Q2 2025 Asure Software Inc Earnings Call
Good afternoon, and welcome to <unk> second quarter 'twenty.
2025 earnings conference call.
Joining us for today's call are.
Chairman and CEO Pat to get the.
Chief Financial Officer, John Pins, and VP of Investor Relations Patrick Mckillop.
Following their prepared remarks, they will be a question and answer session for the analysts and investors.
I would now like to turn the call over to Patrick Mckillop for introductory remarks.
Please go ahead. Thank you operator, good afternoon, everyone and thank you for joining us for sure its second quarter 2025 earnings results call.
Following the close of the markets, we released our financial results.
The earnings release is available on the Sec's website, and our Investor Relations website at Investor Derbyshire software Dot Com, where you can also find the investor presentation.
During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items, a description and timing of these items along with a reconciliation of non-GAAP measures to their most comparable GAAP measures can be found in our earnings release.
Today's call will also contain forward looking statements that refer to future events.
And as such involve some risks we use words, such as expects believes in.
In may to indicate forward looking statements and we encourage you to review our filings with the SEC.
For additional information on factors that could cause actual results to differ materially from our current expectations.
I will hand, the call over to Pat in a moment, but I just wanted to take a moment to remind people of our upcoming investor relations activities.
On August 18th we will be hosting a virtual N D R with Barrington research.
During September we will tend to lag Street conference in New York.
On September 11th and participate in the Barrington Research Virtual conference on September 16th.
On November 20th we will be attending the Stephens conference in Nashville, as well as the Needham Technology Conference in New York.
We also expect to schedule. Some additional non deal road shows this fall investor outreach is very important to assure and I would like to thank all those that assist us in our reference to efforts to connect with investors.
Finally, I would like to remind everyone that this call.
Is being recorded and that it will be made available for replay via a link available on the Investor Relations section of our website.
With that I would now like to turn the call over to Pat Campbell, Chairman and CEO Pat.
Thank you Patrick and welcome everyone to assure softwares second quarter 2025 earnings results call I'm joined on this call by our CFO, John Pets, and we will provide a business update for our second quarter 2025 results as well as our outlook for the second half.
But 2025 following our remarks, we'll be available to answer your questions. We're pleased to report that our second quarter revenues were solid coming in at $31 million, an increase of 7% versus our second quarter prior year and excluding the impact of V. R. A T.
See revenue growth was 10% our revenues reflect continued strong performance from our payroll tax managed spread product and improving attach rates of our human capital management products on July 1st we acquired the late some time Corporation and we are excited to have them as.
Part of the assured family leave somebody has a storied legacy as a pioneer in mechanical time clocks and a trusted name and workforce managed match for over a century. It was founded in 1919 by Georgia Louie late we began selling time clocks across the South East region of the United States.
And what's still managed by the fourth generation of the family.
Company has evolved from punch clocks in early years and transformed into a modern software provider delivering intuitive cloud based time and attendance solutions through its flagship platform paid clock online. We believe the combination of lifetime with our existing time and attendance business.
It's a natural fit which will allow us to achieve scale in this segment of the market the acquisition reinforces <unk> commitment to supporting America's growing businesses with simple effective tools to better manage their workforce and grow their business the target customer base for litho.
Which has approximately 14000 clients matches well with insurers focus on growing companies that go to market strategy is very similar in nature and direct sales as well as strong reseller network is available to assure we view the time and attendance.
As a gateway to payroll processing and a rapid self installation software used with delayed some product. We believe we can accelerate our payroll sales and further drive the opportunity to have an increased attach rates.
Sure pay as an example, the man for such features such as earned wage access weren't employees' hours can be validated at the time clock or in the time and attendance system. We believe the clients of late though also are in need of many additional products for sure has to offer such as.
Tax HR compliance benefit administration 401k, and more we expect the acquisition of late some time corporation to bring additional high.
High margin revenue to assure our payroll tax advantage red product has continued its momentum as we go live with more clients each and every day and our team has an active pipeline of new opportunities sure pay is a multiyear initiative continues to make very good progress in its launch with thousands of cards ordered by our.
And more be inactivated everyday and just a few years, we've accomplished quite a bit as we have been busy building out capabilities with acquired point solutions, we're investing capital. They integrate these point solutions for an improved client experience, which we expect to drive our attach rates higher.
<unk> and ultimately drive improved organic growth while we're in the early innings of these efforts we have seen some positive indicators such as improved attach rates during Q2 with an increase of 400 basis points versus the year ago period, our suite of human capital management product suite.
