Attached files
| file | filename |
|---|---|
| 8-K - Q1 2011 FORM 8-K - ULTIMATE SOFTWARE GROUP INC | form8-k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Ultimate Reports Q1 2011 Financial Results
Recurring Revenues Up by 27%, Total Revenues Up by 16%
Weston, FL, April 26, 2011 — Ultimate Software (Nasdaq: ULTI), a leading provider of unified human capital management SaaS solutions for global businesses, announced today its financial results for the first quarter of 2011. For the quarter ended March 31, 2011, Ultimate reported recurring revenues of $49.9 million, a 27% increase, and total revenues of $64.5 million, an increase of 16%, both compared with 2010’s first quarter. GAAP net income for the first quarter of 2011 was $0.3 million, or $0.01 per diluted share, versus GAAP net income of $0.3 million, or $0.01 per diluted share, for the first quarter of 2010.
Non-GAAP net income, which excludes stock-based compensation and amortization of acquired intangible assets, was $2.8 million, or $0.10 per diluted share, for the first quarter of 2011 compared with non-GAAP net income of $2.3 million, or $0.09 per diluted share, for the first quarter of 2010. See “Use of Non-GAAP Financial Information” below.
“We executed as we expected on our first quarter business plan, positioning us well to deliver on our 2011 objectives,” said Scott Scherr, CEO, president, and founder of Ultimate. “The trend of our new customers attaching strategic products, such as Onboarding, Recruitment, Performance Management and Time Management, to their core UltiPro purchases continued in the first quarter, validating the market appetite for unified, end-to-end human capital management. At the same time, increased numbers of our existing customer base showed similar enthusiasm by adding strategic products to their current product-set.
“In March, we held our Ultimate Partner Forum, known as Connections, and had the largest attendance in our history—820 attendees,” added Scherr. “Our customers partner with us to enhance our products and formulate our vision of the ideal HCM. This partnership and exceptional communication with our customers continues to be a prime driver of our success.”
Ultimate’s financial results teleconference will be held today, April 26, 2011, at 5:00 p.m. Eastern Time, through Vcall at http://www.investorcalendar.com/IC/CEPage.asp?ID=163036. The call will be available for replay at the same address beginning at 9:00 p.m. Eastern Time the same day. Windows Media Player or Real 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 27% for the first quarter of 2011 compared with 2010’s first quarter. The increase was primarily
attributable to revenue growth from our Software-as-a-Service (“SaaS”) offering. Recurring revenues for the first quarter of 2011
were 77% of total revenues as compared with 71% of total revenues for the same period of last year.
|
|
§
|
The operating income (or operating margin) for the first quarter of 2011 was $4.9 million, or 7.6%, on a non-GAAP basis.
|
|
§
|
Ultimate’s annualized retention rate was 96% for its existing recurring revenue customer base as of March 31, 2011.
|
|
§
|
The combination of cash, cash equivalents, and marketable securities was $57.3 million as of March 31, 2011, compared
with $50.2 million as of December 31, 2010. Cash flows from operating activities for the quarter ended March 31, 2011 were $8.8 million,
compared with $4.9 million for the same period last year.
|
1
Financial Outlook
2011 Financial Guidance:
Ultimate provides the following financial guidance for the second quarter ending June 30, 2011 and full year 2011:
For the second quarter of 2011:
§ Recurring revenues of approximately $52 million,
§ Total revenues of approximately $64 million, and
§ Operating margin, on a non-GAAP basis (discussed below), of approximately 10%.
For the year 2011:
§ Recurring revenues to increase by approximately 25% in 2011 over 2010,
§ Total revenues to increase by approximately 19% over 2010, and
§ Operating margin, on a non-GAAP basis (discussed below), of approximately 13%.
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. Non-cash equity-based compensation expense for 2011 is expected to be approximately $15.0 million.
