Asure (ASUR) Q3 2025 Earnings Call Transcript

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DATE

Thursday, Oct. 30, 2025, at 4:30 p.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Patrick F. Goepel
• Chief Financial Officer — John F. Pence

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TAKEAWAYS

• Total Revenue -- $36.3 million in total revenue for Q3 2025, up 24% compared to the prior year period, reflecting broad-based growth across payroll, benefits, recruiting, time and attendance, and payroll tax management.
• Recurring Revenue -- $31.8 million in recurring revenue for Q3 2025, up 11% versus the prior year.
• Professional Services and Hardware Revenue -- $4.4 million for Q3 2025, up from $700,000 in Q3 2024, with most of the increase attributed to the Latham Time acquisition.
• Organic Growth -- 4% sequential organic growth in Q3 2025 compared to Q2 2025; 7% organic growth when excluding HRC ERTC-related churn.
• Bookings -- Down 41% year-over-year in Q3 2025 bookings; when removing prior-year large enterprise deals, bookings were up 21%.
• Float Revenue -- Float revenue declined slightly in Q3 2025 due to federal funds rate cuts, partly offset by higher client funds.
• Gross Profit -- $23.1 million in gross profit for Q3 2025, up from $19.7 million in Q3 2024; gross margin at 64%, down from 67% in the prior year period; non-GAAP gross margin at 70%, down from 73% in Q3 2024.
• Adjusted EBITDA -- $8.1 million in adjusted EBITDA for Q3 2025, up 49% from $5.4 million in the prior year; margin at 22%, a 300 basis-point improvement compared to 19% in the prior year
• Cash and Cash Equivalents -- $21.5 million at the end of Q3 2025
• Total Debt -- $70.4 million in debt as of September 30, 2025.
• Q4 2025 Revenue Guidance -- $38 million to $40 million for Q4 2025; adjusted EBITDA guidance of $10 million to $12 million for Q4 2025.
• Full-Year 2025 Guidance -- Revenue of $139 million to $141 million for full-year 2025; adjusted EBITDA margin of 22%-23% for full-year 2025.
• Initial 2026 Guidance -- Revenue expected at $158 million to $162 million for 2026; adjusted EBITDA margin projected at 23%-25% for 2026.
• Attach Rates -- Continued sequential increase; “attach rates, which measure clients that take more than one product, continuing to move higher.”
• Cross-Sell Performance -- Quarter-over-quarter increase of 7% in cross-sell results, before rollout of Asure Central.
• Latham Time Acquisition -- Performing well; expected to create additional cross-selling and revenue synergies over the next twelve months.
• Asure Central Launch -- Recently launched new client interface to direct clients; indirect rollout to follow soon.
• Interest Rate Sensitivity -- Management modeling two further rate cuts in 2026, with client account balance growth expected to partially offset impact.
• Professional Services and Hardware Run Rate Guidance -- Management expects $2 million in hardware and $1 million in professional services per quarter in the near term.

SUMMARY

Management introduced initial 2026 guidance with the expectation of “consistent profitability,” according to John F. Pence, as revenue grows and the cost structure remains stable. Guidance for medium-term targets was disclosed as $180 million to $200 million in revenue and adjusted EBITDA margins of 30%+ (non-GAAP), although this is not incorporated into the 2026 guidance. Sales pipeline strength was emphasized, with increased marketing spend already factored into outlook.

• Goepel described a business “inflection point” in sequential organic growth rates in Q2 and Q3 2025, with further acceleration expected in 2026.
• Integration of Latham Time is yielding early revenue synergies, with potential to expand payroll sales to Latham’s 15,000 customers currently without these services.
• Supported by balance sheet flexibility and potential MidCap expansion.
• Rollout of Asure Central is projected to further improve cross-sell and attach rates, unifying multiple products under one interface and reducing technology maintenance costs.
• AI initiatives are expected to enhance both revenue and workflow cost efficiency, particularly through automated compliance processes.

