investments in sales, marketing, and R&D despite pandemic-related challenges [CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS](index=20&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights the inherent risks and uncertainties associated with forward-looking statements regarding the company's future performance - The report contains forward-looking statements regarding financial results, growth, and operational performance, which are subject to various risks and uncertainties, including those related to the COVID-19 pandemic, regulatory changes, acquisitions, and competition[90](index=90&type=chunk) [OVERVIEW](index=20&type=section&id=OVERVIEW) Provides an overview of Asure Software's cloud-based HCM solutions for SMBs and the ongoing impact of the COVID-19 pandemic on its operations - Asure Software is a leading provider of cloud-based Human Capital Management (HCM) solutions for over **80,000 small and mid-sized businesses (SMBs)** in the U.S., with a focus on less densely populated metropolitan areas[92](index=92&type=chunk)[94](index=94&type=chunk) - The COVID-19 pandemic has negatively impacted recurring revenue due to client headcount reductions and may continue to affect future sales and financial performance, despite the company's aggressive investments in sales, marketing, and R&D[96](index=96&type=chunk)[97](index=97&type=chunk)[99](index=99&type=chunk) [RESULTS OF OPERATIONS](index=22&type=section&id=RESULTS%20OF%20OPERATIONS) Analyzes the company's financial performance, including revenue, gross profit, and operating expenses, for the three months ended March 31, 2021 [Revenue](index=22&type=section&id=Revenue) Total revenue for Q1 2021 increased by 4.5% year-over-year to $19,802 thousand, primarily driven by recurring revenue growth from acquisitions and higher client fund balances, partially offset by COVID-19 impacts. Recurring revenue constitutes over 95% of total revenue and is subject to seasonal patterns due to annual payroll form processing **Revenue Sources (in thousands):** | Revenue Type | 2021 | 2020 | Increase | % Change | | :-------------------------------- | :---------- | :---------- | :---------- | :------- | | Recurring | $19,242 | $18,436 | $806 | 4.4% | | Professional services, hardware and other | $560 | $511 | $49 | 9.6% | | **Total** | **$19,802** | **$18,947** | **$855** | **4.5%** | - Recurring revenue increased primarily due to client acquisitions in 2020 and higher account balances in funds held for clients, partially offset by the impact of COVID-19[109](index=109&type=chunk) - First quarter revenues and margins are generally higher due to the annual processing of payroll forms (W-2, 1099) and ACA form filing requirements[105](index=105&type=chunk) [Gross Profit and Gross Margin](index=23&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Consolidated gross profit increased by 12.5% to $12,492 thousand for Q1 2021, with gross margin improving to 63.1% from 58.6% in Q1 2020. This improvement is attributed to increased revenue and more efficient operations **Gross Profit and Margin (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------ | :-------------------------------- | :-------------------------------- | | Gross Profit | $12,492 | $11,107 | | Gross Margin | 63.1% | 58.6% | - The increase in gross margin is primarily attributable to the increase in revenue and more efficient operations[111](index=111&type=chunk) [Sales and Marketing Expenses](index=23&type=section&id=Sales%20and%20Marketing%20Expenses) Sales and marketing expenses for Q1 2021 were $3,611 thousand, a slight increase of $36 thousand from Q1 2020. As a percentage of revenue, these expenses decreased to 18.2% from 18.9%, reflecting increased personnel costs offset by lower discretionary marketing spend as the company focuses on hiring direct sales personnel **Sales and Marketing Expenses (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Sales and marketing expenses | $3,611 | $3,575 | | As % of revenue | 18.2% | 18.9% | - The increase in sales and marketing expenses is primarily due to increased personnel costs, offset by lower discretionary marketing spend, as the company focuses on hiring direct sales personnel[112](index=112&type=chunk) [General and Administrative Expenses](index=24&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses increased by $976 thousand to $6,498 thousand for Q1 2021, primarily due to income from a transition services agreement with FM:Systems in 2019 and increased personnel costs. As a percentage of revenue, these expenses rose to 32.8% from 29.1% **General and Administrative Expenses (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | General and administrative expenses | $6,498 | $5,522 | | As % of revenue | 32.8% | 29.1% | - The increase in general and administrative expenses is primarily attributable to income from the transition services agreement with FM:Systems in relation to the sale of the Workspace business in 2019, as well as increased personnel costs[113](index=113&type=chunk) [Research and Development Expenses](index=24&type=section&id=Research%20and%20Development%20Expenses) Research and development expenses decreased by 4.3% to $1,124 thousand for Q1 2021, primarily due to an increase in capitalization costs