Asure Software Inc

Good afternoon and welcome to Assure's Third Quarter 2022 Earnings Conference Call. Joining us for today's call are Assure's Chairman and CEO, Pat Gapple, Assure's Chief Financial Officer, John Pence, and Head of Investor Relations, Randall Rutniewski. Following their prepared remarks, there will be a question and answer session for the analysts and investors. I would now like to send the call over to Randall Rutniewski for introductory remarks. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for Assure's third quarter 2022 earnings call. Following the close of markets, we released our financial results. The earnings release is available on the SEC's website and on our investor relations website at investor.assuresoftware.com, where you can also find the investor presentation. During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items. A description and timing of these items along with the reconciliation of non-GAAP measures to their most comparable GAAP measures can be found in our earnings release. Today's call will also contain forward-looking statements that refer to future events and as such involve some risks. We use words such as expects, believes and may to indicate forward-looking statements and we encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ materially from our current expectations. Finally, I'd like to remind everyone that this call is being recorded and it will be made available for replay via a link available on the investor relations section of our website. With that, I would now like to turn the call over to Pat Geppel, Chairman and CEO. Pat?

Thank you, Randall, and welcome everyone to Assure's Third Quarter Earnings Call. I appreciate your interest, whether you're an employee, partner, investor, analyst, or other interested party. I will begin today's presentation with an update on our business highlights and strategy, and then I'll turn it over to our CFO, John Pence, for a more detailed review of our financial results and outlook for the remainder of 2022 and 2023 fiscal years. We will then conclude the session with time to answer your questions. We had a real strong performance in the third quarter with results that showed improving levels of organic revenue growth as the many initiatives we have undertaken are beginning to see real progress. We grew our third quarter revenues by 22% relative to prior year and adjusted EBITDA by 71%, with adjusted EBITDA margins rising by 280 basis points to 9.6%. Organic revenue growth in the quarter was 4%, and from our revised higher revenue guidance, you can see we expect organic revenue growth to come in at roughly 10% annually in the fourth quarter. Momentum is building nicely in the business, giving us confidence in our fourth quarter and 2023 guidance. Our new sales bookings have been strong all year and have accelerated as the year progressed. In the third quarter, new sales bookings grew by 91% relative to the prior year, including 200% growth in recurring new sales bookings with strength. across many parts of the business, including HR compliance and tax solutions. Demand for our solutions remains strong in the current economic environment, and our pipeline and backlog are very healthy. We anticipate finishing 2022 with strong momentum that will carry through 2023 with continued double-digit organic revenue growth, driving strong adjusted EBITDA margin gains, Margin improvement in 2023 is expected to be driven by revenue growth as well as efficiency improvements that will enable us to convert a high proportion of revenues to adjusted EBITDA. In 2022, we have focused our sales activities on bundled sales as well as introducing new products that we expect will add important revenue streams. These include the introduction of integration marketplace, enhancements to our tax platform, as well as our enhanced HR compliant suite of solutions. I'll talk more about these initiatives in a moment, but we believe our efforts and our focus is really paying off. In the payroll segment, we recorded a 49% increase in new payroll logos added in the third quarter relative to prior year, an increase in average payroll booking size in 2022. In HR compliance, Demand has been very robust, driving 30% plus growth in revenues relative to the prior year. There is a very good attachment and revenue enhancement on bundling HR compliance with payroll. We're also effectively utilizing earned protection tax credit to cross-sell payroll and other solutions. We are just scratching the surface in our bundling efforts and can generate more recurring revenue from our existing client base with HR compliance and tax solutions leading the way. New solutions such as our initiative to leverage our data with Integration Marketplace are also expected to be important contributors to our sales growth. We believe Integration Marketplace will be an increasing proportion of our revenue going forward and it could represent 30% to 40% of Assure's overall revenues over the next couple of years. Integration Marketplace provides Assure's clients with integrations to complementary human capital management services in payroll and tax, time and attendance, retirement, and workman's compensation. Its launch was the culmination of efforts made in 2021 and 2022 to upgrade our technology. It enhances automation, reduces cost of ownership, and allows us to capitalize on partnerships