INDUSTRY GLOSSARY

• Float Revenue: Interest income earned from holding client funds prior to disbursement, influenced by prevailing interest rates and client fund balances.
• HRC ERTC Related Churn: Customer attrition linked to changes around Human Resource Consulting and Employee Retention Tax Credit services.
• Attach Rates: Percentage of clients adopting multiple products or services from the provider.
• ASO Offering: Administrative Services Organization — outsourcing arrangement providing HR and payroll services without co-employment structures inherent to PEOs.
• ARPU: Average Revenue Per User — standard measure of revenue generation per client account.

Full Conference Call Transcript

During the month of November, we will be attending the following conferences: On November 18, the Craig Hallum Alpha Select Conference in New York; on November 19, the ROTH Technology Conference in New York and the Stephens Conference in Nashville; on November 20, we will attend the Needham Technology Conference in New York. On December 16, we will participate in the Northland World Conference, which is being held virtually. We also expect to schedule some additional non-deal roadshows to Asure Software, Inc., and I would like to thank all of those who assist us in our efforts to connect with investors.

Finally, I would like to remind everyone that this call is being recorded and will be made available for replay via a link available on the investor relations section of our website. With that, I would now like to turn the call over to Patrick F. Goepel, Chairman and CEO. Patrick?

Patrick F. Goepel: Thank you, Patrick. And welcome, everyone, to Asure Software, Inc.'s Third Quarter 2025 Earnings results call. I am joined on this call by our CFO, John F. Pence, and we will provide a business update for our third quarter 2025 results as well as our outlook for the remainder of 2025 plus our initial guidance for 2026. We are pleased to report that our third quarter revenues were very strong, coming in at $36.3 million, a 24% increase versus the prior year third quarter.

Our revenues reflect what we believe is an inflection point of increasing growth, which was broadly based across all our product lines, such as payroll, benefits, recruiting, time and attendance, as well as our payroll tax management business. Organic growth in the third quarter improved sequentially from the second quarter, and we are forecasting continued improvement in the future. Our performance this quarter is reflective of what we believe is strong demand for human capital management products from business owners of all sizes. Our recent acquisition of Latham Time is also performing well, and our team is continuing to work on achieving revenue and cost synergies going forward, which we believe can be obtained over the next twelve months.

As a reminder, we believe the addition of Latham will further increase cross-selling opportunities for us, and we have made investments in order to improve our technology as well as integrate and quicken the pace at which we can get new payroll clients started. As we have discussed during the past earnings calls, we are excited to announce that we recently launched a new client interface that started this rollout in the past week with our direct clients, and we plan to introduce it to our indirect clients soon. Our bookings for the third quarter declined by 41% versus a year ago due to large enterprise deals which were booked in 2024.

Excluding those deals from the comparison, our bookings were up 21%. Now, in more detail, I would like to hand it off to John F. Pence to discuss our financial results as well as our guidance. John?

John F. Pence: Thanks, Patrick. As Patrick mentioned at the beginning of this call, several of the financial figures discussed today are given on a non-GAAP or adjusted basis. In the earnings release, you will find a description of these GAAP to non-GAAP reconciliations, which was made available earlier today. The reconciliations themselves are also included in our most recent investor presentation, posted in the Investor Relations section of our website at investor.assuresoftware.com. Now on to the third quarter results. Third quarter total revenue was $36.3 million, increasing by 24% compared to the prior year period. Recurring revenues for the third quarter grew 11% versus the prior year to $31.8 million.

Our professional services and hardware revenue was $4.4 million in the quarter, compared to $700,000 in the third quarter of last year. A majority of the revenue growth in this category was driven by hardware sales tied to our recent acquisition of Latham Time. Our organic growth improved sequentially to approximately 4% in the third quarter compared to 1% in the second quarter. The impact of HRC ERTC related churn in the second quarter was 4%, and then in the third quarter, it was 3%. So in summary, our organic growth excluding HRC ERTC related churn in the third quarter was 7% compared to 5% in the second quarter.