It's stronger than ever and includes a well rounded offering to meet the needs of growing businesses with payroll tax HR compliance insurance 401k time and attendance. The total addressable market for our products is very large.
And we're working to capture increased wallet share we feel our efforts can lead us to better service our client base of over 100000 with the best experience in human capital management industry, whether it's small growing businesses or an enterprise level business, we want to beat a provider of choice.
For our clients offering everything they need from the first date of hire all the way through and employees' retirement, our bookings for the second quarter declined by 53% year over year, primarily due to large enterprise deals which were booked in the second quarter 2024, excluding knows from.
Comparison, we saw bookings increased 15% for the quarter, our contracted revenue backlog is $82 million up 68% versus a year ago and remains at record levels based on our current business trends, we're increasing our full year 2025 revenue guidance.
To a range of 138 to 142 million in revenue with adjusted EBITDA margins of between 22 and 24% from prior guidance of $1 34 to $1 38 in revenue with adjusted EBITDA margin of between 23 and 24%. This guidance includes the.
The impact of the late some time acquisition now I would like to hand, it off to John to discuss our financial results in more detail as well as our Q3 guidance John.
Thanks, Pat as Patrick mentioned at the beginning of this call several of the financial figures discussed today are given on a non-GAAP or adjusted basis.
You will find a description of these GAAP to non-GAAP reconciliations in the earnings release that was made available earlier today. Reconciliations themselves are also included in our most recent investor presentation posted in the Investor Relations section of our website at Investor data sure software Dot com.
Now on to the second quarter results.
Second quarter total revenue was $30 1 million, increasing by 7% compared to the prior year period, excluding <unk> TCE revenues were up 10% from prior year period.
<unk> revenues for the second quarter grew 6%.
Versus the prior year to $28 6 million and over 95% of our total revenue in the quarter.
With 7% total revenue growth in the quarter, our revenue results reflect favorable year over year comparisons driven by payroll tax management and applicant tracking products.
As we discussed last quarter HR compliance still faces some headwinds owing the RTC related bundling activity in 2023.
And this negativity impacted our growth in the second quarter also professional service revenue was a little bit weaker than we forecasted though as we discussed on past earnings calls this revenue can be impacted by the timing of enterprise implementations.
Or our organic growth was 1% however, excluding the eight 4% downward pressure from HR compliance revenue issues organic was 5%.
Summing up our buckets.
Of growth, which are organic enhanced organic and strategic inorganic our growth was 13, 5%, excluding a 4% impact to the organic I just mentioned.
We believe that the second quarter was the low point for the impact of HR compliance ear D C related issues.
Float revenue was down slightly versus prior year period due to previous rate reductions made to the federal funds rate.
However, increased average fund balances have mitigated most of that impact.
We continue to model conservatively for three more interest rate cuts this year.
Our cross selling efforts are continuing to show good results.
With our attach rates, which measures clients that take more than one product growing again by 400 basis points versus the prior.
Year second quarter.
This will be a continued focus for us during the remainder of 2025.
And with the recent acquisition of late some time, we believe this will continue to help us drive acceleration of these attach rates.
Gross profit for the second quarter increased slightly to $19 9 million versus $18 9 million in the prior year second quarter gross margins for the second quarter were 66% compared with prior year at 67%.
non-GAAP gross margin for the second quarter were 73% compared with the same quarter prior year at 73% we.
We continue to believe that there is margin upside over the longer term as the business scales.
Net loss for the second quarter was $6 1 million versus net loss of $4 4 million.
Million during the prior year.
EBITDA for the second quarter was $1 4 million up slightly from $1 3 million in the prior year.
Adjusted EBITDA for the second quarter increased to $5 2 million from $4 1 million in the prior year and our adjusted EBITDA margin was 17% in the quarter compared with 15% in the prior year.
Turning now to the balance sheet.
We ended the second quarter with cash cash equivalents of $66 million.
And we have debt of $67 4 million as of June 30th 2025.
Cause Haytham time Corporation acquisition, which closed on July one 2025.
Was with a purchase price of $39 5 million.
This was paid in the form of $37 5 million in cash provided by the mid cap financial facility with the remaining $2 million being paid in the form of a promissory note.
Yeah.
Yeah.
Now I'd like to provide the backdrop for our updated 2025 guidance.
During the first half of 2025, we invested in our technology to improve the client experience added to our sales force and invest in other areas of business to achieve our revenue and profitability goals.
As we generate more revenue growth with relatively stable cost structure through 2025, we anticipate that we will experience greater operating leverage.
We are modeling for higher interest expense with the newly added debt onto our balance sheet.
Our third quarter and full point 25 guidance is based on continued positive momentum in our business.
