Asure Software (NASDAQ: ASUR) recently released its financial results for the second quarter of 2024, which showed that high-value recurring revenue growth continues to grow at a double-digit pace. For investors, this is a significant factor because it highlights the company’s tangible progress in replacing one-time ERTC revenues with higher value recurring revenue from human capital management software being sold to its SMB clients. Management took the opportunity during the quarterly release to update its full-year 2024 revenue outlook, which estimates very healthy growth for the year.
Q2 2024 Recurring Revenues Account for 96% of Total Sales, 18% Y/Y Growth
For Q2 2024, recurring revenues came in at $27.1 million, representing year-over-year growth of 18%. Furthermore, the $27.1 million recurring revenue represented 96% of the company’s total revenue for the quarter. During Q2 2023, recurring revenue made up 75% of Asure’s total revenue. This shows that Asure continues to replace one-time ERTC revenues with much more valuable recurring sales for its expansive HCM products and technologies. On the first half of 2024 basis, Asure saw recurring revenues expand 13%to $57.3 million, compared to the first half of 2023.
On the earnings call, Asure Chairman and CEO Pat Goepel, announced that the company’s backlog balances have “more than doubled” compared to the second quarter of 2023. The backlog clearly demonstrates the demand for Asure’s software products, and the revenue will be recognized as clients go live with the software in the future. For investors, this is a clear signal supporting the company’s growth estimates, rather than an estimation of simply selling more in the future.
Asure Chairman and CEO Pat Goepel commented “I’m pleased with our second quarter performance as our 18% growth in recurring revenue was made up of a healthy balance of both organic and inorganic, just as we laid out in our 2024 guidance.”
Agreements, Acquisitions Help Expand Asure’s Product Suite
Asure’s recurring revenue growth is being aided by the company’s continued commitment to providing a full suite of HCM services to its SMB clients. During the second quarter Asure struck a new agreement with Vensure Employer Solutions to expand its Payroll Tax Management platform to Vensure’s PrismHR clients, as well as Vensure’s internal operations. For Asure’s Payroll Tax Management business, the Vensure deal represents the second major development this year after the company locked in a big deal with an MLB team during the first quarter of 2024. The deals being announced for the Payroll Tax Management software are larger more enterprise level deals which carry higher revenue opportunities than the average SMB payroll client.
During Q2 2024, Asure announced the acquisition of an applicant tracking system technology company, which will provide its SMB clients with automated and simplified technology for the hiring process. Specifically, the technology will help streamline the job ad writing process, as well as automatically send the opening to major job posting websites and even schedule interviews with potential applicants. Thanks to the growing power of AI, this new technology will likely be another major asset for SMBs to further streamline their HCM process.
The HCM services provider also announced the signing of a strategic partnership agreement with MyHRScreens, a premier provider of background screening services. The partnership seeks to help Asure’s SMB clients access comprehensive background screening capabilities to make more efficient and safer hiring decisions.
Management Updates FY 2024 Revenue Between $123 Million and $129 Million
As recurring revenues continue to be a larger part of overall sales, Asure is on track to see year-over-year top-line growth of at least 20% for the full year 2024. Asure’s management team continues to express excitement over its recurring revenue growth and took the opportunity in the Q2 2024 release to share its full-year 2024 guidance. This means Asure is estimated to generate total revenue between $123 million to $129 million for the entirety of 2024. Compared to Asure’s FY 2023 core revenue result of $101 million, management estimates its recurring revenue to expand at least 20% in 2024.
Since 2021, Asure’s core business revenues have seen expanding at double-digit growth, as the company has continued to focus on the expansion of its products and services. Full-year 2021 core revenue came in at $73 million and expanded 16% y/y to $85 million during FY 2022. Core business revenue then grew another 19% from FY 2022 to FY 2023 when it reached $101 million.
Investors should be focusing on this impressive core business revenue growth run and how the company’s commitment to expanding its technologies for SMBs is paying dividends. One-time ERTC sales were of particular benefit during 2022 and 2023, before the program was paused by the IRS in September 2023. However, ERTC revenues should not be viewed with the same weight as recurring revenue from Asure’s core business operations.
Summary
Overall, Asure’s commitment to providing a comprehensive suite of HCM products and services to its SMB clients continues to generate meaningful growth. The company’s double-digit recurring revenue growth during Q2 2024 further highlights that management’s strategy is on the right track. The applicant tracking tech acquisition and collaborative deal with MyHRScreens are a big step for Asure because they provide a big expansion of technology geared towards streamlining the hiring process for its SMB clients. The collaboration with Vensure Employer Solutions effectively helps expand the company’s Payroll Tax System to another group of potential long-term customers. The deal also provides Asure’s payroll tax business with another big win in 2024, after the company onboarded an MLB team during the first quarter.
With the first half of 2024 in the books, Asure appears right on track to reach its estimated core business growth of at least 20% year-over-year in 2024. For investors, this is an impressive update and reaffirmation that management’s growth strategy is working as it should.
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