Float revenue was down slightly versus the prior year due to previous rate reductions made to the federal funds rate, partially offset by an increase in client funds. Regarding our outlook for interest rates, yesterday, the Federal Reserve cut rates by a quarter point. We believe that as our client fund balances increase, this will help offset some of these rate cuts. Our cross-selling efforts showed good results this quarter, with our attach rates, which measure clients that take more than one product, continuing to move higher sequentially versus the second quarter. Gross profit for the third quarter increased to $23.1 million versus $19.7 million in the prior year third quarter.

Gross margins for the third quarter were 64% compared with the prior year at 67%. Non-GAAP gross margins for the third quarter were 70% compared to the third quarter of the prior year at 73%. Third quarter adjusted EBITDA increased 49% to $8.1 million from $5.4 million in the prior year, and our adjusted EBITDA margin was 22%, an increase of 300 basis points compared to 19% in the prior year. Turning now to the balance sheet, we ended the third quarter with cash and cash equivalents at $21.5 million, and we have debt of $70.4 million as of September 30, 2025.

Now in terms of guidance for the 2025, we are expecting fourth quarter revenues to be in the range of $38 million to $40 million. Adjusted EBITDA for the fourth quarter is expected to be between $10 million and $12 million. Therefore, our full-year 2025 results should be between $139 million to $141 million in revenue with adjusted EBITDA margins of between 22% to 23%. Today, we are also providing our initial view of 2026 revenue, which we believe will be between $158 million to $162 million, with adjusted EBITDA margins of between 23% to 25%. Our belief is that at these higher revenue levels, combined with a consistent cost structure, we will begin to deliver consistent GAAP profitability.

In conclusion, we are excited about the remainder of 2025 and look forward to 2026 being an inflection point for Asure Software, Inc.'s business. With that, I will turn the call back to Patrick F. Goepel for closing remarks.

Patrick F. Goepel: Thanks, John. We are pleased to have delivered strong results in the third quarter of 2025. As we look forward to 2026, we are well on our way to our medium-term plan where we believe we can achieve adjusted EBITDA margins of between 30% plus in revenues of $180 million to $200 million. We are super excited about the launch of Asure Central, which we believe is going to be a major enhancement to our client experience. Our R&D team has spent an enormous amount of time on this development, and I would like to thank them for their efforts. Asure Central is the latest in the list of the many accomplishments we achieved during this past year.

In summary, we continue to work diligently on creating increased value for our shareholders and our stakeholders. We are very pleased to have delivered a strong performance in quarter three, and the outlook for a combination of improved organic growth, margin improvement, and potential GAAP profitability is a great recipe for success. We will continue to provide solutions that help businesses thrive, innovate more, and grow our base. Human capital management is a key focus for us, and we believe we are on the right path. Thank you.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that analysts limit themselves to one question and a follow-up so that others may have an opportunity to ask questions as well. One moment, please, while we poll for questions. Our first question comes from Joshua Christopher Reilly with Needham and Co. Please proceed with your question.

Joshua Christopher Reilly: All right, great. Thanks for taking my questions and nice job on the quarter here. I just wanted to hit on the 2026 outlook to start with here and get a better understanding of what you are assuming in terms of the traditional organic growth and the trend there. And then along with that, how are you thinking about where the balance sheet is at today? Can you continue the reseller acquisitions at a pace that you have been going at in 2024?

John F. Pence: Yeah. I'll answer that. Hey, Josh. This is John. I'll go first and let Patrick F. Goepel kind of annotate. I think we feel pretty good about where the balance sheet sits right now. We'll be opportunistic like we always are in terms of doing the tuck-in deals. We have not modeled anything extraordinary in terms of capacity. One of the reasons we chose MidCap is that they've got the wherewithal to support us if we find things that are interesting. So long-winded answer to say, outside of what's already been acquired, we feel like we have the ability to expand the line if we do find something that's pretty large. So I'll give it that.

