Asure Software Gets 43% Price Target Boost Post Q4 Beat, Courtesy Of Revenue Momentum & Exciting Growth Levers

Needham analyst Joshua Reilly maintained Asure Software Inc ASUR with a Buy and raised the price target from $14 to $20.
Total revenue increased 38.7% Y/Y, while recurring revenue increased 24.5% and represented 82% of total revenue. Organic revenue growth in the quarter was 38% or 24% recurring, which is impressive versus the 4% in 3Q22.
Long-term, Asure anticipates ~20%+ Y/Y revenue growth to be split evenly between organic and inorganic growth. The analyst noted the company showed impressive beats on recurring and professional services.
On recurring, the broad portfolio was strong, including Tax and HR compliance along with float income, while Reilly believes one-time ERTC revenue drove professional services. Total bookings grew 234% Y/Y, up significantly from the 91% achieved during 3Q22. Professional services, hardware, and other revenue increased 199.0% Y/Y.
Gross margins of 76.3% were up 830 bps Y/Y well above Reilly's estimate driven by an increasing contribution from high-margin float income, ERTC one-time revenue leveraging pro services, and strong organic growth.
The analyst expects investors to re-rate shares of Asure higher following the strong organic growth trends in Q4, even after adjusting for one-time pro services revenue and float returning to the model.
The management's ability to deliver impressive growth following several internal changes impressed the analyst.
Finally, they also gained from increasing interest rates and strong demand from "Mainstreet America."
The analyst believes investors would view positively the updated guidance for FY23, which is 6% higher than the previous guide and is courtesy of strength in recurring revenue, not professional services.
Additionally, with at least $6 million in interest income for FY23, Reilly expects there could be an additional upside to margins through the year.
ASUR has several exciting levers for growth, which the analyst believes are merging in FY23, including HR Compliance, Tax portfolio, marketplace, interest income returning to the model, and strong booking trends.
Reilly believes that given the improving margin structure and strong management execution, multiple expansion is warranted versus current levels.
Price Action: ASUR shares traded higher by 17.67% at $13.25 on the last check Tuesday.

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