UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly reporting period ended ~~September 30, 2019~~March 31, 2020

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-38467

Ceridian HCM Holding Inc.

(Exact name of registrant as specified in its charter)

Delaware

46-3231686

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer

Identification Number)

3311 East Old Shakopee Road

Minneapolis, Minnesota 55425

(952) 853-8100

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common stock, $0.01 par value

CDAY

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐☒	Accelerated filer	☐
Non-accelerated filer	☒☐	Smaller reporting company	☐
		Emerging growth company	☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as the latest practicable date: ~~143,881,411~~145,020,556 shares of Common Stock, $0.01 par value per share, as of ~~November 5, 2019.~~May 4, 2020.

Ceridian HCM Holding Inc.

Table of Contents

		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART I. FINANCIAL INFORMATION		45

Item 1.	Condensed Consolidated Financial Statements (unaudited)	45

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3024

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4935

Item 4.	Controls and Procedures	5036

PART II. OTHER INFORMATION		5137

Item 1.	Legal Proceedings	5137

Item 1A.	Risk Factors	5137

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5142

Item 3.	Defaults Upon Senior Securities	5142

Item 4.	Mine Safety Disclosures	5142

Item 5.	Other Information	5142

Item 6.	Exhibits	5243

CAUTIONARY NOTE REGARDING F~~ORWARD-LOOKING~~FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains, or incorporates by reference, not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and that are subject to the safe harbor created by those sections. Forward-looking statements, including, without limitation, statements concerning the conditions of the human capital management solutions industry and our operations, performance, and financial condition, including, in particular, statements relating to our business, growth strategies, product development efforts, and future expenses. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,~~��~~” “seeks,” “believes,” “estimates,” “expects,” “assumes,” “projects,” “could,” “may,” “will,” “should,” and similar references to future periods, or by the inclusion of forecasts or projections.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national, or global political, economic, business, competitive, market, and regulatory conditions and the following:

~~our inability to attain or to maintain profitability;~~

•

the impact of the Coronavirus disease 2019 (“COVID-19”) pandemic on our business, operations, and financial results;

~~significant competition for our solutions;~~

•

our inability to attain or to maintain profitability;

~~our inability to continue to develop or to sell our existing Cloud solutions;~~

•

significant competition for our solutions;

~~our inability to manage our growth effectively;~~

•

our inability to continue to develop or to sell our existing Cloud solutions;

~~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;~~

•

our inability to manage our growth effectively;

~~the decline or slower than expected development of the market for enterprise cloud computing;~~

•

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;

~~failure of our efforts to increase use of our Cloud solutions and our other applications may not succeed;~~

•

the decline or slower than expected development of the market for enterprise cloud computing;

~~our failure to provide enhancements and new features and modifications to our solutions;~~

•

failure of our efforts to increase use of our Cloud solutions and our other applications may not succeed;

~~failure to comply the Federal Trade Commission’s (“FTC”) ongoing consent order regarding data protection;~~

•

our failure to provide enhancements and new features and modifications to our solutions;

~~system interruptions or failures, including cyber-security breaches, identity theft, or other disruptions that could compromise our information;~~

•

failure to comply the Federal Trade Commission’s (“FTC”) ongoing consent order regarding data protection;

~~our failure to comply with applicable privacy, security and data laws, regulations and standards;~~

•

system interruptions or failures, including cyber-security breaches, identity theft, or other disruptions that could compromise our information;

~~changes in regulations governing privacy concerns and laws or other domestic or foreign data protection regulations;~~

•

our failure to comply with applicable privacy, security, data, and financial services laws, regulations and standards;

~~our inability to successfully expand our current offerings into new markets or further penetrate existing markets;~~

•

changes in regulations governing financial services, privacy concerns, and laws or other domestic or foreign data protection regulations;

~~the impact of the material weakness related to the duplicative payroll incident and our failure to maintain effective internal controls in the future;~~

•

the risk of loss caused by customer failure to repay distribution of earned net wages and associated tax amounts made on behalf of our customers for our Dayforce Wallet or other services;

~~our inability to meet the more complex configuration and integration demands of our large customers;~~

•

our inability to successfully expand our current offerings into new markets or further penetrate existing markets;

~~the risk of our customers declining to renew their agreements with us or renewing at lower performance fee levels;~~

•

our inability to meet the more complex configuration and integration demands of our large customers;

~~our failure to manage our technical operations infrastructure;~~

•

reductions in our customers’ employment levels or other overall declines in the financial viability of our current and prospective customers;

