|
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
65-0694077
|
|
(State
or other jurisdiction of incorporation)
|
(I.R.S.
Employer Identification No.)
|
|
or
organization
|
2000 Ultimate Way, Weston,
FL
|
33326
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer ¨
|
Accelerated
filer þ
|
|
Non-accelerated
filer ¨
|
(Do
not check if a smaller reporting company)
|
Smaller
reporting company ¨
|
Page(s)
|
|||
3
|
|||
4
|
|||
5
|
|||
6
|
|||
7-11
|
|||
12-15
|
|||
16
|
|||
16
|
|||
17-21
|
|||
22
|
|||
22
|
|||
23
|
|||
Certifications
|
Item
1 – Financial Statements
|
||||||||
THE
ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
|
||||||||
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||||||
(Dollars
in thousands, except share and per share data)
|
||||||||
As
of
|
As
of
|
|||||||
September
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 15,278 | $ | 17,462 | ||||
Short-term
investments in marketable securities
|
8,516 | 17,120 | ||||||
Accounts
receivable, net of allowance for doubtful accounts of $825 for 2008 and
$700 for 2007
|
32,228 | 34,658 | ||||||
Prepaid
expenses and other current assets
|
14,193 | 9,801 | ||||||
Deferred
tax assets, net
|
3,516 | 3,516 | ||||||
Total
current assets before funds held for customers
|
73,731 | 82,557 | ||||||
Funds
held for customers
|
1,734 | – | ||||||
Total
current assets
|
75,465 | 82,557 | ||||||
Property
and equipment, net
|
22,694 | 18,238 | ||||||
Capitalized
software, net
|
5,609 | 3,631 | ||||||
Goodwill
|
4,063 | 4,063 | ||||||
Long-term
investments in marketable securities
|
– | 1,298 | ||||||
Other
assets, net
|
11,007 | 9,365 | ||||||
Long-term
deferred tax assets, net
|
17,513 | 16,004 | ||||||
Total
assets
|
$ | 136,351 | $ | 135,156 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 6,034 | $ | 3,528 | ||||
Accrued
expenses
|
11,174 | 11,405 | ||||||
Current
portion of deferred revenue
|
48,561 | 43,262 | ||||||
Current
portion of capital lease obligations
|
1,891 | 2,002 | ||||||
Current
portion of long-term debt
|
761 | 572 | ||||||
Total
current liabilities before customer funds obligations
|
68,421 | 60,769 | ||||||
Customer
funds obligations
|
1,727 | – | ||||||
Total
current liabilities
|
70,148 | 60,769 | ||||||
Deferred
revenue, net of current portion
|
8,366 | 8,446 | ||||||
Deferred
rent
|
3,162 | 2,652 | ||||||
Capital
lease obligations, net of current portion
|
1,234 | 1,991 | ||||||
Long-term
debt, net of current portion
|
797 | 320 | ||||||
Total
liabilities
|
83,707 | 74,178 | ||||||
Stockholders’
equity:
|
||||||||
Preferred
Stock, $.01 par value, 2,000,000 shares authorized, no shares issued or
outstanding
|
– | – | ||||||
Series
A Junior Participating Preferred Stock, $.01 par value, 500,000 shares
authorized, no shares issued or outstanding
|
– | – | ||||||
Common
Stock, $.01 par value, 50,000,000 shares authorized, 26,748,771 and
26,219,789 shares issued in 2008 and 2007, respectively
|
267 | 262 | ||||||
Additional
paid-in capital
|
160,821 | 143,913 | ||||||
Accumulated
other comprehensive loss
|
(63 | ) | (18 | ) | ||||
Accumulated
deficit
|
(53,883 | ) | (50,371 | ) | ||||
107,142 | 93,786 | |||||||
Treasury stock, 2,175,475 and
1,452,375 shares, at cost, in 2008 and 2007,
respectively
|
(54,498 | ) | (32,808 | ) | ||||
Total
stockholders’ equity
|
52,644 | 60,978 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 136,351 | $ | 135,156 |
THE
ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
|
||||||||||||||||
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