Now in terms of guidance for the third quarter of 2005, we are guiding the third quarter revenues to be in the range of $35 million to $37 million.
Adjusted EBITDA for the third quarter is expected to be between seven and $9 million.
We are increasing our 2025 revenue guidance from 134 to 138 million with adjusted EBITDA margins of 23% to 24% to now be in the range of 138 to 142 million with adjusted EBITDA margins to be in the range of 22% to 24%.
As Pat mentioned in his commentary really these guidance figures include the anticipated impact of the lithium prime acquisition.
In conclusion, we are excited about the remainder of 2025 and look forward to 'twenty 'twenty.
It's been a great year for sure and driving profitable growth and leveraging initiatives that we've implemented across the business to drive long term sustainable growth.
With that I will turn the call back to Pat for closing remarks.
Thanks, Chad we are pleased to have delivered solid results in the second quarter of 2025 during the first half of 2025, we achieved many accomplishments and growing the business improving our technology and complete our acquisitions, including a strategic deal of late some time.
Operations, we believe we have executed well on our strategy to deliver growth and will achieve scale benefits while organic growth has been hampered during the first half of 2025 due to HR compliance related E. R. T. C. Upsell activity, we believe that the HR compliance headwind will be.
And as we move through the second half of the year, we're budgeting for increased capital spending as we work to integrate the point solutions, we have acquired and going forward. We're consolidating the point solutions to one user experience and this will increase our per employee per month capabilities from a.
About $15 per employee per month, just a few years ago to a $100 per employee per month today. The sales team is making very good progress in our efforts to cross sell and then we increase our attach rates, which during the second quarter increased by 400 basis points year over year.
We believe the increased attach rates and the per employee per month capabilities over time will lead to improved organic growth. The team Merit. It's sure remains focused on the goal of building and growing the business to achieve scale, which we believe will result in improved profitability with adjusted EBITDA margins.
Of 30% plus at the 180 to 200 million revenue levels, we believe that with the positive momentum that we have in our business combined with the record backlogs and recent acquisitions. We have good line of sight of reaching this goal over the medium term, we expect the business to generate positive cash.
<unk> this year and our model suggest we could achieve the 30% level of adjusted EBITDA margins for the fourth quarter and potentially GAAP profitability, which would be an important milestone for this business in summary.
We're very pleased to have delivered a solid performance in Q2, our increased guidance for the full year of 2025.
Blacks, our expectation for continued growth in the high teens range, we have a very healthy contracted revenue backlog of $82 million, which had record levels versus last year's second quarter, we've experienced great momentum with our payroll tax management product and are excited about the addition of blade sometime to our business.
We continue to feel the business is positioned well for the future. We will continue to provide innovative human capital management solutions that help businesses thrive human capital management providers grow their base and large enterprises streamlined tax compliance. Thank you for listening to the prepared remarks.
ARX <unk> that we had so with that I will send the call back to the operator for the Q&A session operator.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
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Press Star and one on your telephone keypad.
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Ladies and gentlemen, we will wait for a moment, while we poll for questions.
We have our first question from Jeff Van <unk> from.
Craig Hallum. Please go ahead.
Yes, my questions guys.
Pat on the payroll tax management I know, obviously, the ERP OS in and you can see you booked a lot of business. There I know the timing around those deals have been difficult to predict two questions. One where is that business now in terms of revenue and then two you know you had some big deals you've talked about I think Kroger Nucor, a number of others that were potentially seven figure area or it doesn't.
Like those have lit up yet just catch us up on where you are now in and how some of these big deals are flowing through and if in fact, they are all still there has anything slipped out of the pipeline.
No not at all Jeff. Thanks for the question just on tax in General you don't wanted to things, where we do have competitors listen in on these calls. So you know I want to make sure and they tried to use stuff like that against us. So suffice to say from a backlog perspective, we've made really good progress some of them.
<unk> been phased installs as you know they get one location or whether they get one business line and then they go to another business line. So theres been a little bit of slippage from that but there's no deals or anything that we've lost out of backlog and we've had some actually some really good in fact I talked to.
A number of them personally.
And I think client satisfaction, we're right, where we want to be so I feel good about that I would say just in you know.
A couple of them have phased as oppose but nothing more nothing less than that I think as we look at the first half and then go into the second half.
We will get those backlog installed that that we have they might be a quarter late in some cases or their phase, but we're right on that.
No right, where I want to be from a unit perspective from a sales perspective, I anticipate having a couple of decent deals. This quarter. We didn't have anything super meaningful are booked in the in the second quarter, but certainly a couple already I think are going to be signed here in the third quarter. So.
