Earnings Call Transcript - ASUR Q3 2021

Operator, Operator

Good afternoon. And welcome to Asure’s Third Quarter 2021 Earnings Conference Call. Joining us for today’s call are Asure’s Chairman and CEO, Pat Goepel; Asure’s Chief Financial Officer, John Pence; and Head of Investor Relations Randal Rudniski. Following their prepared remarks, we’ll have a question-and-answer session from analysts and investors. I would now like to turn the call over to Randal Rudniski for introductory remarks. Please go ahead.

Randal Rudniski, Head of Investor Relations

Thank you, operator. Good afternoon, everyone. And thank you for joining us for Asure’s third quarter 2021 earnings call. Following the close of markets, 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 the investor presentation. During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors 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. We use words such as expect, believe, and may to indicate forward-looking statements. 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. Finally, I would like to remind everyone that this call is being recorded and will be made available for replay via link available on the investor relations section of our website. With that, I would now like to turn the call over to Pat Goepel, Chairman and CEO. Pat?

Pat Goepel, Chairman and CEO

Thank you, Randal, and welcome everyone to Asure Software’s third quarter earnings call. I will begin today’s presentation with an update on our business performance and strategy, then will turn the call over to our CFO, John Pence, for a more detailed review of our financial results and outlook for the fourth quarter of 2021 and fiscal year 2022. We will then conclude the session with time to answer your questions. We are pleased with our performance in the third quarter with revenues reaching almost $18 million, which was up 12% relative to the prior year and up 5% versus the prior quarter. Macroeconomic trends continue to improve in our markets, as is evidenced in the decline of the unemployment rate. I would say though, there remains lingering softness in some areas owing really to the labor shortage that is affecting many small businesses across the country. However, overall, we are pleased to have grown our organic revenues 8% versus the prior year in this economic environment, and our business is continuing to build positive momentum heading into 2022, driven by strong execution across the business. I also want to point out, the third quarter was an important step forward in terms of executing our strategy. We divested the space business, if you recall, in 2019, in order to focus our portfolio and resources where we can make the biggest impact. That focus is on human capital management solutions for small businesses that need a strong partner to run their business. We have repositioned the Board of Directors and the management team in 2020 and 2021 to strengthen the organization’s talent and leadership skills so we could execute on this big opportunity. In 2021, we’re making targeted investments in sales, products, and acquisitions so we can enhance growth and margins for Asure, while providing our valued customers with leading-edge solutions that enable them to be successful in their core business. The key to achieving the benefits of this strategy is execution. I believe we have the right people, the right resources, and the right focus to successfully deliver against our long-term revenue goal of 20% growth in revenues, driven roughly by organic improvements and acquisitions. In terms of the three pillars of our strategy, which are sales expansion, product enhancements, and targeted acquisitions, let’s start with a discussion about acquisitions. In the third quarter, we acquired two of our larger resellers, one based in New Jersey and the other based in Vermont. Both companies were acquired on the last day of the third quarter and did not impact our results in this period. These resellers focus on providing payroll and related services to small and medium-sized businesses within their territories. The acquisitions expand our direct operating territories, providing cross-sell and upsell opportunities, and we believe they will be highly synergistic to our core business. We’re excited to bring these companies into the Asure family, and we expect them to be highly accretive to our business and our stakeholders over time. Both companies currently utilize our payroll solutions. Accordingly, system conversion requirements are limited as we integrate their operations into Asure’s platform. We expect that this should result in a smooth integration while we pick up new operating territories and experienced staff. Acquisitions will remain an important part of our growth strategy, and we will continue to be opportunistic in rolling up our reseller partners that white label our human capital management solutions. We will also consider acquisitions of other payroll businesses that complement and expand our capabilities as we build scale and scope to our solution offerings. Turning now to product, we’re excited about the potential for our new human capital management solution we introduced in