ASURE SOFTWARE INC
For the period ended Dec 31, 2024. Filed Mar 6, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 6, 2025
ASUR$9.65+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-26.
0000884144-24-000022
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-06.
0000884144-25-000012
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 95 previous paragraphs and 84 current paragraphs.
34 unchanged; 35 reworded; 13 added; 25 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
2024 Highlights (in thousands)
Current report
Recurring revenue for the year ended December 31, 2024, was $114,471, an increase of $14,737, or 15%, from $99,734 for the year ended December 31, 2023. The increase is primarily due to an increase of approximately$8,718 in acquisition related revenue and an increase of $4,323 for new multi-year licensing agreements with larger employers finalized during the year.
Current report
Interest Income and Expense
Current report
On October 31, 2024, we entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Roth”). The Sales Agreement provides for the offer and sale of up to $25,000 of our newly issued common stock, from time to time through an “at the market offering” program. We will specify the parameters for the sale of the shares of common stock, including the number of shares to be issued, the time period during which sales are requested to be made, any limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made. We may offer and sell up to $25,000 of shares of common stock pursuant to the Sales Agreement. Actual sales of common stock under the Sales Agreement will depend on a variety of factors including, among other things, market conditions, the trading price of the Common Stock and potential funding needs. As a result, the full amount of capital may not be fully realized. We intend to use the net proceeds from these at-market offerings, if any, for general corporate purposes. Our general corporate purposes include, but are not limited to, repayment or refinancing of debt, capital expenditures, funding possible acquisitions, working capital and satisfaction of other obligations. As of December 31, 2024, there are $25,000 of shares of common stock available for issuance under this acquisition shelf registration statement.
Current report
As of December 31, 2024, we have five promissory notes related to acquisitions that occurred during 2024 and prior years with a combined outstanding principal balance of $9,943 and maturity dates ranging from October 1, 2025 to July 1, 2029.
Current report
CRITICAL ACCOUNTING ESTIMATES
Current report
Valuation of Acquired Assets and Goodwill
Current report
Description
Current report
Identifiable intangible assets and goodwill obtained during business combination transactions are recognized based on the relative and absolute fair values of acquired assets and the excess of purchase price over that value. Intangible assets and goodwill are tested annual for impairment or more frequently when an event or circumstance indicates that they might be impaired.
Current report
Judgements and Uncertainties
Current report
Sensitivity of Estimate to Change
Current report
While we believe we have made reasonable estimates and assumptions to calculate the fair value of acquired intangible assets and goodwill, it is possible that a material difference could occur. If actual results are not consistent with the estimates and assumptions used to calculate fair value, it could result in a significant change to the assessment of fair value for intangible assets and goodwill and thus result in material impairment losses.
Current report
We completed our annual impairment assessments of long-lived assets and goodwill as of December 31, 2024, and determined that there was no impairment of either class of assets.
Removed paragraphs (25)
Previous report
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Previous report
2023 Highlights
Previous report
OPERATING SEGMENT
Previous report
We operate as one operating segment. Operating segments are defined as components of an enterprise for which the chief operating decision maker, who in our case is the Chief Executive Officer, in deciding how to allocate resources and assess performance, evaluates separate financial information regularly. Over the last eight years, we have completed a number of acquisitions. These acquisitions have allowed us to expand our offerings, presence and reach in various market segments of the human capital management market. Our business operates in one operating segment because our chief operating decision maker evaluates our financial information and resources and assesses the performance of these resources on a consolidated basis. Because we operate as one operating segment, all required financial segment information can be found in the Consolidated Financial Statements.
Previous report
RESULTS OF OPERATIONS(in thousands)
Previous report
Recurring revenue for the year ended December 31, 2023 was $99,734, an increase of $13,512, or 16%, from $86,222 for the year ended December 31, 2022. The increase is primarily due to an increase of approximately $7,200 in HR compliance revenue, an increase of $6,500 in interest earned on funds held for clients, and an increase of $3,300 in revenue from AsureMarketplace™, offset by a decrease of $2,300 in ERTC revenue.
Previous report
Interest Expense, Net
Previous report
CRITICAL ACCOUNTING POLICIES
Previous report
Revenue Recognition
Previous report
Our revenue consists of software-as-a-service (“SaaS”) offerings and time-based software subscription license agreements that also, typically include hardware, maintenance/support, and professional services elements. We recognize revenue on an output basis when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We determine standalone selling prices based on the amount that we believe the market is willing to pay determined through historical analysis of sales data as well as through use of the residual approach when we can estimate the standalone selling price for one or more, but not all, of the promised goods or services.