I think the tax business continues to make progress and we don't break out the tax business in general, but you know, it's it's increasingly more of our revenue and some of its if you include float and don't include Florida, and as Standalone et cetera. So you know, we'll keep updating you along the way and then I think on the ear T C.
With HRC or human resource compliance product that was a little bit you know all of them.
Mist in the in the first half of the year you know John quantified data at 400 basis points, we are starting more than we're losing each month here in the second quarter and we anticipate that in the third and fourth so from a bookings retention perspective, that's in pretty good shape.
We just have to you know we had to get through the cohort of the <unk> T C combined.
Losses in that piece in that area, and we're largely past that mhm understood and unless something.
Talk to us about the business itself, what kind of growth rate are you inheriting there what does that business done in the last few years and then what is the impact is coming in for the second half here what is the impact on the outlook in terms of the revenue youre expecting from that.
Yeah, I think just a couple of things. So we think late them. It's just spot on to where we want to go of their client base and our client base. It's really a good match feel really good about that and.
You know what a couple of things that they do is you know.
We have almost the same day install if you will or a self install so we can get client revenue moving faster. We think we gained attach rates faster.
We've grown in the area of 10% and some of the if you step back and look at the business and the purchase price.
Been very consistent on our acquisition somewhere between two and three times revenue. This was like smack Dab in the middle.
Two and a half times revenue and if you think of that $15 million or so in <unk> seven in this quarter eight in the next <unk> seven and the <unk>.
Second half of the year eight in the first half of next year and and then what you look at from a revenue perspective is you know they had some business that is one time.
For us, we're going to move more and more to a reoccurring model. So some of it is a little bit of apples and oranges, but if you think about it it's a $15 billion revenue play.
Growing at about 10% and then for US it opens the door to assure pay it opens the door to payroll. It opens the door HR a lot of cross sell opportunities both ways. So we couldn't be more pleased and excited to ablate them as part of family.
Got it helpful. Thank you Pat.
Thank you Jeff.
Thank you we have our next question from Joshua Reilly from Needham and company. Please go ahead.
Alright, Thanks for taking my question just following up on the lithium acquisition here, how should we think about the penetration of time and attendance solutions within your existing base.
Both direct customers and indirect customers.
And.
How does this change the dynamic in terms of your ability to further penetrate.
That customer or your existing customer base with Chad solutions, Yeah, Great question and you know.
I'll get John pets into the conversation as well but.
Just wanted to things that we have improved our we believe we improve their IR deck or investor relations deck.
Sure Dotcom software dotcom, but.
A couple of things our attach rates, we felt weren't as high as where we wanted them to be in and we saw the opportunity. We felt like we had a good time and attendance solution, but in some cases, it was a little bit more up market.
And you know we wanted to look at that self install same day install and then how we're looking at it is in combination with earned wage access where you can work today get paid today, you can get credit for your time and attendance hours et cetera, and so what we're excited about is that capability.
And and I think attach rates can go up and in the Investor Relations deck, we kind of lay out.
Last quarter, we introduced a.
25% have two or more products, we're already up to 29%. We think we can increase that and then from a pap or model you know our capability at $15. You know a couple of years ago. Now we think we have close to $100 per employee per month, and time and attendance at all I'd like to see that.
That attach rate go way up and I think it will with the book to Bill in the timed install being a lot quicker. So that was the part of the reason for the acquisition. We have about 15000 direct clients away from in effect doubles, our that opportunity here very very quickly so from a P.
Payroll time perspective, we think we are you know if hit a home run here and we're going to work right away on it.
On a moving both the attach rates in both businesses as well as the scaling up the peplum journey or the per employee per month, a journey John I don't know if you had anything to add yeah. A couple of things I think you talked about the 29% I would say.
Probably at least half of that is our clients that have time today with us one of the things that was interesting about the the laythan business as we were talking and we're starting to learn about them.
Roughly 14000 customers really almost the same customer base that we're serving and we can talk to them and trying to understand why they lost customers almost all the time they were losing customers to an integrated payroll solution. So we think that there's a lot of opportunity inside of that space to cross.
Sell into as well as patent.
Pat mentioned.
The product that they've got even go take a look at it they've got a store on Amazon.
You can see the clock, they're selling in and what they've done is it's almost like a router.
<unk> taken a router home and tried to set the Wi Fi at their house and so you know, it's a little bit of a challenge and it takes a couple of hours playing around it and some buttons, but they've got the same kind of setup right. So you can take the clock delivered by Amazon and an hour or two later, you've got Youre up and running you put your credit card down and now you've got a subscription.
