ASURE SOFTWARE INC

Previous wording

This Quarterly Report on Form 10-Q contains certain statements made by management that may constitute “forward-looking” statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements about our financial results may include expected or projected U.S GAAP and other operating and non-operating results. The words “believe,” “may,” “will,” “estimate,” “projects,” “anticipate,” “intend,” “expect,” “should,” “plan,” and similar expressions are intended to identify forward-looking statements. Examples of “forward-looking statements” include statements we make regarding our operating performance, future results of operations and financial position, revenue growth, earnings or other projections. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions, over many of which we have no control. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. The risks and uncertainties referred to above include—but are not limited to— the expiration of major revenue streams such as Employee Retention Tax Credits (“ERTC”) and the impact of the Internal Revenue Service (“IRS”) recent measures regarding Employee Retention Tax Credits claims; risks associated with breaches of the Company’s security measures; risks associated with the Company’s rate of growth and anticipated revenue run rate, including impact of the current economic environment; the Company’s ability to convert deferred revenue and unbilled deferred revenue into revenue and cash flow, and ability to maintain continued growth of deferred revenue and unbilled deferred revenue; privacy concerns and laws and other regulations may limit the effectiveness of our applications; the financial and other impact of any previous and future acquisitions; the Company’s ability to continue to release, gain customer acceptance of and provide support for new and improved versions of the Company’s services; successful customer deployment and utilization of the Company’s existing and future services; interruptions to supply chains and extended shut down of businesses; issues in the use of artificial intelligence in our HCM products and services; political unrest, including the current issues between Russia and Ukraine and the ongoing conflict between Israel and Hamas; reductions in employment and an increase in business failures, specifically among our clients; possible fluctuations in the Company’s financial and…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report on Form 10-Q contains certain statements made by management that may constitute “forward-looking” statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements about our financial results may include expected or projected U.S GAAP and other operating and non-operating results. The words “believe,” “may,” “will,” “estimate,” “projects,” “anticipate,” “intend,” “expect,” “should,” “plan,” and similar expressions are intended to identify forward-looking statements. Examples of “forward-looking statements” include statements we make regarding our operating performance, future results of operations and financial position, revenue growth, earnings or other projections. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions, over many of which we have no control. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. The risks and uncertainties referred to above include—but are not limited to—the expiration of major revenue streams such as Employee Retention Tax Credits (“ERTC”) and the impact of the Internal Revenue Service recent measures regarding ERTC claims; risks associated with breaches of the Company’s security measures; risks associated with the Company’s rate of growth and anticipated revenue run rate, including impact of the current economic environment; the Company’s ability to convert deferred revenue and unbilled deferred revenue into revenue and cash flow, and ability to maintain continued growth of deferred revenue and unbilled deferred revenue; privacy concerns and laws and other regulations may limit the effectiveness of our applications; the financial and other impact of any previous and future acquisitions; the Company’s ability to continue to release, gain customer acceptance of and provide support for new and improved versions of the Company’s services; successful customer deployment and utilization of the Company’s existing and future services; interruptions to supply chains and extended shut down of businesses; issues in the use of artificial intelligence in our HCM products and services; political unrest, including the current conflict between Russia and Ukraine and the ongoing conflict involving Israel in the Middle East; reductions in employment and an increase in business failures, specifically among our clients; possible fluctuations in the Company’s financial and operating results; re…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The following review of Asure’s financial position as of June 30, 2024 and December 31, 2023, and results of operations for the three and six months ended June 30, 2024 and 2023 should be read in conjunction with our 2023 Annual Report on Form 10-K filed with the SEC on February 26, 2024. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are available through the investor relations page of our internet website free of charge as soon as reasonably practicable after they are electronically filed, or furnished to, the SEC. Asure’s internet website and the information contained in our website or connected to our website are not incorporated into this Quarterly Report on Form 10-Q. However, we do post information on the investor relations page of our website that we believe may be of interest to our investors. Asure’s internet website address is www.asuresoftware.com.