Forward-Looking Statements
Certain statements in this press release are, and certain statements on the teleconference call may be, forward-looking statements within the meaning provided under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are made only as of the date hereof. These statements involve known and unknown risks and uncertainties that may cause Ultimate’s actual results to differ materially from those stated or implied by such forward-looking statements, including risks and uncertainties associated with fluctuations in Ultimate’s quarterly operating results, concentration of Ultimate’s product offerings, development risks involved with new products and technologies, competition, contract renewals with business partners, compliance by our customers with the terms of their contracts with us, and other factors disclosed in Ultimate’s filings with the Securities and Exchange Commission. Ultimate undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
About Ultimate
Ultimate is a leading provider of unified human capital management (HCM) Software-as-a-Service (SaaS) solutions for global businesses. Ultimate’s award-winning UltiPro® solutions deliver the functionality businesses need to manage the complete employment life cycle from recruitment to retirement. Based in Weston, FL, Ultimate employs more than 1,200 professionals who are focused on developing the highest quality solutions and services. In 2010, Ultimate was named an Optimas Award winner by Workforce Management magazine. In 2009, Ultimate was awarded first place in the People’s Choice Stevie® competition for Favorite New SaaS Product and was ranked the #1 best medium-sized company to work for in America by the Great Place to Work® Institute for the second consecutive year. In 2010, Ultimate’s security practices were recertified for ISO/IEC 27001, and Ultimate was the first HR SaaS vendor to be ISO/IEC 27001 certified in 2008. Ultimate has approximately 2,200 customers representing diverse industries, including such organizations as Adobe Systems Incorporated, The Container Store, Culligan International, Elizabeth Arden, Major League Baseball, The New York Yankees Baseball Team, and Ruth’s Chris Steak House. More information on Ultimate’s products and services can be found at www.ultimatesoftware.com.
UltiPro is a registered trademark of The Ultimate Software Group, Inc. All other trademarks referenced are the property of their respective owners.
Contact: Mitchell K. Dauerman
Chief Financial Officer and Investor Relations
Phone: 954-331-7369
Email: IR@ultimatesoftware.com
2
|
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
|
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
|
(In thousands, except per share amounts)
|
|
For the Three Months
|
||||||||
|
Ended March 31,
|
||||||||
|
2011
|
2010
|
|||||||
|
Revenues:
|
||||||||
|
Recurring
|
$ | 49,948 | $ | 39,448 | ||||
|
Services
|
13,729 | 15,581 | ||||||
|
License
|
828 | 628 | ||||||
|
Total revenues
|
64,505 | 55,657 | ||||||
|
Cost of revenues:
|
||||||||
|
Recurring
|
14,693 | 11,404 | ||||||
|
Services
|
13,929 | 13,181 | ||||||
|
License
|
173 | 100 | ||||||
|
Total cost of revenues
|
28,795 | 24,685 | ||||||
|
Gross profit
|
35,710 | 30,972 | ||||||
|
Operating expenses:
|
||||||||
|
Sales and marketing
|
17,123 | 15,116 | ||||||
|
Research and development
|
11,967 | 10,233 | ||||||
|
General and administrative
|
5,613 | 5,001 | ||||||
|
Total operating expenses
|
34,703 | 30,350 | ||||||
|
Operating income
|
1,007 | 622 | ||||||
