What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-07 compared with 2022-08-08 · 74 added, 93 removed, 173 unchanged (49% of the section changed)

1 unchanged sentence

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements about our financial results, which may include expected U.S GAAP and non-U.S.

GAAP financial and other operating and non-operating results, including revenue, net income, diluted earnings per share, operating cash flow growth, operating margin improvement, deferred revenue growth, expected revenue run rate, expected tax rates, share-based compensation expenses, amortization of purchased intangibles, amortization of debt discount and shares outstanding.

The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions.

This Form 10-Q contains forward-looking statements about our financial results, which may include expected or projected U.S GAAP and non-U.S.

GAAP financial and other operating and non-operating results, including, by way of example, revenue, net income, diluted earnings per share, operating cash flow growth, operating margin improvement, deferred revenue growth, expected revenue run rate, bookings, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles, amortization of debt discount and shares outstanding.

The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions, over many of which we have no control.

If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the Company’s results could differ materially from the results expressed or implied by the forward-looking statements we make.

The risks and uncertainties referred to above include—but are not limited to—risks associated with possible fluctuations in the Company’s financial and operating results;

the Company’s rate of growth and anticipated revenue run rate, including impact of the current environment, the spread of major pandemics or epidemics (including COVID-19) and other related uncertainties such as government-imposed travel restrictions, interruptions to supply chains and extended shut down of businesses, reductions in employment and an increase in business failures, specifically among our clients, the Company’s ability to convert deferred revenue and unbilled deferred revenue into revenue and cash flow, and ability to maintain continued growth of deferred revenue and unbilled deferred revenue;

the Company’s rate of growth and anticipated revenue run rate, including impact of the current environment, the spread of major pandemics or epidemics (including COVID-19), interruptions to supply chains and extended shut down of businesses, political unrest, including the current issues between Russian and Ukraine, reductions in employment and an increase in business failures, specifically among our clients, the Company’s ability to convert deferred revenue and unbilled deferred revenue into revenue and cash flow, and ability to maintain continued growth of deferred revenue and unbilled deferred revenue;

errors, interruptions or delays in the Company’s services or the Company’s Web hosting;

breaches of the Company’s security measures;

domestic regulatory developments, including changes to or applicability to our business of privacy and data securities laws, money transmitter laws and anti-money laundering laws;

domestic and international regulatory developments, including changes to or applicability to our business of privacy and data securities laws, money transmitter laws and anti-money laundering laws;

the financial and other impact of any previous and future acquisitions;

7 unchanged sentences

the emerging markets in which the Company operates;

the Company’s ability to hire, retain and motivate employees and manage the Company’s growth;

unique aspects of entering or expanding in international markets, including the compliance with United States export control laws, the Company’s ability to hire, retain and motivate employees and manage the Company’s growth;

changes in the Company’s customer base;

14 unchanged sentences

Asure assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

The following review of Asure’s financial position as of June 30, 2022 and December 31, 2021, and results of operations for the three and six months ended June 30, 2022 and 2021 should be read in conjunction with our 2021 Annual Report on Form 10-K filed with the SEC on March 14, 2022.

The following review of Asure’s financial position as of September 30, 2022 and December 31, 2021, and results of operations for the three and nine months ended September 30, 2022 and 2021 should be read in conjunction with our 2021 Annual Report on Form 10-K filed with the SEC on March 14, 2022.

Asure’s internet website address is www.asuresoftware.com.

15 unchanged sentences

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic.

In response, federal, state and local governments imposed various restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the disease, and certain restrictions remain in place.

Beginning in February 2020, we took various actions in order to minimize the risk of COVID-19 to our employees, our clients, and the communities in which we operate, and in March 2020, we prohibited all business-related travel and began transitioning our employees to work-from-home arrangements.

In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic that resulted in federal, state and local government imposed restrictions that have since been lifte d.

As of June 1, 2021, we have opened our offices and resumed in person work.

We continue to take proactive measures, including regular cleaning of the offices, and monitoring of the Center for Disease Control guidelines for returning to work.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees and clients.

The COVID-19 pandemic disrupted the operations of our clients and client prospects and may continue to do so for an indefinite period of time.

