Delaware
(State or other jurisdiction of Incorporation)
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000-24347
(Commission File Number)
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65-0694077
(IRS Employer Identification No.)
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2000 Ultimate Way, Weston, Florida___
(Address of principal executive offices)
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33326
(Zip Code)
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¨
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Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c ) under the Exchange Act (17 CFR 240.13e-4(c ))
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Number
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Description
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99.1
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Press Release, dated July 26, 2011
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SIGNATURES
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THE ULTIMATE SOFTWARE GROUP, INC.
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By: /s/ Mitchell K. Dauerman
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Mitchell K. Dauerman
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Executive Vice President, Chief Financial Officer and Treasurer
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(Principal Financial and Accounting Officer)
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Dated: July 27, 2011
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§
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Recurring revenues grew by 26% for the second quarter of 2011 compared with 2010’s second quarter, primarily due to revenue
growth from our Software-as-a-Service (SaaS) offering. Recurring revenues for the second quarter of 2011 were 81% of total
revenues as compared with 76% of total revenues for the same period of last year.
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§
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Ultimate’s annualized retention rate exceeded 96% for its existing recurring revenue customer base.
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§
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The operating income (or operating margin), on a non-GAAP basis, for the second quarter of 2011 was $6.6 million, or 10.3%,
compared with $4.0 million, or 7.2%, for the second quarter of 2010.
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§
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The combination of cash, cash equivalents, and marketable securities was $54.0 million as of June 30, 2011, compared with
$50.2 million as of December 31, 2010. For the three months ended June 30, 2011, Ultimate generated $6.4 million in cash from
operations. For the six months ended June 30, 2011, Ultimate generated $15.2 million in cash from operations.
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§
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During the three and six months ended June 30, 2011, Ultimate repurchased 149,678 shares of our issued and outstanding
$0.01 par value common stock (“Common Stock”) for $7.9 million, under our previously announced stock repurchase plan.
As of June 30, 2011, we had 255,497 shares available for repurchase in the future under our stock repurchase plan.
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§
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Recurring revenues of approximately $54.5 million;
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§
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Total revenues of approximately $68 million; and
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§
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Operating margin, on a non-GAAP basis (discussed below), of approximately 12%.
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§
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Recurring revenues to increase by approximately 25% over 2010;
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§
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Total revenues to increase by approximately 19% over 2010; and
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§
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Operating margin, on a non-GAAP basis (discussed below), of approximately 13%.
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THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(In thousands, except per share amounts)
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For the Three Months
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For the Six Months
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Ended June 30,
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Ended June 30,
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|||||||||||||||
2011
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2010
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2011
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2010
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Revenues:
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Recurring
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$ | 52,002 | $ | 41,365 | $ | 101,950 | $ | 80,813 | ||||||||
Services
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11,761 | 13,032 | 25,490 | 28,613 | ||||||||||||
License
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442 | 320 | 1,270 | 948 | ||||||||||||
Total revenues
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64,205 | 54,717 | 128,710 | 110,374 | ||||||||||||
Cost of revenues:
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Recurring
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15,543 | 12,048 | 30,236 | 23,452 | ||||||||||||
Services
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12,104 | 11,877 | 26,033 | 25,058 | ||||||||||||