~~our inability to maintain necessary third party relationships, and third party software licenses or there are errors in the software we license;~~

•

the risk of our customers declining to renew their agreements with us or renewing at lower performance fee levels;

~~our inability to protect our intellectual property rights, proprietary technology, information, processes, and know-how;~~

•

our failure to manage our technical operations infrastructure;

~~our failure to keep pace with rapid technological changes and evolving industry standards; or~~

•

our inability to maintain necessary third party relationships, and third party software licenses or there are errors in the software we license;

•

our inability to protect our intellectual property rights, proprietary technology, information, processes, and know-how;

~~changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself.~~
•
our failure to keep pace with rapid technological changes and evolving industry standards;

•

general economic, political and market forces beyond our control; or

•

changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself.

Please refer to Part II, Item IA, “Risk Factors” of this Form 10-Q and Part I, Item IA, “Risk Factors” of our most recently filed Annual Report on Form 10-K, for the year ended December 31, ~~2018~~2019 (“~~2018~~2019 Form 10-K”), for a further description of these and other factors. Although we have attempted to identify important risk factors, there may be other risk factors not presently known to us or that we presently believe are not material that could cause actual results and developments to differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. If any of these risks materialize, or if any of the above assumptions underlying forward-looking statements prove incorrect, actual results and developments may differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. For the reasons described above, we caution you against relying on any forward-looking statements. Any forward-looking statement made by us in this Form 10-Q speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should be viewed as historical data.

PART I. ~~FINANCI~~ALFINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Ceridian HCM Holding Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions, except share data)

							March 31,			December 31,
	September 30,			December 31,			2020			2019
	2019			2018			(unaudited)
ASSETS	(unaudited)
Current assets:
Cash and equivalents	$	270.9		$	217.8		$	255.3		$	281.3
Trade and other receivables, net		69.5			63.9			82.8			80.4
Prepaids expenses and other current assets		59.9			48.9
Prepaid expenses and other current assets								68.9			57.9
Total current assets before customer trust funds		400.3			330.6			407.0			419.6
Customer trust funds		2,604.0			2,603.5			3,649.5			3,204.1
Total current assets		3,004.3			2,934.1			4,056.5			3,623.7
Right of use lease asset		36.8			—			34.8			32.0
Property, plant, and equipment, net		108.8			104.4			124.6			128.3
Goodwill		1,961.2			1,927.4			1,939.5			1,973.5
Other intangible assets, net		181.7			187.5			176.5			177.9
Other assets		143.4			94.4			138.2			150.3
Total assets	$	5,436.2		$	5,247.8		$	6,470.1		$	6,085.7
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	6.8		$	6.8		$	9.7		$	10.8
Short-term lease liabilities		13.3			—
Current portion of long-term lease liabilities								8.4			8.8
Accounts payable		34.1			41.5			34.9			43.2
Deferred revenue		27.2			23.2			26.8			25.5
Employee compensation and benefits		57.4			54.5			49.3			75.9
Other accrued expenses		14.0			23.9			18.4			13.9
Total current liabilities before customer trust funds obligations		152.8			149.9			147.5			178.1
Customer trust funds obligations		2,590.4			2,619.7			3,605.2			3,193.6
Total current liabilities		2,743.2			2,769.6			3,752.7			3,371.7
Long-term debt, less current portion		659.3			663.5			665.0			666.3
Employee benefit plans		129.1			153.3			113.9			117.2
Long-term lease liabilities		31.8			—
Long-term lease liabilities, less current portion								32.8			30.1
Other liabilities		19.7			45.9			20.1			18.1
Total liabilities		3,583.1			3,632.3			4,584.5			4,203.4
Commitments and contingencies (Note 16)
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.01 par, 500,000,000 shares authorized, 143,835,394 and 139,453,710 shares issued and outstanding as of September 30, 2019, and December 31, 2018, respectively		1.4			1.4
Common stock, $0.01 par, 500,000,000 shares authorized, 144,937,946 and 144,386,618 shares issued and outstanding as of March 31, 2020, and December 31, 2019, respectively								1.4			1.4
Additional paid in capital		2,428.3			2,325.6			2,473.0			2,449.1
Accumulated deficit		(228.3	)		(335.6	)		(221.2	)		(229.8	)
Accumulated other comprehensive loss		(348.3	)		(375.9	)		(367.6	)		(338.4	)
Total stockholders’ equity		1,853.1			1,615.5			1,885.6			1,882.3
Total liabilities and equity	$	5,436.2		$	5,247.8		$	6,470.1		$	6,085.7

See accompanying notes to condensed consolidated financial statements.