Their service really really.
Slick system.
Our install is nowhere close to that with our current setup. So we really thought it was kind of the wave of the future in terms of.
Ease of use with us that there is a really nice attachment with the payroll. So you can offer time and payroll almost real time setup and then the last piece that we feel like is really interesting is when they've already proven is that they proved it out in the first week. After we bought them. We have this assure pay card and.
You can now think of Lytham clock in and punch in using that that card right. So it recognizes that ensure pay card. So now you have this almost vehicle to wear.
The employee start to recognize their pay as they are punching at arrow. So we just think there's a lot of lot of attachments here, that's a really nice overlap.
It really goes back to the story that we're trying to do is.
Build out the suite of products and continue to to take the customers down a journey, where they they have more and more value out of our alright, our ecosystem.
Very helpful. Just following up here what are you seeing in terms of core payroll unit growth over the last couple of quarters right. Because if you look at the one 2% organic growth in the quarter I know that doesn't tell the full story.
So is it right to assume that like the core payroll units are growing closer to that 5%, which is the kind of the adjusted.
Or maybe help us understand some of the moving parts.
I think that's exactly right I think thats, what you would see is on average is probably about 5%.
When you take out the impact of the headwind.
And then maybe just a follow up one last point, what gives you confidence or what are you seeing in the numbers that you see the trajectory that the HR compliance headwind is going to lessen in the second half is it that the renewals have gone through at this point primarily or through.
Through the second quarter and the number of renewals declined significantly for those the ITAR compliance. It's last year D. C deals or what what are you seeing yeah. I mean, I think we talked a little bit about this last one and I'll, let Pat kind of give us his feelings, but we went out to market with the idea that we thought that there'd be a lot of goodwill created.
With I mean HR.
Compliance product is really really strong.
We went to market with the idea that hey, if we also get these customers.
Some money from the government. These guys are going to be oil forever. It didnt prove out to be that way. It sounded a lot more of these transactions were transactional in nature right. They were just there for the free T C money in and Didnt necessarily buy into the value prop that we were hoping for with HRC. So what we know now is that we're starting to roll off right.
Because we are a T C.
Is it kind of in the rearview mirror and so were kind of behind that cohort and so anyway. That's what gives us confidence that all would be yes.
It's nothing more than that Josh if I look at the cohorts and if you think about when the RTC was going strong. It was in that kind of 'twenty three 'twenty four area and then when you think about you know as they've rolled off or 'twenty two 'twenty three and then you've got a year or so.
<unk>.
Our average kind of renewal somewhere in close to 90% range that cohort was probably somewhere in the forties range. So that's rolled off and then we get monthly sales number mark the trip numbers that cohort is less and less and we're selling more than we're losing each month.
And so now that as that Snowball continues we'll be back to normal here pretty quickly.
Alrighty ill pass it along thank you.
Thank you.
Thanks.
Thank you.
The next question comes from Brian Bakery with TD Cowen. Please go ahead.
Hi, This is actually Jared Levine on for Brian Tonight, I guess to start here how quickly can you drive revenue synergies with Latham and does any of that assumed in guidance.
Now I think we're.
We're hopeful that we can get the integration done. This this year. So in the next few months, where we're putting a lot of energy towards it.
The guide does not consider a lot of cross sell synergies right now so we're going to focus on getting the product generated making a really good experience for the customer and then figure out what does that mean in terms of upside, but no I don't think we've quite a lot of upside than to do that.
This is part of the year fair Pat Yeah, Sharon I think you'll see 'twenty six 'twenty seven be where a lot of the revenue comes in and there was some duplicate costs that it's been played in this year and and some of it you know will be taken out.
We will do some investment as well around the integration efforts because we do feel that there is such a book to bill in and kind of revenue synergy that that kind of integration now for probably targeting towards the end of October so we might get small amounts that if we do great.
But really it's at 26 27 story.
Got it and then wanted to dig into the revenue guide update here. So you did raise the midpoint by 4 million, but let them was about 7 million. So in terms of that organic guide down you did call out some professional services softness or coming in below plan and QQ here, what kind of is that what's kind of contemplated for a second half that drove that organic.
Got it down is it more professional services or anything else to note there.
Yeah, I think they're they're really to me. There's three areas shared you know if we'd looked at the plan you know it was really a you know kind of 134 to 138, if you'd take the seven out. It's 131 to 35 135, I think the enterprise deals moving more to a phased approach.
And a couple of instances is probably some aspect of it and and then you know obviously the ear to see HRC in and I don't want to give you all the acronyms, but the human resource compliance there was bundled with Dr. T. C. We were a little bit.
