Ceridian Reports Third Quarter 2022 Results

Ceridian Reports Third Quarter 2022 Results


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Dayforce recurring revenue up 29.6% year-over-year, or 31.6% on a constant currency basis

Revenue of $315.6 million, up 22.7% year-over-year, or 25.3% on a constant currency basis

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Cloud recurring gross margin of 72.1% and adjusted Cloud recurring gross margin of 74.8%

MINNEAPOLIS and TORONTO, Nov. 02, 2022 (GLOBE NEWSWIRE) — Ceridian HCM Holding Inc. (“Ceridian”) (NYSE:CDAY) (TSX:CDAY), a global leader in human capital management (HCM) technology, today announced its financial results for the third quarter ended September 30, 2022.

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“We delivered strong financial and operating performance in the third quarter. Our results exceeded our guidance on all revenue and profitability metrics, with Dayforce recurring revenue growing 30%, and 32% at constant currency,” said David Ossip, Chair and Co-CEO of Ceridian. “We sustained topline growth while significantly expanding profitability. I am particularly pleased with our operating cash flows, which more than doubled year-on-year. We now have 5,848 customers live on the Dayforce platform, which validates our commitment to providing a great experience and delivering measurable value to our customers.”

“In the third quarter, we continued to demonstrate strong execution on our growth levers and our initiatives to drive scale in our business,” said Leagh Turner, Co-CEO of Ceridian. “We believe organizations are eager to invest in HCM technology and increasingly looking for insights and efficiencies that will enable them to adapt and compete in the new world of work. We saw continued momentum across all segments of our business from emerging to large enterprise, and in every region in which we operate.”

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“Our third quarter results exceeded our guidance despite the headwind of a stronger than expected U.S. dollar,” said Noemie Heuland, CFO of Ceridian. “Looking ahead, we are raising the mid-point and narrowing our Full Year guidance range at constant currency across all revenue metrics, and raising guidance on our profitability metric, Adjusted EBITDA. Our profitability outlook reflects continued investments in our growth initiatives, efficiencies across our business and our commitment to longer-term margin expansion.”

Financial Highlights for the Third Quarter 20221

  • Total revenue, which includes revenue from both Cloud and Bureau solutions, was $315.6 million, an increase of 22.7%, or 25.3% on a constant currency basis. Excluding float revenue, total revenue was $294.3 million, an increase of 19.0%, or 21.6% on a constant currency basis.

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  • Diluted net loss per share was ($0.14), compared to ($0.14). Adjusted diluted net income per share was $0.20, compared to $0.10.
  • Adjusted EBITDA was $63.5 million, compared to $39.4 million.
  • Cash and equivalents were $408.4 million as of September 30, 2022, compared to $367.5 million as of December 31, 2021.

Supplemental Quarterly Detail

  • 5,848 Dayforce customers were live on the Dayforce platform as of September 30, 2022, an increase of 120 customers since June 30, 2022 and 11.9% year-over-year.2
  • Dayforce recurring revenue per customer was $118,348 for the trailing twelve months ended September 30, 2022, an increase of 10.0%.3
  • Revenue contributions from ADAM HCM totaled $1.3 million, with $1.2 million in Dayforce recurring revenue excluding float and $0.1 million in Dayforce professional services revenue.

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  • The average float balance for Ceridian’s customer funds during the quarter increased 12.8% to $3,871.4 million and the average yield on Ceridian’s float balance was 2.19%, an increase of 103 basis points year over year. As a result, float revenue from invested customer funds was $21.3 million. The allocation of float revenue to Dayforce and Cloud revenue was $16.8 million and $20.1 million, respectively.

1 The quarterly financial highlights are on a year-over-year basis, unless otherwise stated. All financial results are reported in U.S. dollars unless otherwise stated.
2 Excluding the 2021 acquisitions of Ascender HCM Pty Limited (“Ascender”) and ATI ROW, LLC and ADAM HCM MEXICO, S. de R.L. de C.V. (collectively, “ADAM HCM”).
3 Excluding float revenue, the impact of lower employment levels in 2021 and 2020 due to the Coronavirus disease 2019 (“COVID-19”) pandemic, Ascender and ADAM HCM revenue and on a constant currency basis.

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Product Innovation Highlights

  • Ceridian is driving significant innovation across the Dayforce platform. Focusing on people empowerment, workforce intelligence, and global compliance, Ceridian has delivered more than 840 features throughout 2022. Recent highlights include:
    • HR Knowledge Management provides HR professionals with the ability to create knowledge bases that empower employees to find answers to their common HR and compliance questions proactively. HR Knowledge Management is delivered seamlessly to employees through the Dayforce Employee Experience Hub.
    • Mobile Timesheet Management provides managers with a fast and efficient way to view, edit, and manage time information for their teams directly on their mobile device.
    • Integration Studio provides self-service enterprise integration capabilities that enable customers to build, deploy, and manage their integrations with Dayforce. Integration Studio automates many of the traditionally manual integration and reporting tasks that can create complexity for organizations.
  • Ceridian continues to see strong momentum for Dayforce Wallet. Customers across the U.S., Canada, and now the UK offer Dayforce Wallet as a flexible pay experience to their employees, while also using it to help to attract new talent with a modern employee benefit. More than 1,340 customers have signed onto Dayforce Wallet, and more than 750 customers are live on the product. Average registrations are above 45% of eligible users and the typical wallet user uses the wallet about 25 times per month.

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4 Gartner, Magic Quadrant for Cloud HCM Suites for 1000+ Employee Enterprises, by Sam Grinter, Chris Pang, Jeff Freyermuth, Ron Hanscome, Helen Poitevin, Ranadip Chandra, John Kostoulas, Emi Chiba and Rania Stewart, October 31, 2022. Gartner does not endorse any vendor, product or service depicted in our research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. Gartner and Magic Quadrant are registered trademarks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.

