• Record Recurring Revenues of $131.8 Million, Up by 23%
• Record Total Revenues of $155.3 Million, Up by 22%
Weston, FL, October 27, 2015 — Ultimate Software (Nasdaq: ULTI), a leading provider of human capital management (HCM) solutions in the cloud, announced today its financial results for the third quarter of 2015. For the quarter ended September 30, 2015, Ultimate reported recurring revenues of $131.8 million, a 23% increase, and total revenues of $155.3 million, a 22% increase, both compared with 2014’s third quarter. GAAP net income for the third quarter of 2015 was $5.9 million, or $0.20 per diluted share, as compared with GAAP net income of $19.7 million, or $0.67 per diluted share, for the third quarter of 2014. Included in GAAP net income for the three and nine months ended September 30, 2014, was a onetime $12.1 million tax credit for research and development activities for federal and state income tax purposes, covering years 1998–2013. There was no such credit for research and development activities for federal and state income tax purposes for the three and nine months ended September 30, 2015.
Non-GAAP net income for the third quarter of 2015, which excludes stock-based compensation expense and amortization of acquired intangible assets, was $20.5 million, or $0.69 per diluted share. Non-GAAP net income for the third quarter of 2014, which excludes stock-based compensation expense, amortization of acquired intangible assets, and an income tax benefit for research and development tax credits, was $14.8 million, or $0.50 per diluted share. See “Use of Non-GAAP Financial Information” below.
“We performed according to plan in this year’s third quarter for both our recurring revenues and total revenues, keeping us on target to achieve our 2015 objectives. Our operating margin came in above projections at 22%, and our customerretention rate for the rolling 12-month period continued on its consistent track above 96%,” said Scott Scherr, CEO, president, and founder of Ultimate. “We also received certification last month from the Affordable Care Act (ACA) Information Returns Program, allowing us to electronically file required ACA compliance documents with the Internal Revenue Service on behalf of our customers.
“We have a history of exceptional customer satisfaction, and we are pleased that this has been verified once again by independent research firms. In a Nucleus Research note called ‘Anatomy of a Decision: Ultimate Software UltiPro,’ analyst Brent Skinner reported that ‘all of Ultimate Software users with whom Nucleus has spoken say they would again buy from the vendor,’ and ‘most give the vendor an A- or higher for customer support.’ Earlier this month, G2 Crowd published its ‘Fall 2015 Rankings of the Best Recruiting Software, Based on User Reviews,’ and Ultimate was ranked #1 in customer satisfaction. Other recognition during the third quarter included Fortune magazine identifying Ultimate as one of the ‘100 Fastest-Growing Companies in the U.S.,’ the only HCM provider on the list, and Fortune also naming Ultimate to its 2015 list of the ‘100 Best Workplaces for Women.’”
Financial Highlights
• Recurring revenues grew by 23% for the third quarter of 2015 compared with the same period in 2014. The increase was attributable to revenue growth from our cloud offering. Recurring revenues were 85% of total revenues for the third quarter of 2015 versus 84% for 2014’s third quarter.
• Ultimate’s total revenues for the third quarter of 2015 increased by 22%, as compared with those for the third quarter of 2014.
• Ultimate’s annualized retention rate, on a rolling 12-month basis, exceeded 96% for its recurring revenue cloud customer base as of September 30, 2015.
• Cash flows from operating activities for the third quarter of 2015 were $31.9 million, compared with $23.1 million for the same period in 2014. For the nine months ended September 30, 2015, Ultimate generated $75.5 million in cash from operations, compared with $64.1 million for the nine months ended September 30, 2014. The combination of cash, cash equivalents, and marketable securities was $140.4 million as of September 30, 2015, compared with $118.5 million as of December 31, 2014.
Stock Repurchases
During the nine months ended September 30, 2015, we used $31.1 million to acquire 187,469 shares of our $0.01 par value common stock (“Common Stock”) under our previously announced stock repurchase plan (“Stock Repurchase Plan”), and we used $12.5 million to acquire 74,534 shares of our Common Stock to settle employees’ tax withholding obligations associated with their restricted stock that vested during the period. We have 595,905 shares available for repurchase under our Stock Repurchase Plan.
Financial Outlook
Ultimate provides the following financial guidance for the 2015 full year and preliminary financial guidance for the 2016 full year:
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%.
For the year 2016, preliminary:
• Recurring revenues to increase by approximately 25% over 2015,
• Total revenues to increase by approximately 23% over 2015, and
• Operating margin, on a non-GAAP basis (discussed below), in excess of 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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