Late in getting them when we guided last October you know it really getting and understanding the impact that that will have this year and they're not assure pay actually it's pretty good news. We have over 11000 cards issued already we have close to 100000.
And activated our.
Excuse me, a 1000 activated and.
We're pretty pleased with that but it is a you don't kind of Oh.
Net margin revenue model. So we will have a little bit of slippage this year and that but outside of that you know I think we feel pretty good about you know we took the guide down $3 million in that core business. Clearly you know as we get the attach rates. If we go from 400 and and <unk>.
Kris the attach rates, we think we have some upside there the book to bill around Laythan will give us some upside not only time attendance, but payroll and potentially 401k. So we think we've right sized that and then as far as the guide on EBITDA we.
We took about a billion and a half a quarter.
Late in the second quarter, and then as we look at third and fourth quarter. It's really a revenue revenue EBIT a story that we believe we can achieve.
30% adjusted EBITDA margins in the fourth quarter, and we have a shot of GAAP profitability, which I think is an important milestone and then we're really set up next year, both from a revenue growth perspective, and then an EBITA and profitability.
<unk> performance.
Great. Thank you.
Yeah.
Thank you.
We have a next question from Eric Martin Lucy with Lake Street. Please go ahead.
Curious to know the pipeline expectations rigs.
Regarding the installed base.
Another way you talked about the 14000 laythan customers against your 100000 customer installed base do we have a sense of overlap. There is there within that 14000 for instance, how many are already assure customers.
As far as we know Eric based on our initial review very little.
So there's a lot of upside on a greenfield opportunities for us.
And Eric the only thing I would add to that and somebody cases, you know we.
We.
Did not have an interface with placed them. So we've already kind of cross channel, where they have lots of them and they have ops, but maybe they didn't have an integration or or or what have you I think there's huge opportunity in doing that and then I also think there is some opportunity here, where you know in <unk>.
Certain markets, we didn't play.
In those markets because we had maybe a partnership solution et cetera, we don't have to have a partnership solution anymore. We can go right to the late them integration.
So I think that'll be a huge opportunity for us going forward. So you know.
Right now not a lot of crossover there is there is some but because we didn't have a formal integration. We don't track it as kind of one system. It's almost two systems, but I think going forward that's the opportunity.
Okay and then second question is with regard to macro demand for the core payroll and HCM suite, just curious anything changed in the last 90 days with what Youre hearing from channel partners, what Youre hearing from direct sales reps on demand for the core product.
No I think you know, perhaps a little bit in April where you know you had the liberation day and people are trying to figure out some of that stuff but.
But really to me the bad environment, it's been pretty good.
We have a pretty good strong pipeline and when I look at marketing and.
And somebody M. Ql's of Sql's marketing qualified lead in sales qualified lead I know we had a.
In our summer months here just recently, we had our all time record.
Is that tied to some of the big beautiful Bill.
Language and anytime there is change in legislation.
That's usually good for you know a payroll company in general and the demand environment because people have to react to those changes so.
As far as I can see there wasn't much I would say the quarter bookings was a little soft.
Primarily first of all it's a really tough compare but then too you know.
I'm really confident in our pipeline going forward both.
You know really in every market.
We will continue to improve in this area. So I don't see the demand slowing down at all I think it's been a pretty good environment.
Got it thanks for taking my questions.
Thank you thank you Sir.
Thank you we have our next question from Charles Nabhan.
With Stephens incorporation. Please go ahead.
Hi, guys I appreciate all the color around the moving pieces with the guide just had a quick one about the mark the change in the margin outlook. It looks like you lowered the lower end by about 100, Bips curious if that was attributable to a lower margin profile from the incremental lay some revenues or if.
Some of the <unk>.
Some of the other deals that were pushed out might have impacted that as well trying to understand that movement in the guide.
So I think he I think he picked it up right I mean the.
There is a little bit of a margin decrement, we think in the near term with.
With regard to some of the Latham Reuben is going to come in relative to ours.
We feel really good about it over the long term, but there is some cost out but rents due over the next I think it's probably an 18 month.
Process and so that's putting a little pressure just by the nature of their business.
And we've also got kind of a month.
We're going to be going through a process, we probably modify the way they sell so historically they would sell it.
A piece of hardware.
And then they would recognize the revenue on that hardware and then they would sell a subscription.
So the software I think we're going to probably go down a path, where it's more of a integrated sale, where we sell the hardware and the software, but we do it over.
Our subscription promote pieces. So there's just some change in models and so anyway. That's the you pick the right point theres a little bit of margin.
