Good morning. Welcome to Asure Software Second Quarter 2017 Earnings Conference Call. Joining us for today's call are Asure's CEO, Pat Goepel and Director of Human Resources, Cheryl Trbula. Following their remarks, we will open up the call for your questions. But first, I would like to turn the call over to Cheryl, who will provide the necessary cautions regarding the forward-looking statements made by management during this call. Please proceed.

Thank you, Operator. Good morning, everyone. Before we start, I would like to mention that some of the statements made by management during this call might include projections, estimates and other forward-looking information. This will include any discussion of the Company's business outlook or guidance. These particular forward-looking statements and all other statements that may be made on this call that are not historical are subject to a number of risk and uncertainties that could affect their outcome. You are urged to consider the risk factors relating to the Company's business contained in our reports on file with the Securities and Exchange Commission. These risk factors are important and they could cause actual results to differ materially from expected results. Finally, I would like to remind everyone that this call will be recorded and it will be made available for replay via a link available in the Investor Relations section of our Web site at www.asuresoftware.com. With that, I would now like to turn the call over to our CEO, Pat Goepel. Pat?

Thank you, Cheryl. And I’d like to welcome everyone to our second quarter 2017 earnings call. We certainly appreciate your continued support, and whether you’re an employee, a client, an analyst, an investor, or third party partner, we sure appreciate your interest in Asure. Second quarter was a continuation of the same growth and operational momentum we’ve achieved over the last several quarters and years, and it certainly was an eventful quarter; we did two acquisitions, a capital raise, amended our financial bank agreements, so certainly a busy quarter for us. But we’re especially pleased with our top line double-digit growth was at $12.9 million for the quarter. And what was really encouraging was the increase of 64% of our cloud revenue. That’s revenue that’s going to continue to roll forward, and we’re very pleased with that result. We had a 22% increase in hardware revenue and our cloud revenue, as a percentage of total revenue for the second quarter, was 69%. And if I look at last year in the second quarter, we had 56% as cloud. So clearly, we’re on our path for the same success in the cloud arena. I am confident, though, our cloud bookings were just outstanding. We were up 174% from Q2 last year. Not only were we driven by HCM bookings, but also some big space bookings as well. As many of you know, migrating our existing clients to the cloud has been a major initiative for us and we’ve seen very good results in that area. When we migrate a legacy customer, we get about 2.2 times revenue when they go to the cloud. And that is one clear way that we’re positioning Asure for long-term success. And our legacy business is down roughly $4 million a year, so clearly, big momentum…

Thank you [Operator Instructions]. And our first question comes from Richard Baldry from ROTH Capital. Your line is open.

Can you maybe talk, if your [indiscernible] for ’18 works out, you'll be roughly at 3 times the size you were exiting '18 as we were starting '16. So with that backdrop, can you talk a bit more about the management changes? How you feel about the team you have in places? Are there other roles, maybe new roles that you're looking to feel as you’ve really broadened the revenue base of the Company? Thanks.

I've been fortune enough to run a couple of billion dollar divisions in this space of Ceridian and Fidelity. And as a young company growing, I'm really excited about the talent that we're attracting; Eyal Goldstein as our Chief Revenue Officer, who we inquired in December, is just an outstanding executive; Joe Karbowski who’s been with me since 2012 as the CTO, who now also plays the COO role, is done just phenomenal job and is well liked by clients and employees alike. We did see Christine Bellaire come over from Advantec where she's used to work with me in a PEO, has done a great job at Tampa. We have Web Hill that we're able to attract from Ceridian, and he's leading our Burlington initiative. We're able to bring over some great people from the acquisitions. And we've done that in the past. And Joe and among others with the PeopleCube acquisitions, are still with us today and thriving in their roles. And so it's a model we’ll use going forward. Bob Diez coming from IBM, and has long history in the consulting area. So quite simply put, I'm really happy with not only on first level management but our second level management, as well. And I believe we'll continue to look for talent as we grow, but what they talking now, is all about getting our talent focused and getting to that $100 million objective and then going to the next objective after that. So feel like we have the right people and right team in place. We have a really quality finance staff. We do need a leader now as the CFO and that will be my number one focus. I do anticipate that we'll have [indiscernible] probably in the chair somewhere around October 1st. We're going be -- we're not in a rush to sign the right person, but we want that right person because we think we have the right footings to scale this business in a big way.

And maybe talk about the sales side of this, how much your pipeline is increasing pretty fast. Do you feel like you need to hire organically that you supporting that? Do you think that you made some acquisitions, your acquisition pipeline will bring in headcounts you'll need. So is not as much need to hire there organically, how do we think about that?