the market that combines the best features of our small business payroll and HR solutions into a single new solution with advanced customer experience tools. This significant enhancement simplifies the onboarding experience, provides new tools for employer self-service options, and is now part of our standard payroll offering. Also in the third quarter, we launched a new partnership with Employee Navigator, where we both integrated our payroll platform with their system to provide employers with seamless communications and tracking across our combined networks. This partnership should lay the groundwork to enable us to move forward with our ambitions in the broker referral space. I also want to spend some time talking about our tax platform, as well as HR for health. Let’s start with our tax platform. This is an asset we acquired in 2020, and we feel it provides us with some outstanding differentiation in the human capital management marketplace. We’ve had significant client interest in our new tax capabilities, particularly among larger enterprises who see the unique position that we have in the marketplace. This business has the potential to significantly expand our total addressable market and to open up new client segments for us. We’ll keep you updated on the integration, as well as the product development at this business as we are actively optimistic about its potential to drive revenues in the future, not only with tax filing but also with the money movement opportunities this opens. HR for health is another recent initiative we’re excited about. This solution offers the healthcare industry full-service payroll and tax filing services. We’ve had strong client interest for the solution which has recurring revenues with a wholesale revenue model, and it continues to grow with very attractive client retention characteristics. This solution has the potential to open up new end markets for us, and it continues to grow our client base. Think of small dental offices, doctor offices, and similar targets. It also fulfills our objective of enabling clients to focus on running their healthcare practices rather than on back-office improvements. We deliver the improvements for them so they can run their businesses. Turning now to sales activity. We continue to invest in our sales channels, our people, and in lead generation activities for our salespeople. At the end of the third quarter, we had 72 direct sales reps, up from 65 at the end of the second quarter and up significantly from 31 when we started in 2020 after our space divestiture. At year-end 2021, we expect to have approximately 80 direct sales professionals. The average tenure of our sales team now is 14 months, up from about 10 months at the end of last quarter. Getting our sales staff to an average tenure of 18 months is an important milestone, as at that point, we see strong improvements in sales productivity which then in turn drives revenues. With our recruitment and training efforts, we’re getting closer to that important achievement, while we continue to focus on the small business segment. These investments in sales and marketing are paying off with total bookings up 43% year-over-year in the third quarter, while on a year-to-date basis, our small business bookings have doubled. I continue to be very proud of how the Asure team embraced these challenges and took a leadership role through the pandemic. For example, as part of our efforts to support more than 80,000 small business clients in navigating the complex COVID regulations, we introduced an Employee Retention Tax Credit (ERTC) solution to help them efficiently maximize this critical stimulus dollar program. I couldn’t be prouder of our team, as they have helped our clients file over $200 million in total tax credits at the end of the third quarter. These stimulus dollars can help our customers hire staff and grow their businesses. It also shows how our people and platform can respond to new and unique solutions and situations, delivering impactful solutions to our clients. As an essential small business, Asure remains committed to helping more than 80,000 small business clients navigate unprecedented compliance changes and grow in a very challenging environment. We’re committed to ethical business practices, a values-based culture, innovation, social responsibility, leadership, and support for small businesses throughout the United States. In summary, we’re pleased with our third quarter performance, we acquired two of our larger reseller partners, made significant strides in our product strategy, continued to invest in our sales teams, and delivered another solid quarter of growth in an economy that continues to experience new and significant challenges as we move past the pandemic. We’re excited about our acquisition model. We believe our model works as we combine the acquired businesses with Asure’s platform. We see the opportunity to drive significant value creation and enhance margins longer-term, so that our future revenues can be effective in driving higher levels of EBITDA and cash flow. Now, I would like to hand off to John Pence to discuss our financial results in more detail. John?

