ASUR - Earnings call transcript Q1 2020

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Operator

Good afternoon and welcome to Asure’s First Quarter 2020 Earnings Conference Call.

Joining us today for today’s call are Asure’s CEO, Pat Goepel; CFO, Kelyn Brannon; and Vice President of HR, Cheryl Trbula.

With that, I would like to turn the call over to Cheryl for introductory remarks. Cheryl?

Cheryl Trbula

Thank you, operator. everyone. afternoon, good And

any I’d by mention might made particular are be subject uncertainties number risks management other will estimates start, this guidance. to outlook company’s the that include some These statements of and include that statements This are information. made and during forward-looking of like we the that business their statements to a of projections, discussion forward-looking or call Before today’s outcome. could all that and the may on historical affect not of call

urged relating reports business expected results. You’re to to Securities risk the consider with they file important, factors the and our results to could in are materially Commission. actual These risk factors differ contained from the Exchange company’s on and cause

to remind the available made that everyone will will at this on it and be www.asuresoftware.com. would I like recorded be Investor section Relations call

have regarding refer our note on posted that slides I Events the IR to COVID Finally, our on website. and Presentations we would our some section website response. Relations Investor Please

turn With Goepel, call now would like the that, Pat? to over CEO. to I Pat

Pat Goepel

XXXX welcome Thank for the call client, investment, to and third being the interested for party. on whether you, We’d appreciate like first employee thank Cheryl today. your I or a you all earnings quarter interest an call. everyone you’re analyst, or

prayers exceptional to challenging to clients recognize I and the with like circumstances impacted XX,XXX have small their those the rising faced to our business and in Asure for been someone out small all, We COVID-XX. lost by been they’ve workforces service go have sympathize people our who reductions their to know jobs. of also has had thoughts to with who challenge face. First and delivering unavoidable despite the businesses or the employees would

business. going to and offered want pandemic businesses our balances, operations, operational and or reduce mandates to business resulted business. first have and the spend we This and higher I’m pause circumstances unemployment businesses, forced them, and the go by deck IR lower talking well the mentioned interest lower as At caused rates. a to our call on COVID sales, services, many in fund a thank want and you. do products demand about part medium-sized significant decline. to refer, macro of of say I government the it, out website. To unprecedented higher lower for I level, and headcount, stay-at-home small, to headwinds, Cheryl These of that small the client COVID out rates, as has COVID-XX same-store including economic

operations navigate clients’ and to circumstances three strategy and We I’ll making our into effectively will the about remain – macro took normalize. people, optimistic response financial. once our these and decisive multiple these categorize environment categories We clients, tactical are actions in and our be times. We responses adjustments well positioned to long-term challenging unprecedented

four along focus particularly you’re would If and on. Slides seven, the following in deck, I

XX% transitioning We of our work-from-home business to model. First successfully our while plan our of on executed people. all, workforce resiliency a

Still, some clients. to salary temporary employees small, right maintain we talented we and our benefit higher hiring cuts workforce, and furloughed excellent medium to personnel the of management workspace growing our made for paid size And of also the valued We sale, to are overall reductions. business decision levels to related implemented we then support difficult some really our our and personnel.

environment. cuts, million with it’s about those $X.X uncertainty more $X.X categorize $X impact a the permanent, quarter, the million deal million the temporary to To to of

customer the launched increased businesses small customer COVID-XX business and response small for our engagement. significantly center non-customer alike Second, We clients. and

had small help the of including integrate want development a forgiveness. resources to designed redirected and efforts, you daily businesses our approximately compliance our stats. indirect PPP apply X,XXX webinar clients, external more receive new Cares magnitude over and small some business for call programming. legislation into bound products, to also direct our specific with you internal I than provide to activities To to and We X,XXX XX,XXX We loan resellers reports reaching hours attendees, XXX our of give clients

branches Our and and the tax on report about groups the in corresponding laws. were government craft legislation IRS with PPP groups around thought leadership the taking changes. production executing with helping and government various other Congress legislative changing

financials. our Third,

First strong, business increased reps from force year. recurring management cross model We driven the sales in our carrying start as of our as selling. human high capital XX were quarter at revenue by and quota the growing XX results well our progress to

