10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2014
	or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from              to
	Commission file number: 0-24347

_______________

The Ultimate Software Group, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	65-0694077
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
2000 Ultimate Way,	33326
Weston, FL	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code:

(954) 331-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:	Name of Each Exchange on which Registered:
Common Stock, par value $.01 per share	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ  No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o    No þ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).  Yes þ  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  þ	Accelerated filer  o
Non-accelerated filer  o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o  No þ

The aggregate market value of Common Stock, par value $.01 per share, held by non-affiliates of the Registrant, based upon the closing sale price of such shares on the NASDAQ Global Select Market on June 30, 2014 was approximately $3.8 billion.

As of February 18, 2015, there were 28,606,171 shares of the Registrant’s Common Stock, par value $.01, outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the 2015 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. 

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THE ULTIMATE SOFTWARE GROUP, INC.

INDEX

		Page(s)
	Forward-Looking Statements	1
	PART I
Item 1.	Business	1
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	21
Item 2.	Properties	22
Item 3.	Legal Proceedings	22
Item 4.	Mine Safety Disclosures	22
	PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 8.	Financial Statements and Supplementary Data	42
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	74
Item 9A.	Controls and Procedures	74
	Independent Registered Public Accounting Firm’s Report on Internal Control over Financial Reporting	75
Item 9B.	Other Information	76
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	77
Item 11.	Executive Compensation	80
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	80
Item 13.	Certain Relationships and Related Transactions, and Director Independence	80
Item 14.	Principal Accountant Fees and Services	80
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	80
Signatures		84

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This Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (this “Form 10-K”) of The Ultimate Software Group, Inc. and subsidiaries (“Ultimate,” "Ultimate Software," “we,” “us” or “our”) may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent our expectations or beliefs, including, but not limited to, our expectations concerning our operations and financial performance and condition. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks and uncertainties that are difficult to predict. Ultimate’s actual results could differ materially from those contained in the forward-looking statements due to risks and uncertainties associated with fluctuations in our quarterly operating results, concentration of our  product offerings, development risks involved with new products and technologies, competition, our contractual relationships with third parties, 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.  Other factors that may cause such differences include, but are not limited to, those discussed in this Form 10-K, including the risk factors set forth in Item 1A. Ultimate undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

UltiPro® and its related design are registered trademarks of Ultimate in the United States. This Form 10-K also includes names, trademarks, service marks and registered trademarks and service marks of companies other than Ultimate.

PART I

Item 1. Business

Overview

Ultimate Software is a leading cloud provider of people management solutions, often referred to as human capital management (“HCM”). Ultimate's UltiPro product suite (“UltiPro”) is a comprehensive, engaging solution that has human resources ("HR"), payroll, and benefits management at its core and includes global people management, available in ten languages with more than 35 country-specific localizations. The solution is delivered primarily via the Web to organizations based in the United States and Canada with global workforces. We attained our leadership position, we believe, through our focus on unified HCM, people-centric product design, cloud technology, and strong customer relationships. At the close of 2014, we had more than 19 million people records in our HCM cloud.

UltiPro is designed to deliver the functionality businesses need to manage the complete employee life cycle from recruitment to retirement and to facilitate employee engagement with their employers and each other. The solution includes unified feature sets for talent acquisition and onboarding, HR management and compliance, benefits management and online enrollment, payroll, performance management, compensation management with salary planning, budgeting, and development of incentive plans, succession management, reporting and analytical decision-making and predictive tools, and time and attendance. UltiPro has role-based features for HR professionals, executives, managers, administrators, and employees whether they are in or out of the office, including access to business-critical information on mobile devices such as the iPhone, iPad, and other smartphones and tablets.

Our customers tell us that UltiPro helps them to streamline talent management, HR and payroll processes to significantly reduce administrative and operational costs while also empowering them to manage the talent in their workforces more strategically. UltiPro provides our customers tools to analyze workforce trends for better decision making, identify high-performing talent within their organizations, predict who high-performers will be with a high degree of accuracy, find critical information quickly and perform routine business activities efficiently.

Our cloud offering of UltiPro (the “Cloud Offering”) provides Web-based access to comprehensive HCM functionality for organizations that want to simplify delivery and support of their business applications. We have found that our Cloud Offering is attractive to companies that want to focus on their core competencies to increase sales and profits. Through the Cloud Offering, we supply and manage the hardware, infrastructure, ongoing maintenance and backup services for our customers.  Customer systems are currently managed at three data centers--one located in the Atlanta, Georgia area, one in the Phoenix, Arizona area and another one in the Toronto, Canada area. All data centers are owned and operated by independent third parties.

We market our UltiPro solutions primarily to enterprise companies, which we define as companies with more than 1,500 employees, including those with 10,000 or more employees; mid-market companies, which we define as those having

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approximately 500-1,500 employees; and strategic companies, which we define as having approximately 100-499 employees. Our mid-market and strategic customers have access to nearly all the features that our larger enterprise companies have through UltiPro, plus a bundled services package. Since many companies in the mid- and strategic markets do not have information technology (“IT”) staff on their premises to help with system deployment or ongoing management issues, we have created a bundled services package to give these customers a high degree of convenience by handling system configuration, business rules, and other situations for them “behind the scenes.” UltiPro is marketed primarily through our enterprise, mid-market and strategic direct sales teams.

Cloud Computing Model

Cloud computing is the current terminology for describing the delivery of software-as-a-service ("SaaS"). Market acceptance of cloud computing for mission critical enterprise applications has become increasingly common in recent years since software can be delivered cost-effectively, reliably, and securely to businesses over the Internet without the need for customers to purchase supporting software and hardware for an on-premise system or the need to keep IT people on staff to monitor and upgrade such a system.

We introduced our first subscription-based service solution over the Internet in December of 2000, and we began marketing our first multi-tenant SaaS HCM to enterprise companies in 2002. Since that time, we have significantly expanded our HCM offerings and enhanced our foundational technologies. Today, we develop our solutions using the latest advances in cloud computing and provide our customers with solutions that are highly functional, easy to use, configurable, and fast. Our cloud model is based on a multi-tenant architecture that is both open and secure with support for user experiences on both desktop and mobile devices. Our customers that have moved away from traditional on-premise software to our cloud-based service applications benefit by substantially reducing the cost and complexity typical of on-premise software implementations, customizations, and upgrades. Through cloud computing, we supply and manage the hardware, infrastructure, ongoing maintenance, and backup services for our customers. We install the latest version of our software for our customers, thereby reducing their need to buy and maintain their own IT resources. As a part of our cloud model, we also provide activation and training services to our customers as well as support services.

We provide our hardware, infrastructure, ongoing maintenance and backup services at three data centers: one located near Atlanta, Georgia, one located near Phoenix, Arizona, and another near Toronto, Canada. Our data center facilities are owned and operated by independent third parties, who provide redundant power, bandwidth, and physical security. Ultimate employees deploy, monitor, and manage our hardware and software systems in accordance with our security and data privacy policies, which are subject to examination by an independent third-party.

Market Share

Based on our customer counts and market data from Hoover's/Dun & Bradstreet in December 2014, we estimate our approximate market share to be 9 percent for enterprise companies, 6 percent for mid-market companies, and 1 percent for companies in the strategic market.

Company Information

Ultimate is a Delaware corporation formed in April 1996 to assume the business and operations of The Ultimate Software Group, Ltd. (the “Partnership”), a limited partnership founded in 1990. During August 2006, Ultimate formed a wholly-owned subsidiary, The Ultimate Software Group of Canada, Inc. (“Ultimate Canada”), to accommodate our operations in Canada. There were no material assets or revenues in Canada as of or for the year ended December 31, 2014. Ultimate's headquarters is located at 2000 Ultimate Way, Weston, Florida 33326 and our telephone number is (954) 331-7000.

Capabilities of UltiPro

UltiPro is a comprehensive cloud-based solution designed to deliver the functionality businesses need to manage the complete employee life cycle from recruitment to retirement, and to facilitate employee engagement with their employers and each other. The solution includes feature sets for talent acquisition and onboarding, HR management and compliance, benefits management and online enrollment, payroll, performance management, compensation management, succession management, reporting and analytical decision-making tools, time and attendance, and role-based self-service capabilities for executives, managers, administrators, and employees whether they are in or out of the office. UltiPro offers the following capabilities to our customers:

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Role-Based Internet Access to Functionality. UltiPro provides Web access to workforce-related business functions, company communications, and reporting for everyone in our customer's organization, not just the HR department. The access and specific functionality are based upon our customer's process requirements and the individual user's role. We believe that UltiPro's employee-facing Web applications can increase management and administrative efficiencies by providing immediate access to reporting, staff management processes and business intelligence for executives, and can reduce operating costs by eliminating the need for organizations to print and distribute paper communications, handbooks, forms, and paychecks. Ultimate also provides UltiPro functionality for use on mobile devices. Using tablets or smartphones, employees can manage their goals, provide feedback to managers, access their own personal information, such as pay statements, and can quickly access their company's employee directory to look up contact information or employee photos. In addition, managers can approve or deny daily workflow transactions—such as salary changes and paid time off-and can readily review goals, competencies, and accomplishments of their team members.

Rich and Highly Configurable Functionality. UltiPro has rich functionality built into the solution and provides extensive capabilities for configurability. As a result, we have found that our customers can avoid extensive customizations and yet are able to achieve a highly tailored solution to meet their specific business needs. Since UltiPro's feature-sets are unified, our customers are able to streamline their management of the total employment cycle and can generate strategic HR and talent management reports from UltiPro as their primary, central system of record for their employee data.

Flexible, Rapid System Setup and Configuration. UltiPro has been designed to minimize the time and effort required to set up and configure the system to address individual company needs. Largely because our UltiPro solutions deliver extensive functionality that can be configured to align with our customers' various business models with few customizations, our setup of new customers is faster and simpler than implementations typical of legacy, on-premise software.

Reduced Total Cost of Ownership. We believe that the UltiPro solution provides cost saving opportunities for our customers and that UltiPro is competitively priced. In addition, we believe that our current practices in activating the UltiPro solution result in cost savings for customers when compared with implementations of other similar solutions in the industry. The UltiPro customer may also reduce the administrative and IT support costs associated with the organization's HR, benefits and payroll functions over time. Administrative costs can be further reduced by providing an organization with greater access to information, streamlined HR processes and transactions, and control over reporting.

Modern Cloud Technologies. We have consistently focused on identifying leading technologies and practices and integrating them into our products. The primary characteristics of our technology and cloud architecture are:

▪ Multi-tenant model (multiple instances of UltiPro for different organizations can reside on one server) that allows each application component to run on a separate farm, or cluster, of load-balanced servers while still providing customer data security and segregation.

▪ Configurability that enables customers to achieve a highly tailored UltiPro experience for their businesses without incurring the high expense of custom software.

▪ Web services, with a focus on micro-services (a set of platform-neutral and vendor-independent protocols that enable application interactions over the Internet using Extensible Markup Language, or XML, and other Web technologies) that enable UltiPro customers to connect with other applications and data services easily and securely.

▪ Domain-driven, user-centered design framework that leverages industry-leading tools and technologies, including Microsoft's .NET platform, to streamline the complexities of our HCM domain and focus on how our users want to use UltiPro rather than expect them to change their behavior to accommodate our product.

▪ HTML-5 framework and responsive Web design for mobile-centric computing that enables a rich, dynamic user experience for UltiPro users on the smartphones or tablets of their choice.

Rich End-User Experience, Ease of Use and Navigation. We design our products to be user-friendly and to simplify the complexities of managing employees and complying with government regulations in the HR, payroll, and talent management areas. UltiPro uses familiar, consumer-style navigation, which we believe makes our solution convenient and easy to use. While traveling or out of the office, our customer's HR professionals, executives, managers, administrators, and employees can manage payroll and employee functions and run reports by accessing UltiPro over the Internet or find answers to key routine questions by using an UltiPro application on their mobile devices.

Comprehensive Customer Services and Industry-Specific Expertise. We provide several types of customer service: cloud services, professional setup and activation services, knowledge management (or training) services, payment services (tax filing and check printing), and ongoing product and customer support services. All our customer services are designed to create a positive, productive UltiPro experience for our customers. We have multiple avenues for our customers to give us feedback and recommendations on product enhancements, and we provide our customers a portal where they can choose to learn about

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UltiPro and Ultimate in the style that best suits them - online webinars, videos, instructional documents, online chats, customer communities, and other vehicles. We recognize the importance of issuing timely updates that reflect changes in tax and other regulatory laws and employ a dedicated research team to track jurisdictional tax changes for more than 13,000 tax codes included in UltiPro as well as changes in other employee-related regulations.

Managed Services. To further simplify the work lives of our customers’ human resources and payroll people, we introduced UltiPro Managed Services in the fourth quarter of 2013 as a result of our acquisition of certain assets and liabilities of Accel HR, LLC ("Accel HR"). See Note 4 of the Notes to Consolidated Financial Statements. UltiPro Managed Services is designed for those customers who want to outsource some components of their HR, payroll, benefits, and HCM technology management functions without sacrificing the control of, or access to, their employee data that they enjoy with our cloud solution. Unlike other outsourced payroll or Human Resources Information System ("HRIS") services that typically take a one-size-fits-all approach, UltiPro Managed Services allows customers to select from a number of payroll management, HRIS, and/or benefits management services and combine them into a tailored solution that best suits their unique needs. Accel HR has provided these types of services to large and mid-market corporate customers in North America since 2004 and, since 2007, prior to its acquisition by Ultimate, Accel HR partnered exclusively with Ultimate to provide these services.

UltiPro Standard Functionality and Optional Capabilities

UltiPro's standard functionality includes, but is not limited to, a set of role-based features that engage employees while allowing HR generalists as well as benefits, compensation, and payroll managers and other business managers to develop, coach, evaluate and reward their people and meet organizational objectives. Business intelligence along with system configuration tools and integration capabilities support our customers' connections with third-party applications and providers. UltiPro also includes employee relations tools for managing disciplinary actions and grievances, and health and safety incidents.

In addition to UltiPro's HCM functionality, our customers have the option to purchase a number of additional capabilities on a per-employee-per-month (“PEPM”) basis, which are available to enhance and complement the functionality of UltiPro and which are based on the particular business needs of our customers. These optional UltiPro capabilities currently include (i) the talent acquisition suite (recruitment and onboarding); (ii) the talent management suite (performance management, talent predictors, and succession management); (iii) compensation management; (iv) benefits enrollment; (v) time management; (vi) payment services (formerly referred to as “tax filing”); (vii) wage attachments; and (viii) other optional features (collectively, “Optional Capabilities”), which are described below.

Differences between capabilities available to our enterprise, mid-market and strategic customers are specified below. Unless otherwise specified, capabilities are included in both our enterprise and mid-market offerings.

UltiPro's StandardHR/Payroll Functionality

UltiPro can act as the gateway to business activities for a company's executives, management team, HR/payroll staff, administrators, and employees. Employees of customers can access UltiPro from standard Web browsers such as Microsoft Internet Explorer and Mozilla Firefox, view information and perform tasks in a language of their individual choice (most commonly English, Spanish, or French), set their personal preferences for the order and placement of home-page content, and set up access to any available page in one click. Ultimate believes that UltiPro allows our customers to improve service to their employees through better communications and to save time because managers and administrators can complete hundreds of common employee-related tasks, including administering benefits, managing staff and accessing reporting and business intelligence in real time, from one central solution. UltiPro also enables companies to provide secure, on-demand access to company and personal information for their employees over the Internet.

UltiPro's Standard HR/payroll functionality includes, but is not limited to, the following:

Human Resources Management. UltiPro manages all aspects of a person and their employment relationship regardless of where the employee resides. This includes personal details, skills and competencies, international identification documents, employment history, employment contracts (for those employees in countries that require them), performance, job and salary information, career development and preferences, and health and wellness programs. This allows single country or multinational organizations to easily manage and report on worldwide headcounts, and other critical business metrics. In addition, UltiPro facilitates the recording and tracking of key information for government compliance and reporting in the US, Canada and many other countries. This includes the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Health Insurance Portability & Accountability Act (HIPAA), regulations implemented by the Occupational Safety & Health Administration (OSHA), workers' compensation regulations, the Family Medical Leave Act (FMLA), and Equal Employment

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Opportunity (EEO) laws for the United States. UltiPro also enables compliance with HIPPAA confidentiality requirements for protecting sensitive data such as employee social security numbers.

Benefits Management. UltiPro allows companies to automate the matching of health, welfare, dental, vision, and other benefits they offer their employees, including configuration and administration of benefit plans and employee and employer contributions. UltiPro also enables employees to check benefit options and coverage online. UltiPro eliminates the need for duplicate rules, duplicate data entry, and reconciliation reporting because it stores details for deductions and benefit plans in one common table. These features include rules for coverage, premium and employer match computations, and eligibility and participation determinations. UltiPro also allows companies to maintain and administer paid time off benefits, such as vacation (including calculating benefit accrual amounts), track leave-time taken, and facilitate the response to employee leave requests.

Payroll. UltiPro's payroll features a powerful engine that handles hundreds of payroll-related computations intended to minimize the customer's need for side calculations or additional programming. For example, UltiPro delivers complex wage calculations such as average pay rates for overtime calculations, shift premiums, garnishments and levy calculations. With UltiPro, a company's central payroll department, remote offices or multiple divisions can process payroll and can define and report on who completes each specific processing step based on the exact needs of the organization, thus supporting appropriate separation of duties. All of this is managed through an easy-to-use dashboard of payroll tasks and statuses. To help our customers reduce the complexities and errors associated with administrators manually assigning appropriate payroll taxes to employees in the United States, Ultimate introduced a new embedded feature called Smart Tax Search™ in 2014. Smart Tax Search™ leverages the latest GIS (geographic information systems) technology to enable UltiPro to automatically assign the correct federal, state, and local payroll taxation rules based upon the home and work addresses listed in UltiPro’s employee records.

Tablet-Based Time clock. UltiPro TouchBase, which was introduced in connection with our acquisition of Employtouch (the "Employtouch Acquisition"), provides our customers an interactive mobile time clock device that collects time punches, as well as highlights the information most critical to employees and managers via an engaging activity stream. See Note 4 of the Notes to Consolidated Financial Statements. With UltiPro TouchBase, our customers can capture employee time on a touchscreen tablet device, collecting employee-validated data for cost accounting and payroll; can leverage photos for accurate capture of employee time-entry, avoiding 'buddy punches'; and can validate transactions using PIN (Personal Identification Number) entry, HID (Human Interface Device), RFID (Radio Frequency Identification), magnetic swipe or barcode.

Role-Based Self-Service. Authorized managers have self-service access to staff information such as salary, compensation history, key dates and emergency contacts, with reporting and workforce analysis tools to facilitate decision-making. A customer's managers can view and update staff information, manage department activities, post job openings, leverage recruiting and hiring tools, and perform queries on workforce data. UltiPro's document management features can be used to house and categorize employee-related documents such as drivers' licenses, consent forms, and completed I-9 forms with required identification. Administrators and managers have the ability to attach files in standard formats such as Microsoft Word, PDF, JPEG, and spreadsheets to employee files. The documents can be grouped and sorted to individual requirements, as necessary.

Employees also may be given immediate, security-protected access to view their own pay details on a mobile device or the Web, and benefits summaries, frequently used forms, and company information on the Web. They can also update personal information such as address, phone number, emergency contacts, and skills; change their preferences such as direct deposit accounts and benefits selections; make routine requests such as asking for vacation time; and enroll in training.

UltiPro Business Intelligence. UltiPro Business Intelligence uses a business intelligence platform from IBM Cognos Corporation, a third-party provider, for HR, payroll, and talent management reporting and analysis. Accessed via the Web, UltiPro Business Intelligence gives users the ability to access data across the UltiPro solution - from HR, payroll to benefits administration and enrollment, compensation, talent acquisition and onboarding, talent management, compensation, compliance, year-end data, and more - and enables them to create, modify, and distribute workforce-related reports and notifications. UltiPro includes a pre-configured data mapping library and pre-authored reports and analytics. Controlled by role-based security, everyone in a customer's organization—from line managers to executives can have immediate access to key workforce metrics, and they can personalize their own user experience to show the reports they want to see and how they want to see them. We believe that UltiPro Business Intelligence gives our customers significant strategic value for managing their workforce-related functions and saves them labor time and money by eliminating or reducing the need for internal technology people to generate hundreds of individual reports for disparate executive and management needs. We also embed key data visualizations in context of the application. These data visualizations are developed as part of the core application and provide in-context support to decision-makers.

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Other Key Capabilities. UltiPro includes system configuration tools such as graphical workflow configuration and platform configuration to allow customers to extend UltiPro with new secure, reportable fields. In addition, UltiPro offers role-based security, flexible business rules, and an easy-to-use content management tool. Conditional workflow enables organizations to authorize HR/payroll staff, managers, or supervisors to manage key HR processes via UltiPro, expediting business activities such as hiring an employee or making a salary increase. UltiPro workflow is configurable based on customer need and includes numerous pre-configured processes based on industry best-practices. System administration is designed to enable non-technical users to administer UltiPro's role-based security, built-in conditional workflow, and system business rules, as well as to enable system administrators to post company communications, link to external Web sites and tailor functionality to reflect the customer's own company user experience requirements. Enterprise Integration Tools also are included to provide the ability to interface with third-party cloud and on-premise applications and providers such as general ledger, payment services, time clocks, banks, 401(k) and benefits providers, check printing services and unemployment management services.

UltiPro's Optional Capabilities

UltiPro Talent Acquisition is a suite of add-on products comprised of Recruitment and Onboarding.

i) Recruiting. In the second quarter of 2014, Ultimate introduced a completely new, internally developed recruiting solution designed to transform the recruiting process by increasing candidate engagement and simplifying the work of recruiters. The new solution, UltiPro Recruiting, was built to be candidate-centric and has a consumer-like interface to attract and keep top talent engaged, with the goal to reduce the typical 40 percent to 80 percent online application drop-off rate typically occurring with traditional applicant tracking solutions. Rather than being restricted to limited profile information and résumés typical of traditional solutions, candidates can build an in-depth online presence that gives recruiters and hiring managers a more complete understanding of who they are. UltiPro Recruiting includes an appealing user interface, gamification, and collaboration tools. It is fully mobile and integrates with popular social networks such as LinkedIn and Twitter. At the same time, UltiPro Recruiting automates the recruiting process for hiring managers, recruiters, and HR staff by enabling them to track and manage standard recruitment tasks such as posting open jobs, reviewing résumés, screening candidates, and scheduling interviews.

ii) Onboarding. UltiPro Onboarding is a comprehensive solution that provides employers the ability to engage and welcome new employees into an organization before the first day of work and to speed their time to productivity. UltiPro Onboarding enables dynamic content such as video messages from executives, managers, and co-workers and gives new hires the ability to connect with fellow team members, request a mentor, engage in self-directed learning through a feature called ‘Unlock Your Potential,’ and complete compliance and other required documents. The solution is easily configurable to meet the specific needs of an organization and includes such activities as obtaining required government and procedural paperwork, including electronic signatures and document storage; provisioning necessary equipment and job-specific tools such as office location, computer equipment, and uniforms; ensuring enrollment in necessary training programs; and instilling the employer's core values and business objectives.

UltiPro Talent Management is a suite of add-on products comprised of Performance Management, Talent Predictors, and Succession Management.

i) Performance Management. UltiPro Performance Management helps companies maximize the development of their people and improve employee satisfaction by automating and enhancing the performance process, using competency-based employee development. UltiPro Performance Management streamlines the processes of evaluating performance and completing performance reviews, making competency assessments, identifying top performers for succession planning, and tracking and executing coaching, training and development plans. The solution also supports a continuous process of capturing real-time employee feedback from a social network and, through our mobile solution, makes goal management, talent profile information, employee observations, and goal journaling convenient for employees.

ii) Talent Predictors. In 2013 we added a new predictive analytics solution that is embedded in the talent card of the UltiPro Talent Management suite, where predictive metrics and indicators are available to support manager decisions. The new predictors are based on statistical algorithms we developed over the course of more than two years and validated with numerous customers. UltiPro’s predictive metrics help managers to determine the best actions to take for further developing or changing the career trajectory of employees reporting to them, thereby helping organizations to reduce turnover and improve employee engagement. For example, organizations can set tolerances for certain predictive metrics in our UltiPro Retention Predictor™, giving a manager or HR generalist the ability to see

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immediately if an employee exceeds the tolerance level they have defined as "risk of leaving" and, thereby, providing them an early warning to take an appropriate action to increase the chances of that employee staying. In addition to our UltiPro Retention Predictor, the solution includes an UltiPro High Performer Indicator™, which identifies employees who consistently receive high pay raises, and an UltiPro High Performer Predictor™, which ranks employees predicted to be high performers based upon a number of variables tracked in UltiPro. 

iii) Succession Management. With UltiPro Succession Management, organizations can involve company leadership, managers, and individuals in an ongoing, collaborative process of succession planning. Employees can manage their own talent profiles-updating factors that influence succession readiness such as mobility preferences, languages, education, accomplishments, and competencies-to ensure that leadership has a deeper understanding of the talent landscape at their organization. Visible to employees and managers, UltiPro's employee “talent card” provides a consolidated and comparative view of multiple succession-readiness factors, which then can be used in both decision-making and career development processes.

Other Optional Capabilities include, but are not limited to, the following products, which are supplemental to UltiPro's standard HR/payroll capabilities:

Compensation Management. UltiPro Compensation Management includes Salary Planning, Salary Budgeting and Incentive Compensation Plans capabilities. This expanded solution is designed to support executives, managers and compensation analysts working with salary increase allocations and to incentivize employees by giving them visibility into their individual compensation plans. Highly configurable, including multi-currency, UltiPro Compensation Management makes it easy for companies to manage their unique compensation plans and salary award processes with flat amounts, percentages and unit-based compensation such as Restricted Stock Unit awards. Managers can review their salary budgets and merit pool guidelines and determine the best way to allocate pay increases to their employees within their approved budget parameters. Once managers decide on the allocations, they can submit pay increases through UltiPro Payroll.

Benefits Enrollment. With UltiPro Benefits Enrollment, employees can enroll in the appropriate benefit plans for their individual needs online, either at work or from home, during defined open enrollment periods. Employees can also choose to quickly renew their benefits in a single click and are guided to make the right selections based on prerequisites that link benefit plans together. UltiPro mobile capabilities enable employees to update their retirement contributions on the go. Benefits administrators can configure the enrollment process and messaging to make the process easy for employees and can monitor the enrollment progress. UltiPro Benefits Enrollment also guides employees through the benefit and personal information changes necessary as a result of life events such as getting married, having a baby or moving. UltiPro also delivers more than 70 predefined Benefit Carrier templates to facilitate the electronic feeds required for insurance carriers and plan administrators, reducing the need for manual reporting of employee census information, participant coverage, and billing reconciliation.

Time, Attendance, and Scheduling (designed for enterprise companies). Through a strategic partnership, we have the right to market and distribute an independent third party's time and labor management product as part of the UltiPro solution. We have branded this product as UltiPro Time and Attendance, marketing the components as UltiPro Time and Attendance, UltiPro Leave Management, and UltiPro Workforce Scheduling (collectively, “UTA”). Ultimate is the single-source contact for customer implementations and ongoing solution support for UTA. UTA is Web-based and integrated with UltiPro's payroll, HR, and benefits functionality. UltiPro Time and Attendance tracks time and attendance labor metrics and supports a variety of time-capture mechanisms. UltiPro Leave Management includes all of the functionality required to effectively track and manage employee leave. UltiPro Workforce Scheduling features industry-specific employee scheduling options to ensure that organizations in different environments deploy employees in an efficient and legislatively compliant manner.

Time Management (designed for mid-market and strategic companies). UltiPro Time Management delivers the functionality and flexibility needed to manage employee time and attendance efficiently and provides Web access to real-time employee time and labor information. UltiPro Time Management provides companies with the tools to proactively prevent issues that negatively impact business performance, such as employee coverage gaps, labor law violations, and excess labor spending. Fully integrated scheduling, time and attendance, and leave management capabilities reduce payroll expenditures and streamline payroll and workforce management processes.

Payment Services. We have the right to market and distribute an independent third party's tax filing solution that we have branded UltiPro Payment Services (“UltiPro Payment Services”). With this solution, companies are able to meet all Federal, state, and local payroll tax filing obligations quickly and easily. The UltiPro solution saves payroll staff time by eliminating the administrative burdens associated with tax filing. UltiPro Payment Services enables businesses to deposit federal, state, and local tax payments for more than 13,000 tax codes via electronic funds transfer or check and automates filing for monthly, quarterly, and annual tax returns.

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Wage Attachments. For organizations required to process third-party payments on behalf of their employees for items such as child support, tax levies, and creditor garnishments, UltiPro Wage Attachments provides the means to effectively streamline and manage the payment process. UltiPro Wage Attachments eliminates the burden associated with payments to third parties by using information entered and calculated in UltiPro, so there is no need to manage payment processing or analyze varying disbursement schedules for multiple jurisdictions. We ensure that each third-party payment is made according to the designated payment method and reaches its required destination within the assigned timeframe.

Other Optional Capabilities. We offer a number of additional HR and payroll-related services to extend the value of UltiPro, including test environment services, W-2 print services, pre-employment screening, paycheck modeling, pay cards, unemployment tax management, employment verification services, employee assistance, health and wellness, and work/life balance programs. In addition, we offer UltiPro Federated Single Sign-On for standards-based identity management by leveraging Microsoft's Active Directory Federated Services infrastructure as well as single-sign-on capabilities through our partner Ping Identity. These solutions help improve and simplify data security by enabling individuals to use a single login credential (such as a network login) to seamlessly access UltiPro over the Internet.

Technology

We strive to use the most modern and capable technologies available for delivering solutions that are flexible, easy to use, fast, and secure. Major characteristics of our cloud application platform include, but are not limited to, the following:

Multi-tenancy. As a SaaS provider, we use a multi-tenant cloud model that allows us to support multiple customers on a single set of systems while maintaining performance, security, and reliability. We manage and maintain our solutions for our customers, including all hardware and software upgrades. Our customers benefit by reducing their need to keep their own IT resources on staff for UltiPro solutions. Our cloud customers also benefit from having the most current version of UltiPro installed as soon as it is available.

Configurability. We have invested in our own technology and approaches for enabling application and system configurability, enabling customers to achieve a highly tailored solution while minimizing or eliminating the need to create custom code.

Openness and Connectivity. We leverage widely adopted technology and industry standards for exposing data and functionality via application programming interfaces (APIs). Customers can access their HCM data based on these standard, open, and secured connections in order to link to their in-house systems, third-party cloud applications, and other systems that require data feeds such as benefits providers. Our UltiPro Carrier Network (UCN) leverages industry-leading solutions from Informatica, allowing Ultimate to create standard, reusable connectors that support the unique data transfer requirements of individual benefits providers, simplifying both the development and maintenance of these connections. Ultimate also supports a number of pre-packaged connectors for solutions that expand or extend the functionality included in UltiPro. These packaged integrations include, but are not limited to: Yammer, a provider of enterprise social networking solutions; CERTPOINT, a provider of learning management solutions; and Ping Identity, which offers single-sign-on capabilities for business applications.

Domain-Driven, User-Centered Design. Our solution design approach includes domain-driven design, which provides a streamlined process for developing software with the complexities of an HCM domain in alignment with the principles of a service-oriented architecture (SOA). A key focus of our user-centered design is to optimize the overall user experience of our customers and to maximize user engagement. We have invested significant resources in usability design and testing to create a consumer-grade experience that is flexible, responsive, and personalized. In the design of the user-experience, our emphasis is on how users want to use the product rather than the expectation that users will change their behavior to accommodate the product.

Mobile-Centric User Experience. In addition to the user experience capabilities available through Microsoft.NET, Ultimate uses Hypertext Markup Language version 5 (HTML5) and responsive Web design approaches to deliver flexible user experiences for smartphones and tablets. This mobile framework supports applications delivered through multiple browsers and automatically adapts to screen size and orientation and takes advantage of gesture-based capabilities. Other features of our mobile-centric user experience include search for both people data and functionality, configurability for individual users that allows them to drag and drop individual content 'gadgets' and menu controls, and favorite-specific functionality for quick access.

Workflow. Ultimate supports numerous transactions and operational processes for our customers. These processes are frequently unique to an individual customer and typically require multiple steps, approvals, data input, and confirmations. To

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support our customers' unique requirements, UltiPro includes configurable business process automation, or workflow, which enables customers to automate processes based on their own needs and change these processes over time without custom software code.

Business Intelligence. Ultimate provides sophisticated data query and report authoring via IBM Cognos, a leading suite of business intelligence tools. Our customers can access reports and conduct data queries from a Web browser and are able to apply on-line analytical processing to multidimensional data cubes for exploring data on employees graphically and statistically from diverse angles. We maintain a link between Cognos' report catalog and UltiPro's data dictionary, eliminating the necessity for customers to create and maintain ad hoc reporting catalogs on their own. We also maintain a BI Exchange, an online community where Ultimate professionals and customers can post, download, and share standard reports. We have unified security for the data elements across UltiPro and Cognos instances so that role-based security controls data access across both solutions. We also provide single sign-on to simplify and secure user access.

Data Centers for Cloud Offering

Our Cloud Offering provides Web-based access to comprehensive HCM functionality for organizations that want to simplify delivery and support of their business applications. As a part of our Cloud Offering services, Ultimate provides the hardware, infrastructure, ongoing maintenance and backup services for our customers at three data centers. The data center located near Atlanta, Georgia, is owned and operated by Quality Technology Services (“QTS”). The data center located near Toronto, Canada, is owned and operated by CenturyLink Technology Services ("CenturyLink") (formerly known as Savvis Communications Canada, Inc.) and the data center located in Phoenix, Arizona, is owned and operated by IO Phoenix One, LLC.

Ultimate's use of the data center located near Atlanta, Georgia, is governed by a Master Space Agreement dated June 1, 2009 with Quality Technology Services Metro, LLC (“QTS Metro”). Pursuant to the terms of the QTS Agreement, Ultimate may from time to time submit orders for the use of certain physical space within the data centers for hosting Ultimate's hardware equipment, as well as Internet connectivity services, security, power and generator back-up, environmental controls and access controls. The QTS Agreement provides that any service order will automatically renew for successive renewal terms, unless either party notifies the other party in writing at least sixty days prior to the end of the then current term that there will be no such renewal. Furthermore, the QTS Agreement may be terminated at any time by either party thereto, if: (i) the non-terminating party breaches any material term of such QTS Agreement and fails to cure such breach within 10 days after receipt of written notice; (ii) the non-terminating party becomes the subject of a voluntary or involuntary proceeding relating to insolvency, bankruptcy, receivership, liquidation, or reorganization; or (iii) a court or other government authority having jurisdiction over the services prohibits the furnishing of services governed by such QTS Agreement.

Ultimate's use of the data center located near Toronto, Canada, is governed by a Master Services Agreement dated April 30, 2013 (the “CenturyLink Agreement”) between Ultimate's wholly owned subsidiary Ultimate Canada and CenturyLink. Pursuant to the terms of the CenturyLink Agreement, Ultimate Canada has use of certain physical space within the data center for hosting Ultimate Canada's hardware equipment, as well as Internet connectivity services. The CenturyLink Agreement contains provisions relating to data security and access to the data center. Upon placing a service order, Ultimate Canada is guaranteed certain pricing terms and is committed to minimum usage levels for a period of at least 36 months from the service effective date. The CenturyLink Agreement will renew on a month-to-month basis unless either party gives at least sixty days written notice prior to the completion of the applicable term that there will be no such renewal. The CenturyLink Agreement provides that its term will end upon the expiration of the term of the last-executed service order. Ultimate has guaranteed the payment of all amounts due from Ultimate Canada to CenturyLink under the CenturyLink Agreement.

Ultimate's use of the data center located near Phoenix, Arizona is governed by a License and Master Services Agreement dated February 27, 2012 (the "IO Phoenix Agreement") with IO Phoenix One, LLC. Pursuant to the terms of the IO Phoenix Agreement, Ultimate has use of certain physical space within the data center for hosting Ultimate's hardware equipment, as well as Internet connectivity services. The IO Phoenix Agreement contains provisions relating to data security and access to the data center. Ultimate is guaranteed certain pricing terms and is committed to minimum usage levels for a period of at least 36 months from the effective date. The IO Phoenix Agreement will automatically renew thereafter for additional terms of one year unless either party gives written notice prior to the completion of the applicable term that there will be no such renewal. Ultimate must give written notice within 60 days while IO Phoenix must give written notice within 120 days.

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Pricing

Our Cloud Offering is designed to provide an appealing pricing structure to organizations that prefer to minimize the initial cash outlay associated with typical capital expenditures for traditional on-premise products. Our cloud customers purchase the right to use UltiPro on an ongoing basis for a specific term in a shared or dedicated hosted environment, and the arrangement can typically be renewed after its initial term has expired. In the shared environment, Ultimate provides an infrastructure with servers shared among many customers who use a Web browser to access the application software through the related data center. In the dedicated environment, the customer does not share servers with other customers but rather has its own set of servers. The pricing for our Cloud Offerings, including both the hosting element as well as the right to use UltiPro, is on a PEPM basis.

Research and Development Activities

Ultimate incurs research and development expenses, consisting primarily of software development personnel costs, in the normal course of our business. Such research and development expenses are for enhancements to our existing products and for the development of new products. During 2014, 2013 and 2012, we spent $108.8 million, $86.8 million and $65.9 million, respectively, on research and development activities, gross of capitalized software. During 2014, 2013 and 2012, $25.2 million, $19.0 million and $5.2 million, respectively, of research and development expenses were capitalized for computer software development costs related to an internal-use development project that is expected to be offered in the future as a cloud product only. UltiPro Recruiting, a component of the overall capitalized development project, became ready for its intended use during 2014. The remaining components of the development project are expected to be completed during 2015 and thereafter. Amortization for the components of the development project begins when they are ready for their intended use.

Customer Services

We believe that our focus on delivering our customers a positive and productive UltiPro experience has differentiated Ultimate in the marketplace and is critical to the quality of Ultimate's comprehensive service solution. We provide our customer services in two broad categories: (i) professional services and (ii) customer support services and product maintenance. Additionally, we provide services associated with the delivery of our cloud-based solutions. These services include, but are not limited to, purchasing and supporting hardware and system software; installing new versions of UltiPro; and backing up customer data.

Professional Services. Ultimate's professional services include system setup and activation (i.e., implementation), executive relationship management (“ERM”), and knowledge management (or training) services. We believe that our setup and activation consulting services are differentiated from those of other vendors by speed, predictability and completeness. Our successful record with rapid system activation and implementations is due, we believe, to our standardized methodology, long-tenured consultants, highly configurable product functionality, and comprehensive conversion and integration tools.

Ultimate has a long-tenured team of functional and technical consultants who are dedicated to assisting customers with rapid deployments. In addition, we provide our customers with the opportunity to participate in formal training programs conducted by our knowledge management services team, as well as online scheduled courses and on-demand training. Training programs are designed to increase our customers' ability to use the full functionality of our products, thereby maximizing the value of our customers' investments. Courses are designed to align with the stages of implementation and to give attendees hands-on experience with UltiPro. Trainees learn such basics as how to enter new employee information, set up benefit plans and generate standard reports, as well as more complex processes such as defining company rules, configuring the system and creating custom reports. Ultimate maintains training facilities in Atlanta, Georgia; Schaumburg, Illinois; Dallas, Texas; Santa Ana, California; and at our headquarters in Weston, Florida. Ultimate rents training facilities in other locations, such as Toronto, Canada, on an as-needed basis. In addition to offering classes at these facilities, we conduct Web-based training, and provide recorded on-demand training as well as “Quick Tours” for rapid assistance in specific areas of the solution. After our customers have processed their first live payroll using UltiPro (referred to as going “Live”) and have been turned over to our customer support and maintenance program, we assign a customer relationship manager to the account to assist customers obtaining maximum value of the UltiPro solution, connect with other Ultimate users and advanced business analytics. The ERM team also focuses a large portion of its time on customer retention, which is an important aspect of Ultimate's long-term business model.

Customer Support. We offer comprehensive and on-going maintenance services and technical support. These services have historically been purchased by all of our customers, and Ultimate had a recurring revenue cloud customer retention rate which exceeded 96% in 2014. Ultimate's customer support services include: software updates that reflect tax and other legislative changes; a named customer service representative; telephone support 24 hours a day, 7 days a week; unlimited

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access to Ultimate's employee tax center on the Web; seminars on year-end closing procedures; a customer blog; and periodic newswire emails. In addition, our customer support services team maintains a Customer Success Portal for our customers where customers can submit inquiries and service requests as well as search a knowledge base of information for instant answers to questions, holds an annual national user conference and arranges for Ultimate professionals to attend smaller, user-organized user group meetings on a routine basis throughout the United States.

Customers

As of December 31, 2014, Ultimate provided our UltiPro solutions to more than 2,800 customers. Ultimate's customers represent a wide variety of industries, including manufacturing, food services, sports, technology, finance, insurance, retail, real estate, transportation, communications, healthcare and other services. For each of the three years ended December 31, 2014, no customer accounted for more than 10% of total revenues.

Sales and Marketing

We market and sell our products and services primarily through our direct sales force.

Our direct sales force includes business development vice presidents, directors and managers who have defined territories, typically geographic. The sales cycle begins with a sales lead generated through a national, corporate marketing campaign or a territory-based activity. In one or more on-site visits, phone-based sales calls, or Web demonstrations, sales managers work with application and technical sales consultants to analyze prospective client needs, demonstrate Ultimate's UltiPro solutions and, when required, respond to requests for proposals. The sale is finalized after customers complete their internal sign-off procedures and the terms of the contract are negotiated and signed.

With a sale of the Cloud Offering, the agreement generally requires PEPM fees based on company size, and bundled fees for implementation and training. Typical payment terms include a deposit at the time the contract is signed and ongoing PEPM payments on specific payment dates designated in the contract, usually tied to the Live date.

We support our sales force with a comprehensive marketing program that includes public relations, advertising, direct mail, trade shows, seminars and workshops, email marketing, social media marketing, and Web marketing. Working closely with the direct sales force, customers and strategic partners, our marketing team defines positioning strategies and develops a well-defined plan for implementing these strategies. Our marketing services include market surveys and research, overall campaign management, creative development, demand generation, results analysis, and communications with field offices, customers, and marketing partners.

Intellectual Property Rights

Ultimate's success is dependent, in part, on our ability to protect our proprietary technology. We rely on a combination of copyright, trademark and trade secret laws, as well as confidentiality agreements and licensing arrangements, to establish and protect our proprietary rights. We do not have any patents or patent applications pending.

Competition

The market for our products is highly competitive. Our products compete primarily on the basis of technology, delivered functionality, price/performance and service.

Ultimate's competitors in our enterprise market include (i) large service bureaus, primarily Automatic Data Processing Inc. (“ADP”) and, to a lesser extent, Ceridian; and (ii) companies, such as Oracle, Lawson, and Workday that offer human resource management and payroll software products for use on mainframes, client/server environments and/or Web servers. In our mid-market and strategic market, Ultimate's competitors include payroll service providers, such as ADP, Ceridian and Paychex.

Backlog

Backlog consists of our UltiPro cloud-based solutions and, to a lesser extent, sales of services related to our Cloud Offering on a stand-alone basis to customers who already own a perpetual license (“Base Hosting”) under signed contracts for which the services have not yet been delivered. At December 31, 2014, Ultimate had backlog of $185.7 million compared with $160.0 million as of December 31, 2013. Ultimate expects to fill approximately $171.1 million of the backlog during 2015.

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Ultimate does not believe that backlog is a meaningful indicator of sales that can be expected for any future period. There can be no assurance that backlog at any point in time will translate into revenue in any subsequent period.

Employees

As of December 31, 2014, Ultimate employed 2,354 persons. Ultimate believes that our relationships with employees are good, and that belief is validated by Ultimate’s ranking of #20 on FORTUNE’s 2014 “100 Best Companies to Work For” list as well as our # 3 ranking on Great Rated's 2014 Top 20 Technology Workplaces list and #4 ranking on Great Rated’s 2014 list of Ten Great Places to Work For Millennials, all determined by anonymous employee surveys administered by the Great Place to Work Institute. Ultimate's history of good employee relationships is further validated by Ultimate's #9 ranking on FORTUNE's 2013 “100 Best Companies to Work For” list, # 25 ranking on FORTUNE's 2012 list and the Great Place to Work Institute's ranking of Ultimate as the #1 Best Place to Work in America among medium-sized companies for both 2009 and 2008. However, competition for qualified employees in the technology sector and Ultimate's industry is intense. Management of Ultimate believes that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel.

Available Information

Ultimate's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those reports and any registration statements, including but not limited to registration statements on Form S-3, are available free of charge on Ultimate's website at www.ultimatesoftware.com as soon as reasonably practicable after such reports are electronically filed with the Securities and Exchange Commission (“SEC”). Information contained on or accessible through Ultimate's website is not part of this Form 10-K. You may record and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains the reports, proxy and information statements and other information regarding us that we file with the SEC. You can access the SEC's website at www.sec.gov.

Ultimate operates in a rapidly changing and dynamic business environment that involves risk and uncertainty.  The following discussion is a description of risks and uncertainties associated with our business that could cause, or contribute to causing, actual results to differ materially from expectations.  These are not all of the risks we face.  We may be adversely affected by risks not currently known or that we currently consider immaterial.

We may be adversely affected by substantial quarterly fluctuations in our revenues and operating results.

Our quarterly revenues and operating results have varied significantly in the past and are likely to vary substantially from quarter to quarter in the future. Our quarterly operating results may fluctuate as a result of a number of factors, including:

• Increased expenses from one quarter to another (especially as they relate to product development and sales and marketing);

• Spending patterns of our customers;

• Timing of our product releases;

• Increased competition;

•  A drop in the near-term demand for our products, particularly in relation to professional services; and

• Announcements of new products by Ultimate or by our competitors.

We establish our expenditure levels based upon our expectations as to future revenues, which are comprised primarily of recurring revenues and services revenues.   If revenue levels are below expectations, particularly services revenues which are more subject to variations between periods than recurring revenues, expenses can be disproportionately high in a particular period. For example, while sales production could be at our level of expectations, depending on the spending patterns of our customers including the timing in which they begin the implementation of UltiPro and the extent to which they use Ultimate’s resources, the immediate reported total revenues could be lower than expected.

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Our operating results for previous fiscal quarters are not necessarily indicative of our operating results for the full fiscal years or for any future periods. We believe that, due to the underlying factors for quarterly fluctuations, quarter-to-quarter comparisons of our operations are not necessarily meaningful and that such comparisons should not be relied upon as indications of future performance.

Due to the method of accounting for sales from our Cloud Offering, a change in the period of the time from contract date to the Live date (“Time to Live”) could negatively impact the amount of recurring revenues recognized in a reporting period.

Sales production, as it pertains to sales of cloud units, is not reflected in recurring revenues and related variable costs in our consolidated statements of operations until the related customer goes Live. In our internal business model, we make certain assumptions, among other things, with respect to future sales production, revenue growth, variable costs, personnel costs and other operating expenses.

Our expectations for recurring revenue growth are typically established based on combinations of actual sales production (for those units that have been previously sold but have not yet gone Live) and expected future sales production, together with expectations as to the Time to Live periods. Estimates for Time to Live periods are usually based on (i) specific estimates (for certain backlog sales) provided by our field personnel, which estimates include factors and assumptions that are not within the control of our field personnel; and (ii) estimates for Time to Live periods for other cloud sales (including backlog sales without specific estimates at that point in time), as well as expected sales, which are typically based on assumptions derived from our historical Time to Live periods.  These estimates are adjusted periodically, and prospectively, based on management’s assessment of Time to Live for backlog sales at that point in time. Factors that could impact the estimates for Time to Live periods include, but are not limited to, customer size (as larger customers may have longer implementations, tend to go Live on more UltiPro features and have more interface and integration requirements), and the number of complementary products sold in addition to UltiPro to a single customer, which in some cases involve customers’ desire to go Live on all products at once, as compared with UltiPro first followed by complementary products.

To the extent there are changes in the underlying assumptions which drive Ultimate’s expected revenue growth from cloud sales, which include, but are not limited to, actual sales production achieved and changes in Time to Live periods, our recurring revenues, as reported in our consolidated statements of operations, could differ materially from levels we expected to achieve.

Rapid technological changes and the introduction of new products and enhancements by new or existing competitors could undermine our current market position.

The market for our products is characterized by rapid technological advancements, changes in customer requirements, frequent new product introductions and enhancements and changing industry standards. The life cycles of our products are difficult to estimate. Rapid technological changes and the introduction of new products and enhancements by new or existing competitors could undermine our current market position. Our growth and future success will depend, in part, upon our ability to:

▪ Enhance our current products and introduce new products in order to keep pace with products offered by our competitors;

▪ Adapt to technological advancements and changing industry standards; and

▪ Expand the functionality of our products to address the increasingly sophisticated requirements of our customers.

We may not have sufficient resources to make the necessary investments and we may experience difficulties that could delay or prevent the successful development, introduction or marketing of new products or enhancements. In addition, our products or enhancements may not meet the increasingly sophisticated customer requirements of the marketplace or achieve market acceptance at the rate we expect, or at all. Any failure by us to anticipate or respond adequately to technological advancements, customer requirements and changing industry standards, or any significant delays in the development, introduction or availability of new products or enhancements, could undermine our current market position.

If we are unable to enhance our product and develop new services, our revenue growth may be harmed.

Our ability to attract new customers and increase revenue from existing customers will depend in large part on our ability to enhance and improve our existing UltiPro standard/HR payroll product and Optional Capabilities and to introduce new features and Optional Capabilities to our product. The success of any enhancement or new feature depends on several factors, including

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the timely completion, introduction and market acceptance of the enhancement or service. If we are unable to develop enhancements and introduce new features and Optional Capabilities to our existing product in a cost-effective manner that keeps pace with rapid technological developments, our business could be adversely affected. If we are unable to successfully develop, acquire new services or enhance our existing products to meet customer requirements, our revenue may not grow as expected.

Our stock price has experienced high volatility, may continue to be volatile and may decline.

The trading price of our Common Stock has fluctuated widely in the past and may do so in the future, as a result of a number of factors, many of which are outside our control, such as:

▪ The volatility inherent in stock prices within the sector in which we conduct business;

▪ The volume of trading in our Common Stock, including sales upon exercise of outstanding stock options and upon the vesting of restricted stock and restricted stock units;

▪ Failure to achieve earnings expectations;

▪ Changes in our earnings estimates by analysts;

▪ Variations in our actual and anticipated operating results, including, but not limited to, prospective financial guidance provided by Ultimate to our investors and research analysts; and

▪ The announcement of a merger or acquisition.

Stock markets have experienced extreme price and volume fluctuations that have affected the market prices of many technology and computer software companies, particularly Internet-related companies. Such fluctuations have often been unrelated or disproportionate to the operating performance of these companies. These broad market fluctuations could adversely affect the market price of our Common Stock.

Further, securities class action litigation has often been brought against companies that experience periods of volatility in the market prices of their securities. Securities class action litigation could result in substantial costs and a diversion of our management’s attention and resources.

Our failure to maintain and increase acceptance of UltiPro, which accounts for substantially all of our revenues, could cause a significant decline in our revenues.

Currently, the UltiPro solutions, including the UltiPro standard/HR payroll product and Optional Capabilities and related services, account for substantially all of our revenues. Our future success depends on maintaining and increasing acceptance of UltiPro. Any decrease in the demand for UltiPro would have a material adverse effect on our business, operating results and financial condition.

A systems failure or other service interruption at the data center owned and managed by QTS, the data center owned and managed by CenturyLink (formerly known as Savvis), and the data center owned and managed by IO Phoenix One, LLC and used for our hosting services could result in substantial expense to us, loss of customers and claims by our customers for damages caused by any losses they incur.

We offer hosting services, which include hardware, infrastructure, ongoing maintenance and back-up services, to our customers in the United States at a data center owned and operated by QTS, at a location near Atlanta, Georgia and at a data center owned and operated by IO Phoenix One, LLC near Phoenix, Arizona. We also offer hosting services, which include hardware, infrastructure, ongoing maintenance and back-up services, to our customers with employees exclusively in Canada at a data center owned and operated by CenturyLink (formerly known as Savvis) near Toronto, Canada.

These hosting services, which are provided as part of our Cloud Offering, must be able to be reliably operated on a 24 hours per day, seven days per week basis without interruption or data loss. The success of the Cloud Offering depends on our ability to protect the infrastructure, equipment and customer data files against damage from:

▪ Human error;

▪ Natural disasters;

▪ Power loss or telecommunication failures;

▪ Sabotage or other intentional acts of vandalism; and

▪ Unforeseen interruption or damages experienced in moving hardware to a new location.

We perform a daily backup of our customer data which is stored offsite of the data centers. In addition, QTS has implemented various activities comprising QualityTech’s Business Continuity Planning & Disaster Recovery Program which

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includes risk assessment and business impact analysis, redundancy and crisis and emergency response procedures.  CenturyLink also has a Business Continuity Program which handles business continuity planning, incident management and site emergency action planning.  However, the occurrence of one of the above listed events or other unanticipated problems at any of the data centers could:

▪ Result in interruptions in the services we provide to our customers, during which time our customers may be unable to retrieve their data;

▪ Require us to spend substantial amounts of money replacing existing equipment and/or purchasing services from an alternative data center;

▪ Cause existing customers to cancel their contracts;

▪ Cause our customers to seek damages for losses incurred; or

▪ Make it more difficult for us to attract new customers.

We face risks associated with security breaches or cyber-attacks.

We face risks associated with security breaches or cyber-attacks of our computer systems and those of our third-party representatives, vendors and service providers. Although we have implemented security procedures and controls to address these threats, our systems and our software products may still be vulnerable to breaches, data theft, computer viruses, programming errors, attacks by third parties, or similar disruptive problems.

If our systems, or the hosting systems at our third party owned data centers, were breached or attacked, the proprietary and confidential information of our company and our customers could be disclosed, and we may be required to incur substantial costs and liabilities, including the following:

• expenses to rectify the consequences of the security breach or cyber-attack;

• liability for stolen assets or information;

• costs of repairing damage to our systems;

• lost revenue and income resulting from any system downtime caused by such breach or attack;

• loss of competitive advantage if our proprietary information is obtained by competitors as a result of such breach or attack;

• increased costs of cyber security protection;

• costs of incentives we may be required to offer to our customers or business partners to retain their business; and

• damage to our reputation.

As a result, any compromise of security of our systems or cyber-attack could have a material adverse effect on our business, reputation, financial condition, and operating results.

If our direct sales force is not successful, we may be unable to achieve significant revenue growth in the future.

We sell our products and services primarily through a direct sales force.  Our ability to achieve significant revenue growth in the future will depend upon the success of our direct sales force and our ability to adapt our sales efforts to address the evolving markets for our products. If our direct sales force does not perform as expected, our revenues could suffer.

Our current and future competitors include companies with greater financial, technical and marketing resources than we have and if we are unable to compete successfully with other businesses in our industry or with in-house systems developed by potential customers, our profitability will be adversely affected.

Our future success will depend significantly upon our ability to increase our share of our target market, to maintain and increase our recurring revenues from new and existing customers and to sell additional products, product enhancements, maintenance and support services and training and consulting services to existing and new customers. The HCM market is intensely competitive. Our competitors include:

▪ Large service bureaus, primarily ADP and, to a lesser extent, Ceridian;

▪ A number of companies, such as Oracle, Lawson, and Workday that offer HCM software products for use on mainframes, client/server environments and/or Web servers; and, in the UltiPro mid-market and strategic markets, payroll service providers such as ADP, Ceridian and Paychex that service companies on the smaller end of the mid-market; and

▪ The internal HR/payroll departments of potential customers which use custom-written software.

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Our competitors may develop products that are superior to our products or achieve greater market acceptance. Many of our competitors or potential competitors have significantly greater financial, technical and marketing resources than we do. As a result, they may be able to respond more quickly to new or emerging technologies and to changes in customer requirements, or to devote greater resources to the development, promotion and sale of their products than we can. We believe that existing competitors and new market entrants will attempt to develop in-house systems that will compete with our products. We may be unable to compete successfully against current or future competitors. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address the needs of our prospective customers. Accordingly, it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share.

Our acquisitions of other companies, products, or technologies may result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business and results of operations.

As part of our overall business strategy, from time to time, we acquire complementary businesses, products and technologies. These transactions could be material to our financial condition and results of operations. We expect to continue to evaluate, and potentially enter into, acquisitions and a wide array of strategic transactions in the future.

We may not realize the anticipated benefits of our acquisitions to the extent that we anticipate, or at all, because acquisitions involve many risks, including:

• difficulties integrating the acquired operations, personnel, technologies, products or infrastructure;

• diversion of management's attention or other resources from other critical business operations and strategic priorities;

• unexpected difficulties encountered when we enter new markets in which we have little or no experience, or where competitors may have stronger market positions;

• inability to maintain relationships with customers and partners of the acquired business;

• the difficulty of incorporating acquired technology and rights into our products and services;

• potential unknown liabilities associated with an acquired business;

• unanticipated expenses related to integrating acquired technology with our existing technology;

• the impact on our results of operations due to depreciation and amortization related to acquired intangible assets, fixed assets and deferred compensation;

• the tax effects of any such acquisitions;

• potential litigation, such as claims by third parties related to intellectual property of the businesses we acquire;

• potential write-offs of our investments in acquired businesses;

• the need to implement controls, procedures and policies appropriate for a public company at companies that prior to the acquisition lacked such controls, procedures and policies; and

• challenges caused by distance, language and cultural differences.

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and strategic transactions could cause us to fail to realize the anticipated benefits of such acquisitions or transactions, incur unanticipated liabilities, and harm our business generally.

We may issue additional equity securities to pay for future acquisitions or other strategic transactions, the issuance of which could be dilutive to our existing stockholders and affect the trading price of our securities. If any acquisition or other strategic transactions is not perceived as ultimately improving our financial condition and operating results, our stock price may decline. Further, if we fail to properly evaluate and execute acquisitions or other strategic transactions, our business and financial condition may be seriously harmed.

Adverse changes in general economic or political conditions could adversely affect our operating results.

As our business has grown, we have become increasingly subject to the risks arising from adverse changes in domestic and global economic and political conditions.  If the state of the economy and the rate of employment deteriorate in the future, many customers may delay or reduce technology purchases.  This could result in reductions in sales of our products, longer sales cycles, slower adoption of new technologies, increased price competition, customers purchasing fewer services or Optional Capabilities than they have in the past, customers requesting longer payment terms, customers failing to pay amounts due and slower collections of accounts receivable.  In addition, increased unemployment could result in significant decreases in our recurring revenues from our existing customer base as we price our ongoing recurring revenues on a PEPM basis, subject, in many cases, to minimum employee sizes per customer. Any of these events would likely harm our business, results of operations, financial condition and cash flows from operations.

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The loss of the services of one or more of our key employees could negatively affect our ability to implement our business strategy.

Our success depends to a significant extent upon a limited number of members of senior executive management and other key employees, including Scott Scherr, our Chairman of the Board of Directors, President and Chief Executive Officer. We do not have employment contracts with any of our key personnel. The loss of the services of one or more of our key employees could have a material adverse effect upon us. In addition, uncertainty created by turnover of our key employees could cause further turnover of our employees.

If we are not able to successfully recruit personnel, our revenues could be negatively affected.

Our ability to achieve significant revenue growth in the future will also depend on our success in recruiting, training and retaining sufficient sales, marketing, professional services, product development and other personnel.