John Pence, Chief Financial Officer

Thanks, Pat. As Randal mentioned at the beginning of this call, several of the financial figures discussed today are non-GAAP. You will find a description of our GAAP to non-GAAP reconciliations in the earnings release that was made available earlier today. Reconciliations themselves are also included in our most recent investor presentation posted in the Investor Relations section of our website at asuresoftware.com. Now, on to the results. Third-quarter revenue rose by 12% versus the prior year and 5% versus the prior quarter to $18 million. Recurring revenues represented 91% of our total revenue in the quarter. Recurring revenues grew by 7% versus the prior year and our non-recurring revenues more than doubled on the strength of our ERTC service offering, which continued to generate significant client interest. Interest on client funds was approximately $400,000 in the third quarter, flat from the second quarter and up versus the prior year by approximately $200,000. Client fund assets on our balance sheet were $174.8 million at September 30th, compared to $207.4 million at the end of the prior quarter, and $199.3 million at the end of Q3 2020. We are pleased with our gross margin performance. Our non-GAAP gross margin percentage reached 67% in the third quarter, which is up 70 basis points versus Q2 and up from 64% in last year’s third quarter. This marks Q3 as the fourth consecutive quarter in which we have grown our gross margin percentage. This performance is owing to a return to revenue growth and cost containment efforts, and has occurred despite the headwinds from higher pay and benefit increases. Non-GAAP EBITDA for the third quarter was $1.2 million, for an EBITDA margin of 7%. The non-GAAP EBITDA result was 21% higher than the prior year and 15% higher than the prior quarter, despite the increase in salary expenses as we absorbed pay and benefit increases following the implementation of temporary reductions related to COVID. Compensation represents approximately 70% of our cash expenditures, so these adjustments have a meaningful impact. EBITDA comparisons are also affected by an increase in the number of sales representatives as we invest in a sales organization to drive higher revenues in future periods. While there are some headwinds in the third quarter related to sales force expansion and pay restorations, we view these investments in our organization and people as key to building momentum in our business. In order to manage these headwinds, we are accelerating our efforts to improve our operating margins by increasingly leveraging the scalability of our platform and improving cost efficiency. These are the economic drivers that underpin our acquisition strategy, our sales strategy, and our product strategy. Turning to the acquisitions, we acquired two resellers in the quarter for an aggregate purchase price of $38.9 million, which was paid $25.3 million in cash, $6.6 million in notes payable, and by the issuance of 767,000 shares. The acquisitions have resulted in an increase in goodwill and intangible assets on our balance sheet. These acquisitions are important, as we expect they will accelerate our capacity to grow operating margins over time, yielding the benefits of operating leverage and the scale we have built in the business to date. We have a balance sheet capable of making further acquisitions and we’ll continue to evaluate opportunities that fit our criteria and standards. Continuing with the balance sheet, we ended the quarter with cash and cash equivalents of $11.5 million and had $39.7 million of debt, which comprised an initial $30 million drawdown from Structural Capital, with the balance made up of seller notes from acquisitions. We achieved a critical milestone in the third quarter as we entered into a new $50 million term loan facility with Structural Capital. This facility is based on an advanced rate related to our pro forma annual recurring revenues. Aside from the recurring revenue ratio, the facility has limited financial covenant compliance metrics and has a four-year term. We believe, when combined with our previously filed registration statements, we have the financial structuring flexibility to pursue our previously stated strategy regarding organic and inorganic growth. We relied on the facility to complete the purchase of these two resellers in the third quarter. We’ve openly communicated our plans to pursue acquisition opportunities that meet our criteria, and this facility will help us achieve our strategic goals. We’ve also commenced a new partnership with Goldman Sachs that we are really excited about. This venture is made possible because of the closure of our credit facility with Wells Fargo, which enabled us to uncouple our credit facility from our money management activities. This has opened up new options for us with new partners and new business opportunities. In combination with Goldman Sachs, we will offer our clients state-of-the-art money movement, moving into new business areas such as real-time pay with one of the leading financial brands in the world. We also expect to benefit from their expertise in enhancing our investment returns as we invest excess client funds. In the quarter, we booked a gain of $10.5 million relating to the Employee Retention Tax Credit. We filed amended returns for these credits and recorded receivables for them and other current assets. The recognized gain relates to the activity in the first nine months of 2021. This was booked as a discrete item in interest income and other line in our statements and is treated as an adjustment of our non-GAAP reconciliations. While the continuation of this credit is part of the current debate in Washington, we expect to qualify for a similar quarterly credit in the fourth quarter if the law is not modified. Now, I’m going to turn to guidance for the fourth quarter ending December 31, 2021. This guidance is offered with the backdrop of the continuing challenging environment to predict future economic results given the ebbs and flows of employment trends, COVID, and other economic challenges of today, and considers the impact of our recent acquisitions. We are providing the following guidance: Revenue for the fourth quarter of 2021 is expected to be in the range of $20.5 million to $21 million. Non-GAAP EBITDA is guided to be in the range of $1.5 million to $1.7 million, and non-GAAP EPS is guided between negative $0.03 and negative $0.05. For the 2022 fiscal year, we are also introducing the following guidance: Revenue in 2022 is expected to be in the range of $85 million to $90 million. We also anticipate fiscal year 2022 non-GAAP EBITDA margin percentages and non-GAAP EPS to be in line with historical percentages and seasonal trends, subsequent to the space divestiture. Consistent with our historical performance, we expect the first quarter 2022 results will benefit from revenue generated by the annual preparation of federal reporting regarding employee-employer reporting of W2 income and ACA compliance. Our strategy in this environment is to focus on cost levers that we can reasonably control, pursuing beneficial and accretive acquisitions, amplifying our core solution offerings by improving functionality and customer experience, and by expanding our sales efforts to tap into market demand for innovative and trustworthy payroll and HR solutions. With this stabilized foundation as a backdrop, we are pursuing exciting new product and service offerings to better serve our over 80,000 direct and indirect customers and their over 1 million employees. So, with that, I’ll turn the call back over to Pat for some final remarks.

