Asure Software (NASDAQ:ASUR) Q2 2026 Earnings Call

0:00 Good afternoon and welcome to Asure's Second Quarter twenty twenty six Earnings Conference Call. Joining us for today's call are Chairman and CEO, Pat Geppel Chief Financial Officer, John Pence and VP of Investor Relations, Patrick McKillop. Following their prepared remarks, there will be a question and answer session for analysts and investors. I would now like to turn the call over to Patrick McKillop for introductory remarks. Please go ahead.

0:31 Thank you, operator. Good afternoon, everyone, and thank you for joining us for Asure's second quarter twenty twenty six 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.

1:22 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'll hand the call over to Pat in a moment, but I just wanted to take a moment to remind people of some of our upcoming Investor Relations activities. On August 26, we will attend the three part Advisors IDEAS Conference in Chicago. On September 10, we will attend the Lake Street Conference in New York. On September 22, we will participate in the nineteenth Annual Barrington Research Virtual Fall Investment Conference.

2:08 On November 17, we will participate in the Craig Hallum Alpha Select Conference in New York. On November 18, we will attend the Stephens Annual Investment Conference in Nashville, Tennessee as well as the ROTH Conference in New York. On November 19, we will participate in the seventh Annual Needham Virtual Tech Conference. Investor outreach is very important to Asure and I would like to thank all of those that assist us in our efforts to connect with investors. Finally, 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 Gessel, Chairman and CEO. Pat?

2:58 Thank you, Patrick, and welcome everyone to Asure's second quarter twenty twenty six earnings results call. I'm joined on this call by our CFO, John Pence, and we will provide a business update for second quarter twenty twenty six results as well as our updated outlook for the remainder of the year. Our second quarter revenues came in at $37,100,000 representing a growth of 23% compared to second quarter twenty twenty five. Our growth was broad based across our business lines and our past investments in technology products and AI are showing real returns. Our organic growth rate for second quarter twenty twenty six was 5% compared with 1% in quarter two twenty twenty five, an improvement of 400 basis points and down slightly sequentially compared with 7% in quarter one twenty twenty six due to seasonality.

4:00 We continue to receive positive responses to our platform and 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 Venture Employer Services and we are glad to announce that 2,000,000 of their supported employees are now live in our payroll tax management platform.

4:46 Our pipeline of opportunities remains robust and we're excited about the future. However, for competitive and confidentiality reasons, we are limited in our ability to share details. Asure Central 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 twenty twenty six and beyond. The number of clients purchasing multiple products increased by 6% versus quarter two of twenty twenty five. 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.

5:51 The positive trajectory we saw at launch has continued to grow into the second quarter. Our pipeline keeps growing. We've added new clients and 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.

6:42 And 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 twenty twenty six. But 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 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. And it's core to how we drive both our new logo acquisition and multi product cross sell within our existing base.

7:39 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.

8:24 On the M and 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 twenty twenty six. Our new sales bookings for core human capital management payroll grew 14% in quarter over quarter two twenty twenty five and our contracted backlog remains at approximately $80,000,000 We expect to convert approximately 41% of that backlog over the next twelve months. Our client base, primarily small and midsized businesses in payroll intensive compliance driven industries, remains strong. We continue to conservatively model for our clients to have flat headcount growth

9:20 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.

10:05 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 e mails have been screened for sentiment analysis, extending our capability to capture sentiment analysis from both voice into e mail. We continue to replicate the automated Luna powered model that is generally available to 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.

11:24 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. So 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. John? Thanks Pat. As Patrick noted, several figures discussed today are on a non GAAP or adjusted basis. Reconciliations are available in our earnings release and our investor presentation at investor.assuresoftware.com.

12:11 Second quarter total revenues were $37,100,000 compared to $30,100,000 in Q2 of twenty twenty five, representing growth of 23% year over year. Recurring revenue for Q2 twenty twenty six was $34,000,000 compared to $28,600,000 in Q2 of twenty twenty five, an increase of 19% year over year. Recurring revenue represented approximately 91% of total revenue in the quarter. Professional services, hardware and other revenue was $3,200,000 in Q2 twenty twenty six compared to 1,500,000 in Q2 of twenty twenty five. The increase was mostly driven by increased hardware sales from our Latham acquisition.