Across many industries, temporary and permanent business closures as well as business occupancy limitations have resulted in significant layoffs and employee furloughs since late March 2020.

Because we charge our clients on a per-employee basis for certain services we provide, decreases in the headcounts of our clients at the onset of the pandemic negatively impacted our recurring revenue during 2020.

We expect our recurring revenue in future periods to continue to be negatively impacted by headcount reductions until employment levels across our client base return to pre-pandemic levels.

Further, at the onset of the COVID-19 pandemic, a limited number of new clients temporarily delayed service implementation.

As the COVID-19 pandemic continues to create uncertainty and the potential for ongoing business disruptions, we may experience similar client-driven delays in service implementation in the future.

We will continue to actively monitor the situation and may take further actions that alter our business operatio ns as may be required by federal, state or local authorities or that we determine are in the best interests of our employees and clients.

In 2022, we continue to aggressively invest in sales and marketing and in research and development to drive future growth and expand our market share.

Lower headcount at our clients and the other pandemic-related factors described above, which had and may continue to have a negative impact on recurring revenue, combined with increased sales and marketing and research and development expenses, cumulatively had an adverse impact on our operating results for the quarter ended June 30, 2022.

Lower headcount at our clients and other pandemic-related factors, which had a negative impact on recurring revenue, combined with increased sales and marketing and research and development expenses, cumulatively had an adverse impact on our operating results for the quarter ended September 30, 2022.

We expect net income to be negatively affected by the impact of the pandemic on our recurring revenue and our deliberate, increased level of investment in sales and marketing and research and development to drive the growth of our business.

2 unchanged sentences

Although we have not experienced such challenges to date, if clients and client prospects are not as willing or available to engage by video conference and teleconference, the shift from in-person to virtual sales meetings could negatively affect our sales efforts, impede client acquisition and lengthen our sales cycles, which would negatively impact our business and results of operations and could impact our financial condition in the future.

The employee retention tax credit (“ERTC”) for 2020 was established under the CARES Act, amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

The Company evaluated its eligibility for the ERTC for the year ended December 31, 2021.

It was determined that the Company qualified for the employee retention credit for each quarter ended in 2021.

As a result, as of June 30, 2021 approximately $10,533 was recognized in Interest (expense) income, net for the ERTC.

We are unable to estimate the full impact the COVID-19 pandemic could have on our business and results of operations in the future due to numerous uncertainties, including the severity of the disease, the occurrence of variant strains, the duration of the outbreak, actions that may be taken by governmental authorities, the impact it may have on the business of our clients and other factors identified in Part I, Item 1A “Risk Factors” in our 2021 Annual Report on Form 10-K.

As a result, the effect of the ongoing COVID-19 pandemic may not be fully reflected in our results of operations and overall financial performance until future periods.

We are unable to estimate the continuing impact the COVID-19 pandemic could have on our business and results of operations in the future due to numerous uncertainties, including the severity of the disease, the occurrence of variant strains, the duration of the outbreak, actions that may be taken by governmental authorities, the impact it may have on the business of our clients and other factors identified in Part I, Item 1A “Risk Factors” in our 2021 Annual Report on Form 10-K.

On September 30, 2021, our subsidiary, Evolution Payroll Processing LLC (“EPP”), acquired certain assets of a payroll business, which were used to provide payroll processing services.

1 unchanged sentence

(i) $15,000 in cash at closing, (ii) the delivery of 523 shares of the Company’s common stock which the parties agreed had an aggregate value of $4,800 as of September 30, 2021, and (iii) the delivery of a promissory note of $4,350.

The face amount of the promissory note was adjusted to $4,533 to account for post close and working capital adjustments.

The promissory note amount as of September 30, 2022 was $4,080 due to a principal payment made during the period.

Also on September 30, 2021, EPP acquired certain assets of a payroll business, which were used to provide payroll processing services.

2 unchanged sentences

The promissory note was adjusted to $2,223 to account for post close and working capital adjustments.

The agreement is subject to a future working capital adjustment to the purchase price.

On January 1, 2022, the Company acquired certain assets of a Reseller Partner, which were used to provide payroll processing services.