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Business Outlook

Based on information available as of November 2, 2022, Ceridian is issuing guidance for the full year and fourth quarter of 2022 as follows:

Fourth Quarter 2022 Guidance   Supplemental Commentary and Factors
Dayforce recurring revenue excluding float   $196 million to $198 million or an increase of 20% to 21% on a GAAP basis, and by 23% to 24% on a constant currency basis.   Ceridian continues to expect a return to more normalized employment levels.
Cloud revenue   $288 million to $291 million, or an increase of 19% to 21% on a GAAP basis and 23% to 24% on a constant currency basis.   Ceridian expects PowerPay recurring excluding float to decline between 8% and 6%, primarily as a result of FX headwinds.
Total revenue   $323 million to $326 million, or an increase of 14% to 16% on a GAAP basis and 18% to 19% on a constant currency basis.   Ceridian expects Bureau recurring excluding float to decline between 14% and 13%.
Float revenue   $25 million   Float guidance reflects the near-term rate environment and the rolling maturity of its laddered core portfolio.
Adjusted EBITDA   $49 million to $54 million   Ceridian continues to make investments to expand its global HCM footprint in addition to hosting its flagship Insights conference this quarter.

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Supplemental guidance details

As expected, Ceridian incurred severance and restructuring costs in the third quarter of 2022 in conjunction with the re-balancing of its workforce across its global footprint. These costs amounted to $2.5 million in the third quarter of 2022 and were accounted for in cost of recurring revenue. Ceridian now expects an additional $2.5 million of costs associated with this re-balancing of the workforce to be incurred in the fourth quarter.

Ceridian has not reconciled the Adjusted EBITDA range for the full year of 2022 to the directly comparable GAAP financial measure because applicable information for the future period, on which this reconciliation would be based, is not available without unreasonable efforts due to uncertainty regarding, and the potential variability of, depreciation and amortization, share-based compensation expense and related employer taxes, changes in foreign currency exchange rates, and other items.

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Foreign Exchange

The average U.S. dollar to Canadian dollar foreign exchange rate was $1.30, with a daily range of $1.28 to $1.38 for the three months ended September 30, 2022 compared to $1.26, with a daily range of $1.23 to $1.29 for the three months ended September 30, 2021. As of September 30, 2022, the U.S. dollar to Canadian dollar foreign exchange rate was $1.37. To present the performance of the business excluding the effect of foreign currency rate fluctuations, Ceridian presents revenue on a constant currency basis, which it believes is useful to management and investors. Revenue was calculated on a constant currency basis by applying the average foreign exchange rate in effect during the comparable prior period.

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For the fourth quarter 2022, Ceridian’s guidance assumes an average U.S dollar to Canadian dollar foreign exchange rate of $1.37, compared to an average rate of $1.26 for the fourth quarter of 2021.

Supplemental FX Commentary    
Summary of Incremental FX Impact to Guidance vs. Prior Guidance¹
(Dollars in millions)   Q4
 
Dayforce recurring revenue excluding float   ($2.5 )
Cloud revenue   ($5.4 )
Total revenue   ($5.7 )
Float revenue   ($0.6 )
  1. Ceridian’s primary foreign exchange rate revenue exposure is to the Canadian dollar, with additional revenue exposure denominated in the Australian dollar and British pound, all of which have weakened significantly since the beginning of 2022. Ceridian’s fourth quarter 2022 outlook reflects an average U.S. dollar to Canadian dollar foreign exchange rate of $1.37, compared to our previous assumptions of $1.29.

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Conference Call Details

Ceridian will host a conference call to discuss the third quarter of 2022 earnings at 5:00 p.m. Eastern Time on November 2, 2022. A live Zoom Video Webinar of the event can be accessed at that time, through a direct registration link at https://ceridian.zoom.us/webinar/register/WN_doYQwSKbQ8epA29HKZX4ag. Alternatively, the event can be accessed from the Events & Presentations page on Ceridian’s Investor Relations website at https://investors.ceridian.com. A replay and transcript will be available after the conclusion of the live event on Ceridian’s Investor Relations website.

About Ceridian HCM Holding Inc.

Ceridian. Makes Work Life Better™.

Ceridian is a global human capital management software company. Dayforce, the flagship cloud HCM platform, provides human resources, payroll, benefits, workforce management, and talent management functionality. The Dayforce platform is used to optimize management of the entire employee lifecycle, including attracting, engaging, paying, deploying, and developing people. Ceridian has solutions for organizations of all sizes.

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Forward-Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this press release are forward-looking statements. Forward-looking statements give Ceridian’s current expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance and business. Users can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements in this press release include statements relating to the fiscal year of 2022, as well as those relating to future growth initiatives. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “seek,” “plan,” “intend,” “believe,” “will,” “may,” “could,” “continue,” “likely,” “should,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events but not all forward-looking statements contain these identifying words. The forward-looking statements contained in this press release are based on assumptions that Ceridian has made in light of its industry experience and its perceptions of historical trends, current conditions, expected future developments and other factors that it believes are appropriate under the circumstances. As users consider this press release, it should be understood that these statements are not guarantees of performance or results. These assumptions and Ceridian’s future performance or results involve risks and uncertainties (many of which are beyond its control). In particular:

