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ASUR - 4Q11 Results Above RedChip and Management Guidance.

Asure Software, Inc. (“ASUR” or the “Company”) a provider of cloud based workplace optimization software, reported 4Q11 results that exceeded our expectations. Revenue of $3.65 million was in line with our estimate of $3.63 million. Gross margin declined
slightly to 75% as a result of a 294% QoQ increase in hardware revenue (primarily due to the ADI Time acquisition). Total deferred revenue of $5.0 million as of December 31, 2011, was 28.1% higher than our expectation of $3.9 million. ASUR continued to report impressive growth in free cash flow (fcf), generating $1.5 million in 4Q11 vs. our estimate of $1.1 million. EBITDA of $0.72 million in 4Q11 also exceeded our estimate of $0.59 million. FCF, bolstered in the quarter by a one-time program that moved clients who were paying fees month-to-month to an annual fee basis, is expected to revert towards more normal levels in 1Q12 (management has guided for $0.5 - $0.6 million in fcf in 1Q12) but remain strong. Management stated on the earnings call that moving to an annual fee helps standardize the offering for its clients and also makes collecting receivables easier. Additionally, in our opinion, having clients pay on an annual fee basis versus monthly will help improve the Company’s retention rate and improve relationships with its customers. Management guidance for FY12 remains unchanged at $1.00 fcf/share, $4.0 million EBITDA, and $18.0 million revenue, vs. RedChip estimates of $1.01 fcf/share, $3.6 million EBITDA, and $18.6 million revenue. Free cash flow yield based on FY12 estimates is 15.2%, much higher than any of the comps in our peer group.

April 10, 2012
Rating: Strong Buy
Target Price: $22.80
Recent Price: $6.76

4Q11 Research

Organic cloud bookings up 101% YoY and 63% QoQ. ASUR cloud bookings continued to exhibit excellent growth, with cloud bookings from NetSimplicity growing 82% YoY and 64% QoQ and cloud bookings from iEmployee growing 151% YoY and 60% QoQ. Clientele additions during the quarter were strong, as the Company added/expanded business with AT&T, Johns Hopkins, GE’s aviation division, Keiser University in Florida, Salesforce.com and Goodwill. The strong growth in cloud-based bookings led to a strong increase in deferred revenue (up 140% YoY and 86% QoQ), along with recurring revenue (excluding acquisition revenue) as a percentage of revenue increasing to 84% (up from 80% in the three previous quarters). The increase in recurring revenue, along with effective cost control on the part of management, led to a higher EBITDA margin of 19.6% in 4Q11. According to our estimation of QoQ changes in total bookings (as defined by quarterly revenue + change in deferred revenue), ASUR has grown its bookings since 2Q10 at a QoQ rate of 37.0%, a figure that is higher than any of our peers (table shown on page 3). Going forward, given past growth in bookings and recent product and service improvements implemented by ASUR (ADI Time and Legiant acquisitions, offering time clocks in a cloud-based business model, developing a mobile strategy), we expect ASUR to continue to grow cloud-based bookings in 2012, and as such are projecting a YoY increase in deferred revenue of 16% in 2012 to $5.8 million.