ASURE SOFTWARE, INC. — Q2 2011 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2011. Unless otherwise noted, financial amounts are in thousands of dollars. Asure sells NetSimplicity workplace-scheduling software and iEmployee workforce-management software and services.
Financial performance and position
| Metric | Q2 2011 | Q2 2010 | Six months 2011 | Six months 2010 |
|---|---|---|---|---|
| Revenue | $2,434 | $2,625 | $4,791 | $5,085 |
| Gross profit | $1,997 | $2,123 | $3,914 | $3,945 |
| Gross margin | 82% | 81% | 82% | 78% |
| Operating income (loss) | $41 | $(1,036) | $17 | $(1,146) |
| Net income (loss) | $27 | $(1,015) | $(33) | $(1,203) |
| Basic and diluted EPS | $0.01 | $(0.33) | $(0.01) | $(0.39) |
- Cash flow: First-half operating cash flow was $1,016, versus cash used of $1,321 in the prior-year period. Investing activities used $45, primarily for property and equipment; financing activities used $24 for capital-lease payments. Cash increased by $956 to $2,026.
- Liquidity and balance sheet: At June 30, cash was $2,026, current assets $3,304, current liabilities $3,180, and working capital $124. Total liabilities were $3,335 and stockholders’ equity $2,728. The filing reports no material borrowings; other long-term obligations were $10.
- Expenses: Q2 SG&A declined 2% to $1,413, while R&D increased 8% to $393. First-half SG&A declined 2% to $2,815 and R&D increased 11% to $784. Intangible-asset amortization was $150 for Q2 and $298 for the first half.
Material changes versus comparable periods
- Revenue decreased 7% in Q2 and 6% for the first half. Management attributed the reductions mainly to lower MRM perpetual-license sales and lower iEmployee SaaS revenue, with the latter primarily related to Ceridian customer conversions. Growth in MRM SaaS revenue partly offset these declines.
- Gross margin percentage improved, particularly for the first half, which management attributed to fewer lower-margin hardware sales and reduced third-party cost of sales.
- Q2 moved to a small profit from a substantial year-earlier loss; the comparison benefited from the absence of the $1,203 lease-amendment loss recorded in 2010. The company remained slightly loss-making for the first half.
- Cash and working capital improved materially from the prior-year comparison. Deferred revenue rose to $2,216 current and $145 long-term from $1,955 and $116, respectively, at year-end 2010.
Outlook, commentary, and risks
- Management expected positive operating cash flow for the remainder of 2011 and believed liquidity was sufficient for at least the next 12 months. It also cautioned that cash use could exceed recent levels and that additional capital might be needed; there is no assurance it could be raised when required.
- Management planned to continue cost reductions, invest selectively in revenue-generating software development, focus on SaaS sales, and explore strategic acquisitions. Acquisitions could be funded with equity, cash, operating cash flow, or outside cash or debt.
- The company stated that it could not assure revenue growth or profitability for the rest of 2011. It reported no material changes in critical accounting policies, no material pending legal proceedings, and effective disclosure controls as of June 30, 2011.
- Unusual prior-year item: The 2010 lease amendment reduced leased space and rent, but resulted in a $1,203 loss, including a termination payment and related write-offs, net of liability reversals. No comparable charge was recorded in 2011.
Important facts for investors to verify
- Whether MRM SaaS growth can offset continuing declines in perpetual licenses and iEmployee SaaS revenue, including the effects of Ceridian customer conversions.
- Whether positive operating cash flow is sustained and whether the company can maintain adequate liquidity while pursuing cost reductions and potential acquisitions.
- The drivers and durability of the improved gross margin percentage, and the path from a small Q2 profit to sustained profitability.
- The scale, financing, and cash requirements of any planned acquisitions; management said outside financing may be considered.