How are energy investors positioned?
Asure Software Inc. reported a disappointing second quarter for 2025, with earnings per share (EPS) falling short of expectations by a significant margin. The company posted an EPS of -$0.22, starkly contrasting with the anticipated $0.14, marking a surprise of -257.14%. Despite the missed forecasts, Asure’s stock price saw an 8.04% increase in aftermarket trading, reaching $10.48, as investors reacted to its strategic initiatives and future guidance.
Key Takeaways
- Asure Software’s Q2 2025 EPS was -$0.22, missing the forecast of $0.14.
- Revenue for the quarter was $30.1 million, slightly below the expected $31.03 million.
- The company acquired Latham Time Corporation, enhancing its product offerings.
- Asure’s stock increased by 8.04% in aftermarket trading despite the earnings miss.
- The company projects potential GAAP profitability in Q4 2025.
Company Performance
Asure Software’s overall performance in the second quarter of 2025 reflected both challenges and strategic progress. The company reported a net loss of $6.1 million, with total revenue increasing by 7% year-over-year to $30.1 million. Recurring revenues grew by 6%, indicating stable customer retention and service demand. Despite the earnings miss, Asure’s strategic initiatives, including the acquisition of Latham Time Corporation, are expected to bolster its market position.
Financial Highlights
- Revenue: $30.1 million, up 7% year-over-year
- Recurring revenues: $28.6 million, up 6% year-over-year
- Net loss: $6.1 million
- Adjusted EBITDA: $5.2 million with a 17% margin
- Cash and equivalents: $66 million
- Debt: $67.4 million
Earnings vs. Forecast
Asure Software’s actual EPS of -$0.22 fell short of the forecasted $0.14, resulting in a significant surprise of -257.14%. Revenue was also below expectations, coming in at $30.1 million compared to the anticipated $31.03 million. This marks a notable deviation from previous quarters where the company had met or exceeded forecasts.
Market Reaction
Despite the earnings shortfall, Asure Software’s stock rose by 8.04% in aftermarket trading, closing at $10.48. This increase reflects investor optimism regarding the company’s strategic acquisitions and future guidance. The stock’s performance contrasts with its 52-week range, which has seen highs of $12.74 and lows of $7.51, indicating a volatile yet potentially lucrative investment. InvestingPro Fair Value analysis suggests the stock is currently fairly valued, with 5 analysts recently revising their earnings expectations downward. Discover more insights and detailed valuation metrics with InvestingPro’s comprehensive research report, available for over 1,400 US stocks.
Outlook & Guidance
Looking ahead, Asure has set a full-year 2025 revenue guidance of between $138 million and $142 million, with adjusted EBITDA margins projected at 22-24%. The company anticipates achieving GAAP profitability by Q4 2025, driven by improved product integration and increased cross-selling opportunities following the Latham acquisition. With a market capitalization of $264.34 million and revenue growth of 4.52% over the last twelve months, the company shows potential for expansion. Track these metrics and more with InvestingPro’s real-time updates and advanced analytics tools.
Executive Commentary
CEO Pat Geppel expressed confidence in the company’s strategic direction, stating, "We believe we can achieve 30% adjusted EBITDA margins in the fourth quarter." CFO John Pence highlighted the company’s focus on innovative solutions, remarking, "We’re putting together really interesting combinations of solutions geared towards Main Street."
Risks and Challenges
- Integration of Latham Time Corporation may pose operational challenges.
- Market competition in payroll and HR solutions remains intense.
- Economic headwinds could impact small and mid-sized business clients.
- Debt levels of $67.4 million may limit financial flexibility.
- Achieving projected profitability targets in Q4 2025 may be challenging.
Q&A
During the earnings call, analysts inquired about the integration process of Latham Time Corporation and its expected impact on cross-selling opportunities. Executives emphasized the minimal overlap between existing Asure and Latham customers, suggesting ample potential for revenue growth. Additionally, questions focused on the company’s efforts to improve attach rates and expand its payroll and HCM solutions amid strong macro demand.
Full transcript - Asure Software Inc (ASUR) Q2 2025:
Conference Operator: Good afternoon, and welcome to Assure’s Second Quarter twenty twenty five Earnings Conference Call. Joining us for today’s call are Chairman and CEO, Pat Geppel Chief Financial Officer, John Pence and VP of Investor Relations, Patrick McCallop. Following their prepared remarks, there will be a question and answer session for the analysts and investors. I would now like to turn the call over to Patrick McCullough for introductory remarks. Please go ahead.
Patrick McCallop, VP of Investor Relations, Asure Software: Thank you, operator. Good afternoon, everyone, and thank you for joining us for Assure’s second quarter twenty twenty five earnings results call. Following the close of the markets, we released our financial results. The earnings release is available on the SEC’s website and our Investor Relations website at investor.assuresoftware.com, where you can also find the investor presentation. During our call today, we will reference non GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items.
A description and timing of these items along with a reconciliation of non GAAP measures to their most comparable GAAP measures can be found in our earnings release. Today’s call will also contain forward looking statements that refer to future events and as such involve some risks. We use words such as expects, believes and may to indicate forward looking statements, and we encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ materially from our current expectations. I will hand the call over to Pat in a moment, but I just wanted to take a moment to remind people of our upcoming Investor Relations activities. On August 18, we will be hosting a virtual NDR with Barrington Research.