Margin pressure from the license deal.
Got it and as a follow up I wanted to drill into the the new bookings from the quarter just get a sense for what.
What youre seeing from a.
Product uptake standpoint, given the broadening of your your product base over the past year or so what are you seeing.
More more <unk> per from some of the newer cohorts as well as if you're seeing anything different from a demand standpoint in terms of like the size of employers youre selling into.
Yeah, No. That's a great question I do think youre going to see us.
And you know.
Yeah.
A small business kind of focus when you have all the products and services, but clearly you know that.
As we go you know, let's say our average new sale was 20 employees I think youll see US go up a little bit now will continue to serve that kind of under 50 marketplace, but I do think we'll walk up a little bit over time the capability, we see from partners, sometimes they might refer.
For us say payroll tax solution well you don't know partners are saying, hey, bring payroll tax time recruiting bring benefit spring you know almost everything to the party now we're teaching people how to sell service that and then from a technology perspective.
One user interface integrating it makes it easier to do business.
And we've rolled out already.
Sure I'd, where we can recognize where those people are coming from and serve our products right away that will be a continued focus so and in the investor deck. We said last quarter, we're going to really focus on attach rates. We went from 25% to 29% I want to continue to drive that in this later.
Acquisition, I think it's going to be really good for us and then.
On the <unk> I think you'll see us in 'twenty six kind of focus on that as.
Indicator of progress given all of the products and services and then from a technology perspective continue to make it easier and serve up product led kind of.
Almost a touchless integration of more and more products were going to continue to do that so that'll be a focus for us and then training.
Training the service people on on how to service a N a multi product environment from a sales perspective. It goes from a what I'll call our catalog sale over product sale.
Two a solution sale and you know we're in the early innings of that but but feel feel that we have the right tools in place and we've been building for this moment and then finally scale.
We think we have the benefits of scale and profitability and we think we achieved that hey, you know we mentioned in the investor deck that at $180 million to $200 million in revenue as we should be at that 30% with any luck here fourth quarter, we're going to do that and then also achieved GAAP profitability. So were me.
A lot of progress, but there's a lot of stuff in motion.
Got it I appreciate all that color. Thank you guys.
Thank you we have our next question from Richard Baldry with Roth Capital Partners. Please go ahead.
Thanks, and you touched on just a second and a likely but I wanted to ask about the cost synergies with laith on it.
Might take something like 18 months do you think at that point or they are higher adjusted EBITDA contributor to sort of the core company would absorb a lot of the G&A overhead that you don't need from them or do you think they're basically in line with your long term model.
No I think they are very accretive and add to the overall so if you think that.
I think they can be.
50% or higher when it's all said and done in terms of actual contribution now again, that's it's a combination right of taking cost out of our side as well as taking there's redundancies.
We have a private support teams wearing our product.
We have engineered.
Engineered supporting our products they are engineers and product support so it naturally will consolidate the skus in the offering so there is some really obvious ones.
Back office REIT G&A, I mean, theres, just a lot of obvious ones that I think it can be a very healthy contributor to the to the long term.
EBITDA.
Other thing rich to us from a revenue perspective, we're pretty excited about as you know we have let's say a four week or five week install this could be a de install.
So you get revenue quicker, it's easier it's a more scalable.
We have the ability.
And so we looked at these products and services.
So self install that if you'd think about the whole concept of earned wage access, which we have assured pay now you can use the same let's say timecard as your pay card and you have that ability where okay. You work today Youll see a four hour shift and you want to get it in advance on those four.
Hours you can use the same card to do that so lot of stuff here.
And that's going to open up on value proposition revenue strategy, where we're going in this marketplace and the capability gives us a lot of shots bolts ways, whether it's the 15000 direct payroll customers at a 14000 time customers I think we have the ability to do that and then John mentioned, obviously some.
Redundancies and we'll focus on that during due time so.
Good acquisition, all the way around a lot a lot of potential.
I wanted to ask kind of point rich I mean, you think about are our customer.
This main street, we've talked about it all the time on a hourly employees.
African tracking system that we bought last year similar.
It was geared towards that that's a market. So I think we're we're not taking things that are far afield.
I think we're putting together a lot of really interesting combinations of solutions that are really geared towards this this this type of market.
Yeah.
Gage the overlap do you know what there the typical head count of our Laythan client would be sort of a range, maybe and how similar is that to your own.
There are like almost spot on right there in the kind of low teens.
Got it.
And then last for me to be this is a little larger scale acquisition in and you've tended to do you have done in this big performance, how does that impact sort of your near term appetite for other acquisition does it slow down do you look at back sort of bite sized ones, how do we think about that broadly.
