Asure Software, Inc. — Q1 2011 Form 10-Q
Reporting period: Three months ended March 31, 2011; unaudited interim consolidated statements. Amounts below are in thousands of dollars, except per-share data and percentages. Asure sells workforce-management and office-scheduling software and related services, including iEmployee and NetSimplicity products.
Financial performance and liquidity
| Metric | Q1 2011 | Q1 2010 |
|---|---|---|
| Revenue | $2,357 | $2,460* |
| Gross profit / margin | $1,917 / 81.3% | $1,822 / 74.1% |
| Operating expenses | $1,941 | $1,932 |
| Operating loss | $(24) | $(110) |
| Net loss / diluted loss per share | $(60) / $(0.02) | $(188) / $(0.06) |
| Cash from operating activities | $312 | $(111) |
- Revenue declined 4.1% year over year, primarily from a $99 decrease in hardware revenue. The filing’s MD&A gives prior-year revenue as $2,459, while the statements report $2,460.
- Gross profit increased 5.2%; software cost reductions drove higher software margins, partly offset by weaker hardware margins.
- Cash and equivalents were $1,375 at quarter-end, up $305 from December 31, 2010, but below $1,991 at March 31, 2010. Operating cash generation included a $206 reduction in accounts receivable and noncash depreciation and amortization of $238.
- Working capital was negative $147. Current assets were $2,749 and current liabilities were $2,896. Total liabilities were $3,013; the balance sheet reports $14 of other long-term obligations, and the company made $12 of capital-lease payments. No conventional borrowings are separately identified in the supplied filing text.
- Capital spending was $8; financing cash outflow was $12. Deferred revenue totaled $2,149, including $103 long-term.
Changes, outlook, and risks
- Net loss narrowed year over year, helped by stronger gross profit and lower foreign-currency translation loss and interest/other expense. SG&A fell 2.8%, while R&D rose 14.3% to $391 as the company invested in SaaS and cloud platforms.
- SG&A included $56 of one-time severance expense. Lease-related savings of $66 and reductions in insurance and depreciation costs were also discussed.
- Management expected positive operating cash flow for the remainder of 2011 and stated it believed liquidity was sufficient for at least the next 12 months. It anticipated no significant capital expenditures for the rest of 2011, while pursuing growth in existing software operations and considering strategic acquisitions.
- Management cautioned that revenue growth and profitability for the remainder of 2011 were not assured. Additional capital might be needed; the company could not assure it would be available if required. Acquisition funding could include equity, cash, operating cash flow, or external cash or debt.
- The company cited continued cost control and SaaS product development as priorities. It reported no material pending legal proceedings, and no impairment was required for the tested Ceridian-related intangible asset. Management concluded disclosure controls were effective and reported no material control changes during the quarter.
Investor verification priorities
- Reconcile the prior-year revenue discrepancy: $2,460 in the financial statements versus $2,459 in MD&A.
- Assess sustainability of positive operating cash flow and the negative working-capital position, including the timing and collectability of receivables and deferred-revenue obligations.
- Monitor hardware revenue trends, software gross-margin gains, and whether higher R&D spending produces revenue growth and a path to profitability.
- Review lease commitments and potential acquisition financing needs against available cash; management’s liquidity and cash-flow expectations are forward-looking and not guaranteed.
*The financial statements report Q1 2010 revenue of $2,460; MD&A reports $2,459.