First quarter 2020 highlights

We are very pleased with our solid financial performance. Dayforce revenue growth, Cloud recurring services gross margin, and Adjusted EBITDA exceeded our expectations, indicating the strength of the underlying business.

First, from a growth perspective, Dayforce revenue increased by 27.1% year-over-year. Most importantly, Dayforce revenue, excluding float revenue and on a constant currency basis, grew by 31.9% as compared to 25.3% in the same period last year, driven by a 30.4% increase in Dayforce recurring services revenue and a 36.5% increase in Dayforce professional services and other revenue.

Second, from a profitability perspective, Adjusted EBITDA margin increased by 40 basis points year-over-year to 24.8%, Cloud recurring services gross margin increased by 250 basis points to 72.6%, and Cloud professional services and other gross margin improved by 1,080 basis points to (3.4)%.

Although we began to see the impact of COVID-19 in the latter half of March, the financial impact was limited to a decline in float revenue resulting from reductions in the U.S. Federal Reserve federal funds rate and the Bank of Canada overnight rate target, which had the effect of reducing revenue and Adjusted EBITDA by approximately $1.5 million. We experienced some delays in sales and kickoffs, however these delays had minimal impact on first quarter results.

Customer highlights

In times of uncertainty, the winning organizations will become smarter in how they operate. They will spend less time on transactional tasks and more time on strategy. They will leverage a broad spectrum of data and intelligence to make smarter decisions. They will embrace change and find opportunities for value creation within it, and they’ll use modern technologies that learn and adapt and evolve along with them. We

believe that our suite of HCM solutions are uniquely well-positioned to enable our customers to make smart decisions that create quantifiable value and to deliver experiences their employees will love. We call this Intelligence at work, and it remains our plan for how we expect to continue to lead in the HCM space globally.

We ended the first quarter with 4,480 Dayforce customers live, an increase of 117 customers compared to the fourth quarter of 2019 and an increase of 629 customers compared to the first quarter of 2019.

Our expansion into the Enterprise segment is paying off. We continued to see success with larger customers as indicated by a 13% increase in trailing twelve months Dayforce revenue per customer to $124,129*. Trailing twelve months Incremental Dayforce revenue per customer increased by 63% to $213,196*.

Sales highlights

Underlining our continued momentum, key wins in the quarter included:

* Excluding float revenue and on a fixed currency basis

areas of HCM, including pay, time, talent acquisition, talent management, and learning.

And, even right now, in this unprecedented time, we believe one thing remains constant - organizations globally strive to both operate more efficiently and position for growth. In April, we continued to see success including:

Marketing highlights

Virtual marketing has actually expanded our ability to reach potential customers. In April alone, we had over 90,000 HR and business leaders register for our webinar series, significantly more than would be common pre-COVID-19. Our key marketing metrics, including website traffic and qualified leads, are up significantly. We have hosted four virtual-format HCM Summit events, which saw record levels of attendance. Our first virtual HCM Summit had over 500 attendees, and we continued that momentum with an event for the Australia and New Zealand markets. As a result of our successful shift to digital marketing and virtual events, we have been able to reach wider audiences and increase our prospect touchpoints.

Global expansion

We announced an agreement to acquire Excelity. Building on our recent investments in Australia and New Zealand, we believe that this acquisition, which is expected to close in the second quarter, will position Ceridian as a leading HCM provider in the Asia-Pacific region. Excelity works with more than 300 clients, including Forbes, Volvo, Emerson, Oracle, QBE, Palo Alto Networks, Mammoet, Lufthansa, Uber, and Mondelez. They produce more than 1.2 million pay slips, and operate their native payroll platform in 13

countries, including India, China, Singapore, Hong Kong, Japan, Indonesia, South Korea, Malaysia, the Philippines, Taiwan, Thailand, Australia, and New Zealand. This acquisition provides us an opportunity to land and to expand in the Asia-Pacific region, accelerating market presence, and paves the way to extend the Dayforce native payroll platform to the Asia-Pacific region.

In addition to the Excelity acquisition, we began development of native payroll engines for Germany, Mexico, and Mauritius, which are expected to be completed in the next 18 months.

Dayforce Wallet and other product
updates

We achieved a notable milestone with the launch of www.dayforcewallet.com. Dayforce Wallet leverages the Dayforce platform’s unique continuous calculation capabilities to produce an accurate, on-demand payment, instead of an approximation of earnings. The Dayforce Wallet fundamentally changes the concept of the traditional payday as employees can request access to their pay as they earn it and need it, with no direct fees for the employer or employee.

The launch comes at a time when workers are feeling stressed about making ends meet, with many individuals, across income levels and employment types, living paycheck-to-paycheck. Using the Dayforce Wallet app, employees can request a payout of their earnings whenever they need it. They can also manage their finances, check their balance, and track their transaction history. We have a broad spectrum of customers across industries looking to implement Dayforce Wallet to support their workforce during this unprecedented time.