12:58 As a reminder, we are in the early stages of transitioning Latham to a hardware as a service model and we are forecasting a headwind of approximately 600,000 to revenue during the first half of twenty twenty seven. As that shift progresses, you'll see more of this revenue move into the recurring line with some of the corresponding pressure on the non recurring line, a mix shift that is good for the long term health of the business, which should enable us to deliver better customer experience while improving total customer value. Lease speculations will continue to have hardware only customers for the foreseeable future. Boat revenue was relatively flat in Q2 twenty twenty six compared to Q2 twenty twenty five, and we no longer are forecasting any further rate cuts this year based on current market sentiment.

13:48 Gross profit for 2026 Q2 twenty twenty six was $25,100,000 compared to $19,900,000 in Q2 of twenty twenty five. GAAP gross margin for Q2 twenty twenty six was 68% compared to 66% in Q2 twenty twenty five. Non GAAP gross margin for Q2 twenty twenty six was 73%, unchanged versus Q2 of twenty twenty five.

14:19 Net loss for Q2 twenty twenty six was $4,400,000 compared to a net loss of $6,100,000 in Q2 of twenty twenty five. EBITDA for Q2 twenty twenty six was $4,600,000 compared to $1,400,000 in Q2 of twenty twenty five. Adjusted EBITDA for Q2 twenty twenty six was 7,700,000 compared to $5,200,000 in Q2 twenty twenty five, an increase of 48% year over year. Adjusted EBITDA margins for Q2 twenty twenty six was 21% compared to 17% in Q2 twenty twenty five, an increase of 400 basis points.

15:05 For the full year, we continue to expect to generate positive levered free cash flow in the mid to high teens range, which we calculate by taking adjusted EBITDA at the midpoint of our guidance range, less software capitalization of approximately $15,000,000 and approximately $6,000,000 on cash interest expense. We ended the second quarter with cash and cash equivalents of $19,700,000 and total debt of $68,900,000 as of 06/30/2026. Based on the current positive momentum in our business, we are updating our full year 2026 guidance and providing Q3 guidance.

15:46 We expect revenue of $159,000,000 to $163,000,000 for the full year of 2026 and adjusted EBITDA margins of 24% to 25%. For Q3, we anticipate revenue of $38,000,000 to $40,000,000 and adjusted EBITDA of $8 to $10,000,000

16:07 We expect our cost structure including capital expenditures and capitalized software development costs to remain relatively stable on a dollar basis. With that, I'll turn the call back to Pat for closing remarks. Thanks, John. Stepping back, I think quarter two tells us a clear story. We're growing. We're becoming more profitable as we grow and we're doing it on the back of a platform strategy that's all coming together. Asure Central has reached the majority of our client base. Luna is doing real work for us and orchestrating real work on behalf of our clients. AsureWorks is gaining good traction in its early days and we're being disciplined about building a sales force that can sell the whole solution not just a piece of it. We have truly leveled up from a year ago. In quarter two, we grew revenue by 23% in the second quarter and adjusted EBITDA an impressive 48%.

17:07 We also expanded adjusted EBITDA margin by 400 basis points with increased scale in AI efficiencies. We did all that while continuing to invest in the platform and the team. That's the model working the way we designed it to. As you know, we will typically receive revenue tailwinds in the second half and

17:30 we expect that trend to continue with continued acceleration from this point through the rest of 2026 and into 2027. We are increasingly optimistic about 2027 as our initiatives continue to take hold with increasing adoption of ASO, Luna enabled automation of U. S. Payroll and tax and more. We remain on track for our medium target of $180,000,000 to $200,000,000 in revenues with adjusted EBITDA margins of 30% or better. And our longer term vision, which we have discussed with investors, reflects the potential for margins to expand well beyond 30% as we achieve scale.

18:20 AI continues to reduce our cost to serve while simultaneously expanding our revenue opportunities.

18:27 We're proud of the progress this quarter and even more excited about what's ahead. Thank you for your continued support and for joining us today. I will now turn the call back to the operator for questions and answers. Operator?

18:45 Thank you. We will now be conducting a question and answer session. And our first question today will come from Richard Baldry with ROTH Capital Partners. Thanks. In your wrap up comment, you sort of hit on what I wanted to go a little deeper on. In terms of the ability of AI to cut costs and drive revenue. So could you maybe break that into the two pieces and talk about where you feel you're at now in terms of the cost cutting or efficiencies you can gain with it and how much still lies ahead? And then also in terms of your ability to monetize either new features, tools or modules built upon these AI abilities that previously wouldn't have been available? Thanks.