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Please refer to Part II, Item IA, “Risk Factors” of Ceridian’s most recently filed Quarterly Report on Form 10-Q, and Part I, Item IA, “Risk Factors” of Ceridian’s most recently filed Annual Report on Form 10-K, for the year ended December 31, 2021, for a further description of these and other factors. Although Ceridian has attempted to identify important risk factors, additional factors or events that could cause Ceridian’s actual performance to differ from these forward-looking statements may emerge from time to time, and it is not possible for Ceridian to predict all of them. Should one or more of these risks or uncertainties materialize, or should any of Ceridian’s assumptions prove incorrect, its actual financial condition, results of operations, future performance and business may vary in material respects from the performance projected in these forward-looking statements. In addition to any factors and assumptions set forth above in this press release, the material factors and assumptions used to develop the forward-looking information include, but are not limited to: the general economy remains stable; the competitive environment in the HCM market remains stable; the demand environment for HCM solutions remains stable; Ceridian’s implementation capabilities and cycle times remain stable; foreign exchange rates, both current and those used in developing forward-looking statements, specifically USD to CAD, remain stable at, or near, current rates; Ceridian will be able to maintain its relationships with its employees, customers and partners; Ceridian will continue to attract qualified personnel to support its development requirements and the support of its new and existing customers; and that the risk factors noted above, individually or collectively, do not have a material impact on Ceridian. Any forward-looking statement made by Ceridian in this press release speaks only as of the date on which it is made. Ceridian undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

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Ceridian HCM Holding Inc.

Condensed Consolidated Balance Sheets

    September 30,     December 31,  
    2022     2021  
(Dollars in millions, except share data)   (unaudited)        
ASSETS            
Current assets:            
Cash and equivalents   $ 408.4     $ 367.5  
Restricted cash     0.8       1.9  
Trade and other receivables, net     155.4       146.3  
Prepaid expenses and other current assets     107.3       92.6  
Total current assets before customer funds     671.9       608.3  
Customer funds     4,335.3       3,535.8  
Total current assets     5,007.2       4,144.1  
Right of use lease asset     27.5       29.4  
Property, plant, and equipment, net     144.7       128.2  
Goodwill     2,261.8       2,323.6  
Other intangible assets, net     298.4       332.5  
Other assets     266.8       208.4  
Total assets   $ 8,006.4     $ 7,166.2  
LIABILITIES AND EQUITY            
Current liabilities:            
Current portion of long-term debt   $ 8.1     $ 8.3  
Current portion of long-term lease liabilities     14.9       11.3  
Accounts payable     56.7       51.7  
Deferred revenue     42.6       48.7  
Employee compensation and benefits     72.6       77.3  
Other accrued expenses     24.2       24.7  
Total current liabilities before customer funds obligations     219.1       222.0  
Customer funds obligations     4,456.6       3,519.9  
Total current liabilities     4,675.7       3,741.9  
Long-term debt, less current portion     1,214.1       1,124.4  
Employee benefit plans     19.3       20.7  
Long-term lease liabilities, less current portion     23.0       32.7  
Other liabilities     23.1       19.0  
Total liabilities     5,955.2       4,938.7  
Commitments and contingencies            
Stockholders’ equity:            
Common stock, $0.01 par, 500,000,000 shares authorized, 153,033,594 and
151,995,031 shares issued and outstanding, respectively
    1.5       1.5  
Additional paid in capital     2,918.4       2,860.0  
Accumulated deficit     (367.4 )     (309.2 )
Accumulated other comprehensive loss     (501.3 )     (324.8 )
Total stockholders’ equity     2,051.2       2,227.5  
Total liabilities and equity   $ 8,006.4     $ 7,166.2  
                 

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Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Operations

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
    (Dollars in millions, except share and per share data, unaudited)  
Revenue:                        
Recurring   $ 263.8     $ 215.0     $ 762.8     $ 619.1  
Professional services and other     51.8       42.2       147.3       123.0  
Total revenue     315.6       257.2       910.1       742.1  
Cost of revenue:                        
Recurring     77.1       66.0       234.4       191.1  
Professional services and other     61.0       48.9       172.6       140.9  
Product development and management     44.8       36.6       125.0       94.2  
Depreciation and amortization     13.7       12.6       40.0       37.5  
Total cost of revenue     196.6       164.1       572.0       463.7  
Gross profit     119.0       93.1       338.1       278.4  
Selling, general, and administrative     122.7       109.1       367.2       316.5  
Operating loss     (3.7 )     (16.0 )     (29.1 )     (38.1 )
Interest expense, net     7.4       10.0       19.9       25.5  
Other expense, net     5.9       3.4       11.4       16.2  
Loss before income taxes     (17.0 )     (29.4 )     (60.4 )     (79.8 )
Income tax expense (benefit)     4.0       (8.5 )     7.8       (13.9 )
Net loss   $ (21.0 )   $ (20.9 )   $ (68.2 )   $ (65.9 )
Net loss per share:                        
Basic   $ (0.14 )   $ (0.14 )   $ (0.45 )   $ (0.44 )
Diluted   $ (0.14 )   $ (0.14 )   $ (0.45 )   $ (0.44 )
Weighted-average shares outstanding:                        
Basic     153,184,846       150,450,595       152,691,008       149,083,666  
Diluted     153,184,846       150,450,595       152,691,008       149,083,666  
                                 

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Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Cash Flows