Current wording

The following review of Asure’s financial position as of September 30, 2024 and December 31, 2023, and results of operations for the three and nine months ended September 30, 2024 and 2023 should be read in conjunction with our 2023 Annual Report on Form 10-K filed with the SEC on February 26, 2024. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are available through the investor relations page of our internet website free of charge as soon as reasonably practicable after they are electronically filed, or furnished to, the SEC. Asure’s internet website and the information contained in our website or connected to our website are not incorporated into this Quarterly Report on Form 10-Q. However, we do post information on the investor relations page of our website that we believe may be of interest to our investors. Asure’s internet website address is www.asuresoftware.com. All financial information, including shares, is reported in thousands, except for per share amounts.

Previous wording

We are a provider of cloud-based Human Capital Management (“HCM”) software solutions delivered as Software-as-a-Service (“SaaS”) for small and medium-sized businesses (“SMBs”). We offer human resources (“HR”) tools necessary to build a thriving workforce, provide the resources to stay compliant with dynamic federal, state, and local tax jurisdictions and their respective labor laws, freeing cash flows so SMBs can spend their financial capital on growing their businesses rather than administrative overhead that can impede growth. Our solutions also provide new ways for employers to connect with their employees in order to enhance their relationships with their talent. Asure’s HCM suite (“Asure HCM”) includes Payroll & Tax solutions, HR compliance and services, Time & Attendance software and data integrations that enable employers and their employees to enhance efficiencies and take advantage of value-added solutions, which we refer to as AsureMarketplace™. AsureMarketplace™ automates interactions between our HCM systems with third-party providers to enhance efficiency, improve accuracy and to extend the range of services offered to employers and their employees. Our approach to HR compliance services leverages technology and on-demand content to enhance scalability and efficiency while prioritizing client interactions. We offer our services directly and indirectly through our network of reseller partners.

Current wording

We are a provider of cloud-based Human Capital Management (“HCM”) software solutions delivered as Software-as-a-Service (“SaaS”) for small, medium-sized and enterprise-level businesses. We offer human resources (“HR”) tools necessary to build a thriving workforce, provide the resources to stay compliant with dynamic federal, state, and local tax jurisdictions and their respective labor laws, freeing cash flows so these businesses can spend their financial capital on growing their business rather than administrative overhead that can impede growth. Our solutions also provide new ways for employers to connect with their employees in order to enhance their relationships with their talent. Asure’s HCM suite (“Asure HCM”) includes Payroll & Tax solutions, Recruiting, HR compliance and services, Time & Attendance software and data integrations that enable employers and their employees to enhance efficiencies and take advantage of value-added solutions, which we refer to as AsureMarketplace™. AsureMarketplace™ automates interactions between our HCM systems with third-party providers to enhance efficiency, improve accuracy and to extend the range of services offered to employers and their employees. In addition to our current Asure HCM suite, we are in the process of launching our AsurePay™ product which is a new innovative online banking solution which will offer debit cards, paycheck advances, and fee-free ATM withdrawal. Our approach to HR compliance services leverages technology and on-demand content to enhance scalability and efficiency while prioritizing client interactions. We offer our services directly and indirectly through our network of reseller partners.

Previous wording

From recruitment to retirement, our solutions help more than 100,000 SMBs across the United States. Approximately 15,000 of our clients are direct and the 85,000 remaining clients are indirect, as they have contracts with reseller partners who white label our solutions.

Current wording

From recruitment to retirement, our solutions help more than 100,000 businesses across the United States. Approximately 15,000 of our clients are direct and the 85,000 remaining clients are indirect, as they have contracts with reseller partners who white label our solutions.

Previous wording

We strive to be the most trusted HCM resource to SMBs and are focused on less densely populated U.S. metropolitan cities where fewer of our competitors have a presence. Our solutions solve three primary challenges that prevent businesses from growing: HR complexity, allocation of human and financial capital, and the ability to build great teams. We sell our solutions through both direct and partner channels. We supplement our direct sales efforts with partner programs that afford us access to opportunities in various geographic and industry niches. We have two types of partners: reseller partners that white label our products while providing value-added services to their clients (or indirect clients) and referral partners that provide us with SMB leads but do no resell our solutions. We have and will continue to invest in research and development to expand our solutions. Our solutions reduce the administrative burden on employers and increase employee productivity while managing the employment lifecycle.

