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Ultimate Reports Q1 2014 Financial Results

Ultimate Software (Nasdaq: ULTI), a leading cloud provider of people management solutions, announced today its financial results for the first quarter of 2014. For the quarter ended March 31, 2014, Ultimate reported recurring revenues of $97.4 million, a 25% increase, and total revenues of $121.1 million, a 24% increase, both compared with 2013’s first quarter. GAAP net income for the first quarter of 2014 was $6.9 million, or $0.23 per diluted share, versus GAAP net income of $4.5 million, or $0.16 per diluted share, for the first quarter of 2013.

Non-GAAP net income, which excludes stock-based compensation expense and amortization of acquired intangible assets, was $13.8 million, or $0.47 per diluted share, for the first quarter of 2014, compared with non-GAAP net income of $9.2 million, or $0.32 per diluted share, for the first quarter of 2013. See “Use of Non-GAAP Financial Information” below.

“We exceeded our recurring revenue, total revenue, and operating margin objectives in this year’s first quarter, and our customer retention rate remained consistent at greater than 96%. These results position us well to achieve our 2014 goals,” said Scott Scherr, founder, president and CEO of Ultimate.

“In early April, we held our Connections conference for customers, industry analysts, and business leaders and had 1,573 attendees, up 27% over last year’s event. We showcased UltiPro’s expanded global HCM capabilities, including bidirectional global payroll integration and additional language support, and our new candidate-focused UltiPro Recruiting solution. Customers who began using UltiPro Recruiting in December 2013 can now give applicants the ability to securely submit applications in seconds using the LinkedIn profile feature, saving the candidate from having to navigate through multiple systems or having to copy and paste information from an existing profile in order to complete an application. Among the business advantages are ease, convenience, and accuracy.”

Ultimate’s financial results teleconference will be held today, April 29, 2014, at 5:00 p.m. Eastern Time, through Vcall at www.investorcalendar.com/IC/CEPage.asp?ID=172439. 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 25% for the first quarter of 2014 compared with 2013’s first quarter. The increase was primarily attributable to revenue growth from our cloud offering. Recurring revenues were 80% of total revenues for the first quarter of 2014.
  • Ultimate’s total revenues for the first quarter of 2014 increased by 24% compared with those for the first quarter of 2013.
  • Our operating income increased 48%, on a non-GAAP basis, for the first quarter of 2014 to $23.5 million as compared with $15.9 million for the same period of 2013. Our non-GAAP operating margin was 19.4% for the first quarter of 2014 versus 16.2% for the first quarter of 2013.
  • Ultimate’s annualized retention rate exceeded 96% for its existing recurring revenue customer base as of March 31, 2014.
  • Net income, on a non-GAAP basis, for the first quarter of 2014 increased to $13.8 million compared with $9.2 million for the first quarter of 2013.
  • Cash flows from operating activities for the quarter ended March 31, 2014 increased 41% to $25.6 million, compared with $18.1 million for the same period of 2013. The combination of cash, cash equivalents, and marketable securities was $101.7 million as of March 31, 2014, compared with $90.2 million as of December 31, 2013.
  • Days sales outstanding were 61 days at March 31, 2014, representing a reduction of nine days compared with days sales outstanding at December 31, 2013.

Stock Repurchases

  • During the three months ended March 31, 2014, we used $10.2 million to acquire 61,739 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 March 31, 2014, we had 946,165 shares of our outstanding common stock 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, 2014, and full year 2014:

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