Research. During September, we will attend the Lake Street Conference in New York on September 11 and participate in the Barrington Research Virtual Conference on September 16. On November 20, we will be attending the Stephens Conference in Nashville as well as the Needham Technology Conference in New York. We also expect to schedule some additional non deal roadshows this fall. Investor outreach is very important to Asure, and I would like to thank all of those that assist us in our efforts to connect with investors.
Finally, would like to remind everyone that this call is being recorded and that it will be made available for replay via a link available on the Investor Relations section of our website. With that, I would now like to turn the call over to Pat Geppel, Chairman and CEO. Pat?
Pat Geppel, Chairman and CEO, Asure Software: Thank you, Patrick, and welcome everyone to Asure Software’s second quarter twenty twenty five earnings results call. I am joined on this call by our CFO, John Pence, and we will provide a business update for our second quarter twenty twenty five results as well as our outlook for the 2025. Following our remarks, we’ll be available to answer your questions. We’re pleased to report that our second quarter revenues were solid coming in at $30,100,000 an increase of 7% versus our second quarter prior year and excluding the impact of ERTC revenue growth was 10%. Our revenues reflect continued strong performance from our payroll tax management product and improving attach rates of our human capital management products.
On July 1, we acquired the Latham Time Corporation and we are excited to have them as part of the Asure family. Latham has a storied legacy as a pioneer in mechanical time clocks and a trusted name in workforce management for over a century. It was founded in 1919 by George and Louis Latham, who began selling time clocks across the Southeast Region of The United States and was still managed by the fourth generation of the family. The company has evolved from PunchClocks in early years and transformed into modern software provider delivering intuitive cloud based time and attendance solutions through its flagship platform PayClock Online. We believe the combination of Latham with our existing time and attendance business is a natural fit, which will allow us to achieve scale in this segment of the market.
The acquisition reinforces Assure’s commitment to supporting America’s growing businesses with simple effective tools to better manage their workforce and grow their business. The target customer base for Latham, which has approximately 14,000 clients, matches well with Asure’s focus on growing companies. The go to market strategy is very similar in nature and direct sales as well as strong reseller network is available to Asure. We view the Time and Attendance segment as a gateway to payroll processing and the rapid self installation software used with the Latham product, we believe we can accelerate our payroll sales and further drive the opportunity to have increased attach rates. Assure Pay is an example of demand for such features such as earn wage access where an employee’s hours can be validated at the time clock or in the time of attendance system.
We believe the clients of Latham also are in need of many additional products Assure has to offer such as tax, HR compliance, benefit administration, four zero one and more. We expect the acquisition of Latham Time Corporation to bring additional high margin revenue to Assure. Our payroll tax management product has continued its momentum as we go live with more clients each and every day and our team has an active pipeline of new opportunities. Assure Pay is a multiyear initiative continues to make very good progress in its launch with thousands of cards ordered by our clients and more being activated every day. In just a few years, we’ve accomplished quite a bit as we have been busy building our capabilities with acquired point solutions.
We’re investing capital to integrate these point solutions for an improved client experience, which we expect to drive our attach rates higher and ultimately drive improved organic growth. While we’re in the early innings of these efforts, we have seen some positive indicators such as improved attach rates during Q2 with an increase of 400 basis points versus the year ago period. Our suite of human capital management products is now stronger than ever and includes a well rounded offering to meet the needs of growing businesses with payroll tax, HR compliance, insurance, four zero one time and attendance. The total addressable market for our products is very large and we’re working to capture increased wallet share. We feel our efforts can lead us to better service our client base of over 100,000 with the best experience in the human capital management industry, whether it’s small growing businesses or an enterprise level business.
We want to be the provider of choice for our clients offering everything they need from the first state of hire all the way through an employee’s retirement. Our bookings for the second quarter declined by 53% year over year, primarily due to large enterprise deals, which were booked in the 2024. Excluding those from comparison, we saw bookings increase 15% for the quarter. Our contracted revenue backlog is $82,000,000 up 68% versus a year ago and remains at record levels. Based on our current business trends, we’re increasing our full year 2025 revenue guidance to a range of 138 and $42,000,000 in revenue with adjusted EBITDA margins of between 2224% from prior guidance of 134% to 138% in revenue with adjusted EBITDA margins of between 2324%.
This guidance includes the anticipated impact of the Latham Time acquisition. Now, I would like to hand it off to John to discuss our financial results in more detail as well as our Q3 guidance. John?
John Pence, Chief Financial Officer, Asure Software: Thanks Pat. As Patrick mentioned at the beginning of this call, several of the financial figures discussed today are given on a non GAAP or adjusted basis. You will find a description of these GAAP to non GAAP reconciliations in the earnings release that was made available earlier today. The reconciliations themselves are also included in our most recent investor presentation posted in the Investor Relations section of our website at investor.assuresoftware.com. Now on to the second quarter results.
Second quarter total revenue was $30,100,000 increasing by 7% compared to the prior year period. Excluding ERTC revenues, we’re up 10% from prior year period. Recurring revenues for the second quarter grew 6% versus the prior year to $28,600,000 and were 95% of our total revenue in the quarter. With 7% total revenue growth in the quarter, our revenue results reflect favorable year over year comparisons driven by payroll tax management and applicant tracking products. As we discussed last quarter, HR compliance still faces some headwinds owing to ERTC related bundling activity in 2023.
And this negativity impacted our growth in the second quarter. Also professional service revenue was a little bit weaker than we forecasted, though as we discussed on past earnings calls, this revenue can be impacted by the timing of enterprise implementations. Our organic growth was 1%. However, excluding the 4% downward pressure from HR compliance revenue issues, organic was 5%. Summing up our buckets of growth, which are organic, enhanced organic and strategic inorganic, our growth was 13.5% excluding the 4% impact to the organic I just mentioned.