Current wording

We strive to be the most trusted HCM resource to small, medium-sized (“SMBs”) and enterprise-level businesses. We target SMBs through less densely populated U.S. metropolitan cities where fewer of our competitors have a presence and have begun expansion of certain product lines to enterprise-level businesses. Our solutions solve three primary challenges that prevent businesses from growing: HR complexity, allocation of human and financial capital, and the ability to build great teams. We sell our solutions through both direct and partner channels. We supplement our direct sales efforts with partner programs that afford us access to opportunities in various geographic and industry niches. We have two types of partners: reseller partners that white label our products while providing value-added services to their clients (or indirect clients) and referral partners that provide us with business leads but do no resell our solutions. We have and will continue to invest in research and development to expand our solutions. Our solutions reduce the administrative burden on employers and increase employee productivity while managing the employment lifecycle.

Previous wording

On July 11, 2024, we acquired certain assets of an applicant tracking technology company, which were used to provide hiring solutions to small and medium-sized businesses. The aggregate purchase price that we paid for these assets was $15,250, consisting of $8,000 paid in cash on hand, 525 shares of Asure common stock, having an agreed value of $4,250, and the remaining $3,000 in the form of a promissory note with the principal balance due on July 1, 2029.

Current wording

On July 11, 2024, we acquired certain assets of an applicant tracking technology company that provided hiring solutions to small and medium-sized businesses, in a business combination transaction. The aggregate purchase price that we paid for these assets was $15,162, consisting of $7,900 paid in cash on hand, 525 shares of Asure common stock, having a fair value of $4,262, and the remaining $3,000 in the form of a promissory note. As of September 30, 2024, the promissory note had an outstanding principal balance of $3,000 and matures July 1, 2029.

Previous wording

Revenue is comprised of recurring revenue, professional services, hardware, and other revenue. We expect our revenue to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients. As a percentage of total revenue, we expect our mix of recurring revenue, and professional services, hardware and other revenue to remain relatively constant. While revenue mix varies by product, recurring revenue represented over 96% of total revenue in six months ended June 30, 2024, compared to 80% in six months ended June 30, 2023.

Current wording

Revenue is comprised of recurring revenue, professional services, hardware, and other revenue. We expect our revenue to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients. As a percentage of total revenue, we expect our mix of recurring revenue, and professional services, hardware and other revenue to remain relatively constant. While revenue mix varies by product, recurring revenue represented over 97% of total revenue in nine months ended September 30, 2024, compared to 81% in nine months ended September 30, 2023.

Previous wording

Recurring revenue includes fees for our payroll, payroll tax, tax management, time and labor management, HR compliance services, AsureMarketplace™ and other Asure solutions as well as fees charged for form filings and delivery of client payroll checks and reports. These revenues are derived from fixed amounts charged per billing period and sometimes an additional fee per employee or transaction processed. We do not require clients to enter into long-term contractual commitments for our services. Our billing period varies by client based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. We also generate recurring revenue from our reseller partners that license our solutions. Because recurring revenue is based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenue increases as our clients hire more employees. Recurring revenue is recognized in the period services are rendered.

Current wording

Recurring revenue includes fees for our payroll, payroll tax, tax management, time and labor management, recruiting, HR compliance services, AsureMarketplace™ and other Asure solutions as well as fees charged for form filings and delivery of client payroll checks and reports. These revenues are derived from fixed amounts charged per billing period and sometimes an additional fee per employee or transaction processed. Our billing period varies by client based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. We also generate recurring revenue from our reseller partners that license our solutions. Because recurring revenue is based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenue increases as our clients hire more employees. Recurring revenue is recognized in the period services are rendered.

Previous wording

Recurring revenue for the three months ended June 30, 2024 was $27,051, an increase of $4,091, or 18%, from $22,960 for the three months ended June 30, 2023. The increase is primarily due to an increase in payroll and tax management revenue driven by clients obtained through acquisitions, as well as an increase in revenue from AsureMarketplace™, and an increase in interest earned on funds held for clients.

Current wording

Recurring revenue for the three months ended September 30, 2024 was $28,626, an increase of $4,793, or 20%, from $23,833 for the three months ended September 30, 2023. The increase is primarily due to an increase in payroll and tax management revenue driven by clients obtained through acquisitions, as well as an increase in revenue from AsureMarketplace™, and an increase in interest earned on funds held for clients.