Pat Goepel, Chairman and CEO

Thanks, John. In summary, we are pleased with our third quarter performance. We continue to have good momentum in the marketplace as evidenced by our 12% annual growth rate in revenues and 5% sequential growth in organic revenue. We grew our non-GAAP EBITDA by 21% relative to the prior year and 15% relative to the prior quarter, despite headwinds from restoring salary and benefits. Our ERTC solution continues to have great traction in the market, and in total, our clients have filed for more than $200 million in the ERTC credits. We launched the next generation user interface of our small business payroll clients that combines our payroll and HR solutions into a single solution with improved user controls and a fresh look. We implemented a new integration with Employee Navigator that keeps employee data in sync, adds value to our solution, and will enable us to better penetrate the broker referral marketplace. We completed two acquisitions that we’re excited about and that we expect will be highly accretive for stakeholders over time. We’ve diversified our sources of capital which will help us drive the business forward for growth in both organic and inorganic revenues. I’m very proud of the execution of the Asure team, their commitment to our clients, and to providing enhanced payroll and HR solutions that meet and exceed their needs. With that, I’ll turn the call over to the operator for the question-and-answer session.

Operator, Operator

Thank you. Our first question comes from Joshua Reilly from Needham.

Joshua Reilly, Analyst

Maybe starting off with the '22 guidance of $85 million to $90 million in revenue. How should we think about the organic growth rate assumed in that number?

John Pence, Chief Financial Officer

Yes, I don’t think anything has changed, Josh. From our historic guidance, we're aiming for 10%. I think this number shouldn't be overly tied to 2022 right now. We’re trying to provide a perspective on where the street was historically for 2022, considering the impact of these third-quarter acquisitions. More information will follow as we go through the budgeting process and refine our projections for 2022. We wanted to give you some insight into the effect of acquisitions.

Joshua Reilly, Analyst

Yes. No, that’s helpful. And then, how much of the gross margin benefit in the quarter is due to the ERTC product? And then, how sustainable should we think about those revenues being? And does that create a headwind somewhat going into next year if there was some change there?

John Pence, Chief Financial Officer

Yes, definitely helped on the gross margin, right? We didn’t add a lot of people to service that incremental revenue opportunity, so that was impactful. I’ll let Pat address the headwind comment.

Pat Goepel, Chairman and CEO

Yes. I think, Josh, from my perspective, we set scale, and we’ve done a lot of improving in the business. So, we have several initiatives that we think will be impactful in 2022, too, to gross margin, including some of the new product introductions, some of the centralization initiatives, with AWS, and even refining how we go about business, including some of the robots that we talked about last quarter. So, we think there’ll be several initiatives to layer in. As far as ERTC, we’re opportunistic, and we felt it was a great program. Any positives this quarter will help mitigate that or improve next year.