No, I think it was a good question. I mean I think we're looking at acquisitions as part of our growth strategy; one, we think we have incredibly efficient acquisition model, because we already own the technology. We do think that there’s some people that we're talking to that would help the organization. We’re also looking at peoples’ networks to hire proven sales professionals. We’d love to see our sales force continue to build out as we’re getting success. By the same token, we don’t want to get ahead of ourselves. So that combination of internal growth as well as acquisitions I think we’ve laid it out how we’re thinking about it internally, and we’ll continue to look to top grade talent and increase sales people as we go forward. And one of the things is it’s a little bit above this call, I could go to an analyst meeting or go to a conference and then offer free beer I couldn’t get five people to show up three years ago, and now I have a lot of people interested in Asure. It’s the same way with potential sales people. When you have a little success people want to join you and be part of the organization. So we will look to hire opportunistically through the back half of the year.

Thank you. Our next question comes from David Hynes from Cannacord. Your line is open.

Pat, I wanted to ask about the M&A pipeline. So when you did Mangrove and iSystems, I’m sure you pretty quickly identified those folks were likely to be the first movers in terms of the SBOs ready to cut over to Asure. My question, I’m curious what you can do today and how you’re thinking about cultivating that next level balance of M&A opportunities, and those that might impact the business in ’19 and beyond?

I think that’s a great question, David. And again, thank you for the recent conference I was at that was an excellent conference. What we’re doing right now is we’re talking to everybody. And the nice thing about it is we want to grow our partners, in general. So whatever they need, cross-selling opportunity, benefit capability, HRA capability, we’re trying to furnish them to help them grow. And clearly, we have a pipeline that we feel really good about for early ’18. And one of the objectives was to not to grow too quickly this year because we want the organization to settle now with the two acquisitions. But I think you’ll see some movement in January, if not before. And then around back half in ’18 and ’19, we are ready have identified it's almost like an airplane runway, if you will. We’ve identified some of those folks as well, and they’re just logical extensions and growth conversations that we’re having. And what I would say is if you do the right things, good things will happen. And I believe our organization is doing the right things right now. We’re building really good relationships. We’re starting to understand them. And by the way, if we help them grow we’re going to grow, which is a win-win. And if they decide in some cases they want to exit based on a life event or based on where they’re at in live that will help us too. So either way, we feel blessed that we’re developing really good relationships with a good pipeline, both organically and with acquisitions.

And then a couple of nice space wins in the quarter. Just remind us of the implementation cycles there? How long those deals typically take before they start contributing to the numbers?

I think on Fannie Mae, you’ll see for sure some implementation dollars and some SaaS related dollars in ’18 -- in ’17, and then you’ll see them in ’18. I think some of the hardware you’ll see in ’17, as well as the beginnings to cloud revenue, certainly, by ’18, I’ll call it, certainly by July of ’18, I think all of it will be installed. I do think the first phases will get done by October and then the second phase will be done by January with the remaining clean-up, let’s say the first half of ’18.

And then one last one maybe, I assume maybe, it’s tied to those deals, but the uptick in receivables in the quarter. Was it just the timing of when those deals close and the cash collections are still coming, or how should we think about the cash flow impact?

No, I think that’s a good point. I think the one of the things that we have done, as a SaaS company, is our contracting process. We have adapted a more Evergreen approach, and that Evergreen is allowing receivables to really hit the books almost 60 days earlier than in previous. I think from a cash flow perspective, the second half of the year will give us more cash flow. I think you’ll see that as a result of this process, cash flow or receivables will come down after this one-time spike in receivables, some of it due to acquisition, some of it due to the Evergreen renewal where we’re book and receivables earlier. So I think you’ll see some noise about that right now. But overtime, that cash flow will increase and the receivables will normalize.

Our next question comes from Eric Martinuzzi from Lake Street Capital. Your line is open.

Curious to know on the organic growth rates, I’d really love to know on the cloud revenue side what the organic growth rate was, Q2 versus Q2 or year ago. And if you don’t have it at that level of detail, maybe just the total revenue pro forma analysis of the organic growth rate.

Eric, thank for the question. I should have mentioned in my remarks. I would say there is a fair amount of noise in the number with the Mangrove acquisition and then the five acquisitions this year. What I would tell, legacy business is probably down in the area of 20%. I would say a rough number is our organic second quarter growth was around 10% or so. We hope to normalize that and get a better break-out of that but it’s about 10%. And with legacy we’re decelerating in the area of on-prem, some PS and as well as maintenance and support and we’re increasing cloud. So I would say roughly it’s about 10% organic growth and we’re getting further refinement of that number. But there is some noise in that number.

Just on the -- you talked about the success of Compass versus PSNW and CPI. When you talked about PSNW and CPI last quarter, you were saying that top-line increased over 10% and the EBITDA margins in excess of 50%. You’re saying, you’re getting that exact same flow through on Compass?

