Cheryl Trbula - Investor Relations Patrick Goepel - Chief Executive Officer Brad Wolfe - Chief Financial Officer.

Jeff Houston - Northland Securities Vincent Colicchio - Barrington.

Good day, ladies and gentlemen, and welcome to Asure Software's corporate conference call. My name is Vince, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the call over to Cheryl Trbula of Asure Software. Please proceed..

Thank you, Vince, and welcome everyone to Asure Software's conference call. Before we start, I'd like to mention that some of the statements made by management during this call might include projections, estimates and other forward-looking information. This will include any discussion of the company's business outlook.

These particular forward-looking statements and all of the statements that may be made on this call that are not historical are subject to a number of risks and uncertainties that could affect their outcome.

You are urged to consider the risk factors relating to the company's business contained in our latest periodic reports on file with the Securities and Exchange Commission. These risk factors are important and they could cause actual results to differ materially. This call is also being recorded on behalf of Asure Software and is copyrighted material.

It cannot be recorded or rebroadcast without the company's expressed permission and your participation implies consent to the call's recording. After we've completed our review of the quarter, we'll open up the call for questions from the financial analyst community. I would now like to turn the call over to Pat Goepel, CEO of Asure Software.

Pat?.

Thanks, Cheryl. And I'd like to welcome shareholders, clients, interested third-parties, analysts, and in looking at the list there is a number of new interested parties in our company, and I'd like to welcome you to the second quarter call. My name is Pat Goepel, and I'm the CEO of Asure, and I'll take you through the highlights.

Brad Wolfe, our CFO, will go through the very specific results. And then I will rejoin the call to give a look forward and answer any questions that you may have. First of all, second quarter was an outstanding quarter for Asure. We are very pleased with the results and we hope you are too.

On revenue, we had a record for Asure, since I've been here in the last six years. And I'd have to look through the annuals, but I know it's been quite some time, and we really have a record here in revenue for Asure. We made steady progress over the last few years, and we're continuing to drive results.

We had several big wins, primarily in the hoteling space. Some clients that we've welcomed in the second quarter, Fiserv, Genpact and Rogers Communications in Toronto. And we're very excited for them to join the Asure family, and this will bode very, very well for the future. We've had other several wins that you'll hear about over the next year.

Our cloud highlights. We have a legacy base of clients and we're actively talking to some of the clients about moving to the cloud, and we're very, very pleased with the results that we continue to get our legacy clients on the new cloud systems. And that initiative will continue to drive results.

In this past quarter we had a record for the migrations and we'll continue to see the results. And I think we'll see more records, as we continue to convert our legacy base to the cloud. We've completed a technology transfer, which had a previous option, was MPAY.

MPAY has been a good partner with us since 2012, and the latest agreement will take them as a partner through 2018. From a revenue side, this helped us with $200,000 in revenue this quarter, that relationship will be about $200,000 every second quarter through 2018 or so. We're implementing a channel strategy.

We've told you that not only do we have a direct sales force, but we're also going to implement a channel strategy worldwide. We signed up a key partner in South Africa in a competitive win that we are very pleased to get, and one in Brazil. The key partner in South Africa contributed a large sale in July, which we are very pleased with.

So it's already evidence that the partnership is working. We now have a product team that is getting ahead of some of the technology requirements, specifically in the HR space, but also in the digital workspace. And the announcement this Tuesday with SPREO, which really helps us with indoor wayfinding, we're very pleased with.

We believe the marketplace is looking at Asure for technology solutions. We're excited that we're offering those technology solutions. And in many cases the feedback from our large wins is that we're a couple of years ahead of our competitors.

I think these type of partnerships will demonstrate sales results, revenue results into the future, and very, very pleased with our business development and our marketing folks that have been active in technology solutions. We also finally have introduced the backlog metric that Brad will talk about.

One of the things we wanted to cover is we have bookings and then we have revenue, but we also have this situation where clients are waiting to be implemented. And so the introduction of backlog will help with transparency of future revenues and give you an indication of growth in the pipeline.

With that, I talked a lot about the initiatives of the second quarter. Overall, I'm very pleased. I think Asure is starting to hit its stride. And I'll be back to give you a look forward, but with the specific results, I'd like to turn the call over to Brad Wolfe, our CFO..

Thanks, Pat. Good morning, everyone. I'll take a few minutes to go over the second quarter financial highlights and then we'll be happy to answer any questions during the Q&A period at the end of this morning's call. In the second quarter, revenue was at $7.2 million, a 9% increase over the $6.5 million reported for the same quarter last year.