|
Other (expense) income:
|
||||||||
|
Interest and other expense
|
(158 | ) | (45 | ) | ||||
|
Other income, net
|
34 | 22 | ||||||
|
Total other (expense) income, net
|
(124 | ) | (23 | ) | ||||
|
Income from continuing operations, before income taxes
|
883 | 599 | ||||||
|
Provision for income taxes
|
(555 | ) | (279 | ) | ||||
|
Income from continuing operations
|
328 | 320 | ||||||
|
Loss from discontinued operations, net of income taxes
|
– | (65 | ) | |||||
|
Net income
|
$ | 328 | $ | 255 | ||||
|
Basic earnings per share:
|
||||||||
|
Earnings from continuing operations
|
$ | 0.01 | $ | 0.01 | ||||
|
Loss from discontinued operations
|
– | – | ||||||
|
Total
|
$ | 0.01 | $ | 0.01 | ||||
|
Diluted earnings per share:
|
||||||||
|
Earnings from continuing operations
|
$ | 0.01 | $ | 0.01 | ||||
|
Loss from discontinued operations
|
– | – | ||||||
|
Total
|
$ | 0.01 | $ | 0.01 | ||||
|
Weighted average shares outstanding:
|
||||||||
|
Basic
|
25,594 | 24,755 | ||||||
|
Diluted
|
27,724 | 26,823 | ||||||
3
The following table sets forth the stock-based compensation expense (excluding the income tax effect, or “gross”) resulting from stock-based arrangements and the amortization of acquired intangibles that are recorded in Ultimate’s unaudited condensed consolidated statements of operations for the periods indicated (in thousands):
|
For the Three Months
Ended March 31,
|
||||||||
|
2011
|
2010
|
|||||||
|
Stock-based compensation:
|
||||||||
|
Cost of recurring revenues
|
$ | 329 | $ | 217 | ||||
|
Cost of service revenues
|
376 | 341 | ||||||
|
Sales and marketing
|
1,797 | 1,719 | ||||||
|
Research and development
|
384 | 327 | ||||||
|
General and administrative
|
964 | 787 | ||||||
|
Total non-cash stock-based compensation expense
|
$ | 3,850 | $ | 3,391 | ||||
|
Amortization of acquired intangibles:
|
||||||||
|
General and administrative
|
$ | 28 | $ | 74 | ||||
4
|
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
|
||||||||
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||||||
|
(In thousands)
|
||||||||
|
As of
|
As of
|
|||||||
|
March 31,
|
December 31,
|
|||||||
|
2011
|
2010
|
|||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 48,022 | $ | 40,889 | ||||
|
Short-term investments in marketable securities
|
8,399 | 8,884 | ||||||
|
Accounts receivable, net
|
45,644 | 47,570 | ||||||
|
Prepaid expenses and other current assets
|
20,360 | 18,613 | ||||||
|
Deferred tax assets, net
|
1,440 | 1,434 | ||||||
|
Total current assets before funds held for clients
|
123,865 | 117,390 | ||||||
|
Funds held for clients
|
255,999 | 72,875 | ||||||
|
Total current assets
|
379,864 | 190,265 | ||||||
|
Property and equipment, net
|
20,095 | 18,075 | ||||||
|
Capitalized software, net
|
2,777 | 3,115 | ||||||
|
Goodwill
|
3,025 | 3,025 | ||||||
|
Long-term investments in marketable securities
|
926 | 433 | ||||||
|
Other assets, net
|
11,921 | 11,656 | ||||||
|
Long-term deferred tax assets, net
|
22,843 | 22,988 | ||||||
|
Total assets
|
$ | 441,451 | $ | 249,557 | ||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 6,561 | $ | 4,683 | ||||
|
Accrued expenses
|
11,164 | 11,074 | ||||||
|
Current portion of deferred revenue
|
72,315 | 71,808 | ||||||
|
Current portion of capital lease obligations
|
2,552 | 2,551 | ||||||
|
Total current liabilities before client fund obligations
|
92,592 | 90,116 | ||||||
|
Client fund obligations
|
255,999 | 72,875 | ||||||
|
Total current liabilities
|
348,591 | 162,991 | ||||||
|
Deferred revenue, net of current portion
