|
| [July 31, 2012] |
 |
Ultimate Reports Q2 2012 Financial Results
WESTON, Fla. --(Business Wire)--
Ultimate Software (Nasdaq: ULTI), a leading cloud provider of people
management solutions, announced today its financial results for the
second quarter of 2012. For the quarter ended June 30, 2012, Ultimate
reported recurring revenues of $64.6 million, a 24% increase, and total
revenues of $79.2 million, a 23% increase, both compared with 2011's
second quarter. GAAP net income for the second quarter of 2012 was $2.7
million, or $0.09 per diluted share, versus GAAP net income of $0.9
million, or $0.03 per diluted share, for the second quarter of 2011.
Non-GAAP net income, which excludes stock-based compensation and
amortization of acquired intangible assets, was $5.9 million, or $0.21
per diluted share, for the second quarter of 2012 compared with non-GAAP
net income of $3.8 million, or $0.14 per diluted share, for the second
quarter of 2011. See "Use of Non-GAAP Financial Information" below.
"We again executed according to plan for both our recurring and total
revenues in this year's second quarter. Our customer retention rate
remained consistent at greater than 96%, and our operating margin was on
the positive side of our 10.0% target at 13.0%," said Scott Scherr, CEO,
president, and founder of Ultimate. "Our new Enterprise and Workplace
customers continued to attach talent management products to their core
purchases, and we continued our penetration into the Canadian market,
signing our largest Canada-based customer to date."
Ultimate's financial results teleconference will be held today, July 31,
2012, at 5:00 p.m. Eastern Time, through Vcall at http://www.investorcalendar.com/IC/CEPage.asp ID=167837.
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 software is
required to listen to the call and can be downloaded from the site.
Forward-looking information about future company performance will be
discussed during the teleconference call.
Financial Highlights
-
Recurring revenues grew by 24% for the second quarter of 2012 compared
with 2011's second quarter. The increase was primarily attributable to
revenue growth from our Software-as-a-Service ("SaaS") offering.
Recurring revenues for the second quarter of 2012 were 82% of total
revenues as compared with 81% of total revenues for the same period of
last year.
-
The operating income (or operating margin), on a non-GAAP basis, for
the second quarter of 2012 was $10.3 million, or 13.0%, as compared
with $6.6 million, or 10.3%, for the same period last year.
-
Ultimate's annualized retention rate exceeded 96% for its existing
recurring revenue customer base as of June 30, 2012.
-
The combination of cash, cash equivalents, and marketable securities
was $73.1 million as of June 30, 2012, compared with $55.3 million as
of December 31, 2011. Cash flows from operating activities for the
quarter ended June 30, 2012, were $8.3 million, compared with $6.4
million for the same period last year. For the six months ended June
30, 2012, Ultimate generated $22.7 million in cash from operations
compared with $15.2 million for the six months ended June 30, 2011.
-
Days sales outstanding were 62 days at June 30, 2012, representing a
reduction of nine days compared with days sales outstanding at
December 31, 2011.
Financial Outlook
Ultimate provides the following financial guidance for the third quarter
ending September 30, 2012, and full year 2012:
For the third quarter of 2012:
-
Recurring revenues of approximately $68.0 million,
-
Total revenues of approximately $84.0 million, and
-
Operating margin, on a non-GAAP basis (discussed below), of
approximately 16%.
For the year 2012:
-
Recurring revenues to increase by approximately 25% over 2011,
-
Total revenues to increase by approximately 23% over 2011, and
-
Operating margin, on a non-GAAP basis (discussed below), of
approximately 15%.
Operating margin expectations were determined on a non-GAAP basis using
the methodologies identified under the caption "Use of Non-GAAP
Financial Information" in this press release. Non-cash stock-based
compensation expense for 2012 is expected to be approximately $20.0
million.