Second quarter revenue was up $827,000 or 13% from the $6.3 million reported in the previous quarter. Year-to-date revenue was at $13.5 million, up 3% from the $13.1 million reported for the first half of 2014. The year-over-year increase in both second quarter and year-to-date revenue was primarily composed of increases in hardware revenue.

As compared with second quarter of 2014, hardware revenue increased $674,000 or 181%, and on-premises software license revenue increased $72,000 or 29%. As compared with first half of 2014, year-to-date hardware revenue increased $632,000 or 63%. Cloud revenue and on-premises software license revenues slightly increased.

AsureSpace revenue was $4.2 million for the second quarter, an increase of $495,000 or 13% from the $3.8 million recorded for the second quarter of 2014. Cloud and hardware revenues increased, offset by decreases in maintenance and support, on-premises software license and professional services revenue.

The majority of the increase was in hardware revenue, which increased $598,000 or 456%, which increased due to a backlog in the first quarter of 2015, which resulted in revenue in the second quarter, as well as strong hardware sales to large enterprise organizations.

The largest decrease is in on-premises software license revenue, which decreased $120,000 or 79%, as we continue to emphasize the sale of integrated cloud-based solutions. AsureForce revenue for the second quarter was $2.9 million, an increase of $116,000 or 4.1% from the $2.8 million recorded for the second quarter of 2014.

This increase was primarily in on-premises software license revenue and hardware revenue. AsureSpace revenue for the first half of 2015 was $8 million, an increase of $397,000 or 5.2% from the $7.6 million recorded in the first half of 2014.

This increase was primarily due to an increase in cloud revenue and hardware revenue offset by decreases in maintenance and support, on-premises software license and professional service revenue.

AsureForce revenue for the first half of 2015 was $5.5 million, an increase of $19,000 or 0.3% from the $5.4 million reported in the first half of 2014, on-premises software license and hardware revenue increased.

Recurring revenue as a percentage of overall revenue for the quarter was 70% compared to 79% last quarter and 78% in the second quarter of 2014. Gross margin for the quarter was $5.3 million or 74%, up $105,000 or 2% from the $5.2 million or 79% year-over-year and up $600,000 or 13% from the previous quarter gross margin of $4.7 million or 74%.

Year-to-date gross margin was $10 million or 74% as compared to the $10.1 million or 78% %for the first half of last year, a slight decrease of 2%. EBITDA in the quarter was $1.4 million, excluding one-time items compared to $970 million reported in the previous quarter and $1.18 million in the second quarter of 2014.

We incurred $132,000 in one-time items this quarter. Year-to-date EBITDA excluding one-time items was to $2.4 million, up from the $2.3 million reported for the same period last year. For the year, we've incurred $415,000 in one-time items, which include $110,000 loss on the early termination of our Warwick, Rhode Island lease.

Net income excluding one-time items for the second quarter was $0.04 per share. GAAP net income per share amounted to $0.02 per share. The per share difference of $0.02 is due to the one-time items discussed above. Year-to-date net income, excluding one-time items was $0 per share. Year-to-date GAAP net loss per share amounted to $0.06.

The per share difference of $0.06 is due to one-time items. Cash flow from operations for the quarter was $116,000 and $862,000 year-to-date. Capital expenditures were $331,000 for the quarter and $989,000 year-to-date. Cloud bookings, excluding PSSI bookings increased by 103% from the second quarter of 2014.

We're introducing backlog as a metric this quarter. The quantification of backlog will lead to more transparency and visibility of revenue growth. We define backlog as sales bookings, which have not yet turned into revenue or deferred revenue, including both repetitive and non-repetitive product lines.

For repetitive product lines, one year's value is included in backlog. Backlog at June 30, 2015, is $2.2 million. We're maintaining our 2015 guidance and expect year-to-date revenue to be $30 million with EBITDA excluding one-times of $5.6 million and net income per share excluding one-time items of $0.25.

At this time, I'd like to turn the discussion back to Pat Goepel, our CEO, for closing comments. And then we'll open it up for questions. Thank you..

Thanks Brad. Going forward and just look forward, first of all in third quarter in July we had a very strong bookings month. And what was interesting and nice to see it is we had four major initiatives within the company.

One is straight-through processing where Brad and his team really focused on kind of our order to cash process, all the way from marketing and sales force, all the way to great planes in our financial systems, and they've done a good job of continuing to automate the business, so we can scale and scale on a bigger way. We can afford acquisitions.

That way we get the leverage for our shareholders and clients alike.