In the first quarter, we completed launch preparations for Dayforce Wallet, and on April 9 we activated our first customer. Danone, a global multi-national food products company operating in 120 markets, are actively adopting the Dayforce Wallet to improve the financial well-being of their employees. With a large base of front-line manufacturing staff, Danone needed an intuitive app-based solution that would drive value for their people and their business.

We will provide updates on Dayforce Wallet usage in future quarters, and we continue to expect to have more than a hundred organizations live by the end of the year.

We would also like to highlight some other Dayforce product updates for the first quarter. First, we continued to extend the Dayforce platform with the general availability of the Dayforce Engagement module, on which several customers are already live. Second, in response to the COVID-19 crisis, we launched Dayforce Safety Monitor, which enables organizations to track employee movement across facilities and to efficiently communicate potential exposure. Finally, we made COVID-19 related training content available, free-of-charge, to all Dayforce customers and prospects.

Summary

While the world has changed, customers continue to go live on the Dayforce platform. Our virtual marketing events are well attended and generating both pipeline and new sales. We are seeing solid demand for Dayforce Wallet, with live customers and prospective customers in the queue. And our investments are highly focused and tied to our stated growth initiatives that create quantifiable value for our customers.

Despite the real economic headwind we are all facing, Ceridian has underlying momentum in the business, and we believe we are well-positioned to gain share and to drive scale coming out of the crisis.

We have a strong balance sheet, and we are able to continue investing in the growth of Dayforce. We remain laser focused on delivering against our growth strategy and on delivering value to our customers and their employees and, as a result, on delivering value to you, our fellow stockholders.

Arthur Gitajn
Executive VP and CFO, Ceridian

From the CFO

The financial highlights below are on a year-over-year basis, unless otherwise stated. All financial results are reported in U.S. dollars unless otherwise stated.

Revenue

We are pleased with our strong financial performance in the first quarter of 2020.

The average float balance for our customer trust funds during the first quarter was approximately $4,093.3

million, compared to $4,075.4 million in the first quarter last year. The average yield on our float balance was 1.93% during the first quarter of 2020, a decline of 49 basis points compared to the average yield in the first quarter of 2019. The decline was primarily attributable to reductions in the U.S. Federal Reserve federal funds rate of 75 basis points in the second half of 2019 and 150 basis points in the first quarter of 2020, as well as a reduction in the Bank of Canada overnight rate target of 150 basis points in the first quarter of 2020. As a result, float revenue from invested customer trust funds was $19.6 million in the first quarter, compared to $24.3 million in the first quarter last year. The allocation of float revenue to Dayforce and Cloud revenue was $14.1 million and $16.9 million, respectively, in the first quarter of 2020.

Gross margin

In the first quarter of 2020, Cloud recurring services gross margin increased 250 basis points to 72.6%, from 70.1% in the first quarter last year, as we continued to realize economies of scale in customer support and hosting costs. Cloud professional services margin improved from (14.2)% in the first quarter last year to (3.4)%, as we continued to improve productivity in our customer implementations. Activations increased to $25.2 million, or 61.5% of Cloud professional services and other revenue, from $17.9 million, or 59.3% of Cloud professional services and other revenue in the first quarter last year. Post go-live professional services and other revenue increased to $8.7 million, or 21.1% of Cloud professional services and other revenue, from $6.7 million, or 22.2% of Cloud professional services and other revenue in the first quarter last year.

Operating profit and Adjusted EBITDA

Operating profit declined 4.0% in the first quarter of 2020, primarily as a result of share-based compensation expense, but Adjusted EBITDA improved 10.8% year-over-year. Excluding float revenue, Adjusted EBITDA increased 39.6%, reflecting gross margin improvement in our underlying Cloud business.

Net income and net income per share

Net income in the first quarter of 2020 was $8.6 million, or $0.06 per diluted share, compared to $11.2 million, or $0.08 per diluted share, in the first quarter of last year. Adjusted net income in the first quarter of 2020 was $22.0 million, or $0.15 per diluted share, compared to $20.4 million, or $0.14 per diluted share, in the first quarter of last year.

Balance sheet and liquidity

As of March 31, 2020, we had cash and cash equivalents of $255.3 million and availability under our revolving credit facility of $300.0 million. Our total debt balance was $674.7 million as of March 31, 2020, including financing lease obligations of $11.4 million.

On April 2, 2020, in light of the current uncertainty in the global capital markets resulting from the COVID-19 crisis, we elected to borrow $295.0 million under our revolving credit facility as a precautionary measure to increase our cash position and to preserve financial flexibility. We may use a portion of the proceeds from the borrowing for general corporate purposes.

Business Outlook

Impact of COVID-19

As evidenced in our first quarter 2020 results, our underlying business remains strong, and we are executing against our strategic growth levers. Beginning in the latter half of March, however, the COVID-19 crisis began to affect our business.