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Operations

(Unaudited, dollars in millions, except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			Three Months Ended March 31,
				*As Adjusted						*As Adjusted			2020		2019
Revenue:
Recurring services	$	167.4		$	149.5		$	503.7		$	460.5		$	181.5	$	172.8
Professional services and other		34.9			28.6			98.6			85.4			41.2		30.9
Total revenue		202.3			178.1			602.3			545.9			222.7		203.7
Cost of revenue:
Recurring services		49.4			49.1			149.0			149.3			52.2		50.9
Professional services and other		37.6			32.5			107.1			98.7			42.6		35.3
Product development and management		17.5			14.5			49.1			43.3			17.6		15.2
Depreciation and amortization		9.0			8.5			26.7			25.7			9.8		8.7
Total cost of revenue		113.5			104.6			331.9			317.0			122.2		110.1
Gross profit		88.8			73.5			270.4			228.9			100.5		93.6
Selling, general, and administrative expense		82.3			57.3			217.8			193.1
Selling, general, and administrative														74.2		66.2
Operating profit		6.5			16.2			52.6			35.8			26.3		27.4
Interest expense, net		7.8			8.8			25.2			74.4			6.9		8.9
Other expense (income), net		1.6			0.9			4.7			(0.7	)
(Loss) income from continuing operations before income taxes		(2.9	)		6.5			22.7			(37.9	)
Income tax (benefit) expense		(65.6	)		(0.7	)		(57.5	)		6.3
Income (loss) from continuing operations		62.7			7.2			80.2			(44.2	)
Loss from discontinued operations		—			(3.0	)		—			(14.8	)
Net income (loss)		62.7			4.2			80.2			(59.0	)
Net loss attributable to noncontrolling interest		—			—			—			(0.5	)
Net income (loss) attributable to Ceridian	$	62.7		$	4.2		$	80.2		$	(58.5	)
Net income (loss) per share attributable to Ceridian:
Other expense, net														2.6		1.6
Income before income taxes														16.8		16.9
Income tax expense														8.2		5.7
Net income													$	8.6	$	11.2
Net income per share:
Basic	$	0.44		$	0.03		$	0.57		$	(0.63	)	$	0.06	$	0.08
Diluted	$	0.42		$	0.03		$	0.54		$	(0.63	)	$	0.06	$	0.08
Weighted average shares outstanding:
Weighted-average shares outstanding:
Basic		142,780,819			137,768,764			141,369,339			105,730,178			144,645,325		140,149,271
Diluted		149,153,227			145,064,698			148,279,943			105,730,178			151,178,498		147,042,228

*Please refer to Note 2 for a summary of adjustments.

See accompanying notes to condensed consolidated financial statements.

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, dollars in millions)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

*As Adjusted

*As Adjusted

Net income (loss)

$
62.7

$
4.2

$
80.2

$
(59.0
)
Items of other comprehensive income (loss) before income taxes:

Change in foreign currency translation adjustment

(6.5
)

10.2

17.3

(16.6
)
Change in unrealized gain (loss) from invested customer trust funds

3.1

(6.0
)

42.3

(24.5
)
Change in pension liability adjustment ⁽¹⁾

2.5

2.9

7.5

8.7

Other comprehensive (loss) income before income taxes

(0.9
)

7.1

67.1

(32.4
)
Income tax expense (benefit), net

8.8

(0.9
)

12.4

(2.3
)
Other comprehensive (loss) income after income taxes

(9.7
)

8.0

54.7

(30.1
)
Comprehensive income (loss)

53.0

12.2

134.9

(89.1
)
Comprehensive loss attributable to noncontrolling interest

—

—

—

(0.5
)
Comprehensive income (loss) attributable to Ceridian

$
53.0

$
12.2

$
134.9

$
(88.6
)

	Three Months Ended March 31,
	2020			2019
Net income	$	8.6		$	11.2
Items of other comprehensive income (loss) before income taxes:
Change in foreign currency translation adjustment		(49.1	)		12.3
Change in unrealized gain from invested customer trust funds		23.4			21.9
Change in pension liability adjustment ⁽¹⁾		3.3			2.5
Other comprehensive (loss) income before income taxes		(22.4	)		36.7
Income tax expense, net		6.8			2.7
Other comprehensive (loss) income after income taxes		(29.2	)		34.0
Comprehensive (loss) income	$	(20.6	)	$	45.2

(1)

The amount of the pension liability adjustment recognized in the condensed consolidated statements of operations within other expense, ~~(income),~~ net was ~~$2.6~~$3.2 million and ~~$3.0~~$2.6 million during the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018, respectively, and $7.8 million and $9.0 million during the nine months ended September 30, 2019, and 2018,~~ respectively.