We've still got some minus side to someone that we want to do this year I don't think theres anything is going to be this kind of move the needle in terms of.
Revenue impact, but yes, we're going to still be active.
Master we cant.
Consummated this transaction, we're still sitting on a little bit less.
Less than $30 million.
Cash so we've got room to still go do some stuff.
So anyway, we're still going to be acquisitive.
I would tell you, though I think with this deal we're going to probably will have some maybe this balance of this year early next year, but I think we're going also probably.
Start to.
Soon and integrate what we've got for a little while I mean, I think thats somewhat Pat mentioned earlier in some of the cost reductions as a result of of literally that I mean, we've done a lot of deals over the last couple of years and trying to rationalize some of that back office expense.
I think what we need to you know what we'll plan on doing for the next foreseeable future.
Thanks.
Thanks Rich.
Thank you.
We have a next question from Greg <unk>.
With Northland Securities. Please go ahead.
Hey, good afternoon, Pat and John Thanks for taking the questions I appreciate all the color on late some time I'm one of the follow up there in terms of maybe.
Maybe what's involved are the steps involved with the integration.
And then realizing those revenue synergies and maybe how much investment are you aiming to put towards that integration.
And then just I guess secondly, a long way from time kind of longer term expectations on cross sell or the attach rate that you see with both those client basis.
Yeah, I think you know Gregg thanks for the question a couple of things on the longer term attach rates on time, specifically, let us get through the integration and I think as we look at 2006, we could have some pretty firm.
The attach rate goals, the numbers and we want to prove that out job one two and three really is integration of late than miniature.
As far as the integration between payroll and time the integration between assured pay 401k et cetera, where we can get up and running quickly and it'll offer those products, but that's the that's the big initiative that we're working on right away.
And then I think youll see opportunities around attach rates and if you think about it we have the opportunity to.
To fulfill our clients' obligations on time instead of call. It four weeks we call it in.
And four days that that it is in it in itself is a big move for US both from a sales implementation process and the ability for a customer to almost self install if you will we think that there's huge opportunities. There. So we're excited about it we believe.
That said I think more to come in 'twenty six and then we introduced it in the investor deck boats.
What kind of the revenue.
Pat on the model and we can give a little bit more color here as we look to guide towards 2026.
Got it that's helpful and then.
If I could.
<unk> organic revenue growth expectations in the back half what kind of implied there and would you expect maybe the cadence through different between Q3 and Q4.
Yeah, I think just in general if you think about how we thought about lithium.
Where it's roughly $7 million in second half or so that would imply that you know I think last year. We were kind of we mentioned that we would grow about half organic and half inorganic. So if you think of the $1 34 to $1 38, we were trying to achieve.
Double digits here in the second half, we do run into some tougher compares in the second half, but I think if you think about that single digits, you know in the second half and as we integrate.
All of our products and services is as we're doing right and get the attach rates up we think that organic growth is the outcome of that so we're set up to do that I think this second half of the year. It would be in the single digits, but clearly we're trying to grow attach rates and platform to get to it.
Double digit organic growth company and then finally, you know as we've done some acquisitions here you know obviously you have to make investments in your front end of the business to continue to grow organically and we're doing that and in one of the things. We will continue to grow kind of feet on the street, but more.
<unk> sat cross sell component because as we drive a bigger wallet share we think that that will lead us to a scalable profitable growth and then finally as.
As we look at the fourth quarter I think if we can make a marker towards profitability and whether we get there or not we're right. There and now we have the ability then obviously to generate cash grow more and more our revenue organically and then we can continue to look at scale because these businesses are scale.
Businesses and to.
To put a stake in the ground that we can grow in a very profitable way as is important for us as the long term health of the business.
Got it that's helpful. Thanks Pat.
Thank you.
A reminder to all participants.
You May press Star and one on your telephone keypad to ask a question.
Okay, well, operator can I take it home.
Yes this year.
Okay.
Well, let's say in a longer call today, we have a lot of news to share feel like we've made tremendous progress in the business I know some of you have been long term investors and we appreciate your interest in is sure we're going to continue to build out and grow this business, we're making really good progress.
No, it's not always straight up but I'll tell you what we're going to continue to move in and we have some milestones and site that are pretty attractive to tell all of us here and we want to see those to fruition. So really appreciate your time today and look forward to talking to you soon thank you.
Thank you, Sir ladies and gentlemen, the conference of Acos software. It has now concluded. Thank you for your participation you may now disconnect your lines.
Okay.
Yes.
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