|
5,146 | 6,287 | ||||||
|
Deferred rent
|
3,391 | 3,022 | ||||||
|
Capital lease obligations, net of current portion
|
2,243 | 2,406 | ||||||
|
Long-term income taxes payable
|
1,866 | 1,866 | ||||||
|
Total liabilities
|
361,237 | 176,572 | ||||||
|
Stockholders’ equity:
|
||||||||
|
Preferred Stock, $.01 par value
|
– | – | ||||||
|
Series A Junior Participating Preferred Stock, $.01 par value
|
– | – | ||||||
|
Common Stock, $.01 par value
|
294 | 290 | ||||||
|
Additional paid-in capital
|
223,098 | 216,262 | ||||||
|
Accumulated other comprehensive income
|
187 | 126 | ||||||
|
Accumulated deficit
|
(51,925 | ) | (52,253 | ) | ||||
| 171,654 | 164,425 | |||||||
|
Treasury stock, at cost
|
(91,440 | ) | (91,440 | ) | ||||
|
Total stockholders’ equity
|
80,214 | 72,985 | ||||||
|
Total liabilities and stockholders’ equity
|
$ | 441,451 | $ | 249,557 | ||||
5
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
For the Three Months
|
||||||||
|
Ended March 31,
|
||||||||
|
2011
|
2010
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$ | 328 | $ | 255 | ||||
|
Adjustments to reconcile net income to net cash
|
||||||||
|
provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
2,859 | 3,021 | ||||||
|
Provision for doubtful accounts
|
560 | 554 | ||||||
|
Non-cash stock-based compensation expense
|
3,850 | 3,391 | ||||||
|
Income taxes
|
521 | 208 | ||||||
|
Excess tax benefits from employee stock plan
|
(382 | ) | (652 | ) | ||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
1,366 | 16 | ||||||
|
Prepaid expenses and other current assets
|
(1,747 | ) | (1,055 | ) | ||||
|
Other assets
|
(293 | ) | 39 | |||||
|
Accounts payable
|
1,878 | 1,433 | ||||||
|
Accrued expenses and deferred rent
|
459 | (933 | ) | |||||
|
Deferred revenue
|
(634 | ) | (1,394 | ) | ||||
|
Net cash provided by operating activities
|
8,765 | 4,883 | ||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of marketable securities
|
(4,000 | ) | (2,100 | ) | ||||
|
Maturities of marketable securities
|
3,992 | 2,098 | ||||||
|
Net purchases of client funds securities
|
(183,124 | ) | (50,254 | ) | ||||
|
Purchases of property and equipment
|
(3,995 | ) | (1,207 | ) | ||||
|
Net cash used in investing activities
|
(187,127 | ) | (51,463 | ) | ||||
|
Cash flows from financing activities:
|
||||||||
|
Repurchases of Common Stock
|
– | (3,684 | ) | |||||
|
Net proceeds from issuances of Common Stock
|
4,983 | 2,352 | ||||||
|
Excess tax benefits from employee stock plan
|
382 | 652 | ||||||
|
Shares acquired to settle employee tax withholding liability
|
(2,376 | ) | (516 | ) | ||||
|
Principal payments on capital lease obligations
|
(680 | ) | (614 | ) | ||||
|
Net increase in client fund obligations
|
183,124 | 50,254 | ||||||
|
Net cash provided by financing activities
|
185,433 | 48,444 | ||||||
|
Effect of foreign currency exchange rate changes on cash
|
62 | 35 | ||||||
|
Net increase in cash and cash equivalents
|
7,133 | 1,899 | ||||||
|
Cash and cash equivalents, beginning of period
|
40,889 | 23,684 | ||||||
|
Cash and cash equivalents, end of period
|
$ | 48,022 | $ | 25,583 | ||||
|
Supplemental disclosure of cash flow information:
|
||||||||
|
Cash paid for interest
|
$ | 56 | $ | 43 | ||||
|
Cash paid for income taxes
|
$ | 267 | $ | 18 | ||||
Supplemental disclosure of non-cash financing activities:
- Ultimate entered into capital lease obligations to acquire new equipment totaling $519 and $869 for the three
months ended March 31, 2011 and 2010, respectively.
