Ultimate Reports Q1 2013 Financial Results

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Ultimate Reports Q1 2013 Financial Results

  • Record Recurring Revenues of $78.1 Million, Up by 28%
  • Record Total Revenues of $97.9 Million, Up by 25%

WESTON, Fla.--(BUSINESS WIRE)-- Ultimate Software (NAS: ULTI) , a leading cloud provider of people management solutions, announced today its financial results for the first quarter of 2013. For the quarter ended March 31, 2013, Ultimate reported recurring revenues of $78.1 million, a 28% increase, and total revenues of $97.9 million, a 25% increase, both compared with 2012's first quarter. GAAP net income for the first quarter of 2013 was $4.5 million, or $0.16 per diluted share, versus GAAP net income of $1.0 million, or $0.04 per diluted share, for the first quarter of 2012.

Non-GAAP net income, which excludes stock-based compensation, was $9.2 million, or $0.32 per diluted share, for the first quarter of 2013, compared with non-GAAP net income of $3.7 million, or $0.13 per diluted share, for the first quarter of 2012. See "Use of Non-GAAP Financial Information" below.


"The first quarter was a great start to achieving our 2013 goals. Our recurring revenues and operating margin both exceeded our expectations," said Scott Scherr, founder, president and CEO of Ultimate. "A high percentage of our new customers continued to add talent and time management products to their core UltiPro HR and payroll solution purchases in the quarter.

"We held our sixth annual customer forum known as Connections in March. It was our largest conference ever, with attendance up by 27% to more than 1,600 attendees learning about our strategic roadmap and sharing best practices with their peers."

Ultimate's financial results teleconference will be held today, April 30, 2013, at 5:00 p.m. Eastern Time, through Vcall at http://www.investorcalendar.com/ic/cepage.asp?id=170358. The call will be available for replay at the same address beginning at 9:00 p.m. Eastern Time the same day. Windows Media Player software is required to listen to the call and can be downloaded from the site. Forward-looking information about future company performance will be discussed during the teleconference call.

Financial Highlights

  • Recurring revenues grew by 28% for the first quarter of 2013 compared with 2012's first quarter. The increase was primarily attributable to revenue growth from our cloud offering. Recurring revenues for the first quarter of 2013 were 80% of total revenues as compared with 78% of total revenues for 2012's first quarter.
  • Ultimate's total revenues for the first quarter of 2013 increased by 25% compared with those for the first quarter of 2012.
  • Our operating income increased 147%, on a non-GAAP basis, for the first quarter of 2013 to $15.9 million as compared with $6.4 million for the same period of 2012. Our non-GAAP operating margin was 16.2% for the first quarter of 2013 versus 8.2% for the first quarter of 2012.
  • Ultimate's annualized retention rate exceeded 96% for its existing recurring revenue customer base as of March 31, 2013.
  • Net income, on a non-GAAP basis, for the first quarter of 2013 increased to $9.2 million compared with $3.7 million for the first quarter of 2012.
  • The combination of cash, cash equivalents, and marketable securities was $81.3 million as of March 31, 2013, compared with $69.4 million as of December 31, 2012. Cash flows from operating activities for the quarter ended March 31, 2013, were $18.1 million, compared with $14.4 million for the same period of 2012.
  • Days sales outstanding were 64 days at March 31, 2013, representing a reduction of seven days compared with days sales outstanding at December 31, 2012.

Stock Repurchases

  • During the three months ended March 31, 2013, we used $6.2 million to acquire 64,070 shares of our Common Stock to settle the employee tax withholding liability resulting from the vesting of our employees' restricted stock holdings.
  • As of March 31, 2013, we had 946,165 shares available for repurchase in the future under our previously announced Stock Repurchase Plan.

Financial Outlook

Ultimate provides the following financial guidance for the second quarter ending June 30, 2013, and full year 2013:

For the second quarter of 2013:

  • Recurring revenues of approximately $81.0 million,
  • Total revenues of approximately $97.0 million, and
  • Operating margin, on a non-GAAP basis (discussed below), of approximately 15%.

For the year 2013:

  • Recurring revenues to increase by approximately 25% over those of 2012,
  • Total revenues to increase by approximately 23% over those of 2012, and
  • Operating margin, on a non-GAAP basis (discussed below), of approximately 17%.

Operating margin expectations were determined on a non-GAAP basis using the methodologies identified under the caption "Use of Non-GAAP Financial Information" in this press release. Non-cash stock-based compensation expense for 2013 is expected to be approximately $37.5 million.

Forward-Looking Statements

Certain statements in this press release are, and certain statements on the teleconference call may be, forward-looking statements within the meaning provided under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are made only as of the date hereof. These statements involve known and unknown risks and uncertainties that may cause Ultimate's actual results to differ materially from those stated or implied by such forward-looking statements, including risks and uncertainties associated with fluctuations in Ultimate's quarterly operating results, concentration of Ultimate's product offerings, development risks involved with new products and technologies, competition, contract renewals with business partners, compliance by our customers with the terms of their contracts with us, and other factors disclosed in Ultimate's filings with the Securities and Exchange Commission. Ultimate undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

About Ultimate

Ultimate is a leading cloud-based provider of people management solutions, with more than 10 million people records in the cloud. Built on the belief that people are the most important ingredient of any business, Ultimate's award-winning UltiPro delivers HR, payroll, and talent management solutions that seamlessly connect people with the information and resources they need to work more effectively. Founded in 1990, the company is headquartered in Weston, Florida, and has more than 1,600 professionals focused on developing the highest quality solutions and services. In 2013, Ultimate was ranked #9 on FORTUNE's "100 Best Companies to Work For" list, and Minyanville Media Inc. named Ultimate among the top 10 most ethical businesses in the United States. Ultimate has more than 2,500 customers with employees in 144 countries, including Adobe Systems Incorporated, Culligan International, Major League Baseball, The New York Yankees Baseball Team, Pep Boys, and Texas Roadhouse. More information on Ultimate's products and services for people management can be found at www.ultimatesoftware.com.