Previous report
Effective January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), and ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date, which deferred the effective date of ASU 2014-09 by one year. ASU 2014-09 (“Topic 606”) “Revenue from Contracts with Customers) supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition, and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The adoption of ASU 2014-09, using the modified retrospective approach, had no significant impact on our results of operations, cash flows, or financial position. The initial application was applied to all contracts at the date of initial application. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings.
Previous report
The primary impact of adopting Topic 606 is to sales commissions related to onboarding new clients that were previously expensed. Under the new standard, these costs are now capitalized as deferred commissions and amortized over the estimated customer life of five to ten years.
Previous report
The terms of our contracts with customers range from month-to-month for some Asure HCM direct clients to longer terms ranging from one to three years, some of which are renewable for successive terms. A SaaS/software subscription arrangement may also include hardware, setup and implementation services. Revenue allocated to the SaaS/software subscription performance obligations are recognized on an output basis ratably as the service is provided over the non-cancellable term of the SaaS/subscription service and are reported as recurring revenue on the Consolidated Statements of Comprehensive Loss. Revenues generated via fixed fee arrangements for provisioning and filing for Employee Retention Tax Credits with referral partners are also recorded as recurring revenue. Revenue allocated to other performance obligations included in the arrangement is recognized as outlined in the paragraphs below.
Previous report
Hardware devices sold to customers are sold as either a standard product sell arrangement where title to the hardware passes to the customer or under a hardware-as-a-service (“HaaS”) arrangement where the title to the hardware remains with Asure. Revenue allocated to hardware sold as a standard product are recognized on an output basis when title passes to the customer, typically the date we ship the hardware. Revenue allocated to hardware under a HaaS arrangement are recognized on an output basis, recorded ratably as the service is provided over the non-cancellable term of the HaaS arrangement, typically one year. Revenue recognized from hardware devices sold to customers via either of the two above types of arrangements are reported as Hardware revenue on the Consolidated Statements of Comprehensive Loss.
Previous report
Our professional services offerings typically include data migration, set up, training, and implementation services. Set up and implementation services typically occur at the start of the software arrangement while certain other professional services, depending on the nature of the services and customer requirements, may occur several months later. We can reasonably estimate professional services performed for a fixed fee and we recognize allocated revenue on an output basis on a proportional performance basis as the service is provided. We recognize allocated revenue on an output basis for professional services engagements billed on a time and materials basis as the service is provided. We recognize allocated revenue on an output basis on all other professional services engagements upon the earlier of the completion of the service’s deliverable or the expiration of the customer’s right to receive the service. Revenues generated for provisioning and filing for ERTC credits that are based on percentage of recovery are recorded as professional services revenues. Revenue recognized from professional services offerings are reported as Professional service revenue on the Consolidated Statements of Comprehensive Loss.
Previous report
We recognize allocated revenue for maintenance and support on an output basis ratably over the non-cancellable term of the support agreement. Initial maintenance and support terms are typically one to three years and are renewable on an annual basis. Revenue recognized from maintenance and support are reported as Maintenance and support revenue on the Consolidated Statements of Comprehensive Loss.
Previous report
We do not recognize revenue for agreements with rights of return, refundable fees, cancellation rights or substantive acceptance clauses until these return, refund or cancellation rights have expired or acceptance has occurred. Our arrangements with Reseller Partners do not allow for any rights of return.
Previous report
Our payment terms vary by the type of customer and the customer’s payment history and the products or services offered. The term between invoicing and when payment is due is not significant and as such our contracts do not include a significant financing component. The transaction prices of our contracts do not include consideration amounts that are variable and do not include noncash consideration.
Previous report
Deferred revenue includes amounts invoiced to customers in excess of revenue we recognize and is comprised of deferred SaaS/software, HaaS, maintenance and support, and professional services revenue. We recognize deferred revenue when we complete the service and over the terms of the arrangements, primarily ranging from one to three years.
Previous report
Intangible Assets and Goodwill
Previous report
Impairment of Intangible Assets and Long-Lived Assets
Previous report
In accordance with FASB ASC 350, we review and evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that we may not recover their net book value. When such factors and circumstances exist, including those noted above, we compare the assets’ carrying amounts against the estimated undiscounted cash flows we expect to generate with those assets over their estimated useful lives. If the carrying amounts are greater than the undiscounted cash flows, we estimate the fair values of those assets by discounting the projected cash flows. We record any excess of the carrying amounts over the fair values as impairments in that fiscal period.