*Please refer to Note 2 for a summary of adjustments.

~~See accompanying notes to condensed consolidated financial statements.~~

~~Ceridian HCM Holding Inc.~~

~~Condensed Consolidated Statements of Stockholders’ Equity~~

~~(Unaudited, dollars in millions, except share data)~~

Common Stock

Additional
Paid In

Accumulated

Accumulated
Other
Comprehensive

Total
Stockholders

Shares

$

Capital

Deficit

Loss

Equity

Balance as of December 31, 2018

139,453,710

$
1.4

$
2,325.6

$
(335.6
)

$
(375.9
)

$
1,615.5

Cumulative-effect adjustment to accumulated deficit related to
the adoption of ASU 2018-02 (Please refer to Note 2)

—

—

—

27.1

(27.1
)

—

Net income

—

—

—

11.2

—

11.2

Issuance of common stock under share-based compensation plans

1,221,622

—

20.1

—

—

20.1

Share-based compensation

—

—

6.0

—

—

6.0

Foreign currency translation

—

—

—

—

12.3

12.3

Change in unrealized gain, net of tax of $2.7

—

—

—

—

19.2

19.2

Change in pension liability adjustment, net of tax of $0.0

—

—

—

—

2.5

2.5

Balance as of March 31, 2019

140,675,332

$
1.4

$
2,351.7

$
(297.3
)

$
(369.0
)

$
1,686.8

Net income

—

—

—

6.3

—

6.3

Issuance of common stock under share-based compensation plans

1,266,734

—

24.0

—

—

24.0

Share-based compensation

—

—

9.6

—

—

9.6

Foreign currency translation

—

—

—

—

11.5

11.5

Change in unrealized gain, net of tax of $0.9

—

—

—

—

16.4

16.4

Change in pension liability adjustment, net of tax of $0.0

—

—

—

—

2.5

2.5

Balance as of June 30, 2019

141,942,066

$
1.4

$
2,385.3

$
(291.0
)

$
(338.6
)

$
1,757.1

Net income

—

—

—

62.7

—

62.7

Issuance of common stock under share-based compensation plans

1,893,328

—

32.6

—

—

32.6

Share-based compensation

—

—

10.4

—

—

10.4

Foreign currency translation

—

—

—

—

(6.5
)

(6.5
)
Change in unrealized loss, net of tax of $7.0

—

—

—

—

(3.9
)

(3.9
)
Change in pension liability adjustment, net of tax of $1.8

—

—

—

—

0.7

0.7

Balance as of September 30, 2019

143,835,394

$
1.4

$
2,428.3

$
(228.3
)

$
(348.3
)

$
1,853.1

See accompanying notes to condensed consolidated financial statements.

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, dollars in millions, except share data)

	Common Stock				Additional Paid In		Accumulated			Accumulated Other Comprehensive			Total Stockholders
	Shares		$		Capital		Deficit			Loss			Equity
Balance as of December 31, 2019		144,386,618	$	1.4	$	2,449.1	$	(229.8	)	$	(338.4	)	$	1,882.3
Net income		—		—		—		8.6			—			8.6
Issuance of common stock under share-based compensation plans		551,328		—		11.4		—			—			11.4
Share-based compensation		—		—		12.5		—			—			12.5
Foreign currency translation		—		—		—		—			(49.1	)		(49.1	)
Change in unrealized gain, net of tax of $6.0		—		—		—		—			17.4			17.4
Change in pension liability adjustment, net of tax of $0.8		—		—		—		—			2.5			2.5
Balance as of March 31, 2020		144,937,946	$	1.4	$	2,473.0	$	(221.2	)	$	(367.6	)	$	1,885.6

Senior Preferred
Stock

Junior Preferred
Stock

Common Stock

Additional Paid In

Accumulated

Accumulated
Other
Comprehensive

Total
Stockholders

Non-controlling

Total

Shares

$

Shares

$

Shares

$

Capital

Deficit

Loss

Equity

Interest

Equity

Balance as of
   December 31, 2017

16,802,144

$
184.8

58,244,308

$
0.6

65,285,962

$
0.7

$
1,565.4

$
(267.3
)

$
(311.0
)

