_______________ | |||
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 29, 2014 | |||
_______________ | |||
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 29, 2014 |
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 $97.4 Million, Up by 25% |
• | Record Total Revenues of $121.1 Million, Up by 24% |
• | Non-GAAP Operating Income of $23.5 Million, Up by 48% |
• | Recurring revenues grew by 25% for the first quarter of 2014 compared with 2013's first quarter. The increase was primarily attributable to revenue growth from our cloud offering. Recurring revenues were 80% of total revenues for the first quarter of 2014. |
• | Ultimate’s total revenues for the first quarter of 2014 increased by 24% compared with those for the first quarter of 2013. |
• | Our operating income increased 48%, on a non-GAAP basis, for the first quarter of 2014 to $23.5 million as compared with $15.9 million for the same period of 2013. Our non-GAAP operating margin was 19.4% for the first quarter of 2014 versus 16.2% for the first quarter of 2013. |
• | Ultimate’s annualized retention rate exceeded 96% for its existing recurring revenue customer base as of March 31, 2014. |
• | Net income, on a non-GAAP basis, for the first quarter of 2014 increased to $13.8 million compared with $9.2 million for the first quarter of 2013. |
• | Cash flows from operating activities for the quarter ended March 31, 2014 increased 41% to $25.6 million, compared with $18.1 million for the same period of 2013.The combination of cash, cash equivalents, and marketable securities was $101.7 million as of March 31, 2014, compared with $90.2 million as of December 31, 2013. |
• | Days sales outstanding were 61 days at March 31, 2014, representing a reduction of nine days compared with days sales outstanding at December 31, 2013. |
• | During the three months ended March 31, 2014, we used $10.2 million to acquire 61,739 shares of our common stock to settle the employee tax withholding liability resulting from the vesting of our employees' restricted stock holdings. |
• | In addition, as of March 31, 2014, we had 946,165 shares of our outstanding common stock available for repurchase in the future under our previously announced stock repurchase plan. |
• | Recurring revenues of approximately $100 million, |
• | Total revenues of approximately $120 million, and |
• | Operating margin, on a non-GAAP basis (discussed below), of approximately 18%. |
• | Recurring revenues to increase by approximately 25% over 2013, |
• | Total revenues to increase by approximately 23% over 2013, and |
• | Operating margin, on a non-GAAP basis (discussed below), of approximately 20%. |
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, | |||||||
2014 | 2013 | ||||||
Revenues: | |||||||
Recurring | $ | 97,418 | $ | 78,082 | |||
Services | 23,208 | 19,445 | |||||
License | 452 | 390 | |||||
Total revenues | 121,078 | 97,917 | |||||
Cost of revenues: | |||||||
Recurring | 26,954 | 21,828 | |||||
Services | 22,074 | 19,728 | |||||
License | 72 | 90 | |||||
Total cost of revenues | 49,100 | 41,646 | |||||
Gross profit | 71,978 | 56,271 | |||||
Operating expenses: | |||||||
Sales and marketing | 28,829 | 22,910 | |||||
Research and development | 19,720 | 16,130 | |||||
General and administrative | 11,059 | 8,927 | |||||
Total operating expenses | 59,608 | 47,967 | |||||
Operating income | 12,370 | 8,304 | |||||
Other income (expense): | |||||||
Interest and other expense | (66 | ) | (80 | ) | |||
Other income, net | 75 | 41 | |||||
Total other income (expense) | 9 | (39 | ) | ||||
Income before income taxes | 12,379 | 8,265 | |||||