(In
thousands, except per share amounts)
|
||||||||||||||||
For
the Three Months
|
For
the Nine Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Recurring
|
$ | 26,738 | $ | 22,174 | $ | 77,811 | $ | 62,720 | ||||||||
Services
|
15,002 | 12,312 | 42,287 | 35,773 | ||||||||||||
License
|
2,172 | 3,337 | 8,782 | 10,829 | ||||||||||||
Total
revenues
|
43,912 | 37,823 | 128,880 | 109,322 | ||||||||||||
Cost
of revenues:
|
||||||||||||||||
Recurring
|
7,927 | 5,630 | 21,454 | 16,609 | ||||||||||||
Services
|
12,751 | 10,066 |
34,630
|
29,439 | ||||||||||||
License
|
463 | 352 | 1,355 | 1,026 | ||||||||||||
Total
cost of revenues
|
21,141 | 16,048 | 57,439 | 47,074 | ||||||||||||
Gross
profit
|
22,771 | 21,775 | 71,441 | 62,248 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Sales
and marketing
|
12,483 | 9,040 | 35,548 | 26,265 | ||||||||||||
Research
and development
|
9,912 | 7,107 | 28,090 | 20,941 | ||||||||||||
General
and administrative
|
4,697 | 3,645 | 13,398 | 10,345 | ||||||||||||
Total
operating expenses
|
27,092 | 19,792 | 77,036 | 57,551 | ||||||||||||
Operating
income (loss)
|
(4,321 | ) | 1,983 | (5,595 | ) | 4,697 | ||||||||||
Other
income (expense):
|
||||||||||||||||
Interest
expense and other
|
(33 | ) | (61 | ) | (173 | ) | (161 | ) | ||||||||
Other
income, net
|
168 | 433 | 747 | 5,602 | ||||||||||||
Total
other income, net
|
135 | 372 | 574 | 5,441 | ||||||||||||
Income
(loss) before benefit (provision) for income taxes
|
(4,186 | ) | 2,355 | (5,021 | ) | 10,138 | ||||||||||
Benefit
(provision) for income taxes
|
1,135 | – | 1,509 | (115 | ) | |||||||||||
Net
income (loss)
|
$ | (3,051 | ) | $ | 2,355 | $ | (3,512 | ) | $ | 10,023 | ||||||
Net
income (loss) per share:
|
||||||||||||||||
Basic
|
$ | (0.12 | ) | $ | 0.10 | $ | (0.14 | ) | $ | 0.41 | ||||||
Diluted
|
$ | (0.12 | ) | $ | 0.09 | $ | (0.14 | ) | $ | 0.36 | ||||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
24,613 | 24,764 | 24,654 | 24,688 | ||||||||||||
Diluted
|
24,613 | 27,692 | 24,654 | 27,577 | ||||||||||||
THE
ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
|
||||||||
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(In
thousands)
|
||||||||
For
the Nine Months
|
||||||||
Ended
September 30,
|
||||||||
2008
|
2007
|
|||||||
Cash flows from operating
activities:
|
||||||||
Net
income (loss)
|
$ | (3,512 | ) | $ | 10,023 | |||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
7,108 | 5,070 | ||||||
Provision
for doubtful accounts
|
1,325 | 1,075 | ||||||
Non-cash
stock-based compensation expense
|
11,969 | 7,294 | ||||||
Deferred
income taxes
|
(1,509 | ) | – | |||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
1,105 | (3,555 | ) | |||||
Prepaid
expenses and other current assets
|
(3,197 | ) | (1,620 | ) | ||||
Other
assets
|
(1,780 | ) | (1,478 | ) | ||||
Accounts
payable
|
2,506 | 1,479 | ||||||
Accrued
expenses and deferred rent
|
(721 | ) | (1,323 | ) | ||||
Deferred
revenue
|
5,219 | 3,410 | ||||||
Net
cash provided by operating activities
|
18,513 | 20,375 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchases
of marketable securities
|
(6,688 | ) | (13,629 | ) | ||||
Maturities
of marketable securities
|
16,563 | 13,614 | ||||||
Net
purchases of securities from customer funds
|
(1,734 | ) | – | |||||
Capitalized
software
|
(1,511 | ) | (1,391 | ) | ||||
Acquisition-related
expenses
|
– | (24 | ) | |||||
Purchases
of property and equipment
|
(10,137 | ) | (4,777 | ) | ||||
Net
cash used in investing activities
|
(3,507 | ) | (6,207 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Repurchases
