Download PDF

Fellow Shareholders

In 2016, we continued to set records across all areas of our business. We delivered a record $781.3 million in total revenues, an increase of 26% over 2015, and a record $654.2 million in recurring revenues, a 27% increase over 2015. In Sales, our collective team topped the record-setting fourth quarter they produced in 2015, contributing the best quarter for new business in our history in the fourth quarter of 2016. In 2016, our Services team activated more new customers over the span of a year than ever before, and along with our Development team, they created the total customer experience that resulted in our 2016 year-over-year customer retention rate of approximately 97%. We now have approximately 33 million people records in our cloud environment.

Sales exceeded our expectations in 2016, and as a result, we increased our hiring efforts, particularly in Services and Support. To accommodate our growth and maintain high-quality, rapid responsiveness in our infrastructure, we hired more than 1,000 new people in 2016. We also raised our employee retention rate to greater than 94% for 2016. Fortune magazine named Ultimate #1 on its list of 10 Best Large Workplaces in Technology in January 2017, making this our second year to top the list. Our culture and this type of recognition have given us the ability to hire and retain some of the industry’s most talented people.

In January 2017, I attended the annual meetings of our Enterprise, Mid-Market, and Strategic1 sales teams, and they were very excited about our achievements and bullish about our future. The longevity of so many of our salespeople with us has been a major differentiator for years and continues to give us market leverage. Our marketing metrics reinforce our positive view of the future. Our metrics throughout 2016 showed that market desire for our solutions continued to grow at a healthy pace. Our fourth quarter in 2016 was our best quarter ever for responders from companies with 300 or more employees who indicated they are looking to buy a human capital management (HCM) solution in 12 months or less, and was a 46% increase over 2015’s fourth quarter. For the 2016 year, we had a 23%

increase in looking-to-buy responders to marketing campaigns over 2015. On our website, we had a 34% increase in unique visitors for 2016 over the previous year, and we reached a milestone of more than 3 million unique visitors to our site for the year. We also had a 49% increase in number of attendees at our HR Workshops that we held across the United States in 2016 versus 2015.

Our Development team made significant headway with our strategy of adding new product feature-sets that meet the HR market’s most pressing business objectives and bring us new opportunities to partner with our customers in more functional areas. In 2016, we rolled out our new UltiPro Learning solution, powered by the admired Schoox engine, to a segment of our sales organization, and by the end of December, we had sold 60 units. This new solution helps organizations transition from simply training employees to developing talent by making available to our customers a broad array of learning content and employee development tools at their convenience anytime online or via a mobile application. Business leaders can deploy our new learning programs and course structures across multiple teams, business units, and locations rapidly and enable team members to communicate with peers, instructors, or their managers through social tools such as communities, leaderboards, and newsfeeds. We rolled this solution out to the remainder of our sales force in the first quarter of 2017.

We acquired an award-winning cloud workforce intelligence provider, Kanjoya, in 2016, and based on this new technology, we introduced UltiPro Perception, giving our salespeople another solution to offer our customers. UltiPro Perception enables

businesses to collect, understand, and act on employee feedback from surveys. We also acquired Vestrics, a leading HR-focused predictive analytics platform with a history of measuring, predicting, and optimizing the business impact of HR- and talent-related investments and decisions for global businesses. Vestrics’ technology had been recognized for its excellence in recent years by a number of analyst firms. (For additional details on these solutions, see Business Highlights in this 2016 Annual Report.)

Once again in 2016, end-user assessments, measured by a third-party, have validated the strength of our product solutions. G2 Crowd, an independent website that collects and analyzes thousands of software reviews from end users, produces software performance grids for many areas of HCM. In 2016, G2 Crowd identified Ultimate as a “leader” in its grids on Best Recruiting Solutions, Best Payroll, Best Core HR, Best HR Management Suite, and Best Performance Management solutions. In G2 Crowd’s category called Top 10 HR Management Suites Software for Enterprise, UltiPro has the highest satisfaction rating from users—89% on January 2017’s chart—and was based upon 1,843 HR-software-user reviews. In G2’s category called Top 8 Payroll Software for Enterprise, UltiPro also had the highest satisfaction rating from users— again 89% for the same period and based upon 2,414 payroll- user reviews.2

In addition to Fortune recognizing Ultimate as #1 on its technology workplaces list, a number of other third-parties have recognized our success in 2016 and early in 2017. In January 2017, our UltiPro product won a Technology Gold Award in the Best Advance in Online Coaching Tools category from the Brandon Hall Group. In 2016, our Services team was named Best Customer Service Department of the Year at Network Products Guide’s 11th Annual 2016 IT World Awards and also won the 2016 STAR Award for Innovation in the Transformation of Support Services at the SMB Level from the Technology Services Industry Association. Forbes ranked Ultimate #8 on its 2016 list of the 100 Most Innovative Growth Companies. Glassdoor and Battery Ventures ranked Ultimate #1 on its 25 Highest-Rated Public Cloud Computing Companies to Work For list. Fortune ranked Ultimate #15 on its 2016 100 Best Companies to Work For list, marking our fifth consecutive year on this esteemed list, and ranked Ultimate on a number of its other 2016 lists: #3 on 50 Best Workplaces for Parents, #4 on 100 Best Workplaces for Women, #5 on 50 Best Workplaces for Diversity, and #5 on both Best Workplaces for Millennials and Best Workplaces for Gen Xers.3

Our total customer count has risen to more than 3,700 organizations, giving Ultimate, we believe, the industry’s largest customer base using a cloud-based HCM solution that unifies human resources, benefits, payroll, talent acquisition, talent management, compensation management, learning management, and time and labor management. In light of our high customer-satisfaction ratings and the continuing demand we see in our Enterprise, Mid-Market, and Strategic markets, we are confident we will achieve our 2017 objectives and our longer-range goals in 2018. We have the people in place, a strong culture of trust, and award-winning products and services to execute our vision. We remain focused, as always, on our “people first” strategy in serving both our customers and our employees.

We thank you, our shareholders, customers, employees, and partners, for your continuing support

SCOTT SCHERR

Signature of Scott Scherr

Chairman of the Board,

Chief Executive Officer, and Founder

Headshot of Scott Scherr