_______________ | |||
FORM 8-K | |||
CURRENT REPORT | |||
PURSUANT TO SECTION 13 OR 15(d) | |||
OF THE SECURITIES EXCHANGE ACT OF 1934 | |||
Date of Report (Date of Earliest Event Reported) – April 30, 2013 | |||
_______________ | |||
THE ULTIMATE SOFTWARE GROUP, INC. | |||
(Exact name of Registrant as specified in its charter) | |||
Delaware | 000-24347 | 65-0694077 | |
(State or other jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |
2000 Ultimate Way, Weston, Florida | 33326 | ||
(Address of principal executive offices) | (Zip Code) | ||
(954) 331-7000 | |||
(Registrant’s telephone number, including area code) |
o | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Number | Description |
99.1 | Press Release, dated April 30, 2013 |
THE ULTIMATE SOFTWARE GROUP, INC. |
By: /s/ Mitchell K. Dauerman |
Mitchell K. Dauerman |
Executive Vice President, Chief Financial Officer and Treasurer |
(Principal Financial and Accounting Officer) |
• | Record Recurring Revenues of $78.1 Million, Up by 28% |
• | Record Total Revenues of $97.9 Million, Up by 25% |
• | Recurring revenues grew by 28% for the first quarter of 2013 compared with 2012’s first quarter. The increase was primarily attributable to revenue growth from our cloud offering. Recurring revenues for the first quarter of 2013 were 80% of total revenues as compared with 78% of total revenues for 2012’s first quarter. |
• | Ultimate’s total revenues for the first quarter of 2013 increased by 25% compared with those for the first quarter of 2012. |
• | Our operating income increased 147%, on a non-GAAP basis, for the first quarter of 2013 to $15.9 million as compared with $6.4 million for the same period of 2012. Our non-GAAP operating margin was 16.2% for the first quarter of 2013 versus 8.2% for the first quarter of 2012. |
• | Ultimate’s annualized retention rate exceeded 96% for its existing recurring revenue customer base as of March 31, 2013. |
• | Net income, on a non-GAAP basis, for the first quarter of 2013 increased to $9.2 million compared with $3.7 million for the first quarter of 2012. |
• | The combination of cash, cash equivalents, and marketable securities was $81.3 million as of March 31, 2013, compared with $69.4 million as of December 31, 2012. Cash flows from operating activities for the quarter ended March 31, 2013, were $18.1 million, compared with $14.4 million for the same period of 2012. |
• | Days sales outstanding were 64 days at March 31, 2013, representing a reduction of seven days compared with days sales outstanding at December 31, 2012. |
• | During the three months ended March 31, 2013, we used $6.2 million to acquire 64,070 shares of our Common Stock to settle the employee tax withholding liability resulting from the vesting of our employees' restricted stock holdings. |
• | As of March 31, 2013, we had 946,165 shares available for repurchase in the future under our previously announced Stock Repurchase Plan. |
• | Recurring revenues of approximately $81.0 million, |
• | Total revenues of approximately $97.0 million, and |
• | Operating margin, on a non-GAAP basis (discussed below), of approximately 15%. |
• | Recurring revenues to increase by approximately 25% over those of 2012, |
• | Total revenues to increase by approximately 23% over those of 2012, and |
• | Operating margin, on a non-GAAP basis (discussed below), of approximately 17%. |
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, | ||||||||
2013 | 2012 | |||||||
Revenues: | ||||||||
Recurring | $ | 78,082 | $ | 60,873 | ||||
Services | 19,445 | 17,024 | ||||||
License | 390 | 384 | ||||||
Total revenues | 97,917 | 78,281 | ||||||
Cost of revenues: | ||||||||
Recurring | 21,828 | 19,104 | ||||||
Services | 19,728 | 16,523 | ||||||
License | 90 | 88 | ||||||
Total cost of revenues | 41,646 | 35,715 | ||||||
