Asure Holds the Payroll Record for 100 Thousand Small Employers but Owners Kept 1 Million Dollars

Owner cash after capex and all stock pay

$1.0M

Twelve months ended Sep 30, 2026, our calculation

Owner cash as a share of revenue

0.6%

Twelve months ended Sep 30, 2026, our calculation

Recurring revenue growth

16%

Quarter ended Sep 30, 2026, company figure

1. Our call: Avoid, because six years of growth have left owners with almost nothing

Our call: Avoid. Asure Software sells cloud payroll, payroll tax, time and attendance and human resources software to small and mid-sized employers, directly and through Reseller Partners who sell it under their own brands ^[1].

Its solutions serve more than 100,000 clients across the United States, about 35% of them direct ^[1].

Revenue is growing. Third quarter 2026 revenue rose 10% to $40.0M and recurring revenue rose 16% to $36.9M ^[2].

The company guides fiscal 2026 revenue to $162.0M to $164.0M and fiscal 2027 revenue to $183.0M to $187.0M, including an October 2026 purchase ^[2].

Owners have not shared in it. Over the twelve months ended Sep 30, 2026, operating cash flow was $24.1M, capital spending including capitalized software was $14.9M and stock pay was $8.3M, leaving $1.0M of owner cash, 0.6% of $159.2M of revenue, our calculation from SEC XBRL ^[3][7].

Across fiscal 2020 to 2025 owner cash added up to minus $8.8M, before any cash spent buying businesses and client lists, our calculation ^[7]. In fiscal 2025 alone those purchases took $53.2M

2. Asure books little research expense but capitalizes most of its software spending

2b. Asure keeps the payroll and tax record, but resellers own most of the client relationships

Asure collects client money before payroll and tax due dates and holds it, typically for 1 to 30 days and sometimes up to 120 days, earning interest that it books as recurring revenue ^[1]. Funds held for clients were $194.7M at Sep 30, 2026 ^[3].

One pass and three partials. The strength is that payroll is hard to switch mid-year and the tax record is sticky ^[1].

The weakness is that the end client usually belongs to a reseller, and Asure says it plans to keep buying those resellers' businesses, which costs cash and shares ^[1][6].

3. Revenue has more than doubled since 2020, much of it bought

Fiscal 2020 revenue was $65.5M, so revenue has grown about 2.4 times since then, our calculation ^[7]. In fiscal 2025 alone Asure paid $37.5M in cash for businesses and $15.7M for client lists and other intangible assets ^[7].

The 10-K describes the 2025 purchases as adding clients and products ^[1].

Organic growth is lower than the headline. The chief executive said third quarter revenue rose 9% and recurring revenue 14% organically ^[2].

Nine-month revenue rose 18% to $119.9M, helped by businesses bought in 2025 ^[1][3].

Professional services, hardware and other revenue jumped 149% to $13.3M in fiscal 2025, mainly from time and attendance hardware, then fell to $3.1M in the third quarter of 2026 from $4.4M ^[1]

4. New channels and a unified platform are the growth plan

In the third quarter Asure made its Payroll Tax Management product available on Oracle's marketplace and agreed to sell through Amazon Web Services Marketplace ^[2]. It also launched AsureCentral, a unified platform, to its reseller network, and the first resellers went live in September ^[2].

The company says the reseller network reaches about three times as many employers as its direct business ^[2]. That is its own estimate and the release does not give a count ^[2].

On Oct 15, 2026 Asure bought the assets of a payroll processing business in the southeastern United States for $26.5M: $13.5M of cash, a $3.0M note and 1,206,141 new shares valued at $10.0M ^[6]. The release says it adds mid-market clients and technology Asure will use to update some products ^[2].

5. Gross margin rose sharply as the hardware mix fell

GAAP gross profit was $27.8M in the third quarter, 69.6% of revenue, against 64.9% a year earlier, our calculation ^[3]. Cost of sales fell to $12.2M from $12.7M while revenue rose ^[3].

