Ultimate Reports Q3 2011 Financial Results…from Ultimate Software

 

Recurring Revenues Up by 24%, Total Revenues Up by 19%

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Ultimate Software (Nasdaq: ULTI), a leading provider of unified human capital management SaaS solutions for global businesses, announced today its financial results for the third quarter of 2011. For the quarter ended September 30, 2011, Ultimate reported recurring revenues of $54.7 million, an increase of 24%, and total revenues of $67.8 million, an increase of 19%, both compared with 2010’s third quarter. GAAP net income for the third quarter of 2011 was $1.1 million, or $0.04 per diluted share, the same as the third quarter of 2010.

For the three months ended September 30, 2011, non-GAAP net income was $4.9 million, or $0.18 per diluted share, versus non-GAAP net income of $3.5 million, or $0.13 per diluted share, for the third quarter of 2010. Non-GAAP net income for both periods excludes non-cash stock-based compensation expense and amortization of acquired intangible assets. See “Use of Non-GAAP Financial Information” below.

“We again performed according to plan for both our recurring and total revenues in this year’s third quarter. Our operating margin was on the positive side of our 12% target at 12.7%, and our customer retention rate remained consistent at greater than 96%,” said Scott Scherr, CEO, president, and founder of Ultimate.

“We strengthened the strategic power of our unified talent management suite with the release of UltiPro Succession Management in the third quarter. We continued to execute in Canada, and our new customers in both our Enterprise and Workplace markets continued the trend of expanding the value of their UltiPro purchases by adding talent management and time management product components.”

Financial Highlights

  • Recurring revenues grew by 24% for the third quarter of 2011 compared with 2010’s third quarter, primarily due to revenue growth from our Software-as-a-Service (SaaS) offering. Recurring revenues for the third quarter of 2011 were 81% of total revenues as compared with 77% of total revenues for the same period of last year.
  • Ultimate’s annualized retention rate exceeded 96% for its existing recurring revenue customer base.
  • The operating income (or operating margin), on a non-GAAP basis, for the third quarter of 2011 was $8.6 million (or 12.7%) compared with $5.8 million (or 10.2%) for the third quarter of 2010.
  • Cash flows provided by operating activities for the nine months ended September 30, 2011 increased by 45% to $23.6 million from $16.2 million for the same period in the prior year.
  • The combination of cash, cash equivalents, and marketable securities was $52.2 million as of September 30, 2011, compared with $50.2 million as of December 31, 2010.
  • Days sales outstanding were 63 days at September 30, 2011, representing a reduction of 9 days compared with days sales outstanding at December 31, 2010.

Stock Repurchase Plan

During the quarter ended September 30, 2011, we repurchased 197,310 shares of our issued and outstanding $0.01 par value common stock (“Common Stock”) for $9.4 million, under our previously announced stock repurchase plan (“Stock Repurchase Plan”). During the nine months ended September 30, 2011, we repurchased 346,988 shares of our issued and outstanding Common Stock for $17.3 million, under our Stock Repurchase Plan. As of September 30, 2011, we had 58,187 shares available for repurchase in the future under our Stock Repurchase Plan.

On October 24, 2011, our Board of Directors extended the Stock Repurchase Plan (originally approved by the Board in late 2000) by authorizing the repurchase of up to 1,000,000 additional shares of our Common Stock. Accordingly, an aggregate of 1,058,187 shares of Common Stock are available for repurchase under the Stock Repurchase Plan as of today’s date. The extent and timing of repurchase transactions will depend on market conditions and other business considerations.

Financial Outlook

Ultimate provides the following financial guidance for the fourth quarter ending December 31, 2011, the 2011 full year and preliminary financial guidance for the 2012 full year:

For the fourth quarter of 2011:

  • Recurring revenues of approximately $57.0 million;
  • Total revenues of approximately $72.0 million; and
  • Operating margin, on a non-GAAP basis (discussed below), of approximately 16%.

For the year 2011:

  • Recurring revenues to increase by approximately 25% over 2010;
  • Total revenues to increase by approximately 18% over 2010; and
  • Operating margin, on a non-GAAP basis (discussed below), of approximately 12%.

For the year 2012, preliminary:

  • Recurring revenues to increase by approximately 25% over 2011;
  • Total revenues to increase by approximately 23% over 2011; and
  • Operating margin, on a non-GAAP basis (discussed below), of approximately 15%.

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 stock-based compensation expense for 2011 and 2012 is expected to be approximately $15.5 million and $19.0 million, respectively.

For more information on Ultimate Software, please visit www.ultimatesoftware.com

 
Matt Lafata, HRchitect

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