WESTON, Fla.--(BUSINESS WIRE)--Ultimate Software (Nasdaq:ULTI), a leading provider of end-to-end strategic human resources, payroll, and talent management solutions, announced today its financial results for the third quarter of 2008. For the quarter ended September 30, 2008, Ultimate Software reported total revenues of $43.9 million, an increase of 16%, and recurring revenues of $26.7 million, a 21% increase, both compared with 2007’s third quarter. GAAP net loss for the third quarter of 2008 was $3.1 million, or $0.12 per diluted share, versus GAAP net income of $2.4 million, or $0.09 per diluted share, for the third quarter of 2007.
Non-GAAP net loss for the third quarter of 2008 was $0.1 million, or $0.00 per diluted share, compared with 2007’s third quarter non-GAAP net income of $5.0 million, or $0.18 per diluted share. Non-GAAP results exclude stock-based compensation expense and amortization of acquired intangible assets which totaled $4.0 million and $2.6 million for the third quarters of 2008 and 2007, respectively, representing a $1.4 million increase in this non-GAAP measure. (See “Use of Non-GAAP Financial Information.”)
New annual recurring revenues (ARR) attributable to sales during the third quarter of 2008 were $10.8 million, a 51% increase over those for the third quarter of 2007. For the first nine months of 2008, new ARR were $29.3 million, a 46% increase over those for the same period in 2007. (See “Financial and Business Highlights” below for the definition of ARR.)
“Sales execution of both our Enterprise and Workplace teams was strong for the third quarter of this year with 51% growth in new ARR and 48% growth in number of units over that of 2007’s third quarter, bringing year-to-date unit growth to 38%. The new Workplace team gained traction and contributed 19% of the new ARR,” said Scott Scherr, CEO, president, and founder of Ultimate Software.
“We are pleased to see that the percentage of new customers selecting our software-as-a-service model, Intersourcing, increased again, accounting for 96% of the $10.8 million in new ARR for the quarter. We are also pleased with the scores Forrester Research gave our product in its HR Management Wave.” (See “Financial and Business Highlights” below for more detail on the Forrester Wave.)
Ultimate Software’s financial results teleconference will be held today, October 28, 2008, at 5:00 p.m. Eastern Time, through Vcall at http://www.investorcalendar.com/IC/CEPage.asp?ID=135394. The call will be available for replay at the same address beginning at 9:00 p.m. Eastern Time the same day. Windows Media Player or Real Player software is required to listen to the call and can be downloaded from the site. Forward-looking information about future company performance may be discussed during the teleconference call.
| -- New annual recurring revenues (ARR) to grow by more than 30% over those in the 2007 year; |
| -- Recurring revenues of $28 million to $29 million; |
| -- License revenues of $2 million; |
| -- Services revenues of $18 million to $19 million; and |
| -- Operating margins, on a non-GAAP basis (discussed below), of between 9% and 10%. |
Ultimate Software provides the following preliminary financial guidance for 2009 (which differs from the guidance provided on July 29, 2008):
Operating margins expectations do not include the impact of non-cash equity-based compensation expense recognized under Statement of Financial Accounting Standards No. 123(R), “Accounting for Share-Based Payment,” or the impact of the non-cash amortization of the intangible assets resulting from the acquisition of the Company’s United Kingdom subsidiary in 2006, which the Company includes in its GAAP financial results.
Certain statements in this press release are, and certain statements on the teleconference call may be, forward-looking statements within the meaning provided under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are made only as of the date hereof. These statements involve known and unknown risks and uncertainties that may cause the Company’s actual results to differ materially from those stated or implied by such forward-looking statements, including risks and uncertainties associated with fluctuations in the Company’s quarterly operating results, concentration of the Company’s product offerings, development risks involved with new products and technologies, competition, contract renewals with business partners, compliance by our customers with the terms of their contracts with us, and other factors disclosed in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
A leading provider of end-to-end strategic human resources, payroll, and talent management solutions, Ultimate Software markets its award-winning UltiPro products as on-demand services through its software-as-a-service (SaaS) offering, Intersourcing, and as licensed software. Based in Weston, FL, the Company employs more than 900 professionals who are focused on developing the highest quality products and services. In 2008, Ultimate Software was the first HR/payroll SaaS provider to be audited and awarded the ISO/IEC 27001:2005 Certification for security management, and its development team was named the #1 “Best Product Development Team” in the nation by the American Business Awards. Ultimate Software’s internal technology team won a first place award for its management of Intersourcing from the American Business Awards in 2007, and its customer service team won two first-place awards in national competitions for service excellence in 2006. Ultimate Software was ranked the #1 best medium-sized company to work for in America by the Great Place to Work® Institute in June 2008. Ultimate Software has approximately 1,600 customers representing diverse industries, including such organizations as The Container Store, Elizabeth Arden, Major League Baseball, The New York Yankees Baseball Team, Nintendo of America, Ruth’s Chris Steak House, and Sony BMG Entertainment. More information on Ultimate Software’s products and services can be found at www.ultimatesoftware.com.
UltiPro and Intersourcing are registered trademarks of The Ultimate Software Group, Inc. All other trademarks referenced are the property of their respective owners.
Use of Non-GAAP Financial Information
This press release contains non-GAAP financial measures. Ultimate Software believes that non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and results of operations. Management of the Company uses these non-GAAP results to compare the Company’s performance to that of prior periods for trend analyses, for purposes of determining executive incentive compensation, and for budget and planning purposes. These measures are used in monthly financial reports prepared for management and in quarterly financial reports presented to the Company’s Board of Directors. These measures may be different from non-GAAP financial measures used by other companies.
These non-GAAP measures 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 these non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses are excluded from the non-GAAP financial measures.
To compensate for these limitations, the Company presents its non-GAAP financial measures in connection with its GAAP results. Ultimate Software strongly urges investors and potential investors in the Company’s securities to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures that are included in this press release (under the caption “Unaudited Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures”) and not to rely on any single financial measure to evaluate its business.
Ultimate Software presents the following non-GAAP financial measures in this press release: non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income, non-GAAP pre-tax income per diluted share, and non-GAAP net income per diluted share. We exclude the following items from these non-GAAP financial measures as appropriate:
Stock-based compensation. The Company’s non-GAAP financial measures exclude stock-based compensation, which consists of expenses for stock options and stock awards recorded in accordance with SFAS 123(R). For the three and nine months ended September 30, 2008, stock-based compensation was $4.0 million and $12.0 million, respectively, on a pre-tax basis, and $2.9 million and $7.8 million, respectively, on an after-tax basis. For the three and nine months ended September 30, 2007, stock-based compensation was $2.6 million and $7.3 million, respectively, on a pre-tax basis, and $2.6 million and $7.3 million, respectively, on an after-tax basis. Stock-based compensation expenses are excluded from the non-GAAP financial measures because they are non-cash expenses that the Company does not consider part of ongoing operations when assessing its financial performance. The Company believes that such exclusion provides meaningful supplemental information regarding the Company’s operating results because these non-GAAP financial measures facilitate the comparison of results for current and future periods with results from past periods. The dilutive effect of all outstanding options is included in the calculation of pre-tax income and net income per diluted share on both a GAAP and a non-GAAP basis.