    Nine Months Ended September 30,  
    2022     2021  
    (Dollars in millions, unaudited)  
Net loss   $ (68.2 )   $ (65.9 )
Adjustments to reconcile net loss to net cash provided by operating activities:            
Deferred income tax expense (benefit)     5.1       (45.0 )
Depreciation and amortization     64.4       59.3  
Amortization of debt issuance costs and debt discount     3.0       11.5  
Provision for doubtful accounts     2.2       1.5  
Net periodic pension and postretirement cost     3.6       6.6  
Share-based compensation     113.5       83.6  
Change in fair value of contingent consideration     3.2        
Other           0.6  
Changes in operating assets and liabilities excluding effects of acquisitions and divestitures:            
Trade and other receivables     (16.2 )     (5.3 )
Prepaid expenses and other current assets     (14.0 )     (13.9 )
Accounts payable and other accrued expenses     4.5       1.9  
Deferred revenue     (3.5 )     5.2  
Employee compensation and benefits     (2.8 )     (5.1 )
Accrued interest     (0.3 )     0.3  
Accrued taxes     (0.1 )     20.9  
Other assets and liabilities     (3.6 )     (7.3 )
Net cash provided by operating activities     90.8       48.9  
Cash Flows from Investing Activities            
Purchase of customer funds marketable securities     (534.3 )     (500.5 )
Proceeds from sale and maturity of customer funds marketable securities     304.2       409.2  
Expenditures for property, plant, and equipment     (10.4 )     (7.3 )
Expenditures for software and technology     (54.5 )     (38.4 )
Acquisition costs, net of cash and restricted cash acquired           (373.5 )
Net cash used in investing activities     (295.0 )     (510.5 )
Cash Flows from Financing Activities            
Increase in customer funds obligations, net     1,010.4       1,631.0  
Proceeds from issuance of common stock under share-based compensation plans     22.6       70.9  
Repayment of long-term debt obligations     (6.3 )     (4.3 )
Proceeds from revolving credit facility           295.0  
Repayment of revolving credit facility           (295.0 )
Proceeds from issuance of convertible senior notes, net of issuance costs           561.8  
Purchases of capped calls related to convertible senior notes           (45.0 )
Net cash provided by financing activities     1,026.7       2,214.4  
Effect of exchange rate changes on cash, restricted cash, and equivalents     (8.1 )     (0.5 )
Net increase in cash, restricted cash, and equivalents     814.4       1,752.3  
Cash, restricted cash, and equivalents at beginning of period     1,952.8       2,228.5  
Cash, restricted cash, and equivalents at end of period   $ 2,767.2     $ 3,980.8  
Reconciliation of cash, restricted cash, and equivalents to the condensed

consolidated balance sheets

           
Cash and equivalents   $ 408.4     $ 378.8  
Restricted cash     0.8       1.9  
Restricted cash and equivalents included in customer funds     2,358.0       3,600.1  
Total cash, restricted cash, and equivalents   $ 2,767.2     $ 3,980.8  
                 

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Ceridian HCM Holding Inc.

Revenue Financial Measures

(Unaudited)

    Three Months Ended September 30,     Percentage

change in

revenue as

reported

    Impact of

changes in

foreign

currency (a)

    Percentage

change in

revenue on

constant

currency basis (a)

 
    2022     2021     2022 vs. 2021           2022 vs. 2021  
    (Dollars in millions)                    
Revenue:                              
Dayforce recurring, excluding float   $ 191.0     $ 153.0       24.8 %     (1.9 )%     26.7 %
Dayforce float     16.8       7.3       130.1 %     (2.8 )%     132.9 %
Total Dayforce recurring     207.8       160.3       29.6 %     (2.0 )%     31.6 %
Powerpay recurring, excluding float     19.3       18.7       3.2 %     (3.8 )%     7.0 %
Powerpay float     3.3       2.0       65.0 %     (5.0 )%     70.0 %
Total Powerpay recurring     22.6       20.7       9.2 %     (3.8 )%     13.0 %
Total Cloud recurring     230.4       181.0       27.3 %     (2.1 )%     29.4 %
Dayforce professional services and other     46.4       38.4       20.8 %     (2.9 )%     23.7 %
Powerpay professional services and other     0.1       0.2       (50.0 )%     (— )%     (50.0 )%
Total Cloud professional services and
other
    46.5       38.6       20.5 %     (2.8 )%     23.3 %
Total Cloud revenue     276.9       219.6       26.1 %     (2.3 )%     28.4 %
Bureau recurring, excluding float     32.2       33.4       (3.6 )%     (4.5 )%     0.9 %
Bureau float     1.2       0.6       100.0 %     (— )%     100.0 %
Total Bureau recurring     33.4       34.0       (1.8 )%     (4.4 )%     2.6 %
Bureau professional services and other     5.3       3.6       47.2 %     (8.4 )%     55.6 %
Total Bureau revenue     38.7       37.6       2.9 %     (4.8 )%     7.7 %
Total revenue   $ 315.6     $ 257.2       22.7 %     (2.6 )%     25.3 %
                               
Dayforce   $ 254.2     $ 198.7       27.9 %     (2.1 )%     30.0 %
Powerpay     22.7       20.9       8.6 %     (3.8 )%     12.4 %
Total Cloud revenue   $ 276.9     $ 219.6       26.1 %     (2.3 )%     28.4 %
                               
Dayforce, excluding float   $ 237.4     $ 191.4       24.0 %     (2.1 )%     26.1 %
Powerpay, excluding float     19.4       18.9       2.6 %     (3.7 )%     6.3 %
Cloud revenue, excluding float     256.8       210.3       22.1 %     (2.2 )%     24.3 %
Cloud float     20.1       9.3       116.1 %     (3.3 )%     119.4 %
Total Cloud revenue   $ 276.9     $ 219.6       26.1 %     (2.3 )%     28.4 %
                               
Cloud recurring, excluding float   $ 210.3     $ 171.7       22.5 %     (2.1 )%     24.6 %
Bureau recurring, excluding float     32.2       33.4       (3.6 )%     (4.5 )%     0.9 %
Total recurring, excluding float     242.5       205.1       18.2 %     (2.5 )%     20.7 %
Total revenue, excluding float   $ 294.3     $ 247.3       19.0 %     (2.6 )%     21.6 %

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(a)   Ceridian has calculated revenue on a constant currency basis by applying the average foreign exchange rate in effect during the comparable prior period.

Ceridian HCM Holding Inc.

