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AS

ASURE SOFTWARE INC (ASUR)·Q3 2025 Earnings Summary

Executive Summary

  • Topline beat, EPS miss: Q3 revenue was $36.3M, up 24% YoY and above S&P Global consensus of $35.9M*, while normalized EPS was $0.14 vs $0.21 consensus*, reflecting mix and ongoing investment; GAAP EPS was a $(0.19) loss .*
  • Profitability mix-shift: GAAP gross margin fell to 63.8% (from 67.2% YoY) on higher lower‑margin hardware/professional services tied to Lathem; non‑GAAP gross margin was 70% and adjusted EBITDA rose 49% YoY to $8.1M (22% margin) .
  • Guidance: Q4 revenue guided to $38–$40M and adjusted EBITDA to $10–$12M; FY25 revenue narrowed to $139–$141M with 22–23% adjusted EBITDA margin; FY26 initiated at $158–$162M with 23–25% margin and management signaling potential GAAP profitability as scale builds .
  • Strategic catalysts: Launch of Asure Central (unified client platform) to drive cross‑sell and operating leverage; attach rates rose low single digits sequentially (about 7%); organic growth ex‑ERTC improved to 7% (vs 5% in Q2) as ERTC churn fades .

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth and cross-sell: Revenue up 24% YoY to $36.3M with strength across payroll, benefits, recruiting, time & attendance, and payroll tax management; attach rates increased sequentially and bookings ex large Q3’24 enterprise deals were up 21% .
  • Operating leverage on adjusted basis: Adjusted EBITDA rose 49% YoY to $8.1M with 22% margin (up ~300 bps YoY), aided by scale and mix management despite hardware headwinds to GAAP margins .
  • Platform launch to accelerate innovation and AI: Asure Central standardizes identity/design models and positions faster integration of AI, analytics, and workflow automation to strengthen operating leverage and client satisfaction .

Quotes:

  • “Our revenues reflect what we believe is an inflection point of increasing growth… broadly based across all our product lines” (Pat Goepel) .
  • “Non‑GAAP gross margins… were down due to revenue mix as we experienced an increase in lower margin non‑recurring sales, primarily driven by the recent Lathem acquisition” (CFO) .
  • “We will… potentially be GAAP profitable in Q4 of 2025 and for the year 2026” (CEO) .

What Went Wrong

  • EPS miss vs Street and GAAP loss: Normalized EPS of $0.14 fell short of the $0.21 consensus*, and GAAP EPS was $(0.19), wider than Q3’24’s $(0.15), reflecting mix and investment .*
  • Margin pressure from hardware/professional services: GAAP gross margin declined to 63.8% from 67.2% YoY, with non‑recurring hardware tied to Lathem weighing on margins .
  • Bookings volatility: Q3 bookings were down 41% YoY due to tough comps from large enterprise deals in Q3’24, even though underlying bookings ex those deals grew 21% .

Financial Results

Headline Metrics (GAAP unless noted)

MetricQ3 2024Q2 2025Q3 2025
Revenue ($M)29.304 30.124 36.252
GAAP EPS (Basic/Diluted)$(0.15) $(0.22) $(0.19)
Gross Margin % (GAAP)67.2% 66.1% 63.8%
Gross Margin % (Non‑GAAP)73.0% 72.6% 70.1%
EBITDA ($M)2.220 1.435 3.903
Adjusted EBITDA ($M)5.440 5.242 8.102
Adjusted EBITDA Margin %18.6% 17.4% 22.3%

Revenue Mix

Revenue Component ($M)Q3 2024Q2 2025Q3 2025
Recurring28.626 28.596 31.841
Professional services, hardware & other0.678 1.528 4.411
Total Revenue29.304 30.124 36.252

Consensus vs Actual (Q3 2025)

MetricS&P Global ConsensusActualDelta
Revenue ($M)35.886*36.252 +0.366
EPS (Normalized)$0.207*$0.144*−$0.063

