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; regulatory pressures on economic relief enacted as a result of the COVID-19 pandemic that change or cause different interpretations with respect to eligibility for such programs; domestic and international regulatory developments, including changes to or applicability to our business of privacy and data securities laws, money transmitter laws and anti-money laundering laws; technological developments; the nature of the Company’s business model; interest rates; competition; various financial aspects of the Company’s subscription model; impairment of intangible assets; interruptions or delays in the Company’s services or the Company’s Web hosting; access to additional capital; the Company’s ability to hire, retain and motivate employees and manage the Company’s growth; litigation and any related claims, negotiations and settlements, including with respect to intellectual property matters or industry-specific regulations; volatility and weakness in bank and capital markets; factors affecting the Company’s deferred tax assets and ability to value and utilize them; volatility and low trading volume of our common stock; collection of receivables; and general developments in the economy, financial markets, credit markets and the impact of current and future accounting pronouncements and other financial reporting standards.
RECONCILIATION OF NON-GAAP AND ADJUSTED FINANCIAL MEASURES(unaudited) (in thousands)Q3-24Q2-24Q1-24Q4-23Q3-23Q2-23Q1-23Q4-22Revenue(1)$29,304 $28,044 $31,652 $26,264 $29,334 $30,420 $33,064 $29,292 Gross Profit to non-GAAP Gross Profit Gross Profit$19,704 $18,868 $22,607 $17,839 $21,280 $22,018 $24,400 $21,139 Gross Margin 67.2% 67.3% 71.4% 67.9% 72.5% 72.4% 73.8% 72.2% Share-based Compensation 44 43 40 32 28 46 31 34 Depreciation 1,232 1,145 1,110 921 984 1,309 1,009 871 Amortization - intangibles 50 50 50 50 50 50 268 298 One-time expenses Settlements, penalties & interest 2 3 — (6) 8 — 4 3 Acquisition and transaction costs 367 264 39 — — — — — Non-GAAP Gross Profit$21,399 $20,373 $23,846 $18,836 $22,350 $23,423 $25,712 $22,345 Non-GAAP Gross Margin 73.0% 72.6% 75.3% 71.7% 76.2% 77.0% 77.8% 76.3% Sales and Marketing Expense to non-GAAP Sales and Marketing ExpenseSales and Marketing Expense$6,680 $6,924 $7,767 $6,422 $6,597 $8,515 $7,200 $6,022 Share-based Compensation 269 237 243 180 210 149 124 93 Depreciation 1 — 1 1 — — — — One-time expenses Settlements, penalties & interest (5) 5 18 6 30 4 11 — Acquisition and transaction costs 68 37 11 — — — — — Other non-recurring expenses — — — — — 180 — — Non-GAAP Sales and Marketing Expense$6,347 $6,645 $7,494 $6,235 $6,357 $8,182 $7,065 $5,929 General and Administrative Expense to non-GAAP General and Administrative ExpenseGeneral and Administrative Expense$10,378 $10,118 $10,063 $9,747 $9,294 $10,336 $9,956 $9,720 Share-based Compensation 1,187 1,122 1,535 980 936 1,298 1,142 641 Depreciation 264 256 251 225 200 234 210 168 One-time expenses Settlements, penalties & interest 377 304 98 284 101 432 102 34 Acquisition and transaction costs 371 245 57 51 — — — — Other non-recurring expenses 253 — 86 53 — 453 — — Non-GAAP General and Administrative Expense$7,926 $8,191 $8,036 $8,154 $8,057 $7,919 $8,502 $8,877 Research and Development Expense to non-GAAP Research and Development ExpenseResearch and Development Expense$1,973 $1,962 $1,769 $1,739 $1,803 $1,325 $1,979 $1,627 Share-based Compensation 90 86 85 69 76 89 40 70 One-time expenses Settlements, penalties & interest — 27 31 — — — — 25 Acquisition and transaction costs 195 369 147 — — — — — Non-GAAP Research and Development Expense$1,688 $1,480 $1,506 $1,670 $1,727 $1,236 $1,939 $1,532 (1)Note that first quarters are seasonally strong as recurring year-end W2/ACA revenue is recognized in this period.ASURE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(Unaudited) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net loss$(8,569) $(5,632)Adjustments to reconcile loss to net cash (used) in provided by operations: Depreciation and amortization 16,200 14,243 Amortization of operating lease assets 1,025 1,129 Amortization of debt financing costs and discount 531 548 Non-cash interest expense — 1,471 Net accretion of discounts on available-for-sale securities (273) (63)Provision for expected losses 111 2,004 Provision for deferred income taxes 388 111 Loss on extinguishment of debt — 1,208 Net realized gains on sales of available-for-sale securities (1,929) (1,645)Share-based compensation 4,981 4,170 Loss on disposals of long-term assets — 132 Change in fair value of contingent purchase consideration — 175 Changes in operating assets and liabilities: Accounts receivable (3,142) (5,014)Inventory (78) 159 Prepaid expenses and other assets (1,656) 4,031 Operating lease right-of-use assets — 473 Accounts payable (1,253) (498)Accrued expenses and other long-term obligations (1,052) 918 Operating lease liabilities (1,139) (895)Deferred revenue (4,539) (5,190)Net cash (used) in provided by operating activities (394) 11,835 Cash flows from investing activities: Acquisition of intangible asset (12,397) (697)Purchases of property and equipment (546) (1,365)Software capitalization costs (7,677) (5,029)Purchases of available-for-sale securities (10,914) (21,513)Proceeds from sales and maturities of available-for-sale securities 13,325 10,428 Net cash used in investing activities (18,209) (18,176)Cash flows from financing activities: Payments of notes payable (420) (35,627)Debt extinguishment costs — (468)Payments made on amounts due for the acquisition of intangible assets (658) — Net proceeds from issuance of common stock 902 45,986 Capital raise fees (47) (258)Net change in client fund obligations (26,068) (31,033)Net cash used in financing activities (26,291) (21,400)Net decrease in cash and cash equivalents (44,894) (27,741)Cash and cash equivalents, beginning of period 177,622 164,042 Cash and cash equivalents, end of period$132,728 $136,301 ASURE SOFTWARE, INC.
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