19:53 Yes. Rich, I think first of all, I'll start on the revenue side. As we get more to intent data and trigger data, AI is really helping us quite a bit. And just having customer data available and then Luna and or the data is available to us to help cross sell. So a couple of examples and I brought this out before,

20:18 when a company has 20 employees versus 19, they're now subject to have COBRA and they have to have COBRA. Well, we can now with that intent data ask them if they'd like us to provide COBRA services on their behalf or it can be an employee that has a new hire. Would they like to have a four zero one savings

20:47 and or continue to when there's a raise invest more in the four zero one. So all of this intent data with AI, with Luna is going to really tee up those opportunities for revenue. The other aspect of it, if you think about the marketing to sales motion, there's a whole series of kind of data available that would lead it to be very predictive where they use AsureWorks, where they want a system done for them, but maybe they're not ready to go into a PEO. So we think there's a lot of revenue opportunities that I just talked about that

21:29 are really we're putting them in the use cases as we speak. On the cost side where we see opportunity and Lou has been very active on it is Lou is already taking some of the calls or some of the data that would go to people and some of those easy answers or some of those what if questions are being answered with Luna as opposed to getting into a queue or getting into customer service. And what that allows our customer service folks is to build a much more strategic relationship with the customer as opposed to a transaction one. John, I don't know if you have some ideas on this but those are some Rich that we have in place right now. Yes.

22:15 I think you were asking kind of where we are in the journey, and I would say really, really early, early days. But it's pretty interesting stuff. Here's an example of one use case that the ops team is using right now with AI. They've done sentimental analysis on all the calls coming into the customer service center, and they can tell based on and they transcribe them, and then they have key trigger words, and they can tell you, Hey, here's a customer that somebody needs to reach out to because they had a really they were amplified in their language. And so we can proactively go out and deal with customers that might have had a bad experience. And again,

22:55 early days is that a cost cutting, not necessarily cost cutting, but it's definitely going to, I would think, hopefully impact retention over time and customer satisfaction over time. So early days of the cost out, but obviously, you can start to see some of the examples on implementation and some of the other areas of the business where we're going get a lot more efficient. Great. Last for me. If you think about you've been adding to sales on a pretty steady basis. Can you talk generally about your overall sales productivity levels? How good do you think they are now? How much they could improve? And what do you think that the implication for that for let's say a medium term sustainable growth rate for the company on an organic basis? Thanks. Yes, Rich.

23:40 As I even look at the second half, we believe that we'll be double digit reoccurring revenue on an organic basis. And some of that is laying the foundation of salespeople that we've already done. But that being said, if you look at productivity, our productivity around attach rates, having more dollars available to sell, getting at the right level with a software model or we'll do it for you model, we think we're in the early innings. We've had some really good success about productivity. I would think that next year, we'll be targeting 25% plus productivity, especially in those year one to year two sales reps that we'll work through an overall productivity at a later date. But those are the things that really excite me. And I think what's happening, if you look at it, you have an area of bringing all these products together with the Asure Central, layering out Asure Works, adding salespeople, adding training to that and getting up to the business owner as opposed to an office manager.

24:53 All those things are really good for productivity. And then from a growth rate perspective, we're going to be relentless on

25:01 getting to double digit organic growth. We think that's really important part of the model and then layering in tuck in acquisitions where we already especially where we already own the platform. Thanks. Congrats on a good quarter. Thank you, Rich.

25:21 Next we'll hear from Jared Levine with TD Cowen. Thank you. First, I wanted to dig into some of your commentary in terms of expectations of hitting double digit organic growth in the second half. But I guess if you look at the midpoint, it suggests closer to 7%. I guess would you attribute that to conservatism or anything else to note here? Yes. So what we're trying to say, Jared, is if you were to look at last year and the composition of the revenue, I think we had some pretty healthy nonrecurring professional services, specifically with some of the large tax deals. So the way we've got the back half of the year currently forecasted and modeled is those are going to be negative from a compare. So we're going to lose some of that nonrecurring revenue on a compare basis.

26:07 But we think that that's going to be offset by the growth in recurring organic side of the business, which again is healthier, it's better. But yes, we have a little bit of a compare on the nonrecurring from prior year that's causing that overall revenue growth to be a little bit muted because of that. And Jared, a lot of the Jared, I'm sorry, Jared, just a lot of the motion is already in place. So we feel real confident in getting to those kind of outcomes. Yes, understood. And then I was hoping you could dig into some of the ASO offering traction here. We have seen a number of your competitors roll out managed service offerings too. I guess how you expect to differentiate versus some of the competitors out there in terms of these ASO managed service offerings as well?