4 unchanged sentences

The following table sets forth, for the fiscal periods indicated, the percentage of total revenues represented by certain items in the Company’s Condensed Consolidated Statements of Comprehensive Loss:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

14 unchanged sentences

As a percentage of total revenues, we expect our mix of recurring revenues, and professional services, hardware and other revenues to remain relatively constant.

While revenue mix varies by product, recurring revenue represented over 94% of total revenue in six months ended June 30, 2022, compared to 95% in six months ended June 30, 2021.

While revenue mix varies by product, recurring revenue represented over 93% of total revenue in nine months ended September 30, 2022, compared to 94% in nine months ended September 30, 2021.

Our revenue was derived from the following sources (in thousands):

Three Months Ended June 30, Variance

Three Months Ended September 30, Variance

2022 2021 $ %

2 unchanged sentences

Total 21,903 17,981 3,922 22 %

Six Months Ended June 30, Variance

Nine Months Ended September 30, Variance

2022 2021 $ %

14 unchanged sentences

In addition, we often experience increased revenues during the fourth quarter due to unscheduled payroll runs for our clients that occur before the end of the year.

Over time, we expect the seasonality of our revenue cycle to decrease to the extent clients utilize more of our non-payroll applications, which tend to exhibit less sea

Over time, we expect the seasonality of our revenue cycle to decrease to the extent clients utilize more of our non-payroll applications.

This revenue line also includes interest earned on funds held for clients.

3 unchanged sentences

The amount of interest we earn from the investment of client funds is also impacted by changes in interest rates.

Revenue for the three months ended June 30, 2022 was $20,300, an increase of $3,132, or 18%, from $17,168 for the three months ended June 30, 2021.

Recurring revenue increased due to organic growth.

Revenue for the six months ended June 30, 2022 was $44,633, an increase of $7,663, or 21%, from $36,970 for the six months ended June 30, 2021.

Recurring revenue increased due to organic growth.

Revenue for the three months ended September 30, 2022 was $21,903, an increase of $3,922, or 22%, from $17,981 for the three months ended September 30, 2021.

Recurring revenue increase is primarily due to our acquisitions at the end of the third quarter 2021 as well as organic growth related to our Asure HCM suite of services.

Revenue for the nine months ended September 30, 2022 was $66,536, an increase of $11,585, or 21%, from $54,951 for the nine months ended September 30, 2021.

Recurring revenue increase is primarily due to our acquisitions at the end of the third quarter 2021 as well as organic growth related to our Asure HCM suite of services.

Professional Services, Hardware and Other Revenues

Professional Services, Hardware and Other Revenues represents implementation fees, one-time consulting projects, on-premise maintenance, and hardware devices to enhance our software products.

Professional services, hardware and other revenue increased $190, or 17%, for the three months ended June 30, 2022 from the similar period in 2021, due to the implementation of our ERTC service during 2021.

Professional services, hardware and other revenue increased $959, or 58%, for the six months ended June 30, 2022 from the similar period in 2021, due to the implementation of our ERTC service during 2021.

Professional services, hardware and other revenue increased $337, or 21%, for the three months ended September 30, 2022 from the similar period in 2021, primarily due to organic growth related to HR services and payroll tax service projects.

Professional services, hardware and other revenue increased $1,296, or 40%, for the nine months ended September 30, 2022 from the similar period in 2021, primarily due to organic growth related to HR services and payroll tax service projects.

Although our total customer base is widely spread across industries, our sales are concentrated in SMBs.

3 unchanged sentences

Gross Profit and Gross Margin

Consolidated gross profit for the three months ended June 30, 2022 was $12,261, an increase of $2,316, or 23%, from $9,945 for the three months ended June 30, 2021.

Gross margin as a percentage of revenue was 60% for the three months ended June 30, 2022 as compared to 58% for the three months ended June 30, 2021.

Consolidated gross profit for the three months ended September 30, 2022 was $13,647, an increase of $2,779, or 26%, from $10,868 for the three months ended September 30, 2021.

Gross margin as a percentage of revenue was 62% for the three months ended September 30, 2022 as compared to 60% for the three months ended September 30, 2021.

Our increase in gross margin is primarily attributable to the increase in revenue and more efficient operations.

