Ultimate Reports Q1 2016 Financial Results

April 26, 2016

Ultimate Software

  • Record Recurring Revenues of $152.8 Million, Up by 28%
  • Record Total Revenues of $187.2 Million, Up by 29%
Weston, FL, April 26, 2016 —Ultimate Software (Nasdaq: ULTI), a
leading provider of human capital management (HCM) solutions
in the cloud, announced today its financial results for the first quarter ended March 31, 2016. Ultimate reported recurring revenues of $152.8 million, a 28% increase, and total revenues of $187.2 million, a 29% increase, both compared with 2015’s first quarter. GAAP net income for the first quarter of 2016 was $2.4 million, or $0.08 per diluted share, as compared with GAAP net income of $4.2 million, or $0.14 per diluted share, for the first quarter of 2015.
Non-GAAP net income for the first quarter of 2016, which excludes stock-based compensation expense and amortization of acquired intangibles, was $21.9 million, or $0.73 per diluted share. Non-GAAP net income for the first quarter of 2015 was $15.2 million, or $0.52 per diluted share. See “Use of Non-GAAP Financial Information” below.

“Once again, achieving all of our goals as planned in the first quarter has put us in a strong position to execute on our future objectives.

Recurring revenues were nearly $153 million, up by more than 28%, and total revenues were $187 million, up by 29%, both compared with Q1 2015. At the same time, our non-GAAP operating margin came in on the positive side of our targeted 19%, and our year-over-year customer retention rate again exceeded 97%,” said Scott Scherr, founder, president, and CEO of Ultimate.
“In early March, we were honored to be ranked #15 on Fortune’s 2016 100 Best Companies to Work For list, marking our fifth consecutive year in the top 25. Ultimate’s identity and strategic approach as a company have been focused on culture and putting ‘People First’ since the company’s beginning, and will continue to drive our strategic direction. Also in March, more than 2,000 HR and business professionals attended our annual Connections customer conference in Las Vegas, where we featured more than 60 breakout sessions and workshops aimed at ‘Inspiring Engagement’ in employees.”

Financial Highlights

  • Recurring revenues from our cloud offering grew by 28% for the first quarter of 2016 as compared with the same period in 2015. Recurring revenues were 82% of total revenues for the first quarter of 2016 and for the first quarter of 2015
  • Ultimate’s total revenues for the first quarter of 2016 increased by 29%, as compared with those for the first quarter of 2015.
  • Ultimate’s annualized retention rate, on a rolling 12-month basis, exceeded 97% for its recurring revenue cloud customer base as of March 31, 2016, which compares with greater than 96% for the same period of the prior year.
  • Cash flows from operating activities for the first quarter of 2016 were $32.1 million, compared with $26.1 million for the
    first quarter of 2015.

    Stock Repurchases

    The combination of cash, cash equivalents, and corporate marketable securities was $103.8 million as of March 31, 2016, compared with $129.4 million as of December 31, 2015.
    During the three months ended March 31, 2016, we used $29.7 million to acquire 190,400 shares of our Common Stock under our previously announced stock repurchase plan (the “Stock Repurchase Plan”), and we used $17.9 million to acquire 114,253 shares of our outstanding $0.01 par value common stock (“Common Stock”) to settle employees’ tax withholding obligations associated with their restricted stock that vested during the period.
    On April 25, 2016, Ultimate’s Board of Directors extended our Stock Repurchase Plan further by authorizing the repurchase of up to 1,000,000 additional shares of our Common Stock. We have 1,342,005 shares available for repurchase under our Stock Repurchase Plan.

    Financial Outlook

    Ultimate provides the following financial guidance for the second quarter ending June 30, 2016, and full year 2016:

    For the second quarter of 2016:

    • Recurring revenues of approximately $158 million,
    • Total revenues of approximately $187 million, and
    • Operating margin, on a non-GAAP basis (discussed below), of approximately 20%.

    For the year 2016:

    • Recurring revenues to increase by approximately 26% over 2015,
    • Total revenues to increase by approximately 26% over 2015, and
    • Operating margin, on a non-GAAP basis (discussed below), of approximately 21%.
    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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