Asure Software 2026 Q2 Earnings Call

Good afternoon, everyone. Thank you for joining us for Asure's second quarter 2026 earnings results call. Following the close of the market, we released our financial results. The earnings release is available on the SEC's website and our investor relations website at investor.asuresoftware.com, where you can also find our investor presentation. During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors in understanding our business and exclude the impact of certain items. 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.

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'll hand the call over to Pat in a moment, I just wanted to take a moment to remind people of some of our upcoming investor relations activities. On August 26th, we will attend the Three Part Advisors IDEAS Investor Conferences in Chicago. On September 10th, we will attend the Lake Street Conference in N.Y. On September 22nd, we will participate in the 19th Annual Barrington Research Virtual Fall Investment Conference. On November 17th, we will participate in the Craig-Hallum Alpha Select Conference in N.Y. On November 18th, we will attend the Stephens Annual Investment Conference in Nashville, Tennessee, as well as the Roth Conference in N.Y.

On November 19th, we will participate in the seventh annual Needham Virtual Tech Conference. Investor outreach is very important to Asure, we'd like to thank all 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 Goepel, Chairman and CEO.

Pat? Thank you, Patrick, and welcome everyone to Asure's second quarter 2026 earnings results call.

I'm joined on this call by our CFO, John Pence. We will provide a business update for second quarter 2026 results, as well as our updated outlook for the remainder of the year. Our second quarter revenues came in at $37.1 million, representing a growth of 23% compared to second quarter 2025. Our growth was broad-based across our business lines. Our past investments in technology products and AI are showing real returns. Our organic growth rate for second quarter 2026 was 5%, compared with 1% in quarter two 2025, an improvement of 400 basis points and down slightly sequentially compared with 7% in quarter one 2026 due to seasonality.

We continued to receive positive responses to our platform. We believe we will deliver double-digit organic growth as we move through the remainder of 2026 by driving expanded cross-sell of our products and go-lives of previously booked business on our Enterprise Payroll Tax management platform. On the Enterprise Payroll Tax management platform, we're pleased to share an important milestone that was recently achieved. As you recall, we signed an agreement with Vensure Employer Solutions. We are glad to announce that 2 million of their supported employees are now live on our payroll tax management platform. Our pipeline of opportunities remains robust. We're excited about the future. However, for competitive and confidentiality reasons, we are limited in our ability to share details. AsureCentral continued to progress nicely during the second quarter.

We now have a majority of our 30,000 direct clients on the platform, as we forecasted on our prior call. We are increasingly well-positioned to accelerate cross-sells and attach rates through the second half of 2026 and beyond. The number of clients purchasing multiple products increased by 6% versus quarter two of 2025. We remain focused on moving clients from an average of two products per client relationship towards four or more products per client over time. Now, a brief update on AsureWorks, our administrative services outsourcing offering, which allows clients to delegate key payroll and HR compliance processes to Asure. The positive trajectory we saw at launch has continued to grow into the second quarter. Our pipeline keeps growing. We've added new clients. The reception across our target buyer types Small hotel chains, restaurants, HVAC companies, among others, remains very strong.

These are main street businesses that need payroll and HR compliance support, but lack the internal resources to manage it themselves. We're training additional sales reps on AsureWorks every day and building out the dedicated team beyond our original pilot group. AsureWorks remains strategically very important. Clients who adopt managed payroll and compliance services typically represent up to five times the revenue of a payroll-only client. Importantly, AsureWorks is not a PEO model. We're not taking on co-employment risk. For clients constrained by the cost of rigidity of traditional PEO, we believe AsureWorks is a compelling and flexible alternative. On the sales force front, we are working very hard towards our goal of 150 reps by the end of 2026. This isn't just about headcount. We're being deliberate about the types of sales reps we hire. We want full solution sales reps.

People who can sit down with the business owner and sell the entire product suite, not just a single point solution. That's a fundamentally very different skill set than traditional single product selling. It's core to how we drive both our new logo acquisition and multi-product cross-sell within our existing base. Historically, we hired more transactional small business sales professionals suited to selling point solutions. Now, that we're selling the broader platform, and especially with AsureWorks, it's a more consultative needs-based sale, and we've been disciplined about bringing in sales reps who fit that profile. The good news is those reps are ramping faster than what we've historically seen. Today, our existing to new customer logo split is approximately 53% to 47%, which is an improvement from last quarter, and we're still targeting a 35% new logo, 65% base expansion mix over time.

On the M&A front, we did not complete any reseller acquisitions in the second quarter, but we continue to actively evaluate opportunities, and I would expect to see us complete a few deals in the second half of 2026. Our new sales bookings for core human capital management payroll grew 14% over quarter two 2025, and our contracted backlog remains at approximately $80 million. We expect to convert approximately 41% of that backlog over the next 12 months. Our client base, primarily small and mid-sized businesses in payroll-intensive, compliance-driven industries, remains strong. We continue to conservatively model for our clients to have flat headcount growth in our forecast. We haven't seen any meaningful shifts in sales cycle length or competitive intensity during the second quarter. I also want to take a moment to reiterate our thoughts on AI and what it means for our business.

We've discussed this on prior calls, but we feel it's important to remind investors of our view here. Payroll and HR compliance isn't the type of workflow software as a generic AI can replace. We hold money transmitter licenses across the country, interface directly with the IRS and state and local tax agencies, and manage compliance obligations where the margin for error is effectively zero. That regulatory complexity, combined with high switching costs and a consumption-based revenue model, is what makes Asure a system of record and our expertise with enormous moats. At the same time, we continue to see AI as a meaningful accelerator for us as we're already far along in the AI evolution journey.

We witnessed an over 30% increase in platform adoptions with Luna, our AI agent, since the first quarter, and the number of interactions with Luna has increased by approximately 38% versus the first quarter. Additionally, 147,000 voicemail calls have been transcribed and about 196,000 emails have been screened for sentiment analysis, extending our capability to capture sentiment analysis from both voice into email. We continue to replicate the automated Luna-powered model that is generally available for our Canadian tax solution across U.S. payroll, U.S. tax, and HR compliance, bringing our AI capabilities into the flow of work and from human check to AI verified. The same foundation underpins AsureWorks and continues to sharpen our sales intelligence and our support operations. We remain confident in both the durability of our system of record model and the opportunity AI creates for us going forward.

With that, I'd like to turn the call over to John to discuss our quarter two financial results in more detail and provide an update on our 2026 guidance.