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Ultimate Software (ULTI) Beats on Q3 Earnings, Updates View
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The Ultimate Software Group, Inc. delivered third-quarter 2018 non-GAAP earnings of $1.33 per share, which surpassed the Zacks Consensus Estimate by a penny. Moreover, the figure surged 27.9% from the year-ago quarter figure of $1.04.
Revenues increased 21.9% from the year-ago quarter to $287.8 million, almost meeting the Zacks Consensus Estimate of $287 million. The reported figure also came almost in line with the higher end of management’s projected range of $286 to $288 million.
Increase in recurring revenues drove year-over-year revenue growth. Synergies from PeopleDoc acquisition also aided growth. PeopleDoc buyout was concluded in the reported quarter. Notably, PeopleDoc unit will be termed as International Sales, going forward.
As anticipated, PeopleDoc is aiding the company to bolster presence across Europe. In fact, International Sales team delivered a robust quarter with notable customer wins from northern Europe, Central Europe, and Germany.
Quarter Highlights
Recurring revenues (accounted for 88.4% of total revenues) grew 25.4% to $254.6 million on a year-over-year basis, surpassing the higher end of management’s guided range of $250-$252 million.
Services revenues (11.6%) grew 0.6% to $33.2 million on a year-over-year basis.
Ultimate Software reported customer retention rate of 96% year over year.
In the reported quarter, enterprise team's attach rates for Onboarding, Time Management, Recruiting and Performance Management for new customers were reported at 100%, 78%, 85% and 63%, respectively.
For mid-market strategic team, attach rates for Onboarding, Time Management, Recruiting and Performance Management were reported at 97%, 83%, 78% and 78%, respectively.
The top line benefited from new strategic customer wins. Further, management is elated on the recognition of its HCM Suite bythe likes of Gartner, Nucleus Research, to mention a few. Growing clout of company’s AI platform, Xander is notable. Further, robust traction of UltiPro solutions including UltiPro Workforce Management and UltiPro Benefits Prime is a tailwind.
Ultimate Software’s strategic partnership with Deloitte Canada deserves a special mention. The alliance is aimed at providing UltiPro HCM suite throughout North America via Deloitte’s consultancy and technology service abilities. With the tie-up, Ultimate Software’s products and services offering complementary solutions are anticipated to have a broader market.
Operating Details
Non-GAAP operating income grew 8.4% from the year-ago quarter to $57.7 million. However, non-GAAP operating margin contracted 250 basis points (bps) on a year-over-year basis to 20.1%.
Management notes that the margin was ahead of the guided figure of 20% owing to lower costs. Further, management is of the view that PeopleDoc buyout impacted margins by 100 bps.
Non-GAAP net income surged 32.2% from the year-ago quarter to $42.4 million.
Balance Sheet & Cash Flow
As of Sep 30, 2018, cash, cash equivalents, and marketable securities were approximately $141 million down from $188.1 million as of Jun 30, 2018.
The company bought back 241,470 shares for $55.7 million shares during the nine months ended Sep 30, 2018, as part of its Stock Repurchase Plan. The company has 1,342,005 shares remaining for repurchase.
Ultimate Software generated net cash from operations of $172.1 million for the nine months ended Sep 30, 2018. Free cash flow was $113 million for the same time period.
The Ultimate Software Group, Inc. Price, Consensus and EPS Surprise
The company notes that since PeopleDoc is being integrated with business, the forecast financials include the impact from the buyout.
For fourth-quarter 2018, Ultimate Software forecasts recurring revenues between $262 million and $264 million. Total revenues are projected to come in around $300 million. The Zacks Consensus Estimate for revenues is pegged at $302.7 million. Non-GAAP operating margin is anticipated to come in at approximately 21%.
For fiscal 2018, management updated its recurring revenues guidance. Ultimate Software now anticipates recurring revenues to grow 24% year over year compared with the previous guidance of 23%.
However, the company continues to project total revenues for 2018 to grow 21% year over year. The company envisions reporting $1 billion of total revenues. The corresponding Zacks Consensus Estimate for revenues is pegged at $1.14 billion. Non-GAAP operating margin is still projected to be 21%.
The company issued preliminary 2019 guidance, wherein recurring and total revenues are anticipated to grow around 21% and 20% over 2018, respectively. The Zacks Consensus Estimate for revenues is pegged at $1.36 billion. Non-GAAP operating margin is expected to come in at approximately 20%.
Synergies from PeopleDoc buyout make management hopeful about achieving $2 billion in total revenues by 2021. Management anticipates International Sales unit to account for 5% of total revenues in 2021.
Long-term earnings growth rate of Intel, NetApp and Upland Software are 8.4%, 14.1% and 20%, respectively.
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Image: Bigstock
Ultimate Software (ULTI) Beats on Q3 Earnings, Updates View
The Ultimate Software Group, Inc. delivered third-quarter 2018 non-GAAP earnings of $1.33 per share, which surpassed the Zacks Consensus Estimate by a penny. Moreover, the figure surged 27.9% from the year-ago quarter figure of $1.04.