Withdrawing guidance

It is impossible to accurately predict the depth and duration of the COVID-19 crisis, and in particular, its impact on the employment levels at our customers. Accordingly, we are suspending our remaining quarterly guidance and withdrawing our full year 2020 guidance at this time.

To help stockholders and analysts to understand the impact of COVID-19 on our business as the COVID-19 recovery progresses, we are providing additional detail on revenue and performance indicators.

Second quarter 2020 Dayforce revenue

In the second quarter, we expect Dayforce revenue growth between 15% to 20%, excluding float revenue and on a constant currency basis.

Employment levels at existing Dayforce customers

We invoice Dayforce recurring services revenue on a per-employee, per-month (“PEPM”) basis, generally one month in advance, based on the total of active and inactive employees in the system as measured on the 15th of the previous month. Furloughed employees are included in the inactive employee counts. From April 15, 2019 to April 15, 2020, we experienced a net 17% increase in the number of Dayforce users; however, this was 190,000, or approximately 5%, less than our planned expectations.

Subsequent to April 15, 2020, we have observed that the rate of decline in Dayforce users has slowed.

Float revenue on customer trust funds

From the time we provided guidance on February 5, 2020, the Federal Reserve rate has been reduced by 150 basis points to 0.25%, and the Bank of Canada rate has been reduced by 150 basis points to 0.25%. Consistent with our previous disclosure, each 100 basis point decline in market investment rates would result in an approximately $18 million decline in float revenue over the ensuing twelve month period. Based on current market investment rates and assuming no such changes in rates for the remainder of the year, we estimate that float revenue for the full year 2020 would be approximately $48 million, or approximately $22 million lower than our previous full year 2020 guidance.

Foreign exchange impacts

The guidance issued on February 5, 2020, assumed an average U.S. dollar to Canadian dollar foreign exchange rate during the fourth quarter of 2019 of $1.32. Over the past two months, the U.S. dollar to Canadian dollar foreign exchange rate has averaged approximately $1.40; and assuming this rate, revenue would be approximately $10 to $12 million less than our previous full year 2020 guidance. We do not expect a material impact to our Adjusted EBITDA as a result of foreign exchange fluctuations, as our revenues and expenses in Canada are roughly matched.

Powerpay

Powerpay, which constitutes approximately 10% of first quarter 2020 total revenue, is invoiced on a fixed fee plus per-check basis. Approximately 40% of the Powerpay recurring revenue is from the per-check fees. Unlike Dayforce, we do not earn check fees for furloughed employees.

As of March 31, 2020, the number of Powerpay paid employees had declined approximately 13% from pre-COVID-19 levels. We monitor these counts daily, and although we experienced an additional decline of 4% from March 31, 2020 through April 30, 2020, the number of Powerpay paid employees increased modestly in each of the last six days of April.

Bureau

Bureau, which includes both payroll solutions and stand-alone tax solutions, constituted approximately 14% of first quarter 2020 total revenue.

With regard to Bureau payroll solutions, representing approximately 60% of first quarter 2020 Bureau revenue, we typically charge recurring fees on a per-employee, per-process basis. Unlike Dayforce, we do not earn check fees for furloughed employees.

With regard to Bureau stand-alone tax solutions, representing approximately 40% of first quarter 2020 Bureau revenue, invoicing is generally based on a flat monthly fee plus a per-jurisdiction filing fee. As such, we believe revenue from Bureau stand-alone tax solutions will be less impacted by changes in employment levels than revenue from Bureau payroll solutions.

Use of Non-GAAP Financial Measures

We use certain non-GAAP financial measures in this stockholder letter including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, and revenue on a constant currency and fixed currency basis. We believe that Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income, non-GAAP financial measures, are useful to management and investors as supplemental measures to evaluate our overall operating performance. Adjusted EBITDA and Adjusted EBITDA margin are components of our management incentive plan and are used by management to assess performance and to compare our operating performance to our competitors. We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, as adjusted to exclude 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, and other non-recurring charges. Adjusted EBITDA margin is determined by calculating the percentage Adjusted EBITDA is of total revenue. Adjusted net income is defined as net income, as adjusted to exclude release of the valuation allowance, 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, 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 are helpful in highlighting management performance trends because Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted net income 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 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

should not be considered as alternatives to operating profit, net income, 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 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 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 are not defined under GAAP, are not measures of net income, operating profit, 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 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 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, 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 and fixed 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. We calculate revenue on a constant currency basis by applying the average foreign exchange rate in effect during the comparable prior period. Dayforce revenue per customer is calculated on a fixed currency basis by applying the prior year average exchange rate to all comparable periods.

Forward-Looking Statements

This stockholder letter 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 stockholder letter include statements relating to second quarter and full year fiscal 2020, 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:

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.

About Ceridian HCM Holding Inc.

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.

Ceridian. Makes Work Life Better™.