Forward-Looking Statements
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 Ultimate's actual results to differ
materially from those stated or implied by such forward-looking
statements, including risks and uncertainties associated with
fluctuations in Ultimate's quarterly operating results, concentration of
Ultimate'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 Ultimate's filings with the
Securities and Exchange Commission. Ultimate undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
About Ultimate
Ultimate is a leading SaaS provider of people management solutions, with
more than 7,000,000 people records in the cloud. Built on the belief
that people are the most important ingredient of any business,
Ultimate's award-winning UltiPro delivers HR, payroll, and talent
management solutions that seamlessly connect people with the information
and resources they need to work more effectively. Founded in 1990, the
company is headquartered in Weston, Florida, and has more than 1,400
professionals focused on developing the highest quality solutions and
services. In 2012, Ultimate was ranked #25 on FORTUNE'S "100 Best
Companies to Work For" list. Ultimate has more than 2,300 customers with
employees in 115 countries, including Adobe Systems Incorporated, The
Container Store, Culligan International, Major League Baseball, The New
York Yankees Baseball Team, and Texas Roadhouse. More information on
Ultimate's products and services for people management can be found at www.ultimatesoftware.com.
UltiPro is a registered trademark of The Ultimate Software Group, Inc.
All other trademarks referenced are the property of their respective
owners.
|
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended June 30,
|
|
For the Six Months
Ended June 30,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Recurring
|
|
$
|
64,636
|
|
|
$
|
52,002
|
|
|
$
|
125,509
|
|
|
$
|
101,950
|
|
|
Services
|
|
14,010
|
|
|
11,761
|
|
|
31,034
|
|
|
25,490
|
|
|
License
|
|
531
|
|
|
442
|
|
|
915
|
|
|
1,270
|
|
|
Total revenues
|
|
79,177
|
|
|
64,205
|
|
|
157,458
|
|
|
128,710
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
Recurring
|
|
19,235
|
|
|
15,543
|
|
|
38,339
|
|
|
30,236
|
|
|
Services
|
|
14,843
|
|
|
12,104
|
|
|
31,366
|
|
|
26,033
|
|
|
License
|
|
120
|
|
|
100
|
|
|
208
|
|
|
273
|
|
|
Total cost of revenues
|
|
34,198
|
|
|
27,747
|
|
|
69,913
|
|
|
56,542
|
|
|
Gross profit
|
|
44,979
|
|
|
36,458
|
|
|
87,545
|
|
|
72,168
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
17,472
|
|
|
15,524
|
|
|
36,109
|
|
|
32,647
|
|
|
Research and development
|
|
15,989
|
|
|
12,370
|
|
|
31,685
|
|
|
24,337
|
|
|
General and administrative
|
|
6,126
|
|
|
5,762
|
|
|
12,271
|
|
|
11,375
|
|
|
Total operating expenses
|
|
39,587
|
|
|
33,656
|
|
|
80,065
|
|
|
68,359
|
|
|
Operating income
|
|
5,392
|
|
|
2,802
|
|
|
7,480
|
|
|
3,809
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
Interest and other expense
|
|
(101
|
)
|
|
(143
|
)
|
|
(176
|
)
|
|
(301
|
)
|
|
Other income, net
|
|
30
|
|
|
26
|
|
|
43
|
|
|
60
|
|
|
Total other expense, net
|
|
(71
|
)
|
|
(117
|
)
|
|
(133
|
)
|
|
(241
|
)
|
|
Income before income taxes
|
|
5,321
|
|
|
2,685
|
|
|
7,347
|
|
|
3,568
|
|
|
Provision for income taxes
|
|
(2,668
|
)
|
|
(1,792
|
)
|
|
(3,670
|
)
|
|
(2,347
|
)
|
|
Net income
|
|
$
|
2,653
|
|
|
$
|
893
|
|
|
$
|
3,677
|
|
|
$
|
1,221
