Asure Software Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 1, 2025

Key Takeaways

  • Q1 revenues were $34.9 million, up 10% year-over-year (13% ex-ERTC), with recurring revenue representing 95% of total.
  • The payroll tax management segment saw continued momentum, highlighted by a live Strata partnership and a new Canada tax compliance solution for global enterprises.
  • Early traction for Assure Pay shows over 70% of active card users transacting three or more times per month, positioning the offering as a talent-attraction benefit.
  • Assure secured a $60 million credit facility (with $20 million drawn) to fuel inorganic growth; booked new contracts grew 45% and backlog jumped 339% to $82 million.
  • Net loss widened to $2.4 million (from $0.3 million) and EBITDA fell slightly, reflecting both the ERTC wind-down and investments in staff and infrastructure.
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Earnings Conference Call
Asure Software Q1 2025
00:00 / 00:00

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Operator

Good afternoon, and welcome to Asure's First Quarter twenty twenty five Earnings Conference Call. Joining us for today's call are Chairman and CEO, Pat Gopel Chief Financial Officer, John Pence and Vice President of Investor Relations, Patrick McKillop. Following their prepared remarks, there will be a question and answer session for the analysts and investors. I would now like to turn the call over to Patrick McKillop for introductory remarks. Please go ahead.

Patrick McKillop
Patrick McKillop
VP - IR at Asure Software

Thank you, operator. Good afternoon, everyone, and thank you for joining us for Assure's first quarter twenty twenty five earnings results call. Following the close of the markets, we released our financial results. The earnings release is available on the SEC's website and 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.

Patrick McKillop
Patrick McKillop
VP - IR at Asure Software

A description and timing of these items, along with a 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. I will hand the call over to Pat in a moment, but I just wanted to take a moment to remind people of our upcoming Investor Relations activities.

Patrick McKillop
Patrick McKillop
VP - IR at Asure Software

On May 13, we will attend the twentieth Annual Needham Tech Media Consumer Conference in New York. On May 28, we will attend the twenty second Annual Craig Hallum Conference in Minneapolis. On June, we will attend the Stifel Cross Sector Insight Conference in Boston, Mass. And finally, we will participate in the Northland Capital Markets Virtual Growth Conference on June 25. We are also working on a few non deal roadshows during the month of May.

Patrick McKillop
Patrick McKillop
VP - IR at Asure Software

Investor outreach is very important to Assure, and I would like to thank all of those that assist us in our efforts to connect with investors. Finally, I would 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?

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Thank you, Patrick, and welcome everyone to Asure Software's first quarter twenty twenty five earnings result call. I'm joined on this call by our CFO, John Pence, and we will provide a business update to our first quarter twenty twenty five results as well as the outlook for 2025. Following our remarks, we'll be available to answer your questions. We are pleased to report that our first quarter revenues were very strong coming in at $34,900,000 an increase of 10% versus our first quarter prior year. Our revenues reflect strong performance from our payroll tax management product as well as contributions from our payroll benefits and marketplace offerings.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

We believe that our strong results this quarter are reflective of the investments we made in the business. We've invested in our technology to create a more unified client experience as well as adding new products to our solution set. Our payroll tax management product has continued its momentum and we've gone live with our first phase of our partnership with Strata. As you may recall from last quarter's earnings call, we discussed the deal with a large well known audit tax and advisory firm and we expect implementations from this client as well as others such as Venture to ramp up this year. We have hired staff ahead of this to ensure that we are ready for an increased volume throughout the year.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

While speaking of our payroll tax management product, I would also like to highlight that we recently announced new capabilities with a solution designed for large Canadian companies and global enterprises with employees in Canada. The solution offers seamless integration of payroll tax services with major platforms like Workday, Oracle and SAP. We're excited to offer clients this critical solution to enable them to maintain strict compliance with the tax laws that they must adhere to the Canadian government. Assure Pay continues to be rolled out to our client base and we remain pleased about the opportunity. We plan to expand to wider groups as this year progresses.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

While still early in the product launch, we're witnessing very positive trends. An example is that greater than 70% of our active card users are using it over three times per month. Assure Pay offers businesses a competitive edge in the war for talent as many employees are looking for more benefits from their employers. With AssurePay, employees get an alternative online banking delivered via smartphone app, free ATM access, debit card capabilities, plus the ability to get advances on their payroll checks and more. As many of you already know, we have a multi pronged approach to our growth strategy, which includes both organic, enhanced organic and inorganic methods.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