Pat Geppel, Chairman and CEO, Asure Software: We believe that the second quarter was the low point for the impact of HR compliance, ERTC related issues.
John Pence, Chief Financial Officer, Asure Software: Float revenue was down slightly versus prior year period due to previous rate reductions made to the federal funds rate. However, increased average fund balances have mitigated most of that impact. We continue to model conservatively for three more interest rate cuts this year. Our cross selling efforts are continuing to show good results with our attach rates, which measures clients that take more than one product, growing again by 400 basis points versus the prior year second quarter. This will be a continued focus for us during the remainder of 2025.
And with the recent acquisition of Latham Time, we believe this will continue to help us drive acceleration of these attach rates. Gross profit for the second quarter increased slightly to $19,900,000 versus $18,900,000 in the prior year second quarter. Gross margins for the second quarter were 66% compared with prior year at 67%. Non GAAP gross margin for the second quarter were 73% compared with the same quarter of prior year at 73%. We continue to believe that there is margin upside over the longer term as the business scales.
Net loss for the second quarter was $6,100,000 versus net loss of $4,400,000 during the prior year. EBITDA for the second quarter was $1,400,000 up slightly from $1,300,000 in the prior year. Adjusted EBITDA for the second quarter increased to $5,200,000 from $4,100,000 in the prior year and our adjusted EBITDA margin was 17% in the quarter compared with 15% in the prior year. Turning now to the balance sheet. We ended the second quarter with cash and cash equivalents $66,000,000 and we have debt of $67,400,000 as of 06/30/2025.
The Latham Time Corporation acquisition, which closed on 07/01/2025, was with a purchase price of $39,500,000 This was paid in the form of $37,500,000 in cash provided by the MidCap Financial Facility, with the remaining $2,000,000 being paid in the form of the seller promissory note. Now I’d like to provide the backdrop for our updated 2025 guidance. During the 2025, we invested in our technology to improve the client experience, added to our sales force and invest in other areas of business to achieve our revenue and profitability goals. As we generate more revenue growth with relatively stable cost structure through 2025, we anticipate that we will experience greater operating leverage. We are modeling for higher interest expense with the newly added debt to our balance sheet.
Our third quarter and full 2025 guidance is based on continued positive momentum in our business. Now in terms of guidance for the 2025, we are guiding the third quarter revenues to be in the range of 35,000,000 to $37,000,000 Adjusted EBITDA for the third quarter is expected to be between 7 and $9,000,000 We are increasing our 2025 revenue guidance from 134,000,000 to $138,000,000 with adjusted EBITDA margins of 23% to 24% to now be in the range of 138 to $142,000,000 with adjusted EBITDA margins to be in the range of 22 to 24%. As Pat mentioned in his comments earlier, these guidance figures include the anticipated impact of the Latham Time acquisition. In conclusion, we are excited about the remainder of 2025 and look forward to 2025 as being a great year for Asure in driving profitable growth and leveraging initiatives that we have implemented across the business to drive long term sustainable growth. With that, I will turn the call back to Pat for closing remarks.
Pat Geppel, Chairman and CEO, Asure Software: Thanks, John. We are pleased to have delivered solid results in the 2025. During the 2025, we achieved many accomplishments in growing the business, improving our technology and complete acquisitions, including a strategic deal of Latham Time Corporation. We believe we’ve executed well on our strategy to deliver growth and will achieve scale benefits. While organic growth has been hampered during the 2025 due to HR compliance related ERTC upsell activity, we believe that the HR compliance headwind will be lessened as we move through the second half of the year.
We’re budgeting for increased capital spending as we work to integrate the point solutions we’ve acquired. And going forward, we’re consolidating the point solutions to one user experience. And this will increase our per employee per month capabilities from about $15 per employee per month just a few years ago to $100 per employee per month today. The sales team is making very good progress in our efforts to cross sell and then we increase our attach rates, which during the second quarter increased by 400 basis points year over year. We believe the increased attach rates and the per employee per month capabilities over time will lead to improved organic growth.
The team here at Asure remains focused on the goal of building and growing the business to achieve scale, which we believe will result in improved profitability with adjusted EBITDA margins of 30% plus at the 180,000,000 to $200,000,000 revenue level. We believe that with the positive momentum that we have in our business combined with the record backlogs and recent acquisitions, we have good line of sight of reaching this goal over the medium term. We expect the business to generate positive cash flow this year and our model suggests we could achieve the 30% level of adjusted EBITDA margins for the fourth quarter and potentially GAAP profitability, which would be an important milestone for this business. In summary, we’re very pleased to have delivered a solid performance in Q2. Our increased guidance for the full year of 2025 reflects our expectation for continued growth in the high teens range.
We have a very healthy contracted revenue backlog of $82,000,000 which had record levels versus last year’s second quarter. We’ve experienced great momentum with our payroll tax management product and are excited about the addition of Blathometime to our business. We continue to feel the business is positioned well for the future. We’ll continue to provide innovative human capital management solutions that help businesses thrive, human capital management providers grow their base and large enterprises streamline tax compliance. Thank you for listening to the prepared remarks that we had.
So with that, I will send the call back to the operator for the Q and A session. Operator?
Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. You. We have a first question from Jeff Van Rhee from Craig Hallum. Please go ahead.