UltiPro is a registered trademark of The Ultimate Software Group, Inc. All other trademarks referenced are the property of their respective owners.

 

THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

 

For the Three Months Ended
March 31,

2013 2012
Revenues:
Recurring$78,082$60,873
Services19,44517,024
License390 384 
Total revenues97,917 78,281 
Cost of revenues:
Recurring21,82819,104
Services19,72816,523
License90 88 
Total cost of revenues41,646 35,715 
Gross profit56,271 42,566 
Operating expenses:
Sales and marketing22,91018,637
Research and development16,13015,696
General and administrative8,927 6,145 
Total operating expenses47,967 40,478 
Operating income8,3042,088
Other (expense) income:
Interest and other expense(80)(75)
Other income, net41 13 
Total other expense, net(39)(62)
Income before income taxes8,2652,026
Provision for income taxes(3,745)(1,002)
Net income$4,520 $1,024 
Net income per share:  
Basic$0.16 $0.04 
Diluted$0.16 $0.04 
Weighted average shares outstanding:
Basic27,476 26,394 
Diluted28,704 28,073 
 

The following table sets forth the stock-based compensation expense resulting from stock-based arrangements (excluding the income tax effect, or "gross") and the amortization of acquired intangibles that are recorded in Ultimate's unaudited condensed consolidated statements of operations for the periods indicated (in thousands):

 

For the Three Months Ended
March 31,

2013 2012
Stock-based compensation expense:
Cost of recurring revenues$864$513
Cost of services revenues960501
Sales and marketing3,0961,674
Research and development770624
General and administrative1,907 1,042
Total non-cash stock-based compensation expense$7,597 $4,354
 
 
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
  
As ofAs of
March 31,December 31,
20132012
ASSETS
Current assets:
Cash and cash equivalents$72,081$58,817
Investments in marketable securities6,9369,223
Accounts receivable, net70,05970,774
Prepaid expenses and other current assets29,08825,949
Deferred tax assets, net1,372 1,372 
Total current assets before funds held for clients179,536166,135
Funds held for clients642,443 281,007 
Total current assets821,979447,142
Property and equipment, net41,99038,068
Capitalized software, net356508
Goodwill3,0253,025
Investments in marketable securities2,3131,311
Other assets, net16,98316,687
Deferred tax assets, net19,191 18,543 
Total assets$905,837 $525,284 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$6,185$7,584
Accrued expenses21,12415,055
Deferred revenue91,93690,674
Capital lease obligations2,9682,968
Other borrowings3,860 2,311 
Total current liabilities before client fund obligations126,073118,592
Client fund obligations642,443 281,007 
Total current liabilities768,516399,599
Deferred revenue1,0491,302
Deferred rent2,6892,777
Capital lease obligations2,4812,469
Other borrowings1,2552,601
Income taxes payable1,866 1,866 
Total liabilities777,856 410,614 
 
Stockholders' equity:
Preferred Stock, $.01 par value
Series A Junior Participating Preferred Stock, $.01 par value
Common Stock, $.01 par value317314
Additional paid-in capital275,183266,130
Accumulated other comprehensive income (loss)(156)109
Accumulated deficit(28,819)(33,339)
246,525233,214
Treasury stock, at cost(118,544)(118,544)
Total stockholders' equity127,981 114,670 
Total liabilities and stockholders' equity$905,837 $525,284 
 
 
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 

For the Three Months
Ended March 31,

2013 2012
Cash flows from operating activities:
Net income$4,520$1,024
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization3,7493,011
Provision for doubtful accounts613133
Non-cash stock-based compensation expense7,5974,354
Income taxes3,689949
Excess tax benefits from employee stock plan(4,337)(894)
Changes in operating assets and liabilities:
Accounts receivable1024,969
Prepaid expenses and other current assets(3,139)(412)
Other assets(296)(397)
Accounts payable(1,399)(607)
Accrued expenses and deferred rent5,9813,959
Deferred revenue1,009 (1,640)
Net cash provided by operating activities18,089 14,449 
Cash flows from investing activities:
Purchases of marketable securities(3,600)(4,700)
Maturities of marketable securities4,8853,924
Net purchases of client funds securities(361,436)(213,869)
Purchases of property and equipment(6,211)(2,211)
Net cash used in investing activities(366,362)(216,856)
Cash flows from financing activities:
Net proceeds from issuances of Common Stock2,8812,844
Excess tax benefits from employee stock plan4,337894
Shares acquired to settle employee tax withholding liability(6,159)(3,576)
Principal payments on capital lease obligations(896)(784)
Other borrowings203-
Net increase in client fund obligations361,436 213,869 
Net cash provided by financing activities361,802 213,247 
Effect of foreign currency exchange rate changes on cash(265)134 
Net increase in cash and cash equivalents13,26410,974
Cash and cash equivalents, beginning of period58,817 46,149 
Cash and cash equivalents, end of period$72,081 $57,123 
Supplemental disclosure of cash flow information: Read Full Story

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