Previous report
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired in a business combination. We test goodwill for impairment on an annual basis in the fourth fiscal quarter of each year, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. There was no impairment of goodwill in either 2023 or 2022.
Previous report
Income Taxes
Previous report
We account for income taxes using the liability method under ASC 740, Accounting for Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements. Under the liability method, we determine deferred tax assets and liabilities based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which we expect the differences to reverse. We reduce deferred tax assets by a valuation allowance when it is more likely than not that we will not realize some component or all of the deferred tax assets.
Reworded paragraphs (35)
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 and to differentiate themselves 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 incorporates artificial intelligence technology 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”) to businesses of all sizes. 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 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, Recruiting, HR compliance and services, Time & Attendance software, Insurance and Benefits Administration, 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.
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. 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. Asure has two types of partners: Reseller Partners that white label our products while providing value-added services to their clients (our indirect clients) and Referral Partners that provide us with SMB leads but do not resell our solutions.
Current wording
We strive to be the most trusted HCM resource. 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. Asure has two types of partners: Reseller Partners that white label our products while providing value-added services to their clients (our indirect clients) and Referral Partners that provide us with client leads but do not resell our solutions.
Previous wording
As of December 31, 2023, Asure had more than 100,000 clients, with approximately 15% direct and the remaining clients indirect who have contracts with Reseller Partners.
Current wording
As of December 31, 2024, Asure had more than 100,000 clients, with approximately 20% direct and the remaining clients indirect who have contracts with Reseller Partners.
Previous wording
We plan to continue to enhance our products and technologies by leveraging the latest technology stack, Robotic Process Automation (“RPA”), artificial intelligence (“AI”), and development partnerships. We expect that our expanded investment in product, engineering, SaaS hosting, mobile and hardware technologies will lay the groundwork for broader market opportunities and represent a key aspect of our competitive differentiation. We also plan to expand our technological resources through organic improvements and acquired intellectual property. We expect to continue to expand the breadth of integration between our solutions, allowing direct clients and resellers the ability to easily add and implement components across our entire solution set. Our initiatives include providing our customers with more accurate and efficient automation powered by an informed knowledge base. Consistent with that effort, our engineering team utilizes an AI development Copilot to increase their productivity and efficiency. Our operations team utilizes a digital assistant to allow for a more efficient and accurate way to automate repetitive tasks, which we believe will free up our time for more strategic work and reducing the risk of errors. We are committed to providing the best-in-class solutions.
Current wording
We plan to continue to enhance our products and technologies by leveraging the latest technology stack, Robotic Process Automation (“RPA”), artificial intelligence (“AI”), and development partnerships. We expect that our expanded investment in product, engineering, SaaS hosting, mobile and hardware technologies will lay the groundwork for broader market opportunities and represent a key aspect of our competitive differentiation. We also plan to expand our technological resources through organic improvements and acquired intellectual property. We expect to continue to expand the breadth of integration between our solutions, allowing direct clients and our Reseller Partners the ability to easily add and implement components across our entire solution set. Our initiatives include providing our customers with more accurate and efficient automation powered by an informed knowledge base. Consistent with that effort, our engineering team utilizes an AI development Copilot to increase their productivity and efficiency. Our operations team utilizes a digital assistant to allow for a more efficient and accurate way to automate repetitive tasks, which we believe will free up our time for more strategic work and reducing the risk of errors. We are committed to providing the best-in-class solutions.
Previous wording
Software-as-a-service revenue is generated when clients utilize our product suite for their recurring human resource needs—primarily payroll, tax, HR compliance, time and attendance, and AsureMarketplace™. This also contains revenue generated from quarterly and annual reporting requirements to local, state and federal regulatory agencies. Examples include Form W-2 and reporting mandated by the Affordable Care Act (the “ACA”).
Current wording
Software-as-a-service revenue is generated when clients utilize our product suite for their recurring human resource needs—primarily payroll, tax, recruiting, HR compliance, time and attendance, insurance and benefits administration and AsureMarketplace™. This also contains revenue generated from quarterly and annual reporting requirements to local, state and federal regulatory agencies. Examples include Form W-2 and reporting mandated by the ACA.
Previous wording
•Consolidated revenue of $119,082 for 2023, representing a 24% increase over revenue in 2022.