We plan to continue this approach during 2025. We recently entered into a credit agreement, which will provide us more additional capital to drive inorganic and enhanced our acquisitions of this approach. The enhanced component is comprised of us acquiring primarily our reseller network partners in which we gain clients. One of these deals once these deals are completed, we focus on cross selling opportunities which can add to our profitability as we scale the business. Our team has been focused on driving increased attach rates and has delivered thus far early in the year and we believe that the rates that we should improve on will increase in the double digits as the year progresses.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Our sales efforts during the first quarter of twenty twenty five resulted in a 45% increase in new bookings versus the prior year. Our contracted revenue backlog has gone up 339% year over year to $82,000,000 which gives us greater insight into our outlook for the remainder of the year. We've incurred incremental costs as we've been preparing for the year ahead. However, as we look forward, we believe our cost structure to be relatively flat going forward as we experience improved profitability as the revenue growth continues to improve throughout the year. Based on our current business trends, we're reiterating our 2025 full year revenue guidance of 134,000,000 to $138,000,000 with adjusted EBITDA margins of 23 to 24%.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

This guidance excludes any revenue from potential acquisitions. The guidance for the full year 2025 implies a double digit growth rate, which we believe is positive. Now, I'd like to hand it off to John to discuss our financial results in more detail as well as our Q2 guidance. John?

John Pence
John Pence
CFO at Asure Software

Thanks, Pat. As Patrick mentioned at the beginning of this call, several of the financial figures discussed today are given on a non GAAP or adjusted basis. You will find a description of these GAAP to non GAAP reconciliations in the earnings release that was made available earlier today. Reconciliations themselves are also included in our most recent investor presentation posted in the Investor Relations section of our website at investor.asuresoftware.com. Now on to the first quarter results.

John Pence
John Pence
CFO at Asure Software

First quarter revenues were $34,900,000 increasing by 10% compared to the prior year period. Excluding ERTC, revenues were up 13% from the prior year period. Recurring revenues for the first quarter grew 10% versus the prior year to $33,200,000 and were 95% of our total revenue in the quarter. We achieved 10% total revenue growth despite the wind down of the ERTC program revenues, which negatively affected our revenue growth by 300 basis points in the quarter. Our revenue results reflect growth in our payroll, tax, benefits and marketplace groups.

John Pence
John Pence
CFO at Asure Software

HR compliance remains depressed as a result of the ERT related product attachment activity in 2023, although we expect relatively better performance in the back half of twenty twenty five. Float revenue was down slightly relative to prior year, owing to the rate reductions made in the fall of twenty twenty four to the federal funds rate. However, increases in our average fund balances and our laddered investment portfolio has mitigated most of that impact. Gross profit for the first quarter increased to 9% to $24,600,000 versus $22,600,000 in the prior year first quarter. And gross margins for the first quarter were relatively consistent with the prior year period at 71%.

John Pence
John Pence
CFO at Asure Software

Non GAAP gross margins for the first quarter were also consistent with the first quarter of the prior year at 75%. Net loss for the first quarter was $2,400,000 versus a net loss of $308,000 during the prior period. EBITDA for the first quarter was $4,100,000 down from $4,400,000 in the prior year. Adjusted EBITDA for the first quarter increased to $7,300,000 from $6,800,000 in the prior year. And our adjusted EBITDA margin was 21% in the quarter compared to 22% in the prior year.

John Pence
John Pence
CFO at Asure Software

Assured financial performance in the quarter reflects growth across most revenue groups. Here, I'd like to say a few words about our tax and benefits businesses, in particular, which we see meaningful long term growth potential. In tax, our unique market position, dedicated sales and technology investments have opened up new enterprise revenue opportunities that we have begun to capitalize on. We believe our enterprise tax solutions have multiyear growth opportunities ahead, and we are focused on making that happen. In benefits, we acquired an insurance broker of record business in 2024 and are going after new business in this highly profitable segment.

John Pence
John Pence
CFO at Asure Software

The 2024 introductions of new benefit solutions, including our four zero one solution, are also contributing positively to our revenue growth. Turning now to the balance sheet. We ended the first quarter with cash and cash equivalents of $14,100,000 and coincidentally, we had debt of $14,100,000 as well as of 03/31/2025. In April, we finalized a new $60,000,000 credit facility and drew down 20,000,000 at close. We intend to use this facility to fuel our customer acquisition model.