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.10
|
|
|
$
|
0.03
|
|
|
$
|
0.14
|
|
|
$
|
0.05
|
|
|
Diluted
|
|
$
|
0.09
|
|
|
$
|
0.03
|
|
|
$
|
0.13
|
|
|
$
|
0.04
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
26,655
|
|
|
25,837
|
|
|
26,524
|
|
|
25,716
|
|
|
Diluted
|
|
28,281
|
|
|
27,863
|
|
|
28,194
|
|
|
27,804
|
|
The following table sets forth the stock-based compensation expense
resulting from stock-based arrangements (excluding the income tax
effect, or "gross") and the amortization of acquired intangibles that
are recorded in Ultimate's unaudited condensed consolidated statements
of operations for the periods indicated (in thousands):
|
|
|
For the Three Months
Ended June 30,
|
|
For the Six Months
Ended June 30,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
Stock-based compensation expense:
|
|
|
|
|
|
|
|
|
|
Cost of recurring revenues
|
|
$
|
638
|
|
|
$
|
350
|
|
|
$
|
1,151
|
|
|
$
|
679
|
|
Cost of services revenues
|
|
665
|
|
|
371
|
|
|
1,166
|
|
|
747
|
|
Sales and marketing
|
|
1,772
|
|
|
1,713
|
|
|
3,446
|
|
|
3,510
|
|
Research and development
|
|
692
|
|
|
410
|
|
|
1,316
|
|
|
794
|
|
General and administrative
|
|
1,096
|
|
|
925
|
|
|
2,138
|
|
|
1,889
|
|
Total non-cash stock-based compensation expense
|
|
$
|
4,863
|
|
|
$
|
3,769
|
|
|
$
|
9,217
|
|
|
$
|
7,619
|
|
Amortization of acquired intangibles:
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
-
|
|
|
$
|
28
|
|
|
$
|
-
|
|
|
$
|
56
|
|
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
|
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
(In thousands)
|
|
|
|
As of
|
|
As of
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2012
|
|
2011
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
62,612
|
|
|
$
|
46,149
|
|
Investments in marketable securities
|
|
9,439
|
|
|
7,584
|
|
Accounts receivable, net
|
|
53,667
|
|
|
56,186
|
|
Prepaid expenses and other current assets
|
|
25,580
|
|
|
22,944
|
|
Deferred tax assets, net
|
|
1,310
|
|
|
1,277
|
|
Total current assets before funds held for clients
|
|
152,608
|
|
|
134,140
|
|
Funds held for clients
|
|
157,684
|
|
|
118,660
|
|
Total current assets
|
|
310,292
|
|
|
252,800
|
|
Property and equipment, net
|
|
32,886
|
|
|
24,486
|
|
Capitalized software, net
|
|
1,090
|
|
|
1,765
|
|
Goodwill
|
|
3,025
|
|
|
3,025
|
|
Investments in marketable securities
|
|
1,076
|
|
|
1,546
|
|
Other assets, net
|
|
15,802
|
|
|
15,056
|
|
Deferred tax assets, net
|
|
19,886
|
|
|
20,142
|
|
Total assets
|
|
$
|
384,057
|
|
|
$
|
318,820
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
7,642
|
|
|
$
|
6,265
|
|
Accrued expenses
|
|
15,299
|
|
|
11,589
|
|
Deferred revenue
|
|
82,732
|
|
|
83,416
|
|
Capital lease obligations
|
|
3,078
|
|
|
2,694
|
|
Other borrowings
|
|
2,413
|
|
|
-
|
|
Total current liabilities before client fund obligations
|
|
111,164
|
|
|
103,964
|
|
Client fund obligations
|
|
157,684
|
|
|
118,660
|
|
Total current liabilities
|
|
268,848
|
|
|
222,624
|
|
Deferred revenue
|
|
2,118
|
|
|
3,147
|
|
Deferred rent
|
|
2,995
|
|
|
3,384
|
|
Capital lease obligations
|
|
2,591
|
|
|
2,175
|
|
Other borrowings
|
|
2,928
|
|
|
-
|
|
Income taxes payable
|
|
1,866
|
|
|
1,866
|
|
Total liabilities
|
|
281,346
|
|
|
233,196
|
|
Stockholders' equity:
|
|
|
|
|
|
Preferred Stock, $.01 par value
|
|
-
|
|
|
-
|
|
Series A Junior Participating Preferred Stock, $.01 par value
|
|
-