Current wording
•Consolidated revenue of $119,792 for 2024, representing a 1% increase over revenue in 2023.
Previous wording
•Recurring revenue of $99,734 for 2023, representing a 16% increase over recurring revenue in 2022.
Current wording
•Recurring revenue of $114,471 for 2024, representing a 15% increase over recurring revenue in 2023.
Previous wording
•Net loss of $9,214 for 2023, an improvement of $5,252 from prior year loss of $14,466.
Current wording
•Net loss of $11,773 for 2024, an increase of $2,559 from prior year loss of $9,214.
Previous wording
•Gross profit of $85,537 for 2023 versus $62,510 in 2022.
Current wording
•Gross profit of $82,107 for 2024 versus $85,537 in 2023.
Previous wording
Revenues are comprised of recurring revenues, professional services, hardware, and other revenues. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients. As a percentage of total revenues, we expect our mix of recurring revenues, and professional services, hardware and other revenues to remain relatively constant. While revenue mix varies by product, recurring revenue represented over 84% of total revenue in the year ended 2023, compared to 90% in 2022.
Current wording
Revenues are comprised of recurring revenues, professional services, hardware, and other revenues. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients. As a percentage of total revenues, we expect our mix of recurring revenues, and professional services, hardware and other revenues to remain relatively constant. While revenue mix varies by product, recurring revenue represented over 96% of total revenue in the year ended 2024, compared to 84% in 2023.
Previous wording
Recurring revenues include 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 revenues from our Reseller Partners that license our solutions. Because recurring revenues are 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 revenues increase as our clients hire more employees. Recurring revenues are recognized in the period services are rendered.
Current wording
Recurring revenues include fees for our payroll and tax management, recruiting services, HR compliance, time and labor management, insurance and benefits administration, 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 revenues from our Reseller Partners that license our solutions. Because recurring revenues are 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 revenues increase as our clients hire more employees. Recurring revenues are recognized in the period services are rendered.
Previous wording
Recurring revenues include revenues relating to the annual processing of payroll forms, such as Form W-2 and Form 1099, and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. Because payroll forms are typically processed in the first quarter of the year and many of our clients are subject to form filing requirements mandated by the Affordable Care Act (“ACA”), first quarter revenues and margins are generally higher than in subsequent quarters. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, we often experience increased revenues during the fourth quarter due to unscheduled payroll runs for our clients that occur before the end of the year. We expect the seasonality of our revenue cycle to decrease to the extent clients utilize more of our non-payroll applications.
Current wording
Recurring revenues include revenues relating to the annual processing of payroll forms, such as Form W-2 and Form 1099, and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. Because payroll forms are typically processed in the first quarter of the year and many of our clients are subject to form filing requirements mandated by the ACA, first quarter revenues and margins are generally higher than in subsequent quarters. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, we often experience increased revenues during the fourth quarter due to unscheduled payroll runs for our clients that occur before the end of the year. We expect the seasonality of our revenue cycle to decrease to the extent clients utilize more of our non-payroll applications.
Previous wording
This revenue line also includes interest earned on funds held for clients as well as revenues generated via fixed fee arrangements for provisioning and filing for Employee Retention Tax Credit (“ERTC”) credits. Interest earned is generated from funds we collect from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, commercial paper, fixed income securities and certificates of deposit until they are paid to the applicable tax or regulatory agencies or to client employees. The amount of interest we earn from the investment of client funds is also impacted by changes in interest rates. Asure also generates revenues from provisioning and filing for ERTC. Revenue generated for such activity is based on multi-year contracts with volume commitments and is recorded as recurring revenues. Refer to “Risk Factors” in Part I, 1A. for more information about risks related to our ERTC business.
Current wording
This revenue line also includes interest earned on funds held for clients. Interest earned is generated from funds we collect from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, commercial paper, fixed income securities and certificates of deposit until they are paid to the applicable tax or regulatory agencies or to client employees. The amount of interest we earn from the investment of client funds is also impacted by changes in interest rates. Refer to “Risk Factors” in Part I, 1A. for more information about risks related to our ERTC business.