John Pence
John Pence
CFO at Asure Software

Over the past eighteen months, we have made 16 acquisitions. These have been mostly customer acquisitions, but we have also had a few acquisitions to expand our product suite. Guidance. First, I'd like to provide the backdrop for our 2025 guidance. We have been focused on building on the capabilities of our solutions, expanding our solution sets, cross selling into our base and creating efficient platforms that will enable us to achieve our longer term revenue and margin goals.

John Pence
John Pence
CFO at Asure Software

These activities require investments in our sales team, investments in technology and in many other areas of the business. At this point, we believe we have gotten a lot of the heavy lifting behind us. And so we believe our cost structure will be more stable going forward into 2025, permitting more operating leverage from revenue growth to generate adjusted EBITDA. Additionally, we expect revenue growth will accelerate as we move through 2025 and our existing solutions gain traction and new solutions are introduced into the market. As we go past these investments, we expect to see accelerated revenue and adjusted EBITDA generation, particularly in the back half of twenty twenty five.

John Pence
John Pence
CFO at Asure Software

In addition, we will consider acquisitions that make sense from a strategic and tactical perspective in order to cross sell and expand our solution capabilities. Now in terms of guidance for the second quarter of twenty twenty five, we are guiding second quarter revenues to be in the range of $30,000,000 to 32,000,000 Adjusted EBITDA for the second quarter is anticipated to be between $5,000,000 and $6,000,000 As we discussed on our last call, we expect EBITDA growth to be more subdued in the first half as we invested in infrastructure to support more enterprise deals, technology and products. We are maintaining our 2025 revenue guidance to be in the range of $134,000,000 to $138,000,000 with adjusted EBITDA margins of between 23% to 24% at these revenue levels. As Pat mentioned in his comments earlier, these guidance figures exclude any contribution from potential future acquisitions. Our pipeline of potential acquisitions remains strong and we feel confident about reaching our objectives.

John Pence
John Pence
CFO at Asure Software

In conclusion, we are excited about the remainder of 2025 and look forward to 2025 as being a great year for Asure in driving profitable growth and leveraging the initiatives we have implemented across the business to drive long term sustainable growth. With that, I will turn the call back to Pat for closing remarks.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Thanks, John. We are pleased to have delivered great results in the first quarter of twenty twenty five. Our business is experiencing positive momentum as a result of the efforts that we've made to improve our technology and broaden our product portfolio. We believe we've executed well on our strategy to deliver growth. Our pipeline of opportunities remains robust as the team here at Asure remains focused on execution of those opportunities.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

During our past earning calls, we've highlighted a number of new product additions such as recruiting, broker record, four zero one and AssurePay just to name a few. We're at different stages of these product launches. However, we feel we're experiencing good trends overall given that some like AssurePay for example are still in the early days of the launch cycle. Our team now has more opportunities to drive cross selling activity which can have a positive impact on margins. We've witnessed examples of clients that were initially taking one or two products transition to using our full suite of offerings thus increasing our clients' value proposition and of course our revenue.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Our attach rates meaning clients that take more than one product from us have increased by double digit percentages from last year's first quarter to our first quarter of twenty twenty five. The sales team has made good progress on those efforts and we have created some specialized sales groups which will help drive those efforts in the future. We anticipate that the increased focus on attach rates this year will result in further increases by year end. Achieving scale in this business is one of our main goals and we believe we have a good line of sight into reaching that level of 180 to $200,000,000 in revenues over the medium term whereby we would expect to see adjusted EBITDA margins of 30% or possibly more. We're pleased to have recently signed a credit agreement which will aid us in our efforts in driving the inorganic component of our growth strategy.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

We have a robust pipeline of potential reseller acquisitions. We'll continue to work on throughout the year. We're making strides with our efforts in artificial intelligence. We're collaborating with Amazon Web Services or AWS. We're using artificial intelligence to better understand trends in our own customer interactions, our pipeline opportunities and we prioritize those trends using AI for product development and a more proactive approach in supporting our clients.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Also during last quarter earnings call, we discussed our AI agent Luna, the industry's first AI agent for payroll and HR. While there's lots of discussion on the macroeconomic front with tariffs leading stock market headlines, we believe we're relatively insulated from any potential impact. We have a well diversified U. S. Client base.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Our revenues are more than 95% reoccurring. We have modeled conservatively for employment growth and the impact of potential interest rate cuts in the future. In summary, we're very pleased to deliver a strong performance in Q1. Our guidance for the full year 2025 reflects our expectation for double digit growth. Our bookings growth during first quarter was solid increasing by 45%.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