Provision for income taxes | (5,496 | ) | (3,745 | ) | |||
Net income | $ | 6,883 | $ | 4,520 | |||
Net income per share: | |||||||
Basic | $ | 0.24 | $ | 0.16 | |||
Diluted | $ | 0.23 | $ | 0.16 | |||
Weighted average shares outstanding: | |||||||
Basic | 28,196 | 27,476 | |||||
Diluted | 29,309 | 28,704 |
For the Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Stock-based compensation expense: | ||||||||
Cost of recurring revenues | $ | 1,240 | $ | 864 | ||||
Cost of services revenues | 1,055 | 960 | ||||||
Sales and marketing | 4,797 | 3,096 | ||||||
Research and development | 1,270 | 770 | ||||||
General and administrative | 2,476 | 1,907 | ||||||
Total non-cash stock-based compensation expense | $ | 10,838 | $ | 7,597 | ||||
Amortization of acquired intangibles: | ||||||||
General and administrative | 289 | — | ||||||
Total amortization of acquired intangibles | $ | 289 | $ | — | ||||
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES | |||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(in thousands) | |||||||
As of | As of | ||||||
March 31, | December 31, | ||||||
2014 | 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 91,080 | $ | 79,794 | |||
Investments in marketable securities | 8,288 | 8,682 | |||||
Accounts receivable, net | 82,256 | 85,676 | |||||
Prepaid expenses and other current assets | 31,578 | 29,374 | |||||
Deferred tax assets, net | 982 | 1,015 | |||||
Total current assets before funds held for clients | 214,184 | 204,541 | |||||
Funds held for clients | 711,154 | 262,227 | |||||
Total current assets | 925,338 | 466,768 | |||||
Property and equipment, net | 67,385 | 58,186 | |||||
Goodwill | 25,813 | 26,942 | |||||
Investments in marketable securities | 2,320 | 1,771 | |||||
Intangible assets, net | 7,822 | 8,274 | |||||
Other assets, net | 17,593 | 17,340 | |||||
Deferred tax assets, net | 20,116 | 18,913 | |||||
Total assets | $ | 1,066,387 | $ | 598,194 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 8,769 | $ | 6,422 | |||
Accrued expenses | 27,196 | 26,040 | |||||
Deferred revenue | 103,481 | 102,686 | |||||
Capital lease obligations | 3,231 | 2,949 | |||||
Other borrowings | 2,267 | 2,264 | |||||
Total current liabilities before client fund obligations | 144,944 | 140,361 | |||||
Client fund obligations | 711,154 | 262,227 | |||||
Total current liabilities | 856,098 | 402,588 | |||||
Deferred revenue | 341 | 498 | |||||
Deferred rent | 2,495 | 2,687 | |||||
Capital lease obligations | 2,748 | 2,240 | |||||
Other borrowings | 297 | 593 | |||||
Deferred income tax liability | 1,244 | 1,371 | |||||
Total liabilities | 863,223 | 409,977 | |||||
Stockholders’ equity: | |||||||
Preferred Stock, $.01 par value | — | — | |||||
Series A Junior Participating Preferred Stock, $.01 par value | — | — | |||||
Common Stock, $.01 par value | 324 | 321 | |||||
Additional paid-in capital | 324,589 | 315,691 | |||||
Accumulated other comprehensive loss | (2,279 | ) | (1,442 | ) | |||
Accumulated deficit | (926 | ) | (7,809 | ) | |||
321,708 | 306,761 | ||||||
Treasury stock, at cost | (118,544 | ) | (118,544 | ) | |||
Total stockholders’ equity | 203,164 | 188,217 | |||||
Total liabilities and stockholders’ equity | $ | 1,066,387 | $ | 598,194 |
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES | |||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In thousands) | |||||||
For the Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 6,883 | $ | 4,520 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 4,242 | 3,749 | |||||
Provision for doubtful accounts | 490 | 613 | |||||
Non-cash stock-based compensation expense | 10,838 | 7,597 | |||||
Income taxes | 5,261 | 3,689 | |||||
