Ceridian Reports Fourth Quarter and Full Year 2018 Results

  • Fourth quarter 2018 Cloud revenue of $148.3 million, up 27.5%
    year-over-year
  • Fourth quarter 2018 total revenue of $200.3 million, up 9.8%
    year-over-year
  • Excluding the effect of foreign currency fluctuations, fourth
    quarter 2018 Cloud revenue increased 29.6%, and fourth quarter total
    revenue increased 11.3% year-over-year
  • Fourth quarter 2018 operating profit of $21.5 million, up 33.5%
    year-over-year
  • Fourth quarter 2018 Adjusted EBITDA of $43.5 million, up 22.2%
    year-over-year
  • Full year 2018 Cloud revenue of $534.3 million, up 32.2%
    year-over-year
  • Full year 2018 total revenue of $746.4 million, up 11.3%
    year-over-year
  • Excluding the effect of foreign currency fluctuations, full year
    2018 Cloud revenue increased 32.3%, and full year 2018 total revenue
    increased 11.3% year-over-year
  • Full year 2018 operating profit of $52.8 million, up 60.0%
    year-over-year
  • Full year 2018 Adjusted EBITDA of $157.1 million, up 33.4%
    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 fourth quarter and year
ended December 31, 2018. 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 fourth quarter of 2018, which
was a strong ending to a great year for Ceridian,” said David Ossip,
Chairman and Chief Executive Officer of Ceridian. “Revenue from
Dayforce, our flagship cloud HCM platform, grew 34% to $122.6 million,
and we now have 3,718 customers live on the Dayforce platform, a net
increase of 253 customers from the third quarter of 2018, and a net
increase of 717 customers year-over-year. We now have more than 3.1
million active users on the Dayforce platform.”

Arthur Gitajn, Executive Vice President and Chief Financial Officer of
Ceridian, added, “We achieved solid revenue growth in the quarter
despite currency headwinds. On a constant currency basis, Ceridian’s
total revenue grew 11.3%, Cloud revenue grew 29.6%, and Dayforce revenue
grew 35.5% during the fourth quarter of 2018 compared to the fourth
quarter of 2017.”

Financial Highlights for the Fourth Quarter and Full Year 2018

Revenue

  • Dayforce revenue increased 34.3% to $122.6 million for the fourth
    quarter of 2018 and 38.5% to $443.0 million for the full year of 2018,
    both as compared with the same periods in 2017. Excluding the effect
    of foreign currency fluctuations, Dayforce revenue increased 35.5% for
    the fourth quarter of 2018 and 38.5% for the full year of 2018, both
    as compared with the same periods in 2017.
  • Cloud revenue, which includes both Dayforce and Powerpay, increased
    27.5% to $148.3 million for the fourth quarter of 2018 and 32.2% to
    $534.3 million for the full year of 2018, both as compared with the
    same periods in 2017. Excluding the effect of foreign currency
    fluctuations, Cloud revenue increased 29.6% for the fourth quarter of
    2018 and 32.3% for the full year of 2018, both as compared with the
    same periods in 2017.
  • Total revenue, which includes revenue from both our Cloud and Bureau
    solutions, increased 9.8% to $200.3 million for the fourth quarter of
    2018 and 11.3% to $746.4 million for the full year of 2018, both as
    compared with the same periods in 2017. Excluding the effect of
    foreign currency fluctuations, total revenue increased 11.3% for the
    fourth quarter of 2018 and 11.3% for the full year of 2018, both as
    compared with the same periods in 2017.

Operating Profit and Adjusted EBITDA

  • Operating profit increased 33.5% to $21.5 million for the fourth
    quarter of 2018 and 60.0% to $52.8 million for the full year of 2018,
    both as compared with the same periods in 2017. Excluding the impact
    of $26.6 million in transaction expenses associated with our IPO, debt
    refinancing, and secondary offering, operating profit would have been
    $79.4 million for the full year of 2018.
  • Adjusted EBITDA increased 22.2% to $43.5 million for the fourth
    quarter of 2018 and 33.4% to $157.1 million for the full year
    of 2018, both as compared with the same periods in 2017.