offsetting investment costs. As a percentage of revenue, R&D expenses decreased to 5.7% from 6.2%. The company plans to continue enhancing products through technological expansion and integration **Research and Development Expenses (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | R&D expenses | $1,124 | $1,174 | | As % of revenue | 5.7% | 6.2% | - The decrease in R&D expense is primarily attributable to an increase in capitalization costs, offsetting investment costs[115](index=115&type=chunk) - The company plans to continue enhancing products and technologies through expanding technological resources, increasing headcount, and development partnerships, focusing on broader market opportunities and competitive differentiation[116](index=116&type=chunk) [Amortization of Intangible Assets](index=24&type=section&id=Amortization%20of%20Intangible%20Assets) Amortization expense for intangible assets increased by $179 thousand to $2,528 thousand for Q1 2021, representing 12.8% of revenue, up from 12.4% in Q1 2020 **Amortization of Intangible Assets (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Amortization expense | $2,528 | $2,349 | | As % of revenue | 12.8% | 12.4% | [Interest Expense and Other, net](index=24&type=section&id=Interest%20Expense%20and%20Other%2C%20net) Net interest expense and other decreased slightly to $224 thousand for Q1 2021 from $235 thousand in Q1 2020, primarily consisting of interest on notes payable **Interest Expense and Other, net (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Interest expense and other, net | $224 | $235 | | As % of revenue | 1.1% | 1.2% | [Income Taxes](index=24&type=section&id=Income%20Taxes) Income tax expense increased significantly to $105 thousand for Q1 2021 from $19 thousand in Q1 2020, a 450.6% increase **Income Tax Expense (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Income tax expense | $105 | $19 | | % Change | 450.6% | - | [Loss From Operations](index=24&type=section&id=Loss%20From%20Operations) The company reported a loss from operations of $1,598 thousand, or $0.08 per share, for Q1 2021, an improvement from a loss of $1,767 thousand, or $0.11 per share, in Q1 2020. Loss from operations as a percentage of total revenues decreased to 8.1% from 9.3% **Loss From Operations (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Loss from operations | $(1,598) | $(1,767) | | Loss per share | $(0.08) | $(0.11) | | As % of total revenues | 8.1% | 9.3% | [LIQUIDITY AND CAPITAL RESOURCES](index=25&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Discusses the company's working capital, cash flow activities, and available sources of liquidity to fund its operations [Working Capital](index=25&type=section&id=Working%20Capital) Working capital decreased by $866 thousand to $7,340 thousand at March 31, 2021, from $8,206 thousand at December 31, 2020. This includes short-term deferred revenue of $1,605 thousand **Working Capital (in thousands):** | Metric | March 31, 2021 | December 31, 2020 | | :-------------- | :------------- | :---------------- | | Working capital | $7,340 | $8,206 | - Working capital includes **$1,605 thousand** of short-term deferred revenue at March 31, 2021, which represents an obligation to perform future services[123](index=123&type=chunk) [Operating Activities](index=25&type=section&id=Operating%20Activities) Net cash used in operating activities was $1,235 thousand for Q1 2021, primarily driven by a net loss of $1,598 thousand, partially offset by non-cash adjustments of approximately $5,038 thousand **Net Cash Used in Operating Activities (in thousands):** | Period | Amount | | :------------------------ | :----- | | Three Months Ended March 31, 2021 | $(1,235) | | Three Months Ended March 31, 2020 | $(3,403) | - Net cash used in operating activities was primarily driven by a net loss of **$1,598 thousand**, with non-cash adjustments increasing by approximately **$5,038 thousand** due to depreciation and amortization[124](index=124&type=chunk) [Investing Activities](index=25&type=section&id=Investing%20Activities) Net cash provided by investing activities was $65,158 thousand for Q1 2021, primarily due to the net change in funds held for clients **Net Cash Provided by Investing Activities (in thousands):** | Period | Amount | | :------------------------ | :----- | | Three Months Ended March 31, 2021 | $65,158 | | Three Months Ended March 31, 2020 | $24,806 | - The primary driver for net cash provided by investing activities was the net change in funds held for clients[124](index=124&type=chunk) [Financing Activities](index=25&type=section&id=Financing%20Activities) Net cash used in financing activities was $68,210 thousand for Q1 2021, mainly due to a net decrease in client fund obligations of $66,337 thousand and payments of notes payable of $1,981 thousand **Net Cash Used in Financing Activities (in thousands):** | Period | Amount | | :------------------------ | :----- | | Three Months Ended March 31, 2021 | $(68,210) | | Three Months Ended March 31, 2020 | $(29,449) | - The primary components of net cash used in financing activities were a net decrease in client fund obligations (**$66,337 thousand**) and payments of notes payable (**$1,981 thousand**)[125](index=125&type=chunk) [Sources