$
1,173.2

$
37.8

$
1,211.0

Net income

—

—

—

—

—

—

—

0.6

—

0.6

(0.5
)

0.1

Issuance of common
   stock under share-based
   compensation plans

—

—

—

—

88,347

—

—

—

—

—

—

—

Senior preferred dividends
   declared

—

5.3

—

—

—

—

—

(5.3
)

—

—

—

—

Share-based compensation

—

—

—

—

—

—

2.9

—

—

2.9

—

2.9

Foreign currency translation

—

—

—

—

—

—

—

—

(16.4
)

(16.4
)

(0.2
)

(16.6
)
Change in unrealized
   loss, net of tax of ($0.8)

—

—

—

—

—

—

—

—

(12.6
)

(12.6
)

—

(12.6
)
Change in pension liability
   adjustment, net of tax of
   $0.0

—

—

—

—

—

—

—

—

2.9

2.9

—

2.9

Balance as of
   March 31, 2018

16,802,144

$
190.1

58,244,308

$
0.6

65,374,309

$
0.7

$
1,568.3

$
(272.0
)

$
(337.1
)

$
1,150.6

$
37.1

$
1,187.7

Net loss

—

—

—

—

—

—

—

(63.3
)

—

(63.3
)

—

(63.3
)
Issuance of common stock

—

—

—

—

28,695,455

0.3

594.7

—

—

595.0

—

595.0

Issuance of common
   stock under share-based
   compensation plans

—

—

—

—

1,148,801

—

14.1

—

—

14.1

—

14.1

Senior preferred dividends
   declared

—

2.4

—

—

—

—

—

(2.4
)

—

—

—

—

Conversion of senior and
   junior preferred shares

(16,802,144
)

(192.5
)

(58,244,308
)

(0.6
)

42,246,650

0.4

192.7

—

—

—

—

—

LifeWorks Disposition

—

—

—

—

—

—

(95.7
)

—

0.7

(95.0
)

(37.3
)

(132.3
)
Share-based compensation

—

—

—

—

—

—

10.5

—

—

10.5

—

10.5

Foreign currency translation

—

—

—

—

—

—

—

—

(10.4
)

(10.4
)

0.2

(10.2
)
Change in unrealized
   loss, net of tax of ($0.6)

—

—

—

—

—

—

—

—

(4.5
)

(4.5
)

—

(4.5
)
Change in pension liability
   adjustment, net of tax of
   $0.0

—

—

—

—

—

—

—

—

2.9

2.9

—

2.9

Balance as of
   June 30,2018

—

$
—

—

$
—

137,465,215

$
1.4

$
2,284.6

$
(337.7
)

$
(348.4
)

$
1,599.9

$
—

$
1,599.9

Net income

—

—

—

—

—

—

—

4.2

—

4.2

—

4.2

Issuance of common
   stock under share-based
   compensation plans

—

—

—

—

584,503

—

7.8

—

—

7.8

—

7.8

Share-based compensation

—

—

—

—

—

—

4.9

—

—

4.9

—

4.9

Foreign currency translation

—

—

—

—

—

—

—

—

10.2

10.2

—

10.2

Change in unrealized
   loss, net of tax of ($0.9)

—

—

—

—

—

—

—

—

(5.1
)

(5.1
)

—

(5.1
)
Change in pension liability
   adjustment, net of tax of
   $0.0

—

—

—

—

—

—

—

—

2.9

2.9

—

2.9

Balance as of
   September 30, 2018

—

$
—

—

$
—

138,049,718

$
1.4

$
2,297.3

$
(333.5
)

$
(340.4
)

$
1,624.8

$
—

$
1,624.8

	Common Stock				Additional Paid In		Accumulated			Accumulated Other Comprehensive			Total Stockholders
	Shares		$		Capital		Deficit			Loss			Equity
Balance as of December 31, 2018		139,453,710	$	1.4	$	2,325.6	$	(335.6	)	$	(375.9	)	$	1,615.5
Cumulative-effect adjustment to accumulated deficit related to the adoption of ASU 2018-02		—		—		—		27.1			(27.1	)		—
Net income		—		—		—		11.2			—			11.2
Issuance of common stock under share-based compensation plans		1,221,622		—		20.1		—			—			20.1
Share-based compensation		—		—		6.0		—			—			6.0
Foreign currency translation		—		—		—		—			12.3			12.3
Change in unrealized gain, net of tax of $2.7		—		—		—		—			19.2			19.2
Change in pension liability adjustment, net of tax of $0.0		—		—		—		—			2.5			2.5
Balance as of March 31, 2019		140,675,332	$	1.4	$	2,351.7	$	(297.3	)	$	(369.0	)	$	1,686.8

See accompanying notes to condensed consolidated financial statements.