Joshua Reilly, Analyst

Okay, great. And then, maybe I can sneak one more in on that line of questioning there. You hired a new CTO at the beginning of '21. Curious, now as the M&A machine is kind of restarting, is there anything specific you can point to that you guys have done on the integration process on this side of COVID versus the acquisitions you made pre-COVID that’s either going to make the integration go quicker and/or be more margin accretive? Thanks.

Pat Goepel, Chairman and CEO

I think, a couple of things. First of all, really after the space business, we hired a new Board of Directors for the most part with human capital management expertise. I think they did a great job. Todd Waletzki who came from CompuPay was former president, he’s really in charge of some of the operational improvement initiatives going forward. And then, specifically, your question, Yasmine Rodriguez, who’s the CTO, who has a wonderful background in payroll and tax. We’re pointing to several initiatives that we think will help over time, grow gross margins and assist in the acquisition integration. First of all, almost all now, by first quarter of 2022 or second quarter of 2022, will be on the same instance or the same platform within the AWS environment. That’s a real positive development for us. Two, I think just the standardization initiatives that we have. Three, we talked about introducing the robots and really taking non-value add work out of the employment cycle to keep headcount stable while doing much more with production around the robotic effort. That was led by Yasmine as well. And then, finally, just the state of our product set. We’ve introduced a new user interface that will help us integrate going forward, allowing more online actions from customers in that successful environment. All of that will help us in the integration going forward. So, it’s a series of initiatives we’ve been planning for the next couple of years.

Operator, Operator

Our next question comes from the line of Richard Baldry from ROTH Capital.

Richard Baldry, Analyst

Thanks. Sort of thinking historically, I feel like M&A tends to be a bit of a drag on adjusted EBITDA before integration optimization sort of brings up a new level. But against that backdrop, you’re actually guiding for adjusted EBITDA to grow pretty solidly from Q3 to Q4. So, could you maybe talk about what gives you that confidence that those acquisitions aren’t going to start pulling back before you go higher? And then, how long should it take perhaps with an eye on your backend integration being completed across the AWS platform? Do you think you can be faster at fully integrating the acquired entities now and in the future? Thanks.

John Pence, Chief Financial Officer

Yes, I think we can. We have not modeled in all the synergies in the fourth quarter. Clearly, we’re expecting that to deplete into 2022, and we would hope to be done by the end of 2022 with these integrations. To answer your question about the drag, I think it’s just to be clear; historically these companies have used our same software platform. The difference here is configuration. It’s the same use of software, but think about it like Excel and moving funds around. Each of these resellers might use our software a little bit differently, and we’re standardizing the use case across all our previous acquisitions and new acquisitions so we’re able to speed up integration as well as drive margins higher.

Pat Goepel, Chairman and CEO

I would just add, I’d point you to the first-quarter acquisition. We did a smaller acquisition in the Northeast in January. If you look at our kind of headcount and where we’ve run the business here, this year, we’ve added some salespeople, but the overall headcount is down from where that period was, meaning we absorbed that acquisition without headcount over time. We’re nine months from that acquisition, and I think we’ll see similar results here with these two acquisitions.

Richard Baldry, Analyst

Last thing, could you talk about the degree to which the companies you acquired, the resellers, were stable operationally, or was this really more about the earnings integration, and you’re not really thinking so much about the productive sales capacity you’re bringing on more from those? Thanks.

Pat Goepel, Chairman and CEO

Yes. I think both were well-run operators that were in the business. While they were growing, the backdrop of COVID impacted them, but they were both growing. We anticipate that there will be further growth going forward, and we believe that their expertise, coupled with being in business as a partner for a decade or so, will lead to a seamless integration.

John Pence, Chief Financial Officer

Yes. We’ve been transparent that this last year was challenging, and we’re kind of at that breakeven point. Getting to scale is important for us, and it affords us more flexibility in what we invest in and the speed of our investments. It’s key for us.