We have a healthy contracted revenue backlog of $82,000,000 which is up 339% versus last year. Our reoccurring revenues, which carry a higher value, are now greater than 95 of total revenues. We've experienced great momentum in our payroll tax management product line as well as contributions from our other products, which include four zero one, payroll benefits in the marketplace. We expect improved performance of HR compliance as we enter the second half of the year. And on the cost front, as we think about the remainder of the year, we believe that the incremental expenses we incurred in preparing for this year have seen their peak and our costs should be relatively flat for the balance of the year.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Our focus on cross selling additional products to existing clients has shown very good early results and this will remain a focus which we believe will lead to further improvements as we move through the remainder of the year. We believe we'll experience improved revenue growth and adjusted EBITDA in the second half of the year and we feel that the business is well positioned for the future. We will continue to provide innovative human capital management solutions that help businesses thrive, human capital management providers grow their base and large enterprises streamline tax compliance. Thank you for listening to our prepared remarks. So with that, I will send back the call to the operator for the Q and A session. Operator?

Operator

Our first question is from Joshua Riley with Needham and Company.

Joshua Reilly
Senior Analyst at Needham & Company

All right. Thanks for taking my questions here. Maybe just starting off, what are you seeing in terms of productivity now that you've put in place some dedicated sales teams for some of these different product areas? And I know it's early, so maybe you can just give us a sense of when that might actually make a difference in the business.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Yes, Josh. First of all, thanks for the question. We have highlighted attach rates as a primary driver. And we think having a sales specialist drive attach rates is going to be important. We mentioned that we had double digit improvement.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

The overall attach rate in the 20s and we've been going up 2% per year. I'd like to see greater adoption. I think we're positioned well. One thing that really gave me some encouragement, we had an individual client that was about $4,000 annually and they were a payroll only customer. And then they bought time and attendance, four zero one and HR compliance.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

And all of a sudden, they're a $40,000 customer. And then within fifteen days, they ended up engaging with us on a broker record. So now they're close to $120,000 customer. That was just kind of a playbook that we've seen coming for a long time. Now those deals are still early and but it's the exact reason we involved some specialists.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

It's the exact reason we build out the product suite. We want to ultimately be the business owners almost back office, if you will, to allow them to grow. And that would be a case study of what we'd like to see over and over again. So real good progress, but we're early in the movie. We've got them trained up and now we're going to look for the fruits of the labor.

Joshua Reilly
Senior Analyst at Needham & Company

Got it. So that's on the come in terms of some of the benefits still, which is great. How much progress have you made on maintaining HR compliance with customers who have the ERTC and HR compliance bundle? Maybe you could just give some context here for investors on how this dynamic started, how it's playing out and what you kind of see as the end game for working that out for you?

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Yes. I'll let John jump in as well. But a couple of things. First of all, as you know, we have a core competency in tax filing. And we bought that tick tax system out in from a purchase in 2020 and kind of in the middle of COVID.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

We then took that tax filing product and now integrated it to all of Assure. And then when ERTC or the Earned Retention Tax Credit came out, we sold that. And now it's a one time benefit for clients where we were unable to connect them to get money. When we looked at it, we said, okay, we're providing those kind of services. How do we help them over the long term and how do we attach that product?

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

And HR compliance turned out to be, we thought a very good product. Well, typically our average retention rates are close to 90%. But what we did see is we thought the goodwill of earned retention tax credit would stay. When we attached it to HR Compliance, our 90% or so average retention rates went down quite a bit. So what happened was after a year of the services, people really wanted to get their refund and they weren't using the service like our cohort of HRC clients normally.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

So with that, we've now in the second quarter lapped that compare if you will. So the second half, we can already see, in fact, we're starting to see it in April where we're starting many more customers than we're losing. And we think the traditional growth, which over a year even without ERTC went from, call it, 3,000,000 to a little over 8,000,000 We think we'll be back on track with a strong second half and then in the third or in 2026, we'll grow double digits. So that's how we see it play out. The worst is over from that cohort and the cohort of just bundling in with our repetitive products, we see an advantage.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

In fact, we just had a very strong end of the first quarter and just bundling with the sales specialists our products. I don't know, John, if you have anything you want to add.

John Pence
John Pence
CFO at Asure Software

Yes. I think you did a good job there, Pat. I think from my perspective, at the height of the ERTC sales efforts back probably Q4 of twenty twenty three, we peaked in HRC. And so I think what I tried to highlight in my prepared comments was that is a little bit of headwind into the growth of the overall business. But to Pat's point, we're kind of back to the pre ERTC levels and the run rate of that business. And so the hope is that now that, that compare is gone, you'll see some of that the growth come back in, in the back half of the year there.

