On Friday, Stifel, a financial services firm, adjusted its outlook on shares of Asure Software (NASDAQ: NASDAQ:ASUR), reducing the price target to $10.00 from the previous $12.00, while still holding a Buy rating on the company's stock. This move comes after Asure reported third-quarter earnings for 2024 that fell below the lower end of their guidance.
The underperformance was attributed to delays in the go-live and implementation of significant enterprise tax deals, along with slower than anticipated new product penetration within their existing customer base.
In reaction to the earnings shortfall, Asure's management revised their full-year 2024 (FY24) guidance downward by $6 million at the midpoint. Moreover, they provided preliminary guidance for the following fiscal year (FY25) that did not meet analyst expectations. The stock experienced a decline in after-hours trading following the earnings announcement.
Despite the setbacks in the third quarter, Asure's management continued to emphasize the positive aspects of their financial results. They highlighted the year-over-year growth in recurring revenue, which increased by 20% excluding the Employee Retention Tax Credit (ERTC) contributions, and now accounts for 98% of the total revenues.
Furthermore, the company reported strong sales bookings, which surged by 141% compared to the previous year, and a significant increase in backlog growth, up 35% quarter-over-quarter and 250% year-over-year.
The revised stock price target by Stifel reflects the challenges faced in the third quarter and the adjusted guidance provided by Asure's management. Despite these issues, the firm maintains its Buy rating, suggesting a continued positive outlook on the company's stock.
In other recent news, Asure Software has been the focus of significant developments. The company was recently rated Overweight by Stephens due to anticipated growth, with revenue expected to scale to $200 million and a 30% margin. This projection is a substantial increase from the previously forecasted $126 million in revenue and 20% margin for fiscal year 2024.
Asure has also made noteworthy strides in its operations, reporting strong second quarter results in 2024, with revenues of $28 million and an 18% increase in recurring revenues. These figures are largely driven by Asure's Marketplace offering, Payroll Tax Management, and interest from funds held for clients. Moreover, the company completed nine acquisitions, including HireClick, which contributed approximately $15 million to its annual recurring revenue.
The acquisition of HireClick, a hiring solution for small and mid-sized businesses, is expected to enhance Asure's recruitment process capabilities. This move is part of Asure's strategic commitment to support businesses in the competitive talent acquisition landscape.
The company anticipates robust growth for the second half of 2024, with projected revenues between $123 million and $129 million and adjusted EBITDA margins of 20% to 21%. Further details on Asure's progress and projections for 2025 will be provided in the upcoming November call.
InvestingPro Insights
Despite the recent challenges faced by Asure Software, as highlighted in Stifel's revised outlook, InvestingPro data reveals some interesting aspects of the company's financial position. As of the last twelve months ending Q2 2024, Asure reported a robust gross profit margin of 69.9%, underscoring the company's ability to maintain profitability on its core business operations. This aligns with one of the InvestingPro Tips, which notes Asure's "impressive gross profit margins."
Additionally, InvestingPro Tips indicate that Asure "holds more cash than debt on its balance sheet," suggesting a relatively strong financial position despite recent earnings disappointments. This could provide the company with flexibility as it navigates the implementation delays and slower product penetration mentioned in the earnings report.
However, it's worth noting that Asure is currently "not profitable over the last twelve months," according to another InvestingPro Tip. This is reflected in the negative P/E ratio of -28.67 for the same period. Despite this, analysts predict that the company will return to profitability this year, which could explain Stifel's maintained Buy rating despite lowering the price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips on Asure Software, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.