Patrick F. Goepel: Yeah, Josh. I think we're at an inflection point. Second quarter was an inflection point. Organic growth, you know, we're gonna end the year with each quarter increasing more and more on organic growth, and that won't slow down in '26. I think you're gonna see continued organic growth increases. So you know, we're continuing to have confidence in the year. As far as profitability, you know, we're at a point now where we can start throwing off cash. So from a lending perspective, you know, the nice thing about it is we'll have that available. And then as John stated, we have some cash on the balance sheet, but we're also generating cash.

And the second quarter, and I think you're going to see both in GAAP profitability as well as organic growth that we're in a position to keep increasing here. And then from an enhanced perspective, I think we all don't have anything extraordinarily planned right now.

Joshua Christopher Reilly: Gotcha. And then just one follow-up on the 7% adjusted organic growth for the year. That's a little better run rate than what we've seen recently. How much of that is from cross-sell versus net new units to the business? Any color there would be helpful. Thank you.

Patrick F. Goepel: Yeah. What I would say is our cross-sell results were up 7% quarter over quarter. And that's without Asure Central. And Asure Central brings all the products and solutions together under one common UI. They are the fastest growing of the sequential growth in three, four, five products. So people are wanting to buy the whole solution. And from a technology and a delivery perspective, we're increasingly capable of setting that up for clients. So I think you're gonna see that be a big driver and a big theme into next year. And like I said, I think Q2 was the inflection point. You'll see a down payment here in Q3.

John F. Pence: You know, there's probably another 1% maybe impact in the fourth quarter, and then we'll never have to talk about it again. So I think we're getting pretty close to having an ERTC and compares and talk track.

Joshua Christopher Reilly: Great. Thank you, guys.

Operator: Our next question comes from Jared Marshall Levine with TD Cowen. Please proceed with your question.

Jared Marshall Levine: Hi. This is actually Jared Levine on for Bryan Bergin tonight. To start, can you talk about sales cycles and pipeline views across your key offerings? Has anything kind of materially changed since last quarter?

Patrick F. Goepel: No. I think I would say there might be a slowdown, if you will. On the large enterprise deals, you may see an extra thirty days of, you know, measuring once or measuring twice, cutting once. But you know, nothing material for us to talk about today. You know, I think it's really business as usual in the small business area.

Jared Marshall Levine: And what about those pipeline views as well?

Patrick F. Goepel: Pipeline views look pretty strong. I do think you're gonna see us lean in more to marketing in '26, and that was implied in our guide already that you know, we'll continue to look. We think there's opportunity to continue to market and sell to that base. As far as the pipeline this year, pipeline's up quite a bit.

Jared Marshall Levine: Got it. And then in terms of that 7% organic growth assumed for FY '26, just want to double click on this. Can you highlight what are the key drivers underlying this and whether kind of key offerings of a headwind will flow revenue be to that organic growth rate?

Patrick F. Goepel: Yes. From a flow revenue perspective, we've modeled two more cuts in '26, and we think that we'll be somewhere between 3% to 5% at the low point. Now we'd also believe account balances going up will partially offset that. So, really, we're probably a small degradation planned in next year, but, you know, we're hopeful that gets minimized by the some of the things we talked about. As far as the solution offering and the reason we're so excited about it, Asure Central, is as we bring these solutions together, the ability to sell let's say, an ASO offering PEO without the PEO kind of insurance policies, or employee leasing.

And it allows us really to be a back office for a small business and be compliant across all products and services, whether it's HR, payroll tax filing. We think that's a winning proposition, and that's the one we're gonna lean into in general. Some of our point solutions will continue to grow. And then, obviously, we think the attach rates and time to payroll will grow up as part of those offerings.

Jared Marshall Levine: Great. Thank you.

Operator: Our next question comes from Eric Martinuzzi with Lake Street. Please proceed with your question.

Eric Martinuzzi: Yeah. Regarding the Latham Time, you had said last quarter that you're anticipating about a year on schedule as far as bringing Asure and Latham together. Latham has some areas where they have channel partners, etcetera, and we're not gonna change too much of that model. But as we integrate, I think we've already seen some pretty good synergy from a revenue perspective coming together within our offering. So the offering between Asure Payroll and Latham, we're excited about possibilities for '26. Yeah. And the way I think about it too, just as another point on it, they have 15,000 customers right now that are on solutions that don't have a connection with us in terms of payroll.