|
|
|
-
|
|
Common Stock, $.01 par value
|
|
307
|
|
|
302
|
|
Additional paid-in capital
|
|
255,584
|
|
|
242,100
|
|
Accumulated other comprehensive loss
|
|
(136
|
)
|
|
(57
|
|
Accumulated deficit
|
|
(44,294
|
)
|
|
(47,971
|
|
|
|
211,461
|
|
|
194,374
|
|
Treasury stock, at cost
|
|
(108,750
|
)
|
|
(108,750
|
|
Total stockholders' equity
|
|
102,711
|
|
|
85,624
|
|
Total liabilities and stockholders' equity
|
|
$
|
384,057
|
|
|
$
|
318,820
|
|
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
|
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(In thousands)
|
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2012
|
|
2011
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
3,677
|
|
|
$
|
1,221
|
|
|
Adjustments to reconcile net income to net cash
|
|
|
|
|
|
provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
6,352
|
|
|
5,743
|
|
|
Provision for doubtful accounts
|
|
411
|
|
|
1,115
|
|
|
Non-cash stock-based compensation expense
|
|
9,217
|
|
|
7,619
|
|
|
Income taxes
|
|
3,525
|
|
|
2,290
|
|
|
Excess tax benefits from employee stock plan
|
|
(3,302
|
)
|
|
(1,713
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
2,108
|
|
|
(278
|
)
|
|
Prepaid expenses and other current assets
|
|
(1,511
|
)
|
|
(4,094
|
)
|
|
Other assets
|
|
(746
|
)
|
|
(689
|
)
|
|
Accounts payable
|
|
1,377
|
|
|
1,693
|
|
|
Accrued expenses and deferred rent
|
|
3,321
|
|
|
2,379
|
|
|
Deferred revenue
|
|
(1,713
|
)
|
|
(85
|
)
|
|
Net cash provided by operating activities
|
|
22,716
|
|
|
15,201
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Purchases of marketable securities
|
|
(7,385
|
)
|
|
(7,700
|
)
|
|
Maturities of marketable securities
|
|
5,997
|
|
|
8,269
|
|
|
Net purchases of client funds securities
|
|
(39,024
|
)
|
|
(92,593
|
)
|
|
Purchases of property and equipment
|
|
(7,448
|
)
|
|
(7,609
|
)
|
|
Net cash used in investing activities
|
|
(47,860
|
)
|
|
(99,633
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Repurchases of Common Stock
|
|
-
|
|
(7,925
|
)
|
|
Net proceeds from issuances of Common Stock
|
|
5,298
|
|
|
7,407
|
|
|
Excess tax benefits from employee stock plan
|
|
3,302
|
|
|
1,713
|
|
|
Shares acquired to settle employee tax withholding liability
|
|
(4,328
|
)
|
|
(3,631
|
)
|
|
Principal payments on capital lease obligations
|
|
(1,613
|
)
|
|
(1,432
|
)
|
|
Net increase in client fund obligations
|
|
39,024
|
|
|
92,593
|
|
|
Net cash provided by financing activities
|
|
41,683
|
|
|
88,725
|
|
|
Effect of foreign currency exchange rate changes on cash
|
|
(76
|
)
|
|
52
|
|
|
Net increase in cash and cash equivalents
|
|
16,463
|
|
|
4,345
|
|
|
Cash and cash equivalents, beginning of period
|
|
46,149
|
|
|
40,889
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
62,612
|
|
|
$
|
45,234
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
138
|
|
|
$
|
126
|
|
|
Cash paid for income taxes
|
|
$
|
272
|
|
|
$
|
395
|
|
|
Supplemental disclosure of non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Ultimate entered into capital lease obligations to acquire new
equipment totaling $2.4 million and $1.4 million for the six
months ended June 30, 2012 and 2011, respectively.
|
|
Ultimate purchased perpetual licenses with third-party vendors,
totaling $6.5 million, payable over a three year period, of which
payments totaling $2.3 million were made during the six months
ended June 30, 2012.
