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Ceridian HCM Holding Inc
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I would like to remind everyone that our remarks may include forward-looking statements and projections. These forward-looking statements are based on management's reasonable assumptions and current beliefs. There are a number of factors that could cause Ceridian's results to differ materially from our expectations. You can learn more about these risks in the press release and shareholder letter to be issued earlier this afternoon on our website and in our SEC filings. Ceridian undertakes no obligation to revise any forward-looking statements made on this call, except as required by law. With that, I'll turn the call over to David.
Thanks, Matt. And good evening, everyone. Thank you for joining into the call today. Before we go into Q&A, I want to spend a few minutes highlighting the quarter. We had a strong start to the year, executing well across sales implementation, customer support, and product and technology. Dayforce recurring revenue, excluding float, grew by 31% year-over-year, exceeding the high end of our guidance range. Total revenue was 20 -- grew by 25.1%, and adjusted gross margin on recurring increased by 220 basis points to 75.5%. Adjusted EBITDA margin exceeded the high end of our guide by 347 basis points. On the customer side, we added 175 customers and now have 505,609 customers live on Dayforce.
At the same time, the average recurring revenue per Dayforce customer grew by 10%. And on new sales, we sold over 35% of customers acquiring a full suite. Dayforce Wallet continues to do well. We now have sold over 1100 customers on the Dayforce Wallet of which 530 are live. Registration rates have increased to 36% across the eligible employees. Load balancers also increased by 17% year-over-year. So overall a very strong quarter. On the macro-environment, our business remains resilient and we continue to benefit from healthy employee indicators and rising interest rates. And as such, we are raising our fiscal year 2022 guidance for revenue and profitability as detailed in our shareholder letter. With that, I'd like to turn the call over to Matt, who will guide us through the Q&A.
Thank you, David. As we go through the Q&A portion of the call, I'll announce your name, and at that point, we ask that you please unmute your line and ask your question and then a re-mute your line. We also ask that you please limit your time to one question and one follow-up. Thank you. First question from Siti Panigrahi from Mizuho.
[Indiscernible] Tim, thanks taking my question. Just wanted to think so wallet. So it's almost like two years. If our several other time period and now full-year, so it's good to see the momentum and even registration 36%. Just wondering what -- how is the training compared to your expectation so far? And also what sort of feedback you're getting on the new products I cast back in [Indiscernible] two years. And what should we expect in the remaining -- remainder of 2022?
Siti, to answer your question is tracking well against our expectation. Also our merit is that 89% of our new U.S. customers are attached in wallet, which is obviously an increase that we've seen year-over-year. We've seen good reception from the cashback partnership that we have with Nosh. Also within the quarter we added support for minor employees, which allows us obviously to deliver this solution better to hospitality and retail.
Just quick follow up to EBITDA margin, seemed to be pretty good. This quarter, is there any kind of onetime team or I was thinking about the remainder of the quarter, given some of the year-over-year leaning workforces.
I'll start by [Indiscernible] we've raised guidance for the year. We've raised both the low-end and the top end by $10 million. [Indiscernible] Andrew to ask me to add a bit more color to that.
Yes. Sure. For Q1, we had a couple of things. We've increased our Cloud recurring gross margin that actually exceeded our expectations. Last quarter, as you remember, we've discussed that we did some actions to re-balance some of our workforce into our shared Services center in APJ. We've executed that very well. We've gained efficiencies in our Cloud recurring gross margin and that will continue throughout the year. That's very important because that's also helps us scale in the long term.
We had also taken a little bit of an upside on Bureau. We had better volume than expected in our tax and Payroll in North American so that flew also directly through the bottom line, and we had a little bit of float upside as well, so those are the main things that happened in Q1. Of note, we also continued to make some investments in our products and technology as well in Q1 and will continue to do so in the second-half-of-the-year in Q2 as well.
Great. Thank you.
Next up, we have, Jared Levine of Cowen.
Thank you. Can you discuss how 1Q bookings performance came in versus your internal expectations, including contributions by employer size segment in geography as well?
Leagh, you want to take that one?
Sure. I mean, here's a little say. Q1 was an excellent bookings quarter. Really solid results and really robust customer demand. Solid growth in the North American mid-market. An excellent quarter in AMIA, and a really good out of the gate performance in APJ. As David said, more than 35% of our sales in the first quarter were full suite. And we're seeing continued innovation on the platform and therefore, ability to go back into the base and continue to sell.