Values retrieved from S&P Global.*

Additional KPIs and Drivers

  • Organic growth and ERTC impact: Organic growth improved to ~4% in Q3 from 1% in Q2; ERTC‑related churn was a ~3% headwind in Q3 (4% in Q2), implying ~7% organic growth ex‑ERTC in Q3 (5% in Q2) .
  • Attach rates: “Low single‑digit” sequential increase, about 7% q/q; fastest growth in customers using 3–5 products .
  • Bookings: Down 41% YoY on tough comps; excluding large enterprise tax deals booked in Q3’24, bookings up 21% YoY .
  • Float revenue: Down slightly YoY on prior Fed cuts; modeling another 25 bps cut this year; growing client fund balances expected to partly offset .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q4 2025—38–40 New
Adjusted EBITDA ($M)Q4 2025—10–12 New
Revenue ($M)FY 2025138–142 139–141 Narrowed (midpoint unchanged)
Adjusted EBITDA Margin %FY 202522–24% 22–23% Lowered upper bound
Revenue ($M)FY 2026—158–162 New
Adjusted EBITDA Margin %FY 2026—23–25% New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2 2025)Current Period (Q3 2025)Trend
Organic growth & ERTCQ1: strong payroll tax mgmt; >95% recurring revenue; backlog at all‑time high . Q2: organic ~1%; ex‑ERTC growth 10% YoY; attach rates improving .Organic ~4%; ex‑ERTC ~7%; ERTC churn fading (~3% Q3; ~1% more in Q4, then done) .Improving organic growth; waning ERTC drag
Platform/AIQ1: Product investments; Canadian payroll tax solution; credit facility; AI philosophy implied .Launch of Asure Central unifying UX, enabling faster AI/analytics/workflow automation; cost benefits to support/engineering .Platform unification accelerates
Lathem Time (acq.)Closed 7/1; expected to add high‑margin recurring time & attendance and cross‑sell opportunities .$4.6–$4.7M Q3 revenue contribution ($2.7M recurring); hardware drives mix; ~15k Lathem customers for payroll cross‑sell; ~$15M 12‑mo revenue contribution still fair .Integration on plan; near‑term hardware mix; cross‑sell runway
Sales cycles & pipelineNot highlighted in Q1; Q2 steady progress.SMB cycles stable; enterprise cycles slightly longer; pipeline “up quite a bit” .Healthy demand
Float/interest ratesNoted sensitivity in prior calls; funding capacity with MidCap.Slight float pressure from rate cuts; modeling another 25 bps cut; higher client funds offset .Manageable float headwind
Profitability outlookFY25 adj EBITDA margin 22–24% (Q1); mid‑20s longer term .FY25 22–23%; FY26 23–25%; potential GAAP profitability in Q4’25 and FY26 .Path to GAAP profitability reiterated

Management Commentary

  • Strategic positioning: “We believe that we’re at an inflection point in the business… we will continue to increase our growth organically while potentially being GAAP profitable in Q4 of 2025 and for the year 2026” (CEO) .
  • Mix and margins: “Our overall gross margins were down due to revenue mix… increase in lower margin non‑recurring sales, primarily driven by the recent Lathem acquisition” (CFO) .
  • Cross‑sell and platform: “Asure Central… will further accelerate the rate at which we can drive our cross‑selling or attach rates” (CEO) ; attach rates rose ~7% q/q even before Asure Central rollout .
  • 2026 outlook: “2026 being an inflection point… revenues $158–$162M with adjusted EBITDA margins of 23%–25%, and at these higher revenue levels… begin to deliver consistent GAAP profitability” (CFO) .

Q&A Highlights

  • Growth drivers and M&A capacity: 2026 outlook assumes standard organic growth plus runoff of prior acquisitions; lending capacity with MidCap available for larger tuck‑ins .
  • Lathem contribution and model: Q3 net impact ~$4.6–$4.7M (~40% hardware, ~$2.7M recurring); ~$15M over first 12 months still “fair”; plan to bundle time with payroll to shift mix to recurring .
  • Hardware/PS run rate: Near‑term modeling suggested ~$2M hardware and ~$1M professional services per quarter, with some variability from large tax implementations .
  • Float sensitivity: Modeling another 25 bps cut; ~$90M of funds in longer‑term instruments help protect float revenue; balances offset some cuts .
  • Attach rates and ARPU: Attach rates up single digits sequentially (about 7%); management expects Asure Central to support ARPU uplift in 2026 as multi‑product adoption increases .

Estimates Context

  • Q3 2025 revenue beat: $36.252M actual vs $35.886M consensus* .*
  • Q3 2025 normalized EPS miss: $0.144 actual vs $0.207 consensus*.*
  • Management highlighted adjusted EBITDA margin expansion to 22% (up ~300 bps YoY) despite GAAP gross margin pressure from hardware mix .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue momentum with mix headwind: Strong 24% YoY growth and a revenue beat*, but GAAP gross margin compression from hardware should normalize as Lathem bundling shifts mix toward recurring .*
  • Execution on profitability: Adjusted EBITDA up 49% YoY to $8.1M (22% margin), and management targets potential GAAP profitability in Q4’25 and FY26 as scale meets a stable cost structure .
  • Guide implies steady trajectory: Q4 guide of $38–$40M revenue and $10–$12M adjusted EBITDA; FY25 narrowed to $139–$141M and 22–23% margin; FY26 $158–$162M and 23–25% margin .
  • Cross‑sell flywheel: Asure Central rollout plus Lathem’s 15k customers offers a clear path to higher attach rates and ARPU in 2026 .
  • Transient comps/volatility: Bookings down 41% on Q3’24 enterprise comp; ex those deals bookings +21%, suggesting core demand remains healthy .
  • Interest rate risk manageable: Float revenue slightly down YoY; additional minor cuts modeled with partial offsets from larger client funds balances .
  • Trading lens: Near‑term stock reaction likely tied to revenue beat vs EPS miss* and the introduction of FY26 guidance signaling an improving profitability path; watch gross margin recovery and hardware/PS mix in subsequent quarters .*

Appendix: Source Highlights

  • Q3 2025 Press Release: revenue/mix, margins, non‑GAAP reconciliations, guidance .
  • Q3 2025 8‑K Exhibit 99.1: financial statements and guidance tables .
  • Q3 2025 Earnings Call: growth drivers, mix commentary, float, Lathem detail, attach rates, profitability path .
  • Prior Quarters: Q2 2025 press/8‑K and Q1 2025 8‑K for trend context and prior guidance .
  • YoY baseline: Q3 2024 press release for prior year revenue/margins .