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AS

ASURE SOFTWARE INC (ASUR)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $30.1M, up 7% y/y (10% ex-ERTC), with adjusted EBITDA of $5.2M (17% margin) and GAAP net loss of $6.1M; recurring revenue reached 95% of total .
  • Company raised FY 2025 revenue guidance to $138–$142M and introduced Q3 guidance of $35–$37M revenue and $7–$9M adjusted EBITDA; FY adjusted EBITDA margin range narrowed to 22–24% (lower bound reduced) .
  • Bookings fell 53% y/y on tough enterprise comps, but contracted revenue backlog rose to a record $82M (+68% y/y); attach rates increased 400 bps y/y, and Lathem Time acquisition closed July 1 to accelerate time & attendance cross-sell .
  • Versus Wall Street consensus (S&P Global), Q2 revenue, EPS, and EBITDA were below expectations; focus shifted to H2 attach-rate driven growth and integration synergies; narrative catalyst: raised FY guide and Lathem cross-sell, tempered by HR compliance headwind and Q2 miss versus consensus .

What Went Well and What Went Wrong

What Went Well

  • Payroll Tax Management momentum and broader HCM attach: “revenues of $30.1 million increased 7%... excluding ERTC, revenue growth was 10%… driven by continued strong performances coming from our Payroll Tax Management product line and improving attach rates” .
  • Backlog and attach rates improved: contracted backlog hit $82M (+68% y/y), attach rates rose 400 bps y/y, supporting H2 trajectory .
  • Strategic acquisition: “completed the acquisition of Lathem Time… expected to add… high margin recurring revenue and… accelerate cross-selling opportunities” .

What Went Wrong

  • HR compliance headwind from prior ERTC bundling reduced organic growth by ~4 pts; management framed Q2 as low point for that impact .
  • Bookings down 53% y/y on lapping large enterprise wins in Q2’24; excluding those, bookings rose 15% .
  • Professional services revenue weaker than forecast and gross margin dipped to 66.1% (vs 67.3% y/y); interest expense increased with new debt .

Financial Results

Consolidated P&L and Profitability (GAAP and Adjusted)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$30.792 $34.854 $30.124
Gross Profit ($USD Millions)$20.928 $24.608 $19.911
Gross Margin % (GAAP)68.0% 70.6% 66.1%
Net Loss ($USD Millions)$(3.204) $(2.398) $(6.123)
Basic EPS ($USD)$(0.12) $(0.09) $(0.22)
EBITDA ($USD Millions)$3.448 $4.145 $1.435
Adjusted EBITDA ($USD Millions)$6.229 $7.316 $5.242
Adjusted EBITDA Margin %20.2% 21.0% 17.4%

Revenue Mix

MetricQ4 2024Q1 2025Q2 2025
Recurring Revenue ($USD Millions)$28.521 $33.187 $28.596
Professional Services, Hardware & Other ($USD Millions)$2.271 $1.667 $1.528
Recurring % of Total92.6% 95.2% 94.9%

KPIs and Balance Sheet

KPI / MetricQ4 2024Q1 2025Q2 2025
Non-GAAP Gross Margin %73.2% 75.4% 72.6%
Adjusted EBITDA Margin %20.2% 21.0% 17.4%
Contracted Revenue Backlog ($USD Millions)—$82 (as disclosed) $82
Attach Rate Delta (y/y)—+400 bps by Q2 commentary +400 bps
Cash & Cash Equivalents ($USD Millions)$21.425 $14.076 $66.000
Total Notes Payable ($USD Millions)$12.717 (sum current+LT) $14.12 (sum current+LT) $67.382 (sum current+LT)

Q2 2025 Results vs Consensus (S&P Global)

MetricActualConsensusSurprise
Revenue ($USD Millions)$30.124 $31.050*Miss: $(0.926)
Primary EPS ($USD)$0.0818*$0.1414*Miss: $(0.0596)
EBITDA ($USD Millions)$1.531*$5.481*Miss: $(3.950)

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$134–$138 $138–$142 Raised
Adjusted EBITDA Margin %FY 202523%–24% 22%–24% Lowered lower bound
Revenue ($USD Millions)Q3 2025—$35–$37 New
Adjusted EBITDA ($USD Millions)Q3 2025—$7–$9 New
Q2 2025 Delivery vs Prior GuideQ2 2025Rev: $30–$32; Adj EBITDA: $5–$6 Actual Rev: $30.124; Adj EBITDA: $5.242 Delivered within range