And we're seeing that our retention rates and net promoter scores remain very, very high, which makes for a very warm base to be able to sell back into. The pipeline for the full-year rolling to quarter and rolling four quarter is very strong, and our win rates have gone up pretty demonstrably year-over-year. As a result of the number of things, one of which is our consistently building SI ecosystem and the referred pipeline that we're seeing from that ecosystem, which is well known by the size and therefore drives greater win-rate. So a really solid bookings quarter overall.
Okay, great. And then in terms of Salesforce crew activity, is that trending higher? So is it basically approving Salesforce productivity as well as the healthy demand environment? It sounds like -- I don't know impacts or many macro concerns whether that be Russia, Ukraine or inflation, but just be great to hear your color there.
None at all. The Salesforce executed well across GIA and across the segment.
Thank you.
Next up, we have Matthew Pfau from William Blair.
Great. Nice results, guys and thanks for taking my question. Wanted to ask on the full suite attach that you're seeing. How does that 35% compared to what you've seen historically? Are there any major differences in attach by client size?
We've seen the attach rate go up quarter-over-quarter for quite some time now, so it's significantly higher than where it was, say, a year ago, or two years ago, and we will continue to see that do well. We're doing particularly well in our majors market, which goes up to about 3500 employees. I would say when looking at us competitively now on the Talent side, we are very strong, relative to both the ERPs and more of the pure-play players.
Got it. And to follow-up on the Talent intelligence suite and some of the functionality you released, is that a major discussion point in some of the full-service wins that you're seeing there? And is that a big differentiation point relative to some of your competition?
Again, as you know, we differentiate by having a single database, a single application, one user experience within the system. And so when we actually compete, we are differentiated, I think, from all in terms of our end-to-end capability across core HR, talent, and payroll.
Great. Thanks, guys. Appreciate it.
Next up we have Kevin McVeigh from Credit Suisse. Kevin, it sounds like you're muted.
Sorry about that. Thank you -- thank you so much, and congratulations on the results. Can you give us a sense of where you beat expectations in the Cloud recurring gross margin in the first quarter, and really nice leverage coming through the model for the full-year, but just relative to expectations in the first quarter?
Look, we performed very well. What's refining is that there are bosoms of the technology, which is reflected in the very hiring customer retention rate as well as our net per motor scores, has led to a decrease in inbound call volumes, and so lower cost. We're also seeing more efficiencies across implementation and, obviously, the parts of hosting and customer support.
The only other thing I would add is we've spent the last year building customer communities where customers can self-solve issues that may come in -- may have previously come into our support center. And so as a result, we have a really sustainable way of solving customer need that's been built by a really good team.
Great. And then just a quick follow-up. Of the 1100 customers that are signed on the Dayforce Wallet, I think in the shareholder letter, you said 530 were live, the incremental 570, how should we think about the sequencing of that in terms of them going live.
It's a -- there is no real magic to the sequencing of the actual customers. As you know, we typically tried take our payroll customers live on a quarter end in the U.S. and the income there will be more monthly or will be more monthly in AMIA and APJ. When it comes to [Indiscernible] to really comes down to how quickly the customers want to move. Most customers start off with the smaller group of employees which they tested out, rolled it out, and once they get comfortable, they then extend it to the full population.
Thank you so much.
Next up we have Mark Marcon from Baird.
Hey Congratulations on the quarter and thanks for taking my call. Wanted to delve more deeply in terms of the bookings that you highlighted in the shareholder letter. I was particularly impressed by the government of Canada. It looks like that is progressing well. Wondering if you can give some color there, as well as with regards to the magnitude of the international wins that you are getting, it looks like you're making really nice progress from that perspective. Wondering if you can comment about, what's the competitive environment is like there, who the takeaways are from, and what's the scope of services are that the international clients are taking on? And then I have a follow-up
I'll start there and I'm sure you will add a lot more color. The government of Canada project appears to be progressing very well. The contract value was increased by $21 million Canadian inside the quarter. I think that's a good reflection of the progress that we're making over there. On the global side, I think I'd be amiss if I didn't talk about the expansion we've had across native payroll. Within the quarter, we started releasing Singapore native payroll, which is now in pilot with a few charger customers. And as well with Project Unify, which is the Excelity and the Ascender pay engines. We are now supporting countries in Indonesia, the Philippines, Thailand, Malaysia, South Korea, Taiwan, and Hong Kong.