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

  • Income from continuing operations was $10.8 million for the fourth
    quarter of 2018, compared to income from continuing operations of
    $47.7 million for the fourth quarter of 2017, which included a $59.4
    million tax benefit associated with the enactment of the Tax Cuts and
    Jobs Act. Income from continuing operations before income taxes was
    $12.7 million for the fourth quarter of 2018, compared to a loss from
    continuing operations before income taxes of $5.7 million for the
    fourth quarter of 2017. Basic and diluted net income per share from
    continuing operations attributable to Ceridian was $0.08 and $0.07 for
    the fourth quarter of 2018 based on 138.7 million basic and 145.4
    million diluted weighted average common shares outstanding,
    respectively. Basic and diluted net income per share from continuing
    operations attributable to Ceridian was $0.67 and $0.39 for the fourth
    quarter of 2017, based on 65.3 million basic and 110.9 million diluted
    weighted average common shares outstanding, respectively.
  • Loss from continuing operations was $38.1 million for the full year of
    2018, compared to a loss from continuing operations of $4.5 million
    for the full year of 2017, which included a $59.4 million tax benefit
    associated with the enactment of the Tax Cuts and Jobs Act. Loss from
    continuing operations before income taxes was $30.4 million for the
    full year of 2018, compared to loss from continuing operations before
    income taxes of $54.1 million for the full year of 2017. Basic and
    diluted net loss per share from continuing operations attributable to
    Ceridian was $(0.40) for the full year of 2018 based on 114.0 million
    basic and diluted weighted average common shares outstanding. Basic
    and diluted net loss per share from continuing operations attributable
    to Ceridian was $(0.36) for the full year of 2017, based on
    65.2 million basic and diluted weighted average common shares
    outstanding.

Balance Sheet

  • Cash and cash equivalents were $217.8 million as of December 31, 2018,
    an increase of $123.6 million compared to $94.2 million as of
    December 31, 2017.
  • Total debt was $670.3 million as of December 31, 2018, a reduction of
    $449.5 million compared to $1,119.8 million as of December 31, 2017.

Key Metrics

  • Ceridian’s annual Cloud revenue retention rate was 96.3% for the year
    ended December 31, 2018, compared to 97.0% for the year ended December
    31, 2017.
  • Ceridian’s Cloud annualized recurring revenue (“ARR”) was $506.2
    million for the year ended December 31, 2018, an increase of 29.5%, or
    $115.2 million, compared to ARR for the year ended December 31, 2017.

Dayforce Live Customer Count

  • 3,718 Dayforce customers were live on the Dayforce platform at the end
    of 2018, a net increase of 717 customers as compared to 3,001 Dayforce
    customers at the end of 2017.

ASC 606 Adoption

  • Management will adopt Accounting Standards Update (“ASU”) No. 2014-09,
    which replaces all existing revenue accounting guidance with
    Accounting Standards Codification Topic 606 (“ASC 606”), “Revenue from
    Contracts with Customers,” beginning in the first quarter of 2019,
    using the retrospective method for adoption. The new standard will
    result in changes to the classification and timing of Ceridian’s
    revenue recognition. Specifically, revenue classified as professional
    services and other revenue will increase and revenue classified as
    recurring services revenue will be reduced under the new standard, as
    compared to current GAAP. Further, the new standard will result in
    changes to the timing of Ceridian’s revenue recognition compared to
    current GAAP. In compliance with the new standard, a contract asset
    will be reflected on the consolidated balance sheets and will be
    amortized over the contract period, which is generally three years.
    Ceridian will have changes to the timing of certain incremental
    selling, general, and administrative expenses, as the new standard
    will also require capitalizing and amortizing certain selling
    expenses, such as commissions and bonuses paid to the sales force.
    These sales expenses will be amortized over the period of benefit,
    generally five years.
  • We have included in the financial schedules attached to this press
    release the retrospective financial impacts to the specific revenue
    and operating profit (loss) line items, as well as our fully adjusted
    financial results reflecting the adoption of ASC 606 retrospectively
    for the quarterly periods ended in fiscal years 2017 and 2018.