6
|
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
|
||||||||
|
Unaudited Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
|
||||||||
|
(In thousands, except per share amounts)
|
||||||||
|
Three Months Ended
March 31,
|
||||||||
|
2011
|
2010
|
|||||||
|
Non-GAAP operating income reconciliation:
|
||||||||
|
Operating income
|
$ | 1,007 | $ | 622 | ||||
|
Operating income as a % of total revenues
|
1.6 | % | 1.1 | % | ||||
|
Add back:
|
||||||||
|
Non-cash stock-based compensation
|
3,850 | 3,391 | ||||||
|
Non-cash amortization of acquired intangible assets
|
28 | 74 | ||||||
|
Non-GAAP operating income
|
$ | 4,885 | $ | 4,087 | ||||
|
Non-GAAP operating income as a % of total revenues
|
7.6 | % | 7.3 | % | ||||
|
Non-GAAP net income reconciliation:
|
||||||||
|
Net income
|
$ | 328 | $ | 255 | ||||
|
Add back:
|
||||||||
|
Non-cash stock-based compensation
|
3,850 | 3,391 | ||||||
|
Non-cash amortization of acquired intangible assets
|
28 | 74 | ||||||
|
Income tax effect
|
(1,396 | ) | (1,388 | ) | ||||
|
Non-GAAP net income
|
$ | 2,810 | $ | 2,332 | ||||
|
Non-GAAP net income per diluted share reconciliation:
|
||||||||
|
Net income per diluted share
|
$ | 0.01 | $ | 0.01 | ||||
|
Add back:
|
||||||||
|
Non-cash stock-based compensation
|
0.14 | 0.13 | ||||||
|
Non-cash amortization of acquired intangible assets
|
– | – | ||||||
|
Income tax effect
|
(0.05 | ) | (0.05 | ) | ||||
|
Non-GAAP net income per diluted share
|
$ | 0.10 | $ | 0.09 | ||||
|
Shares used in calculation of GAAP and non-GAAP net income per share:
|
||||||||
|
Basic
|
25,594 | 24,755 | ||||||
|
Diluted
|
27,724 | 26,823 | ||||||
7
Use of Non-GAAP Financial Information
This press release contains non-GAAP financial measures. Ultimate believes that non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Ultimate’s financial condition and results of operations. Ultimate’s management uses these non-GAAP results to compare Ultimate’s performance to that of prior periods for trend analyses, for purposes of determining executive incentive compensation, and for budget and planning purposes. These measures are used in monthly financial reports prepared for management and in quarterly financial reports presented to Ultimate’s Board of Directors. These measures may be different from non-GAAP financial measures used by other companies.
These non-GAAP measures should not be considered in isolation or as an alternative to such measures determined in accordance with generally accepted accounting principles in the United States (GAAP). The principal limitation of these non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses are excluded from the non-GAAP financial measures.
To compensate for these limitations, Ultimate presents its non-GAAP financial measures in connection with its GAAP results. Ultimate strongly urges investors and potential investors in Ultimate’s securities to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures that are included in this press release (under the caption “Unaudited Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures”) and not to rely on any single financial measure to evaluate its business.
Ultimate presents the following non-GAAP financial measures in this press release: non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share. We exclude the following items from these non-GAAP financial measures as appropriate:
Stock-based compensation. Ultimate’s non-GAAP financial measures exclude stock-based compensation, which consists of expenses for stock options and stock and stock unit awards recorded in accordance with Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation” (“ASC 718”). For the three months ended March 31, 2011, stock-based compensation was $3.9 million on a pre-tax basis. For the three months ended March 31, 2010, stock-based compensation was $3.4 million on a pre-tax basis. Stock-based compensation expenses are excluded from the non-GAAP financial measures because they are non-cash expenses that Ultimate does not consider part of ongoing operations when assessing its financial performance. Ultimate believes that such exclusion provides meaningful supplemental information regarding Ultimate’s operating results because these non-GAAP financial measures facilitate the comparison of results of ongoing operations for current and future periods with such results from past periods. For GAAP net income periods, non-GAAP reconciliations are calculated on a diluted weighted average share basis.
Amortization of acquired intangible assets. In accordance with GAAP, operating expenses include amortization of acquired intangible assets over the estimated useful lives of such assets. For the three months ended March 31, 2011, the amortization of acquired intangible assets was $28 thousand. For the three months ended March 31, 2010, the amortization of acquired intangible assets was $74 thousand. Amortization of acquired intangible assets is excluded from Ultimate’s non-GAAP financial measures because it is a non-cash expense that Ultimate does not consider part of ongoing operations when assessing its financial performance. Ultimate believes that such exclusion facilitates comparisons to its historical operating results and to the results of other companies in the same industry, which have their own unique acquisition histories.
8