of Common Stock
|
(21,690 | ) | (18,962 | ) | ||||
Principal
payments on capital lease obligations
|
(1,598 | ) | (1,452 | ) | ||||
Net
increase in customer fund obligations
|
1,727 | – | ||||||
Repayments
of borrowings of long-term debt
|
(529 | ) | (684 | ) | ||||
Net
proceeds from issuances of Common Stock
|
4,919 | 6,123 | ||||||
Net
cash used in financing activities
|
(17,171 | ) | (14,975 | ) | ||||
Effect
of exchange rate changes on cash
|
(19 | ) | 7 | |||||
Net
decrease in cash and cash equivalents
|
(2,184 | ) | (800 | ) | ||||
Cash
and cash equivalents, beginning of period
|
17,462 | 16,734 | ||||||
Cash
and cash equivalents, end of period
|
$ | 15,278 | $ | 15,934 | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid for interest
|
$ | 57 | $ | 73 | ||||
Cash
paid for income taxes
|
$ | 316 | $ | – | ||||
Supplemental
disclosure of non-cash financing activities:
|
||||||||
- The
Company entered into capital lease obligations to acquire new equipment
totaling $730 and $2,289
|
||||||||
for
the nine months ended September 30, 2008 and 2007,
respectively.
|
||||||||
- The
Company entered into an agreement to purchase certain source code from
NOVAtime Technology, Inc., a third-party
|
||||||||
vendor,
for $2.0 million, of which $1.0 million was paid during the nine months
ended September 30, 2008.
|
||||||||
- The
Company entered into a 3 year financing agreement for hosting software
maintenance with a third-party vendor
|
||||||||
for
$1.2 million, of which no cash payments were made during the nine months
ended September 30, 2008.
|
||||||||
Common
Stock
|
Additional
Paid-in
|
Accumulated
Other Comprehensive
|
Accumulated
|
Treasury Stock
|
Total
Stockholders’
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Loss
|
Deficit
|
Shares
|
Amount
|
Equity
|
|||||||||||||||||||||||||
Balance, December 31, 2007
|
26,220 | $ | 262 | $ | 143,913 | $ | (18 | ) | $ | (50,371 | ) | 1,452 | $ | (32,808 | ) | $ | 60,978 | |||||||||||||||
Net
loss
|
– | – | – | – | (3,512 | ) | – | – | (3,512 | ) | ||||||||||||||||||||||
Unrealized
loss on investments in marketable securities available for
sale
|
– | – | – | (26 | ) | – | – | – | (26 | ) | ||||||||||||||||||||||
Unrealized
loss on foreign currency translation
|
– | – | – | (19 | ) | – | – | – | (19 | ) | ||||||||||||||||||||||
Comprehensive
loss
|
– | – | – | – | – | – | – | (3,557 | ) | |||||||||||||||||||||||
Repurchases
of Common Stock
|
– | – | – | – | – | 723 | (21,690 | ) | (21,690 | ) | ||||||||||||||||||||||
Issuances
of Common Stock from exercises of stock options
|
529 | 5 | 4,914 | – | – | – | – | 4,919 | ||||||||||||||||||||||||
Non-cash
stock-based compensation
|
– | – | 11,994 | – | – | – | – | 11,994 | ||||||||||||||||||||||||
Balance,
September 30, 2008
|
26,749 | $ | 267 | $ | 160,821 | $ | (63 | ) | $ | (53,883 | ) | 2,175 | $ | (54,498 | ) | $ | 52,644 |
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost
|
Gain
|
Loss
|
Value
|
|||||||||||||
Corporate
debentures – bonds
|
$ | 4,920 | $ | – | $ | (37 | ) | $ | 4,883 | |||||||
Commercial
paper
|
2,483 | – | - | 2,483 | ||||||||||||
Certificates
of deposit
|
500 | – | - | 500 | ||||||||||||
Asset-backed
securities
|
650 | – | - | 650 | ||||||||||||
Total
investments available-for-sale
|
$ | 8,553 | $ | – | $ | (37 | ) | $ | 8,516 |
Amortized
|
Fair
|
|||||||
Cost
|
Value
|
|||||||
Due
in one year or less
|
$ | 8,553 | $ | 8,516 | ||||
$ | 8,553 | $ | 8,516 |
|
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.