Jeff Van Rhee, Analyst, Craig Hallum: Thanks taking my questions guys. Pat, on the payroll tax management, know obviously RPOs and you can see you booked a lot of business there. I know the timing around those deals have been difficult to predict. Two questions. One, where is that business now in terms of revenue?
And then two, you had some big deals you’ve talked about, I think Kroger, Nucor, a number of others that were potentially 7 figure ARR. It doesn’t look like those have lit up yet. Just catch us up on where you are now and how some of these big deals are flowing through? And if in fact they’re all still there, has anything slipped out of the pipeline?
Pat Geppel, Chairman and CEO, Asure Software: No, not at all, Jeff. Thanks for the question. On tax in general, one of the things we’re we do have competitors listen on these calls. So I want to make sure and they try to use stuff like that against us. So suffice to say from a backlog perspective, we made really good progress.
Some of them have been phased installs as they get one location or they get one business line and then they go to another business line. So there’s been a little bit of slippage from that, but there’s no deals or anything that we’ve lost out of the backlog. And we’ve had some actually some really good in fact, I talked to a number of them personally and I think client satisfaction, we’re right where we want to be. So I feel good about that. I would say just in a couple of them have phased as opposed, but nothing more, nothing less than that.
I think as we look at the first half then go into the second half, we’ll get those backlog installed that we have. They might be a quarter late in some cases or they’re phased. But we’re right on right where I want to be from a unit perspective. From a sales perspective, I anticipate having a couple decent deals this quarter. We didn’t have anything super meaningful booked in the second quarter, but certainly a couple already I think are going to be signed here in the third quarter.
So the tax business continues to make progress and we don’t break out the tax business in general, but it’s increasingly more of our revenue and some of it’s if you include float and don’t include float and as standalone etcetera. So we’ll keep updating you along the way. And then I think on the ERTC with HRC, our human resource compliance product, that was a little bit of the missed in the first half of the year. John quantified that at 400 basis points. We are starting more than we’re losing each month here in the second quarter and we anticipate that in the third and fourth.
So from a bookings retention perspective, that’s in pretty good shape. We just have to we had to get through the cohort of the ERTC combined losses in that piece in that area and we’re largely past that.
Jeff Van Rhee, Analyst, Craig Hallum: Understood. And on Latham, the talk to us about the business itself. What kind of growth rate are you inheriting there? What has that business done the last few years? And then what is the impact that’s coming in for the second half here?
What is the impact on the outlook in terms of the revenue you’re expecting from that?
Pat Geppel, Chairman and CEO, Asure Software: Yes. I think just a couple of things. So we think Latham is just spot on to where we want to go. Their client base and our client base, it’s really good match, feel really good about that. And one of the couple of things that they do is we have almost a same day install if you will or a self install.
So we can get client revenue moving faster. We think we gain the attach rates faster. They’ve grown in the area of 10%. And some of the if you step back and look at the business and the purchase price, we’ve been very consistent on our acquisitions somewhere between two and three times revenue. This one is like smack dab in the middle at about 2.5 times revenue.
And if you think of that, it’s $15,000,000 or so and 7,000,000 in this quarter, 8,000,000 the next excuse me, 7 in the second half of the year, 8,000,000 in the first half of next year. And then what you look at from a revenue perspective is they had some business that is one time. For us, we’re going to move more and more to a reoccurring model. So some of it’s a little bit of apples and oranges. But if you think about it, it’s a $15,000,000 revenue play growing at about 10%.
And then for us, it opens the door to SurePay, it opens the door to payroll, the door to HR, a lot of cross sell opportunities both ways. So we couldn’t be more pleased and excited to have Latham as part of the family.
Greg Gibas, Analyst, Northland Securities: Got it. Helpful. Thank you, Pat.
Pat Geppel, Chairman and CEO, Asure Software: Thank you, Jeff.
Conference Operator: Thank you. We have our next question from Joshua Reilly from Needham and Company. Please go ahead.
Joshua Reilly, Analyst, Needham and Company: All right. Thanks for taking my questions. Just following up on the Latham acquisition here. How should we think about the penetration of time and attendance solutions within your existing base of both direct customers and indirect customers? And how does this change the dynamic in terms of your ability to further penetrate that customer or your existing customer base with timing
Charles Nabin, Analyst, Stephens Incorporation: timing great
Pat Geppel, Chairman and CEO, Asure Software: question. And I’ll get John Pence into the conversation as well. But just one of the things that we improved our we believe we improved our IR deck or Investor Relations deck and it’s on sure.comsoftware.com. But a couple of things. Our attach rates we felt weren’t as high as where we wanted them to be and we saw the opportunity.
We felt like we had a good time and attendance solution, but in some cases it was a little bit more up market. And we wanted to look at that self install, same day install. And then how we’re looking at it is in combination with earned wage access where you can work today, get paid today, you can get credit for your time and attendance hours, etcetera. And so what we’re excited about is that capability and I think attach rates can go up. And in the Investor Relations deck, we kind of lay out last quarter we introduced 25% have two or more products.
We’re already up to 29%. We think we can increase that. And then from a PEPPA model, our capability at $15 a couple of years ago, now we think we have close to $100 per employee per month. And time and attendance, I’d like to see that attach rate go way up. And I think it will with the book to bill and the time to install being a lot quicker.
So that was the part of the reason for the acquisition. We have about 15,000 direct clients. Latham in effect doubles that opportunity here very, very quickly. So from a payroll time perspective, we think we have hit a home run here and we’re going to work right away on a moving both the attach rates in both businesses as well as scaling up the PEPM journey or the per employee per month journey. John, I don’t know if you had anything to add.
