Previous Statements by ULTI
» The Ultimate Software Group, Inc. Q1 2010 Earnings Call Transcript
» Ultimate Software Group Q4 2009 Earnings Call Transcript
» The Ultimate Software Group Q3 2009 Earnings Call Transcript
I’m going to begin by reviewing our financial results for the second quarter of 2010 and then I’ll provide financial guidance for the third quarter. Unless otherwise noted, our discussion will be on a non-GAAP basis for all costs, gross margins, operating and net income, as well as EPS when comparing to the same period in the prior year.The primary difference between GAAP and non-GAAP financial information is non-cash stock-based compensation. Please refer to the reconciliation of our financial information on a GAAP basis to that on a non-GAAP included in the press release, which is published on our website. Now for the second quarter of 2010 Ultimate reported total revenues of $54.7 million and recurring revenues of $41.4 million. Non-GAAP net income for the second quarter of 2010 was $2.3 million or $0.09 per diluted share and GAAP net income for continuing operations was $300,000 or $0.01 per share. For Q2 our recurring revenues were $41.4 million, representing a 27% increase over the same quarter in 2009. Recurring revenues represented 76% of total revenues this quarter compared to -- compared with 69% for the second quarter of last year. The recurring revenue gross margin of 71.4% was slightly ahead of our expectation. The annualized retention rate remained at 96% for our recurring revenue customer base. Service revenues for Q2 were $13 million and our services gross margin was 11.3%, both were in line with our expectations. Our total gross margin rate for the quarter was 57.2%. Operating expenses were $27.3 million, slightly better than our expectations. Our operating margins for the quarter of 7.2% were ahead of our expectations at 6%, driven mostly by higher revenues and slightly lower operating expenses than expected. Excluding the impact of license revenue, total revenues for the first half of 2010 grew by 18% and the incremental operating margin was 26%. Our non-GAAP income tax rate for the quarter and the year-to-date was 41%.
Turning to the balance sheet. Total cash in investments and marketable securities were $32 million at June 30th. For the year, we’ve generated $10 million in cash from operations, we invested $3.8 million in total capital expenditures and free cash flow was $6.2 million or $0.23 per diluted share.As part of our stock repurchase program, we used $9.3 million in the quarter to acquire 280,000 shares. For the year-to-date we used $13 million to acquire 400,000 -- 400,500 shares of our common stock. We have 614,075 shares authorized and available for repurchase as of today. The accounts receivable increased to $42.1 million, compared with $38.5 million at the end of last year. DSOs were 70 days at the end of June 2010, compared with 68 days at the end of last year. Deferred revenues were $69 million on June 30th, compared to $68.6 million at December 31st. As a reminder, deferred revenue in the first half of the year reflects the seasonality in annual maintenance billings, when it is typical that maintenance revenues recognized in the income statement will exceed the annual maintenance billings recorded as deferred revenue on the balance sheet. In addition, deferred revenues also reflect the change in contractual implementation services, which tend to fluctuate from one period to the next, as well as the changes in our billing practices, which we have previously discussed. Before I cover guidance, I want to point out that during the quarter we reported a loss from discontinued operations of our U.K. subsidiary. The loss was principally comprised of $900,000 from the realization of non-cash foreign currency translates adjustment. Now turning to Q3 guidance. We expect recurring revenues will be approximately $43 million and total revenues will be approximately $57 million. We expect operating expenses to increase slightly from Q2. We expect operating margins will be approximately 8%. Read the rest of this transcript for free on seekingalpha.com