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|
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
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|
Unaudited Reconciliation of Non-GAAP Financial Measures to GAAP
Financial Measures
|
|
(In thousands, except per share amounts)
|
|
|
|
For the Three Months
Ended June 30,
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|
For the Six Months
Ended June 30,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
Non-GAAP operating income reconciliation:
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
5,392
|
|
|
$
|
2,802
|
|
|
$
|
7,480
|
|
|
$
|
3,809
|
|
|
Operating income, as a % of total revenues
|
|
6.8
|
%
|
|
4.4
|
%
|
|
4.8
|
%
|
|
3.0
|
%
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
Non-cash stock-based compensation expense
|
|
4,863
|
|
|
3,769
|
|
|
9,217
|
|
|
7,619
|
|
|
Non-cash amortization of acquired intangible assets
|
|
-
|
|
|
28
|
|
|
-
|
|
|
56
|
|
|
Non-GAAP operating income
|
|
$
|
10,255
|
|
|
$
|
6,599
|
|
|
$
|
16,697
|
|
|
$
|
11,484
|
|
|
Non-GAAP operating income, as a % of total revenues
|
|
13.0
|
%
|
|
10.3
|
%
|
|
10.6
|
%
|
|
8.9
|
%
|
|
Non-GAAP net income reconciliation:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,653
|
|
|
$
|
893
|
|
|
$
|
3,677
|
|
|
$
|
1,221
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
Non-cash stock-based compensation expense
|
|
4,863
|
|
|
3,769
|
|
|
9,217
|
|
|
7,619
|
|
|
Non-cash amortization of acquired intangible assets
|
|
-
|
|
|
28
|
|
|
-
|
|
|
56
|
|
|
Income tax effect
|
|
(1,608
|
)
|
|
(867
|
)
|
|
(3,286
|
)
|
|
(2,262
|
)
|
|
Non-GAAP net income
|
|
$
|
5,908
|
|
|
$
|
3,823
|
|
|
$
|
9,608
|
|
|
$
|
6,634
|
|
|
Non-GAAP net income, per diluted share, reconciliation: (1)
|
|
|
|
|
|
|
|
|
|
Net income, per diluted share
|
|
$
|
0.09
|
|
|
$
|
0.03
|
|
|
$
|
0.13
|
|
|
$
|
0.04
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
Non-cash stock-based compensation expense
|
|
0.17
|
|
|
0.14
|
|
|
0.33
|
|
|
0.27
|
|
|
Non-cash amortization of acquired intangible assets
|
|
-
|
|
|
-
|
|
|
-
|
|
|
0.01
|
|
|
Income tax effect
|
|
(0.05
|
)
|
|
(0.03
|
)
|
|
(0.12
|
)
|
|
(0.08
|
)
|
|
Non-GAAP net income, per diluted share
|
|
$
|
0.21
|
|
|
$
|
0.14
|
|
|
$
|
0.34
|
|
|
$
|
0.24
|
|
|
Shares used in calculation of GAAP and non-GAAP net income per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
26,655
|
|
|
25,837
|
|
|
26,524
|
|
|
25,716
|
|
|
Diluted
|
|
28,281
|
|
|
27,863
|
|
|
28,194
|
|
|
27,804
|
|
|
(1) The non-GAAP net income per diluted share reconciliation is
calculated on a diluted weighted average share basis for GAAP net
income periods.
|
|
|
|
|
|
|
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|
Use of Non-GAAP Financial Information
This press release contains non-GAAP financial measures. Ultimate
believes that non-GAAP measures of financial results provide 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 these non-GAAP results 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. These measures are used in monthly
financial reports prepared for management and in quarterly financial
reports presented to Ultimate'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 judgment by management about which expenses are excluded
from the non-GAAP financial measures.
To compensate for these limitations, Ultimate presents its non-GAAP
financial measures in connection with its GAAP results. Ultimate
strongly urges investors and potential investors in Ultimate'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 presents the following non-GAAP financial measures in this
press release: non-GAAP operating income, non-GAAP net income and
non-GAAP net income, per diluted share. We exclude the following items
from these non-GAAP financial measures as appropriate:
Stock-based compensation expense. Ultimate's non-GAAP financial
measures exclude 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 three and six months ended June 30, 2012,
stock-based compensation expense was $4.9 million and $9.2 million,
respectively, on a pre-tax basis. For the three and six months ended
June 30, 2011, stock-based compensation expense was $3.8 million and
$7.6 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. There was no
amortization of acquired intangible assets for the three and six months
ended June 30, 2012. For the three and six months ended June 30, 2011,
the amortization of acquired intangible assets was $28 thousand and $56
thousand, respectively. 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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