|
Quoted
|
||||||||||||||||
Prices
in
|
Other
|
Un-
|
||||||||||||||
Active
|
Observable
|
observable
|
||||||||||||||
Markets
|
Inputs
|
Inputs
|
||||||||||||||
Total
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||||||||
Corporate
debentures – bonds
|
$ | 4,883 | $ | — | $ | 4,883 | $ | — | ||||||||
Commercial
paper
|
2,483 | — | 2,483 | — | ||||||||||||
Certificates
of deposit
|
500 | 500 | — | — | ||||||||||||
Asset-backed
securities
|
650 | — | 650 | — | ||||||||||||
Total
investments available-for-sale
|
$ | 8,516 | $ | 500 | $ | 8,016 | $ | — |
As
of
|
As
of
|
|||||||
September
30, 2008
|
December
31, 2007
|
|||||||
Property
and equipment
|
$ | 63,452 | $ | 52,611 | ||||
Less: accumulated
depreciation and amortization
|
40,758 | 34,373 | ||||||
$ | 22,694 | $ | 18,238 |
For
the Three Months
ended
September 30,
|
For
the Nine Months
ended
September 30,
|
||||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||||
Basic
weighted average shares outstanding
|
24,613 | 24,764 | 24,654 | 24,688 | |||||||||||
Effect
of dilutive equity instruments
|
– | 2,928 | – | 2,889 | |||||||||||
Dilutive
weighted average shares outstanding
|
24,613 | 27,692 | 24,654 | 27,577 | |||||||||||
Other
common stock equivalents (i.e., stock options, restricted stock awards and
stock units)
outstanding
which are not included in the calculation
of
diluted income (loss) per share because their impact is
anti-dilutive
|
|||||||||||||||
5,889 | 179 | 5,889 | 634 |
For
the Three Months
ended
September 30,
|
For
the Nine Months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Net
income (loss)
|
$ | (3,051 | ) | $ | 2,355 | $ | (3,512 | ) | $ | 10,023 | ||||||
Other
comprehensive income (loss)
|
||||||||||||||||
Unrealized
gain (loss) on investments in
|
||||||||||||||||
marketable
securities available-for-sale
|
(50 | ) | 14 | (26 | ) | – | ||||||||||
Unrealized
gain (loss) on foreign currency
|
||||||||||||||||
translation
adjustments
|
(9 | ) | 1 | (19 | ) | 6 | ||||||||||
Comprehensive
income (loss)
|
$ | (3,110 | ) | $ | 2,370 | $ | (3,557 | ) | $ | 10,029 |
For
the Three Months
Ended
September 30,
|
For
the Nine Months
Ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Non-cash stock-based compensation
expense:
|
||||||||||||||||
Cost
of recurring revenues
|
$ | 191 | $ | 161 | $ | 689 | $ | 489 | ||||||||
Cost
of services revenues
|
479 | 330 | 1,565 | 1,242 | ||||||||||||
Cost
of license revenues
|
2 | 1 | 9 | 4 | ||||||||||||
Sales
and marketing
|
2,043 | 1,151 | 5,656 | 3,274 | ||||||||||||
Research
and development
|
316 | 213 | 1,257 | 753 | ||||||||||||
General
and administrative
|
924 | 701 | 2,793 | 1,532 | ||||||||||||
Total
non-cash stock-based compensation expense
|
$ | 3,955 | $ | 2,557 | $ | 11,969 | $ | 7,294 |
For
the Three Months
Ended
September 30,
|
For
the Nine Months
Ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Expected
term (in years)
|
5.3 | 5.0 | 5.4 | 5.0 | ||||||||||||
Volatility
|
39 | % | 39 | % | 39 | % | 39 | % | ||||||||
Interest
rate
|
3.38 | % | 4.63 | % | 3.21 | % | 4.64 | % | ||||||||
Dividend
yield
|
– | – | – | – | ||||||||||||
Weighted
average fair value at grant date
|
$ | 13.11 | $ | 12.67 | $ | 11.79 | $ | 10.80 |
For
the Three Months
Ended
September 30,
|
For
the Nine Months
Ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Officers
and employees
|
– | – | – | 105,000 | ||||||||||||
Non-employee
directors
|
1,925 | 2,055 | 6,040 | 2,055 |
Weighted
|