Revenue Financial Measures

(Unaudited)

    Nine Months Ended September 30,     Percentage

change in

revenue as

reported

    Impact of

changes in

foreign

currency (a)

    Percentage

change in

revenue on

constant

currency

basis (a)

 
    2022     2021     2022 vs. 2021           2022 vs. 2021  
    (Dollars in millions)                    
Revenue:                              
Dayforce recurring, excluding float   $ 554.5     $ 433.7       27.9 %     (1.0 )%     28.9 %
Dayforce float     36.2       22.5       60.9 %     (1.8 )%     62.7 %
Total Dayforce recurring     590.7       456.2       29.5 %     (1.1 )%     30.6 %
Powerpay recurring, excluding float     58.3       55.6       4.9 %     (2.8 )%     7.7 %
Powerpay float     8.2       5.9       39.0 %     (3.4 )%     42.4 %
Total Powerpay recurring     66.5       61.5       8.1 %     (3.0 )%     11.1 %
Total Cloud recurring     657.2       517.7       26.9 %     (1.4 )%     28.3 %
Dayforce professional services and other     134.2       113.2       18.6 %     (2.1 )%     20.7 %
Powerpay professional services and other     0.4       0.8       (50.0 )%     (— )%     (50.0 )%
Total Cloud professional services and other     134.6       114.0       18.1 %     (2.1 )%     20.2 %
Total Cloud revenue     791.8       631.7       25.3 %     (1.5 )%     26.8 %
Bureau recurring, excluding float     102.6       98.8       3.8 %     (3.2 )%     7.0 %
Bureau float     3.0       2.6       15.4 %     (— )%     15.4 %
Total Bureau recurring     105.6       101.4       4.1 %     (3.1 )%     7.2 %
Bureau professional services and other     12.7       9.0       41.1 %     (5.6 )%     46.7 %
Total Bureau revenue     118.3       110.4       7.2 %     (3.2 )%     10.4 %
Total revenue   $ 910.1     $ 742.1       22.6 %     (1.8 )%     24.4 %
                               
Dayforce   $ 724.9     $ 569.4       27.3 %     (1.3 )%     28.6 %
Powerpay     66.9       62.3       7.4 %     (2.9 )%     10.3 %
Total Cloud revenue   $ 791.8     $ 631.7       25.3 %     (1.5 )%     26.8 %
                               
Dayforce, excluding float   $ 688.7     $ 546.9       25.9 %     (1.3 )%     27.2 %
Powerpay, excluding float     58.7       56.4       4.1 %     (2.8 )%     6.9 %
Cloud revenue, excluding float     747.4       603.3       23.9 %     (1.4 )%     25.3 %
Cloud float     44.4       28.4       56.3 %     (2.2 )%     58.5 %
Total Cloud revenue   $ 791.8     $ 631.7       25.3 %     (1.5 )%     26.8 %
                               
Cloud recurring, excluding float   $ 612.8     $ 489.3       25.2 %     (1.3 )%     26.5 %
Bureau recurring, excluding float     102.6       98.8       3.8 %     (3.2 )%     7.0 %
Total recurring, excluding float     715.4       588.1       21.6 %     (1.6 )%     23.2 %
Total revenue, excluding float   $ 862.7     $ 711.1       21.3 %     (1.7 )%     23.0 %

(a)   Ceridian has calculated revenue on a constant currency basis by applying the average foreign exchange rate in effect during the comparable prior period.

Ceridian HCM Holding Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

The following tables present a reconciliation of the reported results to the non-GAAP financial measures EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted operating profit, Adjusted net loss, and Adjusted Cloud recurring gross margin for all periods presented. Refer to the “Use of Non-GAAP Financial Measures” below for further discussion.

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
    (Dollars in millions)  
Net loss   $ (21.0 )   $ (20.9 )   $ (68.2 )   $ (65.9 )
Interest expense, net     7.4       10.0       19.9       25.5  
Income tax expense (benefit)     4.0       (8.5 )     7.8       (13.9 )
Depreciation and amortization     21.9       21.0       64.4       59.3  
EBITDA     12.3       1.6       23.9       5.0  
Foreign exchange loss     4.5       1.5       7.3       8.5  
Share-based compensation (a)     39.4       31.0       113.8       85.9  
Severance charges (b)     4.3       2.1       28.6       5.8  
Restructuring consulting fees (c)     1.4       1.8       5.1       13.9  
Other non-recurring items (d)     1.6       1.4       4.0       4.7  
Adjusted EBITDA   $ 63.5     $ 39.4     $ 182.7     $ 123.8  
Net profit margin (e)     (6.7 )%     (8.1 )%     (7.5 )%     (8.9 )%
Adjusted EBITDA margin     20.1 %     15.3 %     20.1 %     16.7 %

(a)   Represents share-based compensation expense and related employer taxes.

(b)   Represents costs for severance compensation paid to employees whose positions have been eliminated or who have been terminated not for cause. During the three and nine months ended September 30, 2022, Ceridian incurred severance charges in conjunction with the re-balancing of the workforce across its global footprint in the amount of $2.5 million and $18.6 million, respectively, within cost of recurring revenue.

(c)   Represents consulting fees and expenses incurred during the periods presented in connection with any acquisition, investment, disposition, recapitalization, equity offering, issuance or repayment of debt, issuance of equity interests, or refinancing.

(d)   Represents (1) the impact of the fair value adjustment for the DataFuzion HCM, Inc. (“DataFuzion”) contingent consideration in 2022, (2) the difference between the historical five-year average pension expense and the current period actuarially determined pension expense associated with the planned termination of the frozen U.S. pension plan and related changes in investment strategy associated with protecting the now fully funded status, and (3) the net impact of the abandonment of certain leased facilities.

(e)   Net profit margin is determined by calculating the percentage that net income (loss) is of total revenue.