Yes, a couple
John Pence, Chief Financial Officer, Asure Software: of things. I think, you talked about the 29%, I would say, probably at least half of that is our clients that have time today with us. One of the things that was interesting about the Latham business as we were talking and starting to learn about them, roughly 14,000 customers, really almost the same customer base that we’re serving. And when you talk to them and try to understand why they lost customers, almost all the time they were losing customers to an integrated payroll solution, right? So we think that there’s a lot of opportunity inside of that base to cross sell into it as well as Pat mentioned
You can go take a look at it. They’ve got a store on Amazon. You can see the clock they’re selling. What they’ve done is it’s almost like a router. Everybody’s taken a router home and tried to set up the Wi Fi at their house.
So it’s a little bit of a challenge. It takes a couple of hours to playing around and hitting some buttons, but they’ve got the same kind of setup, right? So you take the clock, delivered by Amazon and an hour or two later, you’ve got you’re up and running, you put your credit card down and now you’ve got a subscription to their service. It’s a really, really slick system. Our install is nowhere close to that with our current setup.
So we really thought it’s kind of the wave of the future in terms of ease of use. We thought that there’s a really nice attachment with the payroll, so you can offer time and payroll almost real time setup. And then the last piece that we feel like is really interesting is, they’ve already proven this out. They proved it out in the first week after we bought them. We have this Assure Pay card and you can now pick a Latham clock and punch in using that card, right.
So it recognizes that Assure Pay card. So now you have this almost vehicle to where the employees start to recognize their pay as they’re punching in hourly. So we just think there’s a lot of attachments here. That’s a really nice overlap. And it really goes back to the story that we’re trying to do is build out the suite of products and continue to take the customers down a journey where they have more and more value out of our ecosystem.
Joshua Reilly, Analyst, Needham and Company: Very helpful. Just following up here, what are you seeing in terms of core payroll unit growth over the last couple of quarters, right? Because if you look at the 1.2% organic growth in the quarter, I know that doesn’t tell the full story. So is it right to assume that like the core kind of payroll units are growing closer to that 5%, which is the kind of the adjusted growth number or maybe help us understand some of moving parts? No,
John Pence, Chief Financial Officer, Asure Software: I think that’s exactly right. I think that’s what you would see is on average is probably about 5% when you take off the impact of the headwind.
Joshua Reilly, Analyst, Needham and Company: And then maybe just to follow one last point, what gives you confidence or what are you seeing in the numbers that to see the trajectory that the HR compliance headwind is
Greg Gibas, Analyst, Northland Securities: going
Joshua Reilly, Analyst, Needham and Company: to lessen in the second half? Is it that the renewals have gone through at this point primarily or through the second quarter and the number of renewals declined significantly for those HR complianceyear TC deals or what are you seeing?
John Pence, Chief Financial Officer, Asure Software: Yes, I I think we talked a little bit about this last time and I’ll let Pat kind of give his feelings. But we went out to market with the idea that we thought that there’d be a lot of goodwill created with I mean, compliance product is really, really strong. We went to market with the idea that, hey, if we also get these customers some money from the government, these guys are going be loyal forever. It didn’t prove out to be that way. It sounded a lot more of these transactions were transactional in nature, right?
They were just there for the free, you know, ERTC money and didn’t necessarily buy into the value prop that we were hoping for with HRC. So what we know now is that cohort started to roll off, right, just because VRTC is kind of in the rearview mirror. And so we’re kind of behind that cohort. And so anyway, that’s what gives us confidence. And Pat, I’ll leave you.
Pat Geppel, Chairman and CEO, Asure Software: Yes. No, it’s nothing more than that, Josh. If I look at the cohorts and if you think about when ERTC was going strong, it was in that kind of twenty twenty three, 2024 area. And then when you think about as they’ve rolled off or 2022, 2023 and then you got a year or so renewals, our average kind of renewal is somewhere in close to 90% range. That cohort was probably somewhere in the 40s range.
So as that’s rolled off and we get monthly sales number, monthly trip numbers that cohort is less and less and we’re selling more than we’re losing each month. So now that as that snowball continues, we’ll be back to normal here pretty quickly.
Joshua Reilly, Analyst, Needham and Company: All right. I’ll pass it along. Thank you.
Pat Geppel, Chairman and CEO, Asure Software: Thank Thank
Greg Gibas, Analyst, Northland Securities: The
Conference Operator: next question comes from Brian Begren with TD Cowen. Please go ahead.
Jared Levine, Analyst, TD Cowen: Hi, this is actually Jared Levine on for Brian tonight. I guess to start here, quickly can you drive revenue synergies with Latham and is any of that assumed in guidance?
John Pence, Chief Financial Officer, Asure Software: No, I think we’re hopeful that we can get integration done this year. So in the next few months, we’re putting a lot of energy towards it. The guy does not consider a lot of cross sell synergies right now. So we going to focus on getting the product generated, making a really good experience for the customer and then figure out what does that mean in terms of upside. But no, I don’t think we’ve played a lot of upside into that for this part of the year.
Fair enough.
Pat Geppel, Chairman and CEO, Asure Software: Jared, I think you’ll see 26, 27% be where a lot of the revenue comes in. There was some duplicate costs that has been played in this year and some of it will be taken out. We’ll do some investment as well around the integration efforts because we do feel that there’s such a book to bill and kind of revenue synergy that kind of integration effort probably targeting towards the October. So we might get small amounts and if we do great, but really it’s a 2026, 2027 story.