Previous wording
Professional services, hardware and other revenue increased $9,742, or 101%, for the year ended December 31, 2023 from the similar period in 2022, primarily due to growth in non-recurring ERTC revenues. ERTC revenues were originally expected to expire during 2024 and 2025; however, it is possible that the government could make changes to or revoke the program prior to its scheduled expiration. For example, in January 2024, the United States House of Representatives passed the Tax Relief for American Families Act of 2024, which sets an expiration date of January 31, 2024, on additional claims for ERTC that can potentially apply retroactively. If approved by other branches of the government, this will have an effect on our ERTC revenues and cash collections. Additionally, in September 2023, the IRS announced a moratorium through the end of the year on processing new ERTC claims due to concerns over questionable or fraudulent claims. The moratorium may potentially delay the processing and collections of previously filed ERTC claims. Refer to “Risk Factors” in Part I, 1A. for more information about risks related to our ERTC business.
Current wording
ERTC revenues were originally expected to expire during 2024 and 2025; however, subsequent legislation impacted revenues and cash collections during 2024 and is expected to continue in 2025. For example, in January 2024, the United States House of Representatives passed the Tax Relief for American Families Act of 2024, which sets an expiration date of January 31, 2024, on additional claims for ERTC that can potentially apply retroactively. In September 2023, the IRS announced a moratorium through the end of the year on processing new ERTC claims due to concerns over questionable or fraudulent claims. During 2024, the IRS issued multiple releases announcing they had resumed processing of ERTC claims, additionally indicating that most claims are being approved. Refer to “Risk Factors” in Part I, 1A. for more information about risks related to our ERTC business.
Previous wording
Although our total customer base is widely spread across industries, our sales are concentrated in small and medium-sized businesses (“SMBs”). We continue to target SMBs across industries as prospective customers. Geographically, we sell our products primarily in the United States.
Current wording
Our total customer base is widely spread across industries and sizes. Geographically, we sell our products primarily in the United States.
Previous wording
Consolidated gross profit for the year ended December 31, 2023 was $85,537, an increase of $23,027, or 37%, from $62,510 for the year ended December 31, 2022. Gross margin as a percentage of revenue was 72% for the year ended December 31, 2023 as compared to 65% for the year ended December 31, 2022. The increase is primarily attributable to the increase in revenue in higher margin revenue streams and more efficient operations driven by consolidation and standardization efforts across the Company.
Current wording
Consolidated gross profit for the year ended December 31, 2024, was $82,107, a decrease of $3,430, or 4%, from $85,537 for the year ended December 31, 2023. Gross margin as a percentage of revenue was 69% for the year ended December 31, 2024, as compared to 72% for the year ended December 31, 2023. The decrease is primarily attributable to the decrease in revenue in higher margin revenue streams.
Previous wording
Sales and marketing expenses for the year ended December 31, 2023 were $28,734, an increase of $8,474, or 42%, from $20,260 for the year ended December 31, 2022, primarily due to an increase in direct sales personnel, higher sales commissions owing to increased revenues, and an increase in marketing initiatives. Sales and marketing expenses as a percentage of revenue increased to 24% for the year ended December 31, 2023 from 21% for the same period in 2022.
Current wording
Sales and marketing expenses for the year ended December 31, 2024, were $28,316, a decrease of $418, or 1%, from $28,734 for the year ended December 31, 2023, primarily due to an increase in direct sales personnel offset by decreases resulting from reduced ERTC revenues. Sales and marketing expenses as a percentage of revenue remained flat at 24% for the year ended December 31, 2024 and 2023.
Previous wording
General and administrative expenses for the year ended December 31, 2023 were $39,333, an increase of $5,409, or 16%, from $33,924 for the year ended December 31, 2022, primarily attributable to increased personnel, share-based compensation, and contracting costs. General and administrative expenses as a percentage of revenue decreased to 33% for the year ended December 31, 2023 from 35% for the same period in 2022.
Current wording
General and administrative expenses for the year ended December 31, 2024, were $40,499, an increase of $1,166, or 3%, from $39,333 for the year ended December 31, 2023, primarily attributable to an increase in personnel costs from higher healthcare premiums and an increase in share-based compensation. General and administrative expenses as a percentage of revenue increased to 34% for the year ended December 31, 2024, from 33% for the same period in 2023.
Previous wording
R&D expenses for the year ended December 31, 2023 were $6,846, an increase of $699, or 11%, from $6,147 for the year ended December 31, 2022. The increase in R&D expense is primarily attributable to an increase in personnel costs, partially offset by an increase in capitalized software expenses driven by continued investments in development of our products. R&D expenses as a percentage of revenues remained flat at 6% for the years ended December 31, 2023 and 2022.
