Asure Software, Inc.

Asure Software, Inc. (NASDAQ: ASUR) is a provider of cloud-based human capital management (HCM) software and services. The Company’s HCM suite, Asure HCM, includes Asure Payroll & Tax, Asure HR and Time & Attendance.

Key highlights 

• Sequential Growth in Challenging Environment: The company is continuously working closely with customers in the respected market segment to develop innovative product offerings according to new consumer trends. As a result, it is improving its revenue matrix on a sequential basis. Furthermore, 60% of new clients come from SMB’s circle of influence: Brokers, Banks, and CPAs. This trend is expected to continue in fiscal 2021.

Source: Company 

• Growth & Margin Expansion: The company’s business model has many ways to grow revenue. Its organic model has several revenue drivers, and the indirect reseller network represents an acquisition pipeline exceeding USD 200 million in top-line revenue. Margin expansion would occur naturally as fixed costs are spread across a growing business along with key initiatives to drive out cost. The company is working on its 5-year plan to double revenue and expand EBITDA margins to 20%+.

Source: Company 

• Diversified Client Base: The group has a diversified client base in terms of operations, minimising risk due to lower dependence on a single client. None of its clients constituted more than 0.5% of revenues, and no industry represented over 10% of total revenue for the year ended December 31, 2020.

Financial overview of FY2020 (In Thousands of USD)

Source: company

• In FY2020, the company reported a decline in revenue by 10.4% to USD 65.50 million, against USD 73.15 million in 2019. The decline in revenue was primarily due to decreased recurring revenue by 9.6%, mainly due to COVID-19. 

• Gross profit stood at USD 38.09 million in 2020, compared to USD 43.31 million in 2019, a decline of 12.1% was mainly due to lower sales volumes primarily due to COVID.

• The company reported USD 16.31 million of loss from continuing operations in 2020, against a loss of USD 42.29 million in the previous corresponding period. The company posted lower loss mainly due to lower interest expense.

• Net loss stood at USD 16.31 million in 2020, against a profit of USD 30 million in 2019. The company earned a profit in last year due to gain on disposal of a discontinued operation.

Risks associated with investment

The company’s business depends substantially on clients renewing their agreements, purchasing additional products, or adding additional users. If customers do not renew their contracts with them or reduce the services purchased, their revenue will decline, and their business, operating results, and financial condition may be adversely affected. 

Valuation Methodology (Illustrative): EV to Sales 

Note: All forecasted figures and peers have been taken from Thomson Reuters 

Stock recommendation

The company’s growth depends on attracting new clients by further penetrating its existing markets and geographic expansion into new markets by strategically acquiring Reseller Partners. Furthermore, we believe the company’s ability to continue developing new applications and improving existing applications would enable them to increase revenues in the future. Moreover, they are working on its 5-year plan where it expects to double the revenue and expand EBITDA margins to 20%, which is commendable. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating at the closing price of USD 7.75 as on March 16, 2021. We have considered Rimini Street Inc, Net Element Inc, Smith Micro Software Inc, etc. as the peer group for the comparison.

1-Year Price Chart (as on March 16, 2021). Source: Refinitiv (Thomson Reuters)

Corbus Pharmaceuticals Holdings, Inc.

Corbus Pharmaceuticals Holdings, Inc. (NASDAQ: CRBS) is a clinical-stage company focused on the development and commercialization of novel medicines designed to target the endocannabinoid system.

Product Pipeline:

• The group is focused on advancing in-house programs on metabolic abnormalities or limit inflammation and fibrosis and evaluating these compounds in pre-clinical studies. The company is evaluating certain compounds and believes it as the potential candidates for further clinical development for FY22.
• The company reported its Phase 3 study of lenabasum, which would be used for the Treatment of Autoimmune Diseases. The above reduces the production of inflammatory cytokines and eicosanoids and stimulates the production of mediators that resolve inflammation. Notably, Lenabasum received approval from The U.S. Food and Drug Administration (FDA) and The European Medicines Authority (EMA).

FY20 Financial Highlights:

• CRBS announced its quarterly result, wherein the company posted revenue from awards and licenses of USD 3.937 million, as compared to USD 36.143 million in FY19.
• Total operating expenses stood at USD 126.74 million, higher than USD 113.24 million in the previous year. The increase was due to higher research and development costs, coupled with a surge in general and administrative expenses.
• Operating loss widened to USD 122.810 million from a loss of USD 77.104 million in FY19.
• The group reported a net loss of USD 111.269 million, as compared to a loss of USD 71.453 million in the previous year.
• Cash and cash equivalent stood at USD 85.433 million, while total assets were recorded at USD 102.294 million.

FY20 Income Statement Highlights (Source: Company Report)

Risks: The company has continuously reported loses from its operations, which has taken a toll on the group’s financial position. Continuation of this trend can create big problem for the company in future.

Stock Recommendation:

The group has promising product-portfolio and is focusing to start commercializing its products across North America, Europe and Japan. Moreover, the company’s partnership with Kaken Pharmaceuticals, Japan, provides ample scope for the company. However, due to the lack of stable revenue-base, rising input costs, and elevated loses, we prefer to remain on the sidelines. The stock corrected ~71% and ~36% in the last nine months and one year, as the company reported a constant loss in the recent quarters. The stock is currently trading near the lower band of its 52-weeks trading range of USD 9.78 and USD 0.91, respectively. Moreover, the stock of CRBP is trading at an EV to Sales multiple of 32.9x on TTM basis, which is significantly higher than the industry (Healthcare) median of 11.4x. Hence, considering the above rationale, we give an ‘Avoid’ recommendation on the stock of CRBP at the closing price of USD 2.18 on March 16, 2021.

1-Year-Price Chart (as on March 16, 2021). Source: Refinitiv (Thomson Reuters)

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