So we look at that business, using their solutions, yes, they brought us the customers, but we're gonna take credit for when we start to sell the payroll into their time and attendance. So that's where we see a lot of growth. It's gonna be into that Latham base. But it's gonna be our product on top of that Latham base.

Eric Martinuzzi: And if I could on the hardware, in Q3 because of Latham, you had a higher number. That $4.4 million number for professional services and hardware, is that kind of a safe new run rate for that portion of the revenue?

John F. Pence: I think about three, honestly. You know, I think probably fair to the near term to think about $2 million of hardware for sure.

Eric Martinuzzi: Is that a good creep up?

John F. Pence: Least for the next twelve months. And I think a fair number for professional service is $5 million. Now it might be higher or lower, the variability on professional service is gonna come as we're doing some work for these large tax deals, that can vary decently between quarters as they're in the professional services. But in general, I think two in one between those two over the year is probably a fair way to start.

Patrick F. Goepel: Yeah. No. I think, yeah, I think that's exactly right. And I think the two in one is pretty safe, and there might be some upside, you know, down the line. But right now, that's a great place to model.

Eric Martinuzzi: Got it. Thanks for taking my question.

Operator: Our next question comes from Richard Kenneth Baldry with Roth Capital Partners. Please proceed with your question.

Richard Kenneth Baldry: Thanks. I'm curious if Asure Central, the rollout of that, will cut any of your sort of legacy technology stack support costs. And whether it's already includes as a front end for Latham or if that's sort of a near term, you know, thing that will develop.

Patrick F. Goepel: Yeah. Rich, no. Great question. First of all, from a legacy development, we're already seeing some pretty good cost initiatives around some of our costs, you know, the newer products and services that we've rolled out, you know, significantly are cheaper. We're also from a development cycle, you know, spending less money on maintenance and more money on new, and that continues to grow over the past couple years as we, you know, kind of have an eye towards the future, and we've been able to stabilize and improve the back end quite a bit. Now the front end.

And as we look at some of the, you know, new development costs and the new products, they're definitely lower on maintenance. So really excited about that. As far as Latham, we're in the, you know, I'll call it months, not years. We're really close to integrating that with Asure Central. All most of the other products are either online or gonna be online within this quarter. So you know, Latham probably targeted towards first quarter, but we're well on our way to doing that.

Richard Kenneth Baldry: Great. Were you seeing the improvement in the organic growth? Can you talk about sort of what's the underlying drivers there? Is it sales headcount improvements? Is it sales efficiencies? Is it sort of unit driven or ARPU driven? Just sort of the pieces underlying that.

Patrick F. Goepel: Yes, Rich, we said earlier in the year that the 7% sequential growth is a pretty good proof point from second to third quarter. And, you know, and then if I dive into those numbers, which is two or more products, if I look at three, four, and five products, that's the fastest growing. So, you know, I think as we look at this year, we've been kind of run rating it. As you look at 2026, I think you're gonna see us spend more money in sales and marketing. That's implicit in the guide. We're also, you know, bringing online the technology development really that we've been building towards for the last couple years.

So you'll continue to roll that out. That's in the guide. I think we really are sitting on, you know, an opportunity to really grow exponentially here as we bring all these point solutions together. Now anytime you're bringing them together, you know, it's kind of crawl, walk, run. You know, I would say we're walking fast. And we'll continue to do that and get momentum here selling, implementing, servicing multiproduct installations, and we anticipate that area to grow. And we anticipate each quarter in '26 to continue for us to get better at not only this quarter as we've done, you know, in third quarter, but fourth quarter will be increased, first quarter will be increased.

Richard Kenneth Baldry: The last for me would be, you know, with the rollout of some of the newer AI-driven sort of development tools, other things to help back and some of the G&A, you know, agentic.