The potential growth of our business and expansion of our customer base may place a significant strain on our management and operations, and we may be unable to manage that growth and expansion successfully.

We expect to increase research and development, professional services, sales and marketing and administrative operations as and when appropriate to accommodate our growth plans. Accordingly, our future operating results will depend on the ability of our management and other key employees to continue to implement and improve our systems for operations, financial control and information management and to recruit, train, manage and retain our employee base. We cannot be certain that we will be able to manage any future growth successfully.

Our business relies heavily on the products of Microsoft, which may not always be compatible with our products, and we may be required to spend significant capital if businesses adopt alternative technologies that are incompatible with our products.

Our software products are designed primarily to operate with Microsoft technologies and our strategy requires that our products and technology be compatible with new developments in Microsoft technology. Although we believe that Microsoft technologies are currently widely utilized by businesses of all sizes, we cannot be certain that businesses will continue to adopt such technologies as anticipated, will migrate from older Microsoft technologies to newer Microsoft technologies or will not adopt alternative technologies that are incompatible with our products. As a result, we may be required to develop new products or improve our existing products to be compatible with different technologies that may be used by our customers. We cannot be certain we will be able to adapt our product to any technologies other than Microsoft’s.

If our third-party software is not adequately maintained or updated, our sales could be materially adversely affected.

Our products utilize certain software of third-party software developers from whom we have either purchased a license or the underlying source code of such software or entered into a service agreement with the vendor. Although we believe that there are alternatives for these products, any significant interruption in the availability of such third-party software could have a material adverse impact on our sales unless and until we can replace the functionality provided by these products. Additionally, we are, to a certain extent, dependent upon such third parties’ abilities to enhance their current products, to develop new products on a timely and cost-effective basis and to respond to emerging industry standards and other technological changes. We may be unable to replace the functionality provided by the third-party software currently offered in conjunction with our products in the event that such software becomes obsolete or incompatible with future versions of our products or is otherwise not adequately maintained or updated.

If we are unable to release annual or periodic updates on a timely basis to reflect changes in tax laws and regulations or other regulatory provisions applicable to our products, the market acceptance of our products may be adversely affected and our revenues could decline.

Our products are affected by changes in tax laws and regulations and generally must be updated annually or periodically to maintain their accuracy and competitiveness. We cannot be certain that we will be able to release these annual or periodic updates on a timely basis in the future. Failure to do so could have a material adverse effect on market acceptance of our products. In addition, significant changes in tax laws and regulations or other regulatory provisions applicable to our products could require us to make a significant investment in product modifications, which could result in significant unexpected costs to us.

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If we are unable to protect our proprietary rights against unauthorized third-party copying or use, our revenues or our methods of doing business could be negatively impacted.

Our success is dependent, in part, on our ability to protect our proprietary rights. We rely on a combination of copyright, trademark and trade secret laws, as well as confidentiality agreements and licensing arrangements, to establish and protect our proprietary rights. We do not have any patents or patent applications pending, and existing copyright, trademark and trade secret laws afford only limited protection. As a result, we cannot be certain that we will be able to protect our proprietary rights against unauthorized third-party copying or use. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or reverse engineer aspects of our products or to obtain and use information that we regard as proprietary. In addition, others may develop products that perform comparably to our proprietary products. Policing the unauthorized use of our products is difficult.

Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trademarks, copyrights or trade secrets or to determine the validity and scope of the proprietary rights of others; such litigation may be expensive and divert the attention of management.

Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trademarks, copyrights or trade secrets or to determine the validity and scope of the proprietary rights of others. Any litigation could result in substantial costs and diversion of resources and management attention.

As is common in the software industry, from time to time we may become aware of third-party claims of infringement by our operations or products of third-party proprietary rights. While we are not currently aware of any such material claim, our software products may increasingly be subject to such claims as the number of products and competitors in our industry grows, as the functionality of products overlaps and as the issuance of software patents becomes increasingly common. Any such claims, with or without merit, can be time consuming and expensive to defend, cause product shipment delays or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us, or at all.

Defects and errors in our software could affect market acceptance of our products.

Software products such as those offered by us may contain undetected errors or failures when first introduced or as new versions are released. Testing of our products is particularly challenging because it is difficult to simulate the wide variety of computing environments in which our customers may use these products. Despite extensive testing, from time to time we have discovered defects or errors in our products. Defects and errors may:

▪ Cause delays in product introductions and shipments;

▪ Result in increased costs and diversion of development resources;

▪ Require design modifications; or

▪ Decrease market acceptance of, or customer satisfaction with, our products.

Despite testing by us and by current and potential customers, errors may be found after commencement of commercial shipments, which may result in loss of or delay in market acceptance which could have a material adverse impact upon our business, operating results and financial condition.

The sale and support of software products and the performance of related services by us entail the risk of product or service liability claims, which could significantly affect our financial results.

Customers use our products in connection with the preparation and filing of tax returns and other regulatory reports. If any of our products contain errors that produce inaccurate results upon which users rely, or cause users to misfile or fail to file required information, we could be subject to liability claims from users. Our cloud and maintenance renewal agreements with our customers typically contain provisions intended to limit our exposure to such claims, but such provisions may not be effective in limiting our exposure. Contractual limitations we use may not be enforceable and may not provide us with adequate protection against product liability claims in certain jurisdictions. A successful claim for product or service liability brought against us could result in substantial cost to us and divert management’s attention from our operations.

Anti-takeover provisions in our certificate of incorporation and by-laws and under our Amended and Restated Rights Agreement and Delaware law and our Change in Control Bonus Plans could substantially increase the cost to acquire us or

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prevent or delay a change in control and, as a result, negatively impact our stockholders and the price of our Common Stock.

We have taken a number of actions that could have the effect of discouraging a takeover attempt. For example, we have adopted an Amended and Restated Rights Agreement that would cause substantial dilution to a stockholder, and substantially increase the cost paid by a stockholder, who attempts to acquire us on terms not approved by our Board of Directors. This rights plan could prevent us from being acquired.

Our Board of Directors is divided into three classes, each of whose members serve for a staggered three-year term. This board structure may prevent stockholders from changing the composition of our Board of Directors quickly.

In addition, our certificate of incorporation grants our Board of Directors the authority to fix the rights, preferences and privileges of and issue up to 2,500,000 shares of preferred stock without stockholder approval. Although we have no present intention to issue shares of preferred stock, such an issuance could have the effect of making it more difficult and less attractive for a third-party to acquire a majority of our outstanding voting stock. Preferred stock may also have other rights, including economic rights senior to our Common Stock, which could have a material adverse effect on our stock price.

We are also subject to the anti-takeover provisions of Section 203 of Delaware General Corporation Law. This section provides that a corporation may not engage in any business combination with any interested stockholder (as defined in that section) during the three-year period following the time that a stockholder became an interested stockholder.  This provision could have the effect of delaying or preventing a change in control of our company.

We have adopted two Amended and Restated Change in Control Bonus Plans. One plan provides for the payment of cash amounts to three of our named executive officers, Scott Scherr, Marc D. Scherr and Mitchell K. Dauerman, upon a “change in control” of Ultimate. The other plan provides for the payment of cash amounts in the event of a "change in control" to our other executive officers, including our other two named executive officers, and certain of our employees, designated by the Compensation Committee of our Board of Directors. A “change in control” would occur if more than 50% of our Common Stock were acquired by a person or entity other than Ultimate or a subsidiary or employee benefit plan of ours. There are other conditions that could result in a change in control event such as a sale or transfer of all or substantially all of our assets or business. The aggregate amount of the payments that may be made to all participants under the two Amended and Restated Change in Control Bonus Plans may be as much as 6% of the gross consideration received by us or our stockholders in a change in control transaction. The Change in Control Bonus Plan could substantially increase the cost to acquire us.

The growth of the international operations of our business subjects us to additional risks associated with foreign operations.

International operations are subject to risks associated with operating outside of the United States.  During the fourth fiscal quarter of 2006, we began operating in Canada (through the formation of a wholly-owned Canadian subsidiary).  During 2014, we continued to grow our operations in Canada and expanded our development operations to the United Kingdom and Singapore.  The financial impact of our international operations to our overall business has been insignificant to date.  However, over time, our international operations may grow and increase their significance to our business.  Sales to international customers subject us to a number of risks, including foreign currency fluctuations, unexpected changes in regulatory requirements for software, international economic and political instability, compliance with multiple, conflicting, and changing governmental laws and regulations, difficulty in staffing and managing foreign operations, international tax laws, potentially weaker protection for our intellectual property than in the United States, and difficulties in enforcing such rights abroad.  If sales to any of our customers outside of the United States are delayed or canceled because of any of the above factors, our revenue may be negatively impacted.

Our international operations also increase our exposure to international laws and regulations. If we are unable to comply with foreign laws and regulations, which are often complex and subject to variation and unexpected changes, we could incur unexpected costs and potential litigation.

If our goodwill or acquired intangible assets become impaired, we may be required to record a significant charge to earnings.

Under U.S. generally accepted accounting principles, we review our acquired intangible assets for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually.  Factors that may be considered in circumstances indicating that the carrying value of our goodwill or acquired intangible assets may not be recoverable include a reduction in our market capitalization (as a result of a decline in our stock price) to a level below our consolidated stockholders’ equity as of the applicable balance sheet date,

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declining future cash flows, and slower growth rates in our industry.  We may be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill or acquired intangible assets is determined, resulting in a negative impact on our results of operations.

Changes in, or interpretations of, accounting principles could result in unfavorable accounting changes.

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles and accompanying accounting pronouncements, implementation guidelines, and interpretations.  Changes in these rules or their interpretation could significantly change our reported results and may even retroactively affect previously reported transactions.  Our accounting principles that recently have been or may be affected by changes in accounting principles include, but are not limited to:  software revenue recognition; accounting for income taxes; and accounting for business combinations and related goodwill.

Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.

Unanticipated changes in our tax rates could affect our future results of operations.  Our future effective tax rates could be unfavorably affected by changes in tax laws or the interpretation of tax laws, or by changes in the valuation of our deferred tax assets and liabilities.  In addition, we are subject to the examination of our income tax returns by the Internal Revenue Service and other domestic and foreign tax authorities.  We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.  There can be no assurance that these potential examinations will not have an adverse effect on our operating results and financial position.

Privacy concerns could result in regulatory changes that may harm our business.

Personal privacy is a significant issue in the United States and in many other countries where our customers operate.  The United States and many other countries have imposed restrictions and requirements on the use of personal information by those collecting such information.  Changes to law or regulations affecting privacy, if applicable to our business or product, could impose additional costs and potential liability on us and could limit our use and disclosure of such information.  If we were required to change our business activities or revise or eliminate services, our business could be harmed.

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None.

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Our corporate headquarters in Weston, Florida are at different locations in the city, which, in the aggregate, consist of approximately 160,000 square feet of leased space. We also have leased facilities in Atlanta, Georgia; Alpharetta, Georgia; Santa Ana, California; and Toronto, Canada.

Currently, we also lease satellite offices for certain field personnel in various locations throughout the United States and, to a much lesser extent, internationally.  We believe that our existing facilities are suitable and adequate for our current operations for the next 12 months. We further believe that suitable space will be available as needed to accommodate any expansion of our operations on commercially reasonable terms.

From time to time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. We are not currently a party to any legal proceedings the adverse outcome of which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on our operating results or financial condition.

Not applicable.

PART II

Market Information.  The following table sets forth, for the periods indicated, the high and low sales prices of Ultimate’s common stock, $0.01 par value (the "Common Stock"), as quoted on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “ULTI."

	2014		2013
	High	Low	High	Low
First Quarter	$171.96	$131.79	$105.05	$92.14
Second Quarter	139.72	109.50	118.57	91.59
Third Quarter	150.71	125.68	151.08	116.19
Fourth Quarter	156.20	125.74	162.88	137.24

As of February 19, 2015, we had approximately 83 holders of record, representing approximately 3,824 stockholder accounts.

We have never declared or paid any cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain future earnings to fund the development and growth of our business. The payment of dividends in the future, if any, will be at the discretion of our Board of Directors.

Performance Graph.  The following graph compares the cumulative total stockholder returns on Ultimate’s Common Stock for the five year period covering December 31, 2009-December 31, 2014, on an annual basis, with the cumulative total return of The NASDAQ Composite Index and the RDG Software Composite Index for the same period.

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* $100 invested on 12/31/09 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

Issuance of Equity Securities. On October 1, 2013, we entered into agreements (the "Employtouch Agreements") with the shareholders of Employtouch, Inc., a Canadian-based corporation, to acquire 100% of the issued and outstanding shares of Employtouch, Inc., in exchange for a combination of cash and restricted shares of Ultimate's Common Stock. Pursuant to the terms of the Employtouch Agreements, we paid a total of $10.4 million (USD) in cash and a total of 17,788 restricted shares of Ultimate's Common Stock valued at $2.3 million, which are issuable in three (3) equal installments on April 1, 2014, April 1, 2015 and April 1, 2016 (the "Employtouch Stock Consideration"). During 2014, the first installment of the Employtouch Stock Consideration in the amount of 5,928 shares was issued.

On November 15, 2013 (the "Accel HR Closing Date"), pursuant to an asset purchase agreement with Accel HR, LLC, a Delaware limited liability company located in Georgia, and certain members of Accel HR (the "Accel HR Agreement") we acquired certain assets and liabilities of Accel HR in exchange for a combination of cash and restricted shares of Ultimate's Common Stock. Pursuant to the terms of the Accel HR Agreement, we paid a total of $14.6 million in cash and a total of 22,017 restricted shares of Ultimate's Common Stock, valued at $3.0 million, which are issuable in three (3) equal installments on the first, second and third anniversaries of the Accel HR Closing Date (the "Accel HR Stock Consideration"). During 2014, the first installment of the Accel HR Stock Consideration in the amount of 7,339 shares was issued.

We relied on Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act") and Regulation D thereunder for the exemption from registration of the sale of such shares of Common Stock issued to the EmployTouch, Inc. shareholders and the members of Accel HR, LLC (the "Stockholders and Members"). The Stockholders and Members represented their intention to acquire the shares of the Common Stock for investment purposes only, and not with a view towards the sale or distribution thereof; their knowledge, skill and experience in business, financial and investment matters, their ability to evaluate the merits and risk and bear the economic risks of such investment in our Common Stock; that they are "accredited investors" as defined in Regulation D promulgated under the Securities Act; and that they were given the opportunity to ask questions of, and receive answers from us concerning our business.

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The restricted shares of Ultimate's Common Stock issuable pursuant to both the Employtouch Stock Consideration and the Accel HR Stock Consideration are subject only to the passage of time and, as discussed above, such shares will be unregistered when issued which places certain restrictions on when the shares can be freely traded on the open market. No other restrictions apply to the Common Stock issuable for both acquisitions. The fair value of the restricted shares of Ultimate's Common Stock issuable pursuant to the Employtouch Stock Consideration and the Accel HR Stock Consideration was recorded as of the respective acquisition dates since there are no contingencies related to the future stock issuances.

Purchases of Equity Securities by the Issuer.On October 30, 2000, Ultimate announced that our Board of Directors authorized the repurchase of up to 1,000,000 shares of our outstanding Common Stock (the “Stock Repurchase Plan”).

On February 6, 2007, Ultimate’s Board of Directors extended the Stock Repurchase Plan by authorizing the repurchase of up to 1,000,000 additional shares of our issued and outstanding Common Stock.

On February 5, 2008, Ultimate’s Board of Directors extended the Stock Repurchase Plan further by authorizing the repurchase of up to 1,000,000 additional shares of our Common Stock.

On October 26, 2009, Ultimate’s Board of Directors extended the Stock Repurchase Plan further by authorizing the repurchase of up to 1,000,000 additional shares of our Common Stock.

On October 24, 2011, Ultimate’s Board of Directors extended the Stock Repurchase Plan further by authorizing the repurchase of up to 1,000,000 additional shares of our Common Stock.

As of December 31, 2014, Ultimate had purchased 4,216,626 shares of our Common Stock under the Stock Repurchase Plan, with 783,374 shares available for repurchase in the future.  There were no repurchases of shares of our issued and outstanding Common Stock under the Stock Repurchase Plan during the three months ended December 31, 2014.

The number of shares of Common Stock repurchased by us during the three months ended December 31, 2014 is as indicated below:

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Cumulative Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
October 1 – 31, 2014	—	—		4,216,626	783,374
November 1 – 30, 2014	50,475	$	152.59	4,216,626	783,374
December 1 – 31, 2014	—	—		4,216,626	783,374
Total	50,475	$	152.59	4,216,626	783,374

(1) Represents shares of Common Stock that were acquired by us at the fair market value of the Common Stock as of the period stated, in connection with the satisfaction of our employees' tax withholding liability resulting from the vesting of restricted stock holdings.

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The following selected consolidated financial data is qualified by reference to and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Ultimate’s Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K. The statements of operations data presented below for each of the years in the three-year period ended December 31, 2014 and the balance sheet data as of December 31, 2014 and 2013 have been derived from our Consolidated Financial Statements included elsewhere in this Form 10-K.

	Years Ended December 31,
	2014			2013			2012			2011			2010
Statement of Operations Data: (in thousands, except per share data)
Revenues:
Recurring	$	419,238		$	334,434		$	266,430		$	213,785		$	170,905
Services	86,165			75,110			64,563			53,195			55,368
License	533			853			1,275			2,218			1,538
Total revenues	505,936			410,397			332,268			269,198			227,811
Cost of revenues:
Recurring	117,609			91,903			78,121			63,505			49,144
Services	85,939			76,577			66,063			52,341			49,843
License	91			198			280			488			255
Total cost of revenues	203,639			168,678			144,464			116,334			99,242
Gross profit	302,297			241,719			187,804			152,864			128,569
Operating expenses:
Sales and marketing	117,033			93,879			72,565			63,145			58,374
Research and development	83,542			67,757			60,693			51,356			42,222
General and administrative	47,379			36,869			25,433			21,931			19,727
Total operating expenses	247,954			198,505			158,691			136,432			120,323
Operating income	54,343			43,214			29,113			16,432			8,246
Other (expense) income:
Interest and other expense	(353		)	(229		)	(476		)	(401		)	(263		)
Other income, net	339			104			102			91			188
Total other expense, net	(14		)	(125		)	(374		)	(310		)	(75		)
Income from continuing operations before income taxes	54,329			43,089			28,739			16,122			8,171
Provision for income taxes	(9,592		)	(17,559		)	(14,107		)	(11,840		)	(5,161		)
Income from continuing operations	44,737			25,530			14,632			4,282			3,010
Loss from discontinued operations, net of income taxes	—			—			—			—			(853		)
Net income	$	44,737		$	25,530		$	14,632		$	4,282		$	2,157
Basic earnings per share: (1)
Earnings from continuing operations	$	1.58		$	0.92		$	0.55		$	0.17		$	0.12
Loss from discontinued operations	—			—			—			—			(0.03		)
Total	$	1.58		$	0.92		$	0.55		$	0.17		$	0.09
Diluted earnings per share: (1)
Earnings from continuing operations	$	1.52		$	0.88		$	0.52		$	0.15		$	0.11
Loss from discontinued operations	—			—			—			—			(0.03		)
Total	$	1.52		$	0.88		$	0.52		$	0.15		$	0.08

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	Years Ended December 31,
	2014		2013		2012		2011		2010
Weighted average shares outstanding: (1)
Basic	28,293		27,773		26,778		25,814		24,960
Diluted	29,343		29,013		28,375		27,806		27,101
Balance Sheet Data:	As of December 31,
	2014		2013		2012		2011		2010
Cash and cash equivalents	$	108,298	$	79,794	$	58,817	$	46,149	$	40,889
Investments in marketable securities	10,156		10,453		10,534		9,130		9,317
Total assets	1,190,298		598,194		525,284		318,820		249,557
Deferred revenue	109,705		103,184		91,976		86,563		78,095
Long-term borrowings, including capital lease obligations	3,759		2,833		5,070		2,175		2,406
Stockholders’ equity	$	271,749	$	188,217	$	114,670	$	85,624	$	72,985

(1) See Note 11 of the Notes to the Consolidated Financial Statements for information regarding the computation of net earnings (loss) per share.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations provides information we believe is relevant to an assessment and understanding of our results of operations and financial condition.  This discussion should be read in conjunction with our Consolidated Financial Statements and Notes that are included in this Form 10-K.  Also, the discussion of Critical Accounting Estimates in this section is an integral part of the analysis of our results of operations and financial condition.

Overview

Ultimate Software is a leading cloud provider of people management solutions, often referred to as human capital management (“HCM”). Ultimate's UltiPro product suite (“UltiPro”) is a comprehensive, engaging solution that has human resources ("HR"), payroll, and benefits management at its core and includes global people management, available in ten languages with more than 35 country-specific localizations. The solution is delivered primarily via the Web to organizations based in the United States and Canada with global workforces. We attained our leadership position, we believe, through our focus on unified HCM, people-centric product design, cloud technology, and strong customer relationships. At the close of 2014, we had more than 19 million people records in our HCM cloud.

UltiPro is designed to deliver the functionality businesses need to manage the complete employee life cycle from recruitment to retirement and to facilitate employee engagement with their employers and each other. The solution includes unified feature sets for talent acquisition and onboarding, HR management and compliance, benefits management and online enrollment, payroll, performance management, compensation management with salary planning, budgeting, and development of incentive plans, succession management, reporting and analytical decision-making and predictive tools, and time and attendance. UltiPro has role-based features for HR professionals, executives, managers, administrators, and employees whether they are in or out of the office, including access to business-critical information on mobile devices such as the iPhone, iPad, and other smartphones and tablets.

Our cloud offering of UltiPro (the "Cloud Offering") provides Web-based access to comprehensive HCM functionality for organizations that want to simplify delivery and support of their business applications. We have found that our Cloud Offering is attractive to companies that want to focus on their core competencies to increase sales and profits. Through the Cloud Offering, we supply and manage the hardware, infrastructure, ongoing maintenance and backup services for our customers.  Customer systems are currently managed at three data centers--one located in the Atlanta, Georgia area, one in the Phoenix, Arizona area and another one in the Toronto, Canada area. All data centers are owned and operated by independent third parties.

We market our UltiPro solutions primarily to enterprise companies, which we define as companies with more than 1,500 employees, including those with 10,000 or more employees; mid-market companies, which we define as those having approximately 500-1,500 employees; and strategic companies, which we define as having approximately 100-499 employees.

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Our mid-market and strategic customers have access to nearly all the features that our larger enterprise companies have through UltiPro, plus a bundled services package. Since many companies in the mid- and strategic markets do not have information technology (“IT”) staff on their premises to help with system deployment or ongoing management issues, we have created a bundled services package to give these customers a high degree of convenience by handling system configuration, business rules, and other situations for them “behind the scenes.” UltiPro is marketed primarily through our enterprise, mid-market and strategic direct sales teams.

In addition to UltiPro's HCM functionality, our customers have the option to purchase a number of additional capabilities on a per-employee-per-month (“PEPM”) basis, which are available to enhance and complement the functionality of UltiPro and which are based on the particular business needs of our customers. These optional UltiPro capabilities currently include (i) the talent acquisition suite (recruitment and onboarding); (ii) the talent management suite (performance management, talent predictors, and succession management); (iii) compensation management; (iv) benefits enrollment; (v) time management; (vi) payment services (formerly referred to as “tax filing”); (vii) wage attachments; and (viii) other optional features (collectively, “Optional Capabilities”), which are described below.

All Optional Capabilities are priced solely on a subscription basis.  Some of the Optional Capabilities are available to enterprise, mid-market and strategic customers while others are available exclusively to either enterprise, mid-market or strategic customers, and availability is based on the needs of the respective customers, the number of their employees and the complexity of their HCM environment.

To further simplify the work lives of our customers’ human resources and payroll people, we introduced UltiPro Managed Services in November 2013 as a result of the acquisition of Accel HR, a Georgia-based company. UltiPro Managed Services is designed for those customers who want to outsource some components of their HR, payroll, benefits, and HCM technology management functions without sacrificing the control of, or access to, their employee data that they enjoy with our cloud solution. Unlike other outsourced payroll or Human Resources Information System ("HRIS") services that typically take a one-size-fits-all approach, UltiPro Managed Services allows customers to select from a number of payroll management, HRIS, and/or benefits management services and combine them into a tailored solution that best suits their unique needs. Accel HR had provided these types of services to large and mid-market corporate customers in North America since 2004 and, since 2007 Accel HR had partnered exclusively with Ultimate to provide these services to their UltiPro customers.

In October 2013, we introduced UltiPro TouchBase in connection with the acquisition of Employtouch, a Canadian-based company, which provides our customers an interactive mobile time clock device that collects time punches, as well as highlights the information most critical to employees and managers via an engaging activity stream. With UltiPro TouchBase, our customers can capture employee time on a touchscreen tablet device, collecting employee-validated data for cost accounting and payroll; can leverage photos for accurate capture of employee time-entry, avoiding 'buddy punches'; and can validate transactions using PIN (Personal Identification Number) entry, HID (Human Interface Device), RFID (Radio Frequency Identification), magnetic swipe or barcode.

The key drivers of our business are (i) growth in recurring revenues; (ii) operating income, excluding primarily non-cash stock-based compensation and amortization of acquired intangibles ("Non-GAAP Operating Income"); and (iii) retention of our customers once our solutions are sold (“Customer Retention”).  For the year ended December 31, 2014, our (i) recurring revenues grew by 25.4%, compared with the same period in 2013 and (ii) Non-GAAP Operating Income was $101.7 million, or 20.1% of total revenues, as compared with $76.3 million, or 18.6% of total revenues, for the same period in 2013. For the year ended December 31, 2013, our (i) recurring revenues grew by 25.5%, compared with the same period in 2012, and (ii) Non-GAAP Operating Income was $76.3 million, or 18.6% of total revenues, as compared with $49.5 million, or 14.9% of total revenues, for the same period in 2012. As of December 31, 2014 and 2013, our Customer Retention exceeded 96%, on a trailing twelve-month basis. See “Non-GAAP Financial Measures” below.

The HCM market is intensely competitive.  We address competitive pressures through improvements and enhancements to our products and services, the development of additional features of UltiPro and a comprehensive marketing team and process that distinguishes Ultimate and its products from the competition.  Our focus on customer service, which enables us to maintain a high Customer Retention rate, also helps us address competitive pressures.

As our business has grown, we have become increasingly subject to the risks arising from adverse changes in domestic and global economic conditions.  If general economic conditions were to deteriorate, we may experience delays in our sales cycles, increased pressure from prospective customers to offer discounts and increased pressure from existing customers to renew expiring recurring revenue agreements for lower amounts.  We address continuing economic pressures by, among other things, efforts to control growth of our operating expenses through the monitoring of controllable costs and vendor negotiations.

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Ultimate has two primary revenue sources:  recurring revenues and services revenues.  Subscription revenues from our Cloud Offering and customer support and maintenance revenues are the primary components of recurring revenues.  The majority of services revenues are derived from implementation consulting services. Subsequent to the discontinuation of selling perpetual licenses of UltiPro to new customers, which occurred in 2009, we sell licenses to existing license customers but only in relation to the customer's employee growth or for Optional Capabilities if the customer already has a perpetual license for the on-site UltiPro solutions.  As perpetual license agreements were sold in the past, annual maintenance contracts (priced as a percentage of the related license fee) accompanied those agreements.  Maintenance contracts typically have a one-year term with annual renewal periods thereafter. Since 2009, our maintenance revenues are related to renewal maintenance only. In 2012, we announced that we would no longer support the licensed UltiPro ("Legacy") products after December 31, 2014. In the approximate two-year period after the announcement, Ultimate strengthened its campaign to convert Legacy customers to cloud customers. Ultimate believes this campaign program for Legacy to cloud conversions was successful. Since 2009, with the sunsetting of the Legacy product, effective December 31, 2014, a majority of our Legacy customers made the transition to the cloud.

As cloud units are sold, the recurring revenue backlog associated with the Cloud Offering grows, enhancing the predictability of future revenue streams.  Cloud revenues include ongoing monthly subscription fees, priced on a PEPM basis.  Revenue recognition for the Cloud Offering is triggered when the customer processes its first payroll using UltiPro (or goes “Live”).

Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

We recognize revenues in accordance with Accounting Standards Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”). We use the relative selling price method to allocate the total consideration to units of accounting in a multiple element arrangement. We allocate revenue in an arrangement using the estimated selling price (“ESP”) of deliverables if it does not have vendor-specific objective evidence (“VSOE”) or third-party evidence (“TPE”) of selling price. 

VSOE is the price charged when the same or similar product or service is sold separately.  We define VSOE as a median price of recent stand-alone transactions that are priced within a narrow range.

TPE is determined based on the prices charged by our competitors for a similar deliverable when sold separately.  However, due to the difficulty in obtaining sufficient information on competitor pricing and differences in our product offerings when compared with those of our peers, we generally are unable to reliably determine TPE.

ESP is our best estimate of the selling price of an element in a transaction. If we are unable to establish selling price using either VSOE or TPE, we will use ESP in our allocation of arrangement consideration.  The objective of ESP is to determine the price at which we would transact business if the product or service were sold by us on a stand-alone basis.  Our determination of ESP involves the use of a customary discount from the list (or book) price for each element, with the discounted price applied within a narrow range.  The customary discount is derived from historical data that has been analyzed to determine trends and patterns. We analyze the customary discount used for determining ESP on no less than an annual basis.

We evaluate each deliverable in our arrangements to determine whether it represents a separate unit of accounting.  A deliverable constitutes a separate unit of accounting when it has stand-alone value to our customers.  Our products and services continue to qualify as separate units of accounting under ASU 2009-13.

There are two major elements in our multiple element arrangements for the delivery of our Cloud Offering, which are recurring revenues (i.e., cloud subscription revenues) and services revenues (mostly implementation consulting services).   

For multiple element arrangements, the consideration allocated to cloud subscription revenues is recognized as recurring revenues over the initial contract period, as those services are delivered, commencing with the Live date of the related product. The consideration allocated to fixed fee implementation consulting services in multiple element arrangements is

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recognized as services revenues on a percentage of completion basis, using reasonably dependable estimates with respect to milestones achieved (in relation to progression through implementation phases), by product.

Single element arrangements typically consist of renewals for cloud subscriptions and renewal maintenance agreements. In addition, implementation consulting services sold on a time and materials basis typically represent single element arrangements. Under these single element arrangements, cloud subscription and maintenance revenues are recognized over the related renewal period, as the services are delivered, and implementation consulting services are recognized as the services are performed.

We recognize revenues when all of the following criteria are met:

• persuasive evidence of an arrangement exists;

• delivery has occurred;

• the fees are fixed and determinable; and

• collection is considered probable.

If collection is not considered probable, we recognize revenues when the fees are collected. If the fees are not fixed and determinable, we recognize revenues when the fees become due from the customer. If non-standard acceptance periods or non-standard performance criteria are required, we recognize revenue when the acceptance period expires or upon the satisfaction of the acceptance/performance criteria, as applicable.

The majority of services revenues are recognized over the implementation period, which is from the contract execution date until the Live date. Cloud revenues are recognized over the initial contract term, beginning in the month the customer goes Live.

Recurring Revenues

Recurring revenues primarily consist of subscription revenues recognized from our Cloud Offering, as well as customer support and maintenance revenues.

i)  Cloud subscription revenues are principally derived from PEPM fees earned from the Cloud Offering and from sales of hosting services on a stand-alone basis to customers who already own a perpetual license ("Base Hosting").  Ongoing PEPM fees from the Cloud Offering and, to a lesser extent, Base Hosting are recognized as subscription revenues as the services are delivered, commencing when the customer goes Live.

ii)  Customer support and maintenance revenues are derived from maintaining, supporting, and providing periodic updates of our software for our hosting services.  Since we stopped selling perpetual licenses to our new customers effective April 1, 2009, customer support and maintenance revenues stem from annual renewals.

Under our Cloud Offering, our customers do not have the right to take possession of our software and these arrangements are considered service contracts. The selling price of multiple deliverables in cloud arrangements is derived for each element based on the guidance provided by ASU 2009-13.  The multiple elements that typically exist in cloud arrangements include (1) recurring revenues from the combination of hosting services, the right to use UltiPro, and maintenance of UltiPro (i.e., product enhancements, updates and customer support) and (2) professional services (i.e., primarily implementation consulting services).

The pricing for the three elements that pertain to recurring revenues (i.e., hosting services, the right to use UltiPro and maintenance of UltiPro) is bundled.  Since these three bundled elements are components of recurring revenues in the consolidated statements of income, allocation of selling price to each of the three elements is not necessary and they are not reported separately.  Selling price, which is established through VSOE, for the bundled elements, as a whole, is determined on the basis of renewal pricing, without taking into consideration potential price increases or potential changes in the number of employees of the customer in the future due to the uncertainties surrounding these potential occurrences.  These bundled elements are provided on an ongoing basis, represent undelivered elements and are recognized on a monthly basis as the related services are performed, commencing once the customer goes Live.

Services Revenues

Services revenues primarily include revenues from fees charged for implementation consulting services in connection with the implementation of our product solutions and, to a much lesser extent, training of customers in the use of our products

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and fees for other services, including the provision of payroll-related forms, sales of time clocks and the printing of W-2 forms for certain customers, as well as certain client reimbursable out-of-pocket expenses.

Our multiple element contracts contain recurring cloud revenues and implementation consulting services priced on a fixed fee basis. Time and materials implementation consulting services are sold as stand-alone sales not directly related to the basic implementation of the cloud product. The total arrangement consideration is allocated to services elements in the arrangement based on relative selling prices, using the prices established when the services are sold on a stand-alone basis.  Selling price is established through ESP for fixed fee implementation consulting services that are included in our multiple element contracts.

Revenues from implementation consulting services sold on a fixed-fee basis are recognized using the percentage of completion accounting method, which involves the use of estimates.  Percentage of completion is measured at each reporting date based on progress made to date, using reasonably dependable estimates with respect to milestones achieved or billable hours, as applicable.

Revenues from implementation consulting services, billed on a time and materials basis (at an hourly rate), are recognized as these services are performed.  Other services are recognized as the product is shipped or as the services are rendered, depending on the specific terms of the related arrangement.

Income Taxes

We make certain estimates and judgments in determining income tax expense for financial statement purposes.  These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

Ultimate assesses the likelihood that it will be able to recover its deferred tax assets.  Management considers all available evidence, both positive and negative, including historical levels of pre-tax book income, expiration of net operating loss carryforwards, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies as well as current tax laws and interpretation of current tax laws in assessing the need for a valuation allowance.  If recovery is not likely, we record a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable.  The available positive evidence at December 31, 2014 included, among other factors, three years of cumulative historical pre-tax book income and a projection of future pre-tax book income and taxable income.  As a result of our analysis of all available evidence, both positive and negative, we believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize all of the deferred tax assets as of December 31, 2014. As such, there was no valuation allowance for the years ended December 31, 2014, 2013, and 2012.

Business Combinations

We are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed at the acquisition date based upon their estimated fair values. Goodwill as of the acquisition date represents the excess of the purchase consideration of an acquired business over the fair value of the underlying net tangible and intangible assets acquired and liabilities assumed. The purchase price allocation and valuation of the acquisition require management to make significant estimates and assumptions, especially with respect to long-lived and intangible assets.

The estimates used in valuing certain of the intangible assets include, but are not limited to: future expected cash flows of the assets, discount rates to determine the present value of the future cash flows, financial projections of the acquired business, attrition rates of customers and expected technology life cycles. We also estimate the useful lives of the intangible assets based on the expected period over which we anticipate generating economic benefit from the asset.

Our estimates of fair value are based on assumptions believed to be reasonable at that time. If management made different estimates or judgments, material differences in the fair values of the net assets acquired may result.

The fair value of assets acquired and liabilities assumed was based upon a preliminary purchase price allocation and our estimates and assumptions are subject to change within the measurement period.

Goodwill and Intangible Assets

The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. The determination of the value of the intangible

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assets acquired involves certain judgments and estimates. These judgments and estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital.

At December 31, 2014, our goodwill totaled $25.7 million and our identifiable net intangible assets totaled $6.8 million. We assess the impairment of goodwill of our reporting units annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable.  Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.  If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value to the extent necessary.  We consider both market and discounted cash flow approaches in determining the fair value of the reporting unit.  Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value.  The discounted cash flow approach uses expected future operating results.  Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.  We conducted our annual impairment tests of goodwill as of December 31, 2014, 2013 and 2012.  As a result of this test, we determined that the fair value was in excess of the carrying value. 

We evaluate our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows attributable to that asset or group of assets. The amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. We also evaluate the estimated remaining useful lives of intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. Assumptions and estimates about future values and remaining useful lives of our intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends and internal factors such as changes in our business strategy and our internal forecasts.

Allowance for Doubtful Accounts

We perform credit evaluations of our customers to assess their ability to make payments to us for our products and services. We maintain an allowance for doubtful accounts at an amount estimated to be sufficient to provide adequate protection against losses resulting from collecting less than full payment on accounts receivable. A considerable amount of judgment is required in determining the amount of our allowance for doubtful accounts, including assessing the probability of collection and current credit-worthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in further impairment of their ability to make payments, an additional provision for doubtful accounts may be required.

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Results of Operations

The following table sets forth the consolidated statements of operations data of Ultimate, as a percentage of total revenues, for the periods indicated.

	For the Years Ended December 31,
	2014		2013		2012
Revenues:
Recurring	82.9	%	81.5	%	80.2	%
Services	17.0		18.3		19.4
License	0.1		0.2		0.4
Total revenues	100.0		100.0		100.0
Cost of revenues:
Recurring	23.2		22.4		23.5
Services	17.0		18.7		19.9
License	—		—		0.1
Total cost of revenues	40.2		41.1		43.5
Gross profit	59.8		58.9		56.5
Operating expenses:
Sales and marketing	23.1		22.9		21.8
Research and development	16.5		16.5		18.3
General and administrative	9.4		9.0		7.6
Total operating expenses	49.0		48.4		47.7
Operating income	10.8		10.5		8.8
Other income (expense):
Interest expense and other	(0.1	)	—		(0.1	)
Other income, net	—		—		—
Total other income (expense), net	(0.1	)	—		(0.1	)
Income from continuing operations before income taxes	10.7		10.5		8.7
Provision for income taxes	(1.9	)	(4.3	)	(4.3	)
Income from continuing operations	8.8		6.2		4.4
Loss from discontinued operations, net of taxes	—		—		—
Net income	8.8	%	6.2	%	4.4	%

Comparison of Fiscal Years Ended December 31, 2014 and 2013

Revenues

Our revenues are derived from recurring revenues, services revenues and, to a much lesser extent, license revenues.  See “Revenue Recognition” above for further discussion of Ultimate’s revenue sources and its method of accounting for each of them.

Total revenues, primarily consisting of recurring and services revenues, increased 23.3% to $505.9 million for 2014 from $410.4 million for 2013.

Recurring revenues increased 25.4% to $419.2 million for 2014 from $334.4 million for 2013.  The increase in recurring revenues for 2014 was primarily due to an increase in cloud revenues, partially offset by a decrease in maintenance revenues. After we discontinued selling perpetual licenses in 2009, we began the process of converting our on-premise customers to the cloud. In 2012, we formally announced to our on-premise (or "Legacy") customers that we would cease supporting our Legacy product after December 31, 2014. Therefore, beginning in 2012, we strengthened our conversion program for our Legacy customers. Since 2009, we believe our conversion program was successful in transitioning the majority

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of our Legacy customers to the cloud. During 2014, our cloud revenues increased primarily as a result of new customers who went Live on UltiPro and the related Optional Capabilities of UltiPro during the year and, to a lesser extent, the conversion of Legacy customers to the cloud. As a result of the conversion program, maintenance revenues from Legacy customers continued to decrease over the course of 2014 and will no longer exist after December 31, 2014. Our annual revenue customer retention rate for total recurring revenue cloud customer base exceeded 96% in 2014. The impact on recurring revenues of units sold under the Cloud Offering has been a gradual increase from one reporting period to the next, based on the incremental effect of revenue recognition of the subscription fees over the terms of the related contracts as sales in backlog go Live.

Services revenues increased 14.7% to $86.2 million for 2014 from $75.1 million for 2013 primarily as a result of an increase in implementation revenues. The increase in implementation revenues was primarily attributable to a combination of more billable consultants, and the increased utilization of seasoned consultants and, to a lesser extent, the increased use of third-party implementation partners. The increased implementation revenues occurred as a result of increased fixed fee implementations as well as increased time and materials implementation services.

Cost of Revenues

Cost of revenues primarily consists of the costs of recurring and services revenues. Cost of recurring revenues primarily consists of costs to provide maintenance and technical support to Ultimate's customers, the cost of providing periodic updates and the cost of recurring subscription revenues, including hosting data center costs and, to a lesser extent, amortization of capitalized software. Cost of services revenues primarily consists of costs to provide implementation consulting services and training to Ultimate's customers and, to a lesser extent, costs related to sales of payroll-related forms, time clocks and Form W-2 services, as well as costs associated with certain client reimbursable out-of-pocket expenses.

Cost of recurring revenues increased 28.0% to $117.6 million for 2014 from $91.9 million for 2013.  The $25.7 million increase in the cost of recurring revenues for the year was primarily due to increases in both cloud costs and customer support and product update costs. The increase in cloud costs was principally as a result of the growth in cloud operations and increased sales, including increased labor costs (which includes increased non-cash stock-based compensation expense). Non labor-related hosting data center costs increased slightly when compared to the same period in the prior year. The increase in customer support and maintenance costs was primarily due to higher labor costs commensurate with the growth in the number of customers serviced.

Cost of services revenues increased 12.2% to $85.9 million for 2014 from $76.6 million for 2013.  The $9.4 million increase in cost of services revenues was primarily due to an increase in the cost of implementation, which was primarily due to higher labor and related costs (including non-cash stock-based compensation), particularly in association with an increased number of implementation consultants and, to a lesser extent, the increased use of third-party implementation partners.

Sales and Marketing

Sales and marketing expenses consist primarily of salaries and benefits, sales commissions, travel and promotional expenses, and facility and communication costs for direct sales offices, as well as advertising and marketing costs. Sales and marketing expenses increased 24.7% to $117.0 million for 2014 from $93.9 million for 2013.  The $23.2 million increase in sales and marketing during 2014 was primarily due to increased labor and related costs (including additional personnel costs, increased non-cash stock-based compensation expense and, to a lesser extent, higher sales commissions related to increased cloud sales), as well as increased advertising and marketing costs.  Commissions on cloud sales are amortized over the initial contract term (typically 24 to 36 months) commencing on the Live date, which corresponds with the related cloud revenue recognition.

Research and Development

Research and development expenses consist primarily of software development personnel costs. Research and development expenses increased 23.3% to $83.5 million in 2014 from $67.8 million in 2013.  The $15.8 million increase in research and development expenses during 2014 was principally due to higher labor and related costs (which include increased non-cash stock-based compensation expense) attributable to the ongoing development of UltiPro and complementary products, including the impact of increased personnel costs (predominantly from additional headcount), partially offset by capitalized labor costs and capitalized third-party consulting costs. For the years ended December 31, 2014 and 2013, we capitalized $25.2 million and $19.0 million, respectively, of computer software development costs related to an internal-use development project to be sold in the future as a cloud product only. The increase in capitalized research and development costs in 2014 was attributable to the increase in both the internal labor being capitalized and the increased use of third-party consultants working on the development project.

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General and Administrative

General and administrative expenses consist primarily of salaries and benefits of executive, administrative and financial personnel, as well as external professional fees and the provision for doubtful accounts. General and administrative expenses increased by 28.5% to $47.4 million for 2014 from $36.9 million for 2013.  The increase in general and administrative expenses for 2014 was primarily due to increased labor and related costs (which includes the impact of additional personnel costs as well as increased non-cash stock-based compensation expense), partially offset by a decrease in the provision for doubtful accounts and a decrease in professional fees.

Provision for Income Taxes

In 2014, based on pre-tax income, we had income tax expense of $9.6 million as compared to $17.6 million in 2013.  The decrease in income tax expense of $8.0 million was primarily due to a benefit recorded for research and development activities of $14.4 million related to the tax years 1998-2014. This benefit was partially offset by an increase in pre-tax book income and an increase in non-deductible expenses. Ultimate recorded $13.2 million and $2.3 million of research and development tax credit carryforwards during the quarters ended September 30, 2014 and December 31, 2014, respectively.

Comparison of Fiscal Years Ended December 31, 2013 and 2012

Revenues

Total revenues, primarily consisting of recurring and services revenues, increased 23.5% to $410.4 million for 2013 from $332.3 million for 2012.

Recurring revenues increased 25.5% to $334.4 million for 2013 from $266.4 million for 2012.  The increase in recurring revenues for 2013 was primarily due to an increase in cloud revenues, partially offset by a decrease in maintenance revenues. Cloud revenues increased 30.2% for 2013, primarily due to the continued growth of the Cloud Offering, which comprised the majority of unit sales. The increase in cloud revenues is based on the revenue impact of incremental units that have gone Live since December 31, 2012, including the UltiPro standard/HR payroll product and, to a lesser extent, Optional Capabilities of UltiPro.  Recognition of recurring revenues for cloud sales commences upon the respective Live date. Maintenance revenues from previously sold licenses decreased 11.2%. The decrease resulted from the transition of certain customers who were formerly using UltiPro in connection with the purchase of a perpetual license to using UltiPro under our Cloud Offering, combined with the impact of attrition in the ordinary course of business, partially offset by price increases.  Maintenance revenues are recognized on a monthly recurring basis as the maintenance contracts renew annually. Our annual revenue customer retention rate for total recurring revenues exceeded 96% in 2013. The impact on recurring revenues of units sold under the Cloud Offering has been a gradual increase from one reporting period to the next, based on the incremental effect of revenue recognition of the subscription fees over the terms of the related contracts as sales in backlog go Live.

Services revenues increased 16.3% to $75.1 million for 2013 from $64.6 million for 2012 primarily as a result of an increase in implementation revenues. The increase in implementation revenues was primarily attributable to a combination of more billable consultants, and the increased utilization of seasoned consultants.

Cost of Revenues

Cost of revenues primarily consists of the costs of recurring and services revenues. Cost of recurring revenues primarily consists of costs to provide maintenance and technical support to Ultimate's customers, the cost of providing periodic updates and the cost of recurring subscription revenues, including hosting data center costs and, to a lesser extent, amortization of capitalized software. Cost of services revenues primarily consists of costs to provide implementation consulting services and training to Ultimate's customers and, to a lesser extent, costs related to sales of payroll-related forms, time clocks and Form W-2 services, as well as costs associated with certain client reimbursable out-of-pocket expenses.

Cost of recurring revenues increased 17.6% to $91.9 million for 2013 from $78.1 million for 2012.  The $13.8 million increase in the cost of recurring revenues for the year was primarily due to increases in both cloud costs and customer support and maintenance costs, as described below:

i) The increase in cloud costs was principally as a result of the growth in cloud operations and increased sales, including increased labor costs (which includes increased non-cash stock-based compensation expense). Non labor-related hosting data center costs increased slightly when compared to the same period in the prior year.

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ii) The increase in customer support and maintenance costs was primarily due to higher labor costs commensurate with the growth in the number of customers serviced.

Cost of services revenues increased 15.9% to $76.6 million for 2013 from $66.1 million for 2012.  The $10.5 million increase in cost of services revenues was primarily due to an increase in the cost of implementation, which was primarily due to higher labor and related costs, particularly in association with an increased number of implementation consultants and increased non-cash stock-based compensation expense. Costs of third-party implementation consulting partners also increased from more usage.

Sales and Marketing

Sales and marketing expenses consist primarily of salaries and benefits, sales commissions, travel and promotional expenses, and facility and communication costs for direct sales offices, as well as advertising and marketing costs. Sales and marketing expenses increased 29.4% to $93.9 million for 2013 from $72.6 million for 2012.  The $21.3 million increase in sales and marketing during 2013 was primarily due to increased labor and related costs (including additional personnel costs, increased non-cash stock-based compensation expense and, to a lesser extent, higher sales commissions related to increased cloud sales) as well as increased advertising and marketing costs.  Commissions on cloud sales are amortized over the initial contract term (typically 24 months) commencing on the Live date, which corresponds with the related cloud revenue recognition.

Research and Development

Research and development expenses consist primarily of software development personnel costs. Research and development expenses increased 11.6% to $67.8 million in 2013 from $60.7 million in 2012.  The $7.1 million increase in research and development expenses during 2013 was principally due to higher labor and related costs (which include increased non-cash stock-based compensation expense) attributable to the ongoing development of UltiPro and complementary products, including the impact of increased personnel costs (predominantly from additional headcount), partially offset by capitalized labor costs. For the years ended December 31, 2013 and 2012, we capitalized $19.0 million and $5.2 million, respectively, of computer software development costs related to an internal-use development project to be sold in the future as a cloud product only. There were no such costs capitalized in the year ended December 31, 2011. The increase in capitalized research and development costs was attributable to the capitalization of the project for a partial year in 2012 compared with a full year in 2013, combined with the additional use of third-party consultants in the capitalized project during 2013.

General and Administrative

General and administrative expenses consist primarily of salaries and benefits of executive, administrative and financial personnel, as well as external professional fees and the provision for doubtful accounts. General and administrative expenses increased by 45.0% to $36.9 million for 2013 from $25.4 million for 2012.  The increase in general and administrative expenses for 2013 was primarily due to increased labor and related costs (which includes the impact of additional personnel costs as well as increased non-cash stock-based compensation expense) and, to a lesser extent, an increase in the provision for doubtful accounts and an increase in professional fees associated with the 2013 acquisitions.

Interest Expense and Other

Interest expense and other decreased $247 thousand, or 51.9%, to $229 thousand for 2013 from $476 thousand for 2012. The decrease was primarily related to an increase in realized foreign currency exchange losses.

Other Income, net

Other income, net, increased by 2.0% to $104 thousand for 2013 from $102 thousand for 2012. The increase was not significant.

Provision for Income Taxes

In 2013, based on pre-tax income from continuing operations, we had income tax expense of $17.6 million as compared to $14.1 million in 2012.  The increase in income tax expense of $3.5 million was primarily due to an increase in pre-tax book income, partially offset by the recognition of a loss previously reserved upon conclusion of our 2010 IRS examination, and a decrease in non-deductible expenses.  Net operating loss carryforwards available at December 31, 2013,

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which are available to offset future U.S. taxable income, approximated $154.9 million. The carryforwards expire from 2018 through 2033 and from 2014 through 2033, for Federal and state income tax reporting purposes, respectively. As of December 31, 2013, we had approximately $0.2 million of net operating loss carryforwards for foreign income tax reporting purposes available to offset future taxable income. The timing and levels of future profitability may result in the expiration of net operating loss carryforwards before utilization. Additionally, utilization of such net operating losses may be limited as a result of cumulative ownership changes in our equity instruments.

We recognized $18.6 million of deferred tax assets, net of deferred tax liabilities, as of December 31, 2013.  If estimates of taxable income are decreased, a valuation allowance may need to be provided for some or all deferred tax assets, which will cause an increase in income tax expense.

Quarterly Results of Operations

The following table sets forth certain unaudited quarterly results of operations for each of the quarters in the years ended December 31, 2014 and 2013. In management’s opinion, this unaudited information has been prepared on the same basis as the audited consolidated financial statements and includes all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the information for the quarters presented. This information should be read in conjunction with Ultimate’s Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K.

Our quarterly revenues and operating results have varied significantly in the past and are likely to vary substantially from quarter to quarter in the future. Our operating results may fluctuate as a result of a number of factors, including, but not limited to, increased expenses (especially as they relate to product development, sales and marketing and the use of third-party consultants), timing of product releases, increased competition, variations in the mix of revenues, announcements of new products by us or our competitors and capital spending patterns of our customers. We establish our expenditure levels based upon our expectations as to future revenues, and, if revenue levels are below expectations, expenses can be disproportionately high. A drop in near term demand for our products could significantly affect both revenues and profits in any quarter. Operating results achieved in previous fiscal quarters are not necessarily indicative of operating results for the full fiscal years or for any future periods. As a result of these factors, there can be no assurance that we will be able to achieve or maintain profitability on a quarterly basis. We believe that, due to the underlying factors for quarterly fluctuations, quarter-to-quarter comparisons of Ultimate’s operations are not necessarily meaningful and that such comparisons should not be relied upon as indications of future performance.

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Quarters Ended	Dec 31, 2014			Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013
(In thousands, except per share data)
	(Unaudited)
Revenues:
Recurring	$	112,350		$	107,362		$	102,108		$	97,418		$	90,354		$	85,244		$	80,754		$	78,082
Services	23,069			20,047			19,841			23,208			21,570			17,703			16,392			19,445
License	11			22			48			452			(21		)	161			323			390
Total revenues	135,430			127,431			121,997			121,078			111,903			103,108			97,469			97,917
Cost of revenues:
Recurring	31,635			30,598			28,422			26,954			24,148			23,384			22,543			21,828
Services	21,300			21,528			21,037			22,074			19,884			18,935			18,030			19,728
License	3			5			11			72			—			35			73			90
Total cost of revenues	52,938			52,131			49,470			49,100			44,032			42,354			40,646			41,646
Gross profit	82,492			75,300			72,527			71,978			67,871			60,754			56,823			56,271
Operating expenses:
Sales and marketing	30,638			28,104			29,462			28,829			25,816			22,481			22,672			22,910
Research and development	21,970			21,419			20,433			19,720			17,668			17,095			16,864			16,130
General and administrative	12,904			12,172			11,244			11,059			10,590			9,067			8,285			8,927
Total operating expenses	65,512			61,695			61,139			59,608			54,074			48,643			47,821			47,967
Operating income	16,980			13,605			11,388			12,370			13,797			12,111			9,002			8,304
Other (expense) income:
Interest and other expense	(77		)	(104		)	(106		)	(66		)	(26		)	(67		)	(56		)	(80		)
Other income, net	86			82			96			75			25			32			6			41
Total other (expense) income, net	9			(22		)	(10		)	9			(1		)	(35		)	(50		)	(39		)
Income before income taxes	16,989			13,583			11,378			12,379			13,796			12,076			8,952			8,265
Provision for income tax	(5,154		)	6,073			(5,015		)	(5,496		)	(3,988		)	(5,776		)	(4,050		)	(3,745		)
Net income	$	11,835		$	19,656		$	6,363		$	6,883		$	9,808		$	6,300		$	4,902		$	4,520
Earnings per share:
Basic	$	0.42		$	0.69		$	0.23		$	0.24		$	0.35		$	0.23		$	0.18		$	0.16
Diluted	$	0.40		$	0.67		$	0.22		$	0.23		$	0.34		$	0.22		$	0.17		$	0.16
Weighted average shares outstanding:
Basic	28,432			28,285			28,252			28,196			28,005			27,871			27,735			27,476
Diluted	29,424			29,306			29,218			29,309			29,192			29,095			28,875			28,704

Seasonality

We have experienced, and may experience in the future, seasonality in our business, and our business, operating results and financial condition may be affected by such trends in the future. Ultimate's quarterly revenues and operating results have varied significantly in the past and are likely to vary substantially from quarter to quarter in the future. Revenues have historically increased at higher rates in the fourth quarter of the year and at lower rates in the next succeeding quarter. We believe such seasonality is due to a number of factors, including our quota-based compensation arrangements, typical of those used in software companies, and year-end budgetary pressures on our customers. We believe that the seasonal trend that Ultimate has experienced in the past may continue in the foreseeable future.

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Liquidity and Capital Resources

In recent years, we have funded operations from cash flows generated from operations and, to a lesser extent, equipment financing and borrowing arrangements.

As of December 31, 2014, we had $118.5 million in cash, cash equivalents and investments in marketable securities, reflecting a net increase of $28.2 million since December 31, 2013.  This $28.2 million increase was primarily due to cash provided by operations of $108.1 million (excluding the non-cash impact of the excess tax benefit from stock option exercises) and proceeds from the issuance of Common Stock from employee and non-employee director stock option exercises net of the repurchase of Common Stock of $6.2 million, partially offset by cash purchases of property and equipment (including principal payments on financed equipment) of $42.2 million (which includes $25.2 million of capitalized labor costs and third-party consulting fees, paid in cash, associated with an internal-use development project), cash of $20.0 million used for the repurchases of shares of Common Stock under our previously announced stock repurchase plan ("Stock Repurchase Plan"), cash used to settle employee tax withholding liabilities for vesting of restricted stock awards and restricted stock units of $19.9 million, net payments on borrowings of $2.7 million and, to a lesser extent, the effect of the exchange rate on cash of $0.8 million.

Our operating cash inflows primarily consist of payments received from our customers related to our Cloud Offering. Our operating cash outflows primarily consist of cash we invest in personnel and infrastructure to support the anticipated growth of our business, payments to vendors related to our services, payments under arrangements with third party vendors who provide hosting infrastructure services in connection with our Cloud Offering, related sales and marketing costs, costs of operations and systems development and programming costs and, from time to time, payments for acquisitions. Net cash provided by operating activities increased $6.4 million during 2014 as compared with 2013. This increase was primarily due to an increase in operating income and changes in working capital accounts, after adjusting for the impact of non-cash expenses such as depreciation and amortization and expense associated with stock-based compensation awards.

Net cash used in investing activities was $535.2 million for 2014 as compared with $34.4 million for 2013.  The $500.8 million increase from 2013 was primarily attributable to an increase of $517.8 million in funds received from and held in our bank accounts on behalf of Ultimate’s customers using the UltiPro Payment Services offering (“UltiPro Payment Services”) and an increase in cash purchases of property and equipment of $7.7 million (including an increase of $6.2 million of capitalized labor costs and third-party consulting fees, paid in cash, associated with an internal-use development project), partially offset by a significant decrease in cash used for acquisitions of $24.7 million. Customer funds, temporarily held by us as a result of our UltiPro Payment Services, are held in our bank accounts for the benefit of our customers and invested by us in accordance with our internal investment strategies. These customer funds are invested in U.S. Government money market funds that invest in short-term, high quality money market instruments which consist of U.S. Treasury and U.S. Government Agency obligations and repurchase agreements collateralized by such obligations. The money market funds are rated AAA by Standard & Poor's and Aaa by Moody's.

Net cash used in financing activities was $483.9 million for 2014 as compared with net cash provided by financing activities of $17.3 million for 2013. The $501.2 million increase in net cash provided by financing activities was primarily related to an increase of $517.8 million in UltiPro Payment Services funds received, and an increase in excess tax benefits from stock option exercises of $8.3 million, partially offset by cash of $20.0 million used for the repurchases of shares of Common Stock under our previously announced Stock Repurchase Plan, an increase in cash used to settle employee tax withholding liabilities for the vesting of restricted stock of $1.8 million, an increase in payments on other borrowings of $0.6 million and lower proceeds from the issuance of Common Stock from employee and non-employee director stock option exercises of $1.9 million.

Days sales outstanding (“DSO”), calculated on a trailing three-month basis, as of December 31, 2014 were 68 days as compared with 70 days as of December 31, 2013.

Deferred revenues were $109.7 million at December 31, 2014, as compared with $103.2 million at December 31, 2013.  The increase of $6.5 million in deferred revenues for 2014 was primarily due to higher deferred cloud revenues and higher deferred services revenues, partially offset by decreased deferred maintenance revenues. The decreased deferred maintenance revenues resulted from the conversion of Legacy customers to the cloud and, to a lesser extent, terminated maintenance arrangements from customers that did not convert to the cloud as a result of our conversion program which began in 2009 and heightened during 2014. After December 31, 2014, we no longer support our Legacy product and, therefore, as of December 31, 2014, our deferred maintenance revenues no longer exist. Also, for those customers that did convert to the cloud, the related billings changed from annual renewal maintenance billings to quarterly cloud billings for those same customers.  