Previous wording

Recurring revenue for the six months ended June 30, 2024 was $57,324, an increase of $6,408, or 13%, from $50,916 for the six months ended June 30, 2023. Recurring revenue increase is primarily due to an increase in payroll and tax management revenue driven by clients obtained through acquisitions, an increase in HR compliance revenue, an increase in revenue from AsureMarketplace™, and an increase in interest earned on funds held for clients.

Current wording

Recurring revenue for the nine months ended September 30, 2024 was $85,950, an increase of $11,201, or 15%, from $74,749 for the nine months ended September 30, 2023. Recurring revenue increase is primarily due to an increase in payroll and tax management revenue driven by clients obtained through acquisitions, an increase in HR compliance revenue, an increase in revenue from AsureMarketplace™, and an increase in interest earned on funds held for clients.

Previous wording

Professional services, hardware and other revenue decreased $6,467, or 87%, for the three months ended June 30, 2024 from the similar period in 2023, primarily due to a decrease in non-recurring ERTC revenue.

Current wording

Professional services, hardware and other revenue decreased $4,823, or 88%, for the three months ended September 30, 2024 from the similar period in 2023, primarily due to a decrease in non-recurring ERTC revenue.

Previous wording

Professional services, hardware, and other revenue decreased $10,196, or 81%, for the six months ended June 30, 2024 from the similar period in 2023, primarily due to a decrease in non-recurring ERTC revenue.

Current wording

Professional services, hardware, and other revenue decreased $15,019, or 83%, for the nine months ended September 30, 2024 from the similar period in 2023, primarily due to a decrease in non-recurring ERTC revenue.

Previous wording

Although our total customer base is widely spread across industries, our sales are concentrated in SMBs. We continue to target SMBs across industries as prospective customers. Geographically, we sell our products primarily in the United States.

Current wording

Although our total customer base is widely spread across industries, our sales are concentrated in SMBs but are expanding to enterprise-level businesses for certain product lines. While we continue to target SMBs across industries, our search for prospective customers includes both SMBs and enterprise-level customers. Geographically, we sell our products primarily in the United States.

Previous wording

Consolidated gross profit for the three months ended June 30, 2024, was $18,868, a decrease of $3,150, or 14%, from $22,018 for the three months ended June 30, 2023. Gross profit as a percentage of revenue was 67% for the three months ended June 30, 2024 as compared to 72% for the three months ended June 30, 2023. The decrease is primarily attributable to the decrease in professional services revenue during the period.

Current wording

Consolidated gross profit for the three months ended September 30, 2024, was $19,704, a decrease of $1,576, or 7%, from $21,280 for the three months ended September 30, 2023. Gross profit as a percentage of revenue was 67% for the three months ended September 30, 2024 as compared to 73% for the three months ended September 30, 2023. The decrease is primarily attributable to the decrease in ERTC related professional services revenue during the period.

Previous wording

Consolidated gross profit for the six months ended June 30, 2024, was $41,475, a decrease of $4,943, or 11%, from $46,418 for the six months ended June 30, 2023. Gross profit as a percentage of revenue was 69% for the six months ended June 30, 2024 as compared to 73% for the six months ended June 30, 2023. The decrease is primarily attributable to the decrease in professional services revenue during the period.

Current wording

Consolidated gross profit for the nine months ended September 30, 2024, was $61,179, a decrease of $6,519, or 10%, from $67,698 for the nine months ended September 30, 2023. Gross profit as a percentage of revenue was 69% for the nine months ended September 30, 2024 as compared to 73% for the nine months ended September 30, 2023. The decrease is primarily attributable to the decrease in ERTC related professional services revenue during the period.

Previous wording

Sales and marketing expenses for the six months ended June 30, 2024 were $14,691, a decrease of $1,024, or 7%, from $15,715 for the six months ended June 30, 2023. The decrease is primarily due to a decrease in referral fees associated with non-recurring ERTC revenue arrangements. Sales and marketing expenses as a percentage of revenue remained flat at 25% for thesix months ended June 30, 2024 compared to the same period in 2023.

Current wording

Sales and marketing expenses for the nine months ended September 30, 2024 were $21,371, a decrease of $941, or 4%, from $22,312 for the nine months ended September 30, 2023. The decrease is primarily due to a decrease in referral fees associated with non-recurring ERTC revenue arrangements. Sales and marketing expenses as a percentage of revenue remained flat at 24% for the nine months ended September 30, 2024 compared to the same period in 2023.