X% EPS quarter February, COVID revenue impacts were due for unexpected half unemployment was the expectations initiatives. were in our Both through rate an cuts $X.XX. March March. down million, But clear in to related was in quarter interest demonstrating non-GAAP despite of to Bookings spike up year-over-year we the the Street $XX.X exceeded First second XX% success pandemic. and

requirements workplace than We cost service hired expect to plan, to the capital developers, management and human synergies expected. small enabled the sales complete to We fully us people talked which people, transaction we and of ahead the this month, for client realize meet business about businesses. changing sooner

on that complete. non-strategic discussed be human about well-rounded are AWS contracts now finally, we company. strategy to core and some NetSuite us Furthermore, that exited of enable we our laser-focused capital our a previously management And implementations

further, about go to the we results. With financial that, like before Kelyn? Kelyn talk I’d any

Kelyn Brannon

good and Pat you, Thank everyone. afternoon

we December we XXXX revenue provided HCM in For restated comparison purposes, exclude contracts customer that numbers XXXX. non-strategic businesses non-core have and exited

non-GAAP non-revenue And are revenue from results restated measure. find will all GAAP to non-GAAP I today’s GAAP in release. financial and you a discuss press as a today state will them reconciliation usual, numbers unless figures As I

declined During the quarter, bookings X.X%.

bookings in half XX.X% impact impactful quarter with be Prior second the growth up saw Our sales February. the direct we strong first year-over-year XX% of a year. that to saw of representatives in ramp of through will the COVID-XX,

March pandemic. However, of with stalled in bookings the the advent

in from adjusted quarter QX first in of to million total XX% QX compared decreased in declined $XX.X XXXX. an QX Revenue XX% X.X% to was million $XX.X and last adjusted an for revenue year-over-year of Recurring revenue year. of X.X% the

Next, margin to or non-GAAP was a equating I’ll of This QX $XX million of margin gross XX.X%. a our profitability XX.X% in non-GAAP gross gross profit discuss to of $XX.X metrics. compares million, QX XXXX.

fees, Gross been well margins changes XX.X%. as year-over-year to to and these due accounting higher as from move as Applying gross COG QX X.X% would to HCM SaaS changes policy we decreased our by margin we XXXX, completely on OpEx to have business, focused AWS. as hosting re-classes

quarter are improvement. $XXX,XXX first Interest has withholding on margin we to are payments. there of And funds level first XXXX. drive interest XXXX aside, the taking tax first taking between actions up our therefore, said Fed exceeded earnings COVID-XX on Since been Having additional rate that, we $XXX,XXX we fund client gross the in exceeded from client the than last of in for be suspension laser the $XXX,XXX year. less quarter, in focused funds and $XXX,XXX of expect reductions to to on a call, and $XXX,XXX funds

feel non-strategic margin. down EBITDA lower quarter million non-GAAP was was first performance. to Cash in decrease in quarter our expectations million, accurately XXXX. the In Shifting the from of was for for guidance effective at this million $X.X sheet. a measures million exit quarter more end. QX rare gross and balance $X.X actual due at as equivalents is XXXX, our customer million, This of to from gears the we tax our percent, first down $XX.X still $X.X cash and contracts zero non-GAAP

seller we in seller gross $XX.X million March $X.X of XXXX, as of our XX, This QX million notes. for the down million payable amounts debt, $XX.X and had for we notes. loan from XXXX At at are down the paid is which end term

XX sheet ago XX both the days short balance on XX, long-term as revenue QX and March was up including in $X.X in deferred the year days, was million. of quarter. Total combined, DSO XXXX, from

decreased by two XXX. headcount QX sequentially of ending an headcount employees in Overall with

we payable payments During on quarter, X.X generated year-end the negative operations and from first as made million accounts bonuses. cash was

to year to challenging pandemic we the over XXXX Pat, macroeconomic was COVID-XX turn the workspace have I to transition a as depth actions into the to we taken to of today. grew of the we the the want pandemic, we and and conditions back a Before reduce I Due how after are face call preemptive discuss be length responding of our our sale to series infrastructure around uncertainty operating business. costs.

