Ceridian Reports First Quarter 2019 Results

  • First quarter 2019 total revenue of $203.7 million, up 7.9%
    year-over-year, and, on a constant currency basis, up 9.5%
    year-over-year
  • First quarter 2019 Dayforce revenue of $132.8 million, up 27.6%
    year-over-year, and, on a constant currency basis, up 28.6%
    year-over-year
  • First quarter 2019 Cloud revenue of $154.6 million, up 21.8%
    year-over-year, and, on a constant currency basis, up 23.7%
    year-over-year
  • First quarter 2019 operating profit of $27.4 million, and first
    quarter 2019 Adjusted EBITDA of $49.8 million, up 7.1% year-over-year

MINNEAPOLIS & TORONTO–(BUSINESS WIRE)–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 first quarter ended March
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.”

“We are pleased with the results from the first quarter of 2019,” said
David Ossip, Chairman and Chief Executive Officer of Ceridian. “Revenue
from Dayforce, our flagship cloud HCM platform, grew 28% to $132.8
million, and we now have 3,851 customers live on the Dayforce platform.
During the first quarter, we continued to see strong market demand for
our products.”

Arthur Gitajn, Executive Vice President and Chief Financial Officer of
Ceridian, added, “We achieved net income of $11.2 million and
diluted net income per share of $0.08 for the first quarter of 2019,
compared to net income of $0.1 million and diluted net loss per share of
$(0.07) for the first quarter of 2018.”

Financial Highlights for the First Quarter 2019

Revenue

  • Total revenue, which includes revenue from both our Cloud and Bureau
    solutions, increased 7.9% to $203.7 million for the first quarter of
    2019 compared with the first quarter of 2018. Excluding the effect of
    foreign currency fluctuations, total revenue increased 9.5% for the
    first quarter of 2019 compared with the first quarter of 2018.
  • Dayforce revenue increased 27.6% to $132.8 million for the first
    quarter of 2019 compared with the first quarter of 2018. Excluding the
    effect of foreign currency fluctuations, Dayforce revenue increased
    28.6% for the first quarter of 2019 compared with the first quarter of
    2018.
  • Cloud revenue, which includes both Dayforce and Powerpay, increased
    21.8% to $154.6 million for the first quarter of 2019 compared with
    the first quarter of 2018. Excluding the effect of foreign currency
    fluctuations, Cloud revenue increased 23.7% for the first quarter of
    2019 compared with the first quarter of 2018.

Gross Margin, Operating Profit and Adjusted EBITDA

  • Recurring services gross margin improved to 70.5% for the first
    quarter of 2019 compared to 68.5% in the first quarter of 2018.
    Professional services and other gross margin improved to (14.2)% for
    the first quarter of 2019 compared to (17.6)% in the first quarter of
    2018.
  • Gross margin improved to 45.9% for the first quarter of 2019 compared
    to 43.9% in the first quarter of 2018.
  • Operating profit was $27.4 million for the first quarter of 2019
    compared to $28.0 million in the first quarter of 2018. Excluding the
    impact of share-based compensation expense, fees primarily associated
    with the secondary equity offering in March 2019, and severance
    charges, operating profit would have been $36.7 million for the first
    quarter of 2019 compared to $33.2 million in the first quarter of
    2018, an increase of 10.5%.
  • Adjusted EBITDA increased 7.1% to $49.8 million for the first quarter
    of 2019 compared with the first quarter of 2018.

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

  • Income from continuing operations before income taxes was $16.9
    million for the first quarter of 2019 compared to $8.0 million for the
    first quarter of 2018, an increase of more than 100%. Net income
    was $11.2 million for the first quarter of 2019, compared to net
    income of $0.1 million for the first quarter of 2018. Diluted net
    income per share was $0.08 for the first quarter of 2019 based
    on 147.0 million diluted weighted average common shares outstanding
    compared to diluted net loss per share of $(0.07) for the first
    quarter of 2018 based on 65.3 million diluted weighted average common
    shares outstanding.

Balance Sheet

  • Cash and equivalents were $206.3 million as of March 31, 2019, a
    reduction of $11.5 million compared to $217.8 million as of
    December 31, 2018.
  • Total debt was $668.9 million as of March 31, 2019, a reduction of
    $1.4 million compared to $670.3 million as of December 31, 2018.

Dayforce Live Customer Count

  • 3,851 Dayforce customers were live on the Dayforce platform as of
    March 31, 2019, a net increase of 697 customers compared to 3,154
    Dayforce customers as of March 31, 2018, and a net increase of 133
    customers compared to 3,718 as of December 31, 2018.