Current wording
R&D expenses for the year ended December 31, 2024, were $7,807, an increase of $961, or 14%, from $6,846 for the year ended December 31, 2023. The increase in R&D expense is primarily attributable to an increase in personnel costs from higher wages and contractor usage, partially offset by an increase in capitalized software expenses driven by continued investments in development of our products. R&D expenses as a percentage of revenues increased to 7% for the year ended December 31, 2024, from 6% for the same period in 2023.
Previous wording
Amortization expense in operating expenses for the year ended December 31, 2023 was $13,623, an increase of $137, or 1%, from $13,486 for the year ended December 31, 2022. Amortization expense as a percentage of revenue was 11% for theyear ended December 31, 2023 from 14% for the same period in 2022.
Current wording
Amortization expense in operating expenses for the year ended December 31, 2024, was $16,222, an increase of $2,599, or 19%, from $13,623 for the year ended December 31, 2023. The increase in Amortization expense is primarily attributable to increased acquisition activity compared to the prior year. Amortization expense as a percentage of revenue was 14% for theyear ended December 31, 2024, from 11% for the same period in 2023.
Previous wording
Interest expense, net for the year ended December 31, 2023 was an expense of $4,297 compared to an expense of $4,438 for the year ended December 31, 2022. The decrease in interest expense, net relative to the prior year is primarily attributable to our payoff of the outstanding debt under the credit facility with Structural Capital Investments II LP in 2023. Interest expense, net as a percentage of revenue was an expense of 4% and 5% for the years ended December 31, 2023 and December 31, 2022, respectively. Interest expenses for the years ended December 31, 2023 and 2022 are composed primarily of interest expense on notes payable.
Current wording
Interest income for the year ended December 31, 2024, was $913 compared to interest income of $1,342 for the year ended December 31, 2023. Interest income as a percentage of revenue remained flat at 1% for the years ended December 31, 2024 and 2023. Interest expense for the year ended December 31, 2024, was $1,024 compared to interest expense of $5,639 for the year ended December 31, 2023. The decrease in interest expense, net relative to the prior year is primarily attributable to our payoff of the outstanding debt under the credit facility with Structural Capital Investments III LP (“Structural Capital”) in 2023. Interest expense as a percentage of revenue was 1% for the year ended December 31, 2024, compared to 5% for the year ended December 31, 2023. Interest expenses for the years ended December 31, 2024 and 2023, are composed primarily of interest expense on notes payable.
Previous wording
Loss on extinguishment of debt for theyear ended December 31, 2023 was $1,517 compared to no loss for the year ended December 31, 2022. Loss onextinguishment of debt as a percentage of revenue was 1% for theyear ended December 31, 2023. Forthe year ended December 31, 2023, the amount in loss on extinguishment of debt consisted of loss recognized as a result of the termination of our credit facility with Structural Capital.
Current wording
Loss on extinguishment of debt for theyear ended December 31, 2024, was $0 compared to a loss of $1,517 for the year ended December 31, 2023. There was no loss onextinguishment of debt for theyear ended December 31, 2024, compared to 1% of revenue for the year ended December 31, 2023. Forthe year ended December 31, 2023, the amount in loss on extinguishment of debt consisted of loss recognized as a result of the termination of our credit facility with Structural Capital.
Previous wording
Other (expense) income, net for theyear ended December 31, 2023 was an expense of $292 compared to income of $1,391 for the year ended December 31, 2022. Other (expense) income, net as a percentage of revenue was negligible for theyear ended December 31, 2023, and 1%for the year ended December 31, 2022. For theyear ended December 31, 2023, the amounts in other (expense) income, net primarily consisted of losses on disposal of assets. For the year ended December 31, 2022, the amounts in other (expense) income, net primarily consisted of a fair value adjustment on contingent purchase consideration in connection with the acquisition of a payroll business in September 2021.
Current wording
Other (expense) income, net for theyear ended December 31, 2024, was an expense of $8 compared to income of $292 for the year ended December 31, 2023. Other (expense) income, net as a percentage of revenue was negligiblefor the years ended December 31, 2024 and 2023, respectively. For theyear ended December 31, 2024, the amounts in other (expense) income, net primarily consisted of bank fees. For the year ended December 31, 2023, the amounts in other (expense) income, net primarily consisted of losses on disposal of assets.
Previous wording
For the year ended December 31, 2023 and 2022, we recorded an income tax expense attributable to continuing operations of $109 and $112, respectively, a decrease of $3 or 3%.