that, said product will we employees our are invest to close to Having continue that continue to customers development. hire in and

to Now, the back call I’ll Pat? Pat. turn over

Pat Goepel

This to put essential nothing small want businesses. just in the perspective. than payroll with of I it we’re check. a forward, space the going more a And there’s business, small business sale year, helping them and providing Kelyn Thanks,

capital management, changed in they time focused operations The and been of business as environments constrained became my abrupt economic survival. their uncertain time our XX-year in became over on more career maneuvering and payroll behavior as human I’ve with changed the As experienced resource and has own they has prospects and prior and clients than much past. buying small became that have

are delayed. decision both change vendor be made, implementation, critical, mission products has our been making and While the decisions once can

and COVID-XX crisis. these As macroeconomic on year the a full particularly rising light current employment uncertainties, result, we are issued business XXXX guidance in withdrawing previously reopenings, of from

customer pandemic value across us opportunity, base. attractive business Our our headcount the of large help market recurring and impact will mitigate and business, proposition reductions

providing guidance. to As more information becomes plan available, to we return

it I’ll that, up With questions. Operator? open to

Cheryl Trbula

now. questions Operator, we take will

Operator

Our from Ryan question comes first MacDonald Instructions] Needham. [Operator of

open. line Your is

Ryan MacDonald

off, your love and in are versus Good of hear I of lower to to base what Kelyn, headcount within because out simply afternoon business you’re platform you’re I’d customer with hear off going Thanks first of for the love I what existing my questions. of customers churning guess mix seeing that I’d Pat customers. terms actually off, taking first guess

Pat Goepel

Ryan. Yes,

we call segment X,XXX direct payroll around too going or if out then business the daily our It’s schedule. have and early of or of our to our to daily about We call And they’re had have you. our direct downs, so. tell both clients delay what downs, marketplace and

there’s due are of or et returning cetera. XX% say would money, the been last that to the is either some I days, and so eight maybe PPP about Now, days in nine that

Now, and runs money will spike is another out, there that or et once program, cetera. there another be

– some the it is of it’s how many. long And and for how to predict and opening hard stay-at-home

direct. a – far. XX But returned X,XXX not clients today pulled will the return. of We’ve that rumblings I So have that’s in so one we’re good we heard reasons you About that in would others give sense some guidance.

in over and will kind time. some to really, start of would metric And that shelter be of that might Anecdotally, a of the lift XX% challenged reopen lot they as But the or local business. evolve state maybe governments place, visibility. we’ll have national be out more

Ryan MacDonald

appreciate I Excellent. the color.

seeing you’re of new sort to more what if about February responsive In activity, opportunity to through April seeing any for month for March. build their start parsing versus of own bookings thanks are maybe pipelines looking April terms the better, businesses of within these be again Thanks. businesses in some payroll? talk you our Can the as an on you’re and of

Pat Goepel

Yes.

the were step. process and think businesses that’s been step I to think I first of us first coming the this back

internally, be And this, third back to the to work we’ve be it meet a bookings, phase that the first new XX% And be of then phase think for I will as planning daily far and kind And then As order. appears the phase about are of and bookings. really getting more. second providers. on changing buying will in we attainment is

tens we’ve sell had information. our and the just looking would webinars people I to and attend in well thousands is on over say of X,XXX to gone total, people sales PPP alone over how we’re differently. What actually webinars more teaching X,XXX, We’ve for of

website So a experience, to online we’re fast-forwarding experience. really, an

much they’re getting needs And a We it’s quick started. because and some people of what making number offers direct And different a offering to more their have frankly, and have have right we don’t as that kind value now. very then targeted proposition a decisions. of are time

planning encouraged say, that but we’re on we’re at about right would So the right we’re demand I things, doing XX%. for now,

Ryan MacDonald

very you Excellent. much. Thank

Operator

Research. question comes of Barrington from Vincent Our next Colicchio

is line Your open.