The second initiative was global sales, really approaching clients from a global aspect, and I am pleased to report that in July our global team sold Morgan Stanley, which I think will bode well for the second half of the year and in the future in sales, as evidenced, that we can go into these large enterprise sale opportunities and not only compete effectively, but win.

Migration to the cloud, I mentioned that we're very pleased with the second quarter in the migrations to the cloud. I think that initiative is just starting to take off.

And we will keep customers on legacy platforms, but we're also encouraging them to go to the cloud, where we have our development dollars pointed to and we're excited that we're winning more and more.

And then finally, the mobile and facial recognition, the technology initiatives that we're getting our software and everybody's hands as opposed to administrator, I think is boding well that we're having large sale opportunities, partner opportunities.

And an evidence of that, in July, we had a large sale with Kathea, and that was a competitive win that we were more expensive than our competitor, but the quality and the technology that we provide are clearly won out. So very, very pleased with some of the traction that we're getting.

On the acquisition front, we have a very strong financial partner, Wells Fargo. We're very pleased with them. I would say activity is brisk. We have a number of opportunities on the acquisition front that we're hoping to close a nice-sized deal by the end of the year.

As you know acquisitions takes two to tango and a lot can happen, so don't have that as a definitive, but what I would say is the activity is high. So to recap, before we go to questions, Asure had a record second quarter on the revenue side. We continue to work our initiatives and improve the business.

Those of you that have been with us for the six years, we appreciate you on the journey with us. We started this thing at $0.10 a share and we're continuing to drive forward. We're continuing to improve the business. Our management team, our employees I think are strong. All avenues were pointing to growth and we feel good about the future.

With that, I'll take questions and any clarification that you all have..

[Operator Instructions] Our first question comes from Jeff Houston of Northland Securities..

Starting off with it, it sounds like it is great to hear that you had a very strong July bookings and Morgan Stanley signed up as a customer.

Could you provide a bit more color on what they bought and for what geographies?.

Yes, on Morgan Stanley, Jeff, global customer, they bought our digital workspace initiative to allow -- we're going to help them with their hoteling initiative. And they're going to roll our products out over time, really across the globe. And so I think the primary areas at start are New York and London, but over time, that will grow..

And then the seven hoteling deals that you signed in the quarter, I'm just curious about what the average selling price was? And if there are more similar structures, more land and expand, gradual expansions?.

Some of them I can't disclose yet just for confidentiality reasons, but what I would say in general, anywhere from, I would say, north of six figure deals.

What they typically are is north of six figure deals, they're going to -- some of them are trying out a concept around hoteling, and then if hoteling works for them, they will continue to take that along side and into more offices, some will have hoteling in a continent and they'll grow it.

Typically what it does include is it includes some hardware, which might be a sensor, where they can keep track of utilization around their seating capacity, et cetera, and make their ROI much more efficient. In many cases, the digital workspace, it's a new area on how to build a workspace.

And what they'll do is they'll help use us schedule a person's day, and that person's day might be hot-desking or plugging into a big conference room table, and working on email or phone calls. And then over the day, they might have a one-on-one with their manager or they might be able to have a team meeting with the client that they're working on.

And what it gives the client and the company is a lot of flexibility around real estate. Ultimately, what we're hearing back is it's saving on per employee per year cost, somewhere around $5,000 to go to an alternative workspace. So what's exciting about this is they can buy us and use our service to help them achieve these type of savings.

And then over time, we can grow with them, and that's been a big part of the strategy. Gartner in the digital workspace is very strong, that it is going to be a growing space in the future.

And what we're excited about that is we want to ride the wave, and we think the wave is tiny, but it's going to get bigger and bigger over time, we see this as a multi-billion dollar market opportunity..

And then, I guess looking at the channel sales strategy, how does this complement your direct sales force? And how long do you expect these new partners that you sign deals with to ramp up their business and build pipelines?.

Well, on the case of Kathea in South Africa, we have a little over 30 sales reps and they're global and they're good, but they're not going to get to South Africa anytime soon without some help. And so what we did is we looked at who would be a really strong potential partner in South Africa and we're very, very pleased that they chose us.

And so our business development folks, I've worked with them to get them a starter kit and really good communication, so we could have more partnerships going forward. We did the same in Brazil, and we weren't going to get to South Africa, we see that as a great potential revenue source.

We have partners in New Zealand and Australia, so we're very pleased that we have that network in place, we're going to continue to grow that network. And we feel that [indiscernible] our internal sales team and then our business development folks will continue identifying good partners in parts of the world that we'll not be able to reach quite yet.