Revenues increased 21.9% from the year-ago quarter to $287.8 million, almost meeting the Zacks Consensus Estimate of $287 million. The reported figure also came almost in line with the higher end of management’s projected range of $286 to $288 million.
Increase in recurring revenues drove year-over-year revenue growth. Synergies from PeopleDoc acquisition also aided growth. PeopleDoc buyout was concluded in the reported quarter. Notably, PeopleDoc unit will be termed as International Sales, going forward.
As anticipated, PeopleDoc is aiding the company to bolster presence across Europe. In fact, International Sales team delivered a robust quarter with notable customer wins from northern Europe, Central Europe, and Germany.
Quarter Highlights
Recurring revenues (accounted for 88.4% of total revenues) grew 25.4% to $254.6 million on a year-over-year basis, surpassing the higher end of management’s guided range of $250-$252 million.
Services revenues (11.6%) grew 0.6% to $33.2 million on a year-over-year basis.
Ultimate Software reported customer retention rate of 96% year over year.
The Ultimate Software Group, Inc. Revenue (TTM)
The Ultimate Software Group, Inc. Revenue (TTM) | The Ultimate Software Group, Inc. Quote
In the reported quarter, enterprise team's attach rates for Onboarding, Time Management, Recruiting and Performance Management for new customers were reported at 100%, 78%, 85% and 63%, respectively.
For mid-market strategic team, attach rates for Onboarding, Time Management, Recruiting and Performance Management were reported at 97%, 83%, 78% and 78%, respectively.
The top line benefited from new strategic customer wins. Further, management is elated on the recognition of its HCM Suite bythe likes of Gartner, Nucleus Research, to mention a few. Growing clout of company’s AI platform, Xander is notable. Further, robust traction of UltiPro solutions including UltiPro Workforce Management and UltiPro Benefits Prime is a tailwind.
Ultimate Software’s strategic partnership with Deloitte Canada deserves a special mention. The alliance is aimed at providing UltiPro HCM suite throughout North America via Deloitte’s consultancy and technology service abilities. With the tie-up, Ultimate Software’s products and services offering complementary solutions are anticipated to have a broader market.
Operating Details
Non-GAAP operating income grew 8.4% from the year-ago quarter to $57.7 million. However, non-GAAP operating margin contracted 250 basis points (bps) on a year-over-year basis to 20.1%.
Management notes that the margin was ahead of the guided figure of 20% owing to lower costs. Further, management is of the view that PeopleDoc buyout impacted margins by 100 bps.
Non-GAAP net income surged 32.2% from the year-ago quarter to $42.4 million.
Balance Sheet & Cash Flow
As of Sep 30, 2018, cash, cash equivalents, and marketable securities were approximately $141 million down from $188.1 million as of Jun 30, 2018.
The company bought back 241,470 shares for $55.7 million shares during the nine months ended Sep 30, 2018, as part of its Stock Repurchase Plan. The company has 1,342,005 shares remaining for repurchase.
Ultimate Software generated net cash from operations of $172.1 million for the nine months ended Sep 30, 2018. Free cash flow was $113 million for the same time period.
The Ultimate Software Group, Inc. Price, Consensus and EPS Surprise
The Ultimate Software Group, Inc. Price, Consensus and EPS Surprise | The Ultimate Software Group, Inc. Quote
Guidance
The company notes that since PeopleDoc is being integrated with business, the forecast financials include the impact from the buyout.
For fourth-quarter 2018, Ultimate Software forecasts recurring revenues between $262 million and $264 million. Total revenues are projected to come in around $300 million. The Zacks Consensus Estimate for revenues is pegged at $302.7 million. Non-GAAP operating margin is anticipated to come in at approximately 21%.
For fiscal 2018, management updated its recurring revenues guidance. Ultimate Software now anticipates recurring revenues to grow 24% year over year compared with the previous guidance of 23%.
However, the company continues to project total revenues for 2018 to grow 21% year over year. The company envisions reporting $1 billion of total revenues. The corresponding Zacks Consensus Estimate for revenues is pegged at $1.14 billion. Non-GAAP operating margin is still projected to be 21%.
The company issued preliminary 2019 guidance, wherein recurring and total revenues are anticipated to grow around 21% and 20% over 2018, respectively. The Zacks Consensus Estimate for revenues is pegged at $1.36 billion. Non-GAAP operating margin is expected to come in at approximately 20%.
Synergies from PeopleDoc buyout make management hopeful about achieving $2 billion in total revenues by 2021. Management anticipates International Sales unit to account for 5% of total revenues in 2021.
Zacks Rank & Key Picks
Ultimate Software carries a Zacks Rank #3 (Hold).
Intel (INTC - Free Report) , NetApp (NTAP - Free Report) and Upland Software (UPLD - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) are a few stocks worth considering in the broader technology sector. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate of Intel, NetApp and Upland Software are 8.4%, 14.1% and 20%, respectively.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
See them today for free >>