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, dollars in millions)

	Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
				*As Adjusted
Net income (loss)	$	80.2		$	(59.0	)
Loss from discontinued operations		—			14.8
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred income tax benefit		(75.9	)		(9.4	)
Net income							$	8.6		$	11.2
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Deferred income tax expense (benefit)								4.1			(1.9	)
Depreciation and amortization		43.9			42.4			11.8			14.4
Amortization of debt issuance costs and debt discount		0.8			1.9			0.3			0.3
Loss on debt extinguishment		—			25.7
Net periodic pension and postretirement cost		3.9			1.8			0.8			1.3
Non-cash share-based compensation		26.0			18.0			12.5			6.0
Other		1.8			0.1			0.8			0.5
Changes in operating assets and liabilities excluding effects of acquisitions and divestitures:
Trade and other receivables		(10.6	)		4.2			(4.5	)		(3.8	)
Prepaid expenses and other current assets		(10.1	)		(6.4	)		(7.5	)		(7.0	)
Accounts payable and other accrued expenses		(2.5	)		(8.4	)		(2.0	)		(5.8	)
Deferred revenue		2.6			4.8			2.1			(0.2	)
Employee compensation and benefits		(18.5	)		(27.7	)		(26.4	)		(16.9	)
Accrued interest		—			(15.5	)		—			3.4
Accrued taxes		(10.4	)		5.2			0.9			(8.1	)
Other assets and liabilities		(6.6	)		(7.3	)		(0.1	)		(2.2	)
Net cash provided by (used in) operating activities - continuing operations		24.6			(14.8	)
Net cash used in operating activities - discontinued operations		—			(3.3	)
Net cash provided by (used in) operating activities		24.6			(18.1	)		1.4			(8.8	)
Cash Flows from Investing Activities
Purchase of customer trust funds marketable securities		(335.1	)		(694.8	)		(24.6	)		(143.3	)
Proceeds from sale and maturity of customer trust funds marketable securities		278.1			707.9			49.5			49.8
Expenditures for property, plant, and equipment		(10.8	)		(6.8	)		(4.9	)		(4.0	)
Expenditures for software and technology		(27.6	)		(21.9	)		(10.7	)		(9.9	)
Acquisition costs, net of cash acquired		(29.4	)		—			—			(10.2	)
Net cash used in investing activities		(124.8	)		(15.6	)
Net cash provided by (used in) investing activities								9.3			(117.6	)
Cash Flows from Financing Activities
Increase in customer trust funds obligations, net		(54.5	)		(625.5	)		480.8			1,916.1
Net proceeds from issuance of common stock		—			595.0
Proceeds from issuance of common stock under share-based compensation plans		76.7			22.2			11.4			20.1
Proceeds from debt issuance		—			680.0
Repayment of long-term debt obligations		(5.1	)		(1,132.3	)		(2.7	)		(1.7	)
Payment of debt refinancing costs		—			(23.3	)
Net cash provided by (used in) financing activities		17.1			(483.9	)
Net cash provided by financing activities								489.5			1,934.5
Effect of exchange rate changes on cash, restricted cash, and equivalents		7.2			(2.2	)		(14.5	)		3.9
Net decrease in cash, restricted cash, and equivalents		(75.9	)		(519.8	)
Elimination of cash from discontinued operations		—			0.5
Net increase in cash, restricted cash, and equivalents								485.7			1,812.0
Cash, restricted cash, and equivalents at beginning of period		1,106.3			2,411.8			1,658.6			1,106.3
Cash, restricted cash, and equivalents at end of period	$	1,030.4		$	1,892.5		$	2,144.3		$	2,918.3
Reconciliation of cash, restricted cash, and equivalents to the condensed consolidated balance sheets
Cash and equivalents	$	270.9		$	188.0		$	255.3		$	206.3
Restricted cash and equivalents included in customer trust funds		759.5			1,704.5			1,889.0			2,712.0
Total cash, restricted cash, and equivalents	$	1,030.4		$	1,892.5		$	2,144.3		$	2,918.3

*Please refer to Note 2 for a summary of adjustments.

See accompanying notes to condensed consolidated financial statements.