Operator, Operator

Our next question comes from the line of Bryan Bergin from Cowen.

Bryan Bergin, Analyst

A question for you around client employment level, so two-parter here. So, pre-pandemic employment level, can you comment on where average client size really sits today relative to prior to COVID and how much recovery you’re anticipating over the next couple of quarters? And then, I didn’t hear it, but just the pays for control metric in 3Q? Sorry if you did disclose that.

Pat Goepel, Chairman and CEO

Just from a client level employment, let’s talk at a macro level. Early in the COVID mindset, I think we lost $25 million in jobs in the United States early, and it has normalized to about 10 million. Even though you see improvement in the economy and the jobless claims, we’re probably still about 5 million out of the workforce. We’ve done some modeling around that. As far as pays per control, this quarter we were at a little over 20, I believe. Pre-pandemic, that was probably in the area of 22 or 23. Some of that has some noise, but that's the order of magnitude. I would say this quarter showed a slight tick up. Speaking to almost any business owner who are looking to hire people, it takes two; first to hire people, and then for someone to want to come to a job. Mainstream America and small business in general were probably disproportionately affected. So, we’re improving, but we’re not quite there yet. John, do you have anything to add?

John Pence, Chief Financial Officer

The point I was going to make is that the unemployment situation is still a challenge. There’s a slide we added to the IR deck showing that 5 million gap still in unemployment return to normalcy, even though rates are starting to return. So, we still see some upside as things get back to normal.

Bryan Bergin, Analyst

Okay, all right. That’s helpful. And then on as we think about these two acquisitions, are they in line with the acquisition economics that you’ve talked about in targets in the past? What are you expecting here in 4Q revenue contribution? And I’m curious too, is the client size larger than yours? You’ve been talking about mid-market pipeline here for a couple of quarters. Curious if this was in line with that.

John Pence, Chief Financial Officer

I think they are consistent with our customer base. In terms of revenue contribution, it’s obviously reflected in the guidance we gave you of $20.5 million to $21 million. The multiples we paid have been consistent, and we’ve discussed this in our investor relations presentation. Goldilocks scenarios are two times; we think smaller deals will be closer to 1 time, and bigger deals can be closer to 3 times. We want to be in the 1 to 3 range; these deals are on the higher end in terms of size, so you need to infer where we’re at.

Operator, Operator

Our next question comes from the line of Jeff Van Rhee from Craig-Hallum.

Jeff Van Rhee, Analyst

Pat, I think you commented just briefly, and I want to make sure I hear it correctly on the acquisition front. You said you were open to things. And I thought you were saying open acquisitions that are non-evolution resellers and maybe more of a variation on the typical models. So, just clarification on that to start?

Pat Goepel, Chairman and CEO

Yes. First of all, we have a reseller network that is powerful, and we think we have opportunities to continue growth. We also feel pretty good about our ability now to start to get to scale. As we achieve scale, we think we have assets that could be interesting. One of them we talked about was our acquisition of PTM, where we start to have standalone tax filing and money movement. We see some interesting cross-sell opportunities. ERTC shows our ability to cross-sell, and we think there may be other opportunities. While I don’t have anything immediate, we might see opportunities as we turn the page to '22.

Jeff Van Rhee, Analyst

And then, on the HR payroll integrated offering, can you provide some expectations? Does that provide a powerful uplift? What is the impact on ARPU adoption? How should we think about the impact of this new integrated offering?

John Pence, Chief Financial Officer

I think some things Pat mentioned are really about ease of use and customer satisfaction. There might not be immediate ARPU uplift from ease of use or customer satisfaction, but those hopefully lead to higher retention rates. In terms of cross-sell, we had good penetration of the ERTC into our existing customer base, which is around 10%, demonstrating our ability to deliver value. We want to focus on honing our product lines to make them easier for our sales force to cross-sell.

Pat Goepel, Chairman and CEO

The only point I would add is we’re getting through the budget process and will wrap it up shortly. In March, we’ll discuss more specific metrics. We are increasingly excited about opportunities as we look forward.