We made this tremendous progress on the global side. Two data points on the global side, one, our products are very competitive to the players inside those geography that we are not only selling to North American companies that have populations in the EMEA, APJ, [Indiscernible], Brazil, and Caribbean marketplaces that we actually compete head-on with the local players. And because of the investments we have made in employee chart and outlets and Workforce Management, our products obviously is very, very competitive inside the market. In terms of percentage of ACV. Global is now becoming quite considerable. I believe the, of the ACV numbers, the sales number within the quarter, about 20% of it was outside of North America. Now Leagh, do you want to add any color to other global oe to GRC?
Only thing I would add is, the way that we think about global is as we expand, there's an opportunity to do two things, Mark. We can sell locally, so to customers that only have an employee base in the locale that we're servicing or we can sell to global multinationals with lots of different geographies. So our global expansion allows us to unlock TAM in both of those indices simultaneously. And you can see that in our shareholder letter. So what I would say is, in the Shareholder letter we call out the longest standing retailer based in IMEA with 10,000 employees.
They bought the full suite, their IMEA based largely, and they're going to roll it out to their entire population. A global online gaming company in the UK with operations across 10 countries and 7,000 employees can also be serviced by us. When you shift to some of the larger references that we noted in the shareholder letters, second largest global consultancy in the world shows Ceridian to deploy to their North American population of 52,000, but with opportunity to expand globally.
And then as you referenced under our customers section, the world's largest leading global business information company, chose us to service their North American population first, which went live in less than a year, and they're now willing us out to 16 countries over the course of the next 14 months. So we have an opportunity to do those two things as we grow globally, which is a really important marker to our success.
That's fantastic. I had a question for Noemie. Can you talk a little bit about the impact in terms of rising rates? What did you already bake in to the guidance? And what could potentially be a further addition as we think about the [Indiscernible] discussions this afternoon, in terms of rolling out short-term rate hikes?
We've raised our guidance as you saw on cloud revenue until the revenue to account for the near-term rate environment. We've accounted for the recent hikes that we saw, including today, and we also have to seems like a ladder portfolios, so remember there is half of our portfolio that's invested in liquidity and the other half is invested in longer-term instruments so there's not -- there's a little bit more timing until all those interest rates benefit [Indiscernible] years [Indiscernible]
Great. Thank you so much.
Next up, we'll go to Robert Simmons from D. A. Davidson.
Thanks for taking a question. First, I was wondering what impact are you seeing from higher inflation rates? Are you able to move past some of the on terms of price increases to your customers, presumably at renewals?
In the majority of our contracts, we have CPI [Indiscernible] so we do benefit over time on an increased inflation.
The sound quality is a little off. I think maybe there's something wrong with your microphone or speaker or something like that. I [Indiscernible] at times. But second question, the severance starters in the quarter we're pretty high. Can you talk about what kind of changes you're making? Do you think you've got things pretty much set at this point?
Let me take that and maybe you can add some color. First of all, as we've discussed before, now we expected we had rebalanced our workforce, especially in the support and operations into our shared services center in APJ. We've expanded our support center in Manila. We've done that quite successfully. We had very good hiring trends over there. So that has helped us be more efficient and gain scale in the Cloud-recurring gross margin, as we've mentioned. We've also done -- typically what we do at the beginning of the year, we've also performance-managed and look at our existing sales force, as well as resources in the product technology group, and looked at performance management typical -- as you would expect us to do, every beginning of the year, so that's the other part of it.
Got it. Great. Thank you very much.
Next up we have Pinjalim Bora from JPMorgan.
Great. Hey, everyone congrats on the quarter and thanks to taking our questions and the sitting from our care. David I have a question on Wallet. How far along are you with respect to the original vision of the Product? Because I remember it was a pretty grand division with expect to the Dayforce identity where employees will be able to carry them, carry the Wallet across different organizations. Help us understand where are you in that journey? And maybe just a unit economics that you are realizing at wallet at this point.
So we're very happy with the traction we're getting with wallet and Wallet capabilities. I also would say that the Wallet is a very robust system. In other words, we moved to a lot of money very reliably over the last about 18 months to two years. In terms of the full vision, we are actively now building that. And I would expect it to come to market late next year.
Later this year. And we'll expect more revenue?
Late next year, sorry,
Late next year. Okay, got it. And the second question about [Indiscernible] hiring. Helps us understand where are you with respect to sales capacity for this year given the tight labor market.
