Asure Software(ASUR) - 2018 Q4 - Annual Report

Revenue and Growth - Total revenue for 2018 was $88,952, an increase of $34,510, or 63.4%, compared to $54,442 in 2017[191] - Cloud revenue increased by $29,620, or 75.4%, reaching $68,887 in 2018, driven by acquisitions and new sales[192] - Professional services revenue increased by $3,220, or 69.6%, totaling $7,847 in 2018, primarily due to contract work timing[193] - Hardware revenue grew by $1,574, or 33.5%, reaching $6,277 in 2018, compared to $4,703 in 2017[193] Profitability and Expenses - Gross profit rose to $58,122 in 2018, up $16,299, or 39.0%, but gross margin decreased to 65.3% from 76.8% in 2017[197] - Selling, general and administrative expenses increased by $13,446, or 39.7%, totaling $47,333 in 2018, with SG&A as a percentage of revenues at 53.2%[199] - Research and development expenses surged to $8,360 in 2018, an increase of $3,901, or 87.5%, representing 9.4% of revenues[202] - Amortization expenses rose to $8,692 in 2018, an increase of $4,215, or 94.1%, compared to $4,477 in 2017, accounting for 9.8% of revenues in 2018[209] Net Loss and Cash Flow - Asure's net loss increased by $1,826, or 31.9%, to $7,548 in 2018, compared to a net loss of $5,722 in 2017, representing 8.5% of total revenues in 2018[217] - Cash used in operating activities was $7,129 in 2018, primarily driven by the net loss and increases in inventory and accounts receivable[222] - Cash used in investing activities was $107,228 in 2018, mainly due to acquisitions, compared to $58,492 in 2017[224] - Net cash provided by financing activities was $101,788 in 2018, largely due to an increase in indebtedness and net proceeds from a public offering[224] Working Capital and Financial Position - Working capital decreased to $11,443 at December 31, 2018, down $5,583 from $17,026 at December 31, 2017, attributed to decreased cash and cash equivalents[218] - Asure had approximately $15,444 in cash and cash equivalents as of December 31, 2018, and $5,000 available for borrowing under a revolver[226] Tax and Future Capital Needs - The company recorded a tax benefit of $7,229 in 2018, a $7,325 increase from a tax expense of $96 in 2017, resulting in an effective tax rate of (1.7)%[214] - The company may need to raise additional capital in the future to grow its software operations and pursue strategic acquisitions, but there is no assurance it can do so on acceptable terms[239] Acquisitions and Product Development - The company continues to explore acquisition opportunities to enhance its software and services portfolio[196] - AsureSpace product development included launching a new MapView product and plans for a new IoT sensor in March 2019[206] - The EvolutionHCM technology group successfully migrated clients to Asure's AWS infrastructure, enhancing integration capabilities[207] Deferred Revenue and Accounting Policies - Revenue from software-as-a-service (SaaS) offerings and time-based software subscriptions is recognized on an output basis as services are provided over the non-cancellable term, typically ranging from one to three years[244] - Deferred revenue includes amounts invoiced to customers in excess of recognized revenue, primarily ranging from one to three years[250] - The company has not recorded any impairment of intangible assets or goodwill for the periods presented, and goodwill is tested for impairment annually in the fourth fiscal quarter[252][253] - The company accounts for income taxes using the liability method, recognizing deferred tax assets and liabilities based on the expected future tax consequences of events included in the financial statements[254] Market Risks - The company has operations in the U.S. and internationally, facing market risks including interest rate, foreign exchange, and inflation risks, and has not used derivative instruments to mitigate these risks[256]