License
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100 | 50 | 273 | 150 | ||||||||||||
Total cost of revenues
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27,747 | 23,975 | 56,542 | 48,660 | ||||||||||||
Gross profit
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36,458 | 30,742 | 72,168 | 61,714 | ||||||||||||
Operating expenses:
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Sales and marketing
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15,524 | 14,580 | 32,647 | 29,696 | ||||||||||||
Research and development
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12,370 | 10,520 | 24,337 | 20,753 | ||||||||||||
General and administrative
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5,762 | 5,169 | 11,375 | 10,170 | ||||||||||||
Total operating expenses
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33,656 | 30,269 | 68,359 | 60,619 | ||||||||||||
Operating income
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2,802 | 473 | 3,809 | 1,095 | ||||||||||||
Other (expense) income:
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Interest and other expense
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(143 | ) | (64 | ) | (301 | ) | (110 | ) | ||||||||
Other income, net
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26 | 48 | 60 | 71 | ||||||||||||
Total other expense, net
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(117 | ) | (16 | ) | (241 | ) | (39 | ) | ||||||||
Income from continuing operations, before income taxes
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2,685 | 457 | 3,568 | 1,056 | ||||||||||||
Provision for income taxes
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(1,792 | ) | (186 | ) | (2,347 | ) | (465 | ) | ||||||||
Income from continuing operations
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$ | 893 | $ | 271 | $ | 1,221 | $ | 591 | ||||||||
Loss from discontinued operations, net of income taxes
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– | (865 | ) | – | (930 | ) | ||||||||||
Net income (loss)
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$ | 893 | $ | (594 | ) | $ | 1,221 | $ | (339 | ) | ||||||
Basic earnings (loss) per share:
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Earnings from continuing operations
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$ | 0.03 | $ | 0.01 | $ | 0.05 | $ | 0.02 | ||||||||
Loss from discontinued operations
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$ | – | $ | (0.03 | ) | $ | – | $ | (0.04 | ) | ||||||
Total
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$ | 0.03 | $ | (0.02 | ) | $ | 0.05 | $ | (0.02 | ) | ||||||
Diluted earnings (loss) per share:
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Earnings from continuing operations
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$ | 0.03 | $ | 0.01 | $ | 0.04 | $ | 0.02 | ||||||||
Loss from discontinued operations
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$ | – | $ | (0.03 | ) | $ | – | $ | (0.03 | ) | ||||||
Total
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$ | 0.03 | $ | (0.02 | ) | $ | 0.04 | $ | (0.01 | ) | ||||||
Weighted average shares outstanding:
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Basic
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25,837 | 24,839 | 25,716 | 24,797 | ||||||||||||
Diluted
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27,863 | 26,972 | 27,804 | 26,911 |
For the Three Months Ended June 30,
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For the Six Months Ended June 30,
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2011
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2010
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2011
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2010
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Stock-based compensation expense:
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Cost of recurring revenues
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$ | 350 | $ | 224 | $ | 679 | $ | 441 | ||||||||
Cost of services revenues
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371 | 322 | 747 | 663 | ||||||||||||
Sales and marketing
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1,713 | 1,642 | 3,510 | 3,361 | ||||||||||||
Research and development
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410 | 341 | 794 | 668 | ||||||||||||
General and administrative
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925 | 805 | 1,889 | 1,592 | ||||||||||||
Total non-cash stock-based compensation expense
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$ | 3,769 | $ | 3,334 | $ | 7,619 | $ | 6,725 | ||||||||
Amortization of acquired intangibles:
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General and administrative (1)
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$ | 28 | $ | 151 | $ | 56 | $ | 225 | ||||||||
Loss from discontinued operations:
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Foreign currency translation
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adjustment (2)
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$ | – | $ | 886 | $ | – | $ | 886 | ||||||||
(1)
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Due to the discontinued operations of our wholly-owned subsidiary in the United Kingdom (“UK Subsidiary”) during the three months ended June 30, 2010, the amortization of certain intangible assets related to the acquisition of the UK Subsidiary was accelerated.
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(2)
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Pursuant to applicable accounting rules, the amount attributable to the UK Subsidiary and accumulated in the translation adjustment component of equity became realized in the unaudited statement of operations during the second quarter of 2010, the period in which discontinued operations for the UK Subsidiary were substantially complete.