26:57 Yes. And I think if you think about our history we really had managed payroll as part of our core offering before competitors thought it was cool. And so I think we have that opportunity and what we've been layering into Asure Central is really we have the software to run a business and keep them compliant, keep them efficient, etcetera, but we can also do it for them. And then if you think about Luna, we introduced Luna a couple of years ago and for her to really do a lot of the work around workflow and AI, but then also not only do the work, but orchestrate it from a team approach, whether it's payroll benefits, general ledger interface, etcetera, there's a lot of things that get coordinated. So we built AI

27:52 into our product and into AsureWorks. We also if you think about our core customer base, the average maybe company hires an HR professional at about 80 employees or so. We're there every day helping people do work where we've already done it at the payroll manager level. Now we're extending it out through managed services. So we feel that this is really a core offering where we have quite a bit of a lead in. And we think the competition kind of looking at that model will really help us because they're starting fresh and they'll draw more attention to the space. And we feel that this is right in our core confidence team.

28:43 Got it. Thank you. Next we'll hear from Vijay Hohman with Craig Hallum Capital Group. Hi guys. This is Vijay on for Jeff and Reed. Just kind of first question on the sales heads. I know you guys have set the goal, I think, to be at 150 by the end of the year. I was wondering just do you give any update there whether you're on trend? I know last quarter I think you had been a little bit below.

29:14 Yes. I'd say just we're at 150,000,000 for the year here and we're probably still about 10,000,000 where we want to be. If I look at kind of the bridge, in number of cases, we've top skilled or upskilled the sales leadership and those leaderships bring people along in many cases. So about half our kind of resources are manager led versus let's say a recruitment. The recruitment, we have kind of added a couple of recruiters in that space and think we have a really good traction from a pipeline. And then from a selectivity perspective, we are building a efficient kind of adding who we want to select etcetera with the criteria.

30:10 But also we're in a position where it can be a bit choosy and we're in a position as well that we're selling the whole solution as opposed to a point solution. So some of those muscles are different than historically. We feel like we're doing a really good job in getting the salespeople we want. We can see the productivity and we feel confident that we'll be at 150 by the end of the year. Got it. That makes sense. And then just as far as the multi product kind of attach rates, you talked you guys obviously had success getting customers to kind of two products. I guess what's kind of thinning in way of getting people to three or four that you kind of alluded to there in the remarks?

31:01 Yes. I think, well, first of all, we're getting a lot of traction in our HR area with combined with payroll and four zero one. We see just increasingly confidence both of them are really building up units each and every quarter that in a lot of cases are records for us. So that's really positive. Those two obviously tying with the acquisition of Latham and the integration,

31:29 we feel those four products will really be the core to some of payroll. Tax filing is always part of the offering. So then when you think about depending where you are in a cycle of hiring, our recruiting solution from a benefit perspective, we've invested in broker record as well as HSA, FSA, COBRA.

31:56 We're really rounding out the offering, but I'll tell you just the two to four, simply put, time and attendance, HR and four zero one, we have really good line of sight to those being added to our core offerings. Got it. Thanks for taking the questions.

32:19 And we'll move on to Joshua Riley with Needham and Company. Awesome. Thanks for taking my questions. Maybe just starting with the 5% organic growth number in the quarter.

32:33 Would you say that it's fairly balanced in terms of the contribution across product lines? Or did the large enterprise tax deal have an influence, a little bit outside influence on that? And then along with that, you mentioned that the seasonality impacted the quarter over quarter change in organic growth from 7% to 5%. Can you just give us some more color on what that dynamic was there? Yes. A couple of things. First of all, the tax, we've been busy as John mentioned around installing a base of large customers that we've had in the background with tax. We think that there's potential and I think you'll see some activity in the second half of the year around new logo acquisition and new partner acquisition.

33:22 Fuel pipeline is really, really strong. As it relates to the second quarter, the reoccurring mix

33:30 that John talked about, where we very confident in the double digit reoccurring growth that's organic in the second half of the year versus the onetime mix, that leads us to a lot of success here in the quarter, which was small business related. And I talked about some of the attach rates around four zero one and around time and attendance and HRC or HR compliance offerings. Those are the things that have led our growth combined with payroll. And I think you'll see more of it as the reoccurring revenue builds here in the second half. Tax filing, I think, continue. We're very excited about the story. We accomplished a lot in taking ventures over 2,000,000 live.

