Investor Relations

Shareholder Letter

Fellow Shareholders,

In 2014, we executed on our growth strategy as planned and achieved all of our key objectives. We posted $505.9 million in total revenues for 2014, a 23% increase over 2013, and $419.2 million in recurring revenues, a 25% increase over 2013. Recurring revenues were 83% of our total revenues for the 2014 year, up one point over 2013. We continued our track record of year-over-year 96% customer retention, and we grew the number of people records in our cloud to more than 19 million. These results position us well to achieve our 2015 goal of surpassing $600 million in revenues.

Both our enterprise and mid-market sales teams closed out 2014 in the fourth quarter with the most successful quarter in their histories, making it Ultimate’s top-performing quarter ever for new customers. We began training a new strategic sales team in the third quarter of 2014 with the objective of targeting companies with approximately 100-499 employees in 2015.1 We were surprised when our strategic channel contributed to our record-breaking fourth quarter by closing $650 thousand in annual recurring revenue business since we had expected no strategic sales in 2014.

Our marketing metrics indicate that our brand continues to inspire market demand. In 2014, we had the highest number ever of companies with more than 300 employees responding through our marketing vehicles and telling us they are looking to purchase a new human capital management (HCM) solution within 12 months or less. That is 29% more than in 2013. Our inside sales team had a 90% increase in the number of sales opportunities generated in 2014, compared with 2013, and it was the highest number of annual inside sales opportunities identified in Ultimate’s history.

Our total customer count now exceeds 2,800, and Ultimate has, 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, and time and labor management. With the goal to continuously innovate and enhance the work lives of our customers and prospective customers, we added significant new capabilities to our UltiPro product suite in 2014. We released our new UltiPro Recruiting product, our new UltiPro Compensation Management product, and new predictive analytics. We further extended our global HCM capabilities and simplified the payroll tax management process for United States employees by introducing a new feature called Smart Tax SearchTM. We also previewed our new UltiPro Onboarding product at two industry conferences in 2014.2

Customer satisfaction with our products and services continues to be a strong differentiator for us. In both our Spring and Fall 2014 customer surveys, 84% of customers responding indicated they are satisfied or very satisfied with UltiPro. The overall strength of our customer satisfaction was also validated by a third-party in December 2014. G2 Crowd named Ultimate to its “Best of 2014” list in the category of Highest Rated by

Enterprise Users, product users from companies with more than 1,000 employees. G2 Crowd is an independent website for end-users to evaluate their business software systems, and its “Best of 2014” winners received the highest satisfaction scores across a variety of enterprise products, not just HCM. Winners were chosen based upon more than 20,000 user reviews posted in 2014.

Several industry publications and analysts also honored Ultimate’s success in 2014 and early in 2015. For the third year in a row, in January 2014, Ultimate was the only HCM provider named to FORTUNE® magazine’s “100 Best Companies to Work For” list, and we ranked #20 among the top 100. Forbes® magazine ranked Ultimate #8 on its 2014 list of the “Most Innovative Growth Companies,” and FORTUNE® identified Ultimate as one of “20 Great Workplaces in Tech.” Analyst firms Forrester and Nucleus Research both labeled Ultimate a “Leader” in HCM, and the Great Place to Work®’s Great Rated!TM website ranked Ultimate #3 on its list of top technology workplaces and #4 on its list of top workplaces for millennials. In January 2015, for the third year in a row, Achievers recognized Ultimate as one of 50 Most Engaged WorkplacesTM in North America. This award aligns with our core belief at Ultimate – that engaged employees create a culture of innovation that results in industry-leading products and services.3

We are focused on our plan to exceed $600 million in revenues in 2015. We believe we have reached a new pinnacle in business strength. We have passed the pivotal benchmark of $500 million in annual revenues; we have award-winning products and services that are respected and desired in the HCM market; we have talented people who are committed to excellence and innovation; and we have customers who work closely with us as partners. By continuing to adhere to the “People First” vision we are known for, we believe we will achieve our goal to become a $1 billion franchise in 2018.

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

Scott Scherr

Chairman of the Board, Chief Executive Officer, and Founder

1 Our enterprise sales team targets companies with more than 1,500 employees, including those with 10,000 or more employees, and our mid-market sales team targets companies with approximately 500-1,500 employees.

2 For more detail on new product capabilities, see the Business Highlights section of this report.

3 For more detail on awards and recognition, see the Business Highlights section of this report.