Adjusted EBITDA, a company measure that leaves out stock pay and other items, was $10.5M in the quarter against $8.1M ^[2]. The company guides fiscal 2026 adjusted EBITDA to $40.0M to $42.0M and a 26% to 28% margin in fiscal 2027 ^[2].

That figure also ignores capitalized software and client list purchases, which is why we do not use it ^[3][7].

Amortization of intangibles was $18.3M in fiscal 2025, more than three times research expense, a sign of how much of the business was bought ^[1]. Interest expense rose to $5.1M from $1.0M after the 2025 borrowing ^[1].

6. Owner cash has hovered around zero for six years

Capital spending here is purchases of property and equipment plus capitalized software, which was $13.7M in fiscal 2025 ^[1][7]. Stock pay is the full expense from the cash flow statement ^[3].

The table leaves out client list purchases, which we treat as acquisitions ^[7].

Including acquisitions, the picture is worse. In fiscal 2025 Asure paid $37.5M for a business and $15.7M for intangible assets, so owners were short about $53.2M after all of it, our calculation ^[7].

In the first nine months of 2026 it paid $4.7M for intangible assets and no cash for businesses, before the October purchase ^[3][6].

The bull case is that the trend is improving: operating cash flow rose from $9.4M in fiscal 2024 to $22.2M in fiscal 2025 and $24.1M over the latest twelve months

7. The share count keeps rising and the company just borrowed more

Cover page share counts rose from 25.5M in February 2024 to 30.2M in October 2026, up about 18%, our calculation ^[7]. The October 2026 count includes 1,206,141 shares issued for the payroll business purchase ^[6][7].

On Oct 15, 2026 Asure signed a credit agreement led by MUFG Bank for up to $115M, drew an $85.0M term loan and used about $62.6M to repay its MidCap Financial loan in full, including $2.4M of prepayment and termination fees ^[6]. The initial rate was 7.04%, SOFR plus 3.00%, and the loan matures on Oct 15, 2031, which pushes out refinancing risk ^[6].

Before that refinancing, notes payable were $64.7M at Sep 30, 2026 and cash was $16.8M ^[3]. The new term loan, plus the $3.0M seller note, means debt rose after the quarter while owner cash stayed near zero ^[6].

8. The main risks are larger rivals, resellers, interest rates and buying growth

Asure's named competitors include ADP, Paychex, Paycom and Paylocity, which are much larger, and the 10-K lists vendors with face-to-face sales forces among its competitive challenges ^[1]. Small employers are also the clients most likely to try cheaper, self-serve payroll ^[1].

The 10-K says Asure plans to keep buying Reseller Partners' businesses and warns that such purchases could be hard to integrate, add unknown liabilities and dilute holders ^[1]. The October 2026 deal used both shares and new debt ^[6].

The bull reading of these deals is that buying a reseller's client book turns indirect clients into direct ones, which improves Asure's hold on the connection ^[1]. The filings do not disclose how many clients moved from indirect to direct, so we cannot yet test that ^[1][3].

Interest on client funds is part of recurring revenue, so lower short-term rates would reduce revenue with almost no offsetting cost ^[1]

9. With owner cash near zero, there is nothing yet to value

Owner cash of $1.0M over the latest twelve months and minus $8.8M across fiscal 2020 to 2025 leaves no positive base for owner value, our calculation ^[3][7]. The equity story rests on adjusted EBITDA, which leaves out the costs owners actually bear ^[2][3].

Net debt was about $47.9M at Sep 30, 2026, notes payable less cash, and rose after the October refinancing and purchase, our calculation ^[3][6]. Goodwill and intangibles were $195.1M against $197.4M of equity ^[3].

Our base case is revenue growth of 12% to 15% a year, much of it bought, with owner cash staying below $10M a year while acquisitions continue, our estimate ^[2][3][7]

10. Agents that run payroll still need tax filing and funds handling, but not necessarily Asure

Payroll is a strong checkpoint because each run moves money and creates a tax filing ^[1]. Asure holds both for its clients and earns interest on the float in between ^[1].