34:19 There's more to come in that area and you'll see that. But that didn't have any outside influence in second quarter's growth. Got it. That's super helpful. And then, as we think about the Asure Central now having, what was the number, 30,000 direct clients on it. Curious, there's always been the opportunity there for cross sell and increase attach rates but are you actually seeing it now that you have a bigger sample size in pocket? What are you seeing I guess in terms of the near term trends or is it still going to take a few quarters to kind of build awareness? Absolutely and it'll be it'll build on itself exponentially as we continue throughout the year. And in the quarter, we had a 6% improvement in cross sell, but we're just getting started.

35:10 Feel really good about that. And then as we are layering in different cohorts from some of the reseller acquisitions in the past after a year we layer them in, those historically were one or two products. Now they have the ability to continue to cross sell all the offerings. And as we layer, ASUR Central to the multiproduct family, we talk about some of the intent and trigger event analysis. This only is going to continue. So I'm very pleased with the transactions that have been sold around time, 04/2001 and HRC. I think that will build in the second half. And we're as we increase the trigger event opportunities, we believe that will be more of a standard than an incremental approach.

36:08 Got it. Last question for me is if you go back to enterprise payroll tax pipeline, I know you can't discuss any specific deal because of competitive dynamics, but is the pipeline up year over year, would you say in terms of the opportunities? And then I just wanted to confirm you don't have any is it well, I guess, first of all, is there any large deal potential that could be signed in the second half of the year? And if so, have you factored any of that stuff in that you haven't won yet? Or how are thinking about that relative to guidance? Thank you. Yes. Great question, Josh. I would say that the emerging pipeline is extraordinarily strong. As far as when that turns into revenue sometimes they have shorter and longer term cycle but we're very pleased with the opportunities available to us in that area of the business. And as far as forecasting it, John talked a little bit about the one time revenue.

37:05 We didn't forecast a ton of PS work and maybe we're being conservative there and whether that falls in 2026, 2027 or frankly even 2028 will remain to be seen. But our guidance is not have a lot of tax in it, although I think you'll see over the next quarter or so that you'll see some press releases that will reflect growth opportunity in the business. And next we'll move to Eric Martinuzzi with Lake Street. Yes. John, I wanted to ask about the adjusted EBITDA margin midpoint. It looks like you tweak things a little bit higher, so you raised that low end of the adjusted EBITDA margin guidance. And I was just curious to know, is that a result of the mix that you're assuming in the revenue?

38:08 Or is there something going on with your cost of goods? I think it's more of just what's already in the barn, right? So we've got I think we've had pretty strong quarters already We put up in terms of adjusted EBITDA. So we feel pretty steady state that we can hit that bottom line. I mean, we want to tighten up a little bit because we felt like it was pretty achievable. So nothing structurally has changed dramatically. It's really just had pretty strong quarters these first two of the year and want to take it up a little bit based on where we think we're going to land. Okay. And then second question, you've owned Latham Time now for a year. I think that closed in the beginning of July in 2025. If you could comment maybe, first of all, on the retention that you forecast versus what you've been able to hang on to and then the opportunity for cross sell, whether that's a second half 'twenty six or more like 2027?

39:09 Yes. Take the retention. I mean, the thing that business has been around one hundred plus years and was really, really consistent in terms of the retention, very similar retention stats to ours, and nothing's really changed post acquisition. So it's really been very, very consistent business, performed at or a little bit above our expectations when we bought it in terms of the revenue production. So it's been really and we've been able to realize most of the cost savings that we had planned for, if not a little bit more. So it's performed as good as we hoped for from that perspective. And then I'll let Pat kind talk about cross sell. Yes. And culturally, great fit. Bill Latham did a great job from a family perspective. And then our GM, Lance, has done a great job with Latham.

40:02 And the culture, the two companies, the profile of the current customers, etcetera, it's just spot on. And we're continuing to evolve kind of the thinking, whereas Latham was more of a standalone time on a smaller end. We're integrating but we're keeping those key relationships from a standalone perspective, but then also we're integrating the go to market strategy. And John talked about in some cases where the time clocks, etcetera, are going to be has for the first time or hardware as a service in the first half of the year that will impact the revenue about $600,000 but it aligns the value proposition, the offering with an integrated approach with payroll, etcetera.