||||||||||||||||
Average
|
||||||||||||||||
Weighted
|
Remaining
|
Aggregate
|
||||||||||||||
Average
|
Contractual
|
Intrinsic
|
||||||||||||||
Stock
Options
|
Shares
|
Exercise
Price
|
Term
(in Years)
|
Value
|
||||||||||||
Outstanding
at December 31, 2007
|
4,547 | $ | 13.31 | – | – | |||||||||||
Granted
|
947 | 29.98 | – | – | ||||||||||||
Exercised
|
(529 | ) | 9.30 | – | – | |||||||||||
Forfeited
or expired
|
(39 | ) | 27.62 | – | – | |||||||||||
Outstanding
at September 30, 2008
|
4,926 | $ | 16.84 | 6.21 | $ | 53,758 | ||||||||||
Exercisable
at September 30, 2008
|
3,752 | $ | 13.49 | 5.36 | $ | 52,133 |
Weighted
|
||||||||
Average
|
||||||||
Grant
Date
|
||||||||
Restricted
Stock
|
Shares
|
Fair
Value
|
||||||
Outstanding
at December 31, 2007
|
911 | $ | 27.11 | |||||
Granted
|
6 | 30.99 | ||||||
Vested
|
– | – | ||||||
Forfeited
or expired
|
– | – | ||||||
Outstanding
at September 30, 2008
|
917 | $ | 27.14 |
ITEM
2.
|
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
For
the Three Months
|
For
the Nine Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenues:
|
||||||||||||||||
Recurring
|
60.9 | % | 58.6 | % | 60.4 | % | 57.4 | % | ||||||||
Services
|
34.2 | 32.6 | 32.8 | 32.7 | ||||||||||||
License
|
4.9 | 8.8 | 6.8 | 9.9 | ||||||||||||
Total
revenues
|
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
Cost
of revenues:
|
||||||||||||||||
Recurring
|
18.1 | 14.9 | 16.6 | 15.2 | ||||||||||||
Services
|
29.0 | 26.6 | 26.9 | 26.9 | ||||||||||||
License
|
1.1 | 0.9 | 1.1 | 0.9 | ||||||||||||
Total
cost of revenues
|
48.2 | 42.4 | 44.6 | 43.0 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Sales
and marketing
|
28.4 | 23.9 | 27.5 | 24.0 | ||||||||||||
Research
and development
|
22.5 | 18.8 | 21.8 | 19.2 | ||||||||||||
General
and administrative
|
10.7 | 9.6 | 10.4 | 9.5 | ||||||||||||
Total
operating expenses
|
61.7 | 52.3 | 59.7 | 52.7 | ||||||||||||
Operating
income (loss)
|
(9.8 | ) | 5.3 | (4.3 | ) | 4.3 | ||||||||||
Other
income (expense):
|
||||||||||||||||
Interest
expense and other
|
(0.1 | ) | (0.2 | ) | (0.1 | ) | (0.1 | ) | ||||||||
Other
income, net
|
0.4 | 1.1 | 0.5 | 5.1 | ||||||||||||
Total
other income, net
|
0.3 | 0.9 | 0.4 | 5.0 | ||||||||||||
Income
(loss) before income taxes
|
(9.5 | ) | 6.2 | (3.9 | ) | 9.3 | ||||||||||
Benefit (provision)
for income taxes
|
2.6 | – | 1.2 | (0.1 | ) | |||||||||||
Net
income (loss)
|
(6.9 | ) % | 6.2 | % | (2.7 | ) % | 9.2 | % |
|
a)
|
Intersourcing
revenues increased 46.3% and 50.9% for the three and nine months ended
September 30, 2008, respectively, in comparison to the same periods of
2007, primarily due to the continued growth of the Intersourcing Offering,
which comprised the majority of unit sales. The increase in Intersourcing
revenues is based on the revenue impact of incremental units that have
gone Live since September 30, 2007, including both UltiPro and, to a
lesser extent, complementary products such as UltiPro Time and Attendance
(“UTA”) and UltiPro Recruitment. Intersourcing revenues from
the Workplace solution in 2008 also contributed to the year-over-year
growth, particularly since this solution was introduced after September
30, 2007. Recognition of recurring revenues for Intersourcing
sales commences upon Live date. The Company’s rolling twelve month
retention rate of 97% for existing Intersourcing customers also
contributed to the growth in Intersourcing revenues when combined with
continued sales growth.