Joshua Reilly
Senior Analyst at Needham & Company

Got it. Very helpful. Thank you, guys.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Thanks, Josh.

Operator

Our next question is from Eric Martinuzzi with Lake Street.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Yes. I wanted to revisit your commentary, Pat, regarding tariff impact, just kind of a macro high level question. You guys typically serve the service oriented SMBs. Any slowdown in pipeline based on economic uncertainty there?

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Eric, it's a really good question, and I'm looking for it because I read the news every day. And if I listen to CNBC, I'm ready to jump off a bridge here. But Main Street America, we feel pretty good about that. We modeled I'll just remind you, we modeled about flat employment. So we don't have anything heroic in the assumptions.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

We modeled a couple of rate cuts and we'll see how that plays out in July and October. But as far as sales cycles, the pipeline has been up. MQLs and SQLs are up quite a bit. Sales productivity was good. I would say maybe deals have lengthened a bit on pipeline.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

But as we drill into it, I don't see anything abnormal or not. I do think there's probably a question later in the year as people work through inventory etcetera and the tariffs really kick But as far as our customer base in small businesses, we don't have anything aligned super strong to government contractors and stuff like that. So right now, we've seen small business in action. And then in some cases, I was talking to a pretty good customer today that was manufacturing in the heart of Middle America. They're talking about bringing some jobs back and they think they have a competitive advantage because they're U.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

S. Made. So there's some crosswinds around that, but clearly, we're watching it pretty closely.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Got it. Thanks.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Thanks, Eric.

Operator

Our next question is from Charles Nabaughan with Stephens.

Charles Nabhan
Research Analyst at Stephens Inc

Hey, good afternoon and thank you for taking my question. I wanted to ask about some of the investments you were making. I was hoping you could double click on that as well as talk about your product roadmap and how you think about that from an organic and inorganic standpoint. You've come out with some interesting products over the past couple of years, including Assure Pay. So just curious what next and how you're thinking about the road ahead from product standpoint?

John Pence
John Pence
CFO at Asure Software

Yes. I think we've been pretty transparent, this is John, on kind of the strategy. We knew kind of going into last year, we had a couple of gaps we felt in the overall suite. We acquired the broker record business and got fully licensed into the third quarter, beginning of fourth quarter of last year. So that's pretty nascent business. But the example that Pat rattled off, I mean, just shows you that the effect of being able to sell insurance into this base. And it's a pretty kind of greenfield opportunity.

John Pence
John Pence
CFO at Asure Software

The applicant tracking, obviously, is a front end of the hiring process, right? So we've rounded off that part of the suite. So we really feel like we're getting to a point where we've got a very, very compelling, robust solution. One other thing, again, that you touched on, too, there's a movement. I IRS that's saying that they are going to quit cutting paper checks at kind of fourth quarter of this year.

John Pence
John Pence
CFO at Asure Software

So I think there's a movement to get away from paper checks. Right now, in our customer base, we have just in our direct customer base, probably 40,000 people a month that get paper checks still. So Assure Pay really, really ties into that. So if you're an unbanked individual or you have a way to get your pay quicker in a vehicle to move it around a lot easier than having to go and deposit a paper check. We think there's some compelling solutions there.

John Pence
John Pence
CFO at Asure Software

So that's on kind of just the near term products. We're going to always kind of keep an eye on the resellers. And I mean, that's a key part of the strategy. Because I think about it, these are already our customers. We just have an intermediary between us, right?

John Pence
John Pence
CFO at Asure Software

So you have another business that's servicing them. So when we can bring these customers into our ecosystem, it goes back to the points that Pat was making earlier. We can start to have our sales team go in and start to attach other products. And again, that's it's all kind of hopefully ties together. We're building out the products to cross sell into the base.

