Ultimate Reports Q1 2013 Financial Results
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 | ||||||||
2013 | 2012 | |||||||
Revenues: | ||||||||
Recurring | $ | 78,082 | $ | 60,873 | ||||
Services | 19,445 | 17,024 | ||||||
License | 390 | 384 | ||||||
Total revenues | 97,917 | 78,281 | ||||||
Cost of revenues: | ||||||||
Recurring | 21,828 | 19,104 | ||||||
Services | 19,728 | 16,523 | ||||||
License | 90 | 88 | ||||||
Total cost of revenues | 41,646 | 35,715 | ||||||
Gross profit | 56,271 | 42,566 | ||||||
Operating expenses: | ||||||||
Sales and marketing | 22,910 | 18,637 | ||||||
Research and development | 16,130 | 15,696 | ||||||
General and administrative | 8,927 | 6,145 | ||||||
Total operating expenses | 47,967 | 40,478 | ||||||
Operating income | 8,304 | 2,088 | ||||||
Other (expense) income: | ||||||||
Interest and other expense | (80 | ) | (75 | ) | ||||
Other income, net | 41 | 13 | ||||||
Total other expense, net | (39 | ) | (62 | ) | ||||
Income before income taxes | 8,265 | 2,026 | ||||||
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: | ||||||||
Basic | 27,476 | 26,394 | ||||||
Diluted | 28,704 | 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 | |||||||
2013 | 2012 | ||||||
Stock-based compensation expense: | |||||||
Cost of recurring revenues | $ | 864 | $ | 513 | |||
Cost of services revenues | 960 | 501 | |||||
Sales and marketing | 3,096 | 1,674 | |||||
Research and development | 770 | 624 | |||||
General and administrative | 1,907 | 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 of | As of | |||||||
March 31, | December 31, | |||||||
2013 | 2012 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 72,081 | $ | 58,817 | ||||
Investments in marketable securities | 6,936 | 9,223 | ||||||
Accounts receivable, net | 70,059 | 70,774 | ||||||
Prepaid expenses and other current assets | 29,088 | 25,949 | ||||||
Deferred tax assets, net | 1,372 | 1,372 | ||||||
Total current assets before funds held for clients | 179,536 | 166,135 | ||||||
Funds held for clients | 642,443 | 281,007 | ||||||
Total current assets | 821,979 | 447,142 | ||||||
Property and equipment, net | 41,990 | 38,068 | ||||||
Capitalized software, net | 356 | 508 | ||||||
Goodwill | 3,025 | 3,025 | ||||||
Investments in marketable securities | 2,313 | 1,311 | ||||||
Other assets, net | 16,983 | 16,687 | ||||||
Deferred tax assets, net | 19,191 | 18,543 | ||||||
Total assets | $ | 905,837 | $ | 525,284 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 6,185 | $ | 7,584 | ||||
Accrued expenses | 21,124 | 15,055 | ||||||
Deferred revenue | 91,936 | 90,674 | ||||||
Capital lease obligations | 2,968 | 2,968 | ||||||
Other borrowings | 3,860 | 2,311 | ||||||
Total current liabilities before client fund obligations | 126,073 | 118,592 | ||||||
Client fund obligations | 642,443 | 281,007 | ||||||
Total current liabilities | 768,516 | 399,599 | ||||||
Deferred revenue | 1,049 | 1,302 | ||||||
Deferred rent | 2,689 | 2,777 | ||||||
Capital lease obligations | 2,481 | 2,469 | ||||||
Other borrowings | 1,255 | 2,601 | ||||||
Income taxes payable | 1,866 | 1,866 | ||||||
Total liabilities | 777,856 | 410,614 | ||||||
Stockholders' equity: | ||||||||
Preferred Stock, $.01 par value | — | — | ||||||
Series A Junior Participating Preferred Stock, $.01 par value | — | — | ||||||
Common Stock, $.01 par value | 317 | 314 | ||||||
Additional paid-in capital | 275,183 | 266,130 | ||||||
Accumulated other comprehensive income (loss) | (156 | ) | 109 | |||||
Accumulated deficit | (28,819 | ) | (33,339 | ) | ||||
246,525 | 233,214 | |||||||
Treasury stock, at cost | (118,544 | ) | (118,544 | ) | ||||
Total stockholders' equity | 127,981 | 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 | ||||||||
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 amortization | 3,749 | 3,011 | ||||||
Provision for doubtful accounts | 613 | 133 | ||||||
Non-cash stock-based compensation expense | 7,597 | 4,354 | ||||||
Income taxes | 3,689 | 949 | ||||||
Excess tax benefits from employee stock plan | (4,337 | ) | (894 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 102 | 4,969 | ||||||
Prepaid expenses and other current assets | (3,139 | ) | (412 | ) | ||||
Other assets | (296 | ) | (397 | ) | ||||
Accounts payable | (1,399 | ) | (607 | ) | ||||
Accrued expenses and deferred rent | 5,981 | 3,959 | ||||||
Deferred revenue | 1,009 | (1,640 | ) | |||||
Net cash provided by operating activities | 18,089 | 14,449 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of marketable securities | (3,600 | ) | (4,700 | ) | ||||
Maturities of marketable securities | 4,885 | 3,924 | ||||||
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 Stock | 2,881 | 2,844 | ||||||
Excess tax benefits from employee stock plan | 4,337 | 894 | ||||||
Shares acquired to settle employee tax withholding liability | (6,159 | ) | (3,576 | ) | ||||
Principal payments on capital lease obligations | (896 | ) | (784 | ) | ||||
Other borrowings | 203 | - | ||||||
Net increase in client fund obligations | 361,436 | 213,869 | ||||||
Net cash provided by financing activities | 361,802 | 213,247 | ||||||
Effect of foreign currency exchange rate changes on cash | (265 | ) | 134 | |||||
Net increase in cash and cash equivalents | 13,264 | 10,974 | ||||||
Cash and cash equivalents, beginning of period | 58,817 | 46,149 | ||||||
Cash and cash equivalents, end of period | $ | 72,081 | $ | 57,123 | ||||
Supplemental disclosure of cash flow information: | ||||||||