|
|
b)
|
Maintenance
revenues from license sales increased 8.6% and 10.7% for the three and
nine months ended September 30, 2008, respectively, in comparison to the
same periods of 2007, due to additional maintenance fees resulting from
cumulative net increases in the customer base subsequent to September 30,
2007 due to incremental license sales since such
date. Maintenance revenues are recognized over the initial term
of the related license contract, which is typically 12 months, and then on
a monthly recurring basis thereafter as the maintenance contracts renew
annually. The Company’s rolling twelve month retention rate of
97% for existing customers’ annual maintenance renewals in the three and
nine months ended September 30, 2008, combined with the annual price
increases that typically accompany annual renewals, also contributed to
the increase in maintenance
revenues.
|
|
c)
|
The
impact on recurring revenues of units sold under the Intersourcing
Offering (as compared to the typical immediate impact on license revenues
of licensed units sold) has been and is expected to be a gradual increase
from one period to the next, based on the incremental effect of revenue
recognition of the Intersourcing fees over the terms of the related
contracts as sales in backlog go
Live.
|
|
d)
|
Recurring
subscription revenues decreased 70.1% and 54.3% for the three and nine
months ended September 30, 2008, respectively, in comparison to the same
periods of 2007, due to the termination of the Company’s agreement with
Ceridian Corporation effective March 9, 2008, at which time the related
revenue recognition ended.
|
|
·
|
Maximum
safety of principal;
|
|
·
|
Maintenance
of appropriate liquidity for regular cash
needs;
|
|
·
|
Maximum
yields in relationship to guidelines and market
conditions;
|
|
·
|
Diversification
of risks; and
|
|
·
|
Fiduciary
control of all investments.
|
|
§
|
Variations
in the mix of revenues;
|
|
§
|
Increased
expenses (especially as they relate to product development and sales and
marketing);
|
|
§
|
Timing
of product releases:
|
|
§
|
Increased
competition;
|
|
§
|
Announcements
of new products by us or our
competitors;
|
|
§
|
Capital
spending patterns of our customers;
and
|
|
§
|
A
drop in near-term demand for our
products.
|
|
§
|
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.
|
|
§
|
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.
|
|
§
|
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.
|
|
§
|
Large
service bureaus, primarily Automatic Data Processing, Inc. (ADP) and, to a
lesser extent, Ceridian
Corporation;
|
|
§
|
A
number of companies, such as PeopleSoft/Oracle, Lawson and Kronos, that
offer human resource management and payroll software products for use on
mainframes, client/server environments and/or Web servers;
and
|
|
§
|
The
internal payroll/human resources departments of potential customers which
use custom-written software.
|
|
§
|
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.
|
Total
Number of Shares
|
Maximum
Number of
|
|||||||||||||||
Purchased
as Part
|
Shares
That May Yet
|
|||||||||||||||
Total
Number of
|
Average
Price
|
Of
Publicly Announced
|
Be
Purchased Under the
|
|||||||||||||
Period
|
Shares Purchased (1)
|
Paid per Share
|
Plans or Programs
|
Plans or Programs
|
||||||||||||
July
1- 31, 2008
|
– | – | 2,020,375 | 979,625 | ||||||||||||
August
1- 31, 2008
|
155,100 | 25.90 | 2,175,475 | 824,525 | ||||||||||||
September
1- 30, 2008
|
– | – | 2,175,475 | 824,525 | ||||||||||||
Total
|
155,100 | $ | 25. 90 | 2,175,475 | 824,525 | |||||||||||
(1) All
shares were purchased through the publicly announced Stock Repurchase Plan
in open-market transactions.
|
Number
|
Description
|
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
*
|
The
Ultimate Software Group, Inc.
|
||
Date: November
10, 2008
|
By:
|
/s/ Mitchell K. Dauerman
|
Mitchell
K. Dauerman
|
||
Executive
Vice President, Chief Financial Officer and Treasurer (Authorized
Signatory and Principal Financial and Accounting
Officer)
|