John Pence
John Pence
CFO at Asure Software

We're trying to add the base, go bad more price into the base and that's kind of the circle that we're trying to create.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Yes. And Charles, the only thing I'd add to that is everything we look at, it's build partner buy. We decided to buy in the case of broker record in the recruiting. From a partnership perspective, at SurePay, we have gone with a partner but we have the rights to the source code. And then the only other thing I'd talk about and it really ties into the second half of the year and is we do have operational efficiency in our technology.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

We're rolling out internally a client lifecycle management where a customer can manage through the lifecycle. So what that means is today you have different either departments or different people involved. It could be a credit check. It could be AML, BSA. It could be just entering in the POAs for tax filing.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Well, now more and more we'll let the client be able to do that or if we do it, we have validation on the front end where we know what good looks like and it doesn't enable us to go forward unless we have the right stuff. So what that means is it cuts down on rework, it cuts down on kind of people getting involved in the process and it increases our scale. So we're investing quite a bit. We think we have a really strong development team. And as we continue to roll out Assure Central, now that we rolled out Assure ID, now we get to know like if you come into system what products you have and which ones you don't have.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

And now we can kind of drive towards event driven marketing where we have the ability to get to you about a product or a service when that event qualifies you for it. So for example, if you had 20 employees and you're COBRA, you have to provide COBRA by law, we'll offer to do that for you. So those are some of the things we'll work on. We're pretty excited about it. We've worked towards this for a couple of years and we think it's paying off already and it will continue to pay off dividends for us a long time to come.

Joshua Reilly
Senior Analyst at Needham & Company

Right. Super helpful color. I'll hop back in the queue. Thank you, guys.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Thank you. Thank you.

Operator

Our next question is from Jeff Van Rhee with Craig Hallum.

Daniel Hibshman
Research Analyst at Craig-Hallum Capital Group LLC

Hey, this is Daniel Hibschmann on for Jeff Van Rhee. Thanks for taking my questions guys. Just on the acquisitions and the M and A vision, I believe it was two in the quarter, just wanting to confirm that. And then looking forward, how should we be thinking about this with the new credit facility? This is going to be a sort of a similar cadence to 2024, accelerated, decelerated, just in terms of the appetite and the opportunity there relative to 2024 where M and A is headed?

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Yes. No, I appreciate it. I'll let John jump in on the facility. But just in general, we're pleased to get that done in April. I think for us year end is a pretty tough part of the year.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

I do want to confirm as telegraphed on last call, was two acquisitions in the first quarter. I think you'll see acquisition cadence ramp up here in the second half of the year. We have a pretty good pipeline. Just based on the timing of payroll and sometimes the business of year end where volume is pretty heavy, you'll see second quarter to be a little bit light. But third, fourth quarter, I think you'll see strong.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

And then with the facility, we have the ability to go after the deals we want to go after. I kind of very pleased. Think sometimes there's a little bit of pause on the macro. But all in all, pipeline is good. We'll continue to grow.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

We have the people, the technology in place to execute and we're pretty far along. I don't know, John, maybe if you want to talk about the facility or the pipeline.

John Pence
John Pence
CFO at Asure Software

Yes. Mean, facility, we took down $20,000,000 at the close, and it has the flexibility for us to go up to 60 Pat's been pretty clear. I think we're all pretty clear. We want to get bigger quicker, and this is going to give us the flexibility to do that. So we have a healthy appetite.

John Pence
John Pence
CFO at Asure Software

We think we have a healthy pipeline. Obviously, nothing to telegraph that we have ready to announce, but we put the facility in place to give us the flexibility to go quicker, not slower.

Daniel Hibshman
Research Analyst at Craig-Hallum Capital Group LLC

Great. That's helpful. And then just in terms of the tax deals, which seem like they continue to be some of the biggest opportunities like Venture. When we're looking at how that's going to ramp into revenue and just the opportunity there, what's the best thing for us to be watching? Is contracted backlog in the next twelve months, deferred revenue bookings?

Daniel Hibshman
Research Analyst at Craig-Hallum Capital Group LLC

Just how should we be thinking about that hitting? What are sort of the forward indicators? And what will sort of be the size of that ramping?

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Yes. First of all, contracted backlog has grown a bit. And I think the percent within the year has grown as well. So I think for now, we have $82,000,000 I think we're something like 31,000,000 in this year. That's up and will continue to be up.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

So that is an area. And then some of these bigger, whether it's Venture, Astrada, they are phased installations and some of the PS work is being done and there will be some add on work over time here. And then I we announced that we had a large accounting partner. We've gotten a couple of small deals and those are really to test the model. And I think the second half, you'll see bigger opportunities.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

But we'll let you know each quarter. I think the backlog is one tell. John, I don't know if you have any other thoughts.

John Pence
John Pence
CFO at Asure Software

Only thing I was going to suggest, maybe not everybody in the call is as intimate with the industry as you are or we are. Maybe give a little color about Venture and Strata, just so they kind of get a sense as to kind of what who those partners are?