Conference Operator: Got it. And then wanted
Jared Levine, Analyst, TD Cowen: to dig into the revenue guide update here. So you did raise the midpoint by $4,000,000 but Latham was about $7,000,000 So in terms of that organic guide down, you did call out some professional services softness or coming in below plan in 2Q here. What kind of is that what’s kind of contemplate for second half that drove that organic guide down? Is it more professional services or anything else to note there?
Pat Geppel, Chairman and CEO, Asure Software: Yes. I think they’re really to me there’s three areas here. If we looked at the plan, it was really kind of 134,000,000 to 138,000,000 If you take the 7,000,000 out, it’s 131,000,000 to $135,000,000 I think the enterprise deals moving more to a phased approach in a couple of instances is probably some aspect of it. And then obviously the ERTCHRC and I don’t want to give you all the acronyms, but the human resource compliance that was bundled with the ERTC, We were a little bit late in getting that when we guided last October, really getting an understanding the impact that will have this year. And then on AssurePay, actually it’s pretty good news.
We have over 11,000 cards issued already. We have close to 100,000 activated or excuse me, thousand activated. And we’re pretty pleased with that, but it is a kind of a net margin revenue model. So we’ll have a little bit of slippage this year in that. But outside of that, I think we feel pretty good about we took the guide down $3,000,000 in that core business.
Clearly, as we get the attach rates, if we go from 400 and increase the attach rates, we think we have some upside there. The book to bill around Latham will give us some upside, not only in time attendance, but payroll and potentially four zero one. So we think we’ve right sized that. And then as far as the guide on EBITDA, we took about $1,000,000,000 a quarter out late in the second quarter. And then as we look at third and fourth quarter, it’s really a revenue EBITDA story that we believe we can achieve 30% adjusted EBITDA margins in the fourth quarter and we have a shot at GAAP profitability, which I think is an important milestone.
And then we’re really set up next year both from a revenue growth perspective and then an EBITDA and profitability performance.
Jared Levine, Analyst, TD Cowen: Great. Thank you.
Conference Operator: Thank you. We have our next question from Eric Martinuzzi with Lake Street. Please go ahead.
Eric Martinuzzi, Analyst, Lake Street: Yes. Curious to know the pipeline expectations regarding the installed base. Put another way, you talked about the 14,000 Latham customers against your 100,000 customer installed base. Do we have a sense of overlap there? Is there within that 14,000, for instance, how many are already Asure customers?
John Pence, Chief Financial Officer, Asure Software: As far as we know, Eric, based on our initial review, very little. So there’s a lot of upside, a lot of greenfield opportunities for us.
Pat Geppel, Chairman and CEO, Asure Software: And Eric, only thing I would add to that, in some of the cases, we did not have an interface with Latham. So we’ve already kind of cross channeled where they have Latham and they have us, but maybe they didn’t have an integration or what have you. I think there’s huge opportunity in doing that. And then I also think there’s some opportunity here where in certain markets we didn’t play in those markets because we had maybe a partnership solution, etcetera. We don’t have to have a partnership solution anymore.
We can go right to the Latham integration. So I think that will be a huge opportunity for us going forward. Right now, not a lot of crossover. There’s some, but because we didn’t have a formal integration, we don’t track it as kind of one system. It’s almost two systems.
But I think going forward, that’s the opportunity.
Eric Martinuzzi, Analyst, Lake Street: Okay. And then second question is with regard to macro demand for the core payroll and HCM suite. Just curious, anything changed in the last ninety days with what you’re hearing from channel partners, what you’re hearing from direct sales reps on demand for the core product?
Pat Geppel, Chairman and CEO, Asure Software: No, I think perhaps a little bit in April where you had the Liberation Day and people are trying to figure out some of that stuff. But really to me the demand environment has been pretty good. We have a pretty good strong pipeline. When I look at marketing and some of the MQLs and SQLs, marketing qualified lead and sales qualified lead, I know we had a in a summer month here just recently, we had an all time record that tied to some of the big beautiful bill language. And anytime there’s change in legislation, that’s usually good for a payroll company in general and the demand environment because people have to react to those changes.
So as far as I can see, there wasn’t much. I would say the quarter bookings was a little soft and primarily, first of all, it’s a really tough compare. But then I’m really confident in our pipeline going forward both really in every market will continue to improve in this area. So I don’t see the demand slowing down at all. I think it’s been a pretty good environment.
Eric Martinuzzi, Analyst, Lake Street: Got it. Thanks for taking my questions.
John Pence, Chief Financial Officer, Asure Software: Thank you. Thanks, Eric.
Conference Operator: Thank you. We have our next question from Charles Nabin with Stephens Incorporation. Please go ahead.
Charles Nabin, Analyst, Stephens Incorporation: Hi, guys. I appreciate all the color around the moving pieces with the guide. Just had a quick one about the change in the margin outlook. Looks like you lowered the lower end by about 100 bps. Curious if that was attributable to a lower margin profile from the incremental Latham revenues or if some of the other deals that were pushed out might have impacted that as well.
Just trying to understand that movement in the guide.
John Pence, Chief Financial Officer, Asure Software: I think you picked it up, right. I mean, there’s a little bit of a margin decrement we think in the near term with regard to some of the Latham revenue is going to come in relative to ours. We feel really good about it over the long term, but we there are some cost out that we’re going to to do over the next I think it’s probably an eighteen month process. And so that’s putting a little pressure just by the nature of their business. And then we’ve also got kind of a we’re going to be going through a process where we probably modify the way they sell.