Current wording
For the year ended December 31, 2024 and 2023, we recorded an income tax expense attributable to continuing operations of $933 and $109, respectively, an increase of $824.
Previous wording
We incurred a loss from operations of $9,214, or $(0.42) per share, during the year ended December 31, 2023, compared to a loss from operations of $14,466, or $(0.72) per share, during the year ended December 31, 2022. Loss from operations as a percentage of total revenues was 8% and 15% for the years ended December 31, 2023 and 2022, respectively.
Current wording
We incurred a loss from operations of $11,773, or $(0.45) per share, during the year ended December 31, 2024, compared to a loss from operations of $9,214, or $(0.42) per share, during the year ended December 31, 2023. Loss from operations as a percentage of total revenues was 10% and 8% for the years ended December 31, 2024 and 2023, respectively.
Previous wording
(1)This balance excludes cash equivalents in funds held for clients
Current wording
(1)This balance excludes cash and cash equivalents in funds held for clients
Previous wording
Working Capital. We had working capital of $25,880 at December 31, 2023, an increase of $17,787 from working capital of $8,093 at December 31, 2022. Working capital as of December 31, 2023 and December 31, 2022 includes $6,853 and $8,461 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 $13,641 at December 31, 2024, a decrease of $12,239 from working capital of $25,880 at December 31, 2023. Working capital as of December 31, 2024 and 2023, includes $8,363 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 provided by operating activities of $18,900 for the year ended December 31, 2023 was driven by non-cash adjustments to our net loss of approximately $29,530, primarily due to depreciation and amortization. Net cash provided by operating activities of $13,674 for the year ended December 31, 2022 was driven by non-cash adjustments to our net loss of approximately $22,875, primarily due to depreciation and amortization, offset by our net loss of $14,466. For the year ended December 31, 2022, changes in operating assets and liabilities resulted in cash provided of $5,265.
Current wording
Operating Activities. Net cash provided by operating activities of $9,388 for the year ended December 31, 2024, was driven by non-cash adjustments to our net loss of approximately $28,940, primarily due to depreciation and amortization. Net cash provided by operating activities of $18,900 for the year ended December 31, 2023, was driven by non-cash adjustments to our net loss of approximately $29,530, primarily due to depreciation and amortization, offset by our net loss of $9,214. For the year ended December 31, 2023, changes in operating assets and liabilities resulted in a use of $1,416 in cash.
Previous wording
Investing Activities. Net cash used in investing activities of $29,525 for the year ended December 31, 2023 is primarily due to purchases of available-for-sale securities of $27,647, partially offset by proceeds from sales and maturities of available-for-sale securities of $14,385. Net cash used in investing activities of $35,999 for the year ended December 31, 2022 is primarily due to the purchase of available-for-sale securities of $37,232.
Current wording
Investing Activities. Net cash used in investing activities of $19,256 for the year ended December 31, 2024, is primarily due to purchases of available-for-sale securities of $15,643, partially offset by proceeds from sales and maturities of available-for-sale securities of $20,522. Net cash used in investing activities of $29,525 for the year ended December 31, 2023, is primarily due to the purchase of available-for-sale securities of $27,647, partially offset by proceeds from sales and maturities of available-for-sale securities of $14,385.
Previous wording
Financing Activities. Net cash provided by financing activities was $24,205 for the year ended December 31, 2023, which primarily consisted of net proceeds from the issuance of common stock of $46,800, a net increase in client fund obligations of $13,931, offset by payments of notes payable of $35,627. Net cash used in financing activities was $12,376 for the year ended December 31, 2022, which primarily consisted of a net decrease in client fund obligations of $11,055.
Current wording
Financing Activities. Net cash used in financing activities was $22,042 for the year ended December 31, 2024, which primarily consisted of a net decrease in client fund obligations of $26,342, offset by proceeds from notes payable, net of issuance costs of $4,995. Net cash provided by financing activities was $24,205 for the year ended December 31, 2023, which primarily consisted of net proceeds from the issuance of common stock of $46,800, a net increase in client fund obligations of $13,931, offset by payments of notes payable of $35,627.
Previous wording
On September 12, 2023, we terminated the Loan and Security Agreement (the “Loan Agreement”) dated September 10, 2021, with Structural, and Ocean II PLO LLC, as administrative and collateral agent for the Lenders (“Agent”), and repaid the secured promissory note (the “Note”) with Agent evidencing our obligations under the Loan Agreement. In connection with the termination, we paid an aggregate amount of $30,927 (the “Payoff Amount”) in full payment of the outstanding obligations under the Loan Agreement and Note. The Payoff Amount represented $30,617 of outstanding principal and interest on the unpaid principal balance, a prepayment fee in the amount of $306 and an immaterial amount of fees and other expenses due to Agent.