40:54 And long term, it's about a $2,000,000 positive just at the current numbers. So we think the opportunity with Asure Central, what we're trying to accomplish with the Asure Works that really fits us really well. We have a product that's plug and play and now we're aligning the pricing strategy for both of them. So we believe that we're just getting started there. But boy, if you told me a year ago where we'd be with Latham, we've hit really almost every milestone and we have a lot more to build off in the future. So it sounds like more of a 2027 for cross sell opportunity with Lacom?

41:40 No. Well, I think there's certainly more in 2027, but we're we've been pretty pleased with the payroll opportunities that we've gotten and we're pretty pleased with the attach rates of time and attendance. We think some of the pricing around reoccurring time will continue to build. But no, it's been I think when I look at it, the second half and even the first half of this year have been real strong on the cross sell opportunities. It's just going to build and we'll continue the momentum through 2027 and 2028. Got it. Thanks for taking my questions. Next, we'll hear from Greg Gibas with Northland Securities.

42:39 Great. Thanks for taking the questions guys. In your prepared remarks, you mentioned expectations to complete a few M and A deals in the back half, I believe. And just wondering if there's any incremental color you can share around those expectations and perhaps if anything is included in guidance? No. There's nothing included in the guidance right now on the back half, so it will be incremental if we do take some down. We've been, I think, pretty discerning. We've had some deals come across, but we've either for price or whatever reason, we've decided not to do them. So, don't have anything imminent, but we'll continue to look. So nothing in the guide right now for acquisitions. Yes. And as you know, Greg, the reseller will be active in that area and continue to be active. We've been working on a couple that we believe could happen. And I believe you'll see some of that. But more to come when it does get finalized and I think you'll see some of it in the back half of the year.

43:44 Fair enough. And one of the follow-up just regarding the kind of composition of recurring versus non recurring strengths that you had year over year as we head into the back half and kind of how that within your guidance that does imply kind of more recurring strength. Just wanted to get a better more comfortability around kind of what your expectations are in terms of the drivers there, right? I mean, I guess, we do have that muted dynamic related to nonrecurring dropping down a little, where you kind of have confidence in the recurring side? Yes. So right now, again, our current guide, let's say, I look at last year and the back half of the year, we probably had about $9,000,000 of nonrecurring. And I said a big chunk of that obviously, had the Latham hardware coming in, but a lot of that $9,000,000 was some professional services work with regards to large tax deals. So right now, we don't have those focused.

44:39 So I think it's fair if you're thinking about your model, probably in that 5,000,000 to $6,000,000 range is kind of what we're thinking about on nonrecurring in the back half of the year as opposed to 9,000,000 from last year. And so when you start to do that math, that really shows you where the growth is coming from. It's coming from recurring. We don't have any acquisitions imminent. We're lapping Latham. So that's where we kind go back to that beginning comment about most of the growth in the back half as we've currently guided it is coming from the recurring organic side of the house. And more specifically, four zero one, HRC, time and attendance combined with payroll are the leading products that we're cross selling that last year we had, let's say, a seventythirty of new logos to customer.

45:29 Now it's closer to fifty threeforty seven and that additional kind of products and additional dollars are building up and lead to the reoccurring revenue that's growing in the second half. So we think it's a very predictable story. We think investors appreciate the predictability. And if we do have an acquisition or we do have some professional services dollars that will be additive. But right now, we feel really, really good about where we're at as a company. Yes. Let me just I just went back and look at my notes. Actually, was $10,000,000 last year in the back half of the year, I think, for nonrecurring. So yes, I think that's where you're seeing the transition.

46:18 Got it. Appreciate the color, guys. Thank you. All right. Thank you. There are no further questions at this time. I would like to turn the floor back to Pat Goeppel, Chairman and CEO for closing remarks. Well, I sure appreciate your time today in previewing and in viewing the second quarter results. We feel like we have a lot of momentum. We talked to you about the predictability of the results going forward. Feel good about where we're at. And we always take stock at halftime and then look forward to a strong second half and the beginning of twenty twenty seven. We appreciate you as an investor and look forward to talking to you again real soon. We'll do some outreach here with different conferences in the third quarter and fourth quarter. So hopefully, we'll see you soon. Thank you.

47:18 Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.