    Three Months Ended September 30, 2022  
    As reported     Share-based

compensation

    Severance

charges

    Other (a)     Adjusted (b)  
    (Dollars in millions)  
Cost of revenue:                              
Recurring                              
Cloud   $ 64.3     $ 3.9     $ 2.3     $     $ 58.1  
Bureau     12.8       0.3       0.3             12.2  
Total recurring     77.1       4.2       2.6             70.3  
Professional services and other     61.0       3.8                   57.2  
Product development and management     44.8       6.7       0.3             37.8  
Depreciation and amortization     13.7                         13.7  
Total cost of revenue     196.6       14.7       2.9             179.0  
Sales and marketing     62.6       7.4       0.8             54.4  
General and administrative     60.1       17.3       0.6       10.1       32.1  
Operating (loss) profit     (3.7 )     39.4       4.3       10.1       50.1  
Other expense, net     5.9                   4.9       1.0  
Depreciation and amortization     21.9                   (7.5 )     14.4  
EBITDA     12.3       39.4       4.3       7.5       63.5  
Interest expense, net     7.4                         7.4  
Income tax expense (c)     4.0                   (6.6 )     10.6  
Depreciation and amortization     21.9                   7.5       14.4  
Net (loss) income   $ (21.0 )   $ 39.4     $ 4.3     $ 8.4     $ 31.1  
Net (loss) income per share – basic (d)   $ (0.14 )   $ 0.26     $ 0.03     $ 0.05     $ 0.20  
Net (loss) income per share – diluted (d)   $ (0.14 )   $ 0.25     $ 0.03     $ 0.05     $ 0.20  

(a)   Other includes amortization of acquisition-related intangible assets, foreign exchange loss, restructuring consulting fees, the impact of the fair value adjustment for the DataFuzion contingent consideration, the difference between the historical five-year average pension expense and the current period actuarially determined pension expense associated with the planned termination of the frozen U.S. pension plan and related changes in investment strategy associated with protecting the now fully funded status, and the net impact related to the abandonment of certain leased facilities.

(b)   The Adjusted column is a non-GAAP financial measure, adjusted to exclude foreign exchange gains (losses), share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, amortization of acquisition-related intangible assets, and other non-recurring items, all of which are adjusted for the effect of income taxes.

(c)   Income tax effects have been calculated based on the statutory tax rates in effect in the U.S. and foreign jurisdictions during the period.

(d)   Both GAAP and Adjusted net income (loss) per share are calculated by dividing either GAAP or Adjusted net income by the basic or diluted weighted average common shares outstanding. When adjusted diluted net income per share is positive, diluted weighted average common shares outstanding incorporate the effect of dilutive equity instruments. GAAP basic and diluted net loss per share are calculated based upon 153,184,846 weighted-average shares of common stock and Adjusted basic and diluted net income per share are calculated based upon 153,184,846 and 155,601,415 weighted-average shares of common stock, respectively.

    Three Months Ended September 30, 2021  
    As reported     Share-based

compensation

    Severance

charges

    Other (a)     Adjusted (b)  
    (Dollars in millions)  
Cost of revenue:                              
Recurring                              
Cloud   $ 49.4     $ 3.0     $ (0.1 )   $     $ 46.5  
Bureau     16.6       0.5       0.4             15.7  
Total recurring     66.0       3.5       0.3             62.2  
Professional services and other     48.9       2.5                   46.4  
Product development and management     36.6       5.3       0.3             31.0  
Depreciation and amortization     12.6                         12.6  
Total cost of revenue     164.1       11.3       0.6             152.2  
Sales and marketing     56.1       3.6       0.6             51.9  
General and administrative     53.0       16.1       0.9       9.1       26.9  
Operating (loss) profit     (16.0 )     31.0       2.1       9.1       26.2  
Other expense, net     3.4                   2.9       0.5  
Depreciation and amortization     21.0                   (7.3 )     13.7  
EBITDA     1.6       31.0       2.1       4.7       39.4  
Interest expense, net     10.0                         10.0  
Income tax benefit (c)     (8.5 )                 (8.4 )     (0.1 )
Depreciation and amortization     21.0                   7.3       13.7  
Net (loss) income   $ (20.9 )   $ 31.0     $ 2.1     $ 3.6     $ 15.8  
Net (loss) income per share – basic (d)   $ (0.14 )   $ 0.21     $ 0.01     $ 0.02     $ 0.11  
Net (loss) income per share – diluted (d)   $ (0.14 )   $ 0.20     $ 0.01     $ 0.02     $ 0.10  

(a)   Other includes amortization of acquisition-related intangible assets, foreign exchange loss, restructuring consulting fees, the difference between the historical five-year average run rate and the current period actuarially determined pension expense resulting from the changes in investment strategy associated with protecting the now fully funded status of its largest U.S pension plan, and charges related to the abandonment of certain leased facilities.

(b)   The Adjusted column is a non-GAAP financial measure, adjusted to exclude foreign exchange gains (losses), share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, amortization of acquisition-related intangible assets, and other non-recurring items, all of which are adjusted for the effect of income taxes.

(c)   Income tax effects have been calculated based on the statutory tax rates in effect in the U.S. and foreign jurisdictions during the period.

(d)   Both GAAP and Adjusted net income (loss) per share are calculated by dividing either GAAP or Adjusted net income by the basic or diluted weighted average common shares outstanding. When adjusted diluted net income per share is positive, diluted weighted average common shares outstanding incorporate the effect of dilutive equity instruments. GAAP basic and diluted net loss per share are calculated based upon 150,450,595 weighted-average shares of common stock, and Adjusted basic and diluted net income per share are calculated based upon 150,450,595 and 156,861,973 weighted-average shares of common stock, respectively.