Recently Adopted Accounting Pronouncements

  • Prior period information within this release has been adjusted to
    reflect the adoption of Accounting Standards Update (“ASU”) No.
    2014-09, “Revenue from Contracts with Customers (Topic 606),” ASU No.
    2017-07, “Compensation—Retirement Benefits,” and ASU No. 2016-18,
    “Restricted Cash,” as of January 1, 2019.
  • For additional discussion and disclosure of the impacts of the
    adoption of these new accounting pronouncements, please refer to our
    Quarterly Report on Form 10-Q for the quarter ended March 31, 2019,
    filed with the Securities and Exchange Commission on May 1, 2019.

Business Outlook

Based on information available as of May 1, 2019, Ceridian is issuing
guidance for the second quarter and full year of 2019 as indicated
below. The guidance below reflects a $1.30 Canadian dollar to $1.00 U.S.
dollar foreign exchange rate. The average U.S. dollar to Canadian dollar
foreign exchange rate experienced in the first quarter of 2019 was
$1.33, with a daily range of $1.31 to $1.36. The average U.S. dollar to
Canadian dollar foreign exchange rate experienced in 2018 was $1.30,
with a daily range of $1.23 to $1.36.

Full Year 2019

We are reaffirming the full year ranges we provided on February 6, 2019
for Cloud revenue, total revenue, and Adjusted EBITDA, as follows:

  • Cloud revenue is expected to be in the range of $655.0 million to
    $660.0 million.
  • Total revenue is expected to be in the range of $810.0 million to
    $815.0 million.
  • Adjusted EBITDA is expected to be in the range of $182.0 million to
    $187.0 million.

For each $0.01 change in the U.S. dollar to Canadian dollar foreign
exchange rate, we estimate it would affect our full year 2019 guidance
ranges for Cloud revenue by approximately $1.6 million, total revenue by
approximately $2.0 million, and Adjusted EBITDA by approximately $0.6
million.

Second Quarter 2019

We are issuing guidance for the second quarter of 2019, as follows:

  • Cloud revenue is expected to be in the range of $154.0 million to
    $156.0 million.
  • Total revenue is expected to be in the range of $191.0 million to
    $193.0 million.
  • Adjusted EBITDA is expected to be in the range of $37.0 million to
    $39.0 million.

For each $0.01 change in the U.S. dollar to Canadian dollar foreign
exchange rate, we estimate it would affect our second quarter 2019
guidance ranges for Cloud revenue by approximately $0.4 million, total
revenue by approximately $0.5 million, and Adjusted EBITDA by
approximately $0.15 million.

Furthermore, consistent with prior years, the first quarter revenue for
our business is seasonally higher than the second quarter revenue
primarily due to seasonally higher float balances and year-end printing
and processing revenue for W-2 (United States) and T4 (Canada) forms in
the first quarter of each year.

We have not reconciled the Adjusted EBITDA ranges for the second quarter
of 2019 or the full fiscal year of 2019 to the directly comparable GAAP
financial measure because applicable information for future periods, 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, changes in foreign
currency exchange rates, and other items.

Conference Call Details

Ceridian will host a conference call on May 1, 2019 at 5:00 p.m. Eastern
Time to discuss the financial results for the first quarter 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, and revenue growth in a
constant currency. We believe that Adjusted EBITDA and Adjusted EBITDA
margin, 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
or loss before interest, taxes, depreciation, and amortization, as
adjusted to exclude net income or loss from discontinued operations,
sponsor management fees, non-cash charges for asset impairments, gains
or losses on assets and liabilities held in a foreign currency other
than the functional currency of a company subsidiary, share-based
compensation expense, severance charges, restructuring consulting fees,
transaction costs, and environmental reserve charges. Adjusted EBITDA
margin is determined by calculating the percentage Adjusted EBITDA is of
total revenue. Management believes that Adjusted EBITDA and Adjusted
EBITDA margin are helpful in highlighting management performance trends
because Adjusted EBITDA and Adjusted EBITDA margin exclude the results
of decisions that are outside the normal course of our business
operations.

Our presentation of Adjusted EBITDA and Adjusted EBITDA margin are
intended as supplemental measures of our performance that are not
required by, or presented in accordance with, GAAP. Adjusted EBITDA and
Adjusted EBITDA margin 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 and Adjusted EBITDA margin should not be construed to
imply that our future results will be unaffected by similar items to
those eliminated in this presentation. Adjusted EBITDA and Adjusted
EBITDA margin are included in this discussion because they are key
metrics used by management to assess our operating performance.