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Ultimate believes that cash and cash equivalents, investments in marketable securities and cash generated from operations will be sufficient to fund our operations for at least the next 12 months. This belief is based upon, among other factors, management’s expectations for future revenue growth, controlled expenses and collections of accounts receivable.

We did not have any material commitments for capital expenditures as of December 31, 2014.

Off-Balance Sheet Arrangements

We do not, and, as of December 31, 2014, we did not, have any off-balance sheet arrangements (as that term is defined in applicable SEC rules) that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Non-GAAP Financial Measures

Item 10 (e) of Regulation S-K, "Use of Non-GAAP Financial Measures in Commission Filings," defines and prescribes the use of non-GAAP financial information. Our measure of Non-GAAP Operating Income, which excludes non-cash stock-based compensation and amortization of acquired intangibles, meets the definition of a non-GAAP financial measure.

Ultimate believes that this non-GAAP measure of financial results provides 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 this non-GAAP result 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. This measure is used in monthly financial reports prepared for management and in quarterly financial reports presented to Ultimate's Board of Directors. This measure may be different from non-GAAP financial measures used by other companies.

This non-GAAP measure 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 this non-GAAP financial measure is that it excludes significant expenses that are required by GAAP to be recorded. In addition, it is subject to inherent limitations as it reflects the exercise of judgment by management about which expenses are excluded from the non-GAAP financial measure.

To compensate for these limitations, Ultimate presents its non-GAAP financial measure in connection with its GAAP result. Ultimate strongly urges investors and potential investors in Ultimate's securities to review the reconciliation of its non-GAAP financial measure to the comparable GAAP financial measure that is included in the table below and not to rely on any single financial measure to evaluate its business.

We exclude the following items from the non-GAAP financial measure, Non-GAAP Operating Income, as appropriate:

Stock-based compensation expense. Ultimate's non-GAAP financial measure of Non-GAAP Operating Income excludes non-cash stock-based compensation expense, which consists of expenses for stock options and stock and stock unit awards recorded in accordance with Accounting Standards Codification 718, “Compensation - Stock Compensation.” For the years ended December 31, 2014, 2013 and 2012, stock-based compensation expense was $46.2 million, $32.8 million and $20.4 million, respectively, on a pre-tax basis. Stock-based compensation expense is excluded from the 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 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 years ended December 31, 2014 and 2013, the amortization of acquired intangible assets was $1.1 million and $0.2 million, respectively. There was no amortization of acquired intangible assets for the year ended December 31, 2012. 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.

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	For the Year Ended
	2014			2013			2012
Non-GAAP operating income reconciliation:
Operating income	$	54,343		$	43,214		$	29,113
Operating income, as a % of total revenues	10.7		%	10.5		%	8.8		%
Add back:
Non-cash stock-based compensation expense	46,188			32,807			20,412
Non-cash amortization of acquired intangible assets	1,139			242			—
Non-GAAP operating income	$	101,670		$	76,263		$	49,525
Non-GAAP operating income, as a % of total revenues	20.1		%	18.6		%	14.9		%

Contractual Obligations

As of December 31, 2014, Ultimate’s outstanding contractual cash obligations were as follows (in thousands):

	Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		4-5 Years		More than 5 Years
Capital lease obligations (1)	$	7,014	$	3,655	$	3,359	$	—	$	—
Other long-term obligations (2)	43,144		10,379		17,225		9,534		6,006
Other long-term liabilities (3)	4,950		4,950		—		—		—
Total contractual cash obligations	$	55,108	$	18,984	$	20,584	$	9,534	$	6,006

_________________________

(1) We lease certain computer equipment under non-cancelable agreements, which are accounted for as capital leases and expire at various dates through 2017. See Note 13 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for information regarding capital lease obligations.

(2) Included in other long-term obligations were Ultimate’s leases for corporate office space and certain equipment under non-cancelable operating lease agreements expiring at various dates.  Also included in other long-term obligations is a software license agreement with a third-party vendor, payable over a four-year period. See Note 17 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for information regarding operating lease obligations and the software license agreement. Other long-term obligations also included borrowings to purchase perpetual licenses with third-party vendors, payable over a three-year period. See Note 14 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for information regarding other borrowings.

(3) Ultimate has an income tax payable related to the benefit of an unrecognized tax position.  As of the date of this report, it is not reasonable to estimate the timing of this payment.  Ultimate does not have any other long-term liabilities as of December 31, 2014.

In the ordinary course of Ultimate’s operations, we are exposed to certain market risks, primarily interest rate risk and foreign currency risk.  Risks that are either non-financial or non-quantifiable, such as political, economic, tax, or regulatory risks, are not included in the following assessment of our market risks.

Interest Rate Risk. Ultimate is subject to financial market risks, including changes in interest rates which influence the valuations of its fixed income investment portfolio.  Changes in interest rates could also impact Ultimate’s anticipated interest income from interest-bearing cash accounts, or cash equivalents and investments in marketable securities.  We manage financial market risks, including interest rate risks, in accordance with our investment guideline objectives, including:

• Maximum safety of principal;

• Maintenance of appropriate liquidity for regular cash needs;

• Maximum yields in relationship to guidelines and market conditions;

40

• Diversification of risks; and

• Fiduciary control of all investments.

Ultimate targets its fixed income investment portfolio to have maturities of 24 months or less.  Investments are held to enhance the preservation of capital and not for trading purposes.

Cash equivalents consist of money market accounts with original maturities of less than three months. Short-term investments include obligations of U.S. government agencies and corporate debt securities.  Corporate debt securities include commercial paper which, according to Ultimate’s investment guidelines, must carry minimum short-term ratings of P-1 by Moody’s Investor Service, Inc. (“Moody’s”) and A-1 by Standard & Poor’s Ratings Service, a Division of The McGraw-Hill Companies, Inc. (“S&P”).  Other corporate debt obligations must carry a minimum rating of A-2 by Moody’s or A by S&P.  Asset-backed securities must carry a minimum AAA rating by Moody’s and S&P with a maximum average life of two years at the time of purchase.

As of December 31, 2014, total investments in available-for-sale marketable securities were $10.2 million.

As of December 31, 2014, virtually all of the investments in Ultimate’s portfolio were at fixed rates (with a weighted average interest rate of 0.6% per annum).

To illustrate the potential impact of changes in interest rates, Ultimate has performed an analysis based on its December 31, 2014 consolidated balance sheet and assuming no changes in its investments.  Under this analysis, an immediate and sustained 100 basis point increase in the various base rates would result in a decrease in the fair value of Ultimate’s total portfolio of approximately $68 thousand over the next 12 months.  An immediate and sustained 100 basis point decrease in the various base rates would result in an increase in the fair value of Ultimate’s total portfolio of approximately $44 thousand over the next 12 months.

Foreign Currency Risk.  Ultimate has foreign currency risks related to its revenue and operating expenses denominated in currencies other than the U.S. dollar.  Management does not believe movements in the foreign currencies in which Ultimate transacts business will significantly affect future net income.

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INDEX

	Page(s)
Report of Independent Registered Public Accounting Firm	43
Consolidated Balance Sheets as of December 31, 2014 and 2013	44
Consolidated Statements of Income for the Years Ended December 31, 2014, 2013 and 2012	45
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013 and 2012	46
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2014, 2013 and 2012	46
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 2012	48
Notes to Consolidated Financial Statements	50

42

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

The Ultimate Software Group, Inc.:

We have audited the accompanying consolidated balance sheets of The Ultimate Software Group, Inc. and subsidiaries (the Company) as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the years in the three‑year period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), The Ultimate Software Group, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2015 expressed an unqualified opinion on the effectiveness of The Ultimate Software Group, Inc.’s internal control over financial reporting.

/s/ KPMG LLP

February 27, 2015

Jacksonville, Florida

Certified Public Accountants

43

THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES

	As of December 31,
	2014			2013
(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	108,298		$	79,794
Investments in marketable securities	7,862			8,682
Accounts receivable, net of allowance for doubtful accounts of $675 for 2014 and 2013	100,218			85,676
Prepaid expenses and other current assets	34,788			29,374
Deferred tax assets, net	965			1,015
Total current assets before funds held for customers	252,131			204,541
Funds held for customers	759,087			262,227
Total current assets	1,011,218			466,768
Property and equipment, net	86,595			58,186
Goodwill	25,696			26,942
Investments in marketable securities	2,294			1,771
Intangible assets, net	6,774			8,274
Other assets, net	20,611			17,340
Deferred tax assets, net	37,110			18,913
Total assets	$	1,190,298		$	598,194
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,418		$	6,422
Accrued expenses	30,941			26,040
Deferred revenue	109,552			102,686
Capital lease obligations	3,655			2,949
Other borrowings	567			2,264
Total current liabilities before customer funds obligations	152,133			140,361
Customer funds obligations	759,087			262,227
Total current liabilities	911,220			402,588
Deferred revenue	153			498
Deferred rent	2,368			2,687
Capital lease obligations	3,359			2,240
Other borrowings	400			593
Deferred income tax liability	1,049			1,371
Total liabilities	918,549			409,977
Commitments and contingencies (Note 17)	—			—
Stockholders’ equity:
Series A Junior Participating Preferred Stock, $.01 par value, 500,000 shares authorized, no shares issued	—			—
Preferred Stock, $.01 par value, 2,000,000 shares authorized, no shares issued	—			—
Common Stock, $.01 par value, 50,000,000 shares authorized, 32,722,864 and 32,132,376 shares issued and outstanding in 2014 and 2013, respectively	327			321
Additional paid-in capital	376,609			315,691
Accumulated other comprehensive loss	(3,590		)	(1,442		)
Accumulated earnings (deficit)	36,928			(7,809		)
	410,274			306,761
Treasury stock, 4,216,626 and 4,053,835 shares, at cost, for 2014 and 2013, respectively	(138,525		)	(118,544		)
Total stockholders’ equity	271,749			188,217
Total liabilities and stockholders’ equity	$	1,190,298		$	598,194

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

44

THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	For the Years Ended December 31,
	2014			2013			2012
	(in thousands, except per share data)
Revenues:
Recurring	$	419,238		$	334,434		$	266,430
Services	86,165			75,110			64,563
License	533			853			1,275
Total revenues	505,936			410,397			332,268
Cost of revenues:
Recurring	117,609			91,903			78,121
Services	85,939			76,577			66,063
License	91			198			280
Total cost of revenues	203,639			168,678			144,464
Gross profit	302,297			241,719			187,804
Operating expenses:
Sales and marketing	117,033			93,879			72,565
Research and development	83,542			67,757			60,693
General and administrative	47,379			36,869			25,433
Total operating expenses	247,954			198,505			158,691
Operating income	54,343			43,214			29,113
Other (expense) income:
Interest expense	(353		)	(229		)	(476		)
Other income, net	339			104			102
Total other (expense) income, net	(14		)	(125		)	(374		)
Income from operations	54,329			43,089			28,739
Provision for income taxes	(9,592		)	(17,559		)	(14,107		)
Net income	$	44,737		$	25,530		$	14,632
Net income per share:
Basic	$	1.58		$	0.92		$	0.55
Diluted	$	1.52		$	0.88		$	0.52
Weighted average shares outstanding:
Basic	28,293			27,773			26,778
Diluted	29,343			29,013			28,375

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

45

THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	For the Years Ended December 31,
	2014			2013			2012
Net income	$	44,737		$	25,530		$	14,632
Other comprehensive (loss) income :
Unrealized (loss) gain on investments in marketable available for sale securities	(10		)	4			(1		)
Unrealized (loss) gain on foreign currency translation adjustments	(2,143		)	(1,549		)	166
Other comprehensive (loss) income, before tax	(2,153		)	(1,545		)	165
Income tax benefit (expense) related to items of other comprehensive income	1			(6		)	1
Other comprehensive (loss) income, net of tax	$	(2,152	)	$	(1,551	)	$	166
Comprehensive income	$	42,585		$	23,979		$	14,798

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

	Common Stock			Additional Paid -in Capital			Accumulated Other Comprehensive (Loss) Income			Accumulated (Deficit) Earnings			Treasury Stock				Total Stockholders’ Equity
	Shares	Amount											Shares	Amount
Balance, December 31, 2011	30,204	$	302	$	242,100		$	(57	)	$	(47,971	)	3,942	$	(108,750	)	$	85,624
Net income	—	—		—			—			14,632			—	—			14,632
Unrealized gain on foreign exchange, net of tax							166										166
Shares acquired to settle employee tax withholding liability	—	—		(20,384		)	—			—			—	—			(20,384		)
Excess tax benefits from employee stock plan	—	—		12,310			—			—			—	—			12,310
Repurchases of Common Stock	—	—		—			—			—			112	(9,794		)	(9,794		)
Issuances of Common Stock from exercises of stock options	751	8		11,272			—			—			—	—			11,280
Issuances of Common Stock from restricted stock releases	442	4		—			—			—			—	—			4
Non-cash stock-based compensation expense     for stock options, restricted stock and restricted stock units	—	—		20,832			—			—			—	—			20,832
Balance, December 31, 2012	31,397	$	314	$	266,130		$	109		$	(33,339	)	4,054	$	(118,544	)	$	114,670
Net income	—	—		—			—			25,530			—	—			25,530

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	Common Stock			Additional Paid -in Capital			Accumulated Other Comprehensive (Loss) Income			Accumulated (Deficit) Earnings			Treasury Stock				Total Stockholders’ Equity
	Shares	Amount											Shares	Amount
Unrealized loss on investments in      marketable securities available-for-sale, net of tax	—	—		—			(2		)	—			—	—			(2		)
Unrealized loss on foreign exchange, net of tax							(1,549		)								(1,549		)
Shares acquired to settle employee tax withholding liability	—	—		(18,058		)	—			—			—	—			(18,058		)
Excess tax benefits from employee stock plan	—	—		19,167			—			—			—	—			19,167
Stock consideration for acquisitions	—	—		6,115			—			—			—	—			6,115
Issuances of Common Stock from exercises of stock options	440	4		8,132			—			—			—	—			8,136
Issuances of Common Stock from restricted stock releases	296	3															3
Non-cash stock-based compensation expense for stock options, restricted stock and restricted stock units	—	—		34,205			—			—			—	—			34,205
Balance, December 31, 2013	32,133	$	321	$	315,691		$	(1,442	)	$	(7,809	)	4,054	$	(118,544	)	$	188,217
Net income	—	—		—			—			44,737			—	—			44,737
Unrealized loss on investments in marketable securities available-for-sale, net of tax	—	—		—			(5		)	—			—	—			(5		)
Unrealized loss on foreign exchange, net of tax							(2,143		)								(2,143		)
Shares acquired to settle employee tax withholding liability	—	—		(19,883		)	—			—			—	—			(19,883		)
Excess tax benefits from employee stock plan	—	—		27,499			—			—			—	—			27,499
Repurchases of Common Stock	—	—		—			—			—			163	(19,981		)	(19,981		)
Stock consideration for acquisitions	13	—		(818		)	—			—			—	—			(818		)
Issuances of Common Stock from exercises of stock options	310	3		6,205			—			—			—	—			6,208
Issuances of Common Stock from restricted stock releases	267	3		—			—			—			—	—			3
Non-cash stock-based compensation expense     for stock options, restricted stock and restricted stock units	—	—		47,915			—			—			—	—			47,915
Balance, December 31, 2014	32,723	$	327	$	376,609		$	(3,590	)	$	36,928		4,217	$	(138,525	)	$	271,749

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

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THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES

	For the Years Ended December 31,
	2014			2013			2012
	(in thousands)
Cash flows from operating activities:
Net income	$	44,737		$	25,530		$	14,632
Adjustments to reconcile net income to net cash provided by  operating activities:
Depreciation and amortization	19,263			16,058			13,623
Provision for doubtful accounts	2,264			2,523			1,159
Non-cash stock-based compensation expense	46,185			32,807			20,412
Income taxes	9,030			17,347			13,814
Excess tax benefits from employee stock plan	(27,499		)	(19,167		)	(12,310		)
Changes in operating assets and liabilities:
Accounts receivable	(16,806		)	(16,784		)	(15,747		)
Prepaid expenses and other current assets	(5,414		)	(2,982		)	(1,880		)
Other assets	(3,271		)	(403		)	(1,631		)
Accounts payable	996			(1,415		)	1,319
Accrued expenses and deferred rent	4,582			10,752			2,859
Deferred revenue	6,521			9,946			5,413
Net cash provided by operating activities	80,588			74,212			41,663
Cash flows from investing activities:
Purchases of marketable securities	(10,355		)	(10,741		)	(13,643		)
Maturities of marketable securities	10,377			10,819			12,239
Payments for acquisitions, net of cash acquired	(257		)	(24,995		)	—
Net purchases of client funds securities	(496,860		)	20,908			(162,347		)
Purchases of property and equipment	(38,100		)	(30,421		)	(17,326		)
Net cash used in investing activities	(535,195		)	(34,430		)	(181,077		)
Cash flows from financing activities:
Repurchases of Common Stock	(19,981		)	—			(9,794		)
Net proceeds from issuances of Common Stock	6,208			8,139			11,284
Excess tax benefits from employee stock plan	27,499			19,167			12,310
Shares acquired to settle employee tax withholding liabilities	(19,883		)	(18,058		)	(20,384		)
Principal payments on capital lease obligations	(4,082		)	(3,541		)	(3,418		)
Repayments of other borrowings	(2,690		)	(2,055		)	(429		)
Net increase in customer fund obligations	496,860			(20,908		)	162,347
Net cash provided by (used in) financing activities	483,931			(17,256		)	151,916
Effect of exchange rate changes on cash	(820		)	(1,549		)	166
Net increase in cash and cash equivalents	28,504			20,977			12,668
Cash and cash equivalents, beginning of year	79,794			58,817			46,149
Cash and cash equivalents, end of year	$	108,298		$	79,794		$	58,817
Supplemental disclosure of cash flow information:

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Cash paid for interest	$	327		$	358	$	419
Cash paid for taxes	$	582		$	476	$	471
Non-cash investing and financing activities:
Capital lease obligations to acquire new equipment	$	5,907		$	3,293	$	3,986
Stock consideration adjustment recorded for acquisitions	$	(818	)	$	—	$	—
Stock consideration recorded for acquisitions	$	—		$	6,115	$	—
License agreement with third-party vendor	$	800		$	—	$	—
Stock based compensation for capitalized software	$	1,730		$	1,398	$	420

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

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THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES

1.  Nature of Operations

The Ultimate Software Group, Inc. and subsidiaries (“Ultimate,” “we,” “us” or “our”) is a leading provider of cloud-based human capital management (“HCM”). Ultimate's UltiPro software (“UltiPro”) is a comprehensive, easy-to-use solution delivered primarily over the Internet to organizations based in the United States and Canada, including those with global employees. UltiPro is designed to deliver the functionality businesses need to manage the complete employment life cycle from recruitment to retirement.   We market our UltiPro solutions primarily to enterprise companies, which we define as companies with more than 1,500 employees, including those with 10,000 or more employees; mid-market companies, which we define as those having approximately 500-1,500 employees; and strategic companies, which we define as having approximately 100-499 employees. UltiPro is marketed primarily through our enterprise, mid-market and strategic direct sales teams.

2.  Basis of Presentation, Consolidation and the Use of Estimates

The accompanying consolidated financial statements of Ultimate have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The consolidated financial statements included herein reflect all adjustments, which are, in the opinion of Ultimate’s management, necessary for a fair presentation of the information for the periods presented. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, revenue recognition, income taxes, the allowance for doubtful accounts, the valuation of deferred tax assets and long-lived assets, among others discussed below.  Actual results could differ from those estimates.

The consolidated financial statements reflect the financial position and operating results of Ultimate and include its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

3.  Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Cash and Cash Equivalents

All highly liquid instruments with an original maturity of three months or less when acquired are considered cash equivalents and are comprised of interest-bearing accounts.

Accounts Receivable

Accounts receivable are principally from end-users of Ultimate’s products. We perform credit evaluations of our customers and have recorded allowances for estimated losses. We maintain an allowance for doubtful accounts at an amount estimated to be sufficient to provide adequate protection against losses resulting from collecting less than full payment on accounts receivable. A considerable amount of judgment is required when the realization of receivables is assessed, including assessing the probability of collection and current credit-worthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in a further impairment of their ability to make payments, an additional provision for doubtful accounts may be required.We charge off uncollectible amounts against the allowance for doubtful accounts in the period in which we determine they are uncollectible.

Funds Held for Customers and Customers’ Funds Obligations

Ultimate has the right to market and distribute an independent third party’s tax filing solution that Ultimate has branded UltiPro Payment Services.  Ultimate’s UltiPro Payment Services product provides payment services to our customers.  These payment services are being sold directly by us to our customers only on a per-employee-per-month (“PEPM”) basis in conjunction with UltiPro, our core product.  In connection with our UltiPro Payment Services product, we receive funds from our customers and hold such funds for purposes of paying the appropriate taxing authorities on behalf of such customers.  We hold our customers’ payment services deposits for the period between collection from our customers and remittance to the applicable taxing authority.  These funds held for customers and the corresponding customer funds obligations

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are included in current assets and current liabilities, respectively, in our consolidated balance sheets as of December 31, 2014 and 2013.  We have reported the cash flows for purchases of securities with funds received from UltiPro Payment Services customers in the investing activities section of the consolidated statements of cash flows for the years ended December 31, 2014, 2013 and 2012.  We have reported the cash flows related to the funds received and paid on behalf of such customers to the applicable taxing authorities in the financing activities section of the consolidated statements of cash flows for the years ended December 31, 2014, 2013 and 2012.  The associated PEPM fees for UltiPro Payment Services are included in recurring revenues in the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012.  The associated interest earned was not material for the years ended December 31, 2014, 2013 and 2012.

Fair Value of Financial Instruments

Ultimate’s financial instruments, consisting of cash and cash equivalents, investments in marketable securities, funds held for customers and the related obligations, accounts receivable, accounts payable, and capital lease obligations and other borrowings, approximated fair value (due to relatively short maturity) as of December 31, 2014 and 2013.

Prepaid Expenses and Other Current Assets

Ultimate’s financial statements include prepaid expenses and other current assets which include prepaid commissions on cloud sales.  Prepaid expenses are amortized over the life of the asset (typically within one year) and commissions on cloud sales are amortized over the initial contract term (typically 24 months) commencing on the day the customer processes its first live payroll using UltiPro (also referred to as going “Live”), which corresponds with the related cloud revenue recognition. The portion of prepaid commissions that extends beyond one year is classified in other assets, net in the consolidated balance sheets as of December 31, 2014 and 2013.

Long-Lived Assets

We evaluate the carrying value of long-lived assets when indicators of impairment exist.  For the year ended December 31, 2014, no such events or circumstances were identified.  The carrying value of a long-lived asset is considered impaired when the undiscounted expected future cash flows from such asset (or asset group) are separately identifiable and less than the asset’s (or asset group’s) carrying value.  In that event, a loss is recognized to the extent that the carrying value exceeds the fair value of the long-lived asset.  Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved.  For the years ended December 31, 2014, 2013 and 2012, we recorded no impairment of our long-lived assets.

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation and amortization. Property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets, which range from 2 to 20 years. Leasehold improvements and assets under capital leases are amortized over the shorter of the life of the asset or the term of the lease over periods ranging from approximately 3 to 15 years. Maintenance and repairs are charged to expense when incurred; betterments are capitalized. Upon the sale or retirement of assets, the cost, accumulated depreciation and amortization are removed from the accounts and any gain or loss is recognized.

Computer Software Development Costs

We previously capitalized software costs in accordance with Accounting Standards Codification ("ASC") Topic 985-20, Costs of Software to Be Sold, Leased, or Marketed. Those capitalized software costs were fully amortized as of December 31, 2013.

Computer software development costs related to software developed for internal use falls under the accounting guidance of ASC Topic 350-40, Intangibles Goodwill and Other–Internal Use Software, in which computer software costs are expensed as incurred during the preliminary project stage and capitalization begins in the application development stage once the capitalization criteria are met. Costs associated with post implementation activities are expensed as incurred. Costs capitalized during the application development stage include external direct costs of materials and services consumed in developing or obtaining internal-use software and payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the internal-use computer software. In addition to capitalizing costs for software (which are used by us in our general operations, for internal purposes), we also capitalize costs under ASC Topic 350-40 for certain software development projects related to our suite of products sold to our customers exclusively on a subscription basis under our software-as-a-service offering of UltiPro (the “Cloud Offering”).

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Deferred Revenue

Deferred revenue is primarily comprised of deferrals for recurring revenues for cloud services which are recognized over the term of the related contract as the services are performed, typically two years; maintenance services which have not yet been rendered which are recognized ratably over the related annual maintenance period; implementation consulting services for which the services have not yet been rendered which are primarily recognized prior to the respective Live date; and subscription revenues which are recognized ratably over the base term of the related contract upon the delivery of the services.

Guarantees

The standard commercial terms in our sales contracts for UltiPro include an indemnification clause that indemnifies the customer against certain liabilities and damages arising from any claims of patent, copyright, or other proprietary rights of any third party. Due to the nature of the intellectual property indemnification provided to our customers, we cannot estimate the fair value, or determine the total nominal amount, of the indemnification until such time as a claim for such indemnification is made.  In the event of a claim made against us under such provision, we evaluate estimated losses for such indemnification considering such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss.  To date, Ultimate has not had any claims made against it under such provision and, accordingly, has not accrued any liabilities related to such indemnifications in its consolidated financial statements.

Segment Information

Public companies are required to report selected information about operating segments in annual and interim financial reports to shareholders, as well as related disclosures about an enterprise’s business segments, products, services, geographic areas and major customers. Ultimate operates its business as a single segment and is comprised as a single reporting unit.

Revenue Recognition

We recognize revenues in accordance with Accounting Standards Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”). We use the relative selling price method to allocate the total consideration to units of accounting in a multiple element arrangement. We allocate revenue in an arrangement using the estimated selling price (“ESP”) of deliverables if it does not have vendor-specific objective evidence (“VSOE”) or third-party evidence (“TPE”) of selling price. 

VSOE is the price charged when the same or similar product or service is sold separately.  We define VSOE as a median price of recent stand-alone transactions that are priced within a narrow range.

TPE is determined based on the prices charged by our competitors for a similar deliverable when sold separately.  However, due to the difficulty in obtaining sufficient information on competitor pricing and differences in our product offerings when compared with those of our peers, we generally are unable to reliably determine TPE.

ESP is our best estimate of the selling price of an element in a transaction. If we are unable to establish selling price using either VSOE or TPE, we will use ESP in our allocation of arrangement consideration.  The objective of ESP is to determine the price at which we would transact business if the product or service were sold by us on a stand-alone basis.  Our determination of ESP involves the use of a customary discount from the list (or book) price for each element, with the discounted price applied within a narrow range.  The customary discount is derived from historical data that has been analyzed to determine trends and patterns. We analyze the customary discount used for determining ESP on no less than an annual basis.

We evaluate each deliverable in our arrangements to determine whether it represents a separate unit of accounting.  A deliverable constitutes a separate unit of accounting when it has stand-alone value to our customers.  Our products and services continue to qualify as separate units of accounting under ASU 2009-13.

There are two major elements in our multiple element arrangements for the delivery of our Cloud Offering, which are recurring revenues (i.e., cloud subscription revenues) and services revenues (mostly implementation consulting services).   

For multiple element arrangements, the consideration allocated to cloud subscription revenues is recognized as recurring revenues over the initial contract period, as those services are delivered, commencing with the Live date of the related product. The consideration allocated to fixed fee implementation consulting services in multiple element arrangements is

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recognized as services revenues on a percentage of completion basis, using reasonably dependable estimates with respect to milestones achieved (in relation to progression through implementation phases), by product.

Single element arrangements typically consist of renewals for cloud subscriptions and renewal maintenance agreements. In addition, implementation consulting services sold on a time and materials basis typically represent single element arrangements. Under these single element arrangements, cloud subscription and maintenance revenues are recognized over the related renewal period, as the services are delivered, and implementation consulting services are recognized as the services are performed.

We recognize revenues when all of the following criteria are met:

• persuasive evidence of an arrangement exists;

• delivery has occurred;

• the fees are fixed and determinable; and

• collection is considered probable.

If collection is not considered probable, we recognize revenues when the fees are collected. If the fees are not fixed and determinable, we recognize revenues when the fees become due from the customer. If non-standard acceptance periods or non-standard performance criteria are required, we recognize revenue when the acceptance period expires or upon the satisfaction of the acceptance/performance criteria, as applicable.

The majority of services revenues are recognized over the implementation period, which is from the contract execution date until the Live date. Cloud revenues are recognized over the initial contract term, beginning in the month the customer goes Live.

Recurring Revenues

Recurring revenues primarily consist of subscription revenues recognized from our Cloud Offering, as well as customer support and maintenance revenues.

i)  Cloud subscription revenues are principally derived from PEPM fees earned from the Cloud Offering and from sales of hosting services on a stand-alone basis to customers who already own a perpetual license ("Base Hosting").  Ongoing PEPM fees from the Cloud Offering and, to a lesser extent, Base Hosting are recognized as subscription revenues as the services are delivered, commencing when the customer goes Live.

ii)  Customer support and maintenance revenues are derived from maintaining, supporting, and providing periodic updates of our software for our hosting services.  Since we stopped selling perpetual licenses to our new customers effective April 1, 2009, customer support and maintenance revenues stem from annual renewals.

Under our Cloud Offering, our customers do not have the right to take possession of our software and these arrangements are considered service contracts. The selling price of multiple deliverables in cloud arrangements is derived for each element based on the guidance provided by ASU 2009-13.  The multiple elements that typically exist in cloud arrangements include (1) recurring revenues from the combination of hosting services, the right to use UltiPro, and maintenance of UltiPro (i.e., product enhancements, updates and customer support) and (2) professional services (i.e., primarily implementation consulting services).

The pricing for the three elements that pertain to recurring revenues (i.e., hosting services, the right to use UltiPro and maintenance of UltiPro) is bundled.  Since these three bundled elements are components of recurring revenues in the consolidated statements of income, allocation of selling price to each of the three elements is not necessary and they are not reported separately.  Selling price, which is established through VSOE, for the bundled elements, as a whole, is determined on the basis of renewal pricing, without taking into consideration potential price increases or potential changes in the number of employees of the customer in the future due to the uncertainties surrounding these potential occurrences.  These bundled elements are provided on an ongoing basis, represent undelivered elements and are recognized on a monthly basis as the related services are performed, commencing once the customer goes Live.

Services Revenues

Services revenues primarily include revenues from fees charged for implementation consulting services in connection with the implementation of our product solutions and, to a much lesser extent, training of customers in the use of our products

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and fees for other services, including the provision of payroll-related forms, sales of time clocks and the printing of W-2 forms for certain customers, as well as certain client reimbursable out-of-pocket expenses.

Our multiple element contracts contain recurring cloud revenues and implementation consulting services priced on a fixed fee basis. Time and materials implementation consulting services are sold as stand-alone sales not directly related to the basic implementation of the cloud product. The total arrangement consideration is allocated to services elements in the arrangement based on relative selling prices, using the prices established when the services are sold on a stand-alone basis.  Selling price is established through ESP for fixed fee implementation consulting services that are included in our multiple element contracts.

Revenues from implementation consulting services sold on a fixed-fee basis are recognized using the percentage of completion accounting method, which involves the use of estimates.  Percentage of completion is measured at each reporting date based on progress made to date, using reasonably dependable estimates with respect to milestones achieved or billable hours, as applicable.

Revenues from implementation consulting services, billed on a time and materials basis (at an hourly rate), are recognized as these services are performed.  Other services are recognized as the product is shipped or as the services are rendered, depending on the specific terms of the related arrangement.

Business Combinations

We are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed at the acquisition date based upon their estimated fair values. Goodwill as of the acquisition date represents the excess of the purchase consideration of an acquired business over the fair value of the underlying net tangible and intangible assets acquired and liabilities assumed. The purchase price allocation and valuation of the acquisition require management to make significant estimates and assumptions, especially with respect to long-lived and intangible assets.

The estimates used in valuing certain of the intangible assets include, but are not limited to: future expected cash flows of the assets, discount rates to determine the present value of the future cash flows, financial projections of the acquired business, attrition rates of customers and expected technology life cycles. We also estimate the useful lives of the intangible assets based on the expected period over which we anticipate generating economic benefit from the asset.

Our estimates of fair value are based on assumptions believed to be reasonable at that time. If management made different estimates or judgments, material differences in the fair values of the net assets acquired may result.

The fair value of assets acquired and liabilities assumed was based upon a preliminary purchase price allocation and our estimates and assumptions are subject to change within the measurement period.

Goodwill and Intangible Assets

The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. The determination of the value of the intangible assets acquired involves certain judgments and estimates. These judgments and estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital.

At December 31, 2014, our goodwill totaled $25.7 million and our identifiable net intangible assets totaled $6.8 million. We assess the impairment of goodwill of our reporting unit annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable.  Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.  If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value.  We consider both market and discounted cash flow approaches to determine the fair value of the reporting unit.  Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value.  The discounted cash flow approach uses expected future operating results.  Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.  We conducted our annual impairment test of goodwill as of December 31, 2014, and 2013.  As a result of this test, we determined that no adjustment to the carrying value of goodwill for our reporting unit was required. 

We evaluate our amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows attributable to that asset

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or group of assets. The amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. We also evaluate the estimated remaining useful lives of intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. Assumptions and estimates about future values and remaining useful lives of our intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends and internal factors such as changes in our business strategy and our internal forecasts.

Cost of Revenues

Cost of revenues primarily consists of the costs of recurring and services revenues. Cost of recurring revenues primarily consists of costs to provide maintenance and technical support to our customers, the cost of providing periodic updates and the cost of recurring subscription revenues, including amortization of capitalized software. Cost of services revenues primarily consists of costs to provide implementation consulting services and, to a lesser degree, training to our customers, costs related to sales of payroll-related forms, time clocks and costs associated with certain client reimbursable out-of-pocket expenses.

Stock-Based Compensation

Our Amended and Restated 2005 Equity and Incentive Plan (the “Plan”) authorizes the grant of options to non-employee directors, officers and employees of Ultimate to purchase shares of Ultimate’s Common Stock.  The Plan also authorizes the grant to such persons of restricted and non-restricted shares of Common Stock, stock appreciation rights, stock units and cash performance awards (collectively, together with stock options, the “Awards”).  Prior to the adoption of the Plan, options to purchase shares of Common Stock were issued under our Nonqualified Stock Option Plan (the “Prior Plan”).  Beginning in 2009, we began making grants to employees of restricted stock units in lieu of stock options.

As of December 31, 2014, the aggregate number of shares of Common Stock that were available to be issued under all Awards granted under the Plan was 1,165,680 shares.

The Plan provides broad discretion to the Compensation Committee of the Board of Directors to create appropriate equity incentives for directors, officers and employees of Ultimate.  The Plan is intended to attract and retain talented employees and align employee and stockholder interests.

For purposes of calculating and accounting for stock-based compensation expense (“SBC”) in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC 718”) for restricted stock awards and restricted stock units, we measure compensation based on the closing market price of our Common Stock at the date of grant and it is recognized on a straight-line basis over the vesting period.  We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.  The weighted-average forfeiture rate is based on historical data.

In accordance with ASC 718, Ultimate capitalizes the portion of SBC expense attributed to research and development personnel whose labor costs are being capitalized pursuant to ASC Topic 350-40, Intangibles Goodwill and Other-Internal Use Software, related to software development. The following table summarizes SBC recognized by the Company (in thousands):

	For the Years Ended December 31,
	2014		2013		2012
SBC - Statements of income	$	46,185	$	32,807	$	20,412
SBC - Capitalized software	1,730		1,398		420
SBC - Statements of stockholders' equity	$	47,915	$	34,205	$	20,832

Rental Costs Incurred in Relation to a Construction Period

We have incurred rental costs associated with operating leases during the construction period.  Rental costs incurred during a construction period are costs incurred for the right to control the use of a leased asset during and after construction of a leased asset.  Since there is no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period, rental costs associated with ground or building operating leases that are incurred during a construction period are recognized as rental expense on a straight-line basis.

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Income Taxes

We are subject to Federal, foreign and state corporate income taxes.  We account for income taxes using an asset and liability approach under which deferred income taxes are provided based upon enacted tax laws and rates applicable to the periods in which the taxes become payable.

We make certain estimates and judgments in determining income tax expense for financial statement purposes.  These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

We assess the likelihood that Ultimate will be able to recover its deferred tax assets.  Management considers all available evidence, both positive and negative, including historical levels of pre-tax book income, expiration of net operating losses, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies, as well as current tax laws and interpretation of current tax laws, in assessing the need for a valuation allowance.  If recovery is not likely, we record a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable.  The available positive evidence at December 31, 2014 included, among other factors, three years of cumulative historical pre-tax book income and a projection of future pre-tax book income and taxable income sufficient to realize all of our remaining deferred tax assets.  As a result of our analysis of all available evidence, both positive and negative, we believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize all of the deferred tax assets as of December 31, 2014. As such, there was no valuation allowance for the years ended December 31, 2014, 2013, and 2012. See Note 15 for further discussion.

ASC 740, “Income Taxes” (“ASC 740”), clarified the accounting for uncertainty in income taxes recognized in a company’s financial statements.  Specifically, ASC 740 prescribed a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  ASC 740 also provides guidance on the related de-recognition, classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions.  Our accounting policy is to record the tax effects of a change in the opening balance of the unrecognized tax benefits (including unrecognized tax benefits related to prior-period discontinued operations) in current-period income (loss) from continuing operations. We recognize interest and penalties accrued related to unrecognized tax benefits as components of our income tax provision. We did not have any interest and penalties accrued upon the adoption of ASC 740, and, as of December 31, 2014 and 2013, we did not have any interest and penalties accrued related to unrecognized tax benefits.

Reimbursable Out-Of-Pocket Expenses

Reimbursable out-of-pocket expenses, which are included in services revenues and cost of services revenues in our accompanying consolidated statements of operations, were $1.9 million, $1.8 million and $1.4 million for 2014, 2013 and 2012, respectively.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2014-09,  ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for Ultimate on January 1, 2017 and early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method and have not determined the effect the standard will have on our ongoing financial reporting.

4. Business Combinations

2013 Business Combinations

We completed two acquisitions in the fourth quarter of 2013 that were non-significant, individually and in the aggregate, including Employtouch, Inc., (the "Employtouch Acquisition") a Canadian-based corporation and Accel HR, LLC, (the “Accel HR Acquisition”) a Delaware limited liability company located in Georgia.

Acquisition of Employtouch, Inc.

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On October 1, 2013, we entered into agreements with the shareholders of Employtouch, Inc., a Canadian-based corporation, to acquire 100% of the issued and outstanding shares of Employtouch, Inc., in exchange for a combination of cash and restricted shares of Ultimate's Common Stock. Employtouch Inc. is engaged in the business of developing workforce management hardware and software products. Employtouch Inc. was consolidated into The Ultimate Software Group of Canada, Inc. The results of operations from this acquisition have been included in our consolidated financial statements as of the date of acquisition. We are marketing and selling the workforce management solution as UltiPro Touchbase to both customers in Canada and the United States.

In October 2013, we introduced UltiPro TouchBase in connection with the Employtouch Acquisition (discussed above), which provides our customers an interactive mobile time clock device that collects time punches, as well as highlights the information most critical to employees and managers via an engaging activity stream. With UltiPro TouchBase, our customers can capture employee time on a touchscreen tablet device, collecting employee-validated data for cost accounting and payroll; can leverage photos for accurate capture of employee time-entry, avoiding 'buddy punches'; and can validate transactions using PIN entry, HID, RFID, magnetic swipe or barcode.

We paid a total of $10.4 million (USD) in cash and a total of 17,788 restricted shares of Ultimate's Common Stock valued at $2.3 million, which are issuable in three (3) equal installments on April 1, 2014, April 1, 2015 and April 1, 2016 (the "Employtouch Stock Consideration"). During the measurement period, we made certain post-closing adjustments related to the valuation of the stock consideration and purchase price allocation of Employtouch, which are reflected below and included in the cash flows from investing activities and non-cash investing and financing activities in the statements of cash flows.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

	At October 1, 2013
Net tangible assets	$	23
Intangible assets	5,350
Goodwill	8,736
Deferred tax liability	(1,418		)
Total purchase price	$	12,691

We recorded the Employtouch Acquisition using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the date of acquisition. The $5.4 million of amortizable intangible assets consists of $0.1 million in customer relationships, $5.2 million in developed technology and $0.05 million for a covenant not-to-compete. The fair value of the customer relationships and the developed technology has been estimated using the excess earnings method, a form of the income approach, and cash flow projections. The covenant not-to-compete has been estimated using a damages calculation, which is a form of the income approach.

The balance of the acquired intangibles, net of amortization, is stated separately on our consolidated balance sheet. We acquired net tangible assets of $0.02 million and incurred direct costs of $0.3 million in relation to the acquisition. A deferred tax liability of $1.4 million resulted from the Employtouch Acquisition, which was a nontaxable transaction. In accordance with GAAP, direct costs related to the acquisition were expensed as incurred. The balance of $8.7 million was recorded as goodwill. Since the Employtouch Acquisition was a stock purchase, goodwill and acquired intangibles are not deductible for tax purposes. For further discussion of acquired intangibles, see Note 12 of "Notes to Consolidated Financial Statements".

Acquisition of Accel HR, LLC

On November 15, 2013 (the "Accel HR Closing Date"), pursuant to an asset purchase agreement with Accel HR, LLC, a Delaware limited liability company located in Georgia, and certain members of Accel HR (the "Accel HR Agreement") we acquired certain assets and liabilities in exchange for a combination of cash and restricted shares of Ultimate's Common Stock. The business we acquired is now known as UltiPro Managed Services ("UMS"). The results of operations from this acquisition have been included in our consolidated financial statements since that date. We are marketing and selling the comprehensive outsourcing solutions, services and support to both customers in Canada and the United States.

To further simplify the work lives of our customers’ human resources and payroll people, we introduced UltiPro Managed Services in November 2013 as a result of the Accel HR Acquisition (discussed above). UltiPro Managed Services is designed for those customers who want to outsource some components of their HR, payroll, benefits, and HCM technology management functions without sacrificing the control of, or access to, their employee data that they enjoy with our cloud

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solution. Unlike other outsourced payroll or HRIS services that typically take a one-size-fits-all approach, UltiPro Managed Services allows customers to select from a number of payroll management, HRIS, and/or benefits management services and combine them into a tailored solution that best suits their unique needs. Accel HR has provided these types of services to large and mid-market corporate customers in North America since 2004 and, since 2007 prior to its acquisition by us, Accel HR partnered exclusively with Ultimate to provide these services to their UltiPro customers.

Pursuant to the terms of the Accel HR Agreement, we paid a total of $14.6 million in cash and a total of 22,017 restricted shares of Ultimate's Common Stock, valued at $3.0 million, which are issuable in three (3) equal installments on the first, second and third anniversaries of the Accel HR Closing Date (the "Accel HR Stock Consideration"). During the measurement period, we made certain post-closing adjustments related to the valuation of the stock consideration and purchase price allocation of Accel HR, which are reflected below and included in the cash flows from investing activities and non-cash investing and financing activities in the statements of cash flows.

.

The following table summarized the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands)"

	At November 15, 2013
Net tangible liabilities	$	(732	)
Intangible assets	3,350
Goodwill	15,025
Total purchase price	$	17,643

We recorded the Accel HR Acquisition using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the date of acquisition. The $3.4 million of amortizable intangible assets consists of $3.1 million in customer relationships and $0.3 million in the covenants not-to-compete. The fair value of the customer relationships has been estimated using the excess earnings method, a form of the income approach, and cash flow projections. Covenants not-to-compete have been estimated using a damages calculation, which is a form of the income approach.

The balance of the acquired intangibles, net of amortization, is stated separately on our consolidated balance sheet. We assumed net liabilities of $0.7 million and incurred direct costs of $0.3 million in relation to the acquisition. In accordance with GAAP, direct costs related to the acquisition were expensed as incurred. The balance of $15.0 million was recorded as goodwill. For further discussion of acquired intangibles, see Note 12 of "Notes to Consolidated Financial Statements".

The restricted stock issuable pursuant to both the Employtouch Stock Consideration and the Accel HR Stock Consideration is subject to the passage of time and such shares will be unregistered when issued which places certain restrictions on when the shares can be freely traded on the open market. No other restrictions apply to the Common Stock issuable for both acquisitions. The fair value of the restricted stock issuable pursuant to the Employtouch Stock Consideration and the Accel HR Stock Consideration was recorded as of the respective acquisition dates since there are no contingencies related to the future stock issuances.

5.           Investments in Marketable Securities and Fair Value of Financial Instruments

We classify our investments in marketable securities with readily determinable fair values as available-for-sale.  Available-for-sale securities consist of debt and equity securities not classified as trading securities or as securities to be held to maturity.  Unrealized gains and losses, net of tax, on available-for-sale securities are reported as a net amount in accumulated other comprehensive income in stockholders’ equity until realized.  Gains and losses on the sale of available-for-sale securities are determined using the specific identification method.  Included in accumulated other comprehensive income was a $10 thousand net unrealized loss and $4 thousand net unrealized gain on available-for-sale securities at December 31, 2014 and December 31, 2013, respectively. Realized gains and losses resulting on available-for-sale securities are included in other (expense) income, net, in the consolidated statements of income. There were no significant reclassifications of realized gains and losses on available-for-sale securities to the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012.

The amortized cost, net unrealized (loss) gain and fair value of our investments in marketable available-for-sale securities as of December 31, 2014 and December 31, 2013 are shown below (in thousands):

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	As of December 31, 2014							As of December 31, 2013
	Amortized Cost		Net Unrealized (Loss).			Fair Value		Amortized Cost		Net Unrealized Gain		Fair Value
Corporate debentures – bonds	$	8,513	$	(9	)	$	8,504	$	7,375	$	4	$	7,379
Commercial paper	600		—			600		1,799		—		1,799
U.S. Agency bonds	255		—			255		760		—		760
U.S. Treasury bills	798		(1		)	797		—		—		—
Certificates of deposit	—		—			—		515		—		515
Total investments	$	10,166	$	(10	)	$	10,156	$	10,449	$	4	$	10,453

The amortized cost and fair value of the marketable available-for-sale securities by contractual maturity at December 31, 2014 is shown below (in thousands):

	As of December 31, 2014
	Amortized Cost		Fair Value
Due in one year or less	$	7,870	$	7,862
Due after one year	2,296		2,294
Total	$	10,166	$	10,156

We classify and disclose fair value measurements in one of the following three categories of fair value hierarchy:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities.

Level 2: Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Our assets that are measured by management at fair value on a recurring basis are generally classified within Level 1 or Level 2 of the fair value hierarchy.  The types of instruments valued based on quoted market prices in active markets include most money market securities and certificates of deposit.  Such instruments are generally classified within Level 1 of the fair value hierarchy.  We did not have any transfers into and out of Level 1 and Level 2 during the years ended December 31, 2014, 2013 and 2012.

The types of instruments valued by management, based on quoted prices in less active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, include corporate debentures and bonds, commercial paper, U.S. agency bonds, and U.S. Treasury bills.  Such instruments are generally classified within Level 2 of the fair value hierarchy.  We use consensus pricing, which is based on multiple pricing sources, to value our fixed income investments.

The following table sets forth, by level within the fair value hierarchy, financial assets accounted for at fair value as of December 31, 2014 and December 31, 2013 (in thousands):

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	As of December 31, 2014								As of December 31, 2013
	Total		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Un- Observable Inputs (Level 3)		Total		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Un- Observable Inputs (Level 3)
Corporate debentures and bonds	$	8,504	$	—	$	8,504	$	—	$	7,379	$	—	$	7,379	$	—
Commercial paper	600		—		600		—		1,799		—		1,799		—
U.S. Agency bonds	255		—		255		—		760		—		760		—
U.S. Treasury bills	797		—		797		—		—		—		—		—
Certificates of deposit	—		—		—		—		515		515		—		—
Total	$	10,156	$	—	$	10,156	$	—	$	10,453	$	515	$	9,938	$	—

Assets and liabilities measured at fair value on a recurring basis were presented in the consolidated balance sheets as of December 31, 2014 and as of December 31, 2013 as short-term and long-term investments in marketable securities.  There were no financial liabilities accounted for at fair value as of December 31, 2014 and December 31, 2013.

6.           Allowance for Doubtful Accounts

We have established an allowance for doubtful accounts based on a review of the current status of existing accounts receivable by customer and historical experience.

The activity within allowance for doubtful accounts was as follows (in thousands):

	For the Years Ended December 31,
	2014			2013			2012
Balance at beginning of year	$	675		$	475		$	475
Charged to expense	2,264			2,523			1,159
Write-offs	(2,264		)	(2,323		)	(1,159		)
Balance at end of year	$	675		$	675		$	475

7.           Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

	As of December 31,
	2014		2013
Prepaid commissions on cloud sales	$	17,772	$	19,942
Other prepaid expenses	8,064		2,783
Other current assets	8,952		6,649
Total prepaid expenses and other current assets	$	34,788	$	29,374

8.           Property and Equipment, net

Property and equipment, net consists of the following (in thousands):

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	As of December 31,
	2014		2013
Computer equipment	$	119,716	$	103,154
Internal-use software	49,464		24,238
Leasehold improvements	18,125		15,069
Furniture and fixtures	9,220		8,318
Building	1,005		1,005
Land	655		655
Property and equipment	198,185		152,439
Less:  accumulated depreciation and amortization	111,590		94,253
Property and equipment, net	$	86,595	$	58,186

Depreciation and amortization expense on property and equipment, including depreciation and amortization expense on property and equipment under capital leases, totaled $18.1 million, $15.3 million and $12.4 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Included in property and equipment, net, is computer equipment acquired under capital leases as follows (in thousands):

	As of December 31,
	2014		2013
Computer equipment	$	38,913	$	33,006
Less:  accumulated amortization	33,556		29,453
Computer equipment, net	$	5,357	$	3,553

Capital leases entered into and included in property and equipment totaled $5.9 million, $3.3 million and $4.0 million for the years ended December 31, 2014, 2013 and 2012, respectively.

See Note 10 in the Notes to Consolidated Financial Statements for further discussion of computer software development costs related to internal-use software which is included in property and equipment, net.

9.           Foreign Currency

The financial statements of Ultimate’s foreign subsidiaries have been translated into U.S. dollars.  The functional currency of our wholly-owned subsidiary, The Ultimate Software Group of Canada, Inc., is the Canadian dollar.  Assets and liabilities are translated into U.S. dollars at period-end exchange rates.  Income and expenses are translated at the average exchange rate for the reporting period.  The resulting non-cash foreign currency translation adjustments, representing unrealized gains or losses, are included in consolidated stockholders’ equity as a component of accumulated other comprehensive income (loss).  Realized gains and losses resulting from foreign exchange transactions are included in total operating expenses in the consolidated statements of operations. Included in accumulated other comprehensive income (loss), as presented in the accompanying consolidated balance sheets, are $3.6 million of unrealized translation losses at December 31, 2014 and $1.4 million of unrealized translation losses at December 31, 2013. There were no significant reclassifications of realized gains and losses resulting from foreign exchange transactions to the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012.

Included in comprehensive income (loss) for the years ended December 31, 2014, 2013 and 2012 were realized foreign currency translation losses and unrealized foreign currency translation gains (losses), as follows (in thousands):

	For the Years Ended December 31,
	2014			2013			2012
Realized foreign currency translation (losses)	$	—		$	—		$	—
Unrealized foreign currency translation (losses) gains	$	(2,143	)	$	(1,549	)	$	166

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10.           Computer Software Development Costs

We previously capitalized software costs in accordance with Accounting Standards Codification ("ASC") Topic 985-20, Costs of Software to Be Sold, Leased, or Marketed. Those capitalized software costs were full amortized as of December 31, 2013.

Computer software development costs related to software developed for internal use falls under the accounting guidance of ASC Topic 350-40, Intangibles Goodwill and Other-Internal Use Software.     These capitalized costs are included with property and equipment in the consolidated balance sheets and purchases of property and equipment in the statements of cash flows. During the years ended December 31, 2014, 2013 and 2012, we capitalized $25.2 million, $19.0 million and $5.2 million, respectively. Internal-use software is amortized on a straight-line basis over its estimated useful life, generally three to seven years, commencing after the software development is substantially complete and the software is ready for its intended use. During the year ended December 31, 2014, we amortized $0.7 million of our internal use software due to the mid-2014 product release of our UltiPro Recruiting module within the overall capitalized development project. There was no amortization for the years ended December 31, 2013 and 2012. At each balance sheet date, we evaluate the useful lives of these assets and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. The amortization of capitalized software (e.g., from the Recruitment release) is included in cost of recurring revenues.

Capitalized computer software development costs and accumulated amortization of capitalized software, developed for internal use, were as follows (in thousands):

	For the Years Ended December 31,
	2014			2013	2012
Computer software development costs	$	49,464		24,238	5,217
Less: accumulated amortization	(670		)	—	—
Computer software development costs, net	48,794			24,238	5,217

UltiPro Recruiting, a component of the overall capitalized development project, became ready for its intended use during 2014. The remaining components of the development project are expected to be completed during 2015 and thereafter. Amortization for the components of the development project begins when they are ready for their intended use.

11.           Earnings Per Share

Earnings per share calculations require a dual presentation — “basic” and “diluted.” Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted average number of common shares (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

The following is a reconciliation of the shares used in the computation of basic and diluted net income (loss) per share (in thousands):

	For the Years Ended December 31,
	2014	2013	2012
Basic weighted average shares outstanding	28,293	27,773	26,778
Effect of dilutive equity instruments (1)	1,050	1,240	1,597
Dilutive shares outstanding	29,343	29,013	28,375
Anti-dilutive equity instruments (1)	40	47	67
(1) Includes options to purchase shares of Common Stock and other stock-based awards outstanding.

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12.  Goodwill and Intangible Assets

Goodwill represents the excess of cost over the net tangible and identifiable intangible assets of acquired businesses.  Goodwill amounts are not amortized, but rather tested for impairment at least annually. Identifiable intangible assets acquired in business combinations are recorded based upon fair value at the date of acquisition and amortized over their estimated useful lives.

On October 1, 2013, we completed the acquisition of Employtouch, Inc., which is engaged in the business of developing workforce management hardware and software products. On November 15, 2013, we completed the acquisition of the business of Accel HR, LLC which provides comprehensive outsourcing solutions, services and support for middle to large market organizations ranging from approximately 500 to over 25,000 employees. Upon the closing of both acquisitions, Ultimate acquired certain amortizable intangibles for developed technology, customer relationships and non-compete arrangements.  See Note 4 to the Notes to Consolidated Financial Statements for further discussion regarding the acquired intangibles.

The changes in the carrying value of goodwill were as follows:

	For the Year Ended
	December 31, 2014
Goodwill, December 31, 2013	$	26,942
Adjustments (1)	(561		)
Translation adjustment (2)	(685		)
Goodwill, December 31, 2014	$	25,696

(1) Goodwill adjustments represent the net purchase accounting adjustments for acquisitions during the related measurement periods.

(2) Represents the impact of the foreign currency translation of the portion of goodwill that is recorded by our Canadian subsidiary whose functional currency is also its local currency. Such goodwill is translated into U.S. dollars using exchange rates in effect at period end. Adjustments related to foreign currency translation are included in other comprehensive income.

As of December 31, 2014, the Company’s amortizable intangible assets, before amortization expense, have estimated useful lives as follows (in thousands):

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	December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Cumulative Translation Adjustment			Net Carrying Amount		Weighted Average Remaining Useful Life
Developed technology	$	5,200	$	(874	)	$	(537	)	$	3,789	6
Customer relationships	3,200		(392		)	(5		)	2,803		9
Non-compete agreements	300		(115		)	(3		)	182		2
	$	8,700	$	(1,381	)	$	(545	)	$	6,774	7
	December 31, 2013
	Gross Carrying Amount		Accumulated Amortization			Cumulative Translation Adjustment			Net Carrying Amount		Weighted Average Remaining Useful Life
Developed technology	$	5,200	$	(180	)	$	(179	)	$	4,841	7
Customer relationships	3,200		(47		)	(3		)	3,150		10
Non-compete agreements	300		(15		)	(2		)	283		3
	$	8,700	$	(242	)	$	(184	)	$	8,274	8

Acquired intangible assets are amortized over their estimated useful life, generally three to ten years, in a manner that reflects the pattern in which the economic benefits are consumed. Amortization expense for acquired intangible assets was $1,139 thousand and $242 thousand for the years ended December 31, 2014 and 2013. There was no amortization expense for acquired intangible assets for the year ended December 31, 2012. Future amortization expense for acquired intangible assets is as follows, as of December 31, 2014 (in thousands):

Year	Amount
2015	$	1,097
2016	1,075
2017	969
2018	969
2019	969
Thereafter	1,695
Total	$	6,774

13.  Capital Lease Obligations

We lease certain equipment under non-cancelable agreements, which are accounted for as capital leases and expire at various dates through 2017. Interest rates on these leases are 4.25%. The scheduled lease payments of the capital lease obligations are as follows as of December 31, 2014 (in thousands):

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Year	Amount
2015	$	3,877
2016	2,628
2017	832
	7,337
Less amount representing interest	(323		)
Lease obligations reflected as current ($3,655) and non-current ($3,359)	$	7,014

14. Other Borrowings

During the year ended December 31, 2012, we financed the purchase of perpetual licenses with third-party vendors totaling $5.3 million, payable over a three-year period. During the year ended December 31, 2014, we signed an addendum to those agreements totaling $0.8 million, payable over a two-year period. The remaining scheduled repayments of the other borrowings, which excludes interest, as of December 31, 2014, are as follows (in thousands):

Year	Amount
2015	$	567
2016	400
Other borrowings	$	967

15.  Income Taxes

For the year ended December 31, 2014, the income tax provision of $9.6 million was based on book income from operations before income taxes of $54.3 million.  For the year ended December 31, 2013, the income tax provision of $17.6 million was based on book income from operations before income taxes of $43.1 million.  For the year ended December 31, 2012, the income tax provision of $14.1 million was based on a book loss from operations before income taxes of $28.7 million.  Deferred tax assets and liabilities are determined based on the difference between financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. 