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Yes. Strata is a good example. They're a the former Hewitt Associates are alike. They have customers that are kind of big enterprise customers on Workday, Oracle, SAP. They've gotten four customers live now with us.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

They'll continue to grow throughout the year. The nice thing about that is we go to those enterprise customers direct and then we have a solution set with jointly with Strata that we will continue to phase out through the year and really strong opportunity and feel good about the partnership. Venture is a private company. It's actually, it's funny. They're a little bit like us in the sense that they serve about 2,300,000 employees.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

They have a reseller network similar to us. And they have gone live with us here and will continue to grow throughout. They have an ASO business, which is kind of a payroll HR business in addition to a PEO business. And so we're excited with the opportunity to serve them and it's gone very, very well. And then if you think about payroll companies, a lot of them will contract with other tax filing companies.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

We're unique in the sense that we're a payroll company that does tax filing, but we also do tax filing for 27 other payroll companies. I think you'll see us lean into that model more and more. We're talking to some pretty good sized payroll companies where they want somebody that knows payroll and they don't necessarily want to compete with them. So if you think about where we are in the mid market or the enterprise space or even the PEO space where the PEO we don't play, other companies like that are wanting to talk to us about back end tax filing because we know what good looks like with the 14,000 U. S.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Agencies that are locally that you have to pay and remit your funds and you have to do your filings. The 50 states. We have a CAF connection into the IRS. And so we're unique in that aspect that we built this out and we see this as tremendous opportunity going forward.

John Pence
John Pence
CFO at Asure Software

Yes. And I would add,

John Pence
John Pence
CFO at Asure Software

I mean, Pat talked a little bit about the customer lifecycle management as an example. That's a tool that we've built for our own internal use. But the way our dev team built it, it's actually a product that can be sold to other customers. They need the same solution that they're going to service their customers. So the way we've architected and we've done the same thing on some refactoring of our calc engine, we've just created a lot of products that serve us and our customers, but also kind of allow for an extension to an embedded strategy, right?

John Pence
John Pence
CFO at Asure Software

So say, for example, I'm going to be in a vertical and I want to be the be all, end all ERP solution for our plumbers. We can incrementally add functionality that they don't need to go do in our area of expertise and kind of be behind the scenes, almost like I think about it like the source of truth in sales tax is Avalara. I I think we're trying to create solutions to where we can be invisible and be in a lot of different situations and you won't necessarily know it's us in the background.

Daniel Hibshman
Research Analyst at Craig-Hallum Capital Group LLC

That's helpful. Thanks, Pat. Thanks, John.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Thank you.

Operator

Our next question is from Greg Gibas with Northland Securities.

Greg Gibas
Vice President & Senior Research Analyst at Northland Securities, Inc

Hey, good afternoon, Pat, John. Thanks for taking the questions. Kind of from a high level, I wanted to just see if you could discuss or I guess go over the primary drivers of your expectations for accelerated year over year revenue growth in the back half of the year. Is it primarily attach rate and cross sell driven? I know that there's some impact from ERKC in the first half, but what kind of gives you confidence in the full year outlook?

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Yes. Thanks, Greg. First of all, ERTC, we talked about the cohort that was attached to human resource compliance consulting. That's definitely going to grow in the second half. We see that already.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

The contracted backlog has been growing and the second half story, this partner we talked about with accounting, the first four deals here are starting this quarter. We'll see bigger deals in the second half of the year. Where we are on first of all, our cross sell attach rates. Our attach rates are going up. I gave you the example around kind of broker record as well as HRC and four zero one attach rates.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

So some of those in the sales team's momentum, we feel pretty strong about that. So it's a combination of the sales team ramping in a big way, the backlog hitting the beach in the second half of the year, Some of our partners, John outlined some of the embedded strategy, we feel pretty good about. And then just a reminder that none of that includes acquisitions, which we just got a facility for. So I think you'll see some pretty good movement, and we feel good about what we're doing.

Greg Gibas
Vice President & Senior Research Analyst at Northland Securities, Inc

Great. That's very helpful. And if I could follow-up. As it relates to the hired the hiring of additional staff and the other investments in infrastructure that you mentioned to support these enterprise deals, how much, I guess, of that of these increased costs are reflected in Q1 versus anything that is maybe to come or isn't fully reflected in financials yet?

