Asure Software (ASUR) – Part 3 – Workspace Management – Can It Be The Holy Grail?

Globally, Software as a Service (SaaS) in the workspace management space is a segment experiencing tremendous growth. The company’s NetSimplicity and iEmployee product suites provide an automated easy to use self-service unit, which showcases in-depth domain expertise in HR benefits, time tracking, scheduling, and asset management areas. The calculated focus on small to medium size businesses and divisions of large enterprises should allow the company to seed the market as it seeks to set the business up for growth.

Here is a look at the Asure’s NetSimplicity business, a product the company built up in the last few years while pursuing the patent monetizing route:

Year	Revenue	YOY Revenue Growth
2004	1M	NA
2005	2M	100
2006	2.8M	40
2007	4.3M	54

As of October 2006, Asure is lean with a head count of only 37 employees. The business started operating in the black and generated about 100K in cash during the last quarter. The expectation is to grow the revenue close to the $6M range in fiscal year 2008 per the 4th quarter earnings call.

The iEmployee acquisition roughly doubled the business. The purchase price of $10.7 million at slightly more than twice the revenue is reasonable considering the business has 15% bottom line net income. The 8-K filing indicates the cash consideration was roughly $6.6M and the remaining portion was funded through roughly 5M shares of Asure stock. This brings the total outstanding shares to roughly 31M and cash tapers to about $30M.

The combined business is expected to rake in recurring revenue in the 70% range. This welcome rain brings predictability to the company’s business moving forward. The initial expectation is that the combined business will generate cash in the 2nd half of next year but there the guidelines provided stops short. During the 4th quarter earnings call, it was indicated that such guidance would be forthcoming in the November timeframe.

Asure is valued very low since it is unclear how the business will perform as time progresses. Once the business track for the upcoming year is in place much of the uncertainties surrounding revenue, profitability, and growth expectation should get cleared up. If the company can turn profitable it will get valued per the projected growth expectations. Until then, investors will stay in limbo taking solace that the valuation is cheap…

Asure Software Analysis:

1. Part 1 - Transforming A Classic Patent Troll.
2. Part 2 - Building A Business In The Face Of Losses & Delisting Threat.
3. Part 3 - Workspace Management - Can It Be The Holy Grail?