Gross profit | 56,271 | 42,566 | ||||||
Operating expenses: | ||||||||
Sales and marketing | 22,910 | 18,637 | ||||||
Research and development | 16,130 | 15,696 | ||||||
General and administrative | 8,927 | 6,145 | ||||||
Total operating expenses | 47,967 | 40,478 | ||||||
Operating income | 8,304 | 2,088 | ||||||
Other (expense) income: | ||||||||
Interest and other expense | (80 | ) | (75 | ) | ||||
Other income, net | 41 | 13 | ||||||
Total other expense, net | (39 | ) | (62 | ) | ||||
Income before income taxes | 8,265 | 2,026 | ||||||
Provision for income taxes | (3,745 | ) | (1,002 | ) | ||||
Net income | $ | 4,520 | $ | 1,024 | ||||
Net income per share: | ||||||||
Basic | $ | 0.16 | $ | 0.04 | ||||
Diluted | $ | 0.16 | $ | 0.04 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 27,476 | 26,394 | ||||||
Diluted | 28,704 | 28,073 |
For the Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Stock-based compensation expense: | ||||||||
Cost of recurring revenues | $ | 864 | $ | 513 | ||||
Cost of services revenues | 960 | 501 | ||||||
Sales and marketing | 3,096 | 1,674 | ||||||
Research and development | 770 | 624 | ||||||
General and administrative | 1,907 | 1,042 | ||||||
Total non-cash stock-based compensation expense | $ | 7,597 | $ | 4,354 |
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES | |||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(in thousands) | |||||||
As of | As of | ||||||
March 31, | December 31, | ||||||
2013 | 2012 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 72,081 | $ | 58,817 | |||
Investments in marketable securities | 6,936 | 9,223 | |||||
Accounts receivable, net | 70,059 | 70,774 | |||||
Prepaid expenses and other current assets | 29,088 | 25,949 | |||||
Deferred tax assets, net | 1,372 | 1,372 | |||||
Total current assets before funds held for clients | 179,536 | 166,135 | |||||
Funds held for clients | 642,443 | 281,007 | |||||
Total current assets | 821,979 | 447,142 | |||||
Property and equipment, net | 41,990 | 38,068 | |||||
Capitalized software, net | 356 | 508 | |||||
Goodwill | 3,025 | 3,025 | |||||
Investments in marketable securities | 2,313 | 1,311 | |||||
Other assets, net | 16,983 | 16,687 | |||||
Deferred tax assets, net | 19,191 | 18,543 | |||||
Total assets | $ | 905,837 | $ | 525,284 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 6,185 | $ | 7,584 | |||
Accrued expenses | 21,124 | 15,055 | |||||
Deferred revenue | 91,936 | 90,674 | |||||
Capital lease obligations | 2,968 | 2,968 | |||||
Other borrowings | 3,860 | 2,311 | |||||
Total current liabilities before client fund obligations | 126,073 | 118,592 | |||||
Client fund obligations | 642,443 | 281,007 | |||||
Total current liabilities | 768,516 | 399,599 | |||||
Deferred revenue | 1,049 | 1,302 | |||||
Deferred rent | 2,689 | 2,777 | |||||
Capital lease obligations | 2,481 | 2,469 | |||||
Other borrowings | 1,255 | 2,601 | |||||
Income taxes payable | 1,866 | 1,866 | |||||
Total liabilities | 777,856 | 410,614 | |||||
Stockholders’ equity: | |||||||
Preferred Stock, $.01 par value | — | — | |||||
Series A Junior Participating Preferred Stock, $.01 par value | — | — | |||||
Common Stock, $.01 par value | 317 | 314 | |||||
Additional paid-in capital | 275,183 | 266,130 | |||||
Accumulated other comprehensive income (loss) | (156 | ) | 109 | ||||
Accumulated deficit | (28,819 | ) | (33,339 | ) | |||
246,525 | 233,214 | ||||||
Treasury stock, at cost | (118,544 | ) | (118,544 | ) | |||
Total stockholders’ equity | 127,981 | 114,670 | |||||
Total liabilities and stockholders’ equity | $ | 905,837 | $ | 525,284 |
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES | |||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In thousands) | |||||||