Patrick F. Goepel: And then from a revenue perspective, what we've been leaning into is, you know, software rates and multiproduct software gives you all kinds of advantages. And then the client that had 20 employees, they have to report COBRA. And then we can go out and do it for them with their permission. That kind of experience is an AI that drives revenue, and it also drives workflow on cost. So you're gonna see a lot of examples in that over the upcoming year.

Operator: Great. Thanks. As a reminder, if you would like to ask a question, please press star, one. Our next question comes from Gregory Thomas Gibas with Northland Securities. Please proceed with your question.

Gregory Thomas Gibas: Great. Good afternoon, Patrick and John. Thanks for taking the questions. Could you maybe speak to attach rates, the trends you're seeing there?

John F. Pence: You know, you mentioned, I think, 400 basis points of year-over-year improvement last quarter. I think you said seven. I think that's about right. It's somewhere in that range, sequentially in terms of the improvement.

Gregory Thomas Gibas: Got it. And then to follow-up just to clarify, you mentioned about, I think, 7% implied organic growth in 2026. Is that consistent with your expectations for Q4 of this year?

John F. Pence: Yeah. I think so. I think, you know, we did that in Q3. So we expect, I think, maybe a little bit of a tick up. Based on the fourth quarter just implied in the guide. This has to come basically from organic. It's no other place for it to come from.

Gregory Thomas Gibas: Fair enough. And I guess lastly, as it relates to integration plans with Latham Time, you know, relatively early still, but could you maybe discuss, you know, further integration plans that are maybe currently underway?

John F. Pence: I mean, I think there's really exciting things. Like, you know, we've talked in the past about the Asure Pay card. We're still in the early stages of, but imagine what they've got is they've got a time clock. Right? So only that allows them to clock in and clock out, but also as a way to get paid. That could be the vehicle that they're gonna get their paycheck. So that's just one example that we feel like there's a lot of potential with that deal.

Patrick F. Goepel: Yeah. And, Greg, just on that, you know, their client base and our direct client base, you know, jointly have 30,000 clients. Know, the ability to work together is improved book to bill. And then, you know, back office systems on all those products. You know, we talked a little bit about integration. You know, we have opportunities to get integration really through the all the way through '26. So excited about the movement both from a revenue perspective as well as a scale and efficiency perspective. Really good people. We're really excited about it. And, you know, you'll see more of that in 2026.

Gregory Thomas Gibas: Got it. Thanks, Ken.

Patrick F. Goepel: And, you know, in Q3, we had a 7% improvement in unit volume. And we really didn't have Asure Central yet. So if you think about, you know, just in Q2 with, you know, we believe that common look and feel across all products and services will drive more adoption of our cross-sell and in turn that revenue opportunity. We're really excited about that. I think we'll get a little bit more firm data on the ARPU in '26. But for right now, we see evidence that it's happening. We're rolling this out. In all avenues of the business from marketing, implementation, sales, operations, and technology.

So we know and, you know, in my past life, I've had this kind of experience before. You know, we think it's we're really at an inflection point, and bringing these point solutions together will do that. And then from efficiency perspective, the idea to get to venture of a marketing will make it degrees of difficulty easier to cross-sell and implement faster. So, you know, we'll use our data and reach into AI to enable that to grow faster. And our guide reflects, you know, high single digits or so. You know, I think we have an ability to beat that as we go.

But, you know, that's a story for more, you know, more proof points along the way. Year that we've been working on for multiple years. All our products and point solutions, integrating them together. You know, we've had really good growth in areas. We've had really good progress in our money movement and our tax filing business. That will continue as well. So you know, we think we're at the verge of increasing results and you'll see that through the '25 as well as '26. And we really appreciate your support. Patrick mentioned that we'll be out on some roadshows and some client events and investor conferences, and we look forward to telling that story. And seeing you out there.

Thanks for your time today, and, again, really appreciate it. Take care.

Operator: This concludes today's teleconference. You may now disconnect your lines. Thank you for your participation.

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