And we anticipate that that will be a nice slice of revenue growth for us. And eventually, we think 25% revenue or so could come from partners. And we're still early in the game, but we feel good about the way the game is going..

Last question is for Brad. It's good to see that you're sharing the backlog number.

What was [indiscernible] the business that made you decide to do it now? And then how does that compare with where backlog was last quarter and maybe a year ago?.

I think as we've gone upstream and we do more enterprise deals, the backlog has been growing. I think the deal we did last year, PSSI, was our first really big backlog deal.

And since backlog doesn't show up on your financials, we wanted to give people a visibility to give some context I guess, at the beginning of last year, our backlog was probably in the $200,000 range, and now it's up to $2.2 million.

I think that's very important for analysts/investors to realize that these are agreements that we've signed and revenue that we will recognize, but does not show up on our financials today. So we wanted to give the investor community insight into that. And it also ties into our enterprise growth strategy.

So you see that the enterprise growth strategy, the bookings are coming in, but the revenue may come in on a slower pace, but we've got it in the queue and we'll go into '16 with a fairly significant backlog..

Our next question comes from Vincent Colicchio of Barrington..

I just got bounced off the call, so I apologize if any of my questions were asked.

Why the decisions to provide backlog now, is it because your business is more predictable now than it has been?.

Yes. Vince, I think it's a question -- first of all, we're very excited about the growth potential of the business. We think we're going after larger enterprise clients. We also have some clients that have staged implementation opportunities, where they stage globally or they stage one office at a time. So we want to capture that.

And just for frame of reference, two years ago, we had zero backlog. Now, we have $2.2 million in backlog and that doesn't show in the financials yet, but over time we'll implement that into the growth strategy.

So we think that that gives the investors transparency into a metric that they don't see and allows us to both be confident about understanding the future..

You seem to be doing very well on the hotel side.

I'm wondering if there are any other sort of newer verticals that where you're starting to see some interest that could be a potential new area in the future?.

I think in the broad HR space, I think we really have found a niche here in the mobile, agile worker. Workers are working from home, they are traveling, they are growing.

I think our technology around facial recognition with the sale around PSSI, and then around the digital workspace, allowing companies to save big bucks, and we provide a service that they love and it has a strong ROI.

Those initiatives we're going to continue to pound and we're geographically going to get stronger on a reach, where you get more people exposed to those. So we feel we have nice opportunity going forward. We think we like our sales staff, it's grown now.

Over the last couple of years, Steven Rodriguez has done a nice job of growing that team and really from the ground up. And him and Mike Kinney have been employees for now three years, and really have added a lot of strength to the team. And the marketplace is growing.

We got a nice niche and we've got experienced sales force now that we can go after that niche. So we're going to continue to drive results in those areas..

And you mentioned nice pipeline on the acquisition side. Can you rewind us, I'm sure you talked about it before.

What types of acquisitions are most attractive to you right now?.

Well, I think the broad HR space, we look for the hoteling time and labor are always attractive to us. We did a partnership Tuesday with SPREO, which is in the area of wayfinding, which allows people not only to find a location, but once somebody is inside the building, they can go find them where they are in the building.

So we're going to look at technology acquisitions. We're going to look at HR acquisitions that make sense. We think we have a growth engine in place. We think we've built, with Brad's team, a platform where we can add scale of the product and technology team. We're very pleased with the scalability of our product.

So we can add more customers, cross-sell opportunities in the HR technology space. We think that's a winning strategy for us.

As far as the activity, I think Wells Fargo we have a nice partner; we have a $10 million acquisition line; we also have a shelf that is out there, so we can issue more shares; and then we have a very predictable cash flow model and predictable business. So we think those elements bode well for a potential partner.

And we've been actively quoting some partners. And if we can get a deal done, we will, because we're of the belief that as we get bigger, the valuation will be a multiple of where it is now. I suppose two plus two that will be two times two times two. And so that's really what we're trying to strive for..

Thank you. At this time, I don't see any other questions in queue. I'd like to turn it back to Mr. Goepel for closing remarks. End of Q&A.

On behalf of the employees of Asure, we'd like to thank you for your interest and we'd like to thank you for attending the second quarter. I feel really good about second quarter. We've got a lot of work to do. You see the work we laid out, we're going to get after it every day. And we appreciate your interest and your shareholder investment.

We treat it very, very seriously, and we want to do well by you. So thank you for your time today. And have a great day..

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. Thank you and have a great day..