• Record Recurring Revenues of $118.9 Million, Up by 22%
• Record Total Revenues of $144.9 Million, Up by 20%
Weston, FL, April 28, 2015 — Ultimate Software (Nasdaq: ULTI), a leading provider of cloud-based Human Capital Management (HCM) solutions, announced today its financial results for the first quarter of 2015. For the quarter ended March 31, 2015, Ultimate reported recurring revenues of $118.9 million, a 22% increase, and total revenues of $144.9 million, a 20% increase, both compared with 2014’s first quarter. GAAP net income for the first quarter of 2015 was $4.2 million, or $0.14 per diluted share, as compared to GAAP net income of $6.9 million, or $0.23 per diluted share, for the first quarter of 2014.
Non-GAAP net income for the first quarter of 2015, which excludes stock-based compensation expense and amortization of acquired intangible assets, was $15.2 million, or $0.52 per diluted share. Non-GAAP net income for the first quarter of 2014, on a comparable basis, was $13.8 million, or $0.47 per diluted share. See “Use of Non-GAAP Financial Information” below.
“We executed on all of our principal objectives as planned in the first quarter this year and laid a strong foundation for us to achieve our future goals. We increased our recurring revenues by 22% to $119 million and increased total revenues by 20% to $145 million, both compared with those of Q1 2014. We delivered on our targeted non-GAAP operating margin of 18%, and we continued our trend of greater than 96% customer retention, based on the trailing 12 months ending March 31, 2015,” said Scott Scherr, founder, president and CEO of Ultimate.
“In March, we celebrated our 25th anniversary in business with more than 1,800 customers at our Connections conference in Las Vegas, and we announced our alliance with NetSuite to integrate our UltiPro HCM cloud solutions with NetSuite’s industry-leading cloud-based financials/ERP suite. Also in March, we were honored to be ranked among the top 25 companies for the fourth consecutive year on FORTUNE’s 100 Best Companies to Work For list. Culture and putting ‘People First’ have driven our success as a business and will continue to be at the heart of our strategic approach.”
Financial Highlights
•Recurring revenues grew by 22% for the first quarter of 2015 compared with the same period in 2014. The increase was primarily attributable to revenue growth from our cloud offering. Recurring revenues were 82% of total revenues for the first quarter of 2015 as compared with 80% of total revenues for 2014’s first quarter.
•Ultimate’s total revenues for the first quarter of 2015 increased by 20% as compared with those for the first quarter of 2014. 2
•Our operating income for the first quarter of 2015 was $26.1 million, on a non-GAAP basis, as compared with $23.5 million for the first quarter of 2014. Our GAAP operating income for the first quarter of 2015 was $9.8 million as compared with $12.4 million for the first quarter of 2014.
•Our non-GAAP operating margin for the first quarter of 2015 was 18.0% versus 19.4% for the first quarter of 2014. Our GAAP operating margin was 6.7% for the first quarter of 2015 versus 10.2% for the first quarter of 2014. The lower operating margin, in comparison with the same period last year, included the impact of having our Connections conference in first quarter this year versus second quarter last year.
•Ultimate’s annualized retention rate, on a rolling 12-month basis, exceeded 96% for its recurring revenue cloud customer base as of March 31, 2015.
•Net income, on a non-GAAP basis, for the first quarter of 2015 was $15.2 million as compared with $13.8 million for the first quarter of 2014. GAAP net income for the first quarter of 2015 was $4.2 million as compared with $6.9 million for the first quarter of 2014.
•Cash flows from operating activities for the first quarter of 2015 were $26.1 million, compared with $25.6 million for the same period of 2014. The combination of cash, cash equivalents, and marketable securities was $125.4 million as of March 31, 2015, compared with $118.5 million as of December 31, 2014.
•Days sales outstanding were 62 days at March 31, 2015, representing a reduction of 6 days compared with days sales outstanding at December 31, 2014.
Stock Repurchases
During the three months ended March 31, 2015, we used $6.2 million to acquire 37,000 shares of our $0.01 par value common stock (“Common Stock”) under our previously announced stock repurchase plan (“Stock Repurchase Plan”), and we used $10.1 million to acquire 110,876 shares of our Common Stock to settle employees’ tax withholding obligations associated with their restricted stock that vested during the period. We have 746,374 shares available for repurchase under our Stock Repurchase Plan.
Financial Outlook
Ultimate provides the following financial guidance for the second quarter ending June 30, 2015, and full year 2015:
For the second quarter of 2015:
•Recurring revenues of approximately $124 million,
•Total revenues of approximately $146 million, and
•Operating margin, on a non-GAAP basis (discussed below), of approximately 19%.
For the year 2015:
•Recurring revenues to increase by approximately 23% over 2014,
•Total revenues to increase by approximately 22% over 2014, and
•Operating margin, on a non-GAAP basis (discussed below), in excess of 20%.
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.
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