Asure Software ASUR reported third-quarter 2019 adjusted earnings of 11 cents per share, which beat the Zacks Consensus Estimate by 37.5% but declined 21.4% year over year.
Revenues of $24.6 million lagged the Zacks Consensus Estimate by 3%. However, the figure increased 4.7% year over year on an uptick in recurring revenues.
Notably, shares declined 6.6% to close at $8.69 following the release of third-quarter results on Nov 12, primarily due to an unimpressive 2020 guidance.
Asure’s shares have returned 71% on a year-to-date basis compared with the industry’s 2.6% return.
Recurring revenues (86.4% of revenues) increased 8.5% year over year to $21.2 million. However, revenues from professional services, hardware and other (13.6% of revenues) fell 14.3% year over year to $3.3 million.
HCM revenues grew 8% from the year-ago quarter to $17.9 million. However, workspace revenues fell 4% on a year-over-year basis.
Asure Software Inc Price, Consensus and EPS Surprise
Asure Software Inc price-consensus-eps-surprise-chart | Asure Software Inc Quote
HCM revenues represented 73% of revenues compared with 71% in the year-ago quarter. Workspace was 27% of revenues compared with 29% in the prior-year quarter.
The company’s HCM solutions were picked by a number of companies in the reported quarter. Asure also added 16 new reseller organizations to its small business payroll portfolio.
Reflective of these, core HCM bookings increased 8% year over year. Moreover, interest on HCM client funds exceeded $450K, up from $20K in third-quarter 2018.
Gross profit on a non-GAAP basis grew 1.1% year over year to $16.1 million. Gross margin contracted 240 basis points (bps) to 75.9%.
Moreover, adjusted EBITDA fell 0.3% year over year to $5.3 million in the reported quarter. Adjusted EBITDA margin shrank 110 bps on a year-over-year basis to 21.8%.
Total operating expenses on a GAAP basis contracted 4.4% year over year to $16.3 million.
Selling, General & Administrative expenses rose 3.1% to $11.4 million primarily because of increased hiring of sales representatives in the reported quarter.
Research & Development expenses declined 2.8% to $2.5 million.
GAAP operating loss narrowed from the year-ago quarter’s $2 million to $0.8 million in the reported quarter.
Total cash and cash equivalents as of Sep 30, 2019, were $12.6 million compared with $14.7 million as of Jun 30, 2019.
Key Q4 Development
On Oct 8, Asure announced an agreement to divest its work space management business to FM: Systems for $120 million. The deal is expected to close in December.
Asure’s current guidance is based only the performance of the HCM business. Notably, the fourth quarter is expected to be impacted by a large capital gain at the time of closing.
For 2019, Asure expects revenues in the $72-$73 million range. Adjusted EBITDA is expected in the $11-$12 million range.
For 2020, the company expects revenues between $72 million and $74 million. Adjusted EBITDA is anticipated in the $11-12 million range.
Zacks Rank & Stocks to Consider
Asure currently has a Zacks Rank #3 (Hold).
Alteryx AYX, Cirrus Logic CRUS and Marchex MCHX are some better-ranked stocks in the broader computer and technology sector. All three companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
While long-term earnings growth rate for Alteryx is pegged at 39.9%, the same for Cirrus Logic and Marchex is at 15%.
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