Excess tax benefits from employee stock plan | (6,558 | ) | (4,337 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 2,931 | 102 | |||||
Prepaid expenses and other current assets | (2,204 | ) | (3,139 | ) | |||
Other assets | (253 | ) | (296 | ) | |||
Accounts payable | 2,350 | (1,399 | ) | ||||
Accrued expenses and deferred rent | 966 | 5,981 | |||||
Deferred revenue | 638 | 1,009 | |||||
Net cash provided by operating activities | 25,584 | 18,089 | |||||
Cash flows from investing activities: | |||||||
Purchases of marketable securities | (2,833 | ) | (3,600 | ) | |||
Maturities of marketable securities | 2,675 | 4,885 | |||||
Net purchases of client funds securities | (448,926 | ) | (361,436 | ) | |||
Purchases of property and equipment | (11,205 | ) | (6,211 | ) | |||
Net cash used in investing activities | (460,289 | ) | (366,362 | ) | |||
Cash flows from financing activities: | |||||||
Net proceeds from issuances of Common Stock | 2,295 | 2,881 | |||||
Excess tax benefits from employee stock plan | 6,558 | 4,337 | |||||
Shares acquired to settle employee tax withholding liability | (10,216 | ) | (6,159 | ) | |||
Principal payments on capital lease obligations | (919 | ) | (896 | ) | |||
Other borrowings | — | 203 | |||||
Payments on other borrowings | (293 | ) | — | ||||
Net increase in client fund obligations | 448,926 | 361,436 | |||||
Net cash provided by financing activities | 446,351 | 361,802 | |||||
Effect of foreign currency exchange rate changes on cash | (360 | ) | (265 | ) | |||
Net increase in cash and cash equivalents | 11,286 | 13,264 | |||||
Cash and cash equivalents, beginning of period | 79,794 | 58,817 | |||||
Cash and cash equivalents, end of period | $ | 91,080 | $ | 72,081 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 73 | $ | 92 | |||
Cash paid for taxes | $ | 163 | $ | 124 | |||
Non-cash investing and financing activities: | |||||||
Capital lease obligations to acquire new equipment | $ | 1,709 | $ | 908 | |||
Stock consideration adjustment recorded for acquisitions | $ | (818 | ) | $ | — |
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, | |||||||
2014 | 2013 | ||||||
Non-GAAP operating income reconciliation: | |||||||
Operating income | $ | 12,370 | $ | 8,304 | |||
Operating income, as a % of total revenues | 10.2 | % | 8.5 | % | |||
Add back: | |||||||
Non-cash stock-based compensation expense | 10,838 | $ | 7,597 | ||||
Non-cash amortization of acquired intangible assets | 289 | — | |||||
Non-GAAP operating income | $ | 23,497 | $ | 15,901 | |||
Non-GAAP operating income, as a % of total revenues | 19.4 | % | 16.2 | % | |||
Non-GAAP net income reconciliation: | |||||||
Net income | $ | 6,883 | $ | 4,520 | |||
Add back: | |||||||
Non-cash stock-based compensation expense | 10,838 | $ | 7,597 | ||||
Non-cash amortization of acquired intangible assets | 289 | — | |||||
Income tax effect | (4,258 | ) | (2,919 | ) | |||
Non-GAAP net income | $ | 13,752 | $ | 9,198 | |||
Non-GAAP net income, per diluted share, reconciliation: (1) | |||||||
Net income, per diluted share | $ | 0.23 | $ | 0.16 | |||
Add back: | |||||||
Non-cash stock-based compensation expense | 0.37 | 0.26 | |||||
Non-cash amortization of acquired intangible assets | 0.01 | — | |||||
Income tax effect | (0.14 | ) | (0.10 | ) | |||
Non-GAAP net income, per diluted share | $ | 0.47 | $ | 0.32 | |||
Shares used in calculation of GAAP and non-GAAP net income per share: | |||||||
Basic | 28,196 | 27,476 | |||||
Diluted | 29,309 | 28,704 | |||||
(1) The non-GAAP net income per diluted share reconciliation is calculated on a diluted weighted average share basis for GAAP net income periods. |