Current wording
On September 12, 2023, we terminated the Loan and Security Agreement (the “Loan Agreement”) dated September 10, 2021, with Structural Capital, and Ocean II PLO LLC, as administrative and collateral agent for the Lenders (“Agent”), and repaid the secured promissory note (the “Note”) with Agent evidencing our obligations under the Loan Agreement. In connection with the termination, we paid an aggregate amount of $30,927 (the “Payoff Amount”) in full payment of the outstanding obligations under the Loan Agreement and Note. The Payoff Amount represented $30,617 of outstanding principal and interest on the unpaid principal balance, a prepayment fee in the amount of $306 and an immaterial amount of fees and other expenses due to Agent.
Previous wording
We also have an outstanding promissory note in connection with a payroll business acquired in October 2023 in the amount of $1,500 as of December 31, 2023. The outstanding promissory note matures on October 1, 2025.
Current wording
We also have an outstanding promissory note with an unrelated third party intended to fund future acquisitions and for general working capital purposes from November 2024 in the amount of $5,000 as of December 31, 2024. The outstanding promissory note matures on November 1, 2025.
Previous wording
Sources of Liquidity. As of December 31, 2023, our principal sources of liquidity consisted of approximately $30,317 of cash, cash equivalents and restricted cash, and cash generated from operations of our business over twelve months.
Current wording
Sources of Liquidity. As of December 31, 2024, our principal sources of liquidity consisted of approximately $21,425 of cash, cash equivalents and restricted cash, and cash generated from operations of our business over twelve months.
Previous wording
We have prepared our Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles and included the accounts of our wholly owned subsidiaries. We have eliminated all significant intercompany transactions and balances in the consolidation. Preparation of the Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year-end and the reported amounts of revenues and expenses during the fiscal year. The more significant estimates made by management include the valuation allowance for our gross deferred tax asset, the determination of the fair value of our long-lived assets and the fair value of assets acquired and liabilities assumed during acquisitions. We base our estimates on historical experience and on various other assumptions that management believes are reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Management periodically evaluates estimates used in the preparation of our financial statements for continued reasonableness. We prospectively apply appropriate adjustments, if any, to our estimates based upon our periodic evaluation.
Current wording
We have prepared our Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles and included the accounts of our wholly owned subsidiaries. Preparation of the Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. The SEC has defined a company’s critical accounting estimates as those which involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations. Based on this definition, we have identified the critical accounting estimates addressed below.
Previous wording
We record the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Valuation of intangible assets and in-process research and development entails significant estimates and assumptions including, but not limited to, estimating future cash flows from product sales, developing appropriate discount rates, estimating probability rates for the continuation of customer relationships and renewal of customer contracts. U.S. generally accepted accounting principles (“GAAP”) require that we not amortize intangible assets other than goodwill with an indefinite life until we determine their life as finite. We must amortize all other intangible assets over their useful lives. We currently amortize our acquired intangible assets with definite lives over periods ranging from two to fifteen years. We have assessed the fair value of our customer relationship intangible assets as of December 31, 2023, and we do not believe these to be impaired, as the carrying value of the customer relationship intangible assets are recoverable through the associated projected cash flows.
Current wording
During business combination transactions, we use the fair value of acquired identifiable intangible assets to allocate purchase price among acquired assets and determine the excess of purchase price to be recognized as goodwill. Valuation of acquired identifiable intangible assets entails significant estimates and assumptions including, but not limited to, estimating future cash flows from product sales, developing appropriate discount rates, estimating probability rates for the continuation of customer relationships and renewal of customer contracts.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Professional services, hardware and other revenue decreased by $14,027, or 72%, for the year ended December 31, 2024, from the similar period in 2023, primarily due to the discontinuation of non-recurring ERTC revenues.
Current report — wording carried from elsewhere
We base our estimates on historical experience and on various other assumptions that management believes are reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Management periodically evaluates estimates used in the preparation of our financial statements for continued reasonableness. We prospectively apply appropriate adjustments, if any, to our estimates based upon our periodic evaluation.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We have an outstanding promissory note in connection with a payroll business acquired in September 2021 in the amount of $4,200 as of December 31, 2023. The outstanding promissory note matures on September 30, 2026.