Vincent Colicchio

what better maybe financial of you Yes, for or could are maybe portion give overall us like? terms, pricing what clients is looking color Pat, on looking

Pat Goepel

this feel Vince, our loyalty. a chime is to and partner to right Kelyn, free opportunity From I and they’re tremendous think now they’re a build looking think perspective, we looking for in. –

people and right We’re now make we’re see a offers. of don’t lot trying helping right renegotiation to open we’re now attractive to possible. and whenever I

at help take it’s hands us, a them. to them. we’ll services for pivoting changing to and cetera. our their charge people, that’s respond we can a time, really additional really development the but feel, to they People personnel our is about critical, plenty compliance sure got all make where – to of no care offered street We’ve deck really feet have on to with we’re and of But that mission of extending over resources employees. some PPP et approaching help it on they’ve loyalty laws lot with the laws, this And the

them And so for it really, figure them and we’re to through And be really trying a we we’ll tough help life. to smother want partners out. time. And

I approached to So Kelyn, have it. don’t that’s how anything we’ve add. if know you

Kelyn Brannon

it’s And with see would of the out of start half back with them their see saying is small What that and opportunities support. would we’ll think arms of done actually I what be opportunities, as really we we’ve because our No, in to the to wonderful ours reach built year happen some agree we’ve with that around this kind time really comment. with PPP, to, see consulting been I doing really cross-sell customers, changing as come forward And look we’re we you the of of strong about to this, put that. to that and But it. isn’t provide that helping also HR relationships to expect what business out non-clients rules. our the additional

Vincent Colicchio

now? And Are are going side, you’re ramp hire the been on slow since are rapid continue beginning said year. sales reset goal or to but year the has that to the to know to going going the I your – for to sales going you of you you right you

Pat Goepel

be big a and believe there’s an opportunity we believe Vince, a to time, we’ll going underserved cautious. our sales be we in we’ll is, over believe we’re naturally, we perspective, were But market plan very we from we’re that all along – opportunity opportunistic. that and

it’s support you and that. and and people take community going to advantages, to opportunities some business do clients, we strong our an the order when tough that feel do ability that that environment, people. of of to we’re really but well, that opportunity can attract One We a the have continue in get and have advantage small to to the

times. see and to these to out, are planning how impact. be grow, and through and hire, uncertain We’ll plays opportunistic long this lasts, continue But and COVID we the how

Kelyn Brannon

a direct SBOs. our I one called actually unique add our in would that that and to coming And contacted also sales every been of for this our to have opportunity been that’s pivot. has XX,XXX customers representatives new into we

kind So it’s allowed an deep the of opportunity for training dropping into versus end. just

good Joe’s this. sales someone fact Shop on and there going out So Joe I And the and about find we we Ana what’s we to can Santa that in reached really feel Pizza not think had organization this could how help. that out when process find, to did

effective not very actually think I thing it’s it’s for good that sales our been a So but organization.

Vincent Colicchio

all for Thanks color. the

Pat Goepel

Thanks, Vince.

Operator

from Derrick Our of next Cowen. comes question Wood

open. Your line is

Derrick Wood

and can be of doing retail, industries better. Pat, today talk much the much distressed some exposure areas what thanks. Good, of you how the how you is have just travel. about your to exposed to Maybe business more hospitality, may

Pat Goepel

Yes.

a so the no over area from have really X%. business DMB we Just, of one

how pretty XX% And East So States the getting as and pretty spread approached really wise, and of out. stress all and to West clients they’re in well. partner well Heartland the things. is from and kind reaching United them though of areas at We’ve the they strong to the as and geography Coast Coast, then the their out know of our clients in direct range as to base sources our looking

they really they to And get successful. to them. that then then to stay need working anybody with get change really help local of them them to guide staying And laws them they when the and we’re pauses, specifically steps help And what agency them, laws help do reopen, close trying and paid. that to to the be need people local the to can kind on

So a pretty diverse base.

and business no We small has are X%. a that but over one from perspective, so area

Derrick Wood

if economy on? PPP there’s much have place, have where to on? when Do companies get you could Okay. not any headcount in could runs can back it out get doesn’t maybe Do commerce additional you long worse as going shelter the cuts? and sense any come timeframe endure how it Is

Pat Goepel

Derrick, time. improve soothsayer. think slightly look probably of Nike that I I’m is a over swoosh know at, will I it’s kind What it