I would say the sales organization is near capacity now. So we spent a huge amount of time in Q1 doing what every organization does in Q1, which is setting their go-to-market, making the changes that we believed were required in order to unlock the year, and we went on not only -- to Noemie's point, we performance-managed the sales team appropriately, which one should do every year in a healthy sales organization, and we hired the backfill appropriately and of higher-quality in our belief. And so as a result, have a really great go-to-market setup for the full-year.
Good to hear. Thank you.
Next up, we have Bhavin Shah, Deutsche Bank. Bhavin? Okay. We'll circle back. Next up, we have Dan Jester from BMO.
Just conceptually, how should we be thinking about in a higher interest rate environment and how you fund the wallet? And any puts and takes we should be thinking about from that perspective?
In terms of the actual wallet as the interest rates go up, the basis points do go up as well, but if you take a data 25 basis points amounts to probably about seven basis points, the amount of time that's outstanding. Say if it goes up by 1% it will be 28 basis points type of thing.
And then with regards to the international commentary, sounds very positive. I didn't catch how much of that was net new versus conversions from some of the acquisitions data over the years. Can you just dive in to that, please? Thank you.
They were net new.
Did you here that? I don't know if we're a little choppy on this end. David said they were all net new.
Okay. Great. Thank you.
So next up we have Josh Reilly from Needham.
Hey, guys, thanks for taking my questions. Maybe one on the macro here. When you're looking at the business outside the United States, we know that the U.S. has been pretty resilient here since the Ukraine war started. But have you seen any divergence in customer confidence outside the U.S. since the war has started specifically?
We have very little exposure to Russia and Ukraine. I was in London probably about four weeks ago, and I didn't see any impact from the war, as strange as that might be. So we've continued to do very well in EMEA and in the UK and Ireland.
Got it. That's helpful. And then you mentioned in the shareholder letter that the Dayforce card and continues to be used in average of 23 times per month by customers where it's relevant.
25 times.
Is it 25? Okay. Sorry, it's 25. Curious, is the mix and or size of these transactions changing now that the economy's reopening?
I haven't looked at that in particular. It still seems to be the same, largely, grocery, fast food, restaurants, gas, and convenience, followed by ATM withdrawals. The average withdrawal typically is about $30.
Got it. Thanks guys.
Next up, we have Raimo Lenschow from Barclays.
Hey. Thank you. I'm calling with a black t-shirt that's [Indiscernible] David, I wanted to ask about the Wallet in terms of -- it offered a differentiation factor for you in sales pitches. How that's playing out? What do you also expect from the industry there, in terms of trying to come up with copycat products to say, "Oh, we have that as well". Can you speak to that, please?
Look, Raimo, it's very strong. As I mentioned, in the U.S., we're seeing an 89% attachment rate for wallet to new sales, which talks about, obviously, the perceived strength of the product and the value that it brings to the employees of our customers. We have seen the other players in market bringing bolted-on solutions into the marketplace. The major difference is with us, there's no reconciliation that's required, and there is no loan made to the employee. All of the other solutions, the card vendor effectively gives a loan to the employee for the number of days outstanding. We don't do that.
We do a true payroll where we do the remittances at the federal and the state level the very next day. So it's a truly compliant type of solution. The other difference is we do not charge any direct fees to the employees of our customers. We don't believe in doing that. We think that would be morally wrong, whereas the other solutions do require membership fees or fees to use the actual wallet.
Okay. And then if I may, one follow-up. As you started winning more upmarket, you have bigger accounts, what do you see in terms of customer interest -- customer appetite revisit their HR systems? Going back to that whole theme of back office and realizing like, "Oh, my front office systems look really good, but my back office is very dated". You have more success upmarket now. What do you see in terms of customer conversations here? Thank you. And congrats from me as well.
I would start off by saying the government of Canada, what with all quality and testing is core HR talent, payroll, and workforce management, and as you know, if that goes forward, that's for well over 100,000 people. In the major market and enterprise space, we have a very, very healthy attachment rate and upsell rate to the customers where we do to the core HR, as well as the Talent margin. In EMEA, we typically start off with core HR our and Talent, because as you know, those are more demanded to then probably Payroll in that particular market and probably the same across APJ. We now are gauging traction and our Gartner positioning, means that we are being considered for the back-office thesis, as you would say, the core HR, but as well some of the Talent components.
Okay. Thank you.
At this point, we'd like to poll the audience to check if there are any remaining questions. If you have one, please raise your hand. There are no further questions. Thank you all for joining us on the call and we look forward to speaking with you in the future.
Thank you.
Thank you.