John Pence
John Pence
CFO at Asure Software

Yes. So I think, again, we mentioned this last call, we probably have an inflection point in the first quarter of cost. We're going to try to run a business with roughly the same headcount we entered the year with, and that's the biggest driver of our cost structure, right? It's our employees and those employee dollars. So I think we had a little bit of a spike in the first quarter.

John Pence
John Pence
CFO at Asure Software

We think it will kind of get normalized back down to that kind of headcount range for the balance of the year. And so that gives us, again, relatively flat to down cost structure for the back half of the year with increasing revenues. So that's the impetus for the flow through. So if the revenues come, we think the cost structure will produce those kind of EBITDA margins in the back half.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

And if you think about kind of we telegraph some of these deals that are relatively new to us, whether they're acquisitions around broker record or recruiting or they're some of the tax deals that we talked about, you don't bring some of the customers that we're talking about going live with new people. So what you want to do is a higher ahead of the revenue. We've done that over the second half of the year and the first quarter. Now that we have those people in place, now we have the opportunity to position and grow with scale. And as the revenue continues to grow, we can grow without adding headcount because those areas of growth areas of the business that we didn't have headcount in place, we now have.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

So I think you'll see a lot of expansion in the model. This is what we've telegraphed all along. Our long term plan or mid term plan 180,000,000 to $200,000,000 with 30% plus margins on how we define it as adjusted EBITDA. We're right on track to doing that. This will be a good proof point by the end of the year.

Greg Gibas
Vice President & Senior Research Analyst at Northland Securities, Inc

Got it. Very helpful. Thank you.

Operator

Thank you. Our next question is from Vincent Colicchio with Barrington Research.

Vincent Colicchio
Managing Director at Barrington Research Associates

Yes. Pat, can you provide more color on the Canada tax product? For example, is there an early pipeline? What does competition look like as well?

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Yes. Actually, it's interesting, Vince. I appreciate the question. Already, first of all, some customers that we had come in from Strata and Venture, they had Canadian tax. So if you think of Strata in the case, those are enterprise customers.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

They had North America footprint. We could provide historically The U. S. Taxes. Now we can provide Canada.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

And then the venture PEO group, they had a Canada PEO and we have turned on that capability for them as well and their clients. And then some of our clients have a lot of them are very close to cross border, pretty good opportunity there. So and what I love about it too is we have a kind of a look and feel, the design with the team around Canada, it's a very modern look and feel. It's one that will continue to grow out throughout the organization. So pretty strong pipeline.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

We've already had some inquiries on it from just we haven't ventured into Canada yet compared to where we were and already people are asking us and then we already have a ready made client base that is turning this on. So really pleased with development organization and the capability here.

Vincent Colicchio
Managing Director at Barrington Research Associates

And then lastly, any updates on the competitive environment?

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

No, think what I would say is, I think from what I saw and have been seeing, think our new engagements were really strong in the first quarter. Our pipeline and close rate was really good. Sales cycles maybe five to seven days elongated, which in each segment has different kind of avenues. The enterprise space we watch closely just based on our tax deals and where we're at there. But interest level is very, very high.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

I do monitor it just based on some of the volatility of situation. But from kind of our bread and butter marketplace, there's no change in the competitive environment.

Vincent Colicchio
Managing Director at Barrington Research Associates

Thanks, Pat.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Thank you, Vince.

Operator

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Pat Goeppel for closing comments.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

Yes. Well, we got another quarter in the books. Really appreciate you guys listening in on the journey. We do think it's a journey that has a lot of upside and a lot of the heights of which we haven't reached yet, but we will and are. And it's kind of a fun story for me to be involved with as we continue to make progress.

Pat Goepel
Pat Goepel
Chairman and CEO at Asure Software

And we really appreciate your interest along the way and your investment along the way. So until next time. I know Patrick mentioned we have some pretty good investor outreach here over the next quarter and look forward to talking to you soon.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Executives
    • Patrick McKillop
      Patrick McKillop
      VP - IR
    • Pat Goepel
      Pat Goepel
      Chairman and CEO
    • John Pence
      John Pence
      CFO
Analysts
    • Joshua Reilly
      Senior Analyst at Needham & Company
    • Eric Martinuzzi
      Senior Research Analyst at Lake Street Capital
    • Charles Nabhan
      Research Analyst at Stephens Inc
    • Daniel Hibshman
      Research Analyst at Craig-Hallum Capital Group LLC
    • Greg Gibas
      Vice President & Senior Research Analyst at Northland Securities, Inc
    • Vincent Colicchio
      Managing Director at Barrington Research Associates
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