The income tax (provision) benefit consists of the following (in thousands):

	For the Year Ended December 31,
	2014			2013			2012
Current taxes:
Federal	$	(22,406	)	$	(14,091	)	$	(10,085	)
State and local	(5,078		)	(3,298		)	(2,354		)
Foreign	(567		)	(201		)	(164		)
Deferred taxes, net
Federal	16,607			(8		)	(1,710		)
State and local	1,535			(2		)	197
Foreign	317			41			9
Income tax provision	$	(9,592	)	$	(17,559	)	$	(14,107	)

The income tax provision is different from that which would be obtained by applying the statutory federal income tax rate of 35% to income from continuing operations before income taxes as a result of the following (in thousands):

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	For the Year Ended December 31,
	2014			2013			2012
Income tax (provision) benefit at statutory federal tax rate	$	(19,015	)	$	(15,081	)	$	(10,060	)
State and local income taxes, net of the federal benefit	(2,303		)	(2,144		)	(1,402		)
Non-deductible expenses	(2,068		)	(1,965		)	(2,470		)
Change in tax rates	80			51			45
Recognition of previously unrecognized tax benefits, federal benefit	—			1,679			—
Research credit, federal benefit	13,873			—			—
Other, net	(159		)	(99		)	(220		)
Income tax provision	$	(9,592	)	$	(17,559	)	$	(14,107	)

Deferred tax assets and liabilities reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  Significant components of our deferred tax assets and liabilities at December 31, 2014, 2013 and 2012 were as follows (in thousands):

	As of December 31,
	2014			2013			2012
Deferred tax assets:
Net operating losses, foreign	$	59		$	59		$	—
Tax credit carryforwards	127			127			127
Research credit	15,518			—			—
Deferred revenue	168			504			1,140
Accruals not currently deductible	715			472			386
Allowance for doubtful accounts	248			248			169
Charitable contributions	1,281			995			751
Stock-based compensation	41,139			29,840			24,044
Deferred rent adjustment	1,292			1,349			1,350
Gross deferred tax assets	60,547			33,594			27,967
Less valuation allowance	—			—			—
Deferred tax assets	$	60,547		$	33,594		$	27,967
Deferred tax liabilities:
Property and equipment	$	(23,248	)	$	(14,481	)	$	(8,665	)
Acquired intangible assets, foreign	(1,088		)	(1,371		)	—
Software development costs	815			815			613
Other, net	—			—			—
Gross deferred tax liabilities	(23,521		)	(15,037		)	(8,052		)
Net deferred tax assets	$	37,026		$	18,557		$	19,915

Ultimate considers all available evidence, both positive and negative, including historical levels of pre-tax book income, expiration of net operating loss carryforwards, expectations and risks associated with estimates of future taxable income, ongoing prudent and feasible tax planning strategies and reversal of deferred tax liabilities in assessing the need for the valuation allowance. If it is not more likely than not that we will recover our deferred tax assets, we will increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable.

The available positive evidence at December 31, 2014 included, among other factors, three years of cumulative historical pre-tax book income and a projection of future pre-tax book income and taxable income.  As a result of our analysis of all available evidence, both positive and negative, we believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize all of the deferred tax assets as of December 31, 2014. As such, there was no valuation allowance for the years ended December 31, 2014, 2013 and 2012.  

Approximately $1.4 million of deferred tax liabilities were recorded against the identified intangible assets established upon the acquisition of EmployTouch during 2013.

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Management continues to apply the exception to the comprehensive recognition of deferred income taxes to the undistributed earnings of our foreign subsidiary, Ultimate Canada.  The comprehensive recognition of deferred income taxes presumes that all undistributed earnings will be transferred to the parent entity.  This presumption may be overcome by the parent entity, and no income taxes would be accrued, if sufficient evidence shows that the subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a tax-free liquidation.  A parent entity shall have evidence of specific plans for reinvestment of undistributed earnings of a subsidiary which demonstrates that remittance of the earnings will be postponed indefinitely.  These criteria required to overcome the presumption are sometimes referred to as the indefinite reversal criteria.  Accordingly, deferred income taxes were not recognized on the undistributed earnings of Ultimate Canada.  The deferred tax liability, net of available foreign tax credits, resulting from the cumulative undistributed earnings are not deemed material. We recorded a deferred tax asset, of $13.2 million during the third quarter of 2014, for the years 1998 through 2013, and we recorded a deferred tax asset of $2.3 million during the three and twelve months ended December 31, 2014 for the year 2014, as a result of a research and development credit study.

At December 31, 2014, we had approximately $159.8 million of net operating loss carryforwards for Federal income tax reporting purposes available to offset future taxable income.  The $159.8 million was attributable to deductions from the exercise of non-qualified employee, and non-employee director, stock options and the vesting of restricted stock units and restricted stock awards, the tax benefit of which will primarily be credited to paid-in-capital and deferred tax asset when realized.  As a result, the tax benefits associated with stock based compensation are included in net operating loss carryforwards but not reflected in deferred tax assets.  During 2014, we realized a tax benefit of $33.5 million comprised of a $27.5 million and a $6.0 million credit to paid-in-capital and deferred tax asset, respectively.  During 2013, we realized a tax benefit of $25.5 million comprised of a $19.2 million and a $6.3 million credit to paid-in capital and deferred tax asset, respectively. During 2012, we realized a tax benefit of $16.7 million comprised of a $12.3 million and a $4.4 million credit to paid-in capital and deferred tax asset, respectively. As of December 31, 2014, we had approximately $0.2 million of net operating loss carryforwards for foreign income tax reporting purposes available to offset future taxable income. The carryforwards expire from 2018 through 2033 and from 2015 through 2033, for Federal and state income tax reporting purposes, respectively. Utilization of such net operating loss carryforwards may be limited as a result of cumulative ownership changes in Ultimate’s equity instruments due to ownership change provisions of Internal Revenue Code Section 382 and similar state provisions. The Internal Revenue Service examination of our U.S. Federal income tax return for the year ended December 31, 2010 was completed in 2013 with no change to the taxable income or income tax liability as reported.

ASC 740, “Income Taxes,” ("ASC 740") requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.  During 2013, the Internal Revenue Service completed their examination of our U.S. Federal income tax return for the year ended December 31, 2010, which resulted in the recognition of previously unrecognized tax benefits of approximately $1.9 million, which decreased our provision for income taxes and our effective tax rate. As of December 31, 2014, we had $5.0 million of gross unrecognized tax benefits resulting from a research and development credit attributable to the 1998-2014 years as a result of the completion of the research and development activities study that if recognized would affect the annual effective tax rate. While it is often difficult to predict the final outcome of any particular uncertain tax position, management does not believe that it is reasonably possible that the estimates of unrecognized tax benefits will change significantly in the next twelve months.

Tax years 1998 to 2014 remain subject to future examination by the tax jurisdictions in which we are subject to tax.

We recognize interest and penalties accrued related to unrecognized tax benefits as components of our income tax provision.  Due to our net operating loss carryover position, we did not have any interest and penalties accrued upon the adoption of ASC 740, and, as of December 31, 2014 and 2013, we did not have any interest and penalties accrued related to unrecognized tax benefits.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2014, 2013 and 2012 is as follows (in thousands):

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	As of December 31,
	2014		2013			2012
Balance at January 1,	$	—	$	1,866		$	1,866
Tax positions taken in prior period
Gross increases	—		—			—
Gross decreases	—		—			—
Tax positions taken in current period
Gross increases	4,950		—			—
Settlements	—		(1,866		)	—
Statute expiration	—		—			—
Balance at December 31,	$	4,950	$	—		$	1,866

16.  Stock-Based Compensation and Equity

Summary of Plans

Our Amended and Restated 2005 Equity and Incentive Plan (the “Plan”) authorizes the grant of options (“Options”) to non-employee directors, officers and employees of Ultimate to purchase shares of Ultimate's Common Stock ("Common Stock").  The Plan also authorizes the grant to such persons of restricted and non-restricted shares of Common Stock, stock appreciation rights, stock units and cash performance awards (collectively, together with the Options, the “Awards”).

As of December 31, 2014, the aggregate number of shares of Common Stock that were available to be issued under all Awards granted under the Plan was 1,165,680 shares.

Stock-Based Compensation

The following table sets forth the non-cash stock-based compensation expense resulting from stock-based arrangements that is recorded in our consolidated statements of income for the periods indicated (in thousands):

	For the Years Ended December 31,
	2014		2013		2012
Cost of recurring revenues	$	5,495	$	3,866	$	2,508
Cost of services revenues	4,446		3,591		2,729
Sales and marketing	20,767		13,625		7,861
Research and development	4,788		3,585		2,451
General and administrative	10,689		8,140		4,863
Total stock-based compensation expense	$	46,185	$	32,807	$	20,412

Included in computer equipment in property and equipment, net in our consolidated balance sheet and excluded from purchases of property and equipment in the statements of cash flow at December 31, 2014, 2013 and 2012 was $1.7 million, $1.4 million and $0.4 million, respectively, in non-cash stock-based compensation expense related to capitalized software which was developed for internal use during the fiscal years then ended. These amounts would have otherwise been charged to research and development expense for the years ended December 31, 2014, 2013 and 2012.

Net cash proceeds from the exercise of Options were $6.2 million, $8.1 million and $11.3 million for the years ended December 31, 2014, 2013 and 2012, respectively.  There was a $27.5 million, a $19.2 million and a $12.3 million income tax benefit recognized in additional paid in capital from the realization of excess stock-based payment deductions during the years ended December 31, 2014, 2013 and 2012, respectively.

Fair Value

The fair value of restricted stock awards and restricted stock units is equal to the closing price of our Common Stock on NASDAQ on the date of grant.

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We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.  The weighted-average forfeiture rates for the years ended December 31, 2014, 2013 and 2012 were based on historical data.

Options

There were no Options granted during the years ended December 31, 2014, 2013 and 2012. Options granted to officers and employees under the Plan generally have a 10-year term, vesting 25% immediately and 25% on each of the first three anniversaries of the grant date.  Options granted to non-employee directors under the Plan generally have a 10-year term and vest and become exercisable immediately on the grant date.  

Restricted Stock Awards

Under the provisions of the Plan, Ultimate may, at the discretion of the Compensation Committee or the Board, grant restricted stock awards (“Restricted Stock Awards”) to officers, employees and non-employee directors.  The shares of Common Stock issued under Restricted Stock Awards are subject to certain vesting requirements and restrictions on transfer.  During the years ended December 31, 2014, 2013 and 2012, we granted Restricted Stock Awards for 235,000, 191,500 and 396,700 shares, respectively, of Common Stock to officers and employees and we granted Restricted Stock Awards for 10,375, 18,198 and 21,789 shares, respectively, of Common Stock to non-employee directors.  Compensation expense for Restricted Stock Awards is measured based on the closing market price of our Common Stock at the date of grant and is recognized on a straight-line basis over the vesting period.  Holders of Restricted Stock Awards have all rights of a stockholder including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto during the vesting period.  Each Restricted Stock Award becomes vested on the fourth anniversary of the respective date of grant, subject to the grantee’s continued employment with Ultimate or any of its subsidiaries on each such vesting date and subject further to accelerated vesting in the event of a change in control of Ultimate, death or disability, the termination of employment by Ultimate without cause or, in the case of a non-employee director, at cessation of his board services at the end of his term.  Included in our consolidated statements of income for the years ended December 31, 2014, 2013 and 2012 was $23.3 million, $16.1 million and $9.2 million, respectively, of non-cash stock-based compensation expense for Restricted Stock Awards.

Restricted Stock Unit Awards

Ultimate may, at the discretion of the Compensation Committee, make Awards of stock units or restricted stock units under the Plan (“Restricted Stock Unit Awards”) to certain officers and employees.  A Restricted Stock Unit Award is a grant of a number of hypothetical share units with respect to shares of Common Stock that are subject to vesting and transfer restrictions and conditions under a restricted stock unit award agreement.  The value of each unit is equal to the fair value of one share of Common Stock on any applicable date of determination.  The payment with respect to each unit under a Restricted Stock Unit Award may be made, at the discretion of the Compensation Committee, (i) in a number of shares of our Common Stock equal to the number of Restricted Stock Units becoming vested, (ii) in cash, in an amount equal to the fair market value of a share of our Common Stock on the vesting date multiplied by the number of restricted stock units becoming vested on such date or (iii) in a combination of both.  The grantee of a Restricted Stock Unit Award does not have any rights as a stockholder with respect to the shares subject to a Restricted Stock Unit Award until such time as shares of Common Stock are delivered to the grantee pursuant to the terms of the related stock unit award agreement.

Restricted Stock Unit Awards vest in three equal annual installments of 33-1/3% of the number of Restricted Stock Unit Awards on each of the first three anniversaries of the date of grant thereof, subject to the participant’s continued employment with Ultimate or any of its subsidiaries on each such vesting date, and shall be payable as described above, provided, however, that if any such anniversary is not a date on which our Common Stock is traded on NASDAQ, then the vesting date shall be the last such trading day immediately preceding such anniversary; and provided further, however, that if the Chief Financial Officer (“CFO”) of Ultimate should determine that any such anniversary falls within a period during which the participant is prohibited from trading Ultimate’s Common Stock under our stock trading policy, the CFO shall so advise the participant in writing and the vesting date shall be the date as of which the CFO has determined that such period has ended.

There were 207,000, 249,210 and 313,442 Restricted Stock Unit Awards granted to employees during the years ended December 31, 2014, 2013 and 2012, respectively.    Non-cash stock-based compensation expense for Restricted Stock Unit Awards is measured based on the fair market value of our Common Stock on the date of grant and recognized on a straight-line basis over the vesting period.  Included in Ultimate’s consolidated statements of operations for the years ended December 31,

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2014, 2013 and 2012 was $22.9 million, $16.7 million and $11.2 million, respectively, of non-cash stock-based compensation expense for Restricted Stock Unit Awards.

Option, Restricted Stock and Restricted Stock Unit Activity

The following table summarizes Option activity for the years ended December 31, 2012, 2013 and 2014, as follows (in thousands, except per share amounts):

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2011	2,223		$	20.20
Granted
Exercised	(750	)	15.04
Forfeited or expired	—		—
Outstanding and exercisable at December 31, 2012	1,473		$	22.83	3.8	$	105,447
Outstanding at December 31, 2012	1,473		$	22.83
Granted	—		—
Exercised	(440	)	18.48
Forfeited or expired	(1	)	23.31
Outstanding and exercisable at December 31, 2013	1,032		$	24.69	3.1	$	132,615
Outstanding at December 31, 2013	1,032		$	24.69
Granted	—		—
Exercised	(310	)	20.05
Forfeited or expired	—		—
Outstanding and exercisable at December 31, 2014	722		$	26.68	2.6	$	86,758

The aggregate intrinsic value of Options in the table above represents total pretax intrinsic value (i.e., the difference between the closing price of our Common Stock on the last trading day of the reporting period and the exercise price, times the number of shares) that would have been received by the Option holders had all Option holders exercised their Options on December 31, 2014.  The amount of the aggregate intrinsic value changes, based on the fair value of our Common Stock.  Total intrinsic value of Options exercised during the years ended December 31, 2014, 2013 and 2012 was $44.6 million, $42.6 million and $51.7 million, respectively.  There were no Options vested during the years ended December 31, 2014, 2013 and 2012. All options granted under the Plan and the Prior Plan are fully vested as of December 31, 2014.

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The following table summarizes Restricted Stock and Restricted Stock Unit Award activity for the years ended December 31, 2012, 2013 and 2014, as follows (in thousands, except per share amounts):

	Restricted Stock
	Shares		Weighted Average Grant Date Fair Value		Restricted Stock Units Shares
Outstanding at December 31, 2011	1,045		$	31.25	430
Granted	418		93.81		313
Vested	—		—		—
Released	(457	)	15.22		(213	)
Forfeited or expired	(8	)	31.84		(22	)
Outstanding at December 31, 2012	998		$	64.81	508
Granted	210		152.03		249
Vested	—		—		—
Released	(209	)	27.76		(229	)
Forfeited or expired	(31	)	77.92		(27	)
Outstanding at December 31, 2013	968		$	91.28	501
Granted	245		152.39		207
Vested	—		—		—
Released	(153	)	40.38		(242	)
Forfeited or expired	—		—		(22	)
Outstanding at December 31, 2014	1,060		$	112.77	444

As of December 31, 2014, $77.2 million of total unrecognized compensation cost related to non-vested Restricted Stock Awards is expected to be recognized over a weighted average period of 2.07 years.  As of December 31, 2014, $35.3 million of total unrecognized compensation costs related to non-vested Restricted Stock Unit Awards is expected to be recognized over a weighted average period of 1.51 years.

The following table summarizes information with respect to Options outstanding and Options exercisable under the Plan at December 31, 2014:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number	Weighted Average Remaining Contractual Term (Years)	Weighted- Average Exercise Price		Number	Weighted Average Exercise Price
$13.63—$18.69	79,551	2.19	$	16.01	79,551	$	16.01
$21.60—$24.20	94,288	1.38	22.62		94,288	22.62
$24.30—$24.30	125,423	2.10	24.30		125,423	24.30
$26.72—$26.83	6,861	1.76	26.77		6,861	26.77
$27.02—$27.02	1,879	2.37	27.02		1,879	27.02
$28.41—$28.41	201,861	3.10	28.41		201,861	28.41
$30.34—$30.34	49,301	2.56	30.34		49,301	30.34
$32.39—$32.39	87,760	3.57	32.39		87,760	32.39
$32.54—$32.54	52,300	3.32	32.54		52,300	32.54
$34.89—$34.89	22,915	2.81	34.89		22,915	34.89
$13.63—$34.89	722,139	2.61	$	26.68	722,139	$	26.68

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Board Compensation

     Each non-employee director of Ultimate receives compensation for serving on the Board, payable exclusively in the form of Restricted Stock Awards granted under the Plan.

On October 25, 2010, the Board amended the previously approved arrangement pursuant to which the non-employee directors and Chairmen of the Audit and Compensation Committees of the Board, respectively, were granted Awards for each regular Board and Committee meeting attended.  Under the arrangement, as amended, (i) each non-employee director was granted a restricted stock award of 750 shares of Common Stock for each regular meeting of the Board attended during the first three quarters of 2013 and for the years ended December 31, 2012 and 2011 and (ii) each of the Chairmen of the Audit Committee and Compensation Committee was granted a restricted stock award of 468 shares of Common Stock for attendance at each regular meeting of the Committee during the first three quarters of 2013 and for the years ended December 31, 2012 and 2011 that he chaired.

On October 28, 2013, the Board amended the previously approved arrangement pursuant to which the non-employee directors and Chairmen of the Audit, Compensation and Nominating Committees of the Board, respectively, were granted Awards for each regular Board and Committee meeting attended.  Under the arrangement, as amended, (i) each non-employee director was granted a restricted stock award of 400 shares of Common Stock for each regular meeting of the Board attended during the fourth quarter of 2013 and each quarter of 2014 and (ii) each of the Chairmen of the Audit Committee, Compensation Committee and Nominating Committee was granted a restricted stock award of 50 shares of Common Stock for attendance at each regular meeting of the Committee during the fourth quarter of 2013 and each quarter of 2014 that he chaired.

In addition, in 2014, 2013 and 2012 each non-employee director was granted, for each fiscal quarter during which he served, a restricted stock award of that number of shares of Common Stock equal to the quotient of $12,500 divided by the closing price of the Common Stock on NASDAQ on the date of grant, which is the effective date of the grant determined by the Board for each such quarter, rounded down to the closest full number of shares.  Under the arrangement as amended, the date of grant shall not be a date prior to the date of the Board’s determination of the same and such restricted stock awards shall vest on the fourth anniversary of the date of grant, subject to accelerated vesting in the event of a director’s death, disability, cessation of service or the end of his term or the occurrence of a change of control of Ultimate.

The following table summarizes information about Restricted Stock Awards granted by us to non-employee directors in exchange for director related services rendered for 2014, 2013 and 2012:

Year	Market Value of Restricted Stock Awards Granted		Number of Restricted Stock Awards Granted
2012	$	69.00	5,591
	76.42		5,501
	93.84		5,351
	94.50		5,346
2013	$	95.99	5,336
	109.95		5,251
	146.25		5,111
	155.32		2,500
2014	$	164.87	2,625
	118.03		2,625
	132.23		2,570
	152.59		2,555

The non-cash compensation expense, recognized in the consolidated statements of income related to the Restricted Stock Awards granted to non-employee directors, including the chairmen of the Audit, Compensation and Nominating Committees, determined pursuant to the application of ASC 718 for the years ended December 31, 2014, 2013 and 2012, was $1,652,000,

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$1,449,000 and $1,058,000, respectively, and is included in general and administrative expenses in the consolidated statements of income. The non-cash stock-based expense amounts are included in the non-cash stock-based compensation expense for restricted stock awards in the consolidated statements of operations.

Common Stock

The holders of Common Stock are entitled to one vote per share for each share held of record on all matters submitted to a vote of the stockholders.

17.  Commitments and Contingencies

Operating Leases

We lease corporate office space and certain equipment under non-cancelable operating lease agreements expiring at various dates. Total rent expense under these agreements was $8.5 million, $6.6 million and $5.7 million for the years ended December 31, 2014, 2013 and 2012, respectively. Future minimum annual rental commitments related to these leases are as follows as of December 31, 2014 (in thousands):

Year	Amount
2015	$	8,657
2016	8,642
2017	7,028
2018	5,357
2019	4,177
Thereafter	6,006
	$	39,867

Software License Agreements

We have a software license and OEM (original equipment manufacturer) agreement with a third-party vendor for the purposes of development and testing, and support of end users and use with the customer application expiring on December 31, 2016. Future commitments related to this agreement are as follows as of December 31, 2014 (in thousands):

Year	Amount
2015	$	1,155
2016	1,155
	$	2,310

Litigation

From time-to-time, Ultimate is involved in litigation relating to claims arising out of its operations in the normal course of business. We are not currently a party to any legal proceeding the adverse outcome of which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on our operating results or financial condition.

18.  Related Party Transactions

On October 23, 2006, Ultimate’s Board elected Al Leiter as a non-employee member of Ultimate’s Board of Directors.  During October 2002, Mr. Leiter entered into an agreement with Ultimate pursuant to which he agreed to (i) attend and participate in certain internal meetings of Ultimate; (ii) assist our salespeople with prospects; and (iii) act as an official spokesperson for Ultimate in exchange for which we agreed to make contributions to Leiter’s Landing, Mr. Leiter’s non-profit charitable organization benefiting children, in the amount of one tenth (1/10) of one percent, or 0.1%, of our total revenues as reported in our consolidated statements of operations.  In February 2007, Mr. Leiter and Ultimate agreed that the maximum amount payable by Ultimate in any one year under this agreement is $200,000. In June 2012, Mr. Leiter and Ultimate terminated this agreement. Therefore, there were no contributions to Leiter's Landing for the years ended December 31, 2014

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and 2013. For the fiscal year ended December 31, 2012, Ultimate contributed a total of approximately $50,000 to Leiter’s Landing.  

19.  Employee Benefit Plan

Ultimate provides retirement benefits for eligible employees, as defined, through a defined contribution plan that is qualified under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). Contributions to the 401(k) Plan, which are made at the sole discretion of Ultimate, were $5.5 million, $3.6 million and $2.9 million for the years ended December 31, 2014, 2013 and 2012, respectively.

None.

Evaluation of Disclosure Controls and Procedures

Ultimate carried out an evaluation, under the supervision and with the participation of Ultimate’s management, including the Chief Executive Officer (the “CEO”) and the Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of Ultimate’s disclosure controls and procedures as of the end of the period covered by this Form 10-K pursuant to Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, Ultimate’s management, including the CEO and CFO, concluded that, as of December 31, 2014, Ultimate’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in Ultimate’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.  Ultimate’s disclosure controls and procedures were designed to provide reasonable assurance as to the achievement of these objectives.  It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events and thus has inherent limitations.  Therefore, even those systems determined to be effective can only provide reasonable assurance as to the achievement of their objectives.

Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act).  Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP.  Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014.  In making this assessment, our management used the criteria established in Internal Control – Integrated Framework(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on the results of this assessment, our management has concluded that, as of December 31, 2014, our internal control over financial reporting was effective.  However, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation.

KPMG LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Form 10-K, has issued an attestation report on Ultimate’s internal control over financial reporting as of December 31, 2014, which is included below on this Form 10-K.

Changes in Internal Control Over Financial Reporting

There have been no changes during the fourth quarter of 2014 in Ultimate’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Ultimate’s internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

The Ultimate Software Group, Inc.:

We have audited The Ultimate Software Group, Inc.’s (the Company) internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The Ultimate Software Group, Inc. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2014, and our report dated February 27, 2015 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

February 27, 2015

Jacksonville, Florida

Certified Public Accountants

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None.

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PART III

The executive officers (Messrs. Scott Scherr, Marc D. Scherr, Mitchell K. Dauerman, Adam Rogers, Greg Swick, Robert Manne and Chris Phenicie), directors and other key employees of Ultimate, and their ages as of February 18, 2015, are as follows:

Name	Age	Position(s)
Scott Scherr	62	Chairman of the Board, President and Chief Executive Officer
Marc D. Scherr	57	Vice Chairman of the Board and Chief Operating Officer
Mitchell K. Dauerman	57	Executive Vice President, Chief Financial Officer and Treasurer
Adam Rogers	40	Senior Vice President, Chief Technology Officer
Greg Swick	51	Senior Vice President, Chief Enterprise Sales Officer
Robert Manne	61	Senior Vice President, General Counsel
Chris Phenicie	43	Senior Vice President, Chief Mid-Market Sales Officer
James A. FitzPatrick, Jr.	65	Director
Alois T. Leiter	49	Director
LeRoy A. Vander Putten	80	Director
Rick A. Wilber	68	Director
Robert A. Yanover	78	Director
Julie Dodd	45	Senior Vice President, Chief Services Officer
Bill Hicks	49	Senior Vice President, Chief Relationship Officer
Jody Kaminsky	40	Senior Vice President, Marketing
Vivian Maza	53	Senior Vice President, Chief People Officer and Secretary

Scott Scherr has served as President and a director of Ultimate since its inception in April 1996 and has been Chairman of the Board and Chief Executive Officer of Ultimate since September 1996. Mr. Scherr is also a member of the Executive Committee of the Board of Directors (the “Board”). In 1990, Mr. Scherr founded The Ultimate Software Group, Ltd. (the “Partnership”), the business and operations of which were assumed by Ultimate in 1998. Mr. Scherr served as President of the Partnership’s general partner from the inception of the Partnership until its dissolution in March 1998. From 1979 until 1990, he held various positions at ADP, a payroll services company, where his titles included Vice President of Operations and Sales Executive. Prior to joining ADP, Mr. Scherr operated Management Statistics, Inc., a data processing service bureau founded by his father, Reuben Scherr, in 1959. He is the brother of Marc Scherr, the Vice Chairman of the Board of Ultimate and the father-in-law of Adam Rogers, Senior Vice President, Chief Technology Officer.

Marc D. Scherr has been a director of Ultimate since its inception in April 1996 and has served as Vice Chairman since July 1998 and as Chief Operating Officer since October 2003. Mr. Scherr is also a member of the Executive Committee of the Board. Mr. Scherr became an executive officer of Ultimate effective March 1, 2000. Mr. Scherr served as a director of Gerschel & Co., Inc., a private investment firm from January 1992 until March 2000. In December 1995, Mr. Scherr co-founded Residential Company of America, Ltd. (“RCA”), a real estate firm, and served as President of its general partner until March 2000. Mr. Scherr also served as Vice President of RCA’s general partner from its inception in August 1993 until December 1995. From 1990 to 1992, Mr. Scherr was a real estate pension fund advisor at Aldrich, Eastman & Waltch. Previously, he was a partner in the Boston law firm of Fine & Ambrogne. Mr. Scherr is the brother of Scott Scherr, Chairman of the Board, President and Chief Executive Officer of Ultimate.

Mitchell K. Dauerman has served as Executive Vice President of Ultimate since April 1998 and as Chief Financial Officer and Treasurer of Ultimate since September 1996. From 1979 to 1996, Mr. Dauerman held various positions with KPMG LLP, an accounting firm, serving as a Partner in the firm from 1988 to 1996. Mr. Dauerman is a Certified Public Accountant.

Adam Rogers has served as Senior Vice President, Chief Technology Officer since February 6, 2007.  Mr. Rogers served as Senior Vice President, Development from December 2002 to February 6, 2007. From July 2001 to December 2002, Mr. Rogers served as Vice President of Engineering. From May 1997 to July 2001, Mr. Rogers held various positions in Ultimate’s research and development organization, including Director of Technical Support from October 1998 to November

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1999 and Director of Web Development from November 1999 to July 2001.  Mr. Rogers is the son-in-law of Scott Scherr, Chairman of the Board, President and Chief Executive Officer of Ultimate.

Greg Swick has served as Senior Vice President since January 2001 and as Chief Enterprise Sales Officer since February 6, 2007. Mr. Swick served as Vice President and General Manager of the PEO Division of Ultimate’s sales organization from November 1999 to January 2001. From February 1998 to November 1999, Mr. Swick was Director of Sales, Northeast Division. Prior to joining Ultimate, Mr. Swick was President of The Ultimate Software Group of New York and New England, G.P., a reseller of Ultimate Software which was acquired by Ultimate in March 1998. From 1987 to 1994, Mr. Swick held various positions with ADP, where the most recent position was Area Vice President — ADP Dealer Services Division.

Robert Manne has served as Senior Vice President, General Counsel since February 2004 and served as Vice President, General Counsel from May 1999 through January 2004. Prior to joining Ultimate, Mr. Manne was an attorney and partner of Becker & Poliakoff, P.A., an international law firm, since 1978. In addition to administering the Litigation Department of the law firm, Mr. Manne was a permanent member of the firm’s executive committee which was responsible for law firm operations. Mr. Manne has performed legal services for Ultimate since its inception.

Chris Phenicie has served as Senior Vice President and Chief Mid-Market Sales Officer since January 2009 and served as Vice President of Workplace Sales from April 2007 until January 2009. From January 2000 to April 2007, Mr. Phenicie served as Strategic Account Manager for Ultimate. From July 1997 to January 2000, Mr. Phenicie held various sales positions with ADP, the most recent of which position was Sales Manager.

James A. FitzPatrick, Jr. has served as a director of Ultimate since July 2000 and is Chairman of the Nominating Committee of the Board and is a member of the Compensation Committee of the Board since February 2014. Mr. FitzPatrick is, and since June 2012 has been, a partner in the law firm Hogan Lovells US LLP. Mr. FitzPatrick was a partner in the law firm Dewey & LeBoeuf LLP and its predecessor firms from January 1983 until May 2012 and was an associate from September 1974 until January 1983.

Al Leiter has served as director of Ultimate since October 2006 and is a member of the Compensation Committee and the Nominating Committee of the Board.  Mr. Leiter was a three-time Major League Baseball World Champion and two-time All-Star pitcher formerly with the New York Yankees, New York Mets, Toronto Blue Jays, and Florida Marlins, and has been an official spokesperson for Ultimate since 2002.  Mr. Leiter has served as a television commentator for the Yankees Entertainment and Sports Network since 2006 and as an analyst with MLB Network since January 2009.  Mr. Leiter is president and founder of Leiter’s Landing, a charitable organization formed in 1996.  Mr. Leiter has served on the Executive Committee of New York City’s official tourism marketing organization, NYC & Company, since 2000 and is on the Board of Directors of America’s Camp, a legacy organization of the Twin Towers Fund, on which he also served as a board member.

LeRoy A. Vander Putten has served as a director of Ultimate since October 1997, is Chairman of the Compensation Committee of the Board and is a member of the Audit Committee of the Board. Mr. Vander Putten served as the Executive Chairman of The Insurance Center, Inc., a holding company for 14 insurance agencies, from October 2001 until January 2006 at which time the company was sold. Previously, he served as the Chairman of CORE Insurance Holdings, Inc., a member of the GE Global Insurance Group, engaged in the underwriting of casualty reinsurance, from August 2000 to August 2001. From April 1998 to August 2000, he served as Chairman of Trade Resources International Holdings, Ltd., a corporation engaged in trade finance for exporters from developing countries. From January 1988 until May 1997, Mr. Vander Putten was Chairman and Chief Executive Officer of Executive Risk Inc., a specialty insurance holding company. From August 1982 to January 1988, Mr. Vander Putten served as Vice President and Deputy Treasurer of The Aetna Life and Casualty Company, an insurance company.

Rick A. Wilber has served as a director of Ultimate since October 2002 and is a member of the Audit Committee, a member of the Compensation Committee, and a member of the Nominating Committee of the Board. Mr. Wilber formerly served on Ultimate’s Board of Directors from October 1997 through May 2000. Mr. Wilber served as the President of Lynn’s Hallmark Cards, which owned and operated a number of Hallmark Card stores, from 1995 until 2013, at which time Mr. Wilber retired.  Mr. Wilber has served as a director of Synergy Resource Corporation, an oil and gas exploration company, since October 2008.  Mr. Wilber was a co-founder of Champs Sports Shops and served as its President from 1974 to 1984. He served on the Board of Royce Laboratories, a pharmaceutical concern, from 1990 until April 1997, when Royce Laboratories was sold to Watson Pharmaceuticals, Inc., a pharmaceutical concern.

Robert A. Yanover has served as a director of Ultimate since January 1997 and is Chairman of the Audit Committee and a member of the Compensation Committee of the Board. Mr. Yanover founded Computer Leasing Corporation of Michigan, a private leasing company, in 1975 and served as its President from its founding until 2007, at which time Mr.

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Yanover retired. Mr. Yanover also founded Lason, Inc., a corporation specializing in the imaging business, and served as Chairman of the Board from its inception in 1987 until 1998 and as a director through February 2001.

Each officer serves at the discretion of the Board and holds office until his or her successor is elected and qualified or until his or her earliest resignation or removal.  Messrs. Marc D. Scherr, James A. FitzPatrick, Jr. and Rick A. Wilber serve on the Board in the class whose term expires at the Annual Meeting of stockholders (the “Annual Meeting”) in 2015.  Messrs. Scott Scherr and Al Leiter serve on the Board in the class whose term expires at the Annual Meeting in 2016. Messrs. LeRoy A. Vander Putten and Robert A. Yanover serve on the Board in the class whose term expires at the Annual Meeting in 2017.

Julie Dodd has served as Senior Vice President and Chief Services Officer since October 2013, responsible for all support and implementation services provided by the Company to its customers. Ms. Dodd served as Senior Vice President and General Manager, Mid-Market Services, from April 2010 until January 2014 and served as Vice President and General Manager of Mid-Market Operations from January 2009 until April 2010.  From October 2007 to December 2008, Ms. Dodd served as the Director of Product Strategy, with primary focus on the UltiPro Mid-Market product offering.  Prior to joining Ultimate, Ms. Dodd provided consulting services for large scale implementations, operations efficiencies projects and new cloud product launches for various service providers. From 2002 to 2005, Ms. Dodd held various executive positions with Ceridian Corporation, an information technology company, supporting their small and mid-market solutions.

Bill Hicks has served as Senior Vice President and Chief Relationship Officer since October 2013. Mr. Hicks served as Senior Vice President of Shared Services and Chief Information Officer since April 2005.  Mr. Hicks served as Vice President and Chief Information Officer from February 2004 through March 2005.  From 1993 until February 2004, Mr. Hicks held various positions in the management of technologies for Precision Response Corporation, a wholly-owned subsidiary of Interactive Corporation and a provider of call centers and on-line commerce customer care services, including Chief Information Officer and Senior Vice President of Technology from August 2000 until February 2004.

Jody Kaminsky has served as Senior Vice President of Marketing since April 2010.  Ms. Kaminsky served as Vice President of Marketing from July 2008 until April 2010.  Ms. Kaminsky served as Vice President of Marketing Operations from July 2005 to June 2008, as Director of Strategic Marketing from December 2002 through June 2005, and in various other Marketing and Communications positions from November 1999 through November 2002.  Prior to that, Ms. Kaminsky held various positions with General Electric's GE Information Services division from April 1997 through August 1999, including Manager of Communications and Community Relations.

Vivian Maza has served as Senior Vice President, Chief People Officer and Secretary of Ultimate since February 2004 and served as Vice President, People from January 1998 through January 2004.  Ms. Maza has served as Secretary of Ultimate since September 1996. Prior to that, Ms. Maza served as the Office Manager of Ultimate from its organization in April 1996 and of the Partnership from its inception in 1990 until April 1996. Ms. Maza is an HR Generalist and holds a Professional in Human Resources (PHR) certification from the Society for Human Resource Management (SHRM) association. From 1985 to 1990, Ms. Maza was a systems analyst for the Wholesale Division of ADP.

Code of Ethics

Ultimate has adopted a Code of Ethics within the meaning of Item 406 of Regulation S-K of the Exchange Act.  Ultimate’s Code of Ethics applies to its principal executive officer, principal financial officer and principal accounting officer.  A copy of Ultimate’s Code of Ethics is posted on Ultimate’s website at www.ultimatesoftware.com.  In the event that Ultimate makes any amendments to, or grants any waiver from, a provision of the Code of Ethics that requires disclosure under Item 5.05 of Form 8-K, Ultimate will post such information on its website.

Corporate Governance

In 2013 the Board formed a Nominating Committee.   The primary function of the Nominating Committee is to recommend director-nominees to be considered for election or appointment by the Board. Ultimate has established a Nominating Committee Charter that sets forth the Nominating Committee’s principal duties and responsibilities. This charter is available on our website.

When considering potential director candidates, the Board considers, and the Nominating Committee will consider, the candidate’s independence (as mandated by the NASDAQ rules), character, judgment, age, skills, financial literacy, and experience in the context of the needs of Ultimate and the Board.  Other information required by this item is incorporated herein by reference to the information set forth in Ultimate’s Proxy Statement for the Annual Meeting in 2015 under the

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heading “Corporate Governance, Board Meetings and Committees of the Board.”  In 2014, Ultimate did not pay any fees to a third party to assist in identifying or evaluating potential nominees.

The Nominating Committee and the Board will consider director candidates recommended by Ultimate’s stockholders in a similar manner as those recommended by members of management or other directors.

Other Information

The information required by this item is incorporated herein by reference to the information set forth in Ultimate’s Proxy Statement for the Annual Meeting in 2015 under the headings “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance, Board Meetings and Committees of the Board-Audit Committee.”

The information required by this item is incorporated herein by reference to the information in Ultimate’s Proxy Statement for the 2015 Annual Meeting under the headings “Executive Compensation Policy,” “Director Compensation” and “Compensation Committee Report.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information set forth in this item is incorporated herein by reference to the information in Ultimate’s Proxy Statement for the 2015 Annual Meeting under the heading “Security Ownership of Certain Beneficial Owners and Management.”

Equity Compensation Plan Information.

The following table summarizes information related to Ultimate’s equity compensation plans as of December 31, 2014:

Equity Compensation Plan Information
Plan Category	(a) Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights	(b) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		(c) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Refleceted in Column ( a ))
Equity compensation plans approved by security holders	722,139	$	26.68	1,165,680
Equity compensation plans not approved by security holders	—	—		—
Total	722,139	$	26.68	1,165,680

The information required by this item is incorporated herein by reference to the information in Ultimate’s Proxy Statement for the 2015 Annual Meeting under the headings “Certain Relationships and Related Transactions,” “Compensation Committee Interlocks and Insider Participation” and “Corporate Governance, Board Meetings and Committees of the Board.”

The information required by this item is incorporated herein by reference to the information in Ultimate’s Proxy Statement for the 2015 Annual Meeting under the heading “KPMG LLP Fees.”

PART IV

(a) Documents filed as part of this Form 10-K:

1. The following consolidated financial statements of Ultimate, together with the report thereon, of KPMG LLP, our Independent Registered Public Accounting Firm, are included in Part II, Item 8, of this Form 10-K:

Consolidated Balance Sheets as of December 31, 2014 and 2013

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Consolidated Statements of Income for the Years Ended December 31, 2014, 2013 and 2012

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013 and 2012

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2014, 2013 and 2012

Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 2012

Notes to Consolidated Financial Statements

3. Exhibits

Number	Description
3.1	Amended and Restated Certificate of Incorporation  (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 (File 333-47881), initially filed March 13, 1998 (the "Registration Statement"))
3.2	Certificate of Designations of Series A Junior Preferred Stock (incorporated by reference to Exhibit 2  to Ultimate’s Current Report on Form 8-K dated October 23, 1998)
3.3	Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to Ultimate's Current Report on Form 8-K dated February 6, 2013)
4.1	Form of Certificate for the Common Stock, par value $0.01 per share (incorporated by reference to Exhibit 4.1 to the Registration Statement)
4.2	Form of Warrant for Common Stock (incorporated by reference to Exhibit 4.4 to Ultimate's Registration Statement on Form S-3 (File No. 333-107527), initially filed July 31, 2003)
4.3	Amended and Restated Rights Agreement, dated as of August 26, 2008, between Ultimate and Computershare Trust Company, N.A., as Rights Agent.  The Rights Agreement includes the Form of Certificate of Designations of Series A Junior Preferred Stock as Exhibit A, the Form of Rights Certificate as Exhibit B and the Summary of Rights as Exhibit C (incorporated by reference to Exhibit 4.1 to Ultimate’s Current Report on Form 8-K dated September 2, 2008).
10.1	Shareholders Rights Agreement, dated June 6, 1997 among Ultimate and certain stockholders named therein (incorporated by reference to Exhibit 10.1 to the Registration Statement)
10.2	Commercial Office Lease by and between ROHO Ultimate, LTD. II, a Florida limited partnership     (“Landlord”) and Ultimate  dated May 23, 2001 (incorporated by reference to Exhibit 10.32 to Ultimate's Annual Report on Form 10-K dated March 15, 2006)
10.3	Weston Town Center South Office Building Lease between South Office Building-DLB, LLC, a Florida Limited Liability Company, South Office Building Bagtrust, LLC, a Florida Limited Liability Company, and South Office Building-BJB, LLC, a Florida Limited Liability Company, and Ultimate and Weston Common Area LTD., dated August 18, 2005 (incorporated by reference to Exhibit 10.35 to Ultimate’s Annual Report on Form 10-K, dated March 15, 2006)
10.4	Galleria Atlanta office lease agreement between Galleria 600, LLC, a Delaware limited liability company, and Ultimate, dated April 27, 2006  (incorporated by reference to Exhibit 10.36 to Ultimate’s Quarterly Report on Form 10-Q, dated August 8, 2006)
10.5	Lease of Office Space by and between OMERS Realty Corporation CPP Investment Board Real Estate Holdings Inc., and The Ultimate Group of Canada, Inc., dated August 22, 2006 (incorporated by reference to Exhibit 10.37 to Ultimate’s Quarterly Report on Form 10-Q, dated November 8, 2006)
10.6	Indemnity Agreement between OMERS Realty Corporation, CPP Investment Board Real Estate Holdings, Inc., and Ultimate dated August 22, 2006 (incorporated by reference to Exhibit 10.38 to Ultimate’s Quarterly Report on Form 10-Q, dated  November 8, 2006)
10.7	Amendment to Lease by and between ROHO Ultimate, Ltd. I (“Landlord”) and Ultimate Group. Inc. (“Tenant”) for Demised premises at 2000 Ultimate Way, Weston, FL 33326 (the “Premises”) dated February 15, 2000 (incorporated by reference to Exhibit 10.39 to Ultimate’s Annual Report on Form 10-K, dated March 16, 2007)
10.8	First Amendment to Lease between Galleria 600, LLC (“Landlord”) and Ultimate, dated August 18, 2006 (incorporated by reference to Exhibit 10.42 to Ultimate’s Annual Report on Form 10-K, dated March 16, 2007)
10.9	Amended and Restated 2005 Equity and Incentive Plan (incorporated by reference to Exhibit 10.1 to Ultimate’s Current Report on Form 8-K, dated May 18, 2012) †
10.10	Commercial lease between Weston Office, LLC (“Landlord”) and Ultimate, dated January 18, 2008 (incorporated by reference to Exhibit 10.45 to Ultimate’s Annual Report on Form 10-K, dated March 13, 2008)

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10.11	Commercial lease between AGF Woodfield Owner, L.L.C., (“Landlord”) and Ultimate, dated October 31, 2008 (incorporated by reference to Exhibit 10.47 to Ultimate’s Annual Report on Form 10-K, dated March 2, 2009)
10.12	Commercial lease between 300 Galleria Parkway Associates, L.P., (“Landlord”) and Ultimate, dated September 8, 2009 (incorporated by reference to Exhibit 10.33 to Ultimate’s Quarterly Report on Form 10-Q, dated November 9, 2009)
10.13	Commercial lease between RT Twenty-Sixth Pension Properties Limited (“Landlord”) and Ultimate, dated September 4, 2009 (incorporated by reference to Exhibit 10.34 to Ultimate’s Quarterly Report on Form 10-Q, dated November 9, 2009)
10.14	Master Space Agreement between Quality Technology Services Miami LLC and Ultimate, dated June 1, 2009 (incorporated by reference to Exhibit 10.1 to Ultimate’s Quarterly Report on Form 10-Q, dated August 9, 2010) ü
10.15	Master Space Agreement between Quality Technology Services Metro LLC and Ultimate, dated June 1, 2009 (incorporated by reference to Exhibit 10.2 to Ultimate’s Quarterly Report on Form 10-Q, dated August 9, 2010) ü
10.16	Service Order Form between Verizon Canada Ltd. and Ultimate, dated September 23, 2009 (incorporated by reference to Exhibit 10.3 to Ultimate’s Quarterly Report on Form 10-Q, dated August 9, 2010) ü
10.17	Amended and Restated Change in Control Bonus Plan for Executive Officers dated April 26, 2010 (incorporated by reference to Exhibit 10.4 to Ultimate’s Quarterly Report on Form 10-Q, dated August 9, 2010) †
10.18	Commercial lease between 2000 Main Street Associates, LLC (“Landlord”) and Ultimate, dated November 3, 2010 (incorporated by reference to Exhibit 10.54 to Ultimate’s Annual Report on Form 10-K, dated March 1, 2011)
10.19	Commercial lease between Micari Holdings, LLC (“Landlord”) and Ultimate, dated November 5, 2010 (incorporated by reference to Exhibit 10.55 to Ultimate’s Annual Report on Form 10-K, dated March 1, 2011)
10.20	Commercial lease between Galleria 400, LLC (“Landlord”) and Ultimate, dated December 29, 2010 (incorporated by reference to Exhibit 10.56 to Ultimate’s Annual Report on Form 10-K, dated March 1, 2011)
10.21	Commercial lease between AG/LPC Griffin Towers, L.P., (“Landlord”) and Ultimate, dated February 23, 2011 (incorporated by reference to Exhibit 10.1 to Ultimate's Quarterly Report on Form 10-Q, dated May 10, 2011)
10.22	Commercial lease between TCS-CB LLC, ("Landlord") and Ultimate, dated July 25, 2012 (incorporated by reference to Exhibit 10.1 to Ultimate's Quarterly Report on Form 10-Q, dated November 9, 2012)
10.23	License and Master Services Agreement between IO Phoenix One, LLC and Ultimate, dated February 27, 2012, as amended (incorporated by reference to Exhibit 10.2 to Ultimate's Quarterly Report on Form 10-Q, dated November 9, 2012) ü
10.24	Master Services Agreement between Savvis Communications Canada, Inc. and Ultimate, dated April 30, 2013 (incorporated by reference to Exhibit 10.1 to Ultimate's Quarterly Report on Form 10-Q, dated August 8, 2013) ü
10.25	Service Schedule between Savvis Communications Canada, Inc. and Ultimate, dated April 30, 2013 (incorporated by reference to Exhibit 10.2 to Ultimate's Quarterly Report on Form 10-Q, dated August 8, 2013) ü
10.26	Colocation Services Service Level Attachment between Savvis Communications Canada, Inc. and Ultimate, dated April 30, 2013 (incorporated by reference to Exhibit 10.3 to Ultimate's Quarterly Report on Form 10-Q, dated August 8, 2013) ü
10.27	Commercial lease between DP Weston Pointe III, LLC, ("Landlord") and Ultimate, dated December 8, 2014 *
10.28	Form of Restricted Stock Award Agreement * †
21.1	Subsidiaries of the Registrant *
23.1	Consent of Independent Registered Public Accounting Firm *
31.1	Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended *
31.2	Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended *
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended *
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended *
101.1	Interactive Data Files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of December 31, 2013 and 2012, (ii) Consolidated Statements of Income for the Years Ended December 31, 2013, 2012 and 2011, (iii) Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2013, 2012 and 2011; (iv) Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2013, 2012 and 2011; (v) Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011; and (vi) Notes to Consolidated Financial Statements.

* Filed herewith.

† Indicates management contract or compensatory plan, contract or arrangement.

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ü Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, and such portions have been omitted and filed separately with the SEC.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

THE ULTIMATE SOFTWARE GROUP, INC.

By:/s/ Mitchell K. Dauerman

Mitchell K. Dauerman

Executive Vice President, Chief Financial Officer and Treasurer

Date:  February 27, 2015

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Scott Scherr	President, Chief Executive Officer and Chairman of the Board	February 27, 2015
Scott  Scherr
/s/ Mitchell K. Dauerman	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)	February 27, 2015
Mitchell K. Dauerman
/s/ Marc D. Scherr	Vice Chairman of the Board and Chief Operating Officer	February 27, 2015
Marc D. Scherr
/s/ James A. FitzPatrick, Jr.	Director	February 27, 2015
James A. FitzPatrick, Jr.
/s/ LeRoy A. Vander Putten	Director	February 27, 2015
LeRoy A. Vander Putten
/s/ Rick Wilber	Director	February 27, 2015
Rick Wilber
/s/ Robert A. Yanover	Director	February 27, 2015
Robert A. Yanover
/s/ Alois T. Leiter	Director	February 27, 2015
Alois T. Leiter

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EX-10.27

EXHIBIT 10.27

OFFICE LEASE

THIS OFFICE LEASE (the "Lease") is executed this __8th_ day of __December_____________, 2014, by and between DP WESTON POINTE III, LLC, a Delaware limited liability company ("Landlord"), and THE ULTIMATE SOFTWARE GROUP, INC., a Delaware corporation ("Tenant").

ARTICLE 1 - LEASE OF PREMISES

Section 1.01. Basic Lease Provisions and Definitions.

(a)    Leased Premises (shown outlined on Exhibit A attached hereto): all of the building commonly known as Weston Pointe III (the "Building"), located at 2250 North Commerce Parkway, Weston, Florida 33326, within Weston Pointe (the "Park"), which consists of a portion of the first (1^st) floor and all of the second (2^nd), third (3^rd) and fourth (4^th) floors (the "Phase I Premises") and the remaining portion of the first (1^st) floor (the "Phase II Premises") as labeled on Exhibit A-1 attached; provided, however, that prior to the Expansion Date (as defined in Section 1.01(g) below), the Leased Premises shall consist of only the Phase I Premises.

(b)    Rentable Area: 97,178 rentable square feet, which consists of (i) 85,291 rentable square feet in the Phase I Premises, and (ii) 11,887 rentable square feet in the Phase II Premises; provided, however, that prior to the Expansion Date, the Rentable Area shall be 85,291 rentable square feet.

(c)    Tenant's Proportionate Share: 100%; provided, however, that prior to the Expansion Date, Tenant's Proportionate Share shall be 87.77%.

(d)    Minimum Annual Rent:

06/01/2015 – 12/31/2015	$1,136,857.96	$22.85 per rsf
01/01/2016 – 12/31/2016	$2,220,517.32	$22.85 per rsf
01/01/2017 – 12/31/2017	$2,287,132.80	$23.54 per rsf
01/01/2018 – 12/31/2018	$2,355,746.76	$24.24 per rsf
01/01/2019 – 12/31/2019	$2,426,419.20	$24.97 per rsf
01/01/2020 – 12/31/2020	$2,499,211.80	$25.72 per rsf

(Note: Minimum Annual Rent does not include applicable Florida State Sales Tax, or Additional Rent, which sums shall be the sole responsibility of Tenant.)

To the extent that the Commencement Date occurs on a date later than June 1, 2015, all of the dates in the foregoing schedule and the schedule set forth in Section 1.01(e) below shall be adjusted on a day-for-day basis. To the extent that the Expansion Date occurs on a date later than January 1, 2016, only the dates of December 31, 2015 and January 1, 2016 (as such dates may have been adjusted in accordance with the preceding sentence) in the foregoing schedule and the schedule set forth in Section 1.01(e) below shall be adjusted on a day-for-day basis. Notwithstanding anything to the contrary contained herein, the Minimum Annual Rent and Monthly Rental Installment amounts set forth in the foregoing schedule and

the schedule set forth in Section 1.01(e) below, respectively, shall be adjusted based on the Rentable Area being leased by the Tenant during the relevant time period.

(e)    Monthly Rental Installments:

06/01/2015 – 12/31/2015	$162,408.28
01/01/2016 – 12/31/2016	$185,043.11
01/01/2017 – 12/31/2017	$190,594.40
01/01/2018 – 12/31/2018	$196,312.23
01/01/2019 – 12/31/2019	$202,201.60
01/01/2020 – 12/31/2020	$208,267.65

(Note: Monthly Rental Installments do not include applicable Florida State Sales Tax, or Additional Rent, which sums shall be the sole responsibility of Tenant.)

(f)    Commencement Date: the date that is the later to occur of (i) June 1, 2015, or (ii) the date that is five (5) months following Landlord's delivery of the Phase I Premises to Tenant in accordance with the terms of this Lease.

(g)    Expansion Date: the date that is the later to occur of (i) January 1, 2016, or (ii) the date that is five (5) months following Landlord's delivery of the Phase II Premises to Tenant in accordance with the terms of this Lease.

(h)    Expiration Date: the date that is five (5) years and seven (7) months following the Commencement Date.

(i)    Security Deposit: $185,043.11.

(j)    Broker(s): TJT Enterprises, Inc. of Broward representing Tenant, and Duke Realty Services, LLC representing Landlord.

(k)    Permitted Use: General office purposes, including, but not limited to, software development and associated training facilities, and any other uses incidental thereto.

(l)    Address for notices and payments are as follows:

Landlord:        DP Weston Pointe III, LLC

c/o Duke Realty Corporation

Attn.: South Florida Market – V.P., Asset Mgmt. & Customer Service

2400 North Commerce Parkway, Suite 405

Weston, FL 33326

With            DP Weston Pointe III, LLC

Payments to:        75 Remittance Drive, Suite 1749

Chicago, IL 60675-1749

Tenant:            The Ultimate Software Group, Inc.

2

2000 Ultimate Way

Weston, FL 33326

Attn.: Chief Financial Officer

With a copy to:

The Ultimate Software Group, Inc.

2000 Ultimate Way

Weston, FL 33326

Attn.: General Counsel

(m)    Guarantor: None.

EXHIBITS

Exhibit A:    Leased Premises and Exterior Areas

Exhibit A-1    Phase I Premises and Phase II Premises

Exhibit B:    Intentionally Omitted

Exhibit C:    Letter of Understanding

Exhibit D:    Rules and Regulations

Section 1.02. Lease of Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Leased Premises, under the terms and conditions herein, together with an exclusive right to use the exterior areas of the Building and the underlying land and improvements thereto, including, but not limited to, parking areas (collectively, the "Exterior Areas"), as shown on Exhibit A hereto, and all rights of ingress and egress as necessary to access the Leased Premises.

ARTICLE 2 - TERM AND POSSESSION

Section 2.01. Term. The Lease Term shall commence as of the Commencement Date and shall continue through and including the Expiration Date as set forth in Sections 1.01(f) and 1.01(h) above.

Section 2.02. Construction of Tenant Improvements. Tenant shall construct and install all leasehold improvements to the Leased Premises (collectively, the "Tenant Improvements") in accordance with Exhibit B attached hereto and made a part hereof. Landlord shall deliver possession of the Leased Premises to Tenant in accordance with the provisions of Exhibit B.

Section 2.03. Surrender of the Leased Premises. Upon the expiration or earlier termination of this Lease, Tenant shall, at its sole cost and expense, immediately (a) surrender the Leased Premises to Landlord in broom-clean condition and in good order, condition and repair, ordinary wear and tear excepted, (b) remove from the Leased Premises or where located (i) Tenant's Property (as defined in Section 8.01 below), (ii) all data and communications equipment, wiring and cabling (including above ceiling, below raised floors and behind walls) installed by or on behalf of Tenant, and (iii) any alterations required to be removed pursuant to Section 7.03 below, and (c) repair any damage caused by any such removal and restore the Leased Premises to the condition existing upon the Commencement Date, reasonable wear and tear excepted. All of Tenant's Property that is not removed within ten (10) days following Landlord's written demand therefor shall be conclusively deemed to have been abandoned and Landlord shall be entitled to dispose of such property at Tenant's cost without incurring any liability to Tenant. This Section 2.03 shall survive the expiration or any earlier termination of this Lease.

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Section 2.04. Holding Over. If Tenant retains possession of the Leased Premises after the expiration or earlier termination of this Lease, Tenant shall be a tenant at sufferance at one hundred fifty percent (150%) of the Monthly Rental Installments and Annual Rental Adjustment (as hereinafter defined) for the Leased Premises in effect upon the date of such expiration or earlier termination, and otherwise upon the terms, covenants and conditions herein specified, so far as applicable. Acceptance by Landlord of Rent (as defined in Section 3.03(a) below) after such expiration or earlier termination shall not result in a renewal of this Lease, nor shall such acceptance create a month-to-month tenancy. In the event a month-to-month tenancy is created by operation of law, either party shall have the right to terminate such month-to-month tenancy upon thirty (30) days' prior written notice to the other, whether or not said notice is given on the Rent paying date. This Section 2.04 shall in no way constitute a consent by Landlord to any holding over by Tenant upon the expiration or earlier termination of this Lease, nor limit a party's remedies in such event.

ARTICLE 3 - RENT

Section 3.01. Rent. Tenant shall pay to Landlord the Minimum Annual Rent in the Monthly Rental Installments, plus Florida State Sales Tax,in advance, without demand, deduction or offset, on the Commencement Date and on or before the first day of each and every calendar month thereafter during the Lease Term. The Monthly Rental Installments for partial calendar months shall be prorated. Tenant shall be responsible for delivering the Monthly Rental Installments to the payment address set forth in Section 1.01(l) above in accordance with this Section 3.01. Notwithstanding anything to the contrary contained herein, Tenant shall not be obligated to pay any Rent for the Phase I Premises until the Commencement Date and for the Phase II Premises until the Expansion Date.

Section 3.02. Annual Rental Adjustment Definitions.

(a)    "Annual Rental Adjustment" shall mean the amount of Tenant's Proportionate Share of Operating Expenses for the Leased Premises for a particular calendar year, subject to Section 3.05 below.

(b)    "Operating Expenses" shall mean the amount of all of Landlord's actual costs and expenses paid or incurred in operating, repairing, replacing and maintaining the Building and the Exterior Areas in good condition and repair for a particular calendar year, including by way of illustration and not limitation, the following: all Real Estate Taxes (as hereinafter defined), insurance premiums and deductibles; water, sewer, electrical and other utility charges (without any additional markup) other than the separately billed electrical and other charges paid by Tenant as provided in this Lease; service and other charges incurred in the repair, replacement, operation and maintenance of the elevatorsand the heating, ventilation and air-conditioning ("HVAC") system; costs associated with providing fitness facilities; cleaning and other janitorial services; tools and supplies; repair costs; landscape maintenance costs; access patrols; license, permit and inspection fees; management fees (which shall not exceed 3% of the gross rents for the Building); administrative fees; supplies, costs, wages and related employee benefits payable for the management, maintenance and operation of the Building (provided, however, if an employee of Landlord works on several buildings within the area, including the Building, the costs and expenses incurred in connection with such employee shall be allocated among such buildings by Landlord in accordance with reasonable and consistent criteria); maintenance, repair and replacement of the driveways, parking and sidewalk areas, landscaped areas, and lighting; and maintenance and repair costs, dues, fees and assessments incurred under any covenants or charged by any owners association. The cost of any Operating Expenses that are capital in nature shall be amortized over the useful life of the improvement (as reasonably determined by Landlord in accordance with generally accepted accounting principles), and only the amortized portion shall be included in Operating Expenses. Operating Expenses

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shall not include any portion of expenses paid or incurred by Tenant directly. Landlord has not received any notice of special assessments in connection with the Leased Premises from any owners association as of the date of this Lease.

(c)    "Tenant's Proportionate Share of Operating Expenses" shall mean an amount equal to the product of Tenant's Proportionate Share times the Operating Expenses.