Ceridian HCM Holding Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Organization

Ceridian HCM Holding Inc. and its subsidiaries (also referred to in this report as “Ceridian,” “we,” “our,” ~~and “us”~~“us,” or the “Company”) offer a broad range of services and software designed to help employers more effectively manage employment processes, such as payroll, payroll-related tax filing, human resource information systems, employee self-service, time and labor management, employee assistance programs, and recruitment and applicant screening. Our technology-based services are typically provided through long-term customer relationships that result in a high level of recurring revenue. Our operations are primarily located in the United States and Canada.

On April 30, 2018, we completed our initial public offering ("IPO"), in which we issued and sold 21,000,000 shares of common stock at a public offering price of $22.00 per share. We granted the underwriters a 30-day option to purchase an additional 3,150,000 shares of common stock at the offering price, which was exercised in full. A total of 24,150,000 shares of common stock were issued and sold in our IPO. Concurrently with our IPO, we issued and sold an additional 4,545,455 shares of our common stock in a private placement at $22.00 per share. We received gross proceeds of $631.3 million from shares issued and sold in the IPO and concurrent private placement before deducting underwriting discounts, commissions, and other offering related expenses.

Since our IPO, we have completed multiple secondary offerings, in which certain of our stockholders (the “Selling Stockholders”) have sold common stock in underwritten public offerings. All proceeds from the sale of this common stock went to the Selling Stockholders. Our secondary offerings are as follows:

~~12,650,000 shares of common stock sold at a public offering price of $36.00 per share on November 16, 2018~~

14,222,142 shares of common stock sold at a public offering price of $50.50 per share on March 22, 2019 (including 1,222,142 shares purchased pursuant to the underwriters’ option to purchase additional shares on April 3, 2019)

~~8,000,000 shares of common stock sold at a public offering price of $50.50 per share on May 23, 2019~~

~~10,000,000 shares of common stock sold at a public offering price of $49.75 per share on August 8, 2019~~

~~9,000,000 shares of common stock sold at a public offering price of $56.30 per share on September 6, 2019~~

During the three months ended September 30, 2019, we incurred $0.8 million of expenses related to our August 6, and September 4, 2019, secondary offerings. During the nine months ended September 30, 2019, we incurred $2.4 million of expenses related to our secondary offerings. Expenses associated with our secondary offerings are recorded within selling, general, and administrative expense in our condensed consolidated statements of operations.

2. Summary of Significant Accounting Policies

~~Recently Adopted Accounting Pronouncements~~

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which replaced all existing revenue guidance created by Accounting Standards Codification (“ASC”) Topic 605, including prescriptive industry-specific guidance, and created ASC Topic 606 for revenue and ASC Subtopic 340-40 for incremental costs of obtaining a contract with customers. This standard’s core principle is that an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We have adopted ASU No. 2014-09 as of January 1, 2019, using the full retrospective method for adoption. Please refer to the tables below for the retrospective impacts of the adoption of this guidance. Adoption of the new standard resulted in changes to our accounting policies for revenue recognition, as detailed below.

The adoption of the new standard resulted in changes to the classification and timing of our revenue recognition. Specifically, revenue classified as professional services and other revenue was increased, and revenue classified as recurring services revenue was reduced under the new standard, compared to ASC Topic 605. Adoption of the new standard also resulted in changes to the timing of our revenue recognition compared to ASC Topic 605 because professional services and other revenue is generally recognized earlier in the contract period than recurring services revenue. In compliance with the new standard, a contract asset is reflected on the consolidated balance sheets when revenue recognized for professional service performance obligations exceed the billings and is amortized over the contract period, which is generally three years. We also have changed the timing of certain selling, general, and administrative expenses, as the new standard required capitalizing and amortizing certain selling expenses, such as commissions and bonuses paid to the sales force. These sales expenses are now amortized over the period of benefit, which we have determined to be five years.

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. This standard requires balance sheet recognition for both finance leases and operating leases. In July 2018, the FASB issued ASU No. 2018-11 “Leases (Topic 842): Targeted Improvement,” which allowed an additional (and optional) transition method to adopt the new lease requirements. We have adopted ASU No. 2016-02 and ASU No. 2018-11 as of January 1, 2019, by recording a cumulative-effect adjustment to the opening balance of accumulated deficit on this date. Please refer to Note 15, “Leases,” for additional discussion of the impacts of adoption of this guidance.

In November 2016, the FASB issued ASU No. 2016-18, “Restricted Cash,” which requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. We have adopted this guidance as of January 1, 2019, on a retrospective basis for all periods presented. Accordingly, the condensed consolidated statement of cash flows has been revised to include restricted cash and restricted cash equivalents held to satisfy customer trust funds obligations, as a component of cash, cash equivalents, restricted cash, and restricted cash equivalents. Please refer to the tables below for the retrospective impacts of the adoption of this guidance.

