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Ultimate Reports Q3 2013 Financial Results

Ultimate Software (Nasdaq: ULTI), a leading cloud provider of people management solutions, announced today its financial results for the third quarter of 2013. For the quarter ended September 30, 2013, Ultimate reported recurring revenues of $85.2 million, a 26% increase, and total revenues of $103.1 million, a 25% increase, both compared with 2012’s third quarter. GAAP net income for the third quarter of 2013 was $6.3 million, or $0.22 per diluted share, versus GAAP net income of $4.7 million, or $0.16 per diluted share, for the third quarter of 2012.

Non-GAAP net income, which excludes stock-based compensation, was $11.7 million, or $0.40 per diluted share, for the third quarter of 2013, compared with non-GAAP net income of $8.1 million, or $0.29 per diluted share, for the third quarter of 2012. See “Use of Non-GAAP Financial Information” below.

“In this year’s third quarter, we again executed according to plan with both our recurring and total revenues coming in slightly above guidance,” said Scott Scherr, CEO, president, and founder of Ultimate. “Our operating margin was also on the positive side of our target, and we are well-positioned to achieve our 2013 objectives.

“We showcased two new products at the HR Technology Conference in Las Vegas earlier this month that strategically extend the capabilities of our HCM offering, and both generated market enthusiasm,” added Scherr. “The first was our new UltiPro Recruiting solution with its candidate-centric design, new state-of-the-art user interface, gamification, collaboration tools, mobility, and integration with popular social networks. The second was our acquisition of EmployTouch that provides us with an acclaimed tablet-based time collection and employee self-service device called TouchBase for our customers and gives us a pool of talented engineers to help us continue innovating as we grow our UltiPro product suite.”

Ultimate’s financial results teleconference will be held today, October 29, 2013, at 5:00 p.m. Eastern Time, through Vcall at www.investorcalendar.com/IC/CEPage.asp?ID=170360. The call will be available for replay at the same address beginning at 9:00 p.m. Eastern Time today. 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 26% for the third quarter of 2013 compared with 2012’s third quarter. The increase was primarily attributable to revenue growth from our cloud offering. Recurring revenues for the third quarter of 2013 were 83% of total revenues as compared with 82% of total revenues for 2012’s third quarter.
  • Ultimate’s total revenues for the third quarter of 2013 increased by 25% compared with those for the third quarter of 2012.
  • Our operating income increased 43%, on a non-GAAP basis, for the third quarter of 2013 to $20.2 million as compared with $14.2 million for the same period of 2012. Our non-GAAP operating margin was 19.6% for the third quarter of 2013 versus 17.2% for the third quarter of 2012.
  • Ultimate’s annualized retention rate exceeded 96% for its existing recurring revenue customer base as of September 30, 2013.
  • The combination of cash, cash equivalents, and marketable securities was $111.4 million as of September 30, 2013, compared with $69.4 million as of December 31, 2012. Cash flows from operating activities for the quarter ended September 30, 2013 were $21.8 million, compared with $9.6 million for the same period of 2012. For the nine months ended September 30, 2013, Ultimate generated $54.3 million in cash from operations compared with $32.3 million for the nine months ended September 30, 2012.
  • Days sales outstanding were 66 days at September 30, 2013, representing a reduction of five days compared with days sales outstanding at December 31, 2012.

Stock Repurchases
  • During the nine months ended September 30, 2013, we used $8.3 million to acquire 79,767 shares of our Common Stock to settle the employee tax withholding liability resulting from the vesting of our employees' restricted stock holdings.
  • In addition, as of September 30, 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 2013 full year and preliminary financial guidance for the 2014 full year:

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