Ceridian Reports Fourth Quarter and Full Year 2019 Results

Minneapolis, MN and Toronto, ON, February 5, 2020

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Ceridian HCM Holding Inc. (“Ceridian” or the “Company”) (NYSE:CDAY) (TSX:CDAY), a global human capital management (“HCM”) software company, announced today its financial results for the fourth quarter ended December 31, 2019. All financial results are reported in U.S. dollars unless otherwise stated. A reconciliation of U.S. generally accepted accounting principles (“GAAP”) to non-GAAP financial measures has been provided in this press release, including the accompanying tables. An explanation of these measures is also included below under the heading “Use of Non-GAAP Financial Measures.”

“In the fourth quarter we set new records for the subscription value of new sales and for the subscription value of customers taken live,” said David Ossip, Chairman and Chief Executive Officer of Ceridian. “Dayforce revenue grew 35.4%, to $158.7 million, and was up 35.7% on a constant currency basis, and excluding float revenue, Dayforce revenue grew even faster, up 37.5%, to $147.7 million, and was up 38.0% on a constant currency basis.”

“We ended the year with 4,363 Dayforce customers live, consisting of 3.9 million global active users, an increase of 0.8 million users, or 25.8% year-over-year,” added Arthur Gitajn, Chief Financial Officer of Ceridian. “We saw significant traction in our enterprise, major markets, and global segments. The average deal size of a new sale in 2019 grew by 24%, driven by enterprise, where the average deal size grew by 100%. Global sales, primarily UK and Australia, grew by more than 150% compared to 2018.”

The average U.S. dollar to Canadian dollar foreign exchange rate was $1.32 and $1.33, with a daily range of $1.30 to $1.33, and $1.30 to $1.36, for the three and twelve months ended December 31, 2019, respectively, compared to $1.32 and $1.30, with a daily range of $1.28 to $1.36, and $1.23 to $1.36, for the three and twelve months ended December 31, 2018, respectively. As of December 31, 2019, the U.S. dollar to Canadian dollar foreign exchange rate was $1.30. To present the performance of the business excluding the effect of foreign currency rate fluctuations, the Company presents revenue on a constant currency basis, which we believe is useful to management and investors. We have calculated revenue on a constant currency basis by applying a fixed rate of $1.30 Canadian dollar to $1.00 U.S. dollar foreign exchange rate to revenues originally booked in Canadian dollars for all applicable historical periods. Both the GAAP and non-GAAP revenue results are displayed in the tables accompanying this press release.

Financial Highlights for the Fourth Quarter and Full Year 2019

The financial highlights below are on a year-over-year basis, unless otherwise stated.

Revenue

• Dayforce revenue increased 35.4% to $158.7 million for the fourth quarter of 2019, and 30.2% to $569.7 million for the full year of 2019. On a constant currency basis, Dayforce revenue increased 35.7% to $159.5 million for the fourth quarter of 2019, and 30.9% to $572.3 million for the full year of 2019.
• Dayforce recurring revenue increased 30.2% to $114.3 million for the fourth quarter of 2019, and 31.7% to $429.0 million for the full year of 2019. On a constant currency basis, Dayforce recurring revenue increased 30.3% to $114.7 million for the fourth quarter of 2019, and 32.3% to $430.7 million for the full year of 2019.
• Cloud revenue, which includes both Dayforce and Powerpay, increased 28.9% to $184.2 million for the fourth quarter of 2019, and 24.8% to $660.0 million for the full year of 2019. On a constant currency basis, Cloud revenue increased 28.9% to $185.3 million for the fourth quarter of 2019, and 25.7% to $664.4 million for the full year of 2019.
• Total revenue, which includes revenue from both our Cloud and Bureau solutions, increased 13.9% to $221.8 million for the fourth quarter of 2019, and 11.3% to $824.1 million for the full year of 2019. On a constant currency basis, total revenue increased 13.8% to $223.0 million for the fourth quarter of 2019, and 12.1% to $829.4 million for the full year of 2019.

Net (Loss) Income and Net (Loss) Income Per Share

• Net loss was $1.5 million for the fourth quarter of 2019, compared to net loss of $2.1 million. Adjusted net income was $12.1 million for the fourth quarter of 2019, compared to $16.5 million.
• Net income was $78.7 million for the full year of 2019, compared to net loss of $60.6 million. Adjusted net income was $67.8 million for the full year of 2019, compared to $37.7 million.
• Diluted net loss per share was $0.01 for the fourth quarter of 2019, compared to diluted net loss per share of $0.02. Adjusted diluted net income per share was $0.08 for the fourth quarter of 2019, compared to $0.12. Diluted weighted average common shares outstanding were 144.1 million and 138.7 million for the fourth quarter 2019, and 2018, respectively.
• Diluted net income per share was $0.53 for the full year of 2019, compared to diluted net loss per share of $0.60. Adjusted diluted net income per share was $0.46 for the full year of 2019, compared to $0.26. Diluted weighted average common shares outstanding were 148.8 million and 114.0 million for the full year of 2019, and 2018, respectively.