(d)    "Real Estate Taxes" shall mean any form of real estate tax or assessment or service payments in lieu thereof, and any license fee, commercial rental tax, improvement bond or other similar charge or tax (other than inheritance, personal income or estate taxes) imposed upon the Building or Exterior Areas, or against Landlord's business of leasing the Building, by any authority having the power to so charge or tax, together with costs and expenses of contesting the validity or amount of the Real Estate Taxes. Landlord shall, within fifteen (15) days of receiving its annual proposed tax notice, notify Tenant whether it plans to contest Real Estate Taxes applicable to the Leased Premises. If Landlord does not elect to contest Real Estate Taxes applicable to the Building for a particular tax period during the Lease Term, Tenant may request that Landlord contest such taxes by written notice to Landlord. Landlord may then elect either to contest such taxes or to allow Tenant to so contest such taxes subject to Landlord's reasonable approval of the firm or individual hired to conduct such contest. In either case, Tenant shall be responsible for all costs of contesting such taxes to the extent that said costs exceed the savings realized by such contest. Any resulting savings over and above the cost of such contest shall be distributed to Tenant.

Section 3.03. Payment of Additional Rent.

(a)    Any amount required to be paid by Tenant hereunder (in addition to Minimum Annual Rent) and any charges or expenses incurred by Landlord on behalf of Tenant under the terms of this Lease shall be considered "Additional Rent" payable in the same manner and upon the same terms and conditions as the Minimum Annual Rent reserved hereunder, except as set forth herein, Minimum Annual Rent and Additional Rent are sometimes referred to herein as "Rent". Any failure on the part of Tenant to pay such Additional Rent when and as the same shall become due shall entitle Landlord to the remedies available to it for non-payment of Minimum Annual Rent.

(b)    In addition to the Minimum Annual Rent specified in this Lease, commencing as of the Commencement Date, Tenant shall pay to Landlord as Additional Rent for the Leased Premises, in each calendar year or partial calendar year during the Lease Term, an amount equal to the Annual Rental Adjustment for such calendar year. Landlord shall estimate the Annual Rental Adjustment annually, and written notice thereof shall be given to Tenant prior to the beginning of each calendar year. Tenant shall pay to Landlord each month, at the same time the Monthly Rental Installment is due, an amount equal to one-twelfth (1/12) of the estimated Annual Rental Adjustment. Tenant shall be responsible for delivering the Additional Rent to the payment address set forth in Section 1.01(l) above in accordance with this Section 3.03. If Operating Expenses increase during a calendar year, Landlord may increase the estimated Annual Rental Adjustment during such year by giving Tenant written notice to that effect, and thereafter Tenant shall pay to Landlord, in each of the remaining months of such year, an amount equal to the amount of such increase in the estimated Annual Rental Adjustment divided by the number of months remaining in such year. Within one hundred twenty (120) days after the end of each calendar year, Landlord shall prepare and deliver to Tenant a statement showing the actual Annual Rental Adjustment. Within thirty (30) days after receipt of the aforementioned statement, Tenant shall pay to Landlord, or Landlord shall credit against the next Rent payment or payments due from Tenant, as the case may be, the difference between the actual Annual Rental Adjustment for the preceding calendar year and the estimated

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amount paid by Tenant during such year. This Section 3.03 shall survive the expiration or any earlier termination of this Lease.

Section 3.04. Late Charges. Tenant acknowledges that Landlord shall incur certain additional unanticipated administrative and legal costs and expenses if Tenant fails to pay timely any payment required hereunder. Therefore, in addition to the other remedies available to Landlord hereunder, if any payment required to be paid by Tenant to Landlord hereunder shall become overdue by more than five (5) days, such unpaid amount shall bear interest from the due date thereof to the date of payment at the prime rate of interest, as reported in the Wall Street Journal (the "Prime Rate") plus six percent (6%) per annum; provided, however such interest rate shall not be less than twelve percent (12%) per annum nor more than eighteen percent (18%) per annum.

Section 3.05. Maximum Increase in Operating Expenses. Notwithstanding anything in this Lease to the contrary, Tenant will be responsible for Tenant's Proportionate Share of Real Estate Taxes, insurance premiums, utilities, janitorial services, landscaping, management fees (but subject to the cap set forth in Section 3.02(b)above), and charges assessed against the Building pursuant to any covenants or owner's association ("Uncontrollable Expenses"), without regard to the level of increase in any or all of the above in any year or other period of time. Tenant's obligation to pay Tenant's Proportionate Share of Operating Expenses that are not Uncontrollable Expenses (herein "Controllable Expenses") shall be limited to a five percent (5%) per annum increase over the amount the Controllable Expenses per rentable square foot for the immediately preceding calendar year would have been had the Controllable Expenses per rentable square foot increased at the rate of five percent (5%) in all previous calendar years beginning with the actual Controllable Expenses per rentable square foot for the calendar year ending December 31, 2015.

Section 3.06. Electronic Payments. At Tenant's option, Tenant shall have the right to make payments of Minimum Annual Rent and any other amounts due under the Lease by electronic funds transfer into an account specified by Landlord at an Automated Clearing House ("ACH") member bank. In the event Tenant elects to make payments to Landlord by electronic funds transfer, Landlord shall, upon request, provide all necessary information and complete all forms required to process and effectuate such electronic payments. Nothing herein shall obligate Tenant to make electronic payments and, in the event Tenant has elected to process payments to Landlord electronically, Tenant shall have the right, at any time, to discontinue such electronic payments, provided that Tenant continues making such payments in accordance with the terms of this Lease.

ARTICLE 4 - SECURITY DEPOSIT

Upon execution and delivery of this Lease by Tenant, Tenant shall deposit the Security Deposit with Landlord as security for the performance by Tenant of all of Tenant's obligations contained in this Lease. In the event of a default by Tenant, Landlord may, following any applicable notice and cure period, apply all or any part of the Security Deposit to cure all or any part of such default; provided, however, that any such application by Landlord shall not be or be deemed to be an election of remedies by Landlord or considered or deemed to be liquidated damages. Tenant agrees promptly, upon demand, to deposit such additional sum with Landlord as may be required to maintain the full amount of the Security Deposit. All sums held by Landlord pursuant to this Article 4 shall be without interest and may be commingled by Landlord. Within forty-five (45) days following the end of the Lease Term, provided that there is then no uncured default or any repairs required to be made by Tenant pursuant to Section 2.03 above or Section 7.03 below, Landlord shall return the Security Deposit to Tenant.

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ARTICLE 5 - OCCUPANCY AND USE

Section 5.01. Use. Tenant shall use the Leased Premises for the Permitted Use and for no other purpose without the prior written consent of Landlord.

Section 5.02. Covenants of Tenant Regarding Use.

(a)    Tenant shall (i) use and maintain the Leased Premises and conduct its business thereon in a safe, careful, reputable and lawful manner, (ii) comply with all covenants that encumber the Building and all applicable laws, rules, regulations, orders, ordinances, directions and requirements of any governmental authority or agency, now in force or which may hereafter be in force, including, without limitation, those which shall impose upon Landlord or Tenant any duty with respect to or triggered by a change in the use or occupation of, or any improvement or alteration to, the Leased Premises, and (iii) comply with the Building Rules and Regulations attached hereto as Exhibit D and made a part hereof, as may be reasonably modified from time to time by Landlord on reasonable written notice to Tenant so long as any such modification does not materially or adversely affect Tenant's use of the Leased Premises for the Permitted Use. Landlord shall use reasonable efforts, at no cost to Landlord, to cooperate with Tenant in obtaining any approvals required by any owners association.

(b)    Tenant shall not use the Leased Premises, nor allow the Leased Premises to be used, for any purpose or in any manner that would (i) invalidate any policy of insurance now or hereafter carried by Landlord on the Building, or (ii) increase the rate of premiums payable on any such insurance policy unless Tenant reimburses Landlord for any increase in premium charged and paid for by Landlord.

Section 5.03. Landlord's Rights Regarding Use. Without limiting any of Landlord's rights specified elsewhere in this Lease (a) Landlord shall have the right at any time, without notice to Tenant, to control, change or otherwise alter the Exterior Areas in such manner as it deems necessary or proper so long as any such control, change or alteration does not materially or adversely affect Tenant's use of the Leased Premises for the Permitted Use, and (b) Landlord, its agents, employees and contractors and any mortgagee of the Building shall have the right to enter any part of the Leased Premises at reasonable times upon reasonable notice (except in the event of an emergency where no notice shall be required) for the purposes of (i) examining or inspecting the same (including, without limitation, testing to confirm Tenant's compliance with this Lease, provided any such testing shall be at Landlord's sole cost and expense), (ii) showing the same to prospective purchasers or mortgagees, (iii) during the last three hundred sixty-five (365) days of the Lease Term and any time Tenant is in Default hereunder, showing the same to prospective tenants, and (iv) making such repairs, alterations or improvements to the Leased Premises or the Building as Landlord may deem necessary. Landlord shall incur no liability to Tenant for such entry, nor shall such entry constitute an eviction of Tenant or a termination of this Lease, or entitle Tenant to any abatement of Rent therefor. Without limiting the foregoing, Landlord covenants and agrees that in exercising any of its rights under this Section 5.03, Landlord shall use reasonable efforts to minimize any interference with Tenant's use of the Leased Premises for the Permitted Use.

ARTICLE 6 - UTILITIES AND OTHER BUILDING SERVICES

Section 6.01. Services to be Provided. Landlord shall furnish the following utilities and other services to the Leased Premises, or as may be required by law or directed by governmental authority:

(a)    HVAC between the hours of 8:00 a.m. and 6:00 p.m. Monday through Friday and 8:00 a.m. to 1:00 p.m. on Saturday of each week except on legal holidays; provided, however, that HVAC shall

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be available to Tenant on a twenty-four (24) hours a day basis, and Tenant shall have the right to operate the HVAC during after-hours through the use of an automated telephone system;

(b)    Electrical current;

(c)    Water in the Exterior Areas for lavatory and drinking purposes;

(d)    Automatic elevator service;

(e)    Washing of the exterior of windows at intervals reasonably established by Landlord;

(f)    Replacement of all lamps, bulbs, starters and ballasts in Building standard lighting as required from time to time as a result of normal usage

(g)    Maintenance of the Exterior Areas, including the removal of rubbish,

(h)    Connections for telecommunications services;

(i)    Life safety systems; and

(j)    Access to the Leased premises twenty-four (24) hours per day, seven (7) days per week.

Section 6.02. Additional Services. If (a) Tenant requires utilities or building services in addition to those identified above, and (b) Tenant does not contract directly with a utility company or service provider for any such utility or service, then Landlord shall use reasonable efforts to furnish Tenant with such additional utilities or services requested by Tenant. In the event Landlord is able to and does furnish such additional utilities or services, the costs thereof (which shall be deemed to mean the cost that Tenant would have incurred had Tenant contracted directly with the utility company or service provider) shall be borne by Tenant, who shall reimburse Landlord monthly for the same as Additional Rent.

Section 6.03. Interruption of Services. Tenant acknowledges and agrees that any one or more of the utilities or other services identified in Sections 6.01 or 6.02 or otherwise hereunder may be interrupted by reason of accident, emergency or other causes beyond Landlord's control, or may be discontinued or diminished temporarily by Landlord or other persons at Landlord's direction or authorization until certain repairs, alterations or improvements required to be made by Landlord in connection with this Lease can be made. Landlord shall not be liable in damages or otherwise for any failure or interruption of any utility or service and no such failure or interruption shall entitle Tenant to terminate this Lease or withhold sums due hereunder. Notwithstanding the foregoing, in the event that (a) an interruption of utility service to the Leased Premises is due to Landlord’s negligence or intentional wrongful acts, and (b) such interruption renders all or a portion of the Leased Premises untenantable (meaning that Tenant is unable to use, and does not use, such space in the normal course of its business for the Permitted Use) for more than five (5) consecutive business days, then Minimum Annual Rent shall abate proportionately with respect to the portion of the Leased Premises rendered untenantable on a per diem basis for each day after such five (5) business-day period during which such portion of the Leased Premises remains untenantable. Such abatement shall be Tenant's sole remedy for Landlord's failure to restore service as set forth above (unless the effect of the utility interruption constitutes constructive eviction under Florida law, in which case Tenant shall have the right to pursue a claim of constructive eviction in the appropriate court of law), and Tenant shall not be entitled to damages (consequential or otherwise) as a result thereof.

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ARTICLE 7 - REPAIRS, MAINTENANCE AND ALTERATIONS

Section 7.01. Repair and Maintenance of Building. Landlord shall make all necessary repairs and replacements to the roof, exterior walls, exterior doors, windows, corridors and other Exterior Areas, and Landlord shall keep the Building in a clean and neat condition and use reasonable efforts to keep all equipment in good condition and repair. The cost of such repairs, replacements and maintenance shall be included in Operating Expenses to the extent provided in Section 3.02.

Section 7.02. Repair and Maintenance of Leased Premises. Landlord shall keep and maintain the Leased Premises in good condition and repair. The cost of such repairs and maintenance to the Leased Premises shall be included in Operating Expenses. Notwithstanding the above, Tenant shall be solely responsible for any repair or replacement with respect to Tenant's Property (as defined in Section 8.01 below) located in the Leased Premises, the Building or the Exterior Areas. Nothing in this Lease shall obligate Landlord or Tenant to repair normal wear and tear to the Building, the Exterior Areas or the Leased Premises, including, but not limited to, any paint, wall covering, carpeting, landscaping or paving.

Section 7.03. Alterations. Tenant shall not permit alterations in or to the Leased Premises unless and until Landlord has approved the plans therefor in writing; provided, however, that Tenant shall have the right to make alterations to the Leased Premises, without obtaining Landlord's prior written consent provided that (a) such alterations do not exceed One Hundred Thousand and No/100 Dollars ($100,000.00) in cost in any one instance and Five Hundred Thousand and No/100 Dollars ($500,000.00) in cost in the aggregate during the Lease Term; (b) such alterations are non-structural and non-mechanical in nature; (c) Tenant provides Landlord with prior written notice of its intention to make such alterations, stating in reasonable detail the nature, extent and estimated cost of such alterations, together with the plans and specifications for the same, to the extent applicable, and (d) at Landlord's option, Tenant must remove such alterations and restore the Leased Premises upon termination of this Lease. As a condition of such approval, Landlord may require Tenant to remove the alterations and restore the Leased Premises upon termination of this Lease; otherwise, all such alterations shall become a part of the realty and the property of Landlord, and shall not be removed by Tenant. Notwithstanding anything contained herein to the contrary, Tenant shall have no obligation hereunder to remove any alterations or improvements that have been made by Tenant with the express written consent of Landlord, unless, at the time of granting such consent, Landlord has expressly required the removal of any such proposed alterations or improvements as a condition to granting such consent. Tenant agrees that all alterations shall be made in accordance with all applicable laws, regulations and building codes, in a good and workmanlike manner and of quality equal to or better than the original construction of the Building. No person shall be entitled to any lien derived through or under Tenant for any labor or material furnished to the Leased Premises, and nothing in this Lease shall be construed to constitute Landlord's consent to the creation of any lien. If any lien is filed against the Leased Premises for work claimed to have been done for or material claimed to have been furnished to Tenant, Tenant shall cause such lien to be discharged of record or transferred to bond within forty-five (45) days after receipt of written notice of filing. Tenant shall indemnify Landlord from all costs, losses, expenses and attorneys' fees in connection with any construction or alteration performed by or on behalf of Tenant and any related lien.

Section 7.04. Supplemental HVAC. Tenant, at Tenant's sole cost and expense, shall have the right to install, use, operate and maintain a supplemental air conditioning system ("Supplemental HVAC") at a precise location reasonably satisfactory to Landlord. Tenant shall have the right to operate the Supplemental HVAC twenty-four (24) hours a day, seven (7) days a week at temperatures and conditions as required by Tenant, in Tenant's sole discretion. Tenant shall be solely responsible, at its cost and expense, for the maintenance, repair and replacement (if necessary) of the Supplemental HVAC. Tenant

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shall operate and maintain the Supplemental HVAC in accordance with all applicable federal, state and local laws and regulations. In no event shall the Supplemental HVAC exhaust into the Building plenum. Tenant shall also be responsible for the cost of the electricity and the water, if applicable, to operate the Supplemental HVAC. Upon expiration or earlier termination of the Lease, Tenant shall, at Landlord's option, remove the Supplemental HVAC. In the event of such removal, Tenant shall repair any and all damage to the Leased Premises and/or the Building caused by such removal. It is expressly understood and agreed by Landlord and Tenant that (a) Tenant shall be entitled to install the Supplemental HVAC on the roof of the Building, (b) the plans for any such installation shall be approved by Landlord, using reasonable judgment, in writing prior to installation, and (c) the installation of any Supplemental HVAC on the roof of the Building shall be further subject to the conditions contained in Section 17.03 below relating to the roof of the Building.

ARTICLE 8 – INDEMNITY AND INSURANCE

Section 8.01. Release. All of Tenant's trade fixtures, merchandise, inventory, special fire protection equipment, telecommunication and computer equipment, supplemental air conditioning equipment, kitchen equipment and all other personal property in or about the Leased Premises, the Building or the Exterior Areas, which is deemed to include the trade fixtures, merchandise, inventory and personal property of others located in or about the Leased Premises or the Exterior Areas at the invitation, direction or acquiescence (express or implied) of Tenant (all of which property shall be referred to herein, collectively, as "Tenant's Property"), shall be and remain at Tenant's sole risk. Landlord shall not be liable to Tenant or to any other person for, and Tenant hereby releases Landlord (and its affiliates, property managers and mortgagees) from (a) any and all liability for theft or damage to Tenant's Property, and (b) any and all liability for any injury to Tenant or its employees, agents, contractors, guests and invitees in or about the Leased Premises, the Building or the Exterior Areas, except to the extent of personal injury caused directly by the negligence or willful misconduct of Landlord, its agents, employees or contractors. Nothing contained in this Section 8.01 shall limit (or be deemed to limit) the waivers contained in Section 8.06 below. In the event of any conflict between the provisions of Section 8.06 below and this Section 8.01, the provisions of Section 8.06 shall prevail. This Section 8.01 shall survive the expiration or earlier termination of this Lease.

Section 8.02. Indemnification by Tenant. Tenant shall protect, defend, indemnify and hold Landlord, its agents, employees and contractors of all tiers harmless from and against any and all claims, damages, demands, penalties, costs, liabilities, losses, and expenses (including reasonable attorneys' fees and expenses at the trial and appellate levels) to the extent (a) arising out of or relating to any act, omission, negligence, or willful misconduct of Tenant or Tenant's agents, employees, contractors, customers or invitees in or about the Leased Premises, the Building or the Exterior Areas, (b) arising out of or relating to any of Tenant's Property, or (c) arising out of any other act or occurrence within the Leased Premises, in all such cases except to the extent of personal injury caused directly by the negligence or willful misconduct of Landlord, its agents, employees or contractors. Nothing contained in this Section 8.02 shall limit (or be deemed to limit) the waivers contained in Section 8.06 below. In the event of any conflict between the provisions of Section 8.06 below and this Section 8.02, the provisions of Section 8.06 shall prevail. This Section 8.02 shall survive the expiration or earlier termination of this Lease.

Section 8.03. Indemnification by Landlord. Landlord shall protect, defend, indemnify and hold Tenant, its agents, employees and contractors of all tiers harmless from and against any and all claims, damages, demands, penalties, costs, liabilities, losses and expenses (including reasonable attorneys' fees and expenses at the trial and appellate levels) to the extent arising out of or relating to any act, omission,

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negligence or willful misconduct of Landlord or Landlord's agents, employees or contractors. Nothing contained in this Section 8.03 shall limit (or be deemed to limit) the waivers contained in Section 8.06 below. In the event of any conflict between the provisions of Section 8.06 below and this Section 8.03, the provisions of Section 8.06 shall prevail. This Section 8.03 shall survive the expiration or earlier termination of this Lease.

Section 8.04. Tenant's Insurance.

(a)    During the Lease Term (and any period of early entry or occupancy or holding over by Tenant, if applicable), Tenant shall maintain the following types of insurance, in the amounts specified below:

(i)    Liability Insurance. Commercial General Liability Insurance, ISO Form CG 00 01, or its equivalent, covering Tenant's use of the Leased Premises against claims for bodily injury or death or property damage, which insurance shall be primary and non-contributory and shall provide coverage on an occurrence basis with a per occurrence limit of not less than $6,000,000 for each policy year, which limit may be satisfied by any combination of primary and excess or umbrella per occurrence policies.

(ii)    Property Insurance. Special Form Insurance in the amount of the full replacement cost of Tenant's Property (including, without limitation, alterations or additions performed by Tenant pursuant hereto, but excluding those improvements, if any, made pursuant to Section 2.02 above), which insurance shall waive coinsurance limitations.

(iii)    Worker's Compensation Insurance. Worker's Compensation insurance in amounts required by applicable law; provided, if there is no statutory requirement for Tenant, Tenant shall still obtain Worker's Compensation insurance coverage.

(iv)    Business Interruption Insurance. Business Interruption Insurance with limits not less than an amount equal to $1,000,000.

(v)    Automobile Insurance. Comprehensive Automobile Liability Insurance insuring bodily injury and property damage arising from all owned, non-owned and hired vehicles, if any, with minimum limits of liability of $1,000,000 combined single limit, per accident.

(b)    All insurance required to be carried by Tenant hereunder shall (i) be issued by one or more insurance companies reasonably acceptable to Landlord, licensed to do business in the State in which the Leased Premises is located and having an AM Best's rating of A IX or better, and (ii) provide that said insurance shall not be materially changed, canceled or permitted to lapse on less than thirty (30) days' prior written notice to Landlord. In addition, Tenant shall name Landlord, Landlord's managing agent, and any mortgagee requested by Landlord, as additional insureds under its commercial general liability, excess and umbrella policies (but only to the extent of the limits required hereunder). On or before the Commencement Date (or the date of any earlier entry or occupancy by Tenant), and thereafter, within thirty (30) days prior to the expiration of each such policy, Tenant shall furnish Landlord with certificates of insurance in the form of ACORD 25 (or other evidence of insurance reasonably acceptable to Landlord), evidencing all required coverages, and that with the exception of Workers Compensation insurance, such insurance is primary and non-contributory. If Tenant fails to carry such insurance and furnish Landlord with such certificates of insurance, Landlord may obtain such insurance on Tenant's behalf and Tenant shall reimburse Landlord upon demand for the cost thereof as Additional Rent. In the

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event of an extension of the Lease Term, Landlord reserves the right to require Tenant to obtain higher minimum amounts or different types of insurance if it becomes customary for other landlords of similar buildings in the area to require similar sized tenants in similar industries to carry insurance of such higher minimum amounts or of such different types.

Section 8.05. Landlord's Insurance. During the Lease Term, Landlord shall maintain the following types of insurance, in the amounts specified below (the cost of which shall be included in Operating Expenses):

(a)    Liability Insurance. Commercial General Liability Insurance, ISO Form CG 00 01, or its equivalent, covering the Exterior Areas against claims for bodily injury or death and property damage, which insurance shall be primary and non-contributory and shall provide coverage on an occurrence basis with a per occurrence limit of not less than $6,000,000for each policy year, which limit may be satisfied by any combination of primary and excess or umbrella per occurrence policies.

(b)    Property Insurance. Special Form Insurance in the amount of the full replacement cost of the Building, including, without limitation, any improvements, if any, made pursuant to Section 2.02 above, but excluding Tenant's Property and any other items required to be insured by Tenant pursuant to Section 8.04 above.

Section 8.06. Waiver of Subrogation. Notwithstanding anything contained in this Lease to the contrary, Landlord (and its affiliates, property managers and mortgagees) and Tenant (and its affiliates) hereby waive any rights each may have against the other on account of any loss of or damage to their respective property, the Leased Premises, its contents, or other portions of the Building or Exterior Areas arising from any risk which is required to be insured against by Sections 8.04(a)(ii), 8.04(a)(iii), and 8.05(b) above. The special form property insurance policies and worker's compensation insurance policies maintained by Landlord and Tenant as provided in this Lease shall include an endorsement containing an express waiver of any rights of subrogation by the insurance company against Landlord and Tenant, as applicable.

ARTICLE 9 - CASUALTY

In the event of total or partial destruction of the Building or the Leased Premises by fire or other casualty, Landlord agrees promptly to restore and repair same; provided, however, Landlord's obligation hereunder with respect to the Leased Premises shall be limited to the reconstruction of such of the leasehold improvements as were originally made pursuant to Section 2.02 above, if any. Rent shall proportionately abate during the time that the Leased Premises or part thereof are unusable because of any such damage. Notwithstanding the foregoing, if the Leased Premises are (a) so destroyed that they cannot be repaired or rebuilt within one hundred eighty (180) days from the casualty date; or (b) destroyed by a casualty that is not covered by the insurance required hereunder or, if covered, such insurance proceeds are not released by any mortgagee entitled thereto or are insufficient to rebuild the Building and the Leased Premises (but in either case can be repaired or rebuilt within one hundred eighty (180) days from the casualty date); then, in case of a clause (a) casualty, either Landlord or Tenant may, or, in the case of a clause (b) casualty, then Landlord may, upon thirty (30) days' written notice to the other party, terminate this Lease with respect to matters thereafter accruing. Tenant waives any right under applicable laws inconsistent with the terms of this paragraph.

ARTICLE 10 - EMINENT DOMAIN

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If all or any substantial part of the Building or Exterior Areas shall be acquired by the exercise of eminent domain, Landlord may terminate this Lease by giving written notice to Tenant on or before the date possession thereof is so taken. If all or any part of the Leased Premises or Exterior Areas shall be acquired by the exercise of eminent domain so that the Leased Premises shall become impractical for Tenant to use for the Permitted Use, Tenant may terminate this Lease by giving written notice to Landlord as of the date possession thereof is so taken. All damages awarded shall belong to Landlord; provided, however, that Tenant shall be entitled to independently pursue a separate award relating to the loss of, or damage to, Tenant's Property, Tenant's relocation costs and Tenant's loss of business and/or business interruption directly associated with the taking as long as such amounts are not subtracted from Landlord's award.

ARTICLE 11 - ASSIGNMENT AND SUBLEASE

Section 11.01. Assignment and Sublease.

(a)    Tenant shall not assign this Lease or sublet the Leased Premises in whole or in part without Landlord's prior written consent. In the event of any permitted assignment or subletting, Tenant shall remain primarily liable hereunder, and, except as to a Permitted Transferee (as defined below) any extension, expansion, rights of first offer, rights of first refusal or other options granted to Tenant under this Lease shall be rendered void and of no further force or effect. The acceptance of Rent from any other person shall not be deemed to be a waiver of any of the provisions of this Lease or to be a consent to the assignment of this Lease or the subletting of the Leased Premises. Any assignment or sublease consented to by Landlord shall not relieve Tenant (or its assignee) from obtaining Landlord's consent to any subsequent assignment or sublease.

(b)    By way of example and not limitation, Landlord shall be deemed to have reasonably withheld consent to a proposed assignment or sublease if in Landlord's opinion (i) the Leased Premises are or may be in any way adversely affected; (ii) the business reputation of the proposed assignee or subtenant is unacceptable; (iii) the financial worth of the proposed assignee or subtenant is insufficient to meet the obligations hereunder, or (iv) the prospective assignee or subtenant is a current tenant at the Park or is a bona-fide third-party prospective tenant. If Landlord refuses to give its consent to any proposed assignment or subletting where Landlord's consent is required, Landlord may, at its option, within thirty (30) days after receiving a request to consent, terminate this Lease by giving Tenant thirty (30) days prior written notice of such termination, whereupon each party shall be released from all further obligations and liability hereunder, except those which expressly survive the termination of this Lease.

(c)    If Tenant shall make any assignment or sublease, with Landlord's consent, for a rental in excess of the Rent payable under this Lease, Tenant shall pay to Landlord all of any such excess rental upon receipt. Tenant agrees to pay Landlord $500.00 upon demand by Landlord for reasonable accounting and attorneys' fees incurred in conjunction with the processing and documentation of any requested assignment, subletting or any other hypothecation of this Lease or Tenant's interest in and to the Leased Premises as consideration for Landlord's consent.

Section 11.02. Permitted Transfer. Notwithstanding anything to the contrary contained in Section 11.01 above, Tenant shall have the right, without Landlord's consent, to (a) sublet all or part of the Leased Premises to any related corporation or other entity which controls Tenant, is controlled by Tenant or is under common control with Tenant; (b) assign all or any part of this Lease to any related corporation or other entity which controls Tenant, is controlled by Tenant, or is under common control with Tenant, or to a successor entity into which or with which Tenant is merged, consolidated or otherwise reorganized, or

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which acquires substantially all of Tenant's assets or property, whether by sale of assets or stock; or (c) effectuate any public offering of Tenant's stock on the New York Stock Exchange or in the NASDAQ over the counter market, provided that in the event of a transfer pursuant to clause (b), the tangible net worth after any such transaction is not materially less than the tangible net worth of Tenant as of the date hereof and provided further that such successor entity assumes all of the obligations and liabilities of Tenant (any such entity hereinafter referred to as a "Permitted Transferee"). Tenant shall provide Landlord with written notice of any such permitted transfer within ten (10) days following such event. For the purpose of this Article 11, (i) "control" shall mean ownership of not less than fifty percent (50%) of all voting stock or legal and equitable interest in such corporation or entity, and (ii) "tangible net worth" shall mean the excess of the value of tangible assets (i.e. assets excluding those which are intangible such as goodwill, patents and trademarks) over liabilities. Any such transfer shall not relieve Tenant of its obligations under this Lease. Nothing in this paragraph is intended to nor shall permit Tenant to transfer its interest under this Lease as part of a fraud or subterfuge to intentionally avoid its obligations under this Lease (for example, transferring its interest to a shell corporation that subsequently files a bankruptcy), and any such transfer shall constitute a Default hereunder. Any change in control of Tenant resulting from a merger, consolidation, or a transfer of partnership or membership interests, a stock transfer, or any sale of substantially all of the assets of Tenant that do not meet the requirements of this Section 11.02 shall be deemed an assignment or transfer that requires Landlord's prior written consent pursuant to Section 11.01 above.

ARTICLE 12 - TRANSFERS BY LANDLORD

Section 12.01. Sale of the Building. Landlord shall have the right to sell the Building at any time during the Lease Term, subject only to the rights of Tenant hereunder; and such sale shall operate to release Landlord from liability hereunder after the date of such conveyance, provided said purchaser agrees to assume Landlord's obligations hereunder, including, but not limited to, the holding and return of the Security Deposit.

Section 12.02. Estoppel Certificate. Within ten (10) days following receipt of a written request from Landlord, Tenant shall execute and deliver to Landlord, without cost to Landlord, an estoppel certificate in such form as Landlord may reasonably request certifying (a) that this Lease is in full force and effect and unmodified or stating the nature of any modification, (b) the date to which Rent has been paid, (c) that there are not, to Tenant's knowledge, any uncured defaults or specifying such defaults if any are claimed, and (d) any other matters or state of facts reasonably required respecting the Lease. Such estoppel may be relied upon by Landlord and by any purchaser or mortgagee of the Building.

Section 12.03. Subordination. This Lease is and shall be expressly subject and subordinate at all times to the lien of any present or future mortgage or deed of trust encumbering fee title to the Leased Premises. If any such mortgage or deed of trust be foreclosed, upon request of the mortgagee or beneficiary, as the case may be, Tenant will attorn to the purchaser at the foreclosure sale. The foregoing provisions are declared to be self-operative and no further instruments shall be required to effect such subordination and/or attornment; provided, however, that subordination of this Lease to any present or future mortgage or trust deed shall be conditioned upon the mortgagee, beneficiary, or purchaser at foreclosure, as the case may be agreeing that Tenant's occupancy of the Leased Premises and other rights under this Lease shall not be disturbed by reason of the foreclosure of such mortgage or trust deed, as the case may be, so long as Tenant is not in default under this Lease beyond any applicable notice and cure period. Within ten (10) days following receipt of a written request from Landlord, Tenant shall execute and deliver to Landlord, without cost, any instrument that Landlord deems reasonably necessary or desirable to confirm the subordination of this Lease.

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ARTICLE 13 - DEFAULT AND REMEDY

Section 13.01. Default. The occurrence of any of the following shall be a "Default":

(a)    Tenant fails to pay any Monthly Rental Installments or Additional Rent (i) within five (5) days following written notice from Landlord on the first occasion in any twelve (12) month period, or (ii) within five (5) days after the same is due on any subsequent occasion within said twelve (12) month period. Tenant hereby expressly waives any additional notice required under §83.20 of the Florida Statutes.

(b)    Tenant fails to perform or observe any other term, condition, covenant or obligation required under this Lease for a period of thirty (30) days after written notice thereof from Landlord; provided, however, that if the nature of Tenant's default is such that more than thirty (30) days are reasonably required to cure, then such default shall be deemed to have been cured if Tenant commences such performance within said thirty (30) day period and thereafter diligently completes the required action within a reasonable time.

(c)    Tenant shall vacate or abandon the Leased Premises, or fail to occupy the Leased Premises or any substantial portion thereof for a period of thirty (30) days.

(d)    Tenant shall assign or sublet all or a portion of the Leased Premises in contravention of the provisions of Article 11 of this Lease.

(e)    All or substantially all of Tenant's assets in the Leased Premises or Tenant's interest in this Lease are attached or levied under execution (and Tenant does not discharge the same within sixty (60) days thereafter); a petition in bankruptcy, insolvency or for reorganization or arrangement is filed by or against Tenant (and Tenant fails to secure a stay or discharge thereof within sixty (60) days thereafter); Tenant is insolvent and unable to pay its debts as they become due; Tenant makes a general assignment for the benefit of creditors; Tenant takes the benefit of any insolvency action or law; the appointment of a receiver or trustee in bankruptcy for Tenant or its assets if such receivership has not been vacated or set aside within thirty (30) days thereafter; or, dissolution or other termination of Tenant's corporate charter if Tenant is a corporation.

Section 13.02. Remedies. Upon the occurrence of any Default, Landlord shall have the following rights and remedies, in addition to those stated elsewhere in this Lease and those allowed by law or in equity, any one or more of which may be exercised without further notice to Tenant:

(a)    Landlord may re-enter the Leased Premises and cure any Default of Tenant, and Tenant shall reimburse Landlord as Additional Rent for any reasonable costs and expenses that Landlord thereby incurs; and Landlord shall not be liable to Tenant for any loss or damage that Tenant may sustain by reason of Landlord's action except to the extent of Landlord's, or anyone under Landlord's control, negligence or willful misconduct not otherwise waived by Tenant pursuant to Section 8.06 above.

(b)    Landlord may terminate this Lease by giving Tenant notice of termination, in which event this Lease shall expire and terminate on the date specified in such notice of termination and all rights of Tenant under this Lease and in and to the Leased Premises shall terminate. Tenant shall remain liable for all obligations under this Lease arising up to the date of such termination, and Tenant shall surrender the Leased Premises to Landlord on the date specified in such notice. Furthermore, Tenant shall be liable to

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Landlord for the unamortized balance of any leasehold improvement allowance and brokerage fees paid in connection with the Lease.

(c)    Without terminating this Lease, Landlord may terminate Tenant's right to possession of the Leased Premises, and thereafter, neither Tenant nor any person claiming under or through Tenant shall be entitled to possession of the Leased Premises. In such event, Tenant shall immediately surrender the Leased Premises to Landlord, and Landlord may re-enter the Leased Premises and dispossess Tenant and any other occupants of the Leased Premises by any lawful means and may remove their effects, without prejudice to any other remedy that Landlord may have. Upon termination of possession, Landlord may re-let all or any part thereof as the agent of Tenant for a term different from that which would otherwise have constituted the balance of the Lease Term and for rent and on terms and conditions different from those contained herein, whereupon Tenant shall be immediately obligated to pay to Landlord an amount equal to (i) the difference between the Rent provided for herein and that provided for in any lease covering a subsequent re-letting of the Leased Premises, for the period which would otherwise have constituted the balance of the Lease Term had this Lease not been terminated (said period being referred to herein as the "Remaining Term"), (ii) the reasonable costs of recovering possession of the Leased Premises and all other reasonable expenses, loss or damage incurred by Landlord by reason of Tenant's Default (damages set forth in this Section 13.02(c)(ii) being referred to as "Default Damages"), which shall include, without limitation, expenses of preparing the Leased Premises for re-letting, demolition, repairs, tenant finish improvements, brokers' commissions and attorneys' fees, and (iii) all unpaid Minimum Annual Rent and Additional Rent that accrued prior to the date of termination of possession, plus any interest and late fees due hereunder (the "Prior Obligations"). Neither the filing of any dispossessory proceeding nor an eviction of personalty in the Leased Premises shall be deemed to terminate the Lease.

(d)    Landlord may terminate this Lease and recover from Tenant all damages Landlord may incur by reason of Tenant's default, including, without limitation, an amount which, at the date of such termination is equal to the sum of the following: (i) the value of the excess, if any, discounted at the prime rate of interest (as reported in the Wall Street Journal), of (A) the Minimum Annual Rent, Additional Rent and all other sums that would have been payable hereunder by Tenant for the Remaining Term, less (B) the aggregate reasonable rental value of the Leased Premises for the Remaining Term, as determined by a neutral real estate broker licensed in the State of Florida who has at least ten (10) years of experience, (ii) all of Landlord's Default Damages, and (iii) all Prior Obligations. Landlord and Tenant acknowledge and agree that the payment of the amount set forth in clause (i) above shall not be deemed a penalty, but shall merely constitute payment of liquidated damages, it being understood that actual damages to Landlord are extremely difficult, if not impossible, to ascertain. It is expressly agreed and understood that all of Tenant's liabilities and obligations set forth in this subsection (d) shall survive termination.

(e)    With or without terminating this Lease, Landlord may declare immediately due and payable the sum of the following: (i) the present value (discounted at the prime rate of interest, as reported in the Wall Street Journal) of all Minimum Annual Rent and Additional Rent due and coming due under this Lease for the entire Remaining Term (as if by the terms of this Lease they were payable in advance), (ii) all Default Damages, and (iii) all Prior Obligations, whereupon Tenant shall be obligated to pay the same to Landlord; provided, however, that such payment shall not be deemed a penalty or liquidated damages, but shall merely constitute payment in advance of all Minimum Annual Rent and Additional Rent payable hereunder throughout the Remaining Term, and provided further, however, that upon Landlord receiving such payment, Tenant shall be entitled to receive from Landlord all rents received by Landlord from other assignees, tenant and subtenants on account of said Leased Premises

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during the Remaining Term (but only to the extent that the monies to which Tenant shall so become entitled do not exceed the entire amount actually paid by Tenant to Landlord pursuant to this subsection (e)), less all Default Damages of Landlord incurred but not yet reimbursed by Tenant.

(f)    Landlord may sue for injunctive relief or to recover damages for any loss resulting from the Default.

(g)    If Landlord terminates this Lease or Tenant's right to possession, Landlord's duty to mitigate its damages under this Lease shall be as follows: (i) Landlord shall be required only to use reasonable, good faith efforts to mitigate, which shall not exceed such efforts as Landlord generally uses to lease other similar space in the vicinity, (ii) Landlord will not be deemed to have failed to mitigate if Landlord leases any other space in the Weston, Florida submarket before reletting all or any portion of the Leased Premises, and (iii) Landlord shall not be deemed to have failed to mitigate if it incurs reasonable costs and expenses for repairs, maintenance, changes, alterations and improvements to the Leased Premises (whether to prevent damage or to prepare the Leased Premises for reletting), brokerage commissions, advertising costs, attorneys' fees, any industry standard economic incentives given to replacement tenants, and costs of collecting rent from replacement tenants. In recognition that the value of the Building depends on the rental rates and terms of leases therein, Landlord's rejection of a prospective replacement tenant based on an offer of rentals below actual rates for new leases of comparable space to the Building in the Weston, Florida submarket at the time in question shall not give rise to a claim by Tenant that Landlord failed to mitigate Landlord's damages. Tenant shall bear the burden of proving Landlord's failure to mitigate.

Section 13.03. Landlord's Default and Tenant's Remedies. Landlord shall be in default if it fails to perform any term, condition, covenant or obligation required under this Lease for a period of thirty (30) days after written notice thereof from Tenant to Landlord; provided, however, that if the term, condition, covenant or obligation to be performed by Landlord is such that it cannot reasonably be performed within thirty (30) days, such default shall be deemed to have been cured if Landlord commences such performance within said thirty-day period and thereafter diligently undertakes to complete the same. Upon the occurrence of any such default, Tenant may sue for injunctive relief or to recover damages for any loss directly resulting from the breach, but Tenant shall not be entitled to terminate this Lease or withhold, offset or abate any sums due hereunder. In no event, however, shall Landlord be liable to Tenant for any consequential or punitive damages.

Section 13.04. Limitation of Landlord's Liability. If Landlord shall fail to perform any term, condition, covenant or obligation required to be performed by it under this Lease and if Tenant shall, as a consequence thereof, recover a money judgment against Landlord, Tenant agrees that it shall look solely to Landlord's right, title and interest in and to the Building for the collection of such judgment; and Tenant further agrees that no other assets of Landlord shall be subject to levy, execution or other process for the satisfaction of Tenant's judgment.

Section 13.05. Nonwaiver of Defaults. Neither party's failure or delay in exercising any of its rights or remedies or other provisions of this Lease shall constitute a waiver thereof or affect its right thereafter to exercise or enforce such right or remedy or other provision. No waiver of any default shall be deemed to be a waiver of any other default. Landlord's receipt of less than the full Rent due shall not be construed to be other than a payment on account of Rent then due, nor shall any statement on Tenant's check or any letter accompanying Tenant's check be deemed an accord and satisfaction. No act or omission by Landlord or its employees or agents during the Lease Term shall be deemed an acceptance of

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a surrender of the Leased Premises, and no agreement to accept such a surrender shall be valid unless in writing and signed by Landlord.

Section 13.06. Attorneys' Fees. If either party defaults in the performance or observance of any of the terms, conditions, covenants or obligations contained in this Lease and the non-defaulting party obtains a judgment against the defaulting party, then the defaulting party agrees to reimburse the non-defaulting party for reasonable attorneys' fees incurred in connection therewith. In addition, if a monetary Default shall occur and Landlord engages outside counsel to exercise its remedies hereunder, and then Tenant cures such monetary Default, Tenant shall pay to Landlord, on demand, all reasonable expenses incurred by Landlord as a result thereof, including reasonable attorneys' fees, court costs and expenses actually incurred.

ARTICLE 14 - LANDLORD'S RIGHT TO RELOCATE TENANT

INTENTIONALLY OMITTED.

ARTICLE 15 - TENANT'S RESPONSIBILITY REGARDING

ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES

Section 15.01. Environmental Definitions.

(a)    "Environmental Laws" shall mean all present or future federal, state and municipal laws, ordinances, rules and regulations applicable to the environmental and ecological condition of the Leased Premises, and the rules and regulations of the Federal Environmental Protection Agency and any other federal, state or municipal agency or governmental board or entity having jurisdiction over the Leased Premises.

(b)    "Hazardous Substances" shall mean those substances included within the definitions of "hazardous substances," "hazardous materials," "toxic substances" "solid waste" or "infectious waste" under Environmental Laws and petroleum products.

Section 15.02. Restrictions on Tenant. Tenant shall not cause or permit the use, generation, release, manufacture, refining, production, processing, storage or disposal of any Hazardous Substances on, under or about the Leased Premises, or the transportation to or from the Leased Premises of any Hazardous Substances, except as necessary and appropriate for its Permitted Use in which case the use, storage or disposal of such Hazardous Substances shall be performed in compliance with the Environmental Laws and the highest standards prevailing in the industry.

Section 15.03. Notices, Affidavits, Etc. Tenant shall immediately (a) notify Landlord of (i) any known violation by Tenant, its employees, agents, representatives, customers, invitees or contractors of any Environmental Laws on, under or about the Leased Premises, or (ii) the presence or suspected presence of any Hazardous Substances on, under or about the Leased Premises, and (b) deliver to Landlord any notice received by Tenant relating to (a)(i) and (a)(ii) above from any source. Tenant shall execute affidavits, representations and the like within five (5) days of Landlord's request therefor concerning Tenant's best knowledge and belief regarding the presence of any Hazardous Substances on, under or about the Leased Premises.

Section 15.04. Tenant's Indemnification. Tenant shall indemnify Landlord and Landlord's managing agent from any and all claims, losses, liabilities, costs, expenses and damages, including

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attorneys' fees, costs of testing and remediation costs, incurred by Landlord in connection with any breach by Tenant of its obligations under Section 15.02 above. The covenants and obligations under this Article 15 shall survive the expiration or earlier termination of this Lease.

Section 15.05. Existing Conditions. Notwithstanding anything contained in this Article 15 to the contrary, Tenant shall not have any liability to Landlord under this Article 15 resulting from any conditions existing, or events occurring, or any Hazardous Substances existing or generated, at, in, on, under or in connection with the Leased Premises prior to the Commencement Date of this Lease as to the Phase I Premises, or prior to the Expansion Date as to the Phase II Premises (or any earlier occupancy of the Leased Premises by Tenant) except to the extent Tenant exacerbates the same.

ARTICLE 16 - MISCELLANEOUS

Section 16.01. Benefit of Landlord and Tenant. This Lease shall inure to the benefit of and be binding upon Landlord and Tenant and their respective successors and assigns.

Section 16.02. Governing Law. This Lease shall be governed in accordance with the laws of the State where the Building is located.

Section 16.03. Force Majeure. Landlord and Tenant (except with respect to the payment of any monetary obligation) shall be excused for the period of any delay in the performance of any obligation hereunder when such delay is occasioned by causes beyond its control, including but not limited to work stoppages, boycotts, slowdowns or strikes; shortages of materials, equipment, labor or energy; unusual weather conditions; or acts or omissions of governmental or political bodies.

Section 16.04. Examination of Lease. Submission of this instrument by Landlord to Tenant for examination or signature does not constitute an offer by Landlord to lease the Leased Premises. This Lease shall become effective, if at all, only upon the execution by and delivery to both Landlord and Tenant. Execution and delivery of this Lease by Tenant to Landlord constitutes an offer to lease the Leased Premises on the terms contained herein.

Section 16.05. Indemnification for Leasing Commissions. The parties hereby represent and warrant that the only real estate brokers involved in the negotiation and execution of this Lease are the Brokers listed in Section 1.01(j) above and that no other party is entitled, as a result of the actions of the respective party, to a commission or other fee resulting from the execution of this Lease. Each party shall indemnify the other from any and all liability for the breach of this representation and warranty on its part and shall pay any compensation to any other broker or person who may be entitled thereto. Landlord shall pay any commissions due the Brokers based on this Lease pursuant to separate agreements between Landlord and each of the respective Brokers.

Section 16.06. Notices. Any notice required or permitted to be given under this Lease or by law shall be deemed to have been given if it is written and delivered in person or by overnight courier or mailed by certified mail, postage prepaid, to the party who is to receive such notice at the address specified in Section 1.01(l). If sent by overnight courier, the notice shall be deemed to have been given one (1) day after sending. If mailed, the notice shall be deemed to have been given on the date that is three (3) business days following mailing. Either party may change its address by giving written notice thereof to the other party.

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Section 16.07. Partial Invalidity; Complete Agreement. If any provision of this Lease shall be held to be invalid, void or unenforceable, the remaining provisions shall remain in full force and effect. This Lease represents the entire agreement between Landlord and Tenant covering everything agreed upon or understood in this transaction. There are no oral promises, conditions, representations, understandings, interpretations or terms of any kind as conditions or inducements to the execution hereof or in effect between the parties. No change or addition shall be made to this Lease except by a written agreement executed by Landlord and Tenant.

Section 16.08. Financial Statements. In the event that Tenant is no longer a publicly traded company, Tenant shall provide to Landlord on an annual basis, within ninety (90) days following the end of Tenant's fiscal year, a copy of Tenant's most recent financial statements prepared as of the end of Tenant's fiscal year. Such financial statements shall be signed by Tenant or an officer of Tenant, if applicable, who shall attest to the truth and accuracy of the information set forth in such statements, or if the Minimum Annual Rent hereunder exceeds $100,000.00, said statements shall be certified and audited. All financial statements provided by Tenant to Landlord hereunder shall be prepared in conformity with generally accepted accounting principles, consistently applied.

Section 16.09. Representations and Warranties.

(a)    Tenant hereby represents and warrants that (i) Tenant is duly organized, validly existing and in good standing (if applicable) in accordance with the laws of the State under which it was organized; (ii) Tenant is authorized to do business in the State where the Building is located; and (iii) the individual(s) executing and delivering this Lease on behalf of Tenant has been properly authorized to do so, and such execution and delivery shall bind Tenant to its terms.

(b)    Landlord hereby represents and warrants that (i) Landlord is duly organized, validly existing and in good standing (if applicable) in accordance with the laws of the State under which it was organized; (ii) Landlord is authorized to do business in the State where the Building is located; and (iii) the individual(s) executing and delivering this Lease on behalf of Landlord has been properly authorized to do so, and such execution and delivery shall bind Landlord to its terms.

Section 16.10. Signage. Landlord, at its cost and expense, shall provide Tenant with Building standard signage on the main Building directory and at the entrance to the Leased Premises. Any changes requested by Tenant to the initial directory or suite signage shall be made at Tenant's sole cost and expense and shall be subject to Landlord's approval. In addition, Tenant, at Tenant’s sole cost and expense, shall have the right to install (a) two (2) Building-mounted identification signs, which shall include Tenant’s name and/or logo, on the parapet wall at the top of the Building (the "Building Signs"), and (b) a monument sign displaying a placard containing Tenant's name and/or logo (the "Monument Sign"; the Building Signs and the Monument Sign hereinafter referred to, collectively, as the "Signs"); provided that said Signs and Tenant's installation thereof comply with all laws, rules, regulations and ordinances encumbering the Building. Without limiting the foregoing, Tenant specifically acknowledges and agrees that Tenant shall be solely responsible for ensuring that the Signs comply with the protective covenants, if any, that encumber the Building as of the date of this Lease, and that any failure by Tenant to comply with the terms of said protective covenants (including, without limitation, obtaining any approvals therein required) shall be at Tenant's sole risk and expense. Landlord shall use reasonable efforts, at no cost to Landlord, to cooperate with Tenant in obtaining any approvals required by any owners association or governmental entity in connection with the installation of the Signs. The size, location, materials, coloring, lettering, lighting and method of installation of the Signs shall be subject to Landlord’s prior approval. Tenant shall, at its sole cost and expense, keep and maintain the Signs in good

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condition and repair. On or before the expiration or earlier termination of this Lease, Tenant shall be responsible for removing the Building Sign and its placard from the Monument Sign and returning the Building and the surrounding premises to their original condition. Tenant shall not place any other exterior signs on the Leased Premises or interior signs visible from the exterior of the Leased Premises without the prior written consent of Landlord. Notwithstanding any other provision of this Lease to the contrary, Landlord may immediately remove any sign(s) placed by Tenant in violation of this Section 16.10. Landlord shall, at its sole cost and expense, remove any existing signage installed on the Building by any prior tenant prior to the Commencement Date.

Section 16.11. Parking. Tenant shall be entitled to the exclusive use of all of the parking spaces in the parking area contained in the Exterior Areas (which parking consists of approximately three hundred eighty-nine (389) passenger vehicle parking spaces and six (6) handicap parking spaces) and the non-exclusive use of the parking spaces in any parking areas adjacent to the Building outside of the Exterior Areas. Tenant agrees to cooperate with Landlord and other tenants in the use of the parking facilities. No vehicle may be repaired or serviced in the parking area and any vehicle brought into the parking area by Tenant, or any of Tenant's employees, contractors or invitees, and deemed abandoned by Landlord will be towed and all costs thereof shall be borne by Tenant. All driveways, ingress and egress, and all parking spaces are for the joint use of all tenants. There shall be no parking permitted on any of the streets or roadways located within the Park. In addition, Tenant agrees that its employees will not park in the spaces designated visitor parking.

Section 16.12. Consent or Approval. Where the consent or approval of a party is required, such consent or approval will not be unreasonably withheld, conditioned or delayed.

Section 16.13. Time. Time is of the essence of each term and provision of this Lease.

Section 16.14. Patriot Act. Each of Landlord and Tenant, each as to itself, hereby represents its compliance and its agreement to continue to comply with all applicable anti-money laundering laws, including, without limitation, the USA Patriot Act, and the laws administered by the United States Treasury Department's Office of Foreign Assets Control, including, without limitation, Executive Order 13224 ("Executive Order"). Each of Landlord and Tenant further represents (such representation to be true throughout the Lease Term) (a) that it is not, and it is not owned or controlled directly or indirectly by any person or entity, on the SDN List published by the United States Treasury Department's Office of Foreign Assets Control and (b) that it is not a person otherwise identified by government or legal authority as a person with whom a U.S. Person is prohibited from transacting business. As of the date hereof, a list of such designations and the text of the Executive Order are published under the website address www.ustreas.gov/offices/enforcement/ofac.

Section 16.15. Radon Gas. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit.

ARTICLE 17 - SPECIAL STIPULATIONS

Section 17.01. Existing Tenant.

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(a)    Tenant acknowledges that as of the date of this Lease, American Intercontinental University, Inc. (the "Existing Tenant") is the tenant currently occupying the Leased Premises pursuant to a lease between Landlord and the Existing Tenant (the "Existing Lease"). Upon execution of this Lease by both Tenant and Landlord, Landlord agrees to use reasonable good faith efforts to enter into an amendment with the Existing Tenant, pursuant to which (i) the Existing Tenant's right to occupy the Phase I Premises shall terminate as of December 31, 2014 (the "Vacation Date"), (ii) the Existing Tenant shall vacate the Phase I Premises on or before the Vacation Date, (iii) the Existing Lease will terminate effective on or before July 31, 2015 (the "Existing Lease Termination Date"), and (iv) the Existing Tenant shall vacate the Phase II Premises on or before the Existing Lease Termination Date.

(b)    Provided that the Existing Tenant refuses or fails to vacate the Phase I Premises, or any portion thereof, and Landlord fails to deliver possession of the Phase I Premises to Tenant in accordance with the terms of this Lease, on or before the March 31, 2015, Tenant may, at its option and as its sole remedy, terminate this Lease by written notice to Landlord given on or before April 15, 2015 (provided that the contingencies set forth in this sentence have not been satisfied prior to Landlord's receipt of said termination notice), and thereafter neither Landlord nor Tenant shall have any further obligations hereunder, except that Landlord shall refund any and all payments made by Tenant to Landlord pursuant to this Lease, including, but not limited to, the Security Deposit and any pre-paid Rent, within thirty (30) days following Landlord's receipt of such termination notice. Except as set forth in this Section 17.01(b), no liability whatsoever shall arise or accrue against Landlord by reason of the failure of Existing Tenant to vacate the Leased Premises, or Landlord to deliver possession of the Phase I Premises to Tenant.

Section 17.02. Emergency Generator.

(a)    Tenant, at its sole cost and expense and subject to the terms of this Lease, shall have the right to install, operate and maintain an emergency generator and related equipment (collectively, the "Generator") at a precise location on the Building or the Exterior Areas reasonably satisfactory to Landlord. Tenant shall install, operate and maintain the Generator in accordance with all federal, state and local laws and regulations and with any protective covenants. Tenant shall be solely responsible for obtaining any necessary permits and licenses required to install, operate and maintain the Generator and shall provide copies thereof to Landlord. Prior to installation of the Generator, Tenant shall provide Landlord with a certificate of insurance on behalf of the installer reasonably satisfactory to Landlord. Tenant, at Tenant's sole cost and expense, shall install screening around the Generator, the size, location, design and manner of which shall be subject to the written approval of Landlord. Tenant shall at all times keep the Generator and the surrounding area in a clean and orderly condition.

(b)    Tenant, at its sole cost and expense, shall be responsible for removing the Generator and the screening surrounding the Generator and for restoring the Building and/or Exterior Areas affected by the Generator and screening to their original condition after such removal. Tenant agrees, within ten (10) days after written notice from Landlord, to remove the Generator and screening surrounding same in the event any governmental entity or applicable law or regulation requires removal thereof or Tenant fails to materially comply with the terms stated herein. Such removal shall be in accordance with all of the terms and conditions set forth herein. If Tenant fails to remove the Generator and screening surrounding same from the Building or Exterior Areas upon expiration or earlier termination of the Lease, or after expiration of the ten (10) day notice period provided above, the Generator and screening surrounding same shall be deemed abandoned by Tenant and shall become the property of Landlord, or Landlord may remove the same at Tenant's expense.

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(c)    In addition, commencing on the Generator installation date, Tenant shall obtain a policy of liability insurance, or endorsements to Tenant's policy or policies of liability insurance, covering pollution liability with limits of not less than $1,000,000.

Section 17.03. Roof Rights.

(a)    Roof Area. "Roof Area" shall mean the surface of the roof of the Building.

(b)    Dish. "Dish" shall, collectively, mean one (1) satellite dish and related equipment, and one (1) cellular antenna and related equipment.

(c)    License of Roof Area. Provided (i) Tenant is not in default under the Lease, (ii) Tenant complies with all zoning and other municipal and county rules and regulations, and all applicable restrictions of record, and (iii) Landlord, in its sole discretion, has space available on the Roof Area, Tenant shall have the right, at its own cost and expense and subject to the terms hereof, to install, operate and maintain the Dish on the Roof Area, so long as the Dish is used exclusively for Tenant's use and not sold to or utilized in any manner by a third party. Tenant shall be solely responsible for obtaining any necessary permits and licenses required to install and operate the Dish. Copies of such permits and licenses shall be provided to Landlord.

(d)    Installation of the Dish.

(i)    The size, location, design and manner of installation of the Dish and all related wiring shall be designated and approved by Landlord. Landlord, in its sole discretion, may require Tenant to install screening around the Dish. After obtaining Landlord's written approval, Tenant shall have reasonable access to the roof for installation and maintenance of the Dish and shall have the right to install all reasonable wiring related thereto. Unless otherwise approved by Landlord in writing, however, in no event shall Tenant be permitted to penetrate the roof membrane in connection with the installation or maintenance of the Dish. Tenant shall be responsible for repairing any damages caused by the installation or maintenance of the Dish.

(ii)    Tenant shall use the roofing company specified by Landlord to perform any work affecting the roof, provided the costs charged by such roofer are competitive with charges for similar services within the same geographic region. All cable runs, conduit and sleeving shall be installed in a good and workmanlike manner. Cables and transmission lines shall be routed and attached in accordance with current, state of the art industry practices. The Dish shall be identified with permanently marked, weather proof tags at the following locations: (A) each dish bracket; (B) at the transmission line building entry point; (C) at the interior wall feed through or any other transmission line exit point; and (D) at any transmitter combiner, duplexer, or multifed receive port. In addition, all Tenant telephone blocks, demarcs, and cables shall be clearly identified with Tenant's name, type of line, and circuit number.

(iii)    Tenant shall install, operate and maintain the Dish in accordance with all federal, state and local laws and regulations. Prior to installation of the Dish, Tenant shall confirm that its installer carries sufficient insurance coverage.

(e)    Roof Work. If, during the Lease Term, as same may be extended, Landlord needs to perform maintenance work to Landlord's equipment on the roof of the Building or repair or replace the roof of the Building ("Roof Work"), Tenant agrees to cooperate and work with Landlord (at Tenant's sole cost and expense) to achieve said Roof Work. Landlord agrees to provide at least thirty (30) days' notice

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to Tenant of Landlord's intention to perform said work; except in the case of emergency Roof Work, in which case Landlord shall give as much notice as possible under the circumstances. Such Roof Work may require the relocation of any portion of the Dish at Tenant's sole cost and expense or Tenant's installation of temporary equipment. Moreover, if a temporary relocation of the Dish is required to accommodate the Roof Work, Landlord agrees to exercise commercially reasonable efforts to identify a technically feasible alternative location for the relocation portion of the Dish that will not impede the Roof Work. Notwithstanding the foregoing, Landlord does not warrant and represent that an alternative location will be available and, consequently, Landlord's obligation to provide such alternative location is subject to the availability of such space. Under no circumstances shall Landlord be liable to Tenant for any consequential damages as a result of such relocation, including, but not limited to, loss of business income or opportunity. Notwithstanding the foregoing, Tenant shall move the Dish back to its original location after the Roof Work is completed unless the parties agree to utilize the relocated area permanently.