Consolidated gross profit for the six months ended June 30, 2022 was $27,725, an increase of $5,288, or 24%, from $22,437 for the six months ended June 30, 2021.

Gross margin as a percentage of revenue was 62% for the six months ended June 30, 2022 as compared to 61% for the six months ended June 30, 2021.

Consolidated gross profit for the nine months ended September 30, 2022 was $41,372, an increase of $8,067, or 24%, from $33,305 for the nine months ended September 30, 2021.

Gross margin as a percentage of revenue was 62% for the nine months ended September 30, 2022 as compared to 61% for the nine months ended September 30, 2021.

Our increase in gross margin is primarily attributable to the increase in revenue and more efficient operations.

3 unchanged sentences

Sales and marketing expenses primarily consist of salaries and related expenses for sales and marketing staff, including stock-based expenses, commissions, as well as marketing programs, which include events, corporate communications and product marketing activities.

Selling and marketing expenses for the three months ended June 30, 2022 were $4,589, an increase of $967, or 27%, from $3,622 for the three months ended June 30, 2021, primarily due to increased marketing spend.

Selling and marketing expenses as a percentage of revenue increased to 23% for the three months ended June 30, 2022 from 21% for the same period in 2021.

Selling and marketing expenses for the six months ended June 30, 2022 were $9,486, an increase of $2,253, or 31%, from $7,233 for the six months ended June 30, 2021, primarily due to increased marketing spend.

Selling and marketing expenses as a percentage of revenue increased to 21% for the six months ended June 30, 2022 from 20% for the same period in 2021.

Selling and marketing expenses for the three months ended September 30, 2022 were $4,752, an increase of $855, or 22%, from $3,897 for the three months ended September 30, 2021, primarily due to increase in advertising and marketing spending, as well as an increase in commissions resulting from higher bookings.

Selling and marketing expenses as a percentage of revenue remained flat at 22% for the three months ended September 30, 2022 from 22% for the same period in 2021.

Selling and marketing expenses for the nine months ended September 30, 2022 were $14,238, an increase of $3,108, or 28%, from $11,130 for the nine months ended September 30, 2021, primarily due to increase in advertising and marketing spending, as well as an increase in commissions resulting from higher bookings.

Selling and marketing expenses as a percentage of revenue increased to 21% for the nine months ended September 30, 2022 from 20% for the same period in 2021.

We continue to expand and increase selling costs as we focus on hiring direct sales personnel, expanding recognition of our brand, and lead generation.

1 unchanged sentence

General and administrative expenses primarily consist of salaries and related expenses, including stock-based expenses for finance and accounting, legal, internal audit, human resources and management information systems personnel, legal costs, professional fees, and other corporate expenses such as transaction costs for acquisitions.

General and administrative expenses for the three months ended June 30, 2022 were $8,696, an increase of $1,875, or 27%, from $6,821 for the three months ended June 30, 2021, primarily attributable to increased personnel and contracting costs.

General and administrative expenses as a percentage of revenue increased to 60% for the three months ended June 30, 2022 from 58% for the same period in 2021.

General and administrative expenses for the six months ended June 30, 2022 were $16,181, an increase of $2,862, or 21%, from $13,319 for the six months ended June 30, 2021, primarily attributable to increased personnel and contracting costs.

General and administrative expenses as a percentage of revenue increased to 62% for the six months ended June 30, 2022 from 61% for the same period in 2021.

We continue to drive efficiencies within our payroll operations by continually reevaluating our vendor relationships.

General and administrative expenses for the three months ended September 30, 2022 were $8,023, an increase of $1,018, or 15%, from $7,005 for the three months ended September 30, 2021, primarily attributable to increased personnel and contracting costs.

General and administrative expenses as a percentage of revenue decreased to 37% for the three months ended September 30, 2022 from 39% for the same period in 2021.

General and administrative expenses for the nine months ended September 30, 2022 were $24,204, an increase of $3,880, or 19%, from $20,324 for the nine months ended September 30, 2021, primarily attributable to increased personnel and contracting costs.

General and administrative expenses as a percentage of revenue decreased to 36% for the nine months ended September 30, 2022 from 37% for the same period in 2021.