No, I wouldn’t say that. What I would say is Compass does have one large contract with us. So I would say we’re getting that same flow through with the exception of that large client. And I do anticipate that that flow through and same profile will happen by January. But for the initial phase of this, we're right on track.

And then just a housekeeping item. Do you have the share count, just wondering where we are right now, or what weighted average share count you're using for the $0.50 to $0.56 for the year?

I believe that's roughly 10 million shares. I can further pick it up, but I'm sure it's almost 10 million shares.

Thank you [Operator Instructions]. And our next question comes from Vincent Colicchio from Barrington Research. Your line is open.

Just a couple for from me here. So have you retained or keep personnel from your recent acquisitions?

Well, I think we have done some planned cuts, but the people that we’ve wanted to retain and thought was very important to retain, we have good relationships and have retained those. So I'm not aware of the fact that turnover rate is probably lower than it has been. And then I think is attribute to our stock ownership plan but we've been able to retain all the right people.

And then service bureau market, has there been any change in multiples at all, or is it just as easy to find your targeted type evaluation as it was a few months ago?

No, I mean, first of all, it's never easy. But I do believe we have a captive proposition for people and we do have the right area of communication, et cetera. So I don't think there is any change at all in multiples.

And I've seen a couple of new competitors -- in the VC-backed competitors in space manager market. Have you seen any of them become meaningful competitors, or not?

I mean, I think there is some -- there are some VC-backed competitors. And I think that’s adding to marketplace, I don't think we're credibly worried about them. But it's certainly a very competitive space and we got do great job every day.

All right, thank you.

Thank you, Vincent. And Eric, for those you -- Eric, share count was 9,980,000 or I said 10 million 20,000 shares short that but that's what was share count. Go ahead for the next question.

Thank you. Our next question comes from Mike Latimore from Northland Capital. Your line is open.

Just on the sales cycle, any general comments on now that's been trending now that you're selling for the full suite?

Mike, I think we're right along at where we want to be. I think sales -- deal size is up and continues to go up in the quarter it was up again another 10% or so. What I would say is the velocity of deals is about the same. So I think we're selling bigger deals, but we're selling them at a higher level in the organization, and that's helping us move through the process even though they're bigger deals. So I would say we're right on pace. I think that figure will become very important in the second half of the year. As you know, January installs are really important in the HCM business. And we have a couple of product innovations that are due here in the August -- end of August to October timeframe. And I wanted to see that number continue to have success. But I’m very cautiously optimistic that we’ll be about the same with average deal sizing going up.

And then the gross margin was very strong again. Is that a sustainable level do you think, or does that move around a little bit?

It certainly moves around a little bit depending on some of the hardware numbers, et cetera. But I would say we’re increasingly getting confident in our gross margin number. I would anticipate we should be fairly close, maybe there’d be a percent compression due to hardware. But we should be in that number.

And then just in terms of the service bureau acquisition opportunities around iSystems. Should we think about that as the multiple being similar, the accretion opportunity being somewhere and then the competitors being similar to what you see in the Mangrove world?

I think so. I would say we’re right in the middle of some conversations now. I think that Mangrove is certainly a good benchmark. And I would say that’s exactly where we want to be, and feel like we can do great job for people in that area. And I think that’s where we’ll end up as far as competitors, et cetera. I think it's the usual suspects and I don’t think it's changed much at all.

And just lastly, the HSBC deal. Can you mention what product that was again, and then is there a land and expand opportunity there as well?

Yes, absolutely land and expand opportunity and research scheduler with some of our panel solutions. And so we’re excited about rolling that out, not only in the countries I mentioned, but worldwide.

Thank you. And I am showing no further questions from our phone lines. I would now like to turn the conference back over to Mr. Goepel for any closing remarks.

Yes, I just want to thank everybody for the conference call and everybody that’s been on it. We take this business very seriously in the second quarter. If you think about what we’ve been really the first half of the year, we’ve had five acquisitions, we’ve had a capital raise, we had a new banking agreement and we’re partnering will Wells Fargo and Goldman Sachs. We were fantastic partners. We have an organic strategy that’s going to grow. We have an acquisition pipeline, and we feel really good about. I really like to thank our people, they’ve done a great job the first half and they’re all into our mission, and I think it's showing. We were little disappointed with the EPS, but when you consider that some of those charges were transaction based and non-cash. Clearly, we have some momentum here going into the second half of the year and we feel blessed that we have the right partners and activity grow this business for quite some time. And we’d like to thank you for your interest and your personal investment into Asure Software. With that, we’ll see you in the third quarter and have a great day.

Ladies and gentlemen, thank you for your participation in today’s conference. I would like to remind everyone that a recording of today’s call will be available for replay via a link available in investor section of the Company’s website. This concludes Asure’s second quarter 2017 earnings call. Thank you, and have a great day.