Earnings Call Themes & Trends

TopicQ4 2024 (Prior-2)Q1 2025 (Prior-1)Q2 2025 (Current)Trend
Attach-rate and cross-sell focusLaunched AsurePay; broadened suite; target scale and attach rates Double-digit attach-rate improvement y/y; specialized sales groups Attach rates +400 bps y/y; expect acceleration with Lathem integration Improving
Payroll Tax Management enterprise winsMulti-year agreements (Kroger, Nucor, Venture, Strata) and interfaces (SAP/Oracle/Workday) Tax momentum and new Canadian payroll tax solution Backlog strong; phased installs; pipeline intact; more large deals targeted Strong momentum, phased ramp
HR Compliance / ERTC cohortHeadwinds expected to fade in 2025 Depressed due to 2023 ERTC bundling; improvement expected H2 Q2 low point; cohort rolling off; selling > losing monthly Headwind easing
AI/TechnologyIntroduced Luna, AI agent; unifying client UI Collaboration with AWS; lifecycle management tooling; event-driven marketing Faster installs, product integration priorities post-Lathem Execution phase
Macro (rates/tariffs)Modeled conservative; stable float Modeled for potential rate cuts; SMB demand resilient; tariff watch Float down slightly; model conservative for three rate cuts Cautious modeling
New product launches (401k, AsurePay)AsurePay launch; 401(k) momentum building 70%+ active card users frequent use; 401(k) sales record month ~11k cards issued; ~1k activated; AsurePay + Lathem card-link synergy Building adoption

Management Commentary

  • “Our revenues of $30.1 million increased 7% from the prior year second quarter and excluding the impact of ERTC, revenue growth was 10%… driven by continued strong performances coming from our Payroll Tax Management product line and improving attach rates” — Pat Goepel, CEO .
  • “We are increasing our full-year 2025 revenue guidance to a range of $138 million–$142 million… with adjusted EBITDA margins… 22%–24%” — John Pence, CFO .
  • “Our contracted revenue backlog is $82 million, up 68% versus a year ago and remains at record levels” — Pat Goepel, CEO .
  • “The guide does not consider a lot of cross-sell synergies [from Lathem] right now… integration this year; revenue synergies more of a 2026–2027 story” — Management Q&A .

Q&A Highlights

  • Payroll Tax Management backlog intact; phased installations cause timing variability; more enterprise wins expected in H2 .
  • Lathem Time acquisition: ~$15M revenue profile growing ~10%; near-term margin pressure amid subscription model shift; cost synergies expected over ~18 months and potentially 50%+ contribution when fully integrated .
  • Organic growth: Q2 organic +1% (+5% ex HR compliance); bookings down 53% y/y on tough comps; attach rates +400 bps y/y .
  • AsurePay adoption: ~11,000 cards issued, ~1,000 activated; integration with Lathem clocks enables card-based punch-in and earned wage access .
  • Outlook cadence: H2 margin expansion expected with relatively flat cost structure and revenue growth; targeted adjusted EBITDA margin of ~30% in Q4 with potential GAAP profitability .

Estimates Context

  • Q2 2025 vs consensus (S&P Global): Revenue $30.124M vs $31.050M*, EPS $0.0818* vs $0.1414*, EBITDA $1.531M* vs $5.481M* — all misses; underscores impact of HR compliance headwind and PS timing .
  • Q3 2025 consensus vs guide: Revenue $35.886M* vs guide $35–$37M; EBITDA $7.973M* vs guide $7–$9M; EPS $0.207* — guidance brackets estimates .

Values marked with * retrieved from S&P Global.

MetricQ3 2025 Consensus*Company Guidance
Revenue ($USD Millions)35.886$35–$37
Adjusted EBITDA ($USD Millions)7.973$7–$9
Primary EPS ($USD)0.207—

Key Takeaways for Investors

  • FY revenue guide raised despite Q2 consensus misses; near-term narrative hinges on H2 attach-rate driven growth and Lathem integration — constructive for medium-term revenue scale .
  • Expect mix shift benefits: recurring remains ~95% of revenue; non-GAAP gross margin steady ~73%; PS variability persists with enterprise implementation timing .
  • Watch HR compliance normalization in H2: management indicates Q2 was the trough and cohort roll-off underway; organic growth should improve .
  • Lathem synergy timeline: limited cross-sell in 2025 guide; model revenue and cost synergies into 2026–2027 with margin accretion post integration .
  • Balance sheet levered post-acquisition: cash $66.0M and notes payable ~$67.4M; interest expense to rise; management models conservatively for rate cuts .
  • Potential Q4 inflection: management targets ~30% adjusted EBITDA margin and possible GAAP profitability, a stock narrative catalyst if execution aligns .
  • Trading lens: near-term risk from softer PS and HR compliance; medium-term upside from enterprise tax installs, attach-rate gains, and Lathem-enabled time & payroll cross-sell .