Gross Margin, Operating Profit, and Adjusted EBITDA

• Gross margin remained consistent at 44.1% for both the fourth quarter of 2019 and 2018. Gross margin improved to 44.7% for the full year of 2019, compared to 42.5%.
• Recurring services gross margin improved to 70.1%, and 70.3%, for the fourth quarter and full year of 2019, respectively, compared to 69.0%, and 68.0%, respectively. This improvement was driven by Cloud recurring services gross margin of 68.8%, and 69.6%, for the fourth quarter and full year of 2019, respectively, compared to 66.0%, and 66.1%, respectively.
• Professional services and other gross margin improved to 5.9%, and (4.0)%, for the fourth quarter and full year of 2019, respectively, compared to (10.6)%, and (14.3)%, respectively.
• Operating profit was $19.7 million for the fourth quarter of 2019, compared to $20.3 million. Operating profit increased 28.9% to $72.3 million for the full year of 2019.
• Adjusted EBITDA increased 6.2% to $44.4 million for the fourth quarter of 2019, and 14.9% to $184.6 million for the full year of 2019.

Other Key Performance Metrics

• Annual Cloud revenue retention rate was 96.3% for the full year of 2019, compared to 96.0%.
• Cloud annualized recurring revenue (“ARR”) was $582.0 million as of December 31, 2019, an increase of 22.2%, or $105.8 million.

Balance Sheet

• Cash and equivalents were $281.3 million as of December 31, 2019, an increase of $63.5 million, compared to $217.8 million.
• Total debt was $677.1 million as of December 31, 2019, an increase of $6.8 million, compared to $670.3 million. Total debt as of December 31, 2019, included financing lease obligations of $12.4 million.

Dayforce Live Customer Count

• 4,363 Dayforce customers were live on the Dayforce platform as of December 31, 2019, compared to 3,718 Dayforce customers as of December 31, 2018.
• 3.9 million global active users were live on the Dayforce platform as of December 31, 2019, up 25.8% compared to 3.1 million global active users as of December 31, 2018.
• On a constant currency basis, Dayforce revenue per customer was $131,171 for the trailing twelve months ended December 31, 2019, an increase of 11.5% from $117,617.

Business Outlook

To simplify revenue reporting as we expand globally, beginning in 2020, we are changing the way we report the impact of foreign exchange rate fluctuations on the Company’s revenue results. Instead of calculating revenue on a constant currency basis by applying a fixed foreign exchange rate for all periods presented, the Company will be using the average foreign exchange rates in effect during the comparable prior period to calculate constant currency revenue growth rates.

As it relates to guidance, we will be issuing guidance based on the average foreign exchange rates during the most recent fiscal quarter reported. In subsequent periods, we will update our guidance based on the average foreign exchange rates during the most recent fiscal quarter reported, and we will disclose the impact of any change in guidance related to foreign exchange fluctuations.

Based on information available as of February 5, 2020, Ceridian is issuing guidance for the full year and first quarter of 2020 as indicated below. The guidance is based on the average foreign exchange rates during the fourth quarter of 2019 and includes GAAP and non-GAAP financial measures. The guidance assumes no changes from the current Federal Reserve discount rate or the current Bank of Canada interest rate. Based on current market conditions, portfolio composition, and investment practices, each 100 basis point change in market investment rates would result in approximately $18 million of change in float revenue over the ensuing twelve month period.

Comparisons are on a year-over-year basis, unless stated otherwise.

Full Year 2020:

• Dayforce revenue of $708 million to $713 million, or an increase of approximately 24% to 25% on both a GAAP basis and a constant currency basis. Excluding float revenue, Dayforce revenue is expected to grow approximately 27% to 28% on both a GAAP basis and a constant currency basis.
• Cloud revenue of $800 million to $805 million, or an increase of approximately 21% to 22% on both a GAAP basis and a constant currency basis. Excluding float revenue, Cloud revenue is expected to grow approximately 24% on a GAAP basis and approximately 24% to 25% on a constant currency basis.
• Total revenue of $903 million to $908 million, or an increase of approximately 10% on both a GAAP basis and a constant currency basis. Excluding float revenue, total revenue is expected to grow approximately 12% to 13% on both a GAAP basis and a constant currency basis.
• Float revenue of approximately $50 million within Dayforce revenue, $62 million within Cloud revenue, and $70 million within total revenue. Reflecting the reduction in interest rates during 2019, total expected 2020 float revenue of $70 million would represent a decline of $10 million, compared to 2019 float revenue.
• Reflecting investments to drive future growth, including the Dayforce Wallet, acceleration in the enterprise segment, and global expansion, Adjusted EBITDA is expected to be $185 million to $190 million, or an increase of 0% to 3%. Excluding float revenue, Adjusted EBITDA is expected to grow approximately 10% to 15%.