    Nine Months Ended September 30, 2022  
    As reported     Share-based

compensation

    Severance

charges

    Other (a)     Adjusted (b)  
    (Dollars in millions)  
Cost of revenue:                              
Recurring                              
Cloud   $ 189.1     $ 11.4     $ 16.9     $     $ 160.8  
Bureau     45.3       1.0       2.4             41.9  
Total recurring     234.4       12.4       19.3             202.7  
Professional services and other     172.6       10.5       0.5             161.6  
Product development and management     125.0       18.9       4.0             102.1  
Depreciation and amortization     40.0                         40.0  
Total cost of revenue     572.0       41.8       23.8             506.4  
Sales and marketing     183.4       18.9       3.3             161.2  
General and administrative     183.8       53.1       1.5       31.2       98.0  
Operating (loss) profit     (29.1 )     113.8       28.6       31.2       144.5  
Other expense, net     11.4                   8.1       3.3  
Depreciation and amortization     64.4                   (22.9 )     41.5  
EBITDA     23.9       113.8       28.6       16.4       182.7  
Interest expense, net     19.9                         19.9  
Income tax expense (c)     7.8                   (28.9 )     36.7  
Depreciation and amortization     64.4                   22.9       41.5  
Net (loss) income   $ (68.2 )   $ 113.8     $ 28.6     $ 10.4     $ 84.6  
Net (loss) income per share – basic (d)   $ (0.45 )   $ 0.75     $ 0.19     $ 0.07     $ 0.55  
Net (loss) income per share – diluted (d)   $ (0.45 )   $ 0.73     $ 0.18     $ 0.07     $ 0.54  

(a)   Other includes amortization of acquisition-related intangible assets, restructuring consulting fees, foreign exchange loss, the impact of the fair value adjustment for the DataFuzion contingent consideration, the difference between the historical five-year average pension expense and the current period actuarially determined pension expense associated with the planned termination of the frozen U.S. pension plan and related changes in investment strategy associated with protecting the now fully funded status, and the net impact of the abandonment of certain leased facilities.

(b)   The Adjusted column is a non-GAAP financial measure, adjusted to exclude foreign exchange gains (losses), share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, amortization of acquisition-related intangible assets, and other non-recurring items, all of which are adjusted for the effect of income taxes.

(c)   Income tax effects have been calculated based on the statutory tax rates in effect in the U.S. and foreign jurisdictions during the period.

(d)   Both GAAP and Adjusted net income (loss) per share are calculated by dividing either GAAP or Adjusted net income by the basic or diluted weighted average common shares outstanding. When adjusted diluted net income per share is positive, diluted weighted average common shares outstanding incorporate the effect of dilutive equity instruments. GAAP basic and diluted net loss per share are calculated based upon 152,691,008 weighted-average shares of common stock and Adjusted basic and diluted net income per share are calculated based upon 152,691,008 and 155,506,326 weighted-average shares of common stock, respectively.

    Nine Months Ended September 30, 2021  
    As reported     Share-based

compensation

    Severance

charges

    Other (a)     Adjusted (b)  
    (Dollars in millions)  
Cost of revenue:                              
Recurring                              
Cloud   $ 143.4     $ 8.2     $ 0.1     $     $ 135.1  
Bureau     47.7       1.5       1.5             44.7  
Total recurring     191.1       9.7       1.6             179.8  
Professional services and other     140.9       7.1       0.1             133.7  
Product development and management     94.2       13.2       0.5             80.5  
Depreciation and amortization     37.5                         37.5  
Total cost of revenue     463.7       30.0       2.2             431.5  
Sales and marketing     154.5       10.1       1.6             142.8  
General and administrative     162.0       45.8       2.0       33.6       80.6  
Operating (loss) profit     (38.1 )     85.9       5.8       33.6       87.2  
Other expense, net     16.2                   12.8       3.4  
Depreciation and amortization     59.3                   (19.3 )     40.0  
EBITDA     5.0       85.9       5.8       27.1       123.8  
Interest expense, net     25.5                         25.5  
Income tax (benefit) expense (c)     (13.9 )                 (21.8 )     7.9  
Depreciation and amortization     59.3                   19.3       40.0  
Net (loss) income   $ (65.9 )   $ 85.9     $ 5.8     $ 24.6     $ 50.4  
Net (loss) income per share – basic (d)   $ (0.44 )   $ 0.58     $ 0.04     $ 0.17     $ 0.34  
Net (loss) income per share – diluted (d)   $ (0.44 )   $ 0.58     $ 0.04     $ 0.16     $ 0.32  

(a)   Other includes amortization of acquisition-related intangible assets, foreign exchange loss, restructuring consulting fees, the difference between the historical five-year average run rate and the current period actuarially determined pension expense resulting from the changes in investment strategy associated with protecting the now fully funded status of its largest U.S pension plan, and charges related to the abandonment of certain leased facilities.

(b)   The Adjusted column is a non-GAAP financial measure, adjusted to exclude foreign exchange gains (losses), share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, amortization of acquisition-related intangible assets, and other non-recurring items, all of which are adjusted for the effect of income taxes.

(c)   Income tax effects have been calculated based on the statutory tax rates in effect in the U.S. and foreign jurisdictions during the period.

(d)   Both GAAP and Adjusted net income (loss) per share are calculated by dividing either GAAP or Adjusted net income by the basic or diluted weighted average common shares outstanding. When adjusted diluted net income per share is positive, diluted weighted average common shares outstanding incorporate the effect of dilutive equity instruments. GAAP basic and diluted net loss per share are calculated based upon 149,083,666 weighted-average shares of common stock, and Adjusted basic and diluted net income per share are calculated based upon 149,083,666 and 155,444,668 weighted-average shares of common stock, respectively.