Jeff Van Rhee, Analyst

Yes. Maybe one last question, if I could sneak it in. John, on the guidance you set for FY22 non-GAAP EBITDA margin and EPS in line with historical trends prior to divestitures. Can you expand on that a second? There are a lot of trends in there. Which specific trends or relations are you calling out?

John Pence, Chief Financial Officer

Specifically for the bottom line, there’s a seasonal component to our EBITDA that is apparent. In the first quarter, we see a significant increase in the numbers, and then it declines due to the overall figures. That was my main point.

Operator, Operator

Our next question will come from the line of Eric Martinuzzi from Lake Street.

Eric Martinuzzi, Analyst

Yes. My question was regarding the Q4 guidance. Given the two acquisitions, the gross margin assumption, you guys have been operating between 66% and 69% over the past three quarters. What should we think about for gross margin for Q4 with the acquisitions layered on?

John Pence, Chief Financial Officer

I think we are hoping for some improvement this quarter, but I wouldn’t expect any major changes; a steady performance with slight gains would be how I view it.

Eric Martinuzzi, Analyst

Okay. And you’ve laid out an aggressive goal. You mentioned adding reps going into the beginning of the year. You mentioned 72 now, and another net 8 between now and year-end. Are these folks identified already or still in the process?

John Pence, Chief Financial Officer

Yes. No, they’re identified or in the process. We hope to finish the year around 80. I think we have a good line of sight for that. I see us going up from there, and the amount will be discussed in March’s guidance. We think we have a good sight of turning the year at 80 reps.

Eric Martinuzzi, Analyst

All right. And then, in organic growth, we’re talking about inherited reps from the acquired companies?

John Pence, Chief Financial Officer

It’ll be combined, yes. I think the 80 would be both.

Operator, Operator

Our next question will come from the line of Vincent Colicchio from Barrington Research.

Vincent Colicchio, Analyst

I'm interested in how wage inflation might affect your business in the short term regarding costs. Additionally, are customers open to accepting higher prices in the market?

John Pence, Chief Financial Officer

We haven’t had a lot of resistance on pricing, Vince. I think we’re suffering some of the same issues that the rest of the market is, particularly at the lower ends of the employment range. Those entry-level jobs are where we’re seeing more inflation. We believe we can manage through it with efficiencies we’re trying to implement, but we’re still in the 2022 budgeting process. I don’t expect it to create an inordinate headwind for us, but yes, we’re definitely seeing it.

Pat Goepel, Chairman and CEO

I think, Vince, as we capitalize on the flow, wage inflation from our customers will provide opportunities to capture those dollars. Ultimately, that could lead to more float revenue, but that will grow with the market.

Vincent Colicchio, Analyst

Pat, could you share your thoughts on pricing in relation to reseller acquisitions? There seems to be some pressure from both sides; some sellers believe their assets are worth more than they actually are, while at the same time, potential changes to capital gains tax are on the horizon. Are you observing an increase in deals that align with economic value?

Pat Goepel, Chairman and CEO

No, I think it’s always a healthy discussion. As the nation and markets stabilize coming out of COVID, there’s a bit more certainty, which helps in making value judgments. Some people are testing the market, but common sense is prevailing. I feel we have opportunities to get some deals done in the first half of the year. We want the right deal for Asure at this stage as we take advantage of that growth opportunity.

Vincent Colicchio, Analyst

Again, nice job in the quarter. Thank you.

Pat Goepel, Chairman and CEO

Thank you. I appreciate it. Operator, is there any other questions?

Operator, Operator

I’m not showing any further questions, sir.

Pat Goepel, Chairman and CEO

Well, thank you. I really appreciate everybody’s attention on this call. We went into detail and wanted to ensure you understood the business. We think we have pretty good momentum. For those of you that have followed us, we think we’re heading into an exciting 2022. I’m very pleased with the execution of the team and look forward to our update in March. So, thank you, and have a great day.

Operator, Operator

This concludes today’s conference call. Thank you for participating. You may now disconnect. Everyone have a good day.