The Ultimate Software Group, Inc. (NASDAQ:ULTI) Q4 2014 Earnings Conference Call - Final Transcript
Feb 03, 2015 • 05:00 pm ET
Hello and welcome to Ultimate's fourth quarter and year-end financial results 2014 conference call. (Operator Instructions) Your presenters today will be Mr. Scott Scherr, CEO, President and Founder of Ultimate; and Mitchell K. Dauerman, EVP and CFO.
We will begin with comments from Mitchell Dauerman.
Thank you, Rene. Good afternoon and thank you for your interest in Ultimate Software.
(Forward-Looking Cautionary Statements)
Unless otherwise noted, our discussion will be on a non-GAAP basis for all cost, gross margins, operating and net income as well as EPS. The primary differences between GAAP and non-GAAP financial information are non-cash stock-based compensation, the amortization of acquired intangible assets and a R&D tax credit that relates to prior years. Please refer to the reconciliation of our financial information on a GAAP basis to that on a non-GAAP basis included in the press release published on our website.
I'm going to begin by reviewing our financial results for 2014, then the fourth quarter of 2014, and finally I'll provide guidance for both, the first quarter of 2015 and the full year.
A year ago, we provided our financial guidance for 2014 with the goals of achieving recurring revenue growth of 25% over 2013, total revenue growth of 23% and an operating margin of approximately 20%. We're pleased to report that the recurring revenues grew by 25.4% to $419.2 million, representing 83% of total revenues. Customer retention for our cloud business remained in excess of 96%.
Total revenues grew by 23.3% to $505.9 million. Our operating margin expanded by 150 basis points to 20.1%. Operating income increased by 33% to $101.7 million. Net income was $61.8 million and the related net earnings per diluted share were $2.11 for the year. Our cash flows from operating activities for 2014 grew to $80.6 million. And the average daily float balance for our tax filing business was $515 million.
Next, turning to the fourth quarter. Total revenues grew by 21% to $135.4 million. Recurring revenues grew by 24.3% to $112.4 million. And the recurring gross margin was 73.2%, which was consistent with our expectation. On a year-over-year basis, the gross margin rate for the quarter reflects the timing impact of our Managed Services acquisition, additional investments in this business and to a lesser extent the amortization of capitalized cost relating to our recruiting product, which was released in mid-2014.
Services revenues were $23.1 million and they were a little ahead of our expectations, and as a result so was the gross margin rate of 12.6%. The gross margin rate for total revenues was 62.8% compared to 62.4% in the fourth quarter of last year. The increase was primarily a result of higher recurring revenues.
Operating expenses were $55 million for the quarter and were consistent with our expectations. Operating income increased by 28.8% to $30.1 million. And the operating margin for the quarter was 22.2%, 130 basis points ahead of last year's Q4. Net income grew to $19.9 million and the related net earnings per diluted share was $0.68.