But a software agent running a small business could pick any payroll provider that exposes clean interfaces, and the larger rivals have more scale to build them ^[1]. Asure's move onto Oracle and Amazon marketplaces is a step toward being found by software buyers, not just resellers ^[2].

A clean test is whether the tax product wins listings on more third-party platforms in 2027, since each listing puts Asure inside someone else's workflow rather than relying on a reseller to bring the client ^[2]. Another is whether float income holds up if short-term rates fall, because that income needs no extra work from Asure ^[1].

We will check both in the fiscal 2026 10-K.

The gate would widen if Asure's Payroll Tax Management became a default tax engine inside other platforms ^[2]. It would narrow if resellers or rivals took that role ^[1].

11. A chief executive who has run Asure since 2009 and also chairs the board

Patrick Goepel has been chief executive since Jan 1, 2010 and a director since 2009, and he is also chairman ^[4]. He earlier ran Fidelity Investments' human resource services division ^[4].

Eyal Goldstein is president and chief revenue officer, having joined as revenue chief in December 2016 and become president in August 2020 ^[4]. John Pence is chief financial officer and corporate secretary and also signs as principal accounting officer ^[3][4][5].

Daniel Gill is lead independent director ^[4].

Private Capital Management held 14.8% of shares in the proxy, Needham Investment Management 8.7%, Calm Waters Partnership 7.1%, Janus Henderson 5.9% and BlackRock 5.1%; Goepel held 5.0% and directors and officers 8.9% as a group ^[4].

At the May 12, 2026 meeting director Bjorn Reynolds had 2,336,410 votes withheld out of 23,018,379 cast, 10.2%, and Goepel 4.5%, our calculations ^[5]. Reynolds founded and runs SafeGuard World International, a payroll company that licenses Asure's software, and Goepel sits on SafeGuard's board

12. The questions we would ask management, and the calls we are tracking

Question one: when will operating cash flow exceed capitalized software plus stock pay by more than $10M?

Question two: how much revenue came from interest on client funds in fiscal 2025?

Question three: what does SafeGuard pay Asure each year, and how was that reviewed?

Question four: how many more reseller businesses will you buy, and with shares or debt?

Question five: what organic growth rate is in the fiscal 2027 guide? That answer sets our conviction.

Prediction one: fourth quarter 2026 revenue lands inside the $42.0M to $44.0M guide (70%).

Prediction two: fiscal 2026 owner cash, as we define it, is below $5M (75%).

Prediction three: shares outstanding on the next 10-K cover are above 30.0M (85%).

Prediction four: Asure announces another business or client list purchase above $5M by Jun 30, 2027 (60%).

Prediction five: fiscal 2027 revenue lands inside the $183.0M to $187.0M guide (55%).

Filing notes. SafeGuard World International is described in the director biographies as a licensee of Asure's software, with Reynolds as chief executive and Goepel on its board, and Reynolds serves on the audit committee ^[4].

The MidCap payoff included $2.4M of prepayment and termination fees ^[6]. Asure issued shares at $10.0M in value for the October purchase ^[6].

Bottom line: Asure holds the payroll record for small employers, but owners have not been paid for it

Asure grew recurring revenue 16% in the third quarter and holds the payroll and tax record for more than 100,000 clients ^[1][2]. But after capex and all stock pay owners kept only $1.0M over the latest twelve months, the share count is up about 18% since early 2024 and growth leans on purchases funded with shares and debt ^[3][6][7].

We would move to Hold off if twelve-month owner cash exceeds $15M while the share count stays flat, and to Buy only if that holds for a full year with organic recurring growth above 10%. A rate cut that sharply reduces float income, or another share-funded purchase, would harden the call.

Our call: Avoid, conviction 3 of 5.