For the Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 4,520 | $ | 1,024 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 3,749 | 3,011 | |||||
Provision for doubtful accounts | 613 | 133 | |||||
Non-cash stock-based compensation expense | 7,597 | 4,354 | |||||
Income taxes | 3,689 | 949 | |||||
Excess tax benefits from employee stock plan | (4,337 | ) | (894 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 102 | 4,969 | |||||
Prepaid expenses and other current assets | (3,139 | ) | (412 | ) | |||
Other assets | (296 | ) | (397 | ) | |||
Accounts payable | (1,399 | ) | (607 | ) | |||
Accrued expenses and deferred rent | 5,981 | 3,959 | |||||
Deferred revenue | 1,009 | (1,640 | ) | ||||
Net cash provided by operating activities | 18,089 | 14,449 | |||||
Cash flows from investing activities: | |||||||
Purchases of marketable securities | (3,600 | ) | (4,700 | ) | |||
Maturities of marketable securities | 4,885 | 3,924 | |||||
Net purchases of client funds securities | (361,436 | ) | (213,869 | ) | |||
Purchases of property and equipment | (6,211 | ) | (2,211 | ) | |||
Net cash used in investing activities | (366,362 | ) | (216,856 | ) | |||
Cash flows from financing activities: | |||||||
Net proceeds from issuances of Common Stock | 2,881 | 2,844 | |||||
Excess tax benefits from employee stock plan | 4,337 | 894 | |||||
Shares acquired to settle employee tax withholding liability | (6,159 | ) | (3,576 | ) | |||
Principal payments on capital lease obligations | (896 | ) | (784 | ) | |||
Other borrowings | 203 | – | |||||
Net increase in client fund obligations | 361,436 | 213,869 | |||||
Net cash provided by financing activities | 361,802 | 213,247 | |||||
Effect of foreign currency exchange rate changes on cash | (265 | ) | 134 | ||||
Net increase in cash and cash equivalents | 13,264 | 10,974 | |||||
Cash and cash equivalents, beginning of period | 58,817 | 46,149 | |||||
Cash and cash equivalents, end of period | $ | 72,081 | $ | 57,123 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 92 | $ | 69 | |||
Cash paid for income taxes | $ | 124 | $ | 141 | |||
Supplemental disclosure of non-cash financing activities: | |||||||
Ultimate entered into capital lease obligations to acquire new equipment totaling $0.9 million and $1.2 million for the three months ended March 31, 2013 and 2012, respectively. |
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES | |||||||
Unaudited Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures | |||||||
(In thousands, except per share amounts) | |||||||
For the Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Non-GAAP operating income reconciliation: | |||||||
Operating income | $ | 8,304 | $ | 2,088 | |||
Operating income, as a % of total revenues | 8.5 | % | 2.7 | % | |||
Add back: | |||||||
Non-cash stock-based compensation expense | 7,597 | 4,354 | |||||
Non-GAAP operating income | $ | 15,901 | $ | 6,442 | |||
Non-GAAP operating income, as a % of total revenues | 16.2 | % | 8.2 | % | |||
Non-GAAP net income reconciliation: | |||||||
Net income | $ | 4,520 | $ | 1,024 | |||
Add back: | |||||||
Non-cash stock-based compensation expense | 7,597 | 4,354 | |||||
Income tax effect | (2,919 | ) | (1,679 | ) | |||
Non-GAAP net income | $ | 9,198 | $ | 3,699 | |||
Non-GAAP net income, per diluted share, reconciliation: (1) | |||||||
Net income, per diluted share | $ | 0.16 | $ | 0.04 | |||
Add back: | |||||||
Non-cash stock-based compensation expense | 0.26 | 0.15 | |||||
Income tax effect | (0.10 | ) | (0.06 | ) | |||
Non-GAAP net income, per diluted share | $ | 0.32 | $ | 0.13 | |||
Shares used in calculation of GAAP and non-GAAP net income per share: | |||||||
Basic | 27,476 | 26,394 | |||||
Diluted | 28,704 | 28,073 | |||||
(1) The non-GAAP net income per diluted share reconciliation is calculated on a diluted weighted average share basis for GAAP net income periods. |