So historically, they would sell a piece of hardware and then they would recognize the revenue on that hardware and then they would sell a subscription to the software. I think we’re going to probably go down a path where it’s more of an integrated sale where we sell the hardware and the software, but we do it over a subscription for both pieces. So and there’s just some change in models and so anyway that’s think you picked the right point. There’s a little bit of final margin pressure from the Latham deal.
Charles Nabin, Analyst, Stephens Incorporation: Got it. And as a follow-up, wanted to drill into the new bookings from the quarter. Just get a sense for what you’re seeing from a product uptake standpoint given the broadening of your product base over the past year or so, whether you’re seeing more ARPU from some of the newer cohorts as well as if you’re seeing anything different from a demand standpoint in terms of like the size of employers you’re selling into?
Pat Geppel, Chairman and CEO, Asure Software: Yes. No, that’s a great question. I do think you’re going to see us and we have a small business kind of focus when you have all the products and services. But clearly, as we go, let’s say our average new sale was 20 employees, I think you’ll see us go up a little bit. Now we’ll continue to serve that kind of under 50 marketplace, but I do think we’ll walk up a little bit over time.
The capability, we see from partners sometimes they might refer us a payroll tax solution. Well, now partners are saying, hey, payroll tax, time, recruiting, bring benefits, bring almost everything to the party. Now we’re teaching people how to sell service that and then from a technology perspective, one user interface integrating it make it easier to do business. And we’ve rolled out already the Asure ID where we can recognize where those people are coming from and serve our products right away. That will be a continued focus.
So in the investor deck, we said last quarter, we’re going to really focus on attach rates. We went from 25% to 29%. I want to continue to drive that and the Slatham acquisition I think is going to be really good for us. And then on the ARPU, I think you’ll see us in 2026 kind of focus on that as an indicator of progress given all the products and services. And then from a technology perspective, continue to make it easier and serve up product led kind of almost a touchless integration of more and more products.
We’re going to continue to do that. So that will be a focus for us. Then training, we’re training the service people on how to service in a multi product environment. From a sales perspective, it goes from a what I’ll call a catalog sale or a product sale to a solution sale. And we’re in the early innings of that, but feel that we have the right tools in place and we’ve been building for this moment.
And then finally scale, we think we have the benefits of scale and profitability and we think we achieved that. We mentioned in the investor deck that at 180,000,000 to $200,000,000 in revenues, we should be at that 30%. With any luck here, quarter, we’re going to do that and then also achieve GAAP profitability. So we’re making a lot of progress, but there’s a lot of stuff in motion.
Charles Nabin, Analyst, Stephens Incorporation: Got it. Appreciate all the color. Thank you, guys.
Conference Operator: Thank you. We have our next question from Richard Baldry with Roth Capital Partners. Please go ahead.
Patrick McCallop, VP of Investor Relations, Asure Software0: Thanks. You touched on just a second ago lightly, but I wanted to ask about the cost synergies with Latham. You said it might take something like eighteen months. Do you think at that point, are they a higher adjusted EBITDA contributor to sort of the core company would absorb a lot of the G and A overhead that you don’t need from them or do you think they’re basically in line with your long term model?
John Pence, Chief Financial Officer, Asure Software: No, I think they’re very accretive and add to the overall. So if you think that I think they can be 50% or higher when it’s all said and done in terms of actual contribution. Now again, that’s it’s a combination, right, of taking costs out of our side as well as taking there’s redundancies. We’ll have we have a product support team supporting our product. We have engineers supporting our product.
They have engineers. They have product support. So it naturally will consolidate the SKUs and the offering. So there’s some really obvious ones. Back office, right, G and A, I mean, there’s just a lot of obvious ones that I think it can be a very healthy contributor to the long term EBITDA.
Pat Geppel, Chairman and CEO, Asure Software: The other thing Rich too is from a revenue perspective, we’re pretty excited about is, we have, let’s say, a four week or five week install. This could be a day install. So you get revenue quicker, it’s easier, it’s more scalable. We have the ability as we look at these products and services to self install. Then if you think about the whole concept of Earned Wage Access, which we have a SurePay, now you can use the same, let’s say, time card as your PayCard.
And you have that ability where, okay, you work today, you see a four hour shift and you want to get it in advance on those four hours, you can use the same card to do that. So a lot of stuff here that’s going to open up on value proposition, revenue strategy, where we’re going in this marketplace and then the capability gives us a lot of shots both ways, whether it’s the 15,000 direct payroll customers or the 14,000 time customers, I think we have the ability to do that. And then John mentioned obviously some of the redundancies and we’ll focus on that during due time. So good acquisition all the way around, lot, a lot of potential.
John Pence, Chief Financial Officer, Asure Software: Yes. And I’ll just add one last kind of point, Rich. I mean, you think about our customer, I mean, it’s Main Street. We’ve talked about it all the time. A lot of hourly employees, the applicant tracking system that we bought last year, similar was geared towards that same market.
So I think we’re not taking things that are far afield. We were I think we’re putting together a lot of really interesting combinations of solutions that are really geared towards this type of market.
Patrick McCallop, VP of Investor Relations, Asure Software0: Maybe to gauge the overlap, do you know what their the typical headcount of a Latham client would be sort of a range maybe and how similar is that to your own?
John Pence, Chief Financial Officer, Asure Software: It’s they’re like almost spot on, right? They’re in the kind of low teens.
