Asure Software(ASUR)2024-11-01 03:27Financial Data and Key Metrics Changes - The company's Q3 2024 revenue was 5 million decrease in non-recurring ERTC revenue, while total recurring revenue grew by 20% year-over-year [10][25] - Recurring revenue represented 98% of total revenue in Q3 2024, up from 81% in the same period last year, indicating a significant improvement in revenue quality [11][26] - The net loss for Q3 2024 was 2.2 million in the prior year [26] - Gross margins decreased to 67% from 73% year-over-year, while adjusted EBITDA margin was 19%, down from 21% in the prior year [27][28] Business Line Data and Key Metrics Changes - The company completed 12 acquisitions over the past four quarters, contributing approximately 119 million and 134 million to $138 million, reflecting confidence in future growth [22][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the lower revenue was due to timing issues with large deals and emphasized the strong sales growth and backlog as indicators of future success [44][46] - The company is optimistic about the upcoming quarters, expecting to achieve double-digit organic growth in 2025 [15][38] Other Important Information - The company announced a sales agreement for an at-the-market offering to provide additional funding flexibility in the future [33] - The company is evaluating various forms of debt financing as the debt markets become more favorable [32] Q&A Session Summary Question: What caused the lower revenue for the quarter compared to expectations? - Management indicated that the difference was primarily due to timing issues with large deals in professional services and acknowledged that they had modeled in a higher percentage of recurring revenue than achieved [42][44] Question: Can you elaborate on the sales cycle for enterprise payroll tax? - Management explained that the sales cycle varies, with some contracts taking longer than expected due to dependencies on ERP implementations [49] Question: What are the underlying assumptions for the FY '25 revenue guidance? - The guidance does not assume any incremental acquisitions post-Q4, and interest rates were highlighted as a significant factor affecting the revenue outlook [53][55] Question: How many tax deals contributed to the revenue miss? - Management mentioned that there are over 50 tax deals, with timing issues affecting their implementation and revenue recognition [75][76] Question: What is the expected free cash flow conversion for 2025? - Management indicated that free cash flow conversion is expected to improve, with the main delta being related to software capital expenditures and commissions [79] Question: What is the acceptable leverage level for future acquisitions? - Management stated that they would be comfortable with a leverage level of about two times [85]