that will drive high margin revenue streams. In October, We announced a new integration with Equifax to provide clients and their employees with quicker and more secure employment and income verification. This initiative will reduce clients' costs through automation and enable them to focus on their core businesses, which is a key part of our value proposition. In addition to Equifax, we are actively working to expand our integrations to earn wage access benefit reconciliation, retirement solutions, and tax preparation. We're very excited about the future of Integration Marketplace and the benefits it can bring to clients while driving revenue growth for Assure. Another key initiative we've been working on is making enhancements to our tax platform to capitalize on our unique position in the marketplace. Efforts in this area include consolidating to a single tax engine, introducing a new tax portal, and enhancing technology to facilitate integrations. This will allow us to offer a centralized human capital management ecosystem for clients and open up new market segments for our leading tax platform. These efforts are paying off and enabling us to deliver new solutions for clients. We recently introduced two new solutions that we're excited about. In October, we launched a new technology that automates back office processes for tax professionals, enabling them to efficiently prepare amended tax returns for small businesses claiming ERTC stimulus. And in August, we announced an agreement to be a preferred provider, payroll tax filing software and services, for Prism HR, which is a leading provider of HR solutions primarily in the PEO market. We believe these initiatives highlight the increasing recognition by clients of the strength of our tax platform and demonstrate our ability to tap into new market segments in an efficient and flexible manner. We see other opportunities that will leverage our tax platform and look forward to discussing those in future quarters. I want to turn now to some of the enterprise efficiency initiatives we're working on. Our initiatives in this area are designed to enhance standardization and centralization of our operations while delivering exceptional client service. Our work plan is well underway and is expected to be implemented through 2023, delivering approximately $5 million in annual savings once it's fully complete. Project streams for our centralization efforts include development of a human capital management platform to deliver state-of-the-art solutions and accelerate product development. driving robotic process automation through the organization to enhance efficiency, process standardization to give us greater flexibility and reduce costs, and upgrades for our communications infrastructure. These efforts are already producing efficiency gains across the business, enabling us to convert a higher proportion of revenue growth to adjusted EBITDA. These consolidated consolidation efforts also have benefits to our client fund operations providing us with increased leverage as we see increases in the fed funds rate our efficiency initiatives also support our acquisition strategy and enable us to expedite synergies and timelines for integrating future assets turning acquisitions You may recall last October, we had two reseller businesses that we acquired last year, and they have delivered to our expectations. Their integrations are now complete, on time, and on budget. As those businesses were acquired in September 2021, they will not affect our year-over-year comparisons beginning in Q4, which essentially means that all activity will be organic. For 2023, we'll continue to evaluate acquisition opportunities with assets that fit within our M&A model and that drive value creation for our shareholders. None are imminent right now, and no additional revenue has been contemplated in our forward-looking guidance. To wrap up, momentum is really building strongly in the business. We can see the impact. on that of third quarter's new sales bookings of 91% year over year, improvements in investment revenue reflecting higher client balances and rates, as well as increased sales backlog and increased retention across several product lines. Our performance today gives us confidence in our outlook for the remainder of 2022 and our preliminary guidance for 2023. For Q4 in 2023, we expect double-digit organic revenue growth driven by the initiatives we have discussed. We also believe we will deliver significantly expanded adjusted EBITDA margins in 2023 that reflect the impact of our efficiency efforts in a growing portfolio of revenue streams. 2022 has been a very active year for Assure, with strong emphasis on building strength in our business in sales, product, operations. We've introduced several new solutions, such as integrated marketplace, and we expect we'll be important contributors to our performance going forward. We also made significant enhancements to our HR compliance and our tax solution businesses, which are being well received by the market. Our commitment is to provide leading-edge solutions that drive value to our clients and to be the most trusted partner for small and mid-sized businesses. Our innovative solutions help guide our customers through this dynamic environment so they can focus on their core business. Now, I'd like to hand off to John to discuss our financial results in more detail.