(f)    Emergencies. Notwithstanding the foregoing, if an emergency situation exists which Landlord reasonably determines, in its reasonable discretion and by objective evidence, to be attributable to the Dish, Landlord shall immediately notify Tenant verbally, who shall act diligently and expediently to remedy the emergency situation. Should Tenant fail to so remedy the emergency situation or should Landlord reasonably determine that the response time by Tenant is not adequate given the nature of the emergency, Landlord may then shut down the Dish and Tenant shall have no recourse against Landlord as a result of such action except to the extent of Landlord's, or anyone under Landlord's control, negligence or willful misconduct not otherwise waived by Tenant pursuant to Section 8.06 above.

(g)    Removal of the Dish upon Termination. Following any termination or expiration of the Lease, Tenant shall remove the Dish from the Building. In performing such removal, Tenant shall restore the Roof Area and any personal property and fixtures thereon to as good a condition as existed prior to the installation or placement of the Dish, reasonable wear and tear excepted. If Tenant fails to remove the Dish within ten (10) days after expiration or earlier termination of the Lease, Landlord may remove and dispose of the Dish and Tenant shall reimburse Landlord for the costs of such removal and restoration of the Roof Area. Moreover, Landlord may deem the Dish abandoned, in which event the Dish shall become Landlord's property. This subsection (g) shall survive the expiration or earlier termination of the Lease. Landlord shall remove any existing dish installed at or on the Building by any prior tenant prior to the Commencement Date.

(h)    Utilities. Tenant shall be responsible for obtaining and paying for all utilities to operate the Dish.

(i)    Indemnification. Any language in the Lease notwithstanding, Landlord shall not be liable and Tenant shall indemnify, defend and hold Landlord harmless from and against any and all liability, damages (including but not limited to personal injury, death, or property damages), costs and expenses (including, without limitation, attorneys' fees actually incurred, without regard to statutory interpretation) incurred by Landlord arising from any Dish related cause whatsoever, including those arising from the installation, use, maintenance and removal thereof.

Section 17.04. Options to Extend.

(a)    Grant and Exercise of Option. Provided that (i) no Default has occurred and is then continuing, (ii) the creditworthiness of Tenant is then reasonably acceptable to Landlord, and (iii) Tenant originally named herein remains in possession of and has been continuously operating in the entire

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Leased Premises throughout the term immediately preceding the Extension Term (as defined below), Tenant shall have the option to extend the Lease Term for two (2) additional periods of five (5) years each (each an "Extension Term"). Each Extension Term shall be upon the same terms and conditions contained in the Lease except (x) this provision giving two (2) extension options shall be amended to reflect the remaining options to extend, if any, (y) any improvement allowances or other concessions applicable to the Leased Premises under the Lease shall not apply to the Extension Term, and (z) the Minimum Annual Rent shall be adjusted as set forth below (the "Rent Adjustment"). Tenant shall exercise each option by delivering to Landlord, no later than three hundred sixty-five (365) days prior to the expiration of the preceding term, written notice of Tenant's desire to extend the Lease Term. Tenant's failure to timely exercise such option shall be deemed a waiver of such option and any succeeding option. Landlord shall notify Tenant of the amount of the Rent Adjustment no later than ninety (90) days prior to the commencement of the Extension Term. Tenant shall be deemed to have accepted the Rent Adjustment if it fails to deliver to Landlord a written objection thereto within ten (10) business days after receipt thereof. If Tenant properly exercises its option to extend, Landlord and Tenant shall execute an amendment to the Lease (or, at Landlord's option, a new lease on the form then in use for the Building) reflecting the terms and conditions of the Extension Term within thirty (30) days after Tenant's acceptance (or deemed acceptance) of the Rent Adjustment.

(b)    Rent Adjustment. The Minimum Annual Rent for the applicable Extension Term shall be reasonably determined by Landlord based on the monthly rent charged to prospective renewing tenants for the Building and comparable buildings (e.g., buildings of comparable age, physical condition, number of stories, total size, comparable location) in the area in which the Leased Premises are located, taking into account all financial terms, including without limitation, base rent, free rent, escalations, work contributions and allowances and leasing and brokerage commissions. Without limiting the foregoing, if Tenant delivers to Landlord a written objection to Landlord's calculation of the Rent Adjustment within ten (10) business days after Tenant's receipt of Landlord's determination of the Rent Adjustment, and the parties cannot agree on a Rent Adjustment within ten (10) business days after Tenant's written objection then Tenant may retract its exercise of its option to extend, or Tenant may choose arbitration to determine the Rent Adjustment. If Tenant chooses arbitration, Tenant shall give Landlord written notice of its desire to seek arbitration within three (3) business days after expiration of such ten (10) business day period ("Arbitration Notice"). Within ten (10) business days after Tenant provides Landlord with its Arbitration Notice, the parties shall each appoint an appraiser to determine the Rent Adjustment for the Leased Premises. Each appraiser so selected shall be a MAI appraiser or a licensed real estate broker, each having at least ten (10) years prior experience in the appraisal or leasing of comparable space in the Weston, Florida submarket and with a working knowledge of current rental rates and practices. If the two appraisers cannot agree upon the Rent Adjustment for the Leased Premises within twenty (20) business days after their appointment, then, within ten (10) business days after the expiration of such twenty (20) business day period, the two appraisers shall select a third appraiser meeting the above criteria. Once the third appraiser has been selected as provided for above, such third appraiser shall within ten (10) business days after appointment make its determination of the Rent Adjustment. The average of the two closest determinations of the Rent Adjustment shall be used as the Minimum Annual Rent for the applicable Extension Term and shall be binding on both Landlord and Tenant. Landlord and Tenant shall each bear the cost of its appraiser and shall share the cost of the third. If Tenant fails to provide the Arbitration Notice as provided above, then Tenant's exercise of its option to extend shall be deemed retracted. The Monthly Rental Installments shall be an amount equal to one-twelfth (1/12) of the Minimum Annual Rent for the Extension Term and shall be paid at the same time and in the same manner as provided in the Lease.

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Section 17.05. Security System. Tenant shall have the right, upon written consent from Landlord, to install a security system and additional locks (collectively, the "Security System") at the Leased Premises. Tenant acknowledges that (a) Tenant shall be responsible for the cost to install and maintain the Security System, (b) the construction and installation of the Security System shall be subject to the terms of Section 7.03 of the Lease, and (c) Tenant shall be required, at Tenant's sole cost and expense, to remove the Security System upon the expiration or earlier termination of the Lease Term.

[SIGNATURES FOLLOW ON NEXT PAGE]

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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first above written.

WITNESSES:  /s/ Shen Boodoo Printed Name:Shen Boodoo  /s/ Ana M Hernandez Printed Name:Ana M Hernandez Date of execution:12/8/2014

LANDLORD: DP WESTON POINTE III, LLC, a Delaware limited liability company By: Duke Princeton, LLC, a Delaware limited liability company, its sole member    By: Duke/Hulfish, LLC, a Delaware limited liability company, its sole member    By: Duke Realty Limited Partnership, an Indiana limited partnership, its managing member    By: Duke Realty Corporation, an Indiana corporation, its general partner By:/s/Edward P. Mitchell Edward P. Mitchell Senior Vice President Florida Operations

WITNESSES:  /s/ Doretta Martone Knoerr Printed Name:Doretta Martone Knoerr  /s/ Martha Singer Printed Name:Martha Singer Date of execution:11/17/2014

TENANT: THE ULTIMATE SOFTWARE GROUP, INC., a Delaware corporation By:/s/ Robert Manne      Robert Manne      Senior Vice President Attest: Name: Title:

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EXHIBIT A

SITE PLAN OF LEASED PREMISES

Exhibit A

Page 1 of 1

EXHIBIT A-1

PHASE I PREMISES AND PHASE II PREMISES

Exhibit A-1

Page 1 of 2

Exhibit A-1

Page 2 of 2

EXHIBIT B

TENANT IMPROVEMENTS

1. Condition of Leased Premises.

(a)    Tenant has personally inspected the Leased Premises and accepts the same "AS IS" without representation or warranty by Landlord of any kind except as otherwise expressly set forth in the Lease. Tenant shall be responsible for constructing the interior improvements within the Leased Premises (the "Tenant Improvements"). Tenant's proposed architect/engineer, general contractor, and fire protection, plumbing, HVAC and electrical subcontractors are subject to Landlord's prior approval, which approval shall not be unreasonably withheld or delayed. Promptly following the selection and approval of the architect/engineer, Tenant shall forward to said architect/engineer (and copy Landlord on the transmittal) Landlord's building standards heretofore delivered to Tenant (the "Building Standards"), and Tenant shall cause said architect/engineer to comply with said Building Standards. Promptly following the selection and approval of the general contractor, Tenant shall forward to said general contractor (and copy Landlord on the transmittal) Landlord's fire protection, plumbing, HVAC and electrical specifications and Landlord's rules of conduct (collectively, the "Landlord Specifications"), all of which have been delivered to Tenant prior to the date of this Lease, and Tenant shall cause said general contractor to comply with said Landlord Specifications. At Landlord's request, Tenant shall coordinate a meeting among Landlord, Tenant and Tenant's general contractor to discuss the Building systems and other matters related to the construction of the Tenant Improvements.

(b)    Landlord shall deliver the Leased Premises to Tenant in good order, condition and repair and in broom clean condition (and Landlord shall not remove any of the Existing Tenant's improvements, furniture, fixtures and equipment left behind by Existing Tenant, including, but not limited to, tables, chairs, desks, workstations, cubicles, all data and communications equipment, security systems, wiring and cabling (including above ceiling, below raised floors and behind walls), supplemental HVAC, Building signage (subject to Landlord's obligation to remove per the Lease), rooftop dish or other equipment, installed by or on behalf of Existing Tenant) at such time as (i) this Lease is fully executed by Landlord and Tenant, (ii) Tenant delivers to Landlord the certificate of insurance required under Section 8.04(b) of this Lease, and (iii) the Existing Tenant has vacated the Leased Premises, or that applicable portion of the Leased Premises (i.e., the Phase I Premises and the Phase II Premises) in accordance with the terms of the Lease. Tenant's acceptance of the Leased Premises or operation of its business in the Leased Premises (or any portion thereof) prior to the Commencement Date or the Expansion Date, as applicable, shall not be deemed to create an obligation to pay any Rent prior to the Commencement Date or the Expansion Date, as applicable, as set forth in the Lease; provided, however, that Tenant shall otherwise comply with all of the other terms and conditions of this Lease upon acceptance of the Leased Premises. Landlord hereby warrants to Tenant that the Building systems (including the HVAC, electrical, plumbing, elevator and sprinkler systems) shall be in good working order as of the Commencement Date.

2.    Preparation of CD's. Tenant shall, at Tenant's sole cost and expense, prepare and submit to Landlord a set of permittable construction drawings (the "CD's"), based on the preliminary plans to be completed by Tenant and subject to Landlord's review and reasonable consent, covering all work to be performed by Tenant in constructing the Tenant Improvements. Tenant shall have no right to request any Tenant Improvements that would materially alter the exterior appearance (other than the Building Sign, Supplemental HVAC and Generator) or basic nature of the Building or the Building systems. Landlord shall have fifteen (15) days after receipt of the CD's in which to review the CD's and in which to give Tenant written notice of its approval of the CD's or its requested changes to the CD's. If Landlord

Exhibit B

Page 1 of 3

requests any changes to the CD's, Tenant shall make such changes and shall, within ten (10) days of its receipt of Landlord's requested changes (if any), submit the revised portion of the CD's to Landlord. Landlord shall have five (5) days after receipt of the revised CD's in which to review said revised CD's and in which to give to Tenant written notice of its approval of the revised CD's or its requested changes thereto. This process shall continue until such time, if at all, that Landlord approves the CD's in accordance with this paragraph. Tenant shall at all times in its preparation of the CD's, and of any revisions thereto, act expeditiously, reasonably and in good faith. Landlord shall at all times in its review of the CD's, and any revisions thereto, act expeditiously, reasonably and in good faith.

3.    Construction of Tenant Improvements. Prior to commencing the construction of the Tenant Improvements, Tenant shall deliver to Landlord (a) evidence of Tenant's insurance reasonably satisfactory to Landlord, which insurance shall be maintained throughout the construction of the Tenant Improvements, and (b) an estimated project schedule. In addition, Tenant shall require its general contractor to carry appropriate insurance, as determined by Tenant, but which shall include, without limitation, Commercial General Liability, Commercial Auto Liability and Worker's Compensation, in amounts necessary to insure the project and the work related thereto against claims for bodily injury or death or property damage. Tenant's contractors of all tiers shall name Landlord, Landlord's managing agent, and any mortgagee requested by Landlord as additional insured on all liability policies required pursuant to this paragraph. Throughout the construction of the Tenant Improvements, Tenant shall notify Landlord promptly of any material deviations from such project schedule. Tenant or its contractor shall construct the Tenant Improvements in a good, first-class and workmanlike manner and in accordance with the CD's and Specifications and all applicable governmental regulations. If Tenant shall fail to complete the Tenant Improvements by the Commencement Date, Tenant's obligation to pay Minimum Annual Rent and Additional Rent hereunder shall nevertheless begin on the Commencement Date. Landlord shall have the right, from time to time throughout the construction process, to enter upon the Leased Premises to perform periodic inspections of the Tenant Improvements, at Landlord's sole cost and expense. Tenant agrees to respond to and address promptly any reasonable concerns raised by Landlord during or as a result of such inspections.

4.    Substantial Completion. "Substantial Completion" (or any grammatical variation thereof) shall mean completion of construction of the Tenant Improvements, as established by a certificate of occupancy for the Leased Premises from the applicable governing authority.

5.    Improvement Costs. Landlord shall reimburse Tenant for the Improvement Costs (as hereinafter defined) incurred in constructing the Tenant Improvements, up to an amount equal to One Million One Hundred Sixty-Six Thousand One Hundred Thirty-Six and No/100 Dollars ($1,166,136.00) (the "Tenant Allowance"), as follows:

(a)    Landlord shall pay fifty percent (50%) of the Tenant Allowance, less a holdback (the "Holdback") equal to ten percent (10%), to Tenant at such time as:

(i)    Tenant has delivered to Landlord a copy of Tenant's building permit;

(ii)    Tenant has received Landlord's written approval of the CD's;

(iii)    Tenant's general contractor has completed fifty percent (50%) of the Tenant Improvements within the Leased Premises, as evidenced by a certificate from Tenant's architect and invoices, receipts and other evidence reasonably required by Landlord to evidence the cost of the Tenant Improvements made as of the date of Tenant's request for payment; and

Exhibit B

Page 2 of 3

(iv)    Tenant has delivered to Landlord partial lien waivers for the first fifty percent (50%) of the Tenant Improvements from Tenant's general contractor for all subcontractors and all material suppliers having performed any work at the Leased Premises relating to the construction of the first fifty percent (50%) of the Tenant Improvements.

(b)    Landlord shall pay the remainder of the Tenant Allowance (less the Holdback) to Tenant at such time as Tenant's general contractor has:

(i)    Substantially Completed the Tenant Improvements;

(ii)    delivered to Landlord lien waivers and affidavits from Tenant's general contractor for all subcontractors and all materials suppliers having performed any work at the Leased Premises relating to the Tenant Improvements, together with any other evidence reasonably required by Landlord to satisfy Landlord's title insurer that there are no parties entitled to file a lien against the real property underlying the Park in connection with such work; and

(iii)    delivered to Landlord all invoices, receipts and other evidence reasonably required by Landlord to evidence the cost of the Tenant Improvements.

(c)    Landlord shall pay the Holdback to Tenant at such time as Tenant has completed the incomplete work and remedied the defective work set forth on the punchlist.

(d)    Landlord shall not charge any construction management or other fee in connection with the Tenant Improvements, including, but not limited to, review or inspection of same, review of plans or specifications or otherwise.

(e)    For purposes of this Lease, the term "Improvement Costs" shall mean the cost of the CD's and all tenant buildout, including, without limitation, demising walls and utilities. Tenant shall be responsible for all Improvement Costs in excess of the Tenant Allowance.

6.    Certificate of Occupancy. Tenant acknowledges and agrees that Tenant shall have no right to conduct its business at the Leased Premises unless and until Tenant delivers to Landlord an original or copy of the certificate of occupancy, if applicable for the Leased Premises.

Exhibit B

Page 3 of 3

EXHIBIT C

LETTER OF UNDERSTANDING

DP Weston Pointe III, LLC

c/o Duke Realty Corporation

Attn.: South Florida Market – V.P., Asset Mgmt. & Customer Service

2400 North Commerce Parkway, Suite 405

Weston, FL 33326

RE: Office Lease between DP Weston Pointe III, LLC, a Delaware limited liability company ("Landlord") and The Ultimate Software Group, Inc., a Delaware corporation ("Tenant"), dated ________________, 2014 (the "Lease") for the premises located at 2250 North Commerce Parkway, Weston, Florida 33326 (the "Leased Premises"), within Weston Pointe

Dear _________________________:

The undersigned, on behalf of Tenant, certifies to Landlord as follows:

1. The Commencement Date under the Lease is ___________________.

2. The Expansion Date under the Lease is _____________________.

3. The Expiration Date under the Lease is ______________________.

4. The Lease (including amendments or guaranty, if any) is the entire agreement between Landlord and Tenant as to the leasing of the Leased Premises and is in full force and effect.

5. To the best of the undersigned's knowledge, there are no uncured events of default by either Tenant or Landlord under the Lease.

IN WITNESS WHEREOF, the undersigned has caused this Letter of Understanding to be executed this ____ day of _________________, 20____.

Exhibit C

Page 1 of 2

TENANT:

THE ULTIMATE SOFTWARE GROUP, INC., a Delaware corporation

By:

Name:

Title:

Attest:

Name:

Title:

[Exhibit - Not to be executed]

Exhibit C

Page 2 of 2

EXHIBIT D

RULES AND REGULATIONS

1.    The sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or used for any purpose other than ingress and egress. Landlord shall control the Exterior Areas subject to the express rights of Tenant as set forth in the Lease.

2.    Except for the Building Sign, no awnings or other projections shall be attached to the outside walls of the Building. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Leased Premises other than Landlord standard window coverings without Landlord's prior written approval. All electric ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent, of a quality, type, design and tube color approved by Landlord. Neither the interior nor the exterior of any windows shall be coated or otherwise sunscreened without written consent of Landlord.

3.    Except for the Building Sign, no sign, advertisement, notice or handbill shall be exhibited, distributed, painted or affixed by any tenant on, about or from any part of the Leased Premises, the Building or in the Exterior Areas including the parking area without the prior written consent of Landlord. In the event of the violation of the foregoing by any tenant, Landlord may remove or stop same without any liability, and may charge the expense incurred in such removal or stopping to tenant.

4.    The sashes, sash doors, windows, and doors that admit air into halls, passageways or other public places in the Building shall not be covered or obstructed by tenant.

5.    The sinks and toilets and other plumbing fixtures shall not be used for any purpose other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose subtenants, assignees or any of their servants, employees, agents, visitors or licensees shall have caused the same.

6.    Intentionally omitted.

7.    No bicycles, vehicles, birds or animals of any kind (except seeing eye dogs) shall be brought into or kept in or about the Leased Premises, and no cooking shall be done or permitted by any tenant on the Leased Premises, except microwave cooking, and the preparation of coffee, tea, hot chocolate and similar items for tenants and their employees. No tenant shall cause or permit any unusual or objectionable odors to be produced in or permeate from the Leased Premises.

8.    The Leased Premises shall not be used for manufacturing or for the storage of merchandise except as such storage may be incidental to the permitted use of the Leased Premises. No tenant shall occupy or permit any portion of the Leased Premises to be occupied as an office for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as a medical office, or as a barber or manicure shop, or a dance, exercise or music studio, or any type of school or daycare or copy, photographic or print shop or an employment bureau without the express written consent of Landlord. Notwithstanding the foregoing, Tenant may (a) use a portion of the Leased Premises for an exercise studio for the sole use of Tenant and its employees, and (b) print and copy within the Leased Premises in the

Exhibit D

Page 1 of 3

ordinary course of Tenant's business. The Leased Premises shall not be used for lodging or sleeping or for any immoral or illegal purpose.

9.    No tenant shall make, or permit to be made any unseemly, excessive or disturbing noises or disturb or interfere with occupants of this or neighboring buildings or premises or those having business with them, whether by the use of any musical instrument, radio, phonograph, unusual noise, or in any other way. No tenant shall throw anything out of doors, windows or down the passageways.

10.    No tenant, subtenant or assignee nor any of its servants, employees, agents, visitors or licensees, shall at any time bring or keep upon the Leased Premises any flammable, combustible or explosive fluid, chemical or substance or firearm.

11.    No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made to existing locks or the mechanism thereof, except as otherwise expressly allowed under Section 17.05 of the Lease. Each tenant must upon the termination of its tenancy, restore to Landlord all keys of doors, offices, and toilet rooms, either furnished to, or otherwise procured by, such tenant and in the event of the loss of keys so furnished, such tenant shall pay to Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such changes.

12.    No tenant shall overload the floors of the Leased Premises. All damage to the floor, structure or foundation of the Building due to improper positioning of storage items or materials shall be repaired by Landlord at the sole cost and expense of tenant, who shall reimburse Landlord immediately therefor upon demand. All removals or the carrying in or out of any safes, freight, furniture, or bulky matter of any description must take place during the hours that Landlord shall reasonably determine from time to time. The moving of safes or other fixtures or bulky matter of any kind must be done upon previous notice to Landlord and under Landlord's supervision, and the persons employed by any tenant for such work must be acceptable to Landlord. Landlord reserves the right to inspect all safes, freight or other bulky articles to be brought into the Building and to exclude from the Building all safes, freight or other bulky articles which violate any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part. Landlord reserves the right to prescribe the weight and position of all safes, which must be placed upon supports approved by Landlord to distribute the weight.

13.    Landlord shall have the right to prohibit any advertising by any tenant that, in Landlord's commercially reasonable opinion tends to impair the reputation of the Building or its desirability as an office location, and upon written notice from Landlord any tenant shall refrain from or discontinue such advertising.

14.    Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In case of an invasion, mob riot, public excitement or other circumstances rendering such action advisable in Landlord's opinion, Landlord reserves the right without any abatement of rent to require all persons to vacate the Building and to prevent access to the Building during the continuance of the same for the safety of the tenants and the protection of the Building and the property in the Building.

15.    Intentionally omitted.

16.    Canvassing, soliciting and peddling in the Building are prohibited, and each tenant shall report and otherwise cooperate to prevent the same.

Exhibit D

Page 2 of 3

17.    All office equipment of any electrical or mechanical nature shall be placed by tenant in the Leased Premises in settings that will, to the maximum extent possible, absorb or prevent any vibration, noise and annoyance.

18.    No air-conditioning unit or other similar apparatus shall be installed or used by any tenant without the written consent of Landlord except as otherwise expressly set forth in the Lease.

19.    There shall not be used in any space, or in the public halls of the Building, either by any tenant or others, any hand trucks except those equipped with rubber tires and rubber side guards.

20.    Intentionally omitted.

21.    The Building is a smoke-free Building. Smoking is strictly prohibited within the Building. Smoking shall only be allowed in areas designated as a smoking area by Landlord. Tenant and its employees, representatives, contractors or invitees shall not smoke within the Building or throw cigar or cigarette butts or other substances or litter of any kind in or about the Building, except in receptacles for that purpose. Landlord may, at its sole discretion, impose a charge against monthly rent of $50.00 per violation by tenant or any of its employees, representatives, contractors or invitees, of this smoking policy.

22.    Tenants will insure that all doors are securely locked, and water faucets, electric lights and electric machinery are turned off before leaving the Building.

23.    Parking spaces associated with the Building are intended for the exclusive use of passenger automobiles, including sport utility vehicles and any Tenant owned company van or truck. Except for intermittent deliveries, no vehicles other than passenger automobiles, sport utility vehicles and any Tenant owned company van or truck may be parked in a parking space without the express written permission of Landlord. Tenant, its employees, customers, invitees and guests shall, when using the parking facilities in and around the Building, observe and obey all signs regarding fire lanes and no-parking and driving speed zones and designated handicapped and visitor spaces, and when parking always park between the designated lines. Landlord reserves the right to tow away, at the expense of the owner, any vehicle which is improperly parked or parked in a no-parking zone or in a designated handicapped area, and any vehicle which is left in any parking lot in violation of the foregoing regulation. All vehicles shall be parked at the sole risk of the owner, and Landlord assumes no responsibility for any damage to or loss of vehicles except to the extent arising out of the negligence or willful misconduct of Landlord, the managing agent or any of their respective partners, directors, officers, agents or employees.

24.    Tenant shall be responsible for and cause the proper disposal of medical waste, including hypodermic needles, created by its employees.

It is Landlord's desire to maintain in the Building and Exterior Areas the highest standard of dignity and good taste consistent with comfort and convenience for tenants. Landlord reserves the right to make such other and further rules and regulations as in its judgment may from time to time be necessary for the safety, care and cleanliness of the Building and Exterior Areas, and for the preservation of good order therein so long as the same does not materially or adversely affect Tenant's use of the Leased Premises for the Permitted Use.

Exhibit D

Page 3 of 3

EX-10.28

Exhibit 10.28

RESTRICTED STOCK AWARD AGREEMENT

The Ultimate Software Group, Inc.

Amended and Restated 2005 Equity and Incentive Plan

This RESTRICTED STOCK AWARD AGREEMENT (this “Agreement”) made as of this _____ day of _______________, 20___, between The Ultimate Software Group, Inc., a Delaware corporation (the “Company”), and ____________________ (the “Grantee”), is made pursuant to the terms of The Ultimate Software Group, Inc. Amended and Restated 2005 Equity and Incentive Plan (the “Plan”). Capitalized terms used herein but not defined shall have the meanings set forth in the Plan.

Section 1.    Restricted Stock Award. The Company has granted to the Grantee a Restricted Stock Award with respect to the number of shares of common stock of the Company, par value $.01 per share (the “Common Stock”), specified in Appendix A hereto (the “Restricted Shares”). Appendix A may be amended by the Company from time to time to reflect additional grants of Restricted Stock Awards following the date hereof. Each Restricted Stock Award identified in Appendix A shall be subject to the conditions hereinafter provided and subject to the terms and conditions set forth in the Plan, a copy of which the Grantee acknowledges having received. (Each Restricted Stock Award identified in Appendix A is hereinafter referred to as an “Award.”)

Section 2.    Vesting of Awards.

(a)    Vesting Schedule. Subject to Section 2(b) and Section 2(c) hereof, the Restricted Shares subject to the Award shall become vested as set forth on the schedule in Appendix A (each such vesting date listed on the vesting schedule in Appendix A, a “Vesting Date”), subject to the Grantee’s continued employment with the Company or any Subsidiary on each such Vesting Date.

(b)    Full Accelerated Vesting. Notwithstanding the provisions of Section 2(a) hereof, upon (i) the Grantee’s termination of employment as a result of death or Disability, or (ii) the occurrence of a Change in Control of the Company while the Grantee is employed by the Company or any Subsidiary, the transfer restrictions and forfeiture conditions imposed hereunder on any Restricted Shares shall immediately lapse and all such unvested shares shall become fully and immediately vested.

(c)    Partial Accelerated Vesting. Notwithstanding the provisions of Section 2(a) hereof, but without limiting the applicability of Section 2(b) hereof, upon the Grantee’s termination of employment by the Company without “Cause” (as defined below), the transfer restrictions and forfeiture conditions imposed hereunder on any then outstanding Restricted Shares shall immediately lapse and become vested as to that portion of such then outstanding unvested Restricted Shares that would otherwise be scheduled to vest on the Vesting Date immediately succeeding such termination of employment by the Company without “Cause,” multiplied by a fraction (x) the numerator of which shall be the number of complete months of continued employment by the

Grantee with the Company or any Subsidiary following the immediately preceding Vesting Date (or if there has been no preceding Vesting Date, the Date of Grant) and (y) the denominator of which shall be twelve (12). For purposes hereof, termination for “Cause” shall mean a termination of employment due to (i) embezzlement or misappropriation of corporate funds, (ii) any acts of dishonesty resulting in conviction for a felony, (iii) misconduct resulting in material injury to the Company, (iv) a significant violation of Company policy, (v) willful refusal to perform, or substantial disregard of, the duties properly assigned to the Grantee, or (vi) a significant violation of any contractual, statutory or common law duty of loyalty to the Company. Notwithstanding the foregoing, if the Grantee is a party to an employment or similar agreement with the Company or any Subsidiary, the term “Cause” shall, for the purposes of this Agreement, have the same meaning set forth in such employment or similar agreement if and to the extent such term is defined therein.

Section 3.    Termination of Employment. Except as provided in Sections 2(b) and 2(c) hereof, if the Grantee’s employment with the Company or any Subsidiary is terminated prior to the occurrence of any otherwise applicable Vesting Date provided in Section 2 hereof, the Grantee shall (i) forfeit the Grantee’s interest in the Restricted Shares that have not yet become vested, (ii) assign, transfer, and deliver any certificates evidencing ownership of such shares to the Company, and (iii) cease for all purposes to be a stockholder with respect to such shares.

Section 4.    Rights as a Stockholder. Subject to the otherwise applicable provisions of this Agreement, the Grantee will have all rights of a stockholder with respect to the Restricted Shares granted to the Grantee hereunder, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto.

Section 5.    Restrictions on Transfer. Neither this Agreement nor any Restricted Shares covered hereby may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Grantee, otherwise than to the Company, unless as of the date of any such sale, assignment, transfer, encumbrance, hypothecation or pledge, such Restricted Shares to be thus disposed of have become vested in accordance with Section 2 hereof. The certificate or certificates representing shares delivered pursuant to this Agreement shall bear a legend referring to the nontransferability or assignability of such shares pursuant to this Section, and a stop-transfer order against such certificate or certificates will be placed by the Company with its transfer agents and registrars. At the discretion of the Committee, in lieu of issuing a stock certificate to the Grantee, the Company may hold the Restricted Shares in escrow during the period such shares remain subject to the vesting restrictions and other restrictions provided hereunder.

Section 6.    Investment Representation. Upon acquisition of the Restricted Shares at a time when there is not in effect a registration statement under the Securities Act of 1933 relating to the Common Stock, the Grantee hereby represents and warrants, and by virtue of such acquisition shall be deemed to represent and warrant, to the Company that the Restricted Shares shall be acquired for investment and not with a view to the distribution thereof, and not with any present intention of distributing the same, and the Grantee shall provide the Company with such further representations and warranties as the Company may require in order to ensure compliance with applicable federal and state securities, blue sky and other laws. No Restricted Shares shall be acquired unless and until the Company and/or the Grantee shall have complied with all applicable

2

federal or state registration, listing and/or qualification requirements and all other requirements of law or of any regulatory agencies having jurisdiction, unless the Committee has received evidence satisfactory to it that the Grantee may acquire such shares pursuant to an exemption from registration under the applicable securities laws. Any determination in this connection by the Committee shall be final, binding and conclusive. The Company reserves the right to legend any certificate for shares of Common Stock, conditioning sales of such shares upon compliance with applicable federal and state securities laws and regulations.

Section 7.    Adjustments. All Awards hereunder shall be subject to the provisions of Section 4.2 of the Plan relating to adjustments for recapitalizations, reclassifications and other changes in the Company’s corporate structure.

Section 8.    No Right of Continued Employment. Nothing in this Agreement shall confer upon the Grantee any right to continue as an employee of the Company or any Subsidiary or to interfere in any way with any right of the Company to terminate the Grantee’s employment at any time.

Section 9.    Section 83(b) Election; Withholding. The Grantee may make an election under Section 83(b) of the Code with respect to any grant of Restricted Shares by filing a copy of such election with the Company within 30 days of the Date of Grant. If the Grantee makes such an election, such grant of Restricted Shares shall be conditioned upon the prompt payment by the Grantee to the Company of an amount equal to the applicable federal, state and local income taxes and other amounts required by law to be withheld (the “Withholding Taxes”) in connection with such election. If the Grantee does not make an election under Section 83(b) of the Code with respect to a grant of Restricted Shares, the Grantee shall pay to the Company the Withholding Taxes upon the lapse of the vesting restrictions, and the lapse of the restrictions shall be conditioned upon the prior payment of the applicable Withholding Taxes by the Grantee. Subject to the limitations of applicable law, the Grantee hereby consents to the collection of the Withholding Taxes by the Company retaining, and not issuing to the Grantee, a number of such shares of Common Stock (the “Withholding Shares”) having a Fair Market Value on the vesting date equal to the amount of the Withholding Taxes. If and to the extent that the Committee determines not to have the Company retain Withholding Shares pursuant to the preceding sentence, the Company will notify the Grantee at least 10 days prior to the applicable vesting date. Subject to the limitations of applicable law, the Grantee hereby consents and agrees that in such event, the Company shall instruct a broker designated by the Company to sell in the public market, on behalf of the Grantee, the Withholding Shares and remit the proceeds thereof to the Company unless the Grantee has made a lump sum cash payment to the Company, at or prior to the time of vesting, equal to the Company’s estimate of the Withholding Taxes as provided in the Company’s notice. If the amount of the cash payment that the Grantee delivers to the Company exceeds the actual Withholding Taxes, the excess will be repaid to the Grantee promptly by the Company. If such amount is less than the actual Withholding Taxes, the Company will collect the balance from the Grantee immediately or instruct a broker designated by the Company to sell shares of the Company’s Common Stock in the public market, on behalf of the Grantee, in an amount sufficient to cover the shortfall.

3

Section 10.    Notices. Any notice hereunder by the Grantee shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the Secretary of the Company. Any notice hereunder by the Company shall be given to the Grantee in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Grantee may have on file with the Company.

Section 11.    Construction. This Agreement and the Awards hereunder are granted by the Company pursuant to the Plan and are in all respects subject to the terms and conditions of the Plan. The Grantee hereby acknowledges that a copy of the Plan has been delivered to the Grantee and accepts the Restricted Shares hereunder subject to all terms and provisions of the Plan, which is incorporated herein by reference. In the event of a conflict or ambiguity between any term or provision contained herein and a term or provision of the Plan, the Plan will govern and prevail. The construction of and decisions under the Plan and this Agreement are vested in the Committee, whose determinations shall be final, conclusive and binding upon the Grantee and the Company.

Section 12.    Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, excluding the choice of law rules thereof.

Section 13.    Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

Section 14.    Binding Effect. This Agreement shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of the Grantee and the successors of the Company.

Section 15.    Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof and thereof, merging any and all prior agreements.

[SIGNATURES ON FOLLOWING PAGE]

4

IN WITNESS WHEREOF, the Company and the Grantee have executed this Agreement effective as of the date first above written.

THE ULTIMATE SOFTWARE GROUP, INC.

By:

Name:

Title:

GRANTEE

By:

Name:

5

Appendix A

Date of Grant NUMBER OF SHARES SUBJECT TO AWARD Vesting Schedule

A-1

EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

Name	Jurisdiction of Incorporation
The Ultimate Software Group of Canada, Inc.	Ontario, Canada

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Scott Scherr, certify that:

1. I have reviewed this Form 10-K of The Ultimate Software Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  February 27, 2015

/s/  Scott Scherr

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Mitchell K. Dauerman, certify that:

1. I have reviewed this Form 10-K of The Ultimate Software Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  February 27, 2015

/s/  Mitchell K. Dauerman

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott Scherr, Chief Executive Officer of The Ultimate Software Group, Inc., hereby certify to the best of my knowledge and belief that this Annual Report on Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and that the information contained in this Annual Report on Form 10-K fairly represents, in all material respects, the financial condition and results of operations of The Ultimate Software Group, Inc.

/s/ Scott Scherr

Chief Executive Officer

February 27, 2015

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mitchell K. Dauerman, Chief Financial Officer of The Ultimate Software Group, Inc., hereby certify to the best of my knowledge and belief that this Annual Report on Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and that the information contained in this Annual Report on Form 10-K fairly represents, in all material respects, the financial condition and results of operations of The Ultimate Software Group, Inc.

/s/ Mitchell K. Dauerman

Chief Financial Officer

February 27, 2015

XML

Capital Lease Obligations (Tables)

12 Months Ended

Dec. 31, 2014

Capital Lease Obligations [Abstract]

Scheduled lease payments of the capital lease obligations

The scheduled lease payments of the capital lease obligations are as follows as of December 31, 2014 (in thousands):

Year	Amount
2015	$	3,877
2016	2,628
2017	832
	7,337
Less amount representing interest	(323		)
Lease obligations reflected as current ($3,655) and non-current ($3,359)	$	7,014

XML

Foreign Currency (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Foreign Currency [Abstract]
Unrealized foreign currency translation gains (losses)	$ 3,600,000	$ (1,400,000)
Realized foreign currency translation (losses)	0	0	0
Unrealized foreign currency translation gains (losses)	$ (2,143,000)	$ (1,549,000)	$ 166,000

XML

Investments in Marketable Securities and Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 10,166	$ 10,449
Net Unrealized Gain (Loss)	(10)	4
Fair Value	10,156	10,453
Amortized Cost Basis
Due in one year or less	7,870
Due after one year	2,296
Total	10,166
Fair Value
Due in one year or less	7,862
Due after one year	2,294
Total	10,156	10,453
Corporate debentures and bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	8,513	7,375
Net Unrealized Gain (Loss)	(9)	4
Fair Value	8,504	7,379
Fair Value
Total	8,504	7,379
Commercial paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	600	1,799
Net Unrealized Gain (Loss)	0	0
Fair Value	600	1,799
Fair Value
Total	600	1,799
U.S. Agency bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	255	760
Net Unrealized Gain (Loss)	0	0
Fair Value	255	760
Fair Value
Total	255	760
U.S. Treasury bills [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	798	0
Net Unrealized Gain (Loss)	(1)	0
Fair Value	797	0
Fair Value
Total	797	0
Certificates of Deposit [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	0	515
Net Unrealized Gain (Loss)	0	0
Fair Value	0	515
Fair Value
Total	$ 0	$ 515

XML

Commitments and Contingencies (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Operating Leases [Abstract]
Total rent expense under operating lease agreements	$ 8,500,000	$ 6,600,000	$ 5,700,000
Future minimum annual rental commitments [Abstract]
2015	8,657,000
2016	8,642,000
2017	7,028,000
2018	5,357,000
2019	4,177,000
Thereafter	6,006,000
Operating leases, future minimum payment due, Total	$ 39,867,000

XML

Computer Software Development Costs (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Capitalized software development costs	$ 25,200,000	$ 19,000,000	$ 5,200,000
Estimated Useful Lives	7 years	8 years
Capitalized software	49,464,000	24,238,000	5,217,000
Accumulated amortization	(670,000)	0	0
Capitalized software, net	$ 48,794,000	$ 24,238,000	$ 5,217,000
Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Lives	3 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Lives	10 years
Internal Use Software [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life	3 years
Internal Use Software [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life	7 years

XML

Business Combinations (Narrative) (Details) (USD $)	3 Months Ended	12 Months Ended			0 Months Ended
	Dec. 31, 2013 acquisitions	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Oct. 02, 2013 installment	Nov. 15, 2013 installment
Business Acquisition [Line Items]
Number of non-significant individually and in aggregate acquisitions	2
Cash payment to acquire business		$ 257,000	$ 24,995,000	$ 0
Gross deferred tax liabilities	15,037,000	23,521,000	15,037,000	8,052,000
Goodwill	26,942,000	25,696,000	26,942,000
Employtouch Inc [Member]
Business Acquisition [Line Items]
Percentage of the issued and outstanding shares acquired					100.00%
Cash payment to acquire business					10,400,000
Number of installments restricted shares are issuable to acquire business					3
Intangible assets					5,350,000
Estimated fair value of acquired customer relationships					100,000
Estimated fair value of developed technology					5,200,000
Estimated fair value of non-compete agreements					50,000
Net tangible assets					23,000
Acquisition related costs					300,000
Gross deferred tax liabilities					1,400,000
Goodwill					8,736,000
AcceIHR, LLC [Member]
Business Acquisition [Line Items]
Cash payment to acquire business						14,600,000
Number of installments restricted shares are issuable to acquire business						3
Intangible assets						3,350,000
Estimated fair value of acquired customer relationships						3,100,000
Estimated fair value of non-compete agreements						300,000
Net tangible assets						(732,000)
Acquisition related costs						300,000
Goodwill						15,025,000
Net liabilities assumed						700,000
Restricted Stock [Member] | Employtouch Inc [Member]
Business Acquisition [Line Items]
Number of shares issued to acquire business					17,788
Value of shares issued ot acquire business					2,300,000
Restricted Stock [Member] | AcceIHR, LLC [Member]
Business Acquisition [Line Items]
Number of shares issued to acquire business						22,017
Value of shares issued ot acquire business						$ 3,000,000

XML

Prepaid Expenses and Other Current Assets (Tables)

12 Months Ended

Dec. 31, 2014

Prepaid Expense and Other Assets, Current [Abstract]

Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following (in thousands):

	As of December 31,
	2014		2013
Prepaid commissions on cloud sales	$	17,772	$	19,942
Other prepaid expenses	8,064		2,783
Other current assets	8,952		6,649
Total prepaid expenses and other current assets	$	34,788	$	29,374

XML

Employee Benefit Plan (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract]
Employer contributions to the defined contribution plan	$ 5.5	$ 3.6	$ 2.9

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Goodwill and Intangible Assets Goodwill and Intangible Assets (Goodwill) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Nov. 15, 2013
Goodwill [Roll Forward]
Goodwill, December 31, 2013	$ 26,942
Adjustments	(561)
Translation Adjustments	(685)
Goodwill, December 31, 2014	25,696
AcceIHR, LLC [Member]
Goodwill [Roll Forward]
Goodwill, December 31, 2013		15,025
Goodwill, December 31, 2014		$ 15,025

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Commitments and Contingencies (Future Commitments) (Details) (Software License Arrangement [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2014
Software License Arrangement [Member]
Other Commitments [Line Items]
2015	$ 1,155
2016	1,155
Total	$ 2,310

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Related Party Transactions

12 Months Ended

Dec. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions

 Related Party Transactions

On October 23, 2006, Ultimate’s Board elected Al Leiter as a non-employee member of Ultimate’s Board of Directors.  During October 2002, Mr. Leiter entered into an agreement with Ultimate pursuant to which he agreed to (i) attend and participate in certain internal meetings of Ultimate; (ii) assist our salespeople with prospects; and (iii) act as an official spokesperson for Ultimate in exchange for which we agreed to make contributions to Leiter’s Landing, Mr. Leiter’s non-profit charitable organization benefiting children, in the amount of one tenth (1/10) of one percent, or 0.1%, of our total revenues as reported in our consolidated statements of operations.  In February 2007, Mr. Leiter and Ultimate agreed that the maximum amount payable by Ultimate in any one year under this agreement is $200,000. In June 2012, Mr. Leiter and Ultimate terminated this agreement. Therefore, there were no contributions to Leiter's Landing for the years ended December 31, 2014 and 2013. For the fiscal year ended December 31, 2012, Ultimate contributed a total of approximately $50,000 to Leiter’s Landing.

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Allowance for Doubtful Accounts (Details) (Allowance for Doubtful Accounts [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Allowance for Doubtful Accounts [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of year	$ 675	$ 475	$ 475
Charged to expenses	2,264	2,523	1,159
Write-offs	(2,264)	(2,323)	(1,159)
Balance at end of year	$ 675	$ 675	$ 475

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Stock-Based Compensation and Equity (Tables)

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Non-cash stock-based compensation expense

The following table summarizes SBC recognized by the Company (in thousands):

	For the Years Ended December 31,
	2014		2013		2012
SBC - Statements of income	$	46,185	$	32,807	$	20,412
SBC - Capitalized software	1,730		1,398		420
SBC - Statements of stockholders' equity	$	47,915	$	34,205	$	20,832

The following table sets forth the non-cash stock-based compensation expense resulting from stock-based arrangements that is recorded in our consolidated statements of income for the periods indicated (in thousands):

	For the Years Ended December 31,
	2014		2013		2012
Cost of recurring revenues	$	5,495	$	3,866	$	2,508
Cost of services revenues	4,446		3,591		2,729
Sales and marketing	20,767		13,625		7,861
Research and development	4,788		3,585		2,451
General and administrative	10,689		8,140		4,863
Total stock-based compensation expense	$	46,185	$	32,807	$	20,412

Summary of stock option activity

The following table summarizes Option activity for the years ended December 31, 2012, 2013 and 2014, as follows (in thousands, except per share amounts):

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2011	2,223		$	20.20
Granted
Exercised	(750	)	15.04
Forfeited or expired	—		—
Outstanding and exercisable at December 31, 2012	1,473		$	22.83	3.8	$	105,447
Outstanding at December 31, 2012	1,473		$	22.83
Granted	—		—
Exercised	(440	)	18.48
Forfeited or expired	(1	)	23.31
Outstanding and exercisable at December 31, 2013	1,032		$	24.69	3.1	$	132,615
Outstanding at December 31, 2013	1,032		$	24.69
Granted	—		—
Exercised	(310	)	20.05
Forfeited or expired	—		—
Outstanding and exercisable at December 31, 2014	722		$	26.68	2.6	$	86,758

Summary of restricted stock award and restricted stock unit activity

The following table summarizes Restricted Stock and Restricted Stock Unit Award activity for the years ended December 31, 2012, 2013 and 2014, as follows (in thousands, except per share amounts):

	Restricted Stock
	Shares		Weighted Average Grant Date Fair Value		Restricted Stock Units Shares
Outstanding at December 31, 2011	1,045		$	31.25	430
Granted	418		93.81		313
Vested	—		—		—
Released	(457	)	15.22		(213	)
Forfeited or expired	(8	)	31.84		(22	)
Outstanding at December 31, 2012	998		$	64.81	508
Granted	210		152.03		249
Vested	—		—		—
Released	(209	)	27.76		(229	)
Forfeited or expired	(31	)	77.92		(27	)
Outstanding at December 31, 2013	968		$	91.28	501
Granted	245		152.39		207
Vested	—		—		—
Released	(153	)	40.38		(242	)
Forfeited or expired	—		—		(22	)
Outstanding at December 31, 2014	1,060		$	112.77	444

Options outstanding and exercisable by exercise price range

The following table summarizes information with respect to Options outstanding and Options exercisable under the Plan at December 31, 2014:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number	Weighted Average Remaining Contractual Term (Years)	Weighted- Average Exercise Price		Number	Weighted Average Exercise Price
$13.63—$18.69	79,551	2.19	$	16.01	79,551	$	16.01
$21.60—$24.20	94,288	1.38	22.62		94,288	22.62
$24.30—$24.30	125,423	2.10	24.30		125,423	24.30
$26.72—$26.83	6,861	1.76	26.77		6,861	26.77
$27.02—$27.02	1,879	2.37	27.02		1,879	27.02
$28.41—$28.41	201,861	3.10	28.41		201,861	28.41
$30.34—$30.34	49,301	2.56	30.34		49,301	30.34
$32.39—$32.39	87,760	3.57	32.39		87,760	32.39
$32.54—$32.54	52,300	3.32	32.54		52,300	32.54
$34.89—$34.89	22,915	2.81	34.89		22,915	34.89
$13.63—$34.89	722,139	2.61	$	26.68	722,139	$	26.68

Stock options and restricted stock awards granted to non-employee directors

The following table summarizes information about Restricted Stock Awards granted by us to non-employee directors in exchange for director related services rendered for 2014, 2013 and 2012:

Year	Market Value of Restricted Stock Awards Granted		Number of Restricted Stock Awards Granted
2012	$	69.00	5,591
	76.42		5,501
	93.84		5,351
	94.50		5,346
2013	$	95.99	5,336
	109.95		5,251
	146.25		5,111
	155.32		2,500
2014	$	164.87	2,625
	118.03		2,625
	132.23		2,570
	152.59		2,555

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Reconciliation of shares used in the computation of basic and diluted net income per share

The following is a reconciliation of the shares used in the computation of basic and diluted net income (loss) per share (in thousands):

	For the Years Ended December 31,
	2014	2013	2012
Basic weighted average shares outstanding	28,293	27,773	26,778
Effect of dilutive equity instruments (1)	1,050	1,240	1,597
Dilutive shares outstanding	29,343	29,013	28,375
Anti-dilutive equity instruments (1)	40	47	67
(1) Includes options to purchase shares of Common Stock and other stock-based awards outstanding.

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Property and Equipment (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 198,185,000	$ 152,439,000
Less: accumulated depreciation and amortization	111,590,000	94,253,000
Property and equipment, net	86,595,000	58,186,000
Depreciation and amortization expense	18,100,000	15,300,000	12,400,000
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	119,716,000	103,154,000
Internal Use Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	49,464,000	24,238,000
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	18,125,000	15,069,000
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	9,220,000	8,318,000
Building [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,005,000	1,005,000
Land [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 655,000	$ 655,000

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Stock-Based Compensation and Equity 3 (Details) (USD $)	3 Months Ended												12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Restricted stock and restricted stock unit award [Roll Forward}
Granted (in shares)	2,555	2,570	2,625	2,625	2,500	5,111	5,251	5,336	5,346	5,351	5,501	5,591
Restricted stock awards, weighted average grant date fair value [Abstract]
Granted (in dollars per share)	$ 152.59	$ 132.23	$ 118.03	$ 164.87	$ 155.32	$ 146.25	$ 109.95	$ 95.99	$ 94.50	$ 93.84	$ 76.42	$ 69.00
Restricted Stock [Member]
Restricted stock and restricted stock unit award [Roll Forward}
Outstanding at beginning of period (in shares)				968,000				998,000				1,045,000	968,000	998,000	1,045,000
Granted (in shares)													245,000	210,000	418,000
Vested (in shares)													0	0	0
Released (in shares)													(153,000)	(209,000)	(457,000)
Forfeited or expired (in shares)													0	(31,000)	(8,000)
Outstanding at end of period (in shares)	1,060,000				968,000				998,000				1,060,000	968,000	998,000
Restricted stock awards, weighted average grant date fair value [Abstract]
Outstanding at beginning of period (in dollars per share)				$ 91.28				$ 64.81				$ 31.25	$ 91.28	$ 64.81	$ 31.25
Granted (in dollars per share)													$ 152.39	$ 152.03	$ 93.81
Vested (in dollars per share)													$ 0.00	$ 0.00	$ 0.00
Released (in dollars per share)													$ 40.38	$ 27.76	$ 15.22
Forfeited or expired (in dollars per share)													$ 0.00	$ 77.92	$ 31.84
Outstanding at end of period (in dollars per share)	$ 112.77				$ 91.28				$ 64.81				$ 112.77	$ 91.28	$ 64.81
Restricted Stock Units (RSUs) [Member]
Restricted stock and restricted stock unit award [Roll Forward}
Outstanding at beginning of period (in shares)				501,000				508,000				430,000	501,000	508,000	430,000
Granted (in shares)													207,000	249,000	313,442
Vested (in shares)													0	0	0
Released (in shares)													(242,000)	(229,000)	(213,000)
Forfeited or expired (in shares)													(22,000)	(27,000)	(22,000)
Outstanding at end of period (in shares)	444,000				501,000				508,000				444,000	501,000	508,000

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Other Borrowings (Details) (Perpetual Licenses [Member], USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2012
Perpetual Licenses [Member]
Long-term Purchase Commitment [Line Items]
Payments to Acquire Perpetual Licenses	$ 800,000	$ 5,300,000
Period perpetual licenses with third party vendors are payable	2 years	3 years
Purchase Obligation, Fiscal Year Maturity [Abstract]
2015	567,000
2016	400,000
Other borrowings	$ 967,000

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Business Combinations (Assets Acquired and Liabilities Assumed) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Oct. 02, 2013	Nov. 15, 2013
Business Acquisition [Line Items]
Goodwill	$ 25,696	$ 26,942
Employtouch Inc [Member]
Business Acquisition [Line Items]
Net tangible assets			23
Intangible assets			5,350
Goodwill			8,736
Deferred tax liability			(1,418)
Total purchase price			12,691
AcceIHR, LLC [Member]
Business Acquisition [Line Items]
Net tangible assets				(732)
Intangible assets				3,350
Goodwill				15,025
Total purchase price				$ 17,643

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Basis of Presentation, Consolidation and the Use of Estimates

12 Months Ended

Dec. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation, Consolidation and the Use of Estimates

Basis of Presentation, Consolidation and the Use of Estimates

The accompanying consolidated financial statements of Ultimate have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The consolidated financial statements included herein reflect all adjustments, which are, in the opinion of Ultimate’s management, necessary for a fair presentation of the information for the periods presented. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, revenue recognition, income taxes, the allowance for doubtful accounts, the valuation of deferred tax assets and long-lived assets, among others discussed below.  Actual results could differ from those estimates.

The consolidated financial statements reflect the financial position and operating results of Ultimate and include its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Oct. 02, 2013
Income Tax Contingency [Line Items]
Income (loss) from continuing operations before income taxes	$ 54,329	$ 43,089	$ 28,739
Current taxes [Abstract]
Federal	(22,406)	(14,091)	(10,085)
State and local	(5,078)	(3,298)	(2,354)
Foreign	(567)	(201)	(164)
Deferred taxes, net [Abstract]
Federal	16,607	(8)	(1,710)
State and local	1,535	(2)	197
Foreign	317	41	9
Income tax provision	(9,592)	(17,559)	(14,107)
Statutory federal income tax rate (in hundredths)	35.00%
Number of years of historical operating profits used by the Company in assessing the need for a valuation allowance (in years)	3 years
Reconciliation of income tax (provision) benefit [Abstract]
Income tax (provision) benefit at statutory federal tax rate	(19,015)	(15,081)	(10,060)
State and local income taxes, net of the federal benefit	(2,303)	(2,144)	(1,402)
Non deductible expenses	(2,068)	(1,965)	(2,470)
Change in tax rates	80	51	45
Recognition of previously unrecognized tax benefits, federal benefit	0	1,679	0
Research credit, federal benefit	13,873	0	0
Other, net	(159)	(99)	(220)
Income tax provision	(9,592)	(17,559)	(14,107)
Deferred tax assets [Abstract]
Net operating losses, foreign	59	59	0
Tax credit carryforwards	127	127	127
Research credit	15,518	0	0
Deferred revenue	168	504	1,140
Accruals not currently deductible	715	472	386
Allowance for doubtful accounts	248	248	169
Charitable contributions	1,281	995	751
Stock-based compensation	41,139	29,840	24,044
Deferred rent adjustment	1,292	1,349	1,350
Gross deferred tax assets	60,547	33,594	27,967
Less valuation allowance	0	0	0
Deferred tax assets	60,547	33,594	27,967
Deferred tax liabilities [Abstract]
Property and equipment	(23,248)	(14,481)	(8,665)
Acquired intangible assets, foreign	(1,088)	(1,371)	0
Software development costs	815	815	613
Other, net	0	0	0
Gross deferred tax liabilities	(23,521)	(15,037)	(8,052)
Gross deferred tax liabilities	(1,049)	(1,371)
Net deferred tax assets	37,026	18,557	19,915
Employtouch Inc [Member]
Deferred tax liabilities [Abstract]
Gross deferred tax liabilities				(1,400)
Gross deferred tax liabilities	$ (1,400)

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Future minimum annual rental commitments related to operating leases

Future minimum annual rental commitments related to these leases are as follows as of December 31, 2014 (in thousands):

Year	Amount
2015	$	8,657
2016	8,642
2017	7,028
2018	5,357
2019	4,177
Thereafter	6,006
	$	39,867

Schedule of future commitments

Future commitments related to this agreement are as follows as of December 31, 2014 (in thousands):

Year	Amount
2015	$	1,155
2016	1,155
	$	2,310

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Sumary of Significant Accounting Policies and Recent Accounting Pronouncements (Tables)

12 Months Ended

Dec. 31, 2014

Summary of Significant Accounting Policies and Recent Accounting Pronouncements [Abstract]

Non-cash stock-based compensation expense

The following table summarizes SBC recognized by the Company (in thousands):

	For the Years Ended December 31,
	2014		2013		2012
SBC - Statements of income	$	46,185	$	32,807	$	20,412
SBC - Capitalized software	1,730		1,398		420
SBC - Statements of stockholders' equity	$	47,915	$	34,205	$	20,832

The following table sets forth the non-cash stock-based compensation expense resulting from stock-based arrangements that is recorded in our consolidated statements of income for the periods indicated (in thousands):

	For the Years Ended December 31,
	2014		2013		2012
Cost of recurring revenues	$	5,495	$	3,866	$	2,508
Cost of services revenues	4,446		3,591		2,729
Sales and marketing	20,767		13,625		7,861
Research and development	4,788		3,585		2,451
General and administrative	10,689		8,140		4,863
Total stock-based compensation expense	$	46,185	$	32,807	$	20,412

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Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Policies)

12 Months Ended

Dec. 31, 2014

Summary of Significant Accounting Policies and Recent Accounting Pronouncements [Abstract]

Cash and Cash Equivalents

Cash and Cash Equivalents

All highly liquid instruments with an original maturity of three months or less when acquired are considered cash equivalents and are comprised of interest-bearing accounts.

Accounts Receivable

Accounts Receivable

Accounts receivable are principally from end-users of Ultimate’s products. We perform credit evaluations of our customers and have recorded allowances for estimated losses. We maintain an allowance for doubtful accounts at an amount estimated to be sufficient to provide adequate protection against losses resulting from collecting less than full payment on accounts receivable. A considerable amount of judgment is required when the realization of receivables is assessed, including assessing the probability of collection and current credit-worthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in a further impairment of their ability to make payments, an additional provision for doubtful accounts may be required.We charge off uncollectible amounts against the allowance for doubtful accounts in the period in which we determine they are uncollectible.

Funds Held for Customers and Customers' Funds Obligations

Funds Held for Customers and Customers’ Funds Obligations

Ultimate has the right to market and distribute an independent third party’s tax filing solution that Ultimate has branded UltiPro Payment Services.  Ultimate’s UltiPro Payment Services product provides payment services to our customers.  These payment services are being sold directly by us to our customers only on a per-employee-per-month (“PEPM”) basis in conjunction with UltiPro, our core product.  In connection with our UltiPro Payment Services product, we receive funds from our customers and hold such funds for purposes of paying the appropriate taxing authorities on behalf of such customers.  We hold our customers’ payment services deposits for the period between collection from our customers and remittance to the applicable taxing authority.  These funds held for customers and the corresponding customer funds obligations are included in current assets and current liabilities, respectively, in our consolidated balance sheets as of December 31, 2014 and 2013.  We have reported the cash flows for purchases of securities with funds received from UltiPro Payment Services customers in the investing activities section of the consolidated statements of cash flows for the years ended December 31, 2014, 2013 and 2012.  We have reported the cash flows related to the funds received and paid on behalf of such customers to the applicable taxing authorities in the financing activities section of the consolidated statements of cash flows for the years ended December 31, 2014, 2013 and 2012.  The associated PEPM fees for UltiPro Payment Services are included in recurring revenues in the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012.  The associated interest earned was not material for the years ended December 31, 2014, 2013 and 2012.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Ultimate’s financial instruments, consisting of cash and cash equivalents, investments in marketable securities, funds held for customers and the related obligations, accounts receivable, accounts payable, and capital lease obligations and other borrowings, approximated fair value (due to relatively short maturity) as of December 31, 2014 and 2013.