Research and Development Expenses

Research and development (“R&D”) expenses consist primarily of salaries and related expenses, including stock-based expenses for employees supporting our R&D activities.

R&D expenses for the three months ended June 30, 2022 were $1,472, an increase of $129, or 10%, from $1,343 for the three months ended June 30, 2021.

The increase in R&D expense is primarily attributable to an increase in investment costs.

R&D expenses as a percentage of revenue decreased to 7% for the three months ended June 30, 2022 from 8% for the same period in 2021.

R&D expenses for the six months ended June 30, 2022 were $3,293, an increase of $826, or 33%, from $2,467 for the six months ended June 30, 2021.

R&D expenses for the three months ended September 30, 2022 were $1,230, a decrease of $275, or 18%, from $1,505 for the three months ended September 30, 2021.

The decrease in R&D expense is a result of an increase in capitalizable software expenses resulting from a focus on developmental projects.

R&D expenses as a percentage of revenue decreased to 6% for the three months ended September 30, 2022 from 8% for the same period in 2021.

R&D expenses for the nine months ended September 30, 2022 were $4,523, an increase of $551, or 14%, from $3,972 for the nine months ended September 30, 2021.

The increase in R&D expense is primarily attributable to an increase in investment costs.

R&D expenses as a percentage of revenue remained flat at 7% for the six months ended June 30, 2022 for the same period in 2021.

R&D expenses as a percentage of revenue remained flat at 7% for the nine months ended September 30, 2022 for the same period in 2021.

We will continue to enhance our products and technologies through expansion of our technological resources by increasing headcount and development partnerships, as well as through organic improvements and acquired intellectual property.

6 unchanged sentences

Amortization of Intangible Assets

Amortization expense in operating expenses for the three months ended June 30, 2022 was $3,352, an increase of $824, or 33%, from $2,528 for the three months ended June 30, 2021.

Amortization expense as a percentage of revenue increased to 17% for the three months ended June 30, 2022 from 15% for the same period in 2021, respectively.

Amortization expense in operating expenses for the six months ended June 30, 2022 was $6,784, an increase of $1,728, or 34%, from $5,056 for the six months ended June 30, 2021.

Amortization expense as a percentage of revenue increased to 15% for the three months ended June 30, 2022 from 14% for the same period in 2021, respectively.

Amortization expense in operating expenses for the three months ended September 30, 2022 was $3,350, an increase of $816, or 32%, from $2,534 for the three months ended September 30, 2021.

Amortization expense as a percentage of revenue increased to 15% for the three months ended September 30, 2022 from 14% for the same period in 2021, respectively.

Amortization expense in operating expenses for the nine months ended September 30, 2022 was $10,134, an increase of $2,544, or 34%, from $7,590 for the nine months ended September 30, 2021.

Amortization expense as a percentage of revenue increased to 15% for the nine months ended September 30, 2022 from 14% for the same period in 2021, respectively.

Interest Expense, Net

Interest expense, net for the three months ended June 30, 2022 was $1,085 compared to $223 for the three months ended June 30, 2021.

Interest expense, net for the three months ended September 30, 2022 was $1,122 compared to $530 for the three months ended September 30, 2021.

The change in interest expense and other is primarily attributed to the decrease in fair value of the seller notes from acquisitions.

Interest expense, net as a percentage of revenue was 5% for the three months ended June 30, 2022 compared to 1% for the three months ended June 30, 2021.

The increase in interest expense, net in the current period is primarily due to the senior credit facility signed in the third quarter of 2021 as discussed in Note 6 - Notes Payable.

Interest expense, net for the six months ended June 30, 2022 was $1,901 compared to $447 for the six months ended June 30, 2021.

Interest expense, net as a percentage of revenue was 5% for the three months ended September 30, 2022 compared to 3% for the three months ended September 30, 2021.

The increase in interest expense, net in the current period is primarily due to our credit facility with Structural Capital Investments II LP signed in the third quarter of 2021 as discussed in Note 6 - Notes Payable.

Interest expense, net for the nine months ended September 30, 2022 was $3,006 compared to $977 for the nine months ended September 30, 2021.

The increase in interest expense, net relative to the prior year is attributable to new borrowings under our credit facility with Structural Capital Investments III LP as discussed in Note 6 - Notes Payable.