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THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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(In thousands)
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As of
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As of
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June 30,
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December 31,
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2011
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2010
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | 45,234 | $ | 40,889 | ||||
Short-term investments in marketable securities
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7,112 | 8,884 | ||||||
Accounts receivable, net
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46,733 | 47,570 | ||||||
Prepaid expenses and other current assets
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22,707 | 18,613 | ||||||
Deferred tax assets, net
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1,458 | 1,434 | ||||||
Total current assets before funds held for clients
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123,244 | 117,390 | ||||||
Funds held for clients
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165,468 | 72,875 | ||||||
Total current assets
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288,712 | 190,265 | ||||||
Property and equipment, net
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22,040 | 18,075 | ||||||
Capitalized software, net
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2,440 | 3,115 | ||||||
Goodwill
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3,025 | 3,025 | ||||||
Long-term investments in marketable securities
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1,636 | 433 | ||||||
Other assets, net
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12,290 | 11,656 | ||||||
Long-term deferred tax assets, net
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22,386 | 22,988 | ||||||
Total assets
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$ | 352,529 | $ | 249,557 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable
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$ | 6,376 | $ | 4,683 | ||||
Accrued expenses
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12,895 | 11,074 | ||||||
Current portion of deferred revenue
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73,212 | 71,808 | ||||||
Current portion of capital lease obligations
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2,614 | 2,551 | ||||||
Total current liabilities before client fund obligations
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95,097 | 90,116 | ||||||
Client fund obligations
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165,468 | 72,875 | ||||||
Total current liabilities
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260,565 | 162,991 | ||||||
Deferred revenue, net of current portion
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4,798 | 6,287 | ||||||
Deferred rent
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3,580 | 3,022 | ||||||
Capital lease obligations, net of current portion
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2,281 | 2,406 | ||||||
Long-term income taxes payable
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1,866 | 1,866 | ||||||
Total liabilities
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273,090 | 176,572 | ||||||
Stockholders’ equity:
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Preferred Stock, $.01 par value
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– | – | ||||||
Series A Junior Participating Preferred Stock, $.01 par value
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– | – | ||||||
Common Stock, $.01 par value
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296 | 290 | ||||||
Additional paid-in capital
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229,365 | 216,262 | ||||||
Accumulated other comprehensive income
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175 | 126 | ||||||
Accumulated deficit
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(51,032 | ) | (52,253 | ) | ||||
178,804 | 164,425 | |||||||
Treasury stock, at cost
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(99,365 | ) | (91,440 | ) | ||||
Total stockholders’ equity
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79,439 | 72,985 | ||||||
Total liabilities and stockholders’ equity
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$ | 352,529 | $ | 249,557 |
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(In thousands)
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For the Six Months Ended
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June 30,
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2011
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2010
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Cash flows from operating activities:
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Net income (loss)
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$ | 1,221 | $ | (339 | ) | |||
Adjustments to reconcile net income (loss) to net cash
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provided by operating activities:
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Depreciation and amortization
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5,743 | 6,108 | ||||||
Provision for doubtful accounts
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1,115 | 1,038 | ||||||
Non-cash stock-based compensation expense
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7,619 | 6,725 | ||||||
Non-cash realized loss on foreign currency translation
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adjustment
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- | 886 | ||||||
Income taxes
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2,290 | 426 | ||||||
Excess tax benefits from stock-based payments
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(1,713 | ) | (950 | ) | ||||
Changes in operating assets and liabilities:
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Accounts receivable
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(278 | ) | (4,687 | ) | ||||
Prepaid expenses and other current assets
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(4,094 | ) | (2,764 | ) | ||||
Other assets
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(689 | ) | 755 | |||||
Accounts payable
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1,693 | 446 | ||||||
Accrued expenses and deferred rent
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2,379 | 1,949 | ||||||
Deferred revenue
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(85 | ) | 445 | |||||
Net cash provided by operating activities
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15,201 | 10,038 | ||||||
Cash flows from investing activities:
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Purchases of marketable securities
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(7,700 | ) | (4,600 | ) | ||||
Maturities of marketable securities
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8,269 | 4,835 | ||||||
Net purchases of securities with customer funds
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(92,593 | ) | (24,884 | ) | ||||
Purchases of property and equipment
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(7,609 | ) | (2,401 | ) | ||||
Net cash used in investing activities
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(99,633 | ) | (27,050 | ) | ||||
Cash flows from financing activities:
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Repurchases of Common Stock
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(7,925 | ) | (12,987 | ) | ||||
Net proceeds from issuances of Common Stock
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7,407 | 4,936 | ||||||
Excess tax benefits from stock-based payments
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1,713 | 950 | ||||||
Shares acquired to settle employee tax withholding liability
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(3,631 | ) | (552 | ) | ||||
Principal payments on capital lease obligations
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(1,432 | ) | (1,206 | ) | ||||
Net increase in customer fund obligations
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92,593 | 24,884 | ||||||
Net cash provided by financing activities
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88,725 | 16,025 | ||||||
Effect of foreign currency exchange rate changes on cash
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52 | (6 | ) | |||||
Net increase (decrease) in cash and cash equivalents
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4,345 | (993 | ) | |||||
Cash and cash equivalents, beginning of period
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40,889 | 23,684 | ||||||
Cash and cash equivalents, end of period
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$ | 45,234 | $ | 22,691 | ||||
Supplemental disclosure of cash flow information:
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Cash paid for interest
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$ | 126 | $ | 100 | ||||
Cash paid for income taxes
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$ | 395 | $ | 136 | ||||
Supplemental disclosure of non-cash financing activities:
- Ultimate entered into capital lease obligations to acquire new equipment totaling $1.4 million
and $1.4 million for the six months ended June 30, 2011 and 2010, respectively.