Adjusted EBITDA and Adjusted EBITDA margin are not defined under GAAP,
are not measures of net income, operating income, or any other
performance measures derived in accordance with GAAP, and are subject to
important limitations. Our use of the terms Adjusted EBITDA and Adjusted
EBITDA margin 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 and Adjusted EBITDA margin 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. Some of
these limitations are:

  • Adjusted EBITDA and Adjusted EBITDA margin do not reflect our cash
    expenditures or future requirements for capital expenditures or
    contractual commitments;
  • Adjusted EBITDA and Adjusted EBITDA margin do not reflect changes in,
    or cash requirements for, our working capital needs;
  • Adjusted EBITDA and Adjusted EBITDA margin do not reflect any charges
    for the assets being depreciated and amortized that may need to be
    replaced in the future;
  • Adjusted EBITDA and Adjusted EBITDA margin do not reflect the impact
    of share-based compensation upon our results of operations;
  • Adjusted EBITDA and Adjusted EBITDA margin do not reflect the
    significant interest expense or the cash requirements necessary to
    service interest or principal payments on our debt; and
  • Adjusted EBITDA and Adjusted EBITDA margin do not reflect our income
    tax expense or the cash requirements to pay our income taxes.

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

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

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 second quarter and full year
fiscal 2019 total revenue, Cloud 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 market for enterprise cloud computing develops slower than we
    expect or declines;
  • efforts to increase use of our Cloud solutions and our other
    applications may not succeed;
  • we fail to provide enhancements and new features and modifications to
    our solutions;
  • failure to comply the Federal Trade Commission’s (“FTC”) 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;
  • we are unable to successfully expand our current offerings into new
    markets or further penetrate existing markets;
  • we are unable to meet the more complex configuration and integration
    demands of our large customers;
  • our customers declining to renew their agreements with us or renewing
    at lower performance fee levels;
  • we fail to manage our technical operations infrastructure;
  • we are unable 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;
  • we fail 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.

   

Ceridian HCM Holding Inc.
Condensed Consolidated
Balance Sheets

(Dollars in millions, except share data)

 
March 31, December 31,
2019 2018
*As Adjusted
ASSETS
Current assets:
Cash and equivalents $ 206.3 $ 217.8
Trade and other receivables, net 68.8 63.9
Prepaids expenses and other current assets   55.3   48.9
Total current assets before customer trust funds 330.4 330.6
Customer trust funds   4,559.7   2,603.5
Total current assets 4,890.1 2,934.1
Right of use lease asset 39.9
Property, plant, and equipment, net 103.9 104.4
Goodwill 1,944.9 1,927.4
Other intangible assets, net 184.3 187.5
Other assets   96.0   94.4
Total assets $ 7,259.1 $ 5,247.8
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 6.8 $ 6.8
Short-term lease liabilities 13.9
Accounts payable 31.8 41.5
Deferred revenue 23.0 23.2
Employee compensation and benefits 38.9 54.5
Other accrued expenses   15.3   23.9
Total current liabilities before customer trust funds obligations 129.7 149.9
Customer trust funds obligations   4,554.0   2,619.7
Total current liabilities 4,683.7 2,769.6
Long-term debt, less current portion 662.1 663.5
Employee benefit plans 151.1 153.3
Long-term lease liabilities 32.7
Other liabilities   42.7   45.9
Total liabilities 5,572.3 3,632.3
Commitments and contingencies
Stockholders’ equity:

Common stock, $0.01 par, 500,000,000 shares authorized,
140,675,332 and 139,453,710 shares issued and outstanding as of
March 31, 2019 and December 31, 2018, respectively

1.4 1.4
Additional paid in capital 2,351.7 2,325.6
Accumulated deficit (297.3 ) (335.6 )
Accumulated other comprehensive loss   (369.0 )   (375.9 )
Total stockholders’ equity   1,686.8   1,615.5
Total liabilities and equity $ 7,259.1 $ 5,247.8
 

*Prior period information has been adjusted to reflect the
adoption of ASU No. 2014-09, “Revenue from Contracts with
Customers (Topic 606),” which we adopted on January 1, 2019.  