of Liquidity](index=25&type=section&id=Sources%20of%20Liquidity) As of March 31, 2021, the company's primary liquidity sources included $24,290 thousand in cash and cash equivalents, cash generated from operations, and $4,500 thousand available under its Wells Fargo revolver. The PPP loan is not expected to materially affect liquidity due to anticipated forgiveness and payment deferral - Principal sources of liquidity as of March 31, 2021, included **$24,290 thousand** in cash and cash equivalents, cash from operations, and **$4,500 thousand** available under the Wells Fargo revolver[125](index=125&type=chunk)[128](index=128&type=chunk) - The PPP loan is not anticipated to have a material effect on liquidity needs in the next twelve months, as the company expects the loan to be forgiven and payments are deferred[129](index=129&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=26&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) As of March 31, 2021, the company did not have any off-balance sheet arrangements - The company reported no off-balance sheet arrangements as of March 31, 2021[130](index=130&type=chunk) [COMMITMENTS AND CONTINGENCIES](index=26&type=section&id=COMMITMENTS%20AND%20CONTINGENCIES) The company reported no material commitments and contingencies as of March 31, 2021 - There were no material commitments and contingencies reported by the company[130](index=130&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=26&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Information regarding critical accounting policies is incorporated by reference from Note 2, Significant Accounting Policies, to the Condensed Consolidated Financial Statements - Critical accounting policies are detailed in Note 2, Significant Accounting Policies, of the Condensed Consolidated Financial Statements[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes to the company's exposure to market risks since the disclosures in its 2020 Annual Report on Form 10-K - No material changes to market risk exposure were reported compared to the 2020 Annual Report on Form 10-K[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021. No material changes in internal control over financial reporting occurred during the period [Evaluation of Disclosure Control and Procedures](index=26&type=section&id=Evaluation%20of%20Disclosure%20Control%20and%20Procedures) Management's assessment of the effectiveness of the company's disclosure controls and procedures as of March 31, 2021 - As of March 31, 2021, the company's disclosure controls and procedures were deemed effective by management, including the CEO and CFO[133](index=133&type=chunk) [Change in Internal Controls over Financial Reporting](index=26&type=section&id=Change%20in%20Internal%20Controls%20over%20Financial%20Reporting) Reports on any material changes in the company's internal control over financial reporting during the quarter - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2021[134](index=134&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2021, the company was not a party to any material pending legal proceedings - The company was not involved in any material legal proceedings as of March 31, 2021[136](index=136&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K filed on March 11, 2021 - No material changes to risk factors were reported from the company's Annual Report on Form 10-K[137](index=137&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds were reported[137](index=137&type=chunk) [Item 3. Defaults upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) There were no defaults upon senior securities to report - No defaults upon senior securities were reported[137](index=137&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There were no mine safety disclosures to report - No mine safety disclosures were reported[137](index=137&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) There was no other information to report - No other information was reported[138](index=138&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including financial statements in iXBRL format and certifications pursuant to the Sarbanes-Oxley Act - Exhibits include financial statements formatted in iXBRL and certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[135](index=135&type=chunk)[138](index=138&type=chunk) [Signatures](index=28&type=section&id=Signatures) The report is duly signed on behalf of Asure Software, Inc. by Patrick Goepel, Chief Executive Officer, and John Pence, Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer, on May 10, 2021 - The report was signed by Patrick Goepel (CEO) and John Pence (CFO, Principal Financial Officer, and Principal Accounting Officer) on May 10, 2021[142](index=142&type=chunk)

Asure Software, Inc. (NASDAQ:ASUR) Q4 2020 Earnings Conference Call March 11, 2021 4:30 PM ET Company Participants Cheryl Trbula - Vice President-Human Resources Pat Goepel - Chairman & Chief Executive Officer John Pence - Chief Financial Officer Conference Call Participants Ryan MacDonald - Needham Nick Altmann - Cowen Eric Martinuzzi - Lake Street Richard Baldry - ROTH Capital Jeff Van Rhee - Craig-Hallum Vincent Colicchio - Barrington Research Operator Good afternoon and welcome to Asure's Fourth Quarter ...