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets

Ultimate’s financial statements include prepaid expenses and other current assets which include prepaid commissions on cloud sales.  Prepaid expenses are amortized over the life of the asset (typically within one year) and commissions on cloud sales are amortized over the initial contract term (typically 24 months) commencing on the day the customer processes its first live payroll using UltiPro (also referred to as going “Live”), which corresponds with the related cloud revenue recognition. The portion of prepaid commissions that extends beyond one year is classified in other assets, net in the consolidated balance sheets as of December 31, 2014 and 2013.

Long-Lived Assets

Long-Lived Assets

We evaluate the carrying value of long-lived assets when indicators of impairment exist.  For the year ended December 31, 2014, no such events or circumstances were identified.  The carrying value of a long-lived asset is considered impaired when the undiscounted expected future cash flows from such asset (or asset group) are separately identifiable and less than the asset’s (or asset group’s) carrying value.  In that event, a loss is recognized to the extent that the carrying value exceeds the fair value of the long-lived asset.  Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved.  For the years ended December 31, 2014, 2013 and 2012, we recorded no impairment of our long-lived assets.

Property and Equipment

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation and amortization. Property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets, which range from 2 to 20 years. Leasehold improvements and assets under capital leases are amortized over the shorter of the life of the asset or the term of the lease over periods ranging from approximately 3 to 15 years. Maintenance and repairs are charged to expense when incurred; betterments are capitalized. Upon the sale or retirement of assets, the cost, accumulated depreciation and amortization are removed from the accounts and any gain or loss is recognized.

Computer Software Development Costs

We previously capitalized software costs in accordance with Accounting Standards Codification ("ASC") Topic 985-20, Costs of Software to Be Sold, Leased, or Marketed. Those capitalized software costs were fully amortized as of December 31, 2013.

Computer software development costs related to software developed for internal use falls under the accounting guidance of ASC Topic 350-40, Intangibles Goodwill and Other–Internal Use Software, in which computer software costs are expensed as incurred during the preliminary project stage and capitalization begins in the application development stage once the capitalization criteria are met. Costs associated with post implementation activities are expensed as incurred. Costs capitalized during the application development stage include external direct costs of materials and services consumed in developing or obtaining internal-use software and payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the internal-use computer software. In addition to capitalizing costs for software (which are used by us in our general operations, for internal purposes), we also capitalize costs under ASC Topic 350-40 for certain software development projects related to our suite of products sold to our customers exclusively on a subscription basis under our software-as-a-service offering of UltiPro (the “Cloud Offering”).

Deferred Revenue

Deferred Revenue

Deferred revenue is primarily comprised of deferrals for recurring revenues for cloud services which are recognized over the term of the related contract as the services are performed, typically two years; maintenance services which have not yet been rendered which are recognized ratably over the related annual maintenance period; implementation consulting services for which the services have not yet been rendered which are primarily recognized prior to the respective Live date; and subscription revenues which are recognized ratably over the base term of the related contract upon the delivery of the services.

Guarantees

Guarantees

The standard commercial terms in our sales contracts for UltiPro include an indemnification clause that indemnifies the customer against certain liabilities and damages arising from any claims of patent, copyright, or other proprietary rights of any third party. Due to the nature of the intellectual property indemnification provided to our customers, we cannot estimate the fair value, or determine the total nominal amount, of the indemnification until such time as a claim for such indemnification is made.  In the event of a claim made against us under such provision, we evaluate estimated losses for such indemnification considering such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss.  To date, Ultimate has not had any claims made against it under such provision and, accordingly, has not accrued any liabilities related to such indemnifications in its consolidated financial statements.

Segment Information

Segment Information

Public companies are required to report selected information about operating segments in annual and interim financial reports to shareholders, as well as related disclosures about an enterprise’s business segments, products, services, geographic areas and major customers. Ultimate operates its business as a single segment and is comprised as a single reporting unit.

Revenue Recognition

Revenue Recognition

We recognize revenues in accordance with Accounting Standards Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”). We use the relative selling price method to allocate the total consideration to units of accounting in a multiple element arrangement. We allocate revenue in an arrangement using the estimated selling price (“ESP”) of deliverables if it does not have vendor-specific objective evidence (“VSOE”) or third-party evidence (“TPE”) of selling price. 

VSOE is the price charged when the same or similar product or service is sold separately.  We define VSOE as a median price of recent stand-alone transactions that are priced within a narrow range.

TPE is determined based on the prices charged by our competitors for a similar deliverable when sold separately.  However, due to the difficulty in obtaining sufficient information on competitor pricing and differences in our product offerings when compared with those of our peers, we generally are unable to reliably determine TPE.

ESP is our best estimate of the selling price of an element in a transaction. If we are unable to establish selling price using either VSOE or TPE, we will use ESP in our allocation of arrangement consideration.  The objective of ESP is to determine the price at which we would transact business if the product or service were sold by us on a stand-alone basis.  Our determination of ESP involves the use of a customary discount from the list (or book) price for each element, with the discounted price applied within a narrow range.  The customary discount is derived from historical data that has been analyzed to determine trends and patterns. We analyze the customary discount used for determining ESP on no less than an annual basis.

We evaluate each deliverable in our arrangements to determine whether it represents a separate unit of accounting.  A deliverable constitutes a separate unit of accounting when it has stand-alone value to our customers.  Our products and services continue to qualify as separate units of accounting under ASU 2009-13.

There are two major elements in our multiple element arrangements for the delivery of our Cloud Offering, which are recurring revenues (i.e., cloud subscription revenues) and services revenues (mostly implementation consulting services).   

For multiple element arrangements, the consideration allocated to cloud subscription revenues is recognized as recurring revenues over the initial contract period, as those services are delivered, commencing with the Live date of the related product. The consideration allocated to fixed fee implementation consulting services in multiple element arrangements is recognized as services revenues on a percentage of completion basis, using reasonably dependable estimates with respect to milestones achieved (in relation to progression through implementation phases), by product.

Single element arrangements typically consist of renewals for cloud subscriptions and renewal maintenance agreements. In addition, implementation consulting services sold on a time and materials basis typically represent single element arrangements. Under these single element arrangements, cloud subscription and maintenance revenues are recognized over the related renewal period, as the services are delivered, and implementation consulting services are recognized as the services are performed.

We recognize revenues when all of the following criteria are met:

• persuasive evidence of an arrangement exists;

• delivery has occurred;

• the fees are fixed and determinable; and

• collection is considered probable.

If collection is not considered probable, we recognize revenues when the fees are collected. If the fees are not fixed and determinable, we recognize revenues when the fees become due from the customer. If non-standard acceptance periods or non-standard performance criteria are required, we recognize revenue when the acceptance period expires or upon the satisfaction of the acceptance/performance criteria, as applicable.

The majority of services revenues are recognized over the implementation period, which is from the contract execution date until the Live date. Cloud revenues are recognized over the initial contract term, beginning in the month the customer goes Live.

Recurring Revenues

Recurring revenues primarily consist of subscription revenues recognized from our Cloud Offering, as well as customer support and maintenance revenues.

i)  Cloud subscription revenues are principally derived from PEPM fees earned from the Cloud Offering and from sales of hosting services on a stand-alone basis to customers who already own a perpetual license ("Base Hosting").  Ongoing PEPM fees from the Cloud Offering and, to a lesser extent, Base Hosting are recognized as subscription revenues as the services are delivered, commencing when the customer goes Live.

ii)  Customer support and maintenance revenues are derived from maintaining, supporting, and providing periodic updates of our software for our hosting services.  Since we stopped selling perpetual licenses to our new customers effective April 1, 2009, customer support and maintenance revenues stem from annual renewals.

Under our Cloud Offering, our customers do not have the right to take possession of our software and these arrangements are considered service contracts. The selling price of multiple deliverables in cloud arrangements is derived for each element based on the guidance provided by ASU 2009-13.  The multiple elements that typically exist in cloud arrangements include (1) recurring revenues from the combination of hosting services, the right to use UltiPro, and maintenance of UltiPro (i.e., product enhancements, updates and customer support) and (2) professional services (i.e., primarily implementation consulting services).

The pricing for the three elements that pertain to recurring revenues (i.e., hosting services, the right to use UltiPro and maintenance of UltiPro) is bundled.  Since these three bundled elements are components of recurring revenues in the consolidated statements of income, allocation of selling price to each of the three elements is not necessary and they are not reported separately.  Selling price, which is established through VSOE, for the bundled elements, as a whole, is determined on the basis of renewal pricing, without taking into consideration potential price increases or potential changes in the number of employees of the customer in the future due to the uncertainties surrounding these potential occurrences.  These bundled elements are provided on an ongoing basis, represent undelivered elements and are recognized on a monthly basis as the related services are performed, commencing once the customer goes Live.

Services Revenues

Services revenues primarily include revenues from fees charged for implementation consulting services in connection with the implementation of our product solutions and, to a much lesser extent, training of customers in the use of our products and fees for other services, including the provision of payroll-related forms, sales of time clocks and the printing of W-2 forms for certain customers, as well as certain client reimbursable out-of-pocket expenses.

Our multiple element contracts contain recurring cloud revenues and implementation consulting services priced on a fixed fee basis. Time and materials implementation consulting services are sold as stand-alone sales not directly related to the basic implementation of the cloud product. The total arrangement consideration is allocated to services elements in the arrangement based on relative selling prices, using the prices established when the services are sold on a stand-alone basis.  Selling price is established through ESP for fixed fee implementation consulting services that are included in our multiple element contracts.

Revenues from implementation consulting services sold on a fixed-fee basis are recognized using the percentage of completion accounting method, which involves the use of estimates.  Percentage of completion is measured at each reporting date based on progress made to date, using reasonably dependable estimates with respect to milestones achieved or billable hours, as applicable.

Revenues from implementation consulting services, billed on a time and materials basis (at an hourly rate), are recognized as these services are performed.  Other services are recognized as the product is shipped or as the services are rendered, depending on the specific terms of the related arrangement.

Business Combinations

Business Combinations

We are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed at the acquisition date based upon their estimated fair values. Goodwill as of the acquisition date represents the excess of the purchase consideration of an acquired business over the fair value of the underlying net tangible and intangible assets acquired and liabilities assumed. The purchase price allocation and valuation of the acquisition require management to make significant estimates and assumptions, especially with respect to long-lived and intangible assets.

The estimates used in valuing certain of the intangible assets include, but are not limited to: future expected cash flows of the assets, discount rates to determine the present value of the future cash flows, financial projections of the acquired business, attrition rates of customers and expected technology life cycles. We also estimate the useful lives of the intangible assets based on the expected period over which we anticipate generating economic benefit from the asset.

Our estimates of fair value are based on assumptions believed to be reasonable at that time. If management made different estimates or judgments, material differences in the fair values of the net assets acquired may result.

The fair value of assets acquired and liabilities assumed was based upon a preliminary purchase price allocation and our estimates and assumptions are subject to change within the measurement period.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. The determination of the value of the intangible assets acquired involves certain judgments and estimates. These judgments and estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital.

At December 31, 2014, our goodwill totaled $25.7 million and our identifiable net intangible assets totaled $6.8 million. We assess the impairment of goodwill of our reporting unit annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable.  Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.  If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value.  We consider both market and discounted cash flow approaches to determine the fair value of the reporting unit.  Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value.  The discounted cash flow approach uses expected future operating results.  Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.

Cost of Revenues

Cost of Revenues

Cost of revenues primarily consists of the costs of recurring and services revenues. Cost of recurring revenues primarily consists of costs to provide maintenance and technical support to our customers, the cost of providing periodic updates and the cost of recurring subscription revenues, including amortization of capitalized software. Cost of services revenues primarily consists of costs to provide implementation consulting services and, to a lesser degree, training to our customers, costs related to sales of payroll-related forms, time clocks and costs associated with certain client reimbursable out-of-pocket expenses.

Stock-Based Compensation

Stock-Based Compensation

Our Amended and Restated 2005 Equity and Incentive Plan (the “Plan”) authorizes the grant of options to non-employee directors, officers and employees of Ultimate to purchase shares of Ultimate’s Common Stock.  The Plan also authorizes the grant to such persons of restricted and non-restricted shares of Common Stock, stock appreciation rights, stock units and cash performance awards (collectively, together with stock options, the “Awards”).  Prior to the adoption of the Plan, options to purchase shares of Common Stock were issued under our Nonqualified Stock Option Plan (the “Prior Plan”).  Beginning in 2009, we began making grants to employees of restricted stock units in lieu of stock options.

As of December 31, 2014, the aggregate number of shares of Common Stock that were available to be issued under all Awards granted under the Plan was 1,165,680 shares.

The Plan provides broad discretion to the Compensation Committee of the Board of Directors to create appropriate equity incentives for directors, officers and employees of Ultimate.  The Plan is intended to attract and retain talented employees and align employee and stockholder interests.

For purposes of calculating and accounting for stock-based compensation expense (“SBC”) in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC 718”) for restricted stock awards and restricted stock units, we measure compensation based on the closing market price of our Common Stock at the date of grant and it is recognized on a straight-line basis over the vesting period.  We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.  The weighted-average forfeiture rate is based on historical data.

In accordance with ASC 718, Ultimate capitalizes the portion of SBC expense attributed to research and development personnel whose labor costs are being capitalized pursuant to ASC Topic 350-40, Intangibles Goodwill and Other-Internal Use Software, related to software development.

Rental Costs Incurred in Relation to a Construction Period

Rental Costs Incurred in Relation to a Construction Period

We have incurred rental costs associated with operating leases during the construction period.  Rental costs incurred during a construction period are costs incurred for the right to control the use of a leased asset during and after construction of a leased asset.  Since there is no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period, rental costs associated with ground or building operating leases that are incurred during a construction period are recognized as rental expense on a straight-line basis.

Income Taxes

Income Taxes

We are subject to Federal, foreign and state corporate income taxes.  We account for income taxes using an asset and liability approach under which deferred income taxes are provided based upon enacted tax laws and rates applicable to the periods in which the taxes become payable.

We make certain estimates and judgments in determining income tax expense for financial statement purposes.  These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

We assess the likelihood that Ultimate will be able to recover its deferred tax assets.  Management considers all available evidence, both positive and negative, including historical levels of pre-tax book income, expiration of net operating losses, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies, as well as current tax laws and interpretation of current tax laws, in assessing the need for a valuation allowance.  If recovery is not likely, we record a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable.  The available positive evidence at December 31, 2014 included, among other factors, three years of cumulative historical pre-tax book income and a projection of future pre-tax book income and taxable income sufficient to realize all of our remaining deferred tax assets.  As a result of our analysis of all available evidence, both positive and negative, we believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize all of the deferred tax assets as of December 31, 2014. As such, there was no valuation allowance for the years ended December 31, 2014, 2013, and 2012. See Note 15 for further discussion.

ASC 740, “Income Taxes” (“ASC 740”), clarified the accounting for uncertainty in income taxes recognized in a company’s financial statements.  Specifically, ASC 740 prescribed a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  ASC 740 also provides guidance on the related de-recognition, classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions.  Our accounting policy is to record the tax effects of a change in the opening balance of the unrecognized tax benefits (including unrecognized tax benefits related to prior-period discontinued operations) in current-period income (loss) from continuing operations. We recognize interest and penalties accrued related to unrecognized tax benefits as components of our income tax provision. We did not have any interest and penalties accrued upon the adoption of ASC 740, and, as of December 31, 2014 and 2013, we did not have any interest and penalties accrued related to unrecognized tax benefits.

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Earnings Per Share (Details) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Earnings Per Share [Abstract]
Basic weighted average shares outstanding	28,293	27,773	26,778
Effect of dilutive equity instruments	1,050	1,240	1,597
Dilutive weighted average shares outstanding	29,343	29,013	28,375
Options to purchase shares of Common Stock and other stock-based awards outstanding which are not included in the calculation of diluted income per share because their impact is anti-dilutive	40	47	67

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Nature of Operations (Details)	Dec. 31, 2014 employee
Nature of Operations [Line Items]
UltiPro Enterprise Solution Suite, company size, minimum number of employees	1,500
UltiPro Enterprise Solution Suite, number of employees in a company (10,000 or more)	10,000
Minimum [Member]
Nature of Operations [Line Items]
UltiPro Enterprise Solution Suite, number of employees in mid-market companies	500
Number of employees in companies as strategic market	100
Maximum [Member]
Nature of Operations [Line Items]
UltiPro Enterprise Solution Suite, number of employees in mid-market companies	1,500
Number of employees in companies as strategic market	499

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Business Combinations (Tables)

12 Months Ended

Dec. 31, 2014

AcceIHR, LLC [Member]

Business Acquisition [Line Items]

Fair values of the assets acquired and liabilities assumed

The following table summarized the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands)"

	At November 15, 2013
Net tangible liabilities	$	(732	)
Intangible assets	3,350
Goodwill	15,025
Total purchase price	$	17,643

Employtouch Inc [Member]

Business Acquisition [Line Items]

Fair values of the assets acquired and liabilities assumed

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

	At October 1, 2013
Net tangible assets	$	23
Intangible assets	5,350
Goodwill	8,736
Deferred tax liability	(1,418		)
Total purchase price	$	12,691

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Investments in Marketable Securities and Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2014

Investments in Marketable Securities and Fair Value of Financial Instruments [Abstract]

Amortized cost, net unrealized gain and fair value of investments in marketable available-for-sale securities

The amortized cost, net unrealized (loss) gain and fair value of our investments in marketable available-for-sale securities as of December 31, 2014 and December 31, 2013 are shown below (in thousands):

	As of December 31, 2014							As of December 31, 2013
	Amortized Cost		Net Unrealized (Loss).			Fair Value		Amortized Cost		Net Unrealized Gain		Fair Value
Corporate debentures – bonds	$	8,513	$	(9	)	$	8,504	$	7,375	$	4	$	7,379
Commercial paper	600		—			600		1,799		—		1,799
U.S. Agency bonds	255		—			255		760		—		760
U.S. Treasury bills	798		(1		)	797		—		—		—
Certificates of deposit	—		—			—		515		—		515
Total investments	$	10,166	$	(10	)	$	10,156	$	10,449	$	4	$	10,453

Amortized costs and fair value of marketable available-for-sale securities by contractual maturity

The amortized cost and fair value of the marketable available-for-sale securities by contractual maturity at December 31, 2014 is shown below (in thousands):

	As of December 31, 2014
	Amortized Cost		Fair Value
Due in one year or less	$	7,870	$	7,862
Due after one year	2,296		2,294
Total	$	10,166	$	10,156

Fair value of financial assets and liabilities, by level within the fair value hierarchy

The following table sets forth, by level within the fair value hierarchy, financial assets accounted for at fair value as of December 31, 2014 and December 31, 2013 (in thousands):

	As of December 31, 2014								As of December 31, 2013
	Total		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Un- Observable Inputs (Level 3)		Total		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Un- Observable Inputs (Level 3)
Corporate debentures and bonds	$	8,504	$	—	$	8,504	$	—	$	7,379	$	—	$	7,379	$	—
Commercial paper	600		—		600		—		1,799		—		1,799		—
U.S. Agency bonds	255		—		255		—		760		—		760		—
U.S. Treasury bills	797		—		797		—		—		—		—		—
Certificates of deposit	—		—		—		—		515		515		—		—
Total	$	10,156	$	—	$	10,156	$	—	$	10,453	$	515	$	9,938	$	—

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Nature of Operations

12 Months Ended

Dec. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

 Nature of Operations

The Ultimate Software Group, Inc. and subsidiaries (“Ultimate,” “we,” “us” or “our”) is a leading provider of cloud-based human capital management (“HCM”). Ultimate's UltiPro software (“UltiPro”) is a comprehensive, easy-to-use solution delivered primarily over the Internet to organizations based in the United States and Canada, including those with global employees. UltiPro is designed to deliver the functionality businesses need to manage the complete employment life cycle from recruitment to retirement.   We market our UltiPro solutions primarily to enterprise companies, which we define as companies with more than 1,500 employees, including those with 10,000 or more employees; mid-market companies, which we define as those having approximately 500-1,500 employees; and strategic companies, which we define as having approximately 100-499 employees. UltiPro is marketed primarily through our enterprise, mid-market and strategic direct sales teams.

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Allowance for Doubtful Accounts (Tables)

12 Months Ended

Dec. 31, 2014

Valuation and Qualifying Accounts [Abstract]

Allowance for doubtful account

The activity within allowance for doubtful accounts was as follows (in thousands):

	For the Years Ended December 31,
	2014			2013			2012
Balance at beginning of year	$	675		$	475		$	475
Charged to expense	2,264			2,523			1,159
Write-offs	(2,264		)	(2,323		)	(1,159		)
Balance at end of year	$	675		$	675		$	475

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Other Borrowings (Tables)

12 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

Schedule of Repayment of Other Borrowings

ed repayments of the other borrowings, which excludes interest, as of December 31, 2014, are as follows (in thousands):

Year	Amount
2015	$	567
2016	400
Other borrowings	$	967

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Property and Equipment 1 (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Capital Leased Assets [Line Items]
Depreciation and amortization expense	$ 5,900,000	$ 3,300,000	$ 4,000,000
Computer Equipment [Member]
Capital Leased Assets [Line Items]
Capital leased assets, gross	38,913,000	33,006,000
Capital Leases, accumulated amortization	33,556,000	29,453,000
Capital Leases, net	$ 5,357,000	$ 3,553,000

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Related Party Transactions (Details) (Leiter's Landing [Member], USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2012
Related Party Transaction [Line Items]
Percentage of total revenues to be contributed to charitable organization pursuant to agreement with non-employee director (in hundredths)	0.10%
Amount contributed to charitable organization		$ 50,000
Maximum [Member]
Related Party Transaction [Line Items]
Amount contributed to charitable organization		$ 200,000

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 108,298	$ 79,794
Investments in marketable securities	7,862	8,682
Accounts receivable, net of allowance for doubtful accounts of $675 for 2014 and 2013	100,218	85,676
Prepaid expenses and other current assets	34,788	29,374
Deferred tax assets, net	965	1,015
Total current assets before funds held for customers	252,131	204,541
Funds held for customers	759,087	262,227
Total current assets	1,011,218	466,768
Property and equipment, net	86,595	58,186
Goodwill	25,696	26,942
Investments in marketable securities	2,294	1,771
Intangible assets, net	6,774	8,274
Other assets, net	20,611	17,340
Deferred tax assets, net	37,110	18,913
Total assets	1,190,298	598,194
Current liabilities:
Accounts payable	7,418	6,422
Accrued expenses	30,941	26,040
Deferred revenue	109,552	102,686
Capital lease obligations	3,655	2,949
Other borrowings	567	2,264
Total current liabilities before customer funds obligations	152,133	140,361
Customer funds obligations	759,087	262,227
Total current liabilities	911,220	402,588
Deferred revenue	153	498
Deferred rent	2,368	2,687
Capital lease obligations	3,359	2,240
Other borrowings	400	593
Deferred income tax liability	1,049	1,371
Total liabilities	918,549	409,977
Commitments and contingencies (Note 17)	0	0
Stockholders’ equity:
Series A Junior Participating Preferred Stock, $.01 par value, 500,000 shares authorized, no shares issued	0	0
Preferred Stock, $.01 par value, 2,000,000 shares authorized, no shares issued	0	0
Common Stock, $.01 par value, 50,000,000 shares authorized, 32,722,864 and 32,132,376 shares issued and outstanding in 2014 and 2013, respectively	327	321
Additional paid-in capital	376,609	315,691
Accumulated other comprehensive loss	(3,590)	(1,442)
Accumulated earnings (deficit)	36,928	(7,809)
Stockholders' equity before treasury stock	410,274	306,761
Treasury stock, 4,216,626 and 4,053,835 shares, at cost, for 2014 and 2013, respectively	(138,525)	(118,544)
Total stockholders’ equity	271,749	188,217
Total liabilities and stockholders’ equity	$ 1,190,298	$ 598,194

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Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Prepaid Expenses and Other Current Assets [Abstract]
Amortization life (in years)	1 year
Initial contract term (in months)	24 months
Deferred Revenue [Abstract]
Deferred revenue, typical recognition period (in years)	2 years
Revenue Recognition [Abstract]
Goodwill	$ 25,696,000	$ 26,942,000
Intangible assets, net	6,774,000	8,274,000
Stock-Based Compensation [Abstract]
SBC - Statements of operations	46,185,000	32,807,000	20,412,000
SBC - Capitalized software	1,730,000	1,398,000	420,000
SBC - Statements of stockholders' equity	47,915,000	34,205,000	20,832,000
Number of years of historical operating profits used by the Company in assessing the need for a valuation allowance (in years)	3 years
Reimbursable Out-Of-Pocket Expenses [Abstract]
Reimbursable out-of-pocket expenses	$ 1,900,000	$ 1,800,000	$ 1,400,000
Property and equipment [Member] | Minimum [Member]
Property and Equipment [Abstract]
Estimated useful life	2 years
Property and equipment [Member] | Maximum [Member]
Property and Equipment [Abstract]
Estimated useful life	20 years
Leasehold Improvements [Member] | Minimum [Member]
Property and Equipment [Abstract]
Estimated useful life	3 years
Leasehold Improvements [Member] | Maximum [Member]
Property and Equipment [Abstract]
Estimated useful life	15 years
Amended and Restated 2005 Equity and Incentive Plan [Member]
Stock-Based Compensation [Abstract]
Aggregate number of shares of common stock available for issuance (in shares)	1,165,680

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Accumulated Deficit [Member]	Treasury Stock [Member]
Balance at Dec. 31, 2011	$ 85,624	$ 302	$ 242,100	$ (57)	$ (47,971)	$ (108,750)
Balance (in shares) at Dec. 31, 2011		30,204				3,942
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	14,632				14,632
Unrealized gain (loss) on foreign exchange, net of tax	166			166
Shares acquired to settle employee tax withholding liability	(20,384)		(20,384)
Excess tax benefits from employee stock plan	12,310		12,310
Repurchases of Common Stock	(9,794)					(9,794)
Repurchases of Common Stock (in shares)						112
Stock consideration for acquisitions	0
Stock consideration adjustment recorded for acquisitions	0
Issuances of Common Stock from exercises of stock options	11,280	8	11,272
Issuances of Common Stock from exercises of stock options (in shares)	750	751
Issuances of Common Stock from restricted stock releases	4	4
Issuances of Common Stock from restricted stock releases (in shares)		442
Non-cash stock-based compensation expense for stock options, restricted stock and restricted stock units	20,832		20,832
Balance at Dec. 31, 2012	114,670	314	266,130	109	(33,339)	(118,544)
Balance (in shares) at Dec. 31, 2012		31,397				4,054
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	25,530				25,530
Unrealized gain (loss) on investments in marketable securities available-for-sale, net of tax	(2)			(2)
Unrealized gain (loss) on foreign exchange, net of tax	(1,549)			(1,549)
Shares acquired to settle employee tax withholding liability	(18,058)		(18,058)
Excess tax benefits from employee stock plan	19,167		19,167
Stock consideration for acquisitions	6,115		6,115
Stock consideration adjustment recorded for acquisitions	0
Issuances of Common Stock from exercises of stock options	8,136	4	8,132
Issuances of Common Stock from exercises of stock options (in shares)	440	440
Issuances of Common Stock from restricted stock releases	3	3
Issuances of Common Stock from restricted stock releases (in shares)		296
Non-cash stock-based compensation expense for stock options, restricted stock and restricted stock units	34,205		34,205
Balance at Dec. 31, 2013	188,217	321	315,691	(1,442)	(7,809)	(118,544)
Balance (in shares) at Dec. 31, 2013		32,133				4,054
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	44,737				44,737
Unrealized gain (loss) on investments in marketable securities available-for-sale, net of tax	(5)			(5)
Unrealized gain (loss) on foreign exchange, net of tax	(2,143)			(2,143)
Shares acquired to settle employee tax withholding liability	(19,883)		(19,883)
Excess tax benefits from employee stock plan	27,499		27,499
Repurchases of Common Stock	(19,981)					(19,981)
Repurchases of Common Stock (in shares)						163
Stock consideration for acquisitions	0
Stock consideration for acquisitions (in shares)		13
Stock consideration adjustment recorded for acquisitions	(818)		(818)
Issuances of Common Stock from exercises of stock options	6,208	3	6,205
Issuances of Common Stock from exercises of stock options (in shares)	310	310
Issuances of Common Stock from restricted stock releases	3	3
Issuances of Common Stock from restricted stock releases (in shares)		267
Non-cash stock-based compensation expense for stock options, restricted stock and restricted stock units	47,915		47,915
Balance at Dec. 31, 2014	$ 271,749	$ 327	$ 376,609	$ (3,590)	$ 36,928	$ (138,525)
Balance (in shares) at Dec. 31, 2014		32,723				4,217

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Goodwill and Intangible Assets - Finite Lived Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 8,700	$ 8,700
Accumulated Amortization	(1,381)	(242)
Cumulative Translation Adjustment	(545)	(184)
Net Carrying Amount	6,774	8,274
Estimated Useful Lives	7 years	8 years
Developed technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	5,200	5,200
Accumulated Amortization	(874)	(180)
Cumulative Translation Adjustment	(537)	(179)
Net Carrying Amount	3,789	4,841
Estimated Useful Lives	6 years	7 years
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	3,200	3,200
Accumulated Amortization	(392)	(47)
Cumulative Translation Adjustment	(5)	(3)
Net Carrying Amount	2,803	3,150
Estimated Useful Lives	9 years	10 years
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	300	300
Accumulated Amortization	(115)	(15)
Cumulative Translation Adjustment	(3)	(2)
Net Carrying Amount	$ 182	$ 283
Estimated Useful Lives	2 years	3 years

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Foreign Currency (Tables)

12 Months Ended

Dec. 31, 2014

Foreign Currency [Abstract]

Foreign currency translation loss and unrealized foreign currency translation gain (loss)

Included in comprehensive income (loss) for the years ended December 31, 2014, 2013 and 2012 were realized foreign currency translation losses and unrealized foreign currency translation gains (losses), as follows (in thousands):

	For the Years Ended December 31,
	2014			2013			2012
Realized foreign currency translation (losses)	$	—		$	—		$	—
Unrealized foreign currency translation (losses) gains	$	(2,143	)	$	(1,549	)	$	166

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Stock-Based Compensation and Equity 1 (Details) (USD $)	3 Months Ended												12 Months Ended			9 Months Ended	12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total non-cash stock-based compensation expense													$ 46,185,000	$ 32,807,000	$ 20,412,000
Proceeds from Issuance of Common Stock													6,208,000	8,139,000	11,284,000
Excess Tax Benefit from Share-based Compensation, Financing Activities													27,499,000	19,167,000	12,310,000
Granted (in shares)	2,555	2,570	2,625	2,625	2,500	5,111	5,251	5,336	5,346	5,351	5,501	5,591
Non-employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total non-cash stock-based compensation expense													1,652,000	1,449,000	1,058,000
Deferred Compensation Arrangement with Individual, Quarterly Awards, Common Stock Equivalent Value													12,500
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total non-cash stock-based compensation expense													23,300,000	16,100,000	9,200,000
Awards granted to officers and employees during the period (in shares)													235,000	191,500	396,700
Annual vesting percentage (in hundredths)	33.3333%												33.3333%
Granted (in shares)													245,000	210,000	418,000
Restricted Stock [Member] | Non-employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted to non-employee directors													10,375	18,198	21,789
Number of awards granted per quarterly meeting attended (in shares)	450	450	450	450	400										750	750	750
Restricted Stock [Member] | Chairman of the Audit Committee [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of awards granted per quarterly meeting attended (in shares)	50	50	50	50	50										468	468	468
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total non-cash stock-based compensation expense													22,900,000	16,700,000	11,200,000
Granted (in shares)													207,000	249,000	313,442
Restricted Stock Units (RSUs) [Member] | Officers or Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)													207,000	249,210
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from Issuance of Common Stock	6,200,000				8,100,000										11,300,000
Excess Tax Benefit from Share-based Compensation, Financing Activities	27,500,000				19,200,000										12,300,000
Term of stock options (in years)													10 years
Annual vesting percentage (in hundredths)	25.00%												25.00%
Internal Use Software [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total non-cash stock-based compensation expense													$ 1,700,000	$ 1,400,000	$ 400,000

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Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

  Income Taxes

For the year ended December 31, 2014, the income tax provision of $9.6 million was based on book income from operations before income taxes of $54.3 million.  For the year ended December 31, 2013, the income tax provision of $17.6 million was based on book income from operations before income taxes of $43.1 million.  For the year ended December 31, 2012, the income tax provision of $14.1 million was based on a book loss from operations before income taxes of $28.7 million.  Deferred tax assets and liabilities are determined based on the difference between financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. 

The income tax (provision) benefit consists of the following (in thousands):

	For the Year Ended December 31,
	2014			2013			2012
Current taxes:
Federal	$	(22,406	)	$	(14,091	)	$	(10,085	)
State and local	(5,078		)	(3,298		)	(2,354		)
Foreign	(567		)	(201		)	(164		)
Deferred taxes, net
Federal	16,607			(8		)	(1,710		)
State and local	1,535			(2		)	197
Foreign	317			41			9
Income tax provision	$	(9,592	)	$	(17,559	)	$	(14,107	)

The income tax provision is different from that which would be obtained by applying the statutory federal income tax rate of 35% to income from continuing operations before income taxes as a result of the following (in thousands):

	For the Year Ended December 31,
	2014			2013			2012
Income tax (provision) benefit at statutory federal tax rate	$	(19,015	)	$	(15,081	)	$	(10,060	)
State and local income taxes, net of the federal benefit	(2,303		)	(2,144		)	(1,402		)
Non-deductible expenses	(2,068		)	(1,965		)	(2,470		)
Change in tax rates	80			51			45
Recognition of previously unrecognized tax benefits, federal benefit	—			1,679			—
Research credit, federal benefit	13,873			—			—
Other, net	(159		)	(99		)	(220		)
Income tax provision	$	(9,592	)	$	(17,559	)	$	(14,107	)

Deferred tax assets and liabilities reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  Significant components of our deferred tax assets and liabilities at December 31, 2014, 2013 and 2012 were as follows (in thousands):

	As of December 31,
	2014			2013			2012
Deferred tax assets:
Net operating losses, foreign	$	59		$	59		$	—
Tax credit carryforwards	127			127			127
Research credit	15,518			—			—
Deferred revenue	168			504			1,140
Accruals not currently deductible	715			472			386
Allowance for doubtful accounts	248			248			169
Charitable contributions	1,281			995			751
Stock-based compensation	41,139			29,840			24,044
Deferred rent adjustment	1,292			1,349			1,350
Gross deferred tax assets	60,547			33,594			27,967
Less valuation allowance	—			—			—
Deferred tax assets	$	60,547		$	33,594		$	27,967
Deferred tax liabilities:
Property and equipment	$	(23,248	)	$	(14,481	)	$	(8,665	)
Acquired intangible assets, foreign	(1,088		)	(1,371		)	—
Software development costs	815			815			613
Other, net	—			—			—
Gross deferred tax liabilities	(23,521		)	(15,037		)	(8,052		)
Net deferred tax assets	$	37,026		$	18,557		$	19,915

Ultimate considers all available evidence, both positive and negative, including historical levels of pre-tax book income, expiration of net operating loss carryforwards, expectations and risks associated with estimates of future taxable income, ongoing prudent and feasible tax planning strategies and reversal of deferred tax liabilities in assessing the need for the valuation allowance. If it is not more likely than not that we will recover our deferred tax assets, we will increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable.

The available positive evidence at December 31, 2014 included, among other factors, three years of cumulative historical pre-tax book income and a projection of future pre-tax book income and taxable income.  As a result of our analysis of all available evidence, both positive and negative, we believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize all of the deferred tax assets as of December 31, 2014. As such, there was no valuation allowance for the years ended December 31, 2014, 2013 and 2012.  

Approximately $1.4 million of deferred tax liabilities were recorded against the identified intangible assets established upon the acquisition of EmployTouch during 2013.

Management continues to apply the exception to the comprehensive recognition of deferred income taxes to the undistributed earnings of our foreign subsidiary, Ultimate Canada.  The comprehensive recognition of deferred income taxes presumes that all undistributed earnings will be transferred to the parent entity.  This presumption may be overcome by the parent entity, and no income taxes would be accrued, if sufficient evidence shows that the subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a tax-free liquidation.  A parent entity shall have evidence of specific plans for reinvestment of undistributed earnings of a subsidiary which demonstrates that remittance of the earnings will be postponed indefinitely.  These criteria required to overcome the presumption are sometimes referred to as the indefinite reversal criteria.  Accordingly, deferred income taxes were not recognized on the undistributed earnings of Ultimate Canada.  The deferred tax liability, net of available foreign tax credits, resulting from the cumulative undistributed earnings are not deemed material. We recorded a deferred tax asset, of $13.2 million during the third quarter of 2014, for the years 1998 through 2013, and we recorded a deferred tax asset of $2.3 million during the three and twelve months ended December 31, 2014 for the year 2014, as a result of a research and development credit study.

At December 31, 2014, we had approximately $159.8 million of net operating loss carryforwards for Federal income tax reporting purposes available to offset future taxable income.  The $159.8 million was attributable to deductions from the exercise of non-qualified employee, and non-employee director, stock options and the vesting of restricted stock units and restricted stock awards, the tax benefit of which will primarily be credited to paid-in-capital and deferred tax asset when realized.  As a result, the tax benefits associated with stock based compensation are included in net operating loss carryforwards but not reflected in deferred tax assets.  During 2014, we realized a tax benefit of $33.5 million comprised of a $27.5 million and a $6.0 million credit to paid-in-capital and deferred tax asset, respectively.  During 2013, we realized a tax benefit of $25.5 million comprised of a $19.2 million and a $6.3 million credit to paid-in capital and deferred tax asset, respectively. During 2012, we realized a tax benefit of $16.7 million comprised of a $12.3 million and a $4.4 million credit to paid-in capital and deferred tax asset, respectively. As of December 31, 2014, we had approximately $0.2 million of net operating loss carryforwards for foreign income tax reporting purposes available to offset future taxable income. The carryforwards expire from 2018 through 2033 and from 2015 through 2033, for Federal and state income tax reporting purposes, respectively. Utilization of such net operating loss carryforwards may be limited as a result of cumulative ownership changes in Ultimate’s equity instruments due to ownership change provisions of Internal Revenue Code Section 382 and similar state provisions. The Internal Revenue Service examination of our U.S. Federal income tax return for the year ended December 31, 2010 was completed in 2013 with no change to the taxable income or income tax liability as reported.

ASC 740, “Income Taxes,” ("ASC 740") requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.  During 2013, the Internal Revenue Service completed their examination of our U.S. Federal income tax return for the year ended December 31, 2010, which resulted in the recognition of previously unrecognized tax benefits of approximately $1.9 million, which decreased our provision for income taxes and our effective tax rate. As of December 31, 2014, we had $5.0 million of gross unrecognized tax benefits resulting from a research and development credit attributable to the 1998-2014 years as a result of the completion of the research and development activities study that if recognized would affect the annual effective tax rate. While it is often difficult to predict the final outcome of any particular uncertain tax position, management does not believe that it is reasonably possible that the estimates of unrecognized tax benefits will change significantly in the next twelve months.

Tax years 1998 to 2014 remain subject to future examination by the tax jurisdictions in which we are subject to tax.

We recognize interest and penalties accrued related to unrecognized tax benefits as components of our income tax provision.  Due to our net operating loss carryover position, we did not have any interest and penalties accrued upon the adoption of ASC 740, and, as of December 31, 2014 and 2013, we did not have any interest and penalties accrued related to unrecognized tax benefits.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2014, 2013 and 2012 is as follows (in thousands):

	As of December 31,
	2014		2013			2012
Balance at January 1,	$	—	$	1,866		$	1,866
Tax positions taken in prior period
Gross increases	—		—			—
Gross decreases	—		—			—
Tax positions taken in current period
Gross increases	4,950		—			—
Settlements	—		(1,866		)	—
Statute expiration	—		—			—
Balance at December 31,	$	4,950	$	—		$	1,866

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Computer Software Development Costs (Tables)

12 Months Ended

Dec. 31, 2014

Research and Development [Abstract]

Capitalized software

Capitalized computer software development costs and accumulated amortization of capitalized software, developed for internal use, were as follows (in thousands):

	For the Years Ended December 31,
	2014			2013	2012
Computer software development costs	$	49,464		24,238	5,217
Less: accumulated amortization	(670		)	—	—
Computer software development costs, net	48,794			24,238	5,217

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Operating Leases

We lease corporate office space and certain equipment under non-cancelable operating lease agreements expiring at various dates. Total rent expense under these agreements was $8.5 million, $6.6 million and $5.7 million for the years ended December 31, 2014, 2013 and 2012, respectively. Future minimum annual rental commitments related to these leases are as follows as of December 31, 2014 (in thousands):

Year	Amount
2015	$	8,657
2016	8,642
2017	7,028
2018	5,357
2019	4,177
Thereafter	6,006
	$	39,867

Software License Agreements

We have a software license and OEM (original equipment manufacturer) agreement with a third-party vendor for the purposes of development and testing, and support of end users and use with the customer application expiring on December 31, 2016. Future commitments related to this agreement are as follows as of December 31, 2014 (in thousands):

Year	Amount
2015	$	1,155
2016	1,155
	$	2,310

Litigation

From time-to-time, Ultimate is involved in litigation relating to claims arising out of its operations in the normal course of business. We are not currently a party to any legal proceeding the adverse outcome of which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on our operating results or financial condition.

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Stock-Based Compensation and Equity 4 (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Options outstanding and exercisable [Abstract]
Options outstanding, number (in shares)	722,000	1,032,000	1,473,000	2,223,000
Options outstanding, weighted-average remaining contractual life (in years)	2 years 7 months 10 days	3 years 1 month 21 days	3 years 9 months 18 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 26.68	$ 24.69	$ 22.83	$ 20.20
$13.63—$18.69
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 13.63
Range of exercise prices, maximum (in dollars per share)	$ 18.69
Options outstanding, number (in shares)	79,551
Options outstanding, weighted-average remaining contractual life (in years)	2 years 2 months 9 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 16.01
Options exercisable, number (in shares)	79,551
Options exercisable, weighted-average exercise price (in dollars per share)	$ 16.01
$21.60—$24.20
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 21.60
Range of exercise prices, maximum (in dollars per share)	$ 24.20
Options outstanding, number (in shares)	94,288
Options outstanding, weighted-average remaining contractual life (in years)	1 year 4 months 17 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 22.62
Options exercisable, number (in shares)	94,288
Options exercisable, weighted-average exercise price (in dollars per share)	$ 22.62
$24.30—$24.30
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 24.30
Range of exercise prices, maximum (in dollars per share)	$ 24.30
Options outstanding, number (in shares)	125,423
Options outstanding, weighted-average remaining contractual life (in years)	2 years 1 month 6 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 24.30
Options exercisable, number (in shares)	125,423
Options exercisable, weighted-average exercise price (in dollars per share)	$ 24.30
$26.72—$26.83
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 26.72
Range of exercise prices, maximum (in dollars per share)	$ 26.83
Options outstanding, number (in shares)	6,861
Options outstanding, weighted-average remaining contractual life (in years)	1 year 9 months 4 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 26.77
Options exercisable, number (in shares)	6,861
Options exercisable, weighted-average exercise price (in dollars per share)	$ 26.77
$27.02—$27.02
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 27.02
Range of exercise prices, maximum (in dollars per share)	$ 27.02
Options outstanding, number (in shares)	1,879
Options outstanding, weighted-average remaining contractual life (in years)	2 years 4 months 14 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 27.02
Options exercisable, number (in shares)	1,879
Options exercisable, weighted-average exercise price (in dollars per share)	$ 27.02
$28.41—$28.41
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 28.41
Range of exercise prices, maximum (in dollars per share)	$ 28.41
Options outstanding, number (in shares)	201,861
Options outstanding, weighted-average remaining contractual life (in years)	3 years 1 month 6 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 28.41
Options exercisable, number (in shares)	201,861
Options exercisable, weighted-average exercise price (in dollars per share)	$ 28.41
$30.34—$30.34
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 30.34
Range of exercise prices, maximum (in dollars per share)	$ 30.34
Options outstanding, number (in shares)	49,301
Options outstanding, weighted-average remaining contractual life (in years)	2 years 6 months 22 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 30.34
Options exercisable, number (in shares)	49,301
Options exercisable, weighted-average exercise price (in dollars per share)	$ 30.34
$32.39—$32.39
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 32.39
Range of exercise prices, maximum (in dollars per share)	$ 32.39
Options outstanding, number (in shares)	87,760
Options outstanding, weighted-average remaining contractual life (in years)	3 years 6 months 26 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 32.39
Options exercisable, number (in shares)	87,760
Options exercisable, weighted-average exercise price (in dollars per share)	$ 32.39
$32.54—$32.54
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 32.54
Range of exercise prices, maximum (in dollars per share)	$ 32.54
Options outstanding, number (in shares)	52,300
Options outstanding, weighted-average remaining contractual life (in years)	3 years 3 months 26 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 32.54
Options exercisable, number (in shares)	52,300
Options exercisable, weighted-average exercise price (in dollars per share)	$ 32.54
$34.89—$34.89
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 34.89
Range of exercise prices, maximum (in dollars per share)	$ 34.89
Options outstanding, number (in shares)	22,915
Options outstanding, weighted-average remaining contractual life (in years)	2 years 9 months 22 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 34.89
Options exercisable, number (in shares)	22,915
Options exercisable, weighted-average exercise price (in dollars per share)	$ 34.89
$13.63—$34.89
Options outstanding and exercisable [Abstract]
Range of exercise prices, minimum (in dollars per share)	$ 13.63
Range of exercise prices, maximum (in dollars per share)	$ 34.89
Options outstanding, number (in shares)	722,139
Options outstanding, weighted-average remaining contractual life (in years)	2 years 7 months 10 days
Options outstanding, weighted-average exercise price (in dollars per share)	$ 26.68
Options exercisable, number (in shares)	722,139
Options exercisable, weighted-average exercise price (in dollars per share)	$ 26.68

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities:
Net income	$ 44,737	$ 25,530	$ 14,632
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	19,263	16,058	13,623
Provision for doubtful accounts	2,264	2,523	1,159
Non-cash stock-based compensation expense	46,185	32,807	20,412
Income taxes	9,030	17,347	13,814
Excess tax benefits from employee stock plan	(27,499)	(19,167)	(12,310)
Changes in operating assets and liabilities:
Accounts receivable	(16,806)	(16,784)	(15,747)
Prepaid expenses and other current assets	(5,414)	(2,982)	(1,880)
Other assets	(3,271)	(403)	(1,631)
Accounts payable	996	(1,415)	1,319
Accrued expenses and deferred rent	4,582	10,752	2,859
Deferred revenue	6,521	9,946	5,413
Net cash provided by operating activities	80,588	74,212	41,663
Cash flows from investing activities:
Purchases of marketable securities	(10,355)	(10,741)	(13,643)
Maturities of marketable securities	10,377	10,819	12,239
Payments for acquisitions, net of cash acquired	(257)	(24,995)	0
Net purchases of client funds securities	(496,860)	20,908	(162,347)
Purchases of property and equipment	(38,100)	(30,421)	(17,326)
Net cash used in investing activities	(535,195)	(34,430)	(181,077)
Cash flows from financing activities:
Repurchases of Common Stock	(19,981)	0	(9,794)
Net proceeds from issuances of Common Stock	6,208	8,139	11,284
Excess tax benefits from employee stock plan	27,499	19,167	12,310
Shares acquired to settle employee tax withholding liabilities	(19,883)	(18,058)	(20,384)
Principal payments on capital lease obligations	(4,082)	(3,541)	(3,418)
Repayments of other borrowings	(2,690)	(2,055)	(429)
Net increase in customer fund obligations	496,860	(20,908)	162,347
Net cash provided by (used in) financing activities	483,931	(17,256)	151,916
Effect of exchange rate changes on cash	(820)	(1,549)	166
Net increase in cash and cash equivalents	28,504	20,977	12,668
Cash and cash equivalents, beginning of year	79,794	58,817	46,149
Cash and cash equivalents, end of year	108,298	79,794	58,817
Supplemental disclosure of cash flow information:
Cash paid for interest	327	358	419
Cash paid for taxes	582	476	471
Supplemental disclosure of non-cash investing and financing activities (in thousands):
Capital lease obligations to acquire new equipment	5,907	3,293	3,986
Stock consideration adjustment recorded for acquisitions	(818)	0	0
Stock consideration for acquisitions	0	6,115	0
License agreement with third-party vendor	800	0	0
Stock based compensation for capitalized software	$ 1,730	$ 1,398	$ 420

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Current assets:
Allowance for doubtful accounts	$ 675	$ 675
Stockholders’ equity:
Preferred Stock, par value	$ 0.01	$ 0.01
Preferred Stock, shares authorized	2,000,000	2,000,000
Preferred Stock, shares issued	0	0
Common Stock, par value	$ 0.01	$ 0.01
Common Stock, shares authorized	50,000,000	50,000,000
Common Stock, shares issued	32,722,864	32,132,376
Treasury Stock, shares	4,216,626	4,053,835
Series A Junior Participating Preferred Stock [Member]
Stockholders’ equity:
Preferred Stock, par value	$ 0.01	$ 0.01
Preferred Stock, shares authorized	500,000	500,000
Preferred Stock, shares issued	0	0

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Computer Software Development Costs

12 Months Ended

Dec. 31, 2014

Research and Development [Abstract]

Software Development Costs

 Computer Software Development Costs

We previously capitalized software costs in accordance with Accounting Standards Codification ("ASC") Topic 985-20, Costs of Software to Be Sold, Leased, or Marketed. Those capitalized software costs were full amortized as of December 31, 2013.

Computer software development costs related to software developed for internal use falls under the accounting guidance of ASC Topic 350-40, Intangibles Goodwill and Other-Internal Use Software.     These capitalized costs are included with property and equipment in the consolidated balance sheets and purchases of property and equipment in the statements of cash flows. During the years ended December 31, 2014, 2013 and 2012, we capitalized $25.2 million, $19.0 million and $5.2 million, respectively. Internal-use software is amortized on a straight-line basis over its estimated useful life, generally three to seven years, commencing after the software development is substantially complete and the software is ready for its intended use. During the year ended December 31, 2014, we amortized $0.7 million of our internal use software due to the mid-2014 product release of our UltiPro Recruiting module within the overall capitalized development project. There was no amortization for the years ended December 31, 2013 and 2012. At each balance sheet date, we evaluate the useful lives of these assets and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. The amortization of capitalized software (e.g., from the Recruitment release) is included in cost of recurring revenues.

Capitalized computer software development costs and accumulated amortization of capitalized software, developed for internal use, were as follows (in thousands):

	For the Years Ended December 31,
	2014			2013	2012
Computer software development costs	$	49,464		24,238	5,217
Less: accumulated amortization	(670		)	—	—
Computer software development costs, net	48,794			24,238	5,217

UltiPro Recruiting, a component of the overall capitalized development project, became ready for its intended use during 2014. The remaining components of the development project are expected to be completed during 2015 and thereafter. Amortization for the components of the development project begins when they are ready for their intended use.

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Document And Entity Information (USD $) In Billions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Feb. 18, 2015	Jun. 30, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Ultimate Software Group Inc
Entity Central Index Key	0001016125
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 3.8
Entity Common Stock, Shares Outstanding		28,606,171
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2014

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Earnings Per Share

12 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Earnings per share calculations require a dual presentation — “basic” and “diluted.” Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted average number of common shares (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

The following is a reconciliation of the shares used in the computation of basic and diluted net income (loss) per share (in thousands):

	For the Years Ended December 31,
	2014	2013	2012
Basic weighted average shares outstanding	28,293	27,773	26,778
Effect of dilutive equity instruments (1)	1,050	1,240	1,597
Dilutive shares outstanding	29,343	29,013	28,375
Anti-dilutive equity instruments (1)	40	47	67
(1) Includes options to purchase shares of Common Stock and other stock-based awards outstanding.

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CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Revenues:
Recurring	$ 419,238	$ 334,434	$ 266,430
Services	86,165	75,110	64,563
License	533	853	1,275
Total revenues	505,936	410,397	332,268
Cost of revenues:
Recurring	117,609	91,903	78,121
Services	85,939	76,577	66,063
License	91	198	280
Total cost of revenues	203,639	168,678	144,464
Gross profit	302,297	241,719	187,804
Operating expenses:
Sales and marketing	117,033	93,879	72,565
Research and development	83,542	67,757	60,693
General and administrative	47,379	36,869	25,433
Total operating expenses	247,954	198,505	158,691
Operating income	54,343	43,214	29,113
Other (expense) income:
Interest expense	(353)	(229)	(476)
Other income, net	339	104	102
Total other (expense) income, net	(14)	(125)	(374)
Income from operations	54,329	43,089	28,739
Provision for income taxes	(9,592)	(17,559)	(14,107)
Net income	$ 44,737	$ 25,530	$ 14,632
Net income per share:
Basic (in dollars per share)	$ 1.58	$ 0.92	$ 0.55
Diluted (in dollars per share)	$ 1.52	$ 0.88	$ 0.52
Weighted average shares outstanding:
Basic (in shares)	28,293	27,773	26,778
Diluted (in shares)	29,343	29,013	28,375

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Investments in Marketable Securities and Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2014

Investments in Marketable Securities and Fair Value of Financial Instruments [Abstract]

Investments in Marketable Securities and Fair Value of Financial Instruments

 Investments in Marketable Securities and Fair Value of Financial Instruments

We classify our investments in marketable securities with readily determinable fair values as available-for-sale.  Available-for-sale securities consist of debt and equity securities not classified as trading securities or as securities to be held to maturity.  Unrealized gains and losses, net of tax, on available-for-sale securities are reported as a net amount in accumulated other comprehensive income in stockholders’ equity until realized.  Gains and losses on the sale of available-for-sale securities are determined using the specific identification method.  Included in accumulated other comprehensive income was a $10 thousand net unrealized loss and $4 thousand net unrealized gain on available-for-sale securities at December 31, 2014 and December 31, 2013, respectively. Realized gains and losses resulting on available-for-sale securities are included in other (expense) income, net, in the consolidated statements of income. There were no significant reclassifications of realized gains and losses on available-for-sale securities to the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012.

The amortized cost, net unrealized (loss) gain and fair value of our investments in marketable available-for-sale securities as of December 31, 2014 and December 31, 2013 are shown below (in thousands):

	As of December 31, 2014							As of December 31, 2013
	Amortized Cost		Net Unrealized (Loss).			Fair Value		Amortized Cost		Net Unrealized Gain		Fair Value
Corporate debentures – bonds	$	8,513	$	(9	)	$	8,504	$	7,375	$	4	$	7,379
Commercial paper	600		—			600		1,799		—		1,799
U.S. Agency bonds	255		—			255		760		—		760
U.S. Treasury bills	798		(1		)	797		—		—		—
Certificates of deposit	—		—			—		515		—		515
Total investments	$	10,166	$	(10	)	$	10,156	$	10,449	$	4	$	10,453

The amortized cost and fair value of the marketable available-for-sale securities by contractual maturity at December 31, 2014 is shown below (in thousands):

	As of December 31, 2014
	Amortized Cost		Fair Value
Due in one year or less	$	7,870	$	7,862
Due after one year	2,296		2,294
Total	$	10,166	$	10,156

We classify and disclose fair value measurements in one of the following three categories of fair value hierarchy:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities.

Level 2: Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Our assets that are measured by management at fair value on a recurring basis are generally classified within Level 1 or Level 2 of the fair value hierarchy.  The types of instruments valued based on quoted market prices in active markets include most money market securities and certificates of deposit.  Such instruments are generally classified within Level 1 of the fair value hierarchy.  We did not have any transfers into and out of Level 1 and Level 2 during the years ended December 31, 2014, 2013 and 2012.

The types of instruments valued by management, based on quoted prices in less active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, include corporate debentures and bonds, commercial paper, U.S. agency bonds, and U.S. Treasury bills.  Such instruments are generally classified within Level 2 of the fair value hierarchy.  We use consensus pricing, which is based on multiple pricing sources, to value our fixed income investments.

The following table sets forth, by level within the fair value hierarchy, financial assets accounted for at fair value as of December 31, 2014 and December 31, 2013 (in thousands):

	As of December 31, 2014								As of December 31, 2013
	Total		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Un- Observable Inputs (Level 3)		Total		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Un- Observable Inputs (Level 3)
Corporate debentures and bonds	$	8,504	$	—	$	8,504	$	—	$	7,379	$	—	$	7,379	$	—
Commercial paper	600		—		600		—		1,799		—		1,799		—
U.S. Agency bonds	255		—		255		—		760		—		760		—
U.S. Treasury bills	797		—		797		—		—		—		—		—
Certificates of deposit	—		—		—		—		515		515		—		—
Total	$	10,156	$	—	$	10,156	$	—	$	10,453	$	515	$	9,938	$	—

Assets and liabilities measured at fair value on a recurring basis were presented in the consolidated balance sheets as of December 31, 2014 and as of December 31, 2013 as short-term and long-term investments in marketable securities.  There were no financial liabilities accounted for at fair value as of December 31, 2014 and December 31, 2013.

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Business Combinations (Notes)

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Business Combinations

Business Combinations

2013 Business Combinations

We completed two acquisitions in the fourth quarter of 2013 that were non-significant, individually and in the aggregate, including Employtouch, Inc., (the "Employtouch Acquisition") a Canadian-based corporation and Accel HR, LLC, (the “Accel HR Acquisition”) a Delaware limited liability company located in Georgia.

Acquisition of Employtouch, Inc.

On October 1, 2013, we entered into agreements with the shareholders of Employtouch, Inc., a Canadian-based corporation, to acquire 100% of the issued and outstanding shares of Employtouch, Inc., in exchange for a combination of cash and restricted shares of Ultimate's Common Stock. Employtouch Inc. is engaged in the business of developing workforce management hardware and software products. Employtouch Inc. was consolidated into The Ultimate Software Group of Canada, Inc. The results of operations from this acquisition have been included in our consolidated financial statements as of the date of acquisition. We are marketing and selling the workforce management solution as UltiPro Touchbase to both customers in Canada and the United States.

In October 2013, we introduced UltiPro TouchBase in connection with the Employtouch Acquisition (discussed above), which provides our customers an interactive mobile time clock device that collects time punches, as well as highlights the information most critical to employees and managers via an engaging activity stream. With UltiPro TouchBase, our customers can capture employee time on a touchscreen tablet device, collecting employee-validated data for cost accounting and payroll; can leverage photos for accurate capture of employee time-entry, avoiding 'buddy punches'; and can validate transactions using PIN entry, HID, RFID, magnetic swipe or barcode.

We paid a total of $10.4 million (USD) in cash and a total of 17,788 restricted shares of Ultimate's Common Stock valued at $2.3 million, which are issuable in three (3) equal installments on April 1, 2014, April 1, 2015 and April 1, 2016 (the "Employtouch Stock Consideration"). During the measurement period, we made certain post-closing adjustments related to the valuation of the stock consideration and purchase price allocation of Employtouch, which are reflected below and included in the cash flows from investing activities and non-cash investing and financing activities in the statements of cash flows.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

	At October 1, 2013
Net tangible assets	$	23
Intangible assets	5,350
Goodwill	8,736
Deferred tax liability	(1,418		)
Total purchase price	$	12,691

We recorded the Employtouch Acquisition using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the date of acquisition. The $5.4 million of amortizable intangible assets consists of $0.1 million in customer relationships, $5.2 million in developed technology and $0.05 million for a covenant not-to-compete. The fair value of the customer relationships and the developed technology has been estimated using the excess earnings method, a form of the income approach, and cash flow projections. The covenant not-to-compete has been estimated using a damages calculation, which is a form of the income approach.

