Asure Software Inc Up 30%+ After Announcing $120-Million Deal
Asure Software Inc (NASDAQ:ASUR) stock has been on a roller coaster ride since last November. Asure Software stock is down 11% year-over-year, but it’s up approximately 78% year-to-date.
Investors were given reason to cheer when the cloud platform company announced in early October that it was selling its workspace management businesses for $120.0 million.
The strategic move will help Asure Software streamline its operations and focus on its human capital management (HCM) business. It also bolsters the company’s capital structure, allowing it to pay down the majority of its debt.
While the company reported second-quarter results in August that failed to impress, ASUR stock could build on its recent gains if the company’s third-quarter results (to be announced after markets close on November 11) surprise to the upside.
ASUR Stock Overview
Asure Software is a cloud computing company that provides HCM software solutions to more than 60,000 companies in 85 countries. (Source: “About Us,” Asure Software Inc, last accessed October 30, 2019.)
The Austin, Texas-based company’s HCM software handles benefits administration; employee benefits; payroll and tax; talent management; and time and attendance.
ASUR Stock Information
|Market Cap||$140.1 Million|
|Shares Outstanding||15.6 Million|
|50-Day Moving Average||$7.53|
|200-Day Moving Average||$7.45|
(Source: “Asure Software, Inc. (ASUR),” Yahoo! Finance, last accessed October 30, 2019.)
It’s been a rough year for Asure shareholders. Asure Software stock tumbled in November 2018 when the company announced that its third-quarter net loss increased and management lowered their full-year guidance.
It’s been a different story in 2019 though. As mentioned earlier, ASUR stock is up 78% year-to-date, fueled by record fourth-quarter and first-quarter results.
That momentum was quashed in August when the company reported, as far as investors were concerned, mixed second-quarter results. That earnings report included slightly lower guidance for full-year revenue and adjusted earnings before interest, tax, depreciation, and amortization (EBITDA).
All was forgiven when Asure Software Inc announced in early October that it was selling its workspace management businesses.
For technical investors, the Asure Software stock chart just formed an important pattern. In mid-October, the company’s share price formed a golden crossover, a bullish indicator in which the 50-day moving average crossed over the 200-day moving average.
Correlation is not causation, but it does point to ASUR stock moving higher.
Chart courtesy of StockCharts.com
Asure Sells Workspace Management Business to FM:Systems
On October 7, Asure Software announced that it was selling its workspace management business to FM:Systems for $120.0 million. The sale will allow Asure to focus its efforts on its HCM business. (Source: “Asure Software to Sell Workspace Management Business to FM:Systems for $120 Million,” Asure Software Inc, October 7, 2019.)
“This strategic move allows Asure to be laser-focused on our HCM business,” said Pat Goepel, CEO.
“While we plan to focus on organic growth with the help of upsell and cross-sell initiatives, we will also be in a strong position to pursue accretive acquisitions.”
The sale will also improve Asure’s capital structure and increase its recurring revenue stream to over 90%.
Solid Second-Quarter Results
On August 8, Asure Software announced that its revenue for the second quarter ended June 30 increased 14% year-over-year to $24.8 million. Recurring revenue was up 15%, at $20.4 million. (Source: “Asure Software Announces Second Quarter 2019 Results,” Asure Software Inc, August 8, 2019.)
Second-quarter gross profit was almost $15.0 million, a three percent increase from the $14.5 million recorded in the same prior-year period.
Adjusted gross profit was up four percent year-over-year, at $15.6 million. The increase in adjusted gross profit came from the increased mix of HCM in the company’s business.
Asure reported a second-quarter net loss of $0.32 per share, versus a net loss of $0.29 per share in the second quarter of 2018. The company reported adjusted earnings of $0.08 per share, versus $0.14 per share in the same period last year.
Adjusted EBITDA was $4.94 million, up one percent from $4.88 million in the second quarter of 2018.
For fiscal 2019, Asure Software Inc tightened its revenue and adjusted EBITDA guidance range. The company now expects to report full-year revenue in the range of $103.0 to $105.0 million. Previous guidance was for full-year revenue of $104.0 to $107.0 million.
Adjusted EBITDA for 2019 is now projected to be in the range of $22.0 to $24.0 million. Previous guidance called for full-year adjusted EBITDA of $23.0 million to $25.0 million.
All of this guidance will need to be updated again when the company announces its third-quarter results in November, since it announced the sale of its workplace management business following its second-quarter results.
Asure Software Inc is in a better position today than it was a year ago.
The company reported record fourth-quarter 2018 and first-quarter 2019 results. Its second-quarter results were solid too, but Asure revised the bottom end of its revenue and adjusted EBITDA guidance marginally lower.
Since then, the company announced the sale of its workplace management business. The big influx of cash will help it improve its capital structure, increase its recurring revenue stream, and move on accretive acquisitions.
All of which should benefit Asure Software stock investors.
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