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THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
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Unaudited Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
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(In thousands, except per share amounts)
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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2011
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2010
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2011 | 2010 | |||||||||||||
Non-GAAP operating income from continuing operations reconciliation:
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Operating income from continuing operations
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$ | 2,802 | $ | 473 | $ | 3,809 | $ | 1,095 | ||||||||
Operating income from continuing operations, as a % of total revenues
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4.4 | % | 0.9 | % | 3.0 | % | 1.0 | % | ||||||||
Add back:
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Non-cash stock-based compensation expense
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3,769 | 3,336 | 7,619 | 6,727 | ||||||||||||
Non-cash amortization of acquired intangible assets
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28 | 151 | 56 | 225 | ||||||||||||
Non-GAAP operating income from continuing operations
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$ | 6,599 | $ | 3,960 | $ | 11,484 | $ | 8,047 | ||||||||
Non-GAAP operating income from continuing operations, as a % of total revenues
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10.3 | % | 7.2 | % | 8.9 | % | 7.3 | % | ||||||||
Non-GAAP net income (loss) after discontinued operations reconciliation:
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Net income (loss) after discontinued operations
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$ | 893 | $ | (594 | ) | $ | 1,221 | $ | (339 | ) | ||||||
Add back:
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Non-cash stock-based compensation expense
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3,769 | 3,336 | 7,619 | 6,727 | ||||||||||||
Non-cash amortization of acquired intangible assets
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28 | 151 | 56 | 225 | ||||||||||||
Non-cash foreign currency translation adjustment from discontinued operations
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– | 886 | – | 886 | ||||||||||||
Income tax effect
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(867 | ) | (1,431 | ) | (2,262 | ) | (2,853 | ) | ||||||||
Non-GAAP net income after discontinued operations
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$ | 3,823 | $ | 2,348 | $ | 6,634 | $ | 4,646 | ||||||||
Non-GAAP net income (loss) after discontinued operations, per diluted share, reconciliation: (1)
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Net income (loss) after discontinued operations, per diluted share
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$ | 0.03 | $ | (0.02 | ) | $ | 0.04 | $ | (0.01 | ) | ||||||
Add back:
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Non-cash stock-based compensation expense
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0.14 | 0.12 | 0.27 | 0.25 | ||||||||||||
Non-cash amortization of acquired intangible assets
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– | 0.01 | 0.01 | 0.01 | ||||||||||||
Non-cash foreign currency translation adjustment from discontinued operations
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– | 0.03 | – | 0.03 | ||||||||||||
Income tax effect
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(0.03 | ) | (0.05 | ) | (0.08 | ) | (0.11 | ) | ||||||||
Non-GAAP net income after discontinued operations, per diluted share
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$ | 0.14 | $ | 0.09 | $ | 0.24 | $ | 0.17 | ||||||||
Shares used in calculation of GAAP net income (loss) per share:
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Basic
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25,837 | 24,839 | 25,716 | 24,797 | ||||||||||||
Diluted
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27,863 | 26,972 | 27,804 | 26,911 | ||||||||||||
Shares used in calculation of non-GAAP net income per share:
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Basic
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25,837 | 24,839 | 25,716 | 24,797 | ||||||||||||
Diluted
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27,863 | 26,972 | 27,804 | 26,911 | ||||||||||||
(1) The non-GAAP net income (loss) per diluted share reconciliation is calculated on a diluted weighted average
share basis for GAAP net income (loss) periods.
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