ASUR

Business Context and Reporting Period

Company: Asure Software, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2010
Business Overview: Asure provides software and services, primarily through two product lines: NetSimplicity (facility scheduling, e.g., Meeting Room Manager) and iEmployee (HR, time & attendance, and benefits management). The company operates as a smaller reporting company and recently transitioned its fiscal year-end from July 31 to December 31, effective January 1, 2010.

Key Financial Metrics

Note: All amounts in thousands unless otherwise noted. The company reported no long-term debt on the balance sheet as of June 30, 2010.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 13% year-over-year for the quarter ($2.625M vs. $2.314M) and 5% for the six-month period ($5.085M vs. $4.824M). Growth was driven by increases in SaaS revenues and hardware orders, partially offset by a decline in perpetual license sales following the divestiture of the Visual Asset Manager product line.
• Expense Reduction: Selling, General, and Administrative (SG&A) expenses decreased significantly by 50.4% for the quarter and 49.1% for the six-month period compared to 2009. This reduction was due to headcount reductions, salary cuts, lower legal fees, and rent savings from a lease amendment.
• One-Time Charges: The current period included a $1.203 million loss on lease amendment related to reducing office space from 137,000 to 9,000 square feet. This contrasts with the prior year, which included a $0.630 million asset impairment charge related to lease subletting issues.
• Net Loss Improvement: Despite the lease amendment charge, the net loss narrowed significantly compared to the prior year due to substantial expense reductions. The six-month net loss decreased from $3.887 million in 2009 to $1.203 million in 2010.

Guidance, Outlook, and Risks

• Liquidity Outlook: Management expects to generate positive cash flows from operating activities for the remainder of 2010. The company believes it has sufficient capital to fund operations for the next 12 months but noted that future business demands may require raising additional capital.
• Strategic Focus: The company is focused on growing existing software operations, specifically SaaS products (MRM and iEmployee), and exploring strategic acquisitions. Acquisitions would be funded via equity, cash on hand, or external financing.
• Key Risks:
  • Cash Consumption: Uncertainty regarding the ability to limit cash consumption and maintain sufficient balances.
  • Customer Transition: The dissolution of the reseller relationship with Ceridian Corporation required joint customers to choose between contracting directly with Asure or using Ceridian's offerings. As of August 9, 2010, Asure had captured 93% of the pre-dispute monthly recurring revenue.
  • Market Conditions: The company operates in a macroeconomic downturn, which poses challenges to revenue growth and profitability.

Investor Verification Checklist

• Lease Amendment Impact: Verify the long-term cash savings of approximately $0.360 million per quarter resulting from the office space reduction.
• Ceridian Transition: Confirm the retention rate of customers transitioning from the Ceridian reseller relationship and the stability of the resulting recurring revenue.
• Liquidity Runway: Assess the sufficiency of the $0.705 million cash balance against the negative working capital position and ongoing operating cash burn.
• Revenue Mix: Monitor the shift from perpetual licenses to SaaS subscriptions and the impact on gross margins, noting the recent dip in six-month gross margin percentage due to lower-margin hardware sales.
• Future Capital Needs: Evaluate the likelihood of future equity or debt offerings given the company's stated potential need for additional capital to fund growth or acquisitions.