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
    (Dollars in millions)  
Cloud recurring revenue   $ 230.4     $ 181.0     $ 657.2     $ 517.7  
                         
Cost of revenue – Cloud recurring – as reported   $ 64.3     $ 49.4     $ 189.1     $ 143.4  
Share-based compensation     3.9       3.0       11.4       8.2  
Severance charges     2.3       (0.1 )     16.9       0.1  
Cost of revenue – Cloud recurring – as adjusted (a)   $ 58.1     $ 46.5     $ 160.8     $ 135.1  
Gross margin – Cloud recurring – as reported     72.1 %     72.7 %     71.2 %     72.3 %
Gross margin – Cloud recurring – as adjusted (a)     74.8 %     74.3 %     75.5 %     73.9 %

(a)   The Adjusted figures are non-GAAP financial measures, adjusted to exclude share-based compensation expense and related employer taxes, and severance charges.

Use of Non-GAAP Financial Measures

Ceridian uses certain non-GAAP financial measures in this release including EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted operating profit, Adjusted net income, Adjusted diluted net income per share, revenue on a constant currency basis, Dayforce recurring revenue per customer, and Adjusted Cloud recurring gross margin. Ceridian believes that these non-GAAP financial measures are useful to management and investors as supplemental measures to evaluate its overall operating performance including comparison across periods and with competitors. Ceridian’s management uses these non-GAAP financial measures to assess operating performance because these measures exclude the results of decisions that are outside the normal course of its business operations, and are used for internal budgeting and forecasting purposes both for short- and long-term operating plans. Additionally, Adjusted EBITDA and Adjusted EBITDA margin are components of Ceridian’s management incentive plan.

Ceridian defines its non-GAAP financial measures as follows:

  • EBITDA is defined as net income (loss) before interest, taxes, depreciation, and amortization, and Adjusted EBITDA as EBITDA, as adjusted to exclude foreign exchange gains (losses), share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, and other non-recurring items.
  • Adjusted EBITDA margin is determined by calculating the percentage Adjusted EBITDA is of total revenue.
  • Cloud recurring gross margin is defined as total Cloud recurring revenue less cost of Cloud recurring revenue as a percentage of total Cloud recurring revenue, which is exclusive of any product development and management or depreciation and amortization cost allocations. Adjusted Cloud recurring gross margin is defined as total Cloud recurring revenue less cost of Cloud recurring revenue, as adjusted to exclude share-based compensation and severance charges, as a percentage of total Cloud recurring revenue, which is exclusive of any product development and management or depreciation and amortization cost allocations.
  • Adjusted operating profit is defined as operating profit (loss), as adjusted to exclude foreign exchange gains (losses), share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, amortization of acquisition-related intangible assets, and other non-recurring items.
  • Adjusted net income is defined as net income (loss), as adjusted to exclude foreign exchange gains (losses), share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, amortization of acquisition-related intangible assets, and other non-recurring items, all of which are adjusted for the effect of income taxes.
  • Adjusted diluted net income per share is calculated by dividing adjusted net income by diluted weighted average common shares outstanding. When adjusted diluted net income per share is positive, diluted weighted average common shares outstanding incorporate the effect of dilutive equity instruments.
  • Revenue on a constant currency basis is calculated by applying the average foreign exchange rate in effect during the comparable prior period.
  • Dayforce recurring revenue per customer is an indicator of the average size of Dayforce recurring revenue customers. To calculate Dayforce recurring revenue per customer, Ceridian starts with Dayforce recurring revenue on a constant currency basis by applying the same exchange rate to all comparable periods for the trailing twelve months and excludes float revenue, the impact of lower employment levels in 2021 and 2020 due to the COVID-19 pandemic, and Ascender and ADAM HCM revenue. This amount is divided by the number of live Dayforce customers at the end of the trailing twelve month period, excluding Ascender and ADAM HCM. Ceridian calculates and monitors Dayforce recurring revenue per customer on a quarterly basis. Ceridian’s Dayforce recurring revenue per customer may fluctuate as a result of a number of factors, including the number of live Dayforce customers and the number of customers purchasing the full HCM suite. Ceridian has not reconciled the Dayforce recurring revenue per customer because there is no directly comparable GAAP financial measure.

Ceridian’s presentation of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cloud recurring gross margin, Adjusted operating profit, Adjusted net income, Adjusted diluted net income per share, revenue on a constant currency basis, and Dayforce recurring revenue per customer are intended as supplemental measures of its performance that are not required by, or presented in accordance with, GAAP. These non-GAAP financial measures should not be considered as alternatives to net income (loss), earnings (loss) per share, revenue, or any other performance measures derived in accordance with GAAP, or as measures of operating cash flows or liquidity. Ceridian’s presentation of non-GAAP financial measures should not be construed to imply that its future results will be unaffected by similar items to those eliminated in this presentation.

EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cloud recurring gross margin, Adjusted operating profit, Adjusted net income, Adjusted diluted net income per share, revenue on a constant currency basis, and Dayforce recurring revenue per customer are not defined under GAAP, are not measures of net income (loss) or any other performance measures derived in accordance with GAAP, and are subject to important limitations. Ceridian’s use of these terms may not be comparable to similarly titled measures of other companies in its industry and are not measures of performance calculated in accordance with GAAP. These non-GAAP financial measures have important limitations as analytical tools, and should not be considered in isolation or as substitutes for analysis of Ceridian’s results as reported under GAAP. In evaluating non-GAAP financial measures, users should be aware that in the future Ceridian may incur expenses similar to those eliminated in this presentation.

Source: Ceridian HCM Holding Inc.

For further information, please contact:

Investor Relations
1-844-829-9499
[email protected]

Public Relations
1-647-417-2117
[email protected]

Quoted from Various Sources

Published for: Ipodifier