Interest expense, net as a percentage of revenue was 4% and 1% for the six months ended June 30, 2022 and June 30, 2021, respectively.

Interest expense, net as a percentage of revenue was 5% and 2% for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Other Income, Net

Other income, net for the three months ended June 30, 2022 was $1,147 compared to $8,654 for the three months ended June 30, 2021.

Other income, net as a percentage of revenue was 6% for the three months ended June 30, 2022 compared to 50% for the same period ended June 30, 2021.

For the three months ended June 30, 2022, the amounts in other income, net primarily consisted of contingent liability adjustments and debt extinguishment.

For the three months ended June 30, 2021, the amounts in other income, net consisted of debt extinguishment related to the Company’s Paycheck Protection Program loan.

Other income, net for the six months ended June 30, 2022 was $1,147 compared to $8,654 for the six months ended June 30, 2021.

Other income, net as a percentage of revenue was 3% and 23% for the six months ended June 30, 2022 and June 30, 2021, respectively.

For the six months ended June 30, 2022, the amounts in other income, net primarily consisted of contingent liability adjustments and debt extinguishment.

For the six months ended June 30, 2021, the amounts in other income, net consisted of debt extinguishment related to the Company’s Paycheck Protection Program loan.

For the three months ended June 30, 2022 and 2021, we recorded an income tax expense attributable to continuing operations of $74 and $298, respectively, a decrease of $224 or 75%.

For the six months ended June 30, 2022 and 2021, we recorded an income tax expense attributable to continuing operations of $104 and $403, respectively, a decrease of $299 or 74%.

Loss From Operations

We incurred a loss from operations of $5,848, or $0.29 per share, during the three months ended June 30, 2022, compared to income from operations of $4,369, or $0.20 per share, during the three months ended June 30, 2021.

Loss and income from operations as a percentage of total revenues was 29% and 22% for the three months ended June 30, 2022 and 2021, respectively.

We incurred a loss from operations of $8,019, or $0.44 per share, during the six months ended June 30, 2022, compared to income from operations of $5,638, or $0.11 per share, during the six months ended June 30, 2021.

Loss and income from operations as a percentage of total revenues was 20% and 6% for the six months ended June 30, 2022 and 2021, respectively.

Other income, net for the three months ended September 30, 2022 was $399 compared to $10,191 for the three months ended September 30, 2021.

Other income, net as a percentage of revenue was 2% for the three months ended September 30, 2022 compared to 59% for the same period ended September 30, 2021.

For the three months ended September 30, 2022, the amounts in other income, net primarily consisted of contingent liability adjustments and debt extinguishment.

For the three months ended September 30, 2021, the amounts in other income, net consisted of debt extinguishment related to the Company’s Paycheck Protection Program loan and amounts accrued for the Employee Retention Tax Credit.

Other income, net for the nine months ended September 30, 2022 was $1,349 compared to $18,845 for the nine months ended September 30, 2021.

Other income, net as a percentage of revenue was 2% and 19% for the nine months ended September 30, 2022 and September 30, 2021, respectively.

For the nine months ended September 30, 2022, the amounts in other income, net primarily consisted of contingent liability adjustments and debt extinguishment.

For the nine months ended September 30, 2021, the amounts in other income, net consisted of debt extinguishment related to the Company’s Paycheck Protection Program loan and amounts accrued for the Employee Retention Tax Credit.

For the three months ended September 30, 2022 and 2021, we recorded an income tax expense attributable to continuing operations of $102 and $260, respectively, a decrease of $158 or 61%.

For the nine months ended September 30, 2022 and 2021, we recorded an income tax expense attributable to continuing operations of $206 and $663, respectively, a decrease of $457 or 69%.

We incurred a loss of $4,533, or $0.22 per share, during the three months ended September 30, 2022, compared to net income of $5,328, or $0.28 per share, during the three months ended September 30, 2021.

Loss and income as a percentage of total revenues was 21% and 30% for the three months ended September 30, 2022 and 2021, respectively.

We incurred a loss of $13,410, or $0.67 per share, during the nine months ended September 30, 2022, compared to income of $7,494, or $0.39 per share, during the nine months ended September 30, 2021.