Previous wording

General and administrative expenses for the three months ended June 30, 2024 were $10,118, a decrease of $218, or 2%, from $10,336 for the three months ended June 30, 2023. The decrease is primarily attributable to a decrease in bonus expense in 2024 based on the performance towards the current year bonus plan, partially offset by increased personnel expenses driven by merit increases and higher employee insurance premiums. General and administrative expenses as a percentage of revenue increased to 36% for the three months ended June 30, 2024 from 34% for the same period in 2023.

Current wording

General and administrative expenses for the three months ended September 30, 2024 were $10,378, an increase of $1,084, or 12%, from $9,294 for the three months ended September 30, 2023. The increase is primarily attributable to an increase in personnel expenses driven by merit increases and higher employee insurance premiums, partially offset by a decrease in bonus expense in 2024 based on the performance towards the current year bonus plan. General and administrative expenses as a percentage of revenue increased to 35% for the three months ended September 30, 2024 from 32% for the same period in 2023.

Previous wording

General and administrative expenses for the six months ended June 30, 2024 were $20,181, a decrease of $111, or 1%, from $20,292 for the six months ended June 30, 2023. The decrease is primarily attributable to a decrease in bonus expense in 2024 based on the performance towards the current year bonus plan, and a decrease in facilities rent expense due to some office leases terminating in 2023 and early 2024. These decreases were partially offset by increased personnel expenses driven by merit increases and higher employee insurance premiums. General and administrative expenses as a percentage of revenue increased to 34% for thesix months ended June 30, 2024 from 32% for the same period in 2023.

Current wording

General and administrative expenses for the nine months ended September 30, 2024 were $30,559, an increase of $973, or 3%, from $29,586 for the nine months ended September 30, 2023. The increase is primarily attributable to an increase in personnel expenses driven by merit increases and higher employee insurance premiums. These increases were partially offset by a decrease in bonus expense in 2024 based on the performance towards the current year bonus plan, and a decrease in facilities rent expense due to some office leases terminating in 2023 and early 2024. General and administrative expenses as a percentage of revenue increased to 34% for the nine months ended September 30, 2024 from 32% for the same period in 2023.

Previous wording

R&D expenses for the three months ended June 30, 2024 were $1,962, an increase of $637, or 48%, from $1,325 for the three months ended June 30, 2023. Theincrease is primarily attributable to an increase in personnel expenses due to increased headcount from the prior period, partially offset by an increase in capitalized software expenses driven by continued investments in the development of our products. R&D expenses as a percentage of revenue increased to 7% for the three months ended June 30, 2024 from 4%for the same period in 2023.

Current wording

R&D expenses for the three months ended September 30, 2024 were $1,973, an increase of $170, or 9%, from $1,803 for the three months ended September 30, 2023. The increase is primarily attributable to an increase in personnel expenses due to increased headcount from the prior period, partially offset by an increase in capitalized software expenses driven by continued investments in the development of our products. R&D expenses as a percentage of revenue increased to 7% for the three months ended September 30, 2024 from 6% for the same period in 2023.

Previous wording

R&D expenses for the six months ended June 30, 2024 were $3,731, an increase of $427, or 13%, from $3,304 for the six months ended June 30, 2023. The increase is primarily attributable to an increase in personnel expenses due to increased headcount from the prior period, partially offset by an increase in capitalized software expenses driven by continued investments in the development of our products. R&D expenses as a percentage of revenue increased to 6% for thesix months ended June 30, 2024 from 5% for the same period in 2023.

Current wording

R&D expenses for the nine months ended September 30, 2024 were $5,704, an increase of $597, or 12%, from $5,107 for the nine months ended September 30, 2023. The increase is primarily attributable to an increase in personnel expenses due to increased headcount from the prior period, partially offset by an increase in capitalized software expenses driven by continued investments in the development of our products. R&D expenses as a percentage of revenue remained flat at 6% for the nine months ended September 30, 2024 from 6% for the same period in 2023.

Previous wording

Amortization expense for the three months ended June 30, 2024 was $4,046, an increase of $752, or 23%, from $3,294 for the three months ended June 30, 2023. Amortization expense as a percentage of revenue increased to 14% for the three months ended June 30, 2024 from 11% for the same period in 2023. The increase in amortization expense in the three months ended June 30, 2024 is primarily due to new asset acquisitions in the fourth quarter of 2023 and in the second quarter of 2024.

Current wording

Amortization expense for the three months ended September 30, 2024 was $4,295, an increase of $962, or 29%, from $3,333 for the three months ended September 30, 2023. Amortization expense as a percentage of revenue increased to 15% for the three months ended September 30, 2024 from 11% for the same period in 2023. The increase in amortization expense in the three months ended September 30, 2024 is primarily due to new asset acquisitions and business combinations in the fourth quarter of 2023 and throughout 2024.

Previous wording

Amortization expense for the six months ended June 30, 2024 was $7,495, an increase of $899, or 14%, from $6,596 for the six months ended June 30, 2023. Amortization expense as a percentage of revenue increased to 13% for the six months ended June 30, 2024 from 10% for the same period in 2023. The increase in amortization expense in the six months ended June 30, 2024 is primarily due to new asset acquisitions in the fourth quarter of 2023 and in the first half of 2024.

Current wording

Amortization expense for the nine months ended September 30, 2024 was $11,790, an increase of $1,861, or 19%, from $9,929 for the nine months ended September 30, 2023. Amortization expense as a percentage of revenue increased to 13% for the nine months ended September 30, 2024 from 11% for the same period in 2023. The increase in amortization expense in the nine months ended September 30, 2024 is primarily due to new asset acquisitions and business combinations in the fourth quarter of 2023 and throughout 2024.

Previous wording

Interest income for the three months ended June 30, 2024 was $261 compared to interest income of $230 for the three months ended June 30, 2023. Interest income as a percentage of revenue was 1% for the three months ended June 30, 2024 and 2023. Interest expense for thethree months ended June 30, 2024 was $208 compared to interest expense of $1,823 for the three months ended June 30, 2023. Interest expense as a percentage of revenue was 1% for the three months ended June 30, 2024 compared to 6% for the three months ended June 30, 2023. The decrease in interest expense in thethree months ended June 30, 2024 is primarily due to our payoff of the outstanding debt under the credit facility with Structural Capital Investments II LP (“Structural”) in the third quarter of 2023.

Current wording

Interest income for the three months ended September 30, 2024 was $165 compared to interest income of $437 for the three months ended September 30, 2023. Interest income as a percentage of revenue was 1% for the three months ended September 30, 2024 and 2023. Interest expense for the three months ended September 30, 2024 was $274 compared to interest expense of $1,219 for the three months ended September 30, 2023. Interest expense as a percentage of revenue was 1% for the three months ended September 30, 2024 compared to 4% for the three months ended September 30, 2023. The decrease in Interest expense in the three months ended September 30, 2024 is primarily due to our payoff of the outstanding debt under the credit facility with Structural Capital Investments II LP (“Structural”) in the third quarter of 2023.

Previous wording

Interest income for the six months ended June 30, 2024 was $597 compared to interest income of $578 for the six months ended June 30, 2023. Interest income as a percentage of revenue was 1% for the three months ended June 30, 2024 and 2023. Interest expense for thesix months ended June 30, 2024 was $388 compared to interest expense of $4,116 for the six months ended June 30, 2023. Interest expense as a percentage of revenue was 1% for the six months ended June 30, 2024 compared to 6% for the six months ended June 30, 2023. Thedecrease in interest expense in thesix months ended June 30, 2024 is primarily due to our payoff of the outstanding debt under the credit facility with Structural in the third quarter of 2023.

Current wording

Interest income for the nine months ended September 30, 2024 was $762 compared to interest income of $1,015 for the nine months ended September 30, 2023. Interest income as a percentage of revenue was 1% for the three months ended September 30, 2024 and 2023. Interest expense for the nine months ended September 30, 2024 was $662 compared to interest expense of $5,336 for the nine months ended September 30, 2023. Interest expense as a percentage of revenue was 1% for the nine months ended September 30, 2024 compared to 6% for the nine months ended September 30, 2023. The decrease in interest expense in the nine months ended September 30, 2024 is primarily due to our payoff of the outstanding debt under the credit facility with Structural in the third quarter of 2023.

Previous wording

Other (expense) income, net for the three months ended June 30, 2024 was $0 compared to an expense of $93 for the three months ended June 30, 2023. Other (expense) income, net as a percentage of revenue was negligible for the three months ended June 30, 2024 and 2023.

Current wording

Other (expense) income, net for the three months ended September 30, 2024 was $0 compared to $283 of expense for the three months ended September 30, 2023. Other (expense) income, net as a percentage of revenue was negligible for the three months ended September 30, 2024 and 2023.

Previous wording

Other (expense) income, net for the six months ended June 30, 2024 was $10 compared to $(9) for the six months ended June 30, 2023. Other (expense) income, net as a percentage of revenue was negligible for the six months ended June 30, 2024 and 2023.

Current wording

Other (expense) income, net for the nine months ended September 30, 2024 was $10 of income compared to $291 of expense for the nine months ended September 30, 2023. Other (expense) income, net as a percentage of revenue was negligible for the nine months ended September 30, 2024 and 2023.

Previous wording

For the six months ended June 30, 2024 and 2023, we recorded income tax expense attributable to continuing operations of$264 and $390, respectively, a decrease of $126.

Current wording

For the three months ended September 30, 2024 and 2023, we recorded income tax expense attributable to continuing operations of $170 and income tax benefit of $123, respectively, an increase of $293.

Previous wording

For the three months ended June 30, 2024 and 2023, we recorded income tax expense attributable to continuing operations of$231 and $627, respectively, a decrease of $396.

Current wording

For the nine months ended September 30, 2024 and 2023, we recorded income tax expense attributable to continuing operations of $434 and $267, respectively, an increase of $167.

Previous wording

We incurred a loss of $4,360, or $0.17 per share, during the three months ended June 30, 2024, compared to a loss of $3,765, or $0.18 per share, during the three months ended June 30, 2023. Loss as a percentage of total revenue was 16% and 12% for the three months ended June 30, 2024 and 2023, respectively.

Current wording

We incurred a loss of $3,901, or $0.15 per share, during the three months ended September 30, 2024, compared to a loss of $2,206, or $0.10 per share, during the three months ended September 30, 2023. Loss as a percentage of total revenue was 13% and 8% for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

We incurred a loss of $4,668, or $0.18 per share, during the six months ended June 30, 2024, compared to a loss of $3,426, or $0.17 per share, during the six months ended June 30, 2023. Loss as a percentage of total revenue was 8% and 5% for the six months ended June 30, 2024 and 2023, respectively.

Current wording

We incurred a loss of $8,569, or $0.33 per share, during the nine months ended September 30, 2024, compared to a loss of $5,632, or $0.27 per share, during the nine months ended September 30, 2023. Loss as a percentage of total revenue was 10% and 6% for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Working Capital. We had working capital of $23,663 at June 30, 2024, a decrease of $2,217 from working capital of $25,880 at December 31, 2023. Working capital as of June 30, 2024 and December 31, 2023 includes $3,030 and $6,853 of short-term deferred revenue, respectively. Deferred revenue is an obligation to perform future services. We expect that deferred revenue will convert to future revenue as we perform our services, but this does not represent future payments. Deferred revenue can vary based on seasonality, expiration of initial multi-year contracts and deals that are billed after implementation rather than in advance of service delivery.

Current wording

Working Capital. We had working capital of $14,428 at September 30, 2024, a decrease of $11,452 from working capital of $25,880 at December 31, 2023. Working capital as of September 30, 2024 and December 31, 2023 includes $3,029 and $6,853 of short-term deferred revenue, respectively. Deferred revenue is an obligation to perform future services. We expect that deferred revenue will convert to future revenue as we perform our services, but this does not represent future payments. Deferred revenue can vary based on seasonality, expiration of initial multi-year contracts and deals that are billed after implementation rather than in advance of service delivery.

Previous wording

Operating Activities. Net cash used in operating activities of $1,719 for the six months ended June 30, 2024 was primarily driven by changes in operating assets and liabilities, which resulted in a use of $10,677 in cash. This was offset by non-cash adjustments to our net loss of approximately $13,626, primarily due to depreciation and amortization and share-based compensation. Net cash provided by operating activities of $6,096 for the six months ended June 30, 2023 was driven by non-cash adjustments to our net loss of approximately $16,082, primarily due to depreciation and amortization and share-based compensation. For the six months ended June 30, 2023, changes in operating assets and liabilities resulted in a use of $6,560 in cash.

