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01/11 16:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary shows mixed signals: strong EBITDA growth and positive guidance, but declining gross margins and increased net loss. The Q&A section reveals management's optimistic outlook on organic growth and integration of acquisitions, yet lacks clarity on certain aspects. The increased revenue guidance and optimistic long-term goals are positive, but the lack of explicit explanations for net loss and gross margin decline temper enthusiasm. Without market cap data, the prediction leans towards a neutral market reaction.
Third Quarter Revenue $36.3 million, a 24% increase year-over-year. The growth was driven by strong demand across all product lines, including payroll, benefits, recruiting, time and attendance, and payroll tax management.
Recurring Revenue $31.8 million, an 11% increase year-over-year. Growth was attributed to consistent demand and client retention.
Professional Services and Hardware Revenue $4.4 million, up from $700,000 in the prior year. The increase was primarily driven by hardware sales tied to the recent acquisition of Lathem Time.
Organic Growth 4% in the third quarter, up from 1% in the second quarter. Excluding HRC ERTC-related churn, organic growth was 7%, compared to 5% in the second quarter. The improvement was due to reduced churn and better sequential performance.
Gross Profit $23.1 million, up from $19.7 million in the prior year. The increase was due to higher revenues, though gross margins declined due to a revenue mix shift towards lower-margin nonrecurring sales.
Gross Margins 64%, down from 67% in the prior year. Non-GAAP gross margins were 70%, down from 73%. The decline was attributed to an increase in lower-margin nonrecurring sales, primarily from the Lathem acquisition.
Net Loss $5.4 million, compared to a net loss of $3.9 million in the prior year. The increase in net loss was not explicitly explained in the transcript.
EBITDA $3.9 million, up from $2.2 million in the prior year. Adjusted EBITDA increased 49% to $8.1 million, with an adjusted EBITDA margin of 22%, up 300 basis points from 19%. The improvement was due to higher revenues and better cost management.
Cash and Cash Equivalents $21.5 million as of September 30, 2025. No year-over-year comparison or reasons for change were provided.
Debt $70.4 million as of September 30, 2025. No year-over-year comparison or reasons for change were provided.
Launch of Asure Central: A new client interface designed to enhance user experience, improve workflow, and amplify event-driven marketing efforts. It is expected to accelerate cross-selling opportunities among over 100,000 clients.
Acquisition of Lathem Time: The acquisition is performing well, contributing to revenue and cost synergies. It has driven hardware sales growth and is expected to enhance cross-selling opportunities and expedite onboarding of new payroll clients.
Revenue Growth: Third quarter revenue increased by 24% year-over-year to $36.3 million, driven by growth across all product lines including payroll, benefits, recruiting, time and attendance, and payroll tax management.
Adjusted EBITDA: Adjusted EBITDA for the third quarter increased by 49% to $8.1 million, with a margin improvement to 22% from 19% in the prior year.
Gross Margins: Non-GAAP gross margins declined to 70% from 73% due to a revenue mix shift towards lower-margin nonrecurring sales, primarily from the Lathem acquisition.
2026 Revenue Guidance: Initial 2026 revenue guidance is set at $158 million to $162 million, with adjusted EBITDA margins expected to improve to 23%-25%.
Medium-Term Revenue Plan: Targeting $180 million to $200 million in revenues with adjusted EBITDA margins of 30%+.
Bookings Decline: Bookings for the third quarter declined by 41% compared to the same period last year due to large enterprise deals booked in the prior year. This decline could impact revenue growth and overall business momentum.
Gross Margin Reduction: Gross margins for the third quarter decreased to 64% from 67% in the prior year, with non-GAAP gross margins also declining. This was attributed to revenue mix changes, including an increase in lower-margin nonrecurring sales driven by the Lathem acquisition.
Net Loss Increase: Net loss for the third quarter increased to $5.4 million from $3.9 million in the prior year, indicating financial strain despite revenue growth.
Interest Rate Cuts: The Federal Reserve's interest rate cuts have negatively impacted float revenue, which could continue to affect financial performance if rates are further reduced.
Debt Levels: The company has a significant debt burden of $70.4 million as of September 30, 2025, which could constrain financial flexibility and increase risk in a rising interest rate environment.
HRC ERTC-Related Churn: The company experienced a 3% churn in the third quarter related to HRC ERTC, which, while an improvement from the prior quarter, still poses a challenge to organic growth.
Fourth Quarter 2025 Revenue: Expected to be in the range of $38 million to $40 million.
Fourth Quarter 2025 Adjusted EBITDA: Expected to be between $10 million and $12 million.
Full Year 2025 Revenue: Expected to be between $139 million to $141 million.
Full Year 2025 Adjusted EBITDA Margin: Expected to be between 22% and 23%.
2026 Revenue: Expected to be between $158 million and $162 million.
2026 Adjusted EBITDA Margin: Expected to be between 23% to 25%.
Medium-Term Revenue Plan: Targeting $180 million to $200 million in revenues with adjusted EBITDA margins of 30%+.
Organic Growth: Expected to continue improving into 2026.
Cost Structure: Modeled to remain relatively stable for the remainder of 2025 and into 2026.
GAAP Profitability: Expected to achieve consistent GAAP profitability at higher revenue levels in 2026.
The selected topic was not discussed during the call.
The earnings call summary shows mixed signals: strong EBITDA growth and positive guidance, but declining gross margins and increased net loss. The Q&A section reveals management's optimistic outlook on organic growth and integration of acquisitions, yet lacks clarity on certain aspects. The increased revenue guidance and optimistic long-term goals are positive, but the lack of explicit explanations for net loss and gross margin decline temper enthusiasm. Without market cap data, the prediction leans towards a neutral market reaction.
The earnings call presents a mixed picture. While there is revenue growth and positive developments like the Lathem acquisition, there are concerns about increased net loss and unclear guidance in some areas. The Q&A session reveals some uncertainties, particularly around specific revenue figures and organic growth expectations. The overall sentiment is balanced, with positive elements like cross-selling opportunities and strong demand, but offset by concerns about losses and guidance. Without the market cap, it's challenging to predict a strong reaction, leading to a neutral outlook.
The earnings call indicates a positive outlook with strong recurring revenue growth, product expansion, and a significant increase in contracted revenue backlog. Despite a net loss, the company maintains stable gross margins and has a positive EBITDA trend. The Q&A reveals optimism in sales productivity and a robust M&A pipeline, although some responses lacked clarity. With a new credit facility and strategic acquisitions, the company's prospects appear favorable, suggesting a positive stock price movement in the short term.
The company shows strong recurring revenue growth and promising product launches. However, challenges like ERTC revenue decline, financial constraints, and competitive pressures dampen optimism. The Q&A reveals uncertainty in revenue contributions and deal implementations, while the absence of a share repurchase program is neutral. Despite positive guidance and backlog growth, the lack of clear management responses and financial constraints balance the sentiment.
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