Loss and income as a percentage of total revenues was 20% and 14% for the nine months ended September 30, 2022 and 2021, respectively.

LIQUIDITY AND CAPITAL RESOURCES (in thousands)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Cash and cash equivalents (1)

2 unchanged sentences

Working Capital .

We had working capital of $14,451 at June 30, 2022, a decrease of $2,555 from working capital of $17,006 at December 31, 2021.

Working capital as of June 30, 2022 and December 31, 2021 includes $2,038 and $3,750 of short-term deferred revenue, respectively.

We had working capital of $5,179 at September 30, 2022, a decrease of $11,827 from working capital of $17,006 at December 31, 2021.

Working capital as of September 30, 2022 and December 31, 2021 includes $4,173 and $3,750 of short-term deferred revenue, respectively.

Deferred revenue is an obligation to perform future services.

2 unchanged sentences

Operating Activities .

Net cash provided by operating activities of $7,481 for the six months ended June 30, 2022 was primarily driven by non-cash adjustments to our net loss of approximately $12,013, primarily due to depreciation and amortization.

Net cash provided by operating activities of $6,957 for the nine months ended September 30, 2022 was primarily driven by non-cash adjustments to our net loss of approximately $17,917, primarily due to depreciation and amortization.

This was offset by our net loss of $13,410 and changes in operating assets and liabilities, which resulted in cash provided of $3,777.

Net cash used in operating activities of $1,898 for the six months ended June 30, 2021 was driven by non-cash adjustments to our net income of approximately $1,581, primarily due to depreciation and amortization, offset by our net income of $2,166.

For the six months ended June 30, 2021, changes in operating assets and liabilities resulted in a use of $5,645 in cash.

Net cash used in operating activities of $1,144 for the nine months ended September 30, 2021 was driven by non-cash adjustments to our net income of approximately $7,026, primarily due to depreciation and amortization, offset by our net income of $7,494.

For the nine months ended September 30, 2021, changes in operating assets and liabilities resulted in a use of $15,473 in cash.

Investing Activities .

Net cash used in investing activities of $21,570 for the six months ended June 30, 2022 is primarily due to our first quarter acquisition totaling $2,039 and purchases of available-for-sale securities and maturities of $19,870.

Net cash provided by investing activities of $5,180 for the six months ended June 30, 2021 is primarily due to the proceeds from sales and maturities of available-for-sale securities of $1,926.

Net cash used in investing activities of $33,991 for the nine months ended September 30, 2022 is primarily due to our first quarter acquisition totaling $2,289 and purchases of available-for-sale securities and maturities of $33,454.

Net cash used in investing activities of $21,042 for the nine months ended September 30, 2021 is primarily due to the proceeds from sales and maturities of available-for-sale securities of $1,926.

Financing Activities .

Net cash used in financing activities was $32,524 for the six months ended June 30, 2022, which primarily consisted of a net decrease in client fund obligations of $32,716.

Net cash used in financing activities was $117,657 for the six months ended June 30, 2021, which primarily consisted of a net decrease in client fund obligations of $113,251.

Net cash used in financing activities was $34,032 for the nine months ended September 30, 2022, which primarily consisted of a net decrease in client fund obligations of $32,527.

Net cash used in financing activities was $133,990 for the nine months ended September 30, 2021, which primarily consisted of a net decrease in client fund obligations of $146,206.

Sources of Liquidity .

As of June 30, 2022, the Company’s principal sources of liquidity consisted of approximately $14,594 of cash, cash equivalents and restricted cash, together with cash generated from operations of our business over the next twelve months.

Structural Capital Investments III, LP had committed to lend us up to an additional $20,000 in term loan financing to support our growth needs (the “Facility”) until March 31, 2022 which was extended to June 30, 2022.

The Facility is discussed in Note 6 — Notes Payable, to the Condensed Consolidated Financial Statements.

We did not elect to take an additional advance from the facility.

As of September 30, 2022, the Company’s principal sources of liquidity consisted of approximately $10,885 of cash, cash equivalents and restricted cash, together with cash generated from operations of our business over the next twelve months.

We cannot assure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions;

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis