ASURE Software, Inc. — 2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014; comparisons are with 2013. Unless otherwise noted, amounts are in millions of dollars.
Business context
Asure provides cloud-based and on-premise workplace and workforce management software, including space scheduling and utilization, time tracking, and labor management. It reported approximately 6,000 clients in 80 countries. During 2014, it acquired FotoPunch, a mobile biometric time-clock provider, and Roomtag, a workspace technology business.
Financial performance and liquidity
| Metric | 2014 | 2013 |
|---|---|---|
| Revenue | $27.206 | $25.474 |
| Gross profit / margin | $20.892 / 76.8% | $19.049 / 74.8% |
| Operating income | $1.584 | $0.782 |
| Net loss | ($0.262) | ($1.662) |
| Net loss per share | ($0.04) | ($0.29) |
| Cash from operating activities | $2.706 | $2.025 |
- Revenue increased 6.8%. Cloud revenue rose 6.5% to $13.716 million; hardware rose 22.8% to $2.623 million; professional services rose 25.5% to $3.379 million. Maintenance and support fell 2.8%, and on-premise license revenue fell 8.5%.
- AsureSpace revenue increased 15.0%; AsureForce revenue decreased 3.2%. Management attributed the overall gross-margin improvement to a mix shift toward cloud and professional services.
- Operating cash flow was positive, but cash declined to $0.320 million from $3.938 million. Investing used $4.200 million, primarily for acquisitions and equipment; financing used $2.147 million.
- Working capital deficit was $7.314 million, including $10.641 million of deferred revenue. Total notes payable were $15.131 million, of which $0.750 million was current; the 2013 balance was $17.006 million.
- The Wells Fargo term loan matures in March 2019 and bears interest at LIBOR plus an applicable margin. The company reported compliance with debt covenants at year-end; substantially all company and subsidiary assets secure the facility.
Changes, outlook, risks, and unusual items
- Net loss narrowed substantially, but 2014 results included a $1.034 million gain from settling PeopleCube litigation and a $1.402 million refinancing loss. These items materially affected comparability.
- The March 2014 Wells Fargo refinancing replaced the Deerpath loan. Asure also settled its PeopleCube acquisition dispute, paying $1.700 million against a $2.460 million remaining note balance and receiving $0.500 million from its insurer; the net settlement gain was approximately $1.034 million.
- FotoPunch consideration included $1.500 million cash and up to $3.000 million in earnouts tied to revenue targets. Roomtag consideration included $0.933 million cash and a $0.754 million subordinated note.
- No quantified revenue or earnings guidance was provided. Management expected to generate positive operating cash flow and meet operating and debt obligations over the following 12 months, while cautioning that growth, profitability, and positive cash flows were not assured. It anticipated approximately $0.800 million in 2015 capital expenditures.
- Liquidity risks include low year-end cash, a working capital deficit, debt covenant requirements, and the possibility that additional capital may be needed. Management stated that future financing might not be available on acceptable terms. Competition, product acceptance, acquisition integration, and retaining key personnel are also risks.
- The filing reports $0.395 million available under the revolver in its liquidity discussion, but elsewhere states that the full $3.000 million revolver was available with no balance outstanding. The actual borrowing availability is not clear from the filing text.
- Federal net operating loss carryforwards were approximately $116.6 million, but use may be limited by ownership-change rules; the company maintained a valuation allowance against most deferred tax assets. No material pending legal proceedings were reported. Management concluded disclosure controls and internal control over financial reporting were effective.
Important facts for investors to verify
- Confirm actual revolver availability and covenant headroom, including the effect of the March 2015 amendment.
- Assess whether operating cash flow can sustain debt service and planned spending given the decline in cash and the working capital deficit.
- Track recurring cloud revenue growth, particularly the divergence between AsureSpace growth and AsureForce contraction.
- Verify FotoPunch earnout performance and integration, and the repayment terms and status of the Roomtag note.
- Separate recurring operating performance from the PeopleCube settlement gain and refinancing loss when evaluating 2014 results.