Current wording

Operating Activities. Net cash used in operating activities of $394 for the nine months ended September 30, 2024 was primarily driven by changes in operating assets and liabilities, as noted in our Condensed Consolidated Statement of Cash Flows, which resulted in a use of $12,859 in cash. This was offset by non-cash adjustments to our net loss of approximately $21,034, primarily due to depreciation, amortization, and share-based compensation, which is driven by acquisitions of intangible assets since the third quarter of 2023 and equity compensation arrangements granted in 2024, respectively. Net cash provided by operating activities of $11,835 for the nine months ended September 30, 2023 was driven by non-cash adjustments to our net loss of approximately $23,483, primarily due to depreciation, amortization, and share-based compensation. For the nine months ended September 30, 2023, changes in operating assets and liabilities resulted in a use of $6,016 in cash.

Previous wording

Investing Activities. Net cash used in investing activities of $7,359 for the six months ended June 30, 2024 is primarily due to purchases of available-for-sale securities and maturities of $6,462 and software capitalization costs of $5,042, partially offset by proceeds from sales and maturities of available-for-sale securities of $8,617. Net cash used in investing activities of $17,266 for the six months ended June 30, 2023 is primarily due to purchases of available-for-sale securities and maturities of $18,885.

Current wording

Investing Activities. Net cash used in investing activities of $18,209 for the nine months ended September 30, 2024 is primarily due to acquisitions of intangible assets in business combinations or asset acquisitions of $12,397, purchases of available-for-sale securities and maturities of $10,914, and software capitalization costs of $7,677, partially offset by proceeds from sales and maturities of available-for-sale securities of $13,325. Net cash used in investing activities of $18,176 for the nine months ended September 30, 2023 is primarily due to purchases of available-for-sale securities and maturities of $21,513.

Previous wording

Financing Activities. Net cash used in financing activities was $27,935 for the six months ended June 30, 2024, which primarily consisted of a net decrease in client fund obligations of $28,225. Net cash used in financing activities was $15,602 for the six months ended June 30, 2023, which primarily consisted of a net decrease in client fund obligations of $17,225.

Current wording

Financing Activities. Net cash used in financing activities was $26,291 for the nine months ended September 30, 2024, which primarily consisted of a net decrease in client fund obligations of $26,068. Net cash used in financing activities was $21,400 for the nine months ended September 30, 2023, which primarily consisted of payments of notes payable of $35,627 for the extinguishment of the structural debt and a net decrease in client fund obligations of $31,033. These usages of cash were partially offset by net proceeds from issuance of common stock of $45,986.

Previous wording

Sources of Liquidity. As of June 30, 2024, the Company’s principal sources of liquidity consisted of approximately $20,736 of cash and cash equivalents, together with cash generated from operations of our business over the next twelve months.

Current wording

Sources of Liquidity. As of September 30, 2024, the Company’s principal sources of liquidity consisted of approximately $11,248 of cash and cash equivalents, together with cash generated from operations of our business over the next twelve months. As of December 31, 2023, the Company had cash and cash equivalents of $30,317. These amounts do not include cash contained within client funds. The decrease of cash and cash equivalents is primarily due to the Company’s investing activities of acquisitions and software capitalization.

Previous wording

We cannot ensure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions; however, we do believe that we have sufficient liquidity to support our business operations for at least the next twelve months. Future business demands may lead to cash utilization at levels greater than recently experienced or expected. We may need to raise additional capital in the future in order to grow our existing software operations and to seek additional strategic acquisitions in the near future. Currently, we do not have a credit facility or access to a line of credit. Further, we cannot ensure that we will be able to raise additional capital on acceptable terms, or at all, or at the time we need it.

Current wording

We cannot ensure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions; however, we do believe that we have sufficient liquidity to support our business operations for at least the next twelve months. Future business demands may lead to cash utilization at levels greater than recently experienced or expected. We may need to raise additional capital in the future in order to grow our existing software operations and to seek additional strategic acquisitions in the near future. Currently, we do not have a credit facility or access to a line of credit as of September 30, 2024 and we may leverage these potential sources of liquidity to raise additional capital for the aforementioned purposes. If we do leverage such sources, we cannot ensure that we will be able to raise additional capital on acceptable terms, or at all, or at the time we need it. We also cannot ensure that we will be able to obtain financing through lending institutions when we need it or on acceptable terms.