Asure Software is a global provider of cloud-based software-as-a-service (SaaS) solutions that helps companies to bring people, time, space and assets together. The Company serves approximately 7,000 clients in over 80 countries
The rational: This play is based on a company with a very strong growth potential that starts to create traction in the market. To accelerate the growth they done an acquisition earlier this year that will pay from off from Q3. The main reasons for the play are:
1/ Earnings Figures and raise of 2016 guidance: on March 21st , they acquired “Mangrove Software” (a leading Cloud SaaS vendor in Human Capital Management applications) and integrated its operations during Q2’16. This integration effort caused some substantial one-off costs bringing down the Q2 figures. If one takes out these one-time costs, revenue was up 8% and EBITDA +87%. This growth figure will become even more visible in next quarter earnings when there are no one-off costs.
Additionally, on the effect of the integration of Mangrove Software, the CEO Pat Goebel, mentioned ” we continue to be optimistic about our financial performance for the full year. Because of the strong performance we’ve had so far, along with the fact that we’ve experienced faster-than-expected realization of cost synergies and backlog conversion, we believe it is necessary to raise our full year guidance for 2016.” http://bit.ly/2ce1QLT .. and so they adjusted their guidance with +3% EBITDA.
2/ Nasdaq compliance: On May 17th 2016, they got a notice from Nasdaq that they were going to be delisted if they remained under the $2,500,000 minimum level of stockholders’ equity. On Augustus 26th they regained compliance with Nasdaq rules http://bit.ly/2bYrnGJ. They achieved the additional stockholders equity by selling additional 225K shares in June causing the price to fade until a support area of 4.6$. Since then the price bounced off from this level. This countermeasure didn’t have any significant price effect. The issuing of the limited amount of 225K shares also indicates they are aiming at having a small number of shares outstanding ~ 6.52M
On August 29th, ASUR was invited to ring the opening bell at the NASDAQ which of course is a positive recognition and attracts potential new investors.
3/ Insider buying: The CEO bought on September 2nd, 50.000 shares at a price of 5.29$. He also holds multiple stock options which grant him to buy shares until 2021. This additional investment by him can also been seen as an effort to buy back a part of the additional shares that were issued to become compliant. http://bit.ly/2c9cepr . Interesting to note is that recent employee stock options granted to him and a director have an exercise price of 5.76$, which is currently higher than the stock price and makes a case that only good news can follow.
The play:
As the future is looking bright for Asure, we expect better estimated figures at the next earnings call November 14th. The price is currently close to the resistance level of 5.4$ and has historical support around 4.5 $.
Knowing the potential price spike reaction on news (like on August 15th with the earnings call), we assume a breakout of the 5.4$ level could cause this stock to get legs. Potential news can come from their new version 8 products mentioned in the earnings call “Version 8 product which we’re launching for October starts. This latest version integrates human capital management, time and labor and space under one common user interface under unifying our entire suite of solutions and that will allow us to present $500 per employee per year offering.”
We consider holding this to see a price effect of the news on the new version and any price run-up afterwareds into the Q3 earnings in November.
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