Patrick McCallop, VP of Investor Relations, Asure Software0: Got it. And then last for me would be, this is a little larger scale acquisition than you’ve tended to do. You have done in this big before, but how does that impact sort of your near term appetite for other acquisitions? Does it slow down? Do you look at back to sort of bite sized ones?
How do we think about that broadly?
John Pence, Chief Financial Officer, Asure Software: We’ve still got some minus side to some of that we want to do this year. I don’t think there’s anything that’s going to be this kind of move the needle in terms of huge revenue impact, but yes, we’re going to still be active. After we consummated this transaction, we’re still sitting a little bit less than $30,000,000 in cash. So we’ve got room to still go do some stuff. So anyway, we’re still going to be acquisitive.
I would tell you though, I think with this deal, we’re going to probably we’ll have some maybe this balance of this year early next year, but I think we’re going to also probably start to consume and integrate what we’ve got for a little while. I mean, I think that’s some of what Pat mentioned earlier and some of the cost reductions is a result of literally that. I mean, we’ve done a lot of deals over the last couple of years and trying to rationalize some of that back office expense is I think what we need to what we’ll plan on doing for the next foreseeable future.
Patrick McCallop, VP of Investor Relations, Asure Software0: Got it. Thanks.
Charles Nabin, Analyst, Stephens Incorporation: Thanks, Rich.
Conference Operator: Thank you. We have our next question from Greg Gibas with Northland Securities. Please go ahead.
Greg Gibas, Analyst, Northland Securities: Hey, good afternoon, Pat and John. Thanks for taking the questions. I appreciate all the color on length and time. I wanted to follow-up there in terms of maybe what’s involved or the steps involved with the integration and then realizing those revenue synergies? And maybe how much investment are you aiming to put towards that integration?
And then just, I guess, secondly, along length and time, kind of longer term expectations on cross sell or the attach rate that you see with both those client bases?
Pat Geppel, Chairman and CEO, Asure Software: Yes. I think, Greg, thanks for the question. A couple of things on the longer term attach rates on time specifically, let us get through the integration. And I think as we look at 2026, we can have some pretty firm attach rate goals and numbers and we want to prove that out. Job one, two and three really is integration of Latham and Assure.
As far as the integration between payroll and time, the integration between AssurePay, four zero one etcetera, where we can get up and running quickly and offer those products. But that’s the big initiative that we’re working on right away. And then I think you’ll see opportunities around attach rates. And if you think about it, we have the opportunity to fulfill a client’s obligations on time instead of call it four weeks, we call it in less than four days. That in itself is a big kind of move for us both from a sales implementation process and the ability for a customer to almost self install if you will.
We think that there’s huge opportunities there. So we’re excited about it. We believe that’s it. I think more to come in 2026 and then we introduced in the investor deck both kind of the revenue, PEPM model and we can give a little bit more color here as we look to guide towards 2026.
Greg Gibas, Analyst, Northland Securities: Got it. That’s helpful, Pat. And then if I could on organic revenue growth expectations in the back half, what’s kind of implied there? And would you expect maybe the cadence to differ between Q3 and Q4?
Pat Geppel, Chairman and CEO, Asure Software: Yes. I think just in general, if you think about how we thought about Latham, where it’s roughly $7,000,000 in the second half or so, that would imply that, I think last year we were kind of we mentioned that we would grow about half organic and half inorganic. So if you think at a 134,000,000 to 138,000,000 we were trying to achieve double digits here in the second half. We do run into some tougher compares in the second half. But I think if you think about that single digits in the second half and as we integrate all our products and services as we’re doing and get the attach rates up, we think that organic growth is the outcome of that.
So we’re set up to do that. I think this second half of the year, it would be in the single digits. But clearly, we’re trying to grow attach rates and PEPM to get to a double digit organic growth company. And then finally, as we’ve done some acquisitions here, obviously you have to make investments in your front end of the business to continue to grow organically and we’re doing that. And one of the things we’ll continue to grow kind of feet on the street, but more importantly it’s that cross sell component because as we drive a bigger wallet share, we think that that will lead us to scalable profitable growth.
And then finally, as we look at the fourth quarter, I think if we can make a marker towards profitability and whether we get there or not, we’re right there. And now we have the ability then obviously to generate cash, grow more and more revenue organically and then we can continue to look at scale. These businesses are scale businesses and to put a stake in the ground that we can grow in a very profitable way is important for us as the long term health of the business.
Greg Gibas, Analyst, Northland Securities: Got it. That’s helpful. Thanks for that.
Joshua Reilly, Analyst, Needham and Company: Thank you.
Pat Geppel, Chairman and CEO, Asure Software: Okay. Well, can I take it home?
John Pence, Chief Financial Officer, Asure Software: Yes, sir. Sure.
Pat Geppel, Chairman and CEO, Asure Software: Okay. Well, listen, longer call today, but we had a lot of news to share. Feel like we’ve made tremendous progress in the business. I know some of you have been long term investors and we appreciate your interest in Asure. We’re going to continue to build out and grow this business.
We’re making really good progress. It’s not always straight up, but I’ll tell you what, we’re going to continue to move and we have some milestones in sight that are pretty attractive to all of us and we want to see those to fruition. So really appreciate your time today. Look forward to talking to you soon. Thank you.
Conference Operator: Thank you, sir. Ladies and gentlemen, the conference of Azure Software has now concluded. Thank you for your participation. You may now disconnect your lines.
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