First Quarter 2020:

• Dayforce revenue of $166 million to $168 million, or an increase of approximately 25% to 27% on both a GAAP basis and a constant currency basis. Excluding float revenue, Dayforce revenue is expected to grow approximately 29% to 30% on both a GAAP basis and a constant currency basis.
• Cloud revenue of $188 million to $190 million, or an increase of approximately 22% to 23% on both a GAAP basis and a constant currency basis. Excluding float revenue, Cloud revenue is expected to grow approximately 25% to 26% on a GAAP basis and 25% to 27% on a constant currency basis.
• Total revenue of $221 million to $223 million, or an increase of approximately 8% to 9% on a GAAP basis, and 9% to 10% on a constant currency basis. Excluding float revenue, total revenue is expected to grow approximately 11% to 13% on a GAAP basis, and 12% to 13% on a constant currency basis.
• Float revenue of approximately $15 million within Dayforce revenue, $18 million within Cloud revenue, and $21 million within total revenue.
• Adjusted EBITDA of $47 million to $49 million, or a decline of approximately 2% to 6%. Excluding float revenue, Adjusted EBITDA is expected to grow approximately 2% to 10%.

We have not reconciled the Adjusted EBITDA range for the first quarter or the full fiscal year of 2020 to the directly comparable GAAP financial measure because applicable information for the future period, on which this reconciliation would be based, is not readily available 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.

Conference Call Details

Ceridian will host a conference call on February 5, 2020 at 5:00 p.m. Eastern Time to discuss the financial results for the fourth quarter and fiscal year of 2019. Those wishing to participate via the webcast should access the call through Ceridian’s Investor Relations website at https://investors.ceridian.com. Those wishing to participate via the telephone may dial in at 877-701-0459 (USA) or 647-689-5466 (International). The conference call replay will be available via webcast through Ceridian’s Investor Relations website at https://investors.ceridian.com.

About Ceridian HCM Holding Inc.

Ceridian. Makes Work Life Better™.
Ceridian is a global human capital management software company. Dayforce, our flagship cloud HCM platform, provides human resources, payroll, benefits, workforce management, and talent management functionality. Our 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.

Use of Non-GAAP Financial Measures

We use certain non-GAAP financial measures in this release including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income (loss), revenue on a constant currency basis, revenue retention rate, and ARR. We believe that Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss), non-GAAP financial measures, are useful to management and investors as supplemental measures to evaluate our overall operating performance. Adjusted EBITDA is a component of our management incentive plan and Adjusted EBITDA and Adjusted EBITDA margin are used by management to assess performance and to compare our operating performance to our competitors. We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation, and amortization, as adjusted to exclude net income (loss) from discontinued operations, sponsor management fees, non-cash charges for asset impairments, gain (loss) on assets and liabilities held in a foreign currency other than the functional currency of a company subsidiary, share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, transaction costs, and other non-recurring charges. Adjusted EBITDA margin is determined by calculating the percentage Adjusted EBITDA is of total revenue. Adjusted net income (loss) is defined as net income (loss), as adjusted to exclude net income (loss) from discontinued operations, release of the valuation allowance, gain (loss) on extinguishment of debt, sponsor management fees, non-cash charges for asset impairments, gain (loss) on assets and liabilities held in a foreign currency other than the functional currency of a company subsidiary, share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, transaction costs, and other non-recurring charges, all of which are adjusted for the effect of income taxes. Management believes that Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss) are helpful in highlighting management performance trends because Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss) exclude the results of decisions that are outside the normal course of our business operations.

Our presentation of Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss) are intended as supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss) should not be considered as alternatives to operating profit (loss), net income (loss), earnings per share, or any other performance measures derived in accordance with GAAP, or as measures of operating cash flows or liquidity. Our presentation of Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss) should not be construed to imply that our future results will be unaffected by similar items to those eliminated in this presentation. Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss) are included in this discussion because they are key metrics used by management to assess our operating performance.

Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss) are not defined under GAAP, are not measures of net income (loss), operating profit (loss), or any other performance measures derived in accordance with GAAP, and are subject to important limitations. Our use of the terms Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss) may not be comparable to similarly titled measures of other companies in our industry and are not measures of performance calculated in accordance with GAAP.

Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss) have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.

In evaluating Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income (loss), you should be aware that in the future we may incur expenses similar to those eliminated in this presentation.

We present revenue on a constant currency basis to assess how our underlying businesses performed, excluding the effect of foreign currency rate fluctuations, which we believe is useful to management and investors.

Our annual Cloud revenue retention rate measures the percentage of revenues that we retain from our existing Cloud customers. We use this retention rate as an indicator of customer satisfaction and future revenues. We calculate the annual Cloud revenue retention rate as a percentage, where the numerator is the Cloud annualized recurring revenue for the prior year, less the Cloud annualized recurring revenue from lost Cloud customers during that year; and the denominator is the Cloud annualized recurring revenue for the prior year. We set annual targets for Cloud revenue retention rate and monitor progress toward those targets on a quarterly basis by reviewing known customer losses and anticipated future customer losses. Our Cloud revenue retention rate may fluctuate as a result of a number of factors, including the mix of Cloud solutions used by customers, the level of customer satisfaction, and changes in the number of users live on our Cloud solutions. We have not reconciled the annual Cloud revenue retention rate because there is no directly comparable GAAP financial measure. 

We derive the majority of our Cloud revenues from recurring fees, primarily PEPM subscription charges. We also derive recurring revenue from fees related to the rental and maintenance of clocks, charges for once-a-year services, such as year-end tax statements, and investment income on our customer funds held in trust before such funds are remitted to taxing authorities, customer employees, or other third parties. To calculate Cloud ARR, we start with recurring revenue at year end, subtract the once-a-year charges, annualize the revenue for customers live for less than a full year to reflect the revenue that would have been realized if the customer had been live for a full year, and add back the once-a-year charges. We set annual targets for Cloud ARR and monitor progress toward those targets on a quarterly basis. We have not reconciled the Cloud ARR because there is no directly comparable GAAP financial measure. 

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 our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You 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 first quarter and full year fiscal 2020 total revenue, Cloud revenue, Dayforce revenue, float revenue, and Adjusted EBITDA, 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 we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. As you consider this press release, you should understand that these statements are not guarantees of performance or results. These assumptions and our future performance or results involve risks and uncertainties (many of which are beyond our control). These risks and uncertainties include, but are not limited to, the following:

• our inability to attain or to maintain profitability;
• significant competition for our solutions;
• our inability to continue to develop or to sell our existing Cloud solutions;
• our inability to manage our growth effectively;
• the risk that we may not be able to successfully migrate our Bureau customers to our Cloud solutions or to offset the decline in Bureau revenue with Cloud revenue;
• the decline or slower than expected development of the market for enterprise cloud;
• failure of our efforts to increase use of our Cloud solutions and our other applications may not succeed;
• our failure to provide enhancements and new features and modifications to our solutions;
• failure to comply the Federal Trade Commission’s ongoing consent order regarding data protection;
• system interruptions or failures, including cyber-security breaches, identity theft, or other disruptions that could compromise our information;
• our failure to comply with applicable privacy, security and data laws, regulations and standards;
• changes in regulations governing privacy concerns and laws or other domestic or foreign data protection regulations;
• our inability to successfully expand our current offerings into new markets or further penetrate existing markets;
• our inability to meet the more complex configuration and integration demands of our large customers;
• the impact of the material weakness related to the duplicative payroll incident and our failure to maintain effective internal controls in the future;
• the risk of our customers declining to renew their agreements with us or renewing at lower performance fee levels;
• our failure to manage our technical operations infrastructure;
• our inability to maintain necessary third party relationships, and third party software licenses or there are errors in the software we license;
• our inability to protect our intellectual property rights, proprietary technology, information, processes, and know-how;
• our failure to keep pace with rapid technological changes and evolving industry standards;
• changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself;
• general economic, political and market forces beyond our control; and
• other risks and uncertainties described in our most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and other filings with the Securities and Exchange Commission.

Additional factors or events that could cause our actual performance to differ from these forward-looking statements may emerge from time to time, and it is not possible for us to predict all of them. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our 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; our 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; we will be able to maintain our relationships with our employees, customers and partners; we will continue to attract qualified personnel to support our development requirements and the support of our new and existing customers; and that the risk factors noted above, individually or collectively, do not have a material impact on the Company. Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Source: Ceridian HCM Holding Inc.

For further information, please contact:

Investor Relations
Jeremy Johnson
Vice President, Finance and Investor Relations
Ceridian HCM Holding Inc.
1-844-829-9499
investors@ceridian.com

Public Relations
Teri Murphy
Director, Corporate Communications
Ceridian HCM Holding Inc.
1-647-417-2117
teri.murphy@ceridian.com