The balance of the acquired intangibles, net of amortization, is stated separately on our consolidated balance sheet. We acquired net tangible assets of $0.02 million and incurred direct costs of $0.3 million in relation to the acquisition. A deferred tax liability of $1.4 million resulted from the Employtouch Acquisition, which was a nontaxable transaction. In accordance with GAAP, direct costs related to the acquisition were expensed as incurred. The balance of $8.7 million was recorded as goodwill. Since the Employtouch Acquisition was a stock purchase, goodwill and acquired intangibles are not deductible for tax purposes. For further discussion of acquired intangibles, see Note 12 of "Notes to Consolidated Financial Statements".

Acquisition of Accel HR, LLC

On November 15, 2013 (the "Accel HR Closing Date"), pursuant to an asset purchase agreement with Accel HR, LLC, a Delaware limited liability company located in Georgia, and certain members of Accel HR (the "Accel HR Agreement") we acquired certain assets and liabilities in exchange for a combination of cash and restricted shares of Ultimate's Common Stock. The business we acquired is now known as UltiPro Managed Services ("UMS"). The results of operations from this acquisition have been included in our consolidated financial statements since that date. We are marketing and selling the comprehensive outsourcing solutions, services and support to both customers in Canada and the United States.

To further simplify the work lives of our customers’ human resources and payroll people, we introduced UltiPro Managed Services in November 2013 as a result of the Accel HR Acquisition (discussed above). UltiPro Managed Services is designed for those customers who want to outsource some components of their HR, payroll, benefits, and HCM technology management functions without sacrificing the control of, or access to, their employee data that they enjoy with our cloud solution. Unlike other outsourced payroll or HRIS services that typically take a one-size-fits-all approach, UltiPro Managed Services allows customers to select from a number of payroll management, HRIS, and/or benefits management services and combine them into a tailored solution that best suits their unique needs. Accel HR has provided these types of services to large and mid-market corporate customers in North America since 2004 and, since 2007 prior to its acquisition by us, Accel HR partnered exclusively with Ultimate to provide these services to their UltiPro customers.

Pursuant to the terms of the Accel HR Agreement, we paid a total of $14.6 million in cash and a total of 22,017 restricted shares of Ultimate's Common Stock, valued at $3.0 million, which are issuable in three (3) equal installments on the first, second and third anniversaries of the Accel HR Closing Date (the "Accel HR Stock Consideration"). During the measurement period, we made certain post-closing adjustments related to the valuation of the stock consideration and purchase price allocation of Accel HR, which are reflected below and included in the cash flows from investing activities and non-cash investing and financing activities in the statements of cash flows.

.

The following table summarized the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands)"

	At November 15, 2013
Net tangible liabilities	$	(732	)
Intangible assets	3,350
Goodwill	15,025
Total purchase price	$	17,643

We recorded the Accel HR Acquisition using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the date of acquisition. The $3.4 million of amortizable intangible assets consists of $3.1 million in customer relationships and $0.3 million in the covenants not-to-compete. The fair value of the customer relationships has been estimated using the excess earnings method, a form of the income approach, and cash flow projections. Covenants not-to-compete have been estimated using a damages calculation, which is a form of the income approach.

The balance of the acquired intangibles, net of amortization, is stated separately on our consolidated balance sheet. We assumed net liabilities of $0.7 million and incurred direct costs of $0.3 million in relation to the acquisition. In accordance with GAAP, direct costs related to the acquisition were expensed as incurred. The balance of $15.0 million was recorded as goodwill. For further discussion of acquired intangibles, see Note 12 of "Notes to Consolidated Financial Statements".

The restricted stock issuable pursuant to both the Employtouch Stock Consideration and the Accel HR Stock Consideration is subject to the passage of time and such shares will be unregistered when issued which places certain restrictions on when the shares can be freely traded on the open market. No other restrictions apply to the Common Stock issuable for both acquisitions. The fair value of the restricted stock issuable pursuant to the Employtouch Stock Consideration and the Accel HR Stock Consideration was recorded as of the respective acquisition dates since there are no contingencies related to the future stock issuances.

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Stock-Based Compensation and Equity

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

 Stock-Based Compensation and Equity

Summary of Plans

Our Amended and Restated 2005 Equity and Incentive Plan (the “Plan”) authorizes the grant of options (“Options”) to non-employee directors, officers and employees of Ultimate to purchase shares of Ultimate's Common Stock ("Common Stock").  The Plan also authorizes the grant to such persons of restricted and non-restricted shares of Common Stock, stock appreciation rights, stock units and cash performance awards (collectively, together with the Options, the “Awards”).

As of December 31, 2014, the aggregate number of shares of Common Stock that were available to be issued under all Awards granted under the Plan was 1,165,680 shares.

Stock-Based Compensation

The following table sets forth the non-cash stock-based compensation expense resulting from stock-based arrangements that is recorded in our consolidated statements of income for the periods indicated (in thousands):

	For the Years Ended December 31,
	2014		2013		2012
Cost of recurring revenues	$	5,495	$	3,866	$	2,508
Cost of services revenues	4,446		3,591		2,729
Sales and marketing	20,767		13,625		7,861
Research and development	4,788		3,585		2,451
General and administrative	10,689		8,140		4,863
Total stock-based compensation expense	$	46,185	$	32,807	$	20,412

Included in computer equipment in property and equipment, net in our consolidated balance sheet and excluded from purchases of property and equipment in the statements of cash flow at December 31, 2014, 2013 and 2012 was $1.7 million, $1.4 million and $0.4 million, respectively, in non-cash stock-based compensation expense related to capitalized software which was developed for internal use during the fiscal years then ended. These amounts would have otherwise been charged to research and development expense for the years ended December 31, 2014, 2013 and 2012.

Net cash proceeds from the exercise of Options were $6.2 million, $8.1 million and $11.3 million for the years ended December 31, 2014, 2013 and 2012, respectively.  There was a $27.5 million, a $19.2 million and a $12.3 million income tax benefit recognized in additional paid in capital from the realization of excess stock-based payment deductions during the years ended December 31, 2014, 2013 and 2012, respectively.

Fair Value

The fair value of restricted stock awards and restricted stock units is equal to the closing price of our Common Stock on NASDAQ on the date of grant.

We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.  The weighted-average forfeiture rates for the years ended December 31, 2014, 2013 and 2012 were based on historical data.

Options

There were no Options granted during the years ended December 31, 2014, 2013 and 2012. Options granted to officers and employees under the Plan generally have a 10-year term, vesting 25% immediately and 25% on each of the first three anniversaries of the grant date.  Options granted to non-employee directors under the Plan generally have a 10-year term and vest and become exercisable immediately on the grant date.  

Restricted Stock Awards

Under the provisions of the Plan, Ultimate may, at the discretion of the Compensation Committee or the Board, grant restricted stock awards (“Restricted Stock Awards”) to officers, employees and non-employee directors.  The shares of Common Stock issued under Restricted Stock Awards are subject to certain vesting requirements and restrictions on transfer.  During the years ended December 31, 2014, 2013 and 2012, we granted Restricted Stock Awards for 235,000, 191,500 and 396,700 shares, respectively, of Common Stock to officers and employees and we granted Restricted Stock Awards for 10,375, 18,198 and 21,789 shares, respectively, of Common Stock to non-employee directors.  Compensation expense for Restricted Stock Awards is measured based on the closing market price of our Common Stock at the date of grant and is recognized on a straight-line basis over the vesting period.  Holders of Restricted Stock Awards have all rights of a stockholder including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto during the vesting period.  Each Restricted Stock Award becomes vested on the fourth anniversary of the respective date of grant, subject to the grantee’s continued employment with Ultimate or any of its subsidiaries on each such vesting date and subject further to accelerated vesting in the event of a change in control of Ultimate, death or disability, the termination of employment by Ultimate without cause or, in the case of a non-employee director, at cessation of his board services at the end of his term.  Included in our consolidated statements of income for the years ended December 31, 2014, 2013 and 2012 was $23.3 million, $16.1 million and $9.2 million, respectively, of non-cash stock-based compensation expense for Restricted Stock Awards.

Restricted Stock Unit Awards

Ultimate may, at the discretion of the Compensation Committee, make Awards of stock units or restricted stock units under the Plan (“Restricted Stock Unit Awards”) to certain officers and employees.  A Restricted Stock Unit Award is a grant of a number of hypothetical share units with respect to shares of Common Stock that are subject to vesting and transfer restrictions and conditions under a restricted stock unit award agreement.  The value of each unit is equal to the fair value of one share of Common Stock on any applicable date of determination.  The payment with respect to each unit under a Restricted Stock Unit Award may be made, at the discretion of the Compensation Committee, (i) in a number of shares of our Common Stock equal to the number of Restricted Stock Units becoming vested, (ii) in cash, in an amount equal to the fair market value of a share of our Common Stock on the vesting date multiplied by the number of restricted stock units becoming vested on such date or (iii) in a combination of both.  The grantee of a Restricted Stock Unit Award does not have any rights as a stockholder with respect to the shares subject to a Restricted Stock Unit Award until such time as shares of Common Stock are delivered to the grantee pursuant to the terms of the related stock unit award agreement.

Restricted Stock Unit Awards vest in three equal annual installments of 33-1/3% of the number of Restricted Stock Unit Awards on each of the first three anniversaries of the date of grant thereof, subject to the participant’s continued employment with Ultimate or any of its subsidiaries on each such vesting date, and shall be payable as described above, provided, however, that if any such anniversary is not a date on which our Common Stock is traded on NASDAQ, then the vesting date shall be the last such trading day immediately preceding such anniversary; and provided further, however, that if the Chief Financial Officer (“CFO”) of Ultimate should determine that any such anniversary falls within a period during which the participant is prohibited from trading Ultimate’s Common Stock under our stock trading policy, the CFO shall so advise the participant in writing and the vesting date shall be the date as of which the CFO has determined that such period has ended.

There were 207,000, 249,210 and 313,442 Restricted Stock Unit Awards granted to employees during the years ended December 31, 2014, 2013 and 2012, respectively.    Non-cash stock-based compensation expense for Restricted Stock Unit Awards is measured based on the fair market value of our Common Stock on the date of grant and recognized on a straight-line basis over the vesting period.  Included in Ultimate’s consolidated statements of operations for the years ended December 31, 2014, 2013 and 2012 was $22.9 million, $16.7 million and $11.2 million, respectively, of non-cash stock-based compensation expense for Restricted Stock Unit Awards.

Option, Restricted Stock and Restricted Stock Unit Activity

The following table summarizes Option activity for the years ended December 31, 2012, 2013 and 2014, as follows (in thousands, except per share amounts):

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2011	2,223		$	20.20
Granted
Exercised	(750	)	15.04
Forfeited or expired	—		—
Outstanding and exercisable at December 31, 2012	1,473		$	22.83	3.8	$	105,447
Outstanding at December 31, 2012	1,473		$	22.83
Granted	—		—
Exercised	(440	)	18.48
Forfeited or expired	(1	)	23.31
Outstanding and exercisable at December 31, 2013	1,032		$	24.69	3.1	$	132,615
Outstanding at December 31, 2013	1,032		$	24.69
Granted	—		—
Exercised	(310	)	20.05
Forfeited or expired	—		—
Outstanding and exercisable at December 31, 2014	722		$	26.68	2.6	$	86,758

The aggregate intrinsic value of Options in the table above represents total pretax intrinsic value (i.e., the difference between the closing price of our Common Stock on the last trading day of the reporting period and the exercise price, times the number of shares) that would have been received by the Option holders had all Option holders exercised their Options on December 31, 2014.  The amount of the aggregate intrinsic value changes, based on the fair value of our Common Stock.  Total intrinsic value of Options exercised during the years ended December 31, 2014, 2013 and 2012 was $44.6 million, $42.6 million and $51.7 million, respectively.  There were no Options vested during the years ended December 31, 2014, 2013 and 2012. All options granted under the Plan and the Prior Plan are fully vested as of December 31, 2014.

The following table summarizes Restricted Stock and Restricted Stock Unit Award activity for the years ended December 31, 2012, 2013 and 2014, as follows (in thousands, except per share amounts):

	Restricted Stock
	Shares		Weighted Average Grant Date Fair Value		Restricted Stock Units Shares
Outstanding at December 31, 2011	1,045		$	31.25	430
Granted	418		93.81		313
Vested	—		—		—
Released	(457	)	15.22		(213	)
Forfeited or expired	(8	)	31.84		(22	)
Outstanding at December 31, 2012	998		$	64.81	508
Granted	210		152.03		249
Vested	—		—		—
Released	(209	)	27.76		(229	)
Forfeited or expired	(31	)	77.92		(27	)
Outstanding at December 31, 2013	968		$	91.28	501
Granted	245		152.39		207
Vested	—		—		—
Released	(153	)	40.38		(242	)
Forfeited or expired	—		—		(22	)
Outstanding at December 31, 2014	1,060		$	112.77	444

As of December 31, 2014, $77.2 million of total unrecognized compensation cost related to non-vested Restricted Stock Awards is expected to be recognized over a weighted average period of 2.07 years.  As of December 31, 2014, $35.3 million of total unrecognized compensation costs related to non-vested Restricted Stock Unit Awards is expected to be recognized over a weighted average period of 1.51 years.

The following table summarizes information with respect to Options outstanding and Options exercisable under the Plan at December 31, 2014:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number	Weighted Average Remaining Contractual Term (Years)	Weighted- Average Exercise Price		Number	Weighted Average Exercise Price
$13.63—$18.69	79,551	2.19	$	16.01	79,551	$	16.01
$21.60—$24.20	94,288	1.38	22.62		94,288	22.62
$24.30—$24.30	125,423	2.10	24.30		125,423	24.30
$26.72—$26.83	6,861	1.76	26.77		6,861	26.77
$27.02—$27.02	1,879	2.37	27.02		1,879	27.02
$28.41—$28.41	201,861	3.10	28.41		201,861	28.41
$30.34—$30.34	49,301	2.56	30.34		49,301	30.34
$32.39—$32.39	87,760	3.57	32.39		87,760	32.39
$32.54—$32.54	52,300	3.32	32.54		52,300	32.54
$34.89—$34.89	22,915	2.81	34.89		22,915	34.89
$13.63—$34.89	722,139	2.61	$	26.68	722,139	$	26.68

Board Compensation

     Each non-employee director of Ultimate receives compensation for serving on the Board, payable exclusively in the form of Restricted Stock Awards granted under the Plan.

On October 25, 2010, the Board amended the previously approved arrangement pursuant to which the non-employee directors and Chairmen of the Audit and Compensation Committees of the Board, respectively, were granted Awards for each regular Board and Committee meeting attended.  Under the arrangement, as amended, (i) each non-employee director was granted a restricted stock award of 750 shares of Common Stock for each regular meeting of the Board attended during the first three quarters of 2013 and for the years ended December 31, 2012 and 2011 and (ii) each of the Chairmen of the Audit Committee and Compensation Committee was granted a restricted stock award of 468 shares of Common Stock for attendance at each regular meeting of the Committee during the first three quarters of 2013 and for the years ended December 31, 2012 and 2011 that he chaired.

On October 28, 2013, the Board amended the previously approved arrangement pursuant to which the non-employee directors and Chairmen of the Audit, Compensation and Nominating Committees of the Board, respectively, were granted Awards for each regular Board and Committee meeting attended.  Under the arrangement, as amended, (i) each non-employee director was granted a restricted stock award of 400 shares of Common Stock for each regular meeting of the Board attended during the fourth quarter of 2013 and each quarter of 2014 and (ii) each of the Chairmen of the Audit Committee, Compensation Committee and Nominating Committee was granted a restricted stock award of 50 shares of Common Stock for attendance at each regular meeting of the Committee during the fourth quarter of 2013 and each quarter of 2014 that he chaired.

In addition, in 2014, 2013 and 2012 each non-employee director was granted, for each fiscal quarter during which he served, a restricted stock award of that number of shares of Common Stock equal to the quotient of $12,500 divided by the closing price of the Common Stock on NASDAQ on the date of grant, which is the effective date of the grant determined by the Board for each such quarter, rounded down to the closest full number of shares.  Under the arrangement as amended, the date of grant shall not be a date prior to the date of the Board’s determination of the same and such restricted stock awards shall vest on the fourth anniversary of the date of grant, subject to accelerated vesting in the event of a director’s death, disability, cessation of service or the end of his term or the occurrence of a change of control of Ultimate.

The following table summarizes information about Restricted Stock Awards granted by us to non-employee directors in exchange for director related services rendered for 2014, 2013 and 2012:

Year	Market Value of Restricted Stock Awards Granted		Number of Restricted Stock Awards Granted
2012	$	69.00	5,591
	76.42		5,501
	93.84		5,351
	94.50		5,346
2013	$	95.99	5,336
	109.95		5,251
	146.25		5,111
	155.32		2,500
2014	$	164.87	2,625
	118.03		2,625
	132.23		2,570
	152.59		2,555

The non-cash compensation expense, recognized in the consolidated statements of income related to the Restricted Stock Awards granted to non-employee directors, including the chairmen of the Audit, Compensation and Nominating Committees, determined pursuant to the application of ASC 718 for the years ended December 31, 2014, 2013 and 2012, was $1,652,000, $1,449,000 and $1,058,000, respectively, and is included in general and administrative expenses in the consolidated statements of income. The non-cash stock-based expense amounts are included in the non-cash stock-based compensation expense for restricted stock awards in the consolidated statements of operations.

Common Stock

The holders of Common Stock are entitled to one vote per share for each share held of record on all matters submitted to a vote of the stockholders.

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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill represents the excess of cost over the net tangible and identifiable intangible assets of acquired businesses.  Goodwill amounts are not amortized, but rather tested for impairment at least annually. Identifiable intangible assets acquired in business combinations are recorded based upon fair value at the date of acquisition and amortized over their estimated useful lives.

On October 1, 2013, we completed the acquisition of Employtouch, Inc., which is engaged in the business of developing workforce management hardware and software products. On November 15, 2013, we completed the acquisition of the business of Accel HR, LLC which provides comprehensive outsourcing solutions, services and support for middle to large market organizations ranging from approximately 500 to over 25,000 employees. Upon the closing of both acquisitions, Ultimate acquired certain amortizable intangibles for developed technology, customer relationships and non-compete arrangements.  See Note 4 to the Notes to Consolidated Financial Statements for further discussion regarding the acquired intangibles.

The changes in the carrying value of goodwill were as follows:

	For the Year Ended
	December 31, 2014
Goodwill, December 31, 2013	$	26,942
Adjustments (1)	(561		)
Translation adjustment (2)	(685		)
Goodwill, December 31, 2014	$	25,696

(1) Goodwill adjustments represent the net purchase accounting adjustments for acquisitions during the related measurement periods.

(2) Represents the impact of the foreign currency translation of the portion of goodwill that is recorded by our Canadian subsidiary whose functional currency is also its local currency. Such goodwill is translated into U.S. dollars using exchange rates in effect at period end. Adjustments related to foreign currency translation are included in other comprehensive income.

As of December 31, 2014, the Company’s amortizable intangible assets, before amortization expense, have estimated useful lives as follows (in thousands):

	December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Cumulative Translation Adjustment			Net Carrying Amount		Weighted Average Remaining Useful Life
Developed technology	$	5,200	$	(874	)	$	(537	)	$	3,789	6
Customer relationships	3,200		(392		)	(5		)	2,803		9
Non-compete agreements	300		(115		)	(3		)	182		2
	$	8,700	$	(1,381	)	$	(545	)	$	6,774	7
	December 31, 2013
	Gross Carrying Amount		Accumulated Amortization			Cumulative Translation Adjustment			Net Carrying Amount		Weighted Average Remaining Useful Life
Developed technology	$	5,200	$	(180	)	$	(179	)	$	4,841	7
Customer relationships	3,200		(47		)	(3		)	3,150		10
Non-compete agreements	300		(15		)	(2		)	283		3
	$	8,700	$	(242	)	$	(184	)	$	8,274	8

Acquired intangible assets are amortized over their estimated useful life, generally three to ten years, in a manner that reflects the pattern in which the economic benefits are consumed. Amortization expense for acquired intangible assets was $1,139 thousand and $242 thousand for the years ended December 31, 2014 and 2013. There was no amortization expense for acquired intangible assets for the year ended December 31, 2012. Future amortization expense for acquired intangible assets is as follows, as of December 31, 2014 (in thousands):

Year	Amount
2015	$	1,097
2016	1,075
2017	969
2018	969
2019	969
Thereafter	1,695
Total	$	6,774

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Property and Equipment

12 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and Equipment, net

Property and equipment, net consists of the following (in thousands):

	As of December 31,
	2014		2013
Computer equipment	$	119,716	$	103,154
Internal-use software	49,464		24,238
Leasehold improvements	18,125		15,069
Furniture and fixtures	9,220		8,318
Building	1,005		1,005
Land	655		655
Property and equipment	198,185		152,439
Less:  accumulated depreciation and amortization	111,590		94,253
Property and equipment, net	$	86,595	$	58,186

Depreciation and amortization expense on property and equipment, including depreciation and amortization expense on property and equipment under capital leases, totaled $18.1 million, $15.3 million and $12.4 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Included in property and equipment, net, is computer equipment acquired under capital leases as follows (in thousands):

	As of December 31,
	2014		2013
Computer equipment	$	38,913	$	33,006
Less:  accumulated amortization	33,556		29,453
Computer equipment, net	$	5,357	$	3,553

Capital leases entered into and included in property and equipment totaled $5.9 million, $3.3 million and $4.0 million for the years ended December 31, 2014, 2013 and 2012, respectively.

See Note 10 in the Notes to Consolidated Financial Statements for further discussion of computer software development costs related to internal-use software which is included in property and equipment, net.

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Capital Lease Obligations (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Capital Lease Obligations [Abstract]
Interest rate on leases, minimum (in hundredths)	4.25%
Scheduled lease payments of capital lease obligations [Abstract]
2015	$ 3,877
2016	2,628
2017	832
Future minimum payments due, total	7,337
Less amount representing interest	(323)
Lease obligations reflected as current ($3,655) and non-current ($3,359)	7,014
Lease obligations, current	3,655	2,949
Lease obligations, non-current	$ 3,359	$ 2,240

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Allowance for Doubtful Accounts

12 Months Ended

Dec. 31, 2014

Valuation and Qualifying Accounts [Abstract]

Allowance for Doubtful Accounts

 Allowance for Doubtful Accounts

We have established an allowance for doubtful accounts based on a review of the current status of existing accounts receivable by customer and historical experience.

The activity within allowance for doubtful accounts was as follows (in thousands):

	For the Years Ended December 31,
	2014			2013			2012
Balance at beginning of year	$	675		$	475		$	475
Charged to expense	2,264			2,523			1,159
Write-offs	(2,264		)	(2,323		)	(1,159		)
Balance at end of year	$	675		$	675		$	475

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Prepaid Expenses and Other Current Assets

12 Months Ended

Dec. 31, 2014

Prepaid Expense and Other Assets, Current [Abstract]

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

	As of December 31,
	2014		2013
Prepaid commissions on cloud sales	$	17,772	$	19,942
Other prepaid expenses	8,064		2,783
Other current assets	8,952		6,649
Total prepaid expenses and other current assets	$	34,788	$	29,374

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Foreign Currency

12 Months Ended

Dec. 31, 2014

Foreign Currency [Abstract]

Foreign Currency

 Foreign Currency

The financial statements of Ultimate’s foreign subsidiaries have been translated into U.S. dollars.  The functional currency of our wholly-owned subsidiary, The Ultimate Software Group of Canada, Inc., is the Canadian dollar.  Assets and liabilities are translated into U.S. dollars at period-end exchange rates.  Income and expenses are translated at the average exchange rate for the reporting period.  The resulting non-cash foreign currency translation adjustments, representing unrealized gains or losses, are included in consolidated stockholders’ equity as a component of accumulated other comprehensive income (loss).  Realized gains and losses resulting from foreign exchange transactions are included in total operating expenses in the consolidated statements of operations. Included in accumulated other comprehensive income (loss), as presented in the accompanying consolidated balance sheets, are $3.6 million of unrealized translation losses at December 31, 2014 and $1.4 million of unrealized translation losses at December 31, 2013. There were no significant reclassifications of realized gains and losses resulting from foreign exchange transactions to the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012.

Included in comprehensive income (loss) for the years ended December 31, 2014, 2013 and 2012 were realized foreign currency translation losses and unrealized foreign currency translation gains (losses), as follows (in thousands):

	For the Years Ended December 31,
	2014			2013			2012
Realized foreign currency translation (losses)	$	—		$	—		$	—
Unrealized foreign currency translation (losses) gains	$	(2,143	)	$	(1,549	)	$	166

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Stock-Based Compensation and Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total non-cash stock-based compensation expense	$ 46,185	$ 32,807	$ 20,412
Amended and Restated 2005 Equity and Incentive Plan [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Aggregate number of shares of common stock available for issuance (in shares)	1,165,680
Cost of recurring revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total non-cash stock-based compensation expense	5,495	3,866	2,508
Cost of services revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total non-cash stock-based compensation expense	4,446	3,591	2,729
Sales and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total non-cash stock-based compensation expense	20,767	13,625	7,861
Research and development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total non-cash stock-based compensation expense	4,788	3,585	2,451
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total non-cash stock-based compensation expense	$ 10,689	$ 8,140	$ 4,863

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Stock-Based Compensation and Equity 2 (Details) (USD $)	12 Months Ended			3 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Stock Options [Roll Forward]
Outstanding at beginning of period (in shares)	1,032,000	1,473,000	2,223,000
Granted (in shares)	0	0
Exercised (in shares)	(310,000)	(440,000)	(750,000)
Forfeited or expired (in shares)	0	(1,000)	0
Outstanding at end of period (in shares)	722,000	1,032,000	1,473,000	722,000	1,032,000
Weighted Average Exercise Price [Abstract]
Outstanding at beginning of period (in dollars per share)	$ 24.69	$ 22.83	$ 20.20
Granted (in dollars per share)	$ 0.00	$ 0.00
Exercised (in dollars per share)	$ 20.05	$ 18.48	$ 15.04
Forfeited or expired (in dollars per share)	$ 0.00	$ 23.31	$ 0.00
Outstanding at end of period (in dollars per share)	$ 26.68	$ 24.69	$ 22.83	$ 26.68	$ 24.69
Weighted Average Remaining Contractual Term [Abstract]
Outstanding at beginning of period	2 years 7 months 10 days	3 years 1 month 21 days	3 years 9 months 18 days
Outstanding at end of period (in years)	2 years 7 months 10 days	3 years 1 month 21 days	3 years 9 months 18 days
Aggregate Intrinsic Value [Abstract]
Outstanding at beginning of period	$ 132,615,000	$ 105,447,000
Outstanding at end of period	86,758,000	132,615,000	105,447,000	86,758,000	132,615,000
Restricted Stock [Member]
Aggregate Intrinsic Value [Abstract]
Total unrecognized compensation costs	77,200,000			77,200,000
Weighted average period over which unrecognized compensation costs are expected to be recognized (in years)	2 years 26 days
Restricted Stock Units (RSUs) [Member]
Aggregate Intrinsic Value [Abstract]
Total unrecognized compensation costs	35,300,000			35,300,000
Weighted average period over which unrecognized compensation costs are expected to be recognized (in years)	1 year 6 months 4 days
Stock Options [Member]
Aggregate Intrinsic Value [Abstract]
Total intrinsic value of options exercised			$ 51,700,000	$ 44,600,000	$ 42,600,000

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Income Taxes (Details 1) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2009
Operating Loss Carryforwards [Line Items]
Gross deferred tax assets	$ 60,547,000	$ 33,594,000	$ 27,967,000
Research credit	15,518,000	0	0
Tax benefits associated with stock based compensation exercised	33,500,000	25,500,000	16,700,000
Tax benefits associated with stock based compensation exercised, credited to paid-in-capital	27,500,000	19,200,000	12,300,000
Tax benefits associated with stock based compensation exercised, credited to deferred tax assets	6,000,000	6,300,000	4,400,000
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	1,900,000
Unrecognized tax benefits reconciliation [Abstract]
Beginning Balance	0	1,866,000		1,866,000
Tax positions taken in prior period [Abstract]
Gross increases	0	0	0
Gross decreases	0	0	0
Tax positions taken in current period [Abstract]
Gross increases	4,950,000	0	0
Settlements	0	(1,866,000)	0
Statute expiration	0	0	0
Ending Balance	4,950,000	0	1,866,000	1,866,000
Federal [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	159,800,000
Foreign Tax Authority [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	200,000
Tax Years 1998 Through 2013
Operating Loss Carryforwards [Line Items]
Gross deferred tax assets	13,200,000
Tax Years 1998 Through 2014 [Member]
Tax positions taken in current period [Abstract]
Ending Balance	5,000,000
Tax Year 2014
Operating Loss Carryforwards [Line Items]
Research credit	$ 2,300,000

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property and equipment, net consists of the following (in thousands):

	As of December 31,
	2014		2013
Computer equipment	$	119,716	$	103,154
Internal-use software	49,464		24,238
Leasehold improvements	18,125		15,069
Furniture and fixtures	9,220		8,318
Building	1,005		1,005
Land	655		655
Property and equipment	198,185		152,439
Less:  accumulated depreciation and amortization	111,590		94,253
Property and equipment, net	$	86,595	$	58,186

Schedule of Capital Leased Assets

Included in property and equipment, net, is computer equipment acquired under capital leases as follows (in thousands):

	As of December 31,
	2014		2013
Computer equipment	$	38,913	$	33,006
Less:  accumulated amortization	33,556		29,453
Computer equipment, net	$	5,357	$	3,553

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Prepaid Expenses and Other Current Assets (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Prepaid Expense and Other Assets, Current [Abstract]
Prepaid commissions on cloud sales	$ 17,772	$ 19,942
Other prepaid expense	8,064	2,783
Other current assets	8,952	6,649
Total prepaid expenses and other current assets	$ 34,788	$ 29,374

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Other Borrowings (Notes)

12 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

Other Borrowings

Other Borrowings

During the year ended December 31, 2012, we financed the purchase of perpetual licenses with third-party vendors totaling $5.3 million, payable over a three-year period. During the year ended December 31, 2014, we signed an addendum to those agreements totaling $0.8 million, payable over a two-year period. The remaining scheduled repayments of the other borrowings, which excludes interest, as of December 31, 2014, are as follows (in thousands):

Year	Amount
2015	$	567
2016	400
Other borrowings	$	967

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Employee Benefit Plan

12 Months Ended

Dec. 31, 2014

Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract]

Employee Benefit Plan

Employee Benefit Plan

Ultimate provides retirement benefits for eligible employees, as defined, through a defined contribution plan that is qualified under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). Contributions to the 401(k) Plan, which are made at the sole discretion of Ultimate, were $5.5 million, $3.6 million and $2.9 million for the years ended December 31, 2014, 2013 and 2012, respectively.

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Investments in Marketable Securities and Fair Value of Financial Instruments (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Corporate debentures and bonds	$ 8,504	$ 7,379
Commercial paper	600	1,799
U.S. Agency bonds	255	760
U.S. Treasury bills	797	0
Certificates of deposit	0	515
Total	10,156	10,453
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Corporate debentures and bonds	0	0
Commercial paper	0	0
U.S. Agency bonds	0	0
U.S. Treasury bills	0	0
Certificates of deposit	0	515
Total	0	515
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Corporate debentures and bonds	8,504	7,379
Commercial paper	600	1,799
U.S. Agency bonds	255	760
U.S. Treasury bills	797	0
Certificates of deposit	0	0
Total	10,156	9,938
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Corporate debentures and bonds	0	0
Commercial paper	0	0
U.S. Agency bonds	0	0
U.S. Treasury bills	0	0
Certificates of deposit	0	0
Total	$ 0	$ 0

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income tax (provision) benefit components

The income tax (provision) benefit consists of the following (in thousands):

	For the Year Ended December 31,
	2014			2013			2012
Current taxes:
Federal	$	(22,406	)	$	(14,091	)	$	(10,085	)
State and local	(5,078		)	(3,298		)	(2,354		)
Foreign	(567		)	(201		)	(164		)
Deferred taxes, net
Federal	16,607			(8		)	(1,710		)
State and local	1,535			(2		)	197
Foreign	317			41			9
Income tax provision	$	(9,592	)	$	(17,559	)	$	(14,107	)

Income tax reconciliation to statutory rate

The income tax provision is different from that which would be obtained by applying the statutory federal income tax rate of 35% to income from continuing operations before income taxes as a result of the following (in thousands):

	For the Year Ended December 31,
	2014			2013			2012
Income tax (provision) benefit at statutory federal tax rate	$	(19,015	)	$	(15,081	)	$	(10,060	)
State and local income taxes, net of the federal benefit	(2,303		)	(2,144		)	(1,402		)
Non-deductible expenses	(2,068		)	(1,965		)	(2,470		)
Change in tax rates	80			51			45
Recognition of previously unrecognized tax benefits, federal benefit	—			1,679			—
Research credit, federal benefit	13,873			—			—
Other, net	(159		)	(99		)	(220		)
Income tax provision	$	(9,592	)	$	(17,559	)	$	(14,107	)

Deferred tax assets and liabilities

Significant components of our deferred tax assets and liabilities at December 31, 2014, 2013 and 2012 were as follows (in thousands):

	As of December 31,
	2014			2013			2012
Deferred tax assets:
Net operating losses, foreign	$	59		$	59		$	—
Tax credit carryforwards	127			127			127
Research credit	15,518			—			—
Deferred revenue	168			504			1,140
Accruals not currently deductible	715			472			386
Allowance for doubtful accounts	248			248			169
Charitable contributions	1,281			995			751
Stock-based compensation	41,139			29,840			24,044
Deferred rent adjustment	1,292			1,349			1,350
Gross deferred tax assets	60,547			33,594			27,967
Less valuation allowance	—			—			—
Deferred tax assets	$	60,547		$	33,594		$	27,967
Deferred tax liabilities:
Property and equipment	$	(23,248	)	$	(14,481	)	$	(8,665	)
Acquired intangible assets, foreign	(1,088		)	(1,371		)	—
Software development costs	815			815			613
Other, net	—			—			—
Gross deferred tax liabilities	(23,521		)	(15,037		)	(8,052		)
Net deferred tax assets	$	37,026		$	18,557		$	19,915

Reconciliation of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2014, 2013 and 2012 is as follows (in thousands):

	As of December 31,
	2014		2013			2012
Balance at January 1,	$	—	$	1,866		$	1,866
Tax positions taken in prior period
Gross increases	—		—			—
Gross decreases	—		—			—
Tax positions taken in current period
Gross increases	4,950		—			—
Settlements	—		(1,866		)	—
Statute expiration	—		—			—
Balance at December 31,	$	4,950	$	—		$	1,866

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
Net income	$ 44,737	$ 25,530	$ 14,632
Other comprehensive (loss) income :
Unrealized (loss) gain on investments in marketable available for sale securities	(10)	4	(1)
Unrealized (loss) gain on foreign currency translation adjustments	(2,143)	(1,549)	166
Other comprehensive (loss) income, before tax	(2,153)	(1,545)	165
Income tax benefit (expense) related to items of other comprehensive income	1	(6)	1
Other comprehensive (loss) income, net of tax	(2,152)	(1,551)	166
Comprehensive income	$ 42,585	$ 23,979	$ 14,798

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Summary of Significant Accounting Policies and Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2014

Summary of Significant Accounting Policies and Recent Accounting Pronouncements [Abstract]

Summary of Significant Accounting Policies and Recent Accounting Pronouncements [Text Block]

Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Cash and Cash Equivalents

All highly liquid instruments with an original maturity of three months or less when acquired are considered cash equivalents and are comprised of interest-bearing accounts.

Accounts Receivable

Accounts receivable are principally from end-users of Ultimate’s products. We perform credit evaluations of our customers and have recorded allowances for estimated losses. We maintain an allowance for doubtful accounts at an amount estimated to be sufficient to provide adequate protection against losses resulting from collecting less than full payment on accounts receivable. A considerable amount of judgment is required when the realization of receivables is assessed, including assessing the probability of collection and current credit-worthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in a further impairment of their ability to make payments, an additional provision for doubtful accounts may be required.We charge off uncollectible amounts against the allowance for doubtful accounts in the period in which we determine they are uncollectible.

Funds Held for Customers and Customers’ Funds Obligations

Ultimate has the right to market and distribute an independent third party’s tax filing solution that Ultimate has branded UltiPro Payment Services.  Ultimate’s UltiPro Payment Services product provides payment services to our customers.  These payment services are being sold directly by us to our customers only on a per-employee-per-month (“PEPM”) basis in conjunction with UltiPro, our core product.  In connection with our UltiPro Payment Services product, we receive funds from our customers and hold such funds for purposes of paying the appropriate taxing authorities on behalf of such customers.  We hold our customers’ payment services deposits for the period between collection from our customers and remittance to the applicable taxing authority.  These funds held for customers and the corresponding customer funds obligations are included in current assets and current liabilities, respectively, in our consolidated balance sheets as of December 31, 2014 and 2013.  We have reported the cash flows for purchases of securities with funds received from UltiPro Payment Services customers in the investing activities section of the consolidated statements of cash flows for the years ended December 31, 2014, 2013 and 2012.  We have reported the cash flows related to the funds received and paid on behalf of such customers to the applicable taxing authorities in the financing activities section of the consolidated statements of cash flows for the years ended December 31, 2014, 2013 and 2012.  The associated PEPM fees for UltiPro Payment Services are included in recurring revenues in the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012.  The associated interest earned was not material for the years ended December 31, 2014, 2013 and 2012.

Fair Value of Financial Instruments

Ultimate’s financial instruments, consisting of cash and cash equivalents, investments in marketable securities, funds held for customers and the related obligations, accounts receivable, accounts payable, and capital lease obligations and other borrowings, approximated fair value (due to relatively short maturity) as of December 31, 2014 and 2013.

Prepaid Expenses and Other Current Assets

Ultimate’s financial statements include prepaid expenses and other current assets which include prepaid commissions on cloud sales.  Prepaid expenses are amortized over the life of the asset (typically within one year) and commissions on cloud sales are amortized over the initial contract term (typically 24 months) commencing on the day the customer processes its first live payroll using UltiPro (also referred to as going “Live”), which corresponds with the related cloud revenue recognition. The portion of prepaid commissions that extends beyond one year is classified in other assets, net in the consolidated balance sheets as of December 31, 2014 and 2013.

Long-Lived Assets

We evaluate the carrying value of long-lived assets when indicators of impairment exist.  For the year ended December 31, 2014, no such events or circumstances were identified.  The carrying value of a long-lived asset is considered impaired when the undiscounted expected future cash flows from such asset (or asset group) are separately identifiable and less than the asset’s (or asset group’s) carrying value.  In that event, a loss is recognized to the extent that the carrying value exceeds the fair value of the long-lived asset.  Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved.  For the years ended December 31, 2014, 2013 and 2012, we recorded no impairment of our long-lived assets.

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation and amortization. Property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets, which range from 2 to 20 years. Leasehold improvements and assets under capital leases are amortized over the shorter of the life of the asset or the term of the lease over periods ranging from approximately 3 to 15 years. Maintenance and repairs are charged to expense when incurred; betterments are capitalized. Upon the sale or retirement of assets, the cost, accumulated depreciation and amortization are removed from the accounts and any gain or loss is recognized.

Computer Software Development Costs

We previously capitalized software costs in accordance with Accounting Standards Codification ("ASC") Topic 985-20, Costs of Software to Be Sold, Leased, or Marketed. Those capitalized software costs were fully amortized as of December 31, 2013.

Computer software development costs related to software developed for internal use falls under the accounting guidance of ASC Topic 350-40, Intangibles Goodwill and Other–Internal Use Software, in which computer software costs are expensed as incurred during the preliminary project stage and capitalization begins in the application development stage once the capitalization criteria are met. Costs associated with post implementation activities are expensed as incurred. Costs capitalized during the application development stage include external direct costs of materials and services consumed in developing or obtaining internal-use software and payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the internal-use computer software. In addition to capitalizing costs for software (which are used by us in our general operations, for internal purposes), we also capitalize costs under ASC Topic 350-40 for certain software development projects related to our suite of products sold to our customers exclusively on a subscription basis under our software-as-a-service offering of UltiPro (the “Cloud Offering”).

Deferred Revenue

Deferred revenue is primarily comprised of deferrals for recurring revenues for cloud services which are recognized over the term of the related contract as the services are performed, typically two years; maintenance services which have not yet been rendered which are recognized ratably over the related annual maintenance period; implementation consulting services for which the services have not yet been rendered which are primarily recognized prior to the respective Live date; and subscription revenues which are recognized ratably over the base term of the related contract upon the delivery of the services.

Guarantees

The standard commercial terms in our sales contracts for UltiPro include an indemnification clause that indemnifies the customer against certain liabilities and damages arising from any claims of patent, copyright, or other proprietary rights of any third party. Due to the nature of the intellectual property indemnification provided to our customers, we cannot estimate the fair value, or determine the total nominal amount, of the indemnification until such time as a claim for such indemnification is made.  In the event of a claim made against us under such provision, we evaluate estimated losses for such indemnification considering such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss.  To date, Ultimate has not had any claims made against it under such provision and, accordingly, has not accrued any liabilities related to such indemnifications in its consolidated financial statements.

Segment Information

Public companies are required to report selected information about operating segments in annual and interim financial reports to shareholders, as well as related disclosures about an enterprise’s business segments, products, services, geographic areas and major customers. Ultimate operates its business as a single segment and is comprised as a single reporting unit.

Revenue Recognition

We recognize revenues in accordance with Accounting Standards Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”). We use the relative selling price method to allocate the total consideration to units of accounting in a multiple element arrangement. We allocate revenue in an arrangement using the estimated selling price (“ESP”) of deliverables if it does not have vendor-specific objective evidence (“VSOE”) or third-party evidence (“TPE”) of selling price. 

VSOE is the price charged when the same or similar product or service is sold separately.  We define VSOE as a median price of recent stand-alone transactions that are priced within a narrow range.

TPE is determined based on the prices charged by our competitors for a similar deliverable when sold separately.  However, due to the difficulty in obtaining sufficient information on competitor pricing and differences in our product offerings when compared with those of our peers, we generally are unable to reliably determine TPE.

ESP is our best estimate of the selling price of an element in a transaction. If we are unable to establish selling price using either VSOE or TPE, we will use ESP in our allocation of arrangement consideration.  The objective of ESP is to determine the price at which we would transact business if the product or service were sold by us on a stand-alone basis.  Our determination of ESP involves the use of a customary discount from the list (or book) price for each element, with the discounted price applied within a narrow range.  The customary discount is derived from historical data that has been analyzed to determine trends and patterns. We analyze the customary discount used for determining ESP on no less than an annual basis.

We evaluate each deliverable in our arrangements to determine whether it represents a separate unit of accounting.  A deliverable constitutes a separate unit of accounting when it has stand-alone value to our customers.  Our products and services continue to qualify as separate units of accounting under ASU 2009-13.

There are two major elements in our multiple element arrangements for the delivery of our Cloud Offering, which are recurring revenues (i.e., cloud subscription revenues) and services revenues (mostly implementation consulting services).   

For multiple element arrangements, the consideration allocated to cloud subscription revenues is recognized as recurring revenues over the initial contract period, as those services are delivered, commencing with the Live date of the related product. The consideration allocated to fixed fee implementation consulting services in multiple element arrangements is recognized as services revenues on a percentage of completion basis, using reasonably dependable estimates with respect to milestones achieved (in relation to progression through implementation phases), by product.

Single element arrangements typically consist of renewals for cloud subscriptions and renewal maintenance agreements. In addition, implementation consulting services sold on a time and materials basis typically represent single element arrangements. Under these single element arrangements, cloud subscription and maintenance revenues are recognized over the related renewal period, as the services are delivered, and implementation consulting services are recognized as the services are performed.

We recognize revenues when all of the following criteria are met:

• persuasive evidence of an arrangement exists;

• delivery has occurred;

• the fees are fixed and determinable; and

• collection is considered probable.

If collection is not considered probable, we recognize revenues when the fees are collected. If the fees are not fixed and determinable, we recognize revenues when the fees become due from the customer. If non-standard acceptance periods or non-standard performance criteria are required, we recognize revenue when the acceptance period expires or upon the satisfaction of the acceptance/performance criteria, as applicable.

The majority of services revenues are recognized over the implementation period, which is from the contract execution date until the Live date. Cloud revenues are recognized over the initial contract term, beginning in the month the customer goes Live.

Recurring Revenues

Recurring revenues primarily consist of subscription revenues recognized from our Cloud Offering, as well as customer support and maintenance revenues.

i)  Cloud subscription revenues are principally derived from PEPM fees earned from the Cloud Offering and from sales of hosting services on a stand-alone basis to customers who already own a perpetual license ("Base Hosting").  Ongoing PEPM fees from the Cloud Offering and, to a lesser extent, Base Hosting are recognized as subscription revenues as the services are delivered, commencing when the customer goes Live.

ii)  Customer support and maintenance revenues are derived from maintaining, supporting, and providing periodic updates of our software for our hosting services.  Since we stopped selling perpetual licenses to our new customers effective April 1, 2009, customer support and maintenance revenues stem from annual renewals.

Under our Cloud Offering, our customers do not have the right to take possession of our software and these arrangements are considered service contracts. The selling price of multiple deliverables in cloud arrangements is derived for each element based on the guidance provided by ASU 2009-13.  The multiple elements that typically exist in cloud arrangements include (1) recurring revenues from the combination of hosting services, the right to use UltiPro, and maintenance of UltiPro (i.e., product enhancements, updates and customer support) and (2) professional services (i.e., primarily implementation consulting services).

The pricing for the three elements that pertain to recurring revenues (i.e., hosting services, the right to use UltiPro and maintenance of UltiPro) is bundled.  Since these three bundled elements are components of recurring revenues in the consolidated statements of income, allocation of selling price to each of the three elements is not necessary and they are not reported separately.  Selling price, which is established through VSOE, for the bundled elements, as a whole, is determined on the basis of renewal pricing, without taking into consideration potential price increases or potential changes in the number of employees of the customer in the future due to the uncertainties surrounding these potential occurrences.  These bundled elements are provided on an ongoing basis, represent undelivered elements and are recognized on a monthly basis as the related services are performed, commencing once the customer goes Live.

Services Revenues

Services revenues primarily include revenues from fees charged for implementation consulting services in connection with the implementation of our product solutions and, to a much lesser extent, training of customers in the use of our products and fees for other services, including the provision of payroll-related forms, sales of time clocks and the printing of W-2 forms for certain customers, as well as certain client reimbursable out-of-pocket expenses.

Our multiple element contracts contain recurring cloud revenues and implementation consulting services priced on a fixed fee basis. Time and materials implementation consulting services are sold as stand-alone sales not directly related to the basic implementation of the cloud product. The total arrangement consideration is allocated to services elements in the arrangement based on relative selling prices, using the prices established when the services are sold on a stand-alone basis.  Selling price is established through ESP for fixed fee implementation consulting services that are included in our multiple element contracts.

Revenues from implementation consulting services sold on a fixed-fee basis are recognized using the percentage of completion accounting method, which involves the use of estimates.  Percentage of completion is measured at each reporting date based on progress made to date, using reasonably dependable estimates with respect to milestones achieved or billable hours, as applicable.

Revenues from implementation consulting services, billed on a time and materials basis (at an hourly rate), are recognized as these services are performed.  Other services are recognized as the product is shipped or as the services are rendered, depending on the specific terms of the related arrangement.

Business Combinations

We are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed at the acquisition date based upon their estimated fair values. Goodwill as of the acquisition date represents the excess of the purchase consideration of an acquired business over the fair value of the underlying net tangible and intangible assets acquired and liabilities assumed. The purchase price allocation and valuation of the acquisition require management to make significant estimates and assumptions, especially with respect to long-lived and intangible assets.

The estimates used in valuing certain of the intangible assets include, but are not limited to: future expected cash flows of the assets, discount rates to determine the present value of the future cash flows, financial projections of the acquired business, attrition rates of customers and expected technology life cycles. We also estimate the useful lives of the intangible assets based on the expected period over which we anticipate generating economic benefit from the asset.

Our estimates of fair value are based on assumptions believed to be reasonable at that time. If management made different estimates or judgments, material differences in the fair values of the net assets acquired may result.

The fair value of assets acquired and liabilities assumed was based upon a preliminary purchase price allocation and our estimates and assumptions are subject to change within the measurement period.

Goodwill and Intangible Assets

The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. The determination of the value of the intangible assets acquired involves certain judgments and estimates. These judgments and estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital.

At December 31, 2014, our goodwill totaled $25.7 million and our identifiable net intangible assets totaled $6.8 million. We assess the impairment of goodwill of our reporting unit annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable.  Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.  If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value.  We consider both market and discounted cash flow approaches to determine the fair value of the reporting unit.  Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value.  The discounted cash flow approach uses expected future operating results.  Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.  We conducted our annual impairment test of goodwill as of December 31, 2014, and 2013.  As a result of this test, we determined that no adjustment to the carrying value of goodwill for our reporting unit was required. 

We evaluate our amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows attributable to that asset or group of assets. The amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. We also evaluate the estimated remaining useful lives of intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. Assumptions and estimates about future values and remaining useful lives of our intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends and internal factors such as changes in our business strategy and our internal forecasts.

Cost of Revenues

Cost of revenues primarily consists of the costs of recurring and services revenues. Cost of recurring revenues primarily consists of costs to provide maintenance and technical support to our customers, the cost of providing periodic updates and the cost of recurring subscription revenues, including amortization of capitalized software. Cost of services revenues primarily consists of costs to provide implementation consulting services and, to a lesser degree, training to our customers, costs related to sales of payroll-related forms, time clocks and costs associated with certain client reimbursable out-of-pocket expenses.

Stock-Based Compensation

Our Amended and Restated 2005 Equity and Incentive Plan (the “Plan”) authorizes the grant of options to non-employee directors, officers and employees of Ultimate to purchase shares of Ultimate’s Common Stock.  The Plan also authorizes the grant to such persons of restricted and non-restricted shares of Common Stock, stock appreciation rights, stock units and cash performance awards (collectively, together with stock options, the “Awards”).  Prior to the adoption of the Plan, options to purchase shares of Common Stock were issued under our Nonqualified Stock Option Plan (the “Prior Plan”).  Beginning in 2009, we began making grants to employees of restricted stock units in lieu of stock options.

As of December 31, 2014, the aggregate number of shares of Common Stock that were available to be issued under all Awards granted under the Plan was 1,165,680 shares.

The Plan provides broad discretion to the Compensation Committee of the Board of Directors to create appropriate equity incentives for directors, officers and employees of Ultimate.  The Plan is intended to attract and retain talented employees and align employee and stockholder interests.

For purposes of calculating and accounting for stock-based compensation expense (“SBC”) in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC 718”) for restricted stock awards and restricted stock units, we measure compensation based on the closing market price of our Common Stock at the date of grant and it is recognized on a straight-line basis over the vesting period.  We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.  The weighted-average forfeiture rate is based on historical data.

In accordance with ASC 718, Ultimate capitalizes the portion of SBC expense attributed to research and development personnel whose labor costs are being capitalized pursuant to ASC Topic 350-40, Intangibles Goodwill and Other-Internal Use Software, related to software development. The following table summarizes SBC recognized by the Company (in thousands):

	For the Years Ended December 31,
	2014		2013		2012
SBC - Statements of income	$	46,185	$	32,807	$	20,412
SBC - Capitalized software	1,730		1,398		420
SBC - Statements of stockholders' equity	$	47,915	$	34,205	$	20,832

Rental Costs Incurred in Relation to a Construction Period

We have incurred rental costs associated with operating leases during the construction period.  Rental costs incurred during a construction period are costs incurred for the right to control the use of a leased asset during and after construction of a leased asset.  Since there is no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period, rental costs associated with ground or building operating leases that are incurred during a construction period are recognized as rental expense on a straight-line basis.

Income Taxes

We are subject to Federal, foreign and state corporate income taxes.  We account for income taxes using an asset and liability approach under which deferred income taxes are provided based upon enacted tax laws and rates applicable to the periods in which the taxes become payable.

We make certain estimates and judgments in determining income tax expense for financial statement purposes.  These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

We assess the likelihood that Ultimate will be able to recover its deferred tax assets.  Management considers all available evidence, both positive and negative, including historical levels of pre-tax book income, expiration of net operating losses, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies, as well as current tax laws and interpretation of current tax laws, in assessing the need for a valuation allowance.  If recovery is not likely, we record a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable.  The available positive evidence at December 31, 2014 included, among other factors, three years of cumulative historical pre-tax book income and a projection of future pre-tax book income and taxable income sufficient to realize all of our remaining deferred tax assets.  As a result of our analysis of all available evidence, both positive and negative, we believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize all of the deferred tax assets as of December 31, 2014. As such, there was no valuation allowance for the years ended December 31, 2014, 2013, and 2012. See Note 15 for further discussion.

ASC 740, “Income Taxes” (“ASC 740”), clarified the accounting for uncertainty in income taxes recognized in a company’s financial statements.  Specifically, ASC 740 prescribed a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  ASC 740 also provides guidance on the related de-recognition, classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions.  Our accounting policy is to record the tax effects of a change in the opening balance of the unrecognized tax benefits (including unrecognized tax benefits related to prior-period discontinued operations) in current-period income (loss) from continuing operations. We recognize interest and penalties accrued related to unrecognized tax benefits as components of our income tax provision. We did not have any interest and penalties accrued upon the adoption of ASC 740, and, as of December 31, 2014 and 2013, we did not have any interest and penalties accrued related to unrecognized tax benefits.

Reimbursable Out-Of-Pocket Expenses

Reimbursable out-of-pocket expenses, which are included in services revenues and cost of services revenues in our accompanying consolidated statements of operations, were $1.9 million, $1.8 million and $1.4 million for 2014, 2013 and 2012, respectively.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2014-09,  ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for Ultimate on January 1, 2017 and early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method and have not determined the effect the standard will have on our ongoing financial reporting.

XML

Goodwill and Intangible Assets (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Lives	7 years	8 years
Amortization expense for the acquired intangible assets	$ 1,139,000	$ 242,000	$ 0
2015	1,097,000
2016	1,075,000
2017	969,000
2018	969,000
2019	969,000
Thereafter	1,695,000
Total	6,774,000	8,274,000
Translation adjustment - Employtouch Acquisition	(545,000)	(184,000)
Total	8,700,000	8,700,000
Amortization of acquired intangibles	(1,381,000)	(242,000)
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Lives	3 years
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Lives	10 years
Developed technology
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Lives	6 years	7 years
Total	3,789,000	4,841,000
Translation adjustment - Employtouch Acquisition	(537,000)	(179,000)
Total	5,200,000	5,200,000
Amortization of acquired intangibles	(874,000)	(180,000)
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Lives	9 years	10 years
Total	2,803,000	3,150,000
Translation adjustment - Employtouch Acquisition	(5,000)	(3,000)
Total	3,200,000	3,200,000
Amortization of acquired intangibles	(392,000)	(47,000)
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Lives	2 years	3 years
Total	182,000	283,000
Translation adjustment - Employtouch Acquisition	(3,000)	(2,000)
Total	300,000	300,000
Amortization of acquired intangibles	$ (115,000)	$ (15,000)
AcceIHR, LLC [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Number of employees in middle to large market organizations	500
AcceIHR, LLC [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Number of employees in middle to large market organizations	25,000

XML

Stock-Based Compensation and Equity 5 (Details) (USD $)	3 Months Ended												12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Stock Options and Restricted Stock Awards, non-employee directors in exchange for services [Abstract]
Exercise price of options granted (in dollars per share)													$ 0.00	$ 0.00
Number of options granted (in shares)													0	0
Market value of restricted stock awards granted (in dollars per share)	$ 152.59	$ 132.23	$ 118.03	$ 164.87	$ 155.32	$ 146.25	$ 109.95	$ 95.99	$ 94.50	$ 93.84	$ 76.42	$ 69.00
Number of restricted stock awards granted (in shares)	2,555	2,570	2,625	2,625	2,500	5,111	5,251	5,336	5,346	5,351	5,501	5,591

XML

Schedule II (Notes)

12 Months Ended

Dec. 31, 2014

Valuation and Qualifying Accounts [Abstract]

Schedule II

 Allowance for Doubtful Accounts

We have established an allowance for doubtful accounts based on a review of the current status of existing accounts receivable by customer and historical experience.

The activity within allowance for doubtful accounts was as follows (in thousands):

	For the Years Ended December 31,
	2014			2013			2012
Balance at beginning of year	$	675		$	475		$	475
Charged to expense	2,264			2,523			1,159
Write-offs	(2,264		)	(2,323		)	(1,159		)
Balance at end of year	$	675		$	675		$	475

XML

Goodwill and Intangible Assets Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of changes in carrying balance of goodwill

The changes in the carrying value of goodwill were as follows:

	For the Year Ended
	December 31, 2014
Goodwill, December 31, 2013	$	26,942
Adjustments (1)	(561		)
Translation adjustment (2)	(685		)
Goodwill, December 31, 2014	$	25,696

(1) Goodwill adjustments represent the net purchase accounting adjustments for acquisitions during the related measurement periods.

(2) Represents the impact of the foreign currency translation of the portion of goodwill that is recorded by our Canadian subsidiary whose functional currency is also its local currency. Such goodwill is translated into U.S. dollars using exchange rates in effect at period end. Adjustments related to foreign currency translation are included in other comprehensive income.

Schedule of estimated useful lives of intangible assets

As of December 31, 2014, the Company’s amortizable intangible assets, before amortization expense, have estimated useful lives as follows (in thousands):

	December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Cumulative Translation Adjustment			Net Carrying Amount		Weighted Average Remaining Useful Life
Developed technology	$	5,200	$	(874	)	$	(537	)	$	3,789	6
Customer relationships	3,200		(392		)	(5		)	2,803		9
Non-compete agreements	300		(115		)	(3		)	182		2
	$	8,700	$	(1,381	)	$	(545	)	$	6,774	7
	December 31, 2013
	Gross Carrying Amount		Accumulated Amortization			Cumulative Translation Adjustment			Net Carrying Amount		Weighted Average Remaining Useful Life
Developed technology	$	5,200	$	(180	)	$	(179	)	$	4,841	7
Customer relationships	3,200		(47		)	(3		)	3,150		10
Non-compete agreements	300		(15		)	(2		)	283		3
	$	8,700	$	(242	)	$	(184	)	$	8,274	8

Schedule of expected amortization expense

Future amortization expense for acquired intangible assets is as follows, as of December 31, 2014 (in thousands):

Year	Amount
2015	$	1,097
2016	1,075
2017	969
2018	969
2019	969
Thereafter	1,695
Total	$	6,774

XML

Capital Lease Obligations

12 Months Ended

Dec. 31, 2014

Capital Lease Obligations [Abstract]

Capital Lease Obligations

Capital Lease Obligations

We lease certain equipment under non-cancelable agreements, which are accounted for as capital leases and expire at various dates through 2017. Interest rates on these leases are 4.25%. The scheduled lease payments of the capital lease obligations are as follows as of December 31, 2014 (in thousands):

Year	Amount
2015	$	3,877
2016	2,628
2017	832
	7,337
Less amount representing interest	(323		)
Lease obligations reflected as current ($3,655) and non-current ($3,359)	$	7,014