Carter's Inc.

Asure reported Q2 2026 revenue of $37.1 million, up 23% from $30.1 million in Q2 2025. Recurring revenue was $34 million, up 19% year over year, and represented about 91% of total revenue; professional services, hardware and other revenue was $3.2 million versus $1.5 million last year. Gross profit was $25.1 million versus $19.9 million, GAAP gross margin was 68% versus 66%, non-GAAP gross margin was 73% unchanged, net loss was $4.4 million versus $6.1 million, EBITDA was $4.6 million versus $1.4 million, and adjusted EBITDA was $7.7 million versus $5.2 million. For the full year 2026, management raised guidance to revenue of $159 million-$163 million and adjusted EBITDA margin of 24%-25%; Q3 guidance is revenue of $38 million-$40 million and adjusted EBITDA of $8 million-$10 million. The company ended Q2 with $19.7 million of cash and cash equivalents and $68.9 million of total debt, and continues to expect positive levered free cash flow in the mid to high teens range for the full year.

Pat Goepel said the quarter showed the platform strategy is working, citing broad-based growth, stronger organic growth than a year ago, and expanding multi-product adoption. He emphasized AsureCentral reaching a majority of direct clients, AsureWorks gaining traction, and Luna AI helping both revenue opportunities and service efficiency. His tone was upbeat and confident, repeatedly pointing to a stronger second half, double-digit organic growth aspirations, and increasing optimism for 2027.

John Pence focused on the financial mix shift toward recurring revenue and improving profitability. He cited Q2 revenue of $37.1 million, gross profit of $25.1 million, adjusted EBITDA of $7.7 million, and a 21% adjusted EBITDA margin, then raised full-year revenue guidance to $159 million-$163 million and margin guidance to 24%-25%. He also noted $19.7 million of cash, $68.9 million of debt, expected positive levered free cash flow in the mid to high teens range, and a roughly $600,000 revenue headwind in the first half of 2027 from Lathem’s hardware-as-a-service transition.

Analysts pressed on how much AI can reduce costs versus create revenue, and management said the opportunity is still early but already helping with intent data, cross-sell, sentiment analysis, and customer service triage. They also asked why second-half organic growth guidance implied less than double digits on the headline number; Pat explained that tougher comparisons on non-recurring professional services, especially tax work, mute the top-line rate even as recurring organic growth should stay strong. Other questions focused on sales hiring, multi-product attach, AsureWorks differentiation, Lathem cross-sell, and M&A; management said they are about 10 reps short of the 150 goal, see attach rates improving, believe AsureWorks is differentiated by combining software, AI, and managed services without PEO risk, and do not have acquisitions included in guidance.