 
 

Ceridian HCM Holding Inc.
Condensed Consolidated
Statements of Operations

(Dollars in millions, except
share and per share data)

 
Three Months Ended March 31,
2019     2018
*As Adjusted
Revenue:
Recurring services $ 172.8 $ 160.9
Professional services and other   30.9   27.9
Total revenue 203.7 188.8
Cost of revenue:
Recurring services 50.9 50.7
Professional services and other 35.3 32.8
Product development and management 15.2 13.7
Depreciation and amortization   8.7   8.7
Total cost of revenue   110.1   105.9
Gross profit 93.6 82.9
Selling, general, and administrative expense   66.2   54.9
Operating profit 27.4 28.0
Other expense (income), net 1.6 (2.2 )
Interest expense, net   8.9   22.2
Income from continuing operations before income taxes 16.9 8.0
Income tax expense   5.7   5.8
Income from continuing operations 11.2 2.2
Loss from discontinued operations     (2.1 )
Net income   11.2   0.1
Net loss attributable to noncontrolling interest     (0.5 )
Net income attributable to Ceridian $ 11.2 $ 0.6
Net income (loss) per share attributable to Ceridian:
Basic $ 0.08 $ (0.07 )
Diluted $ 0.08 $ (0.07 )
Weighted average shares outstanding:
Basic 140,149,271 65,314,462
Diluted 147,042,228 65,314,462
 

*Prior period information has been adjusted to reflect the
adoption of ASU No. 2014-09, “Revenue from Contracts with
Customers (Topic 606)” and ASU No. 2017-07,
“Compensation—Retirement Benefits,” which we adopted on January 1,
2019.

 
 

Ceridian HCM Holding Inc.
Condensed Consolidated
Statements of Cash Flows

(Dollars in millions)

 
Three Months Ended March 31,
2019   2018
*As Adjusted
Net income $ 11.2 $ 0.1
Loss from discontinued operations 2.1
Adjustments to reconcile net income to net cash used in operating
activities:
Deferred income tax benefit (1.9 ) (0.2 )
Depreciation and amortization 14.4 13.9
Amortization of debt issuance costs and debt discount 0.3 1.0
Net periodic pension and postretirement cost 1.3 0.6
Non-cash share-based compensation 6.0 2.7
Other 0.5 (0.2 )

Changes in operating assets and liabilities excluding effects of
acquisitions and divestitures:

Trade and other receivables (3.8 ) (1.3 )
Prepaid expenses and other current assets (7.0 ) (13.3 )
Accounts payable and other accrued expenses (5.8 ) (2.0 )
Deferred revenue (0.2 ) 3.3
Employee compensation and benefits (16.9 ) (17.0 )
Accrued interest 3.4 (13.1 )
Accrued taxes (8.1 ) 6.3
Other assets and liabilities   (2.2 )   (5.2 )
Net cash used in operating activities – continuing operations (8.8 ) (22.3 )
Net cash used in operating activities – discontinued operations     (1.1 )
Net cash used in operating activities (8.8 ) (23.4 )
Cash Flows from Investing Activities
Purchase of customer trust funds marketable securities (143.3 ) (520.6 )
Proceeds from sale and maturity of customer trust funds marketable
securities
49.8 175.4
Expenditures for property, plant, and equipment (4.0 ) (2.9 )
Expenditures for software and technology (9.9 ) (7.4 )
Acquisition costs, net of cash acquired   (10.2 )  
Net cash used in investing activities (117.6 ) (355.5 )
Cash Flows from Financing Activities
Increase in customer trust funds obligations, net 1,916.1 230.4
Proceeds from issuance of common stock upon exercise of stock options 20.1
Repayment of long-term debt obligations   (1.7 )   (0.3 )
Net cash provided by financing activities 1,934.5 230.1
Effect of exchange rate changes on cash, restricted cash, and
equivalents
  3.9   (4.5 )
Net increase (decrease) in cash, restricted cash, and equivalents 1,812.0 (153.3 )
Elimination of cash from discontinued operations 1.0
Cash, restricted cash, and equivalents at beginning of period   1,106.3   2,411.8
Cash, restricted cash, and equivalents at end of period $ 2,918.3 $ 2,259.5

Reconciliation of cash, restricted cash, and equivalents to
the condensed consolidated balance sheets

Cash and equivalents $ 206.3 $ 57.8
Restricted cash and equivalents included in customer trust funds   2,712.0   2,201.7
Total cash, restricted cash, and equivalents $ 2,918.3 $ 2,259.5
 

*Prior period information has been adjusted to reflect the
adoption of ASU No. 2014-09, “Revenue from Contracts with
Customers (Topic 606)” and ASU No. 2016-18, “Restricted Cash,”
which we adopted on January 1, 2019.

 

Contacts

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

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Author: dmnnewswire