Now, hot quickly and be there along all and being that. the depending open if that said, may and way Vs on Ws we too spots

the far As wildly. it as local business really owner, varies

we get team had Some for time. be are would well capitalized if when into were pause. a formal we a that they daily And I say Omaha, were look call varies business referee And to and a restaurant, wildly. some for knew know pays in kind the not of it, so capitalization companies We going sports much. referees, we going out individual We from well, the of we What say at had outfit of be a the period a downs, you would what I while. closed to is quite dining. they’re more of why

would all for to when was was or money going going or to and month started of a small months. I a access it we business started, us think it be I be is say looking this, longer, couple to

eight I the say the from evolving. think And keeps people, call talk have I correlation the to returned that money. that there I we is, think the daily or downs they situation got when a XX% days so. direct in last would

kind laws a that’s So have and the then correlation shelter reopening by survive state helped them in local and of place

is thing somewhere health limited limited financial are not Those though though, a was What individual or opening, hire, every get or help When continue use I’m there even say grow, to continue decisions. concerns, are Austin could I the a help. under-capitalized And opportunity to business between? or love that to the think opening. community, to though, in either or concerns even is business though was funds. longer I there would as this Is that would continue the folks small goes, community, the

Derrick Wood

squeeze in Great. one That’s great Kelyn. for could color. If I more

you’re things what at you walk to through you or doing a bit little the could what actions that mentioned looking improve levers on You more margin. Could gross take?

Kelyn Brannon

be I’d excited to, really actually.

call we’ve things have been that our the the and are of doing one sale focused payroll So on really the since daily we business, we now of business, workspace downs.

taking in, did to prior down is go to started in call it, analytics, So level. pandemic. the and – downs able And Domo with we doing only we’re NetSuite the January we about client we’re there the what details to concerns now the daily we’re not and the that

So what freight. we scheduled. look We at every are talk day about payrolls

of one So the systems, the we that that have that and the different are shipping margin. the areas opportunity given we have all found contracts with out there, that we real in disparate a made acquisitions and

turnaround down And we have of do to type the at providing we that of our go our best and the we out we’re the charging a customers? amount. right looking level FedEx UPS. so to now, the Are appropriate set system Is a deal client

things So gross those are on some kind focus to of margin. we’re that doing of the

as It we there. charges. up running. an opportunity There’s about may take But and SBO, incurring initial up think hosting charge opportunities we or there’s When new there. AWS spin There’s to five months a get AWS. them really we’re four

teams those gross big of margin, task So costs. in improve have areas those buckets actually within working to we

Pat Goepel

to add I example. just Derrick, a AWS, on think it’s the And because great

office a mission for Our clients. back all to our have was really quality firs

dedicated the There’s our cybersecurity, our the a – for provide do clients dials do speed, our experience the they AWS. make need place robustness the really cost through whole recovery client as in right and on those client, reseller, data. team AWS well also dial as effective a backup with to of use way. and but it right end for in effective we optimize working a we’re Now, How

at to And there’s that a price. very service opportunity efficient there quality provide

now some And P&L years, So around we’re of the opportunities. those around centered that. going had then costs the are that that focused human issues after we’re some on compare management, year-over- the we capital geography

– you’ll on think I and working really we’re time. over see Now, improvement

Derrick Wood

Great. Thanks guys.

Operator

[Operator Instructions]

Pat Goepel

a thank today to Asure more employees reporting. exceptional Thursday dedication to them I our questions and busy for thank time there with and their to, want again, been a their know personally. tough with want Well, clients and is I COVID, no our We amazing it’s the since through efforts and market, companies has

we’re give far responding we are a the and you looking business we’re as that As to wanted these the what taking. forward we’re color times. We to uncertain and to investors, how on actions realize COVID how

make about perspective, While thinking that, how uncertainty, guidance we guidance business thrive sure understood the and understand to had going we a to with from the forward really market to pull I mitigate long-term. trying and the you wanted we’re

bit clients can conversations look to here finally, continue think that thank every forward then for day a together. each we and grow we having to our us. opportunities loyalty thrive there’s mitigates and where with our And COVID partnership as them their all we and to And that will the

your to So forward thanks for speaking again soon. time. Look

Operator

Thank your participation Ladies and gentlemen, for this and conference. concludes you today’s day. wonderful have a

You all disconnect. may

Asure Software (ASUR) 10 May 202020 Q1 Earnings call transcript