Business Outlook

Based on information available as of February 6, 2019, Ceridian is
issuing guidance for the first quarter and full year of 2019 as
indicated below. Please note that this guidance reflects the January 1,
2019, adoption of ASU No. 2014-09, ASC 606. Furthermore, this guidance
reflects a $1.30 Canadian dollar to $1.00 U.S. dollar foreign exchange
rate.

Full Year 2019

  • 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.

First Quarter 2019

  • 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 $203.0 million to
    $205.0 million.
  • Adjusted EBITDA is expected to be in the range of $46.0 million to
    $48.0 million.

We have not reconciled the Adjusted EBITDA ranges for the first 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 February 6, 2019 at 5:00 p.m.
Eastern Time to discuss the financial results for the fourth quarter and
fiscal year of 2018. 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, revenue growth in a constant
currency, revenue retention rate, and ARR. 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.

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 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; we fail to comply with the FTC’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; 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 fourth party
licenses or errors; 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 and general economic,
political and market forces beyond our control. 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, 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.
Consolidated Balance Sheets
(Dollars in millions, except share data)
 
    December 31,
2018     2017
(unaudited)
ASSETS
Current assets:
Cash and equivalents $ 217.8 $ 94.2
Trade and other receivables, net 69.9 66.6
Prepaid expenses 40.3 36.4
Assets of discontinued operations 156.2
Other current assets   2.0     5.3  
Total current assets before customer trust funds 330.0 358.7
Customer trust funds   2,603.5     4,099.7  
Total current assets 2,933.5 4,458.4
Property, plant, and equipment, net 104.4 102.0
Goodwill 1,927.4 1,961.0
Other intangible assets, net 187.5 206.5
Other assets   1.6     2.0  
Total assets $ 5,154.4   $ 6,729.9  
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 6.8 $
Accounts payable 41.5 44.4
Accrued interest 0.1 15.9
Deferred revenue 17.2 14.0
Employee compensation and benefits 54.5 68.8
Liabilities of discontinued operations 0.2 19.6
Other accrued expenses   23.6     15.0  
Total current liabilities before customer trust funds obligations 143.9 177.7
Customer trust funds obligations   2,619.7     4,105.5  
Total current liabilities 2,763.6 4,283.2
Long-term debt, less current portion 663.5 1,119.8
Employee benefit plans 153.3 152.4
Other liabilities   42.0     45.5  
Total liabilities 3,622.4 5,600.9
Commitments and contingencies
Stockholders’ equity:

Senior preferred stock, $0.01 par, 70,000,000 shares authorized,
16,802,144 shares issued and outstanding as of December 31, 2017

184.8

Junior preferred stock, $0.01 par, 70,000,000 shares authorized,
58,244,308 shares issued and outstanding as of December 31, 2017

0.6

Common stock, $0.01 par, 500,000,000 shares authorized,
139,453,710 shares issued and outstanding as of December 31, 2018,
and 150,000,000 shares authorized, 65,285,962 shares issued and
outstanding as of December 31, 2017

1.4 0.7
Additional paid in capital 2,325.6 1,565.4
Accumulated deficit (419.3 ) (348.2 )
Accumulated other comprehensive loss   (375.7 )   (312.1 )
Total stockholders’ equity 1,532.0 1,091.2
Noncontrolling interest       37.8  
Total equity   1,532.0     1,129.0  
Total liabilities and equity $ 5,154.4   $ 6,729.9  
 

Contacts

Investor Relations
Jeremy Johnson
Vice President, Finance and
Investor Relations
Ceridian HCM Holding Inc.
1-844-829-9499
[email protected]

Public Relations
Teri Murphy
Director, Corporate Communications
Ceridian
HCM Holding Inc.
1-647-417-2117
[email protected]

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