In March 2017, the FASB issued ASU No. 2017-07, “Compensation—Retirement Benefits,” which aims to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments in this update require that an employer (a) report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period, and (b) report the other components of net benefit cost in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. We have adopted this guidance as of January 1, 2019, on a retrospective basis for all periods presented. Please refer to the tables below for the retrospective impacts of the adoption of this guidance.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement—Reporting Comprehensive Income,” in response to a narrow-scope financial reporting issue that arose as a consequence of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The amendment in this update allows entities to reclassify from accumulated other comprehensive income to retained earnings, the impact of the reduced federal statutory tax rate for corporations included in the Tax Act. We have adopted this guidance as of January 1, 2019, resulting in an increase in accumulated other comprehensive loss of $27.1 million, and a decrease in accumulated deficit for the same amount on our consolidated balance sheets. As of January 1, 2019, we have changed our policy for releasing income tax effects from accumulated other comprehensive loss to comply with this guidance, which is considered a change in accounting principle.

We have adjusted our condensed consolidated financial statements from amounts previously reported due to the adoption of ASC Topic 606, ASU No. 2017-07, and ASU No. 2016-18. Please refer to our Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on May 21, 2019, for information on our adjusted consolidated balance sheet as of December 31, 2018. Selected condensed consolidated financial statement line items, which reflect the adoption of the new ASUs, are as follows:

Three Months Ended September 30, 2018

As previously
reported

ASC Topic 606
Adjustments

ASU 2017-07
Adjustments

As
adjusted

Condensed Consolidated Statement of Operations

(Dollars in millions, except per share data)

Revenue:

Recurring services

$
157.2

$
(7.7
)

$
—

$
149.5

Professional services and other

22.4

6.2

—

28.6

Total revenue

$
179.6

$
(1.5
)

$
—

$
178.1

Selling, general, and administrative expense

59.4

(1.5
)

(0.6
)

57.3

Operating profit

15.6

—

0.6

16.2

Other expense, net

0.3

—

0.6

0.9

Income tax benefit

(0.9
)

0.2

—

(0.7
)
Net income

$
4.4

$
(0.2
)

$
—

$
4.2

Net income per share, basic and diluted

$
0.03

$
—

$
—

$
0.03

Nine Months Ended September 30, 2018

As previously
reported

ASC Topic 606
Adjustments

ASU 2017-07
Adjustments

As
adjusted

Condensed Consolidated Statement of Operations

(Dollars in millions, except per share data)

Revenue:

Recurring services

$
480.8

$
(20.3
)

$
—

$
460.5

Professional services and other

65.3

20.1

—

85.4

Total revenue

$
546.1

$
(0.2
)

$
—

$
545.9

Selling, general, and administrative expense

200.3

(5.4
)

(1.8
)

193.1

Operating profit

28.8

5.2

1.8

35.8

Other income, net

(2.5
)

—

1.8

(0.7
)
Income tax expense

5.8

0.5

—

6.3

Net loss attributable to Ceridian

$
(63.2
)

$
4.7

$
—

$
(58.5
)
Net loss per share attributable to Ceridian, basic and diluted

$
(0.67
)

$
0.04

$
—

$
(0.63
)

Nine Months Ended September 30, 2018

As previously
reported

ASC Topic 606
Adjustments

ASU 2016-18
Adjustments

As
adjusted

Condensed Consolidated Statement of Cash Flows

(Dollars in millions)

Net loss

$
(63.7
)

$
4.7

$
—

$
(59.0
)
Adjustments to reconcile net loss to net cash used in
   operating activities:

Deferred income tax benefit

(9.8
)

0.4

—

(9.4
)
Changes in operating assets and liabilities excluding effects of
   acquisitions and divestitures:

Trade and other receivables

2.9

1.3

—

4.2

Prepaid expenses and other current assets

(3.0
)

(3.4
)

—

(6.4
)
Deferred revenue

2.8

2.0

—

4.8

Other assets and liabilities

(2.3
)

(5.0
)

(7.3
)
Net cash used in operating activities- continuing operations

(14.8
)

—

—

(14.8
)
Cash Flows from Investing Activities

Net change in restricted cash and other restricted assets held
   to satisfy customer trust funds obligations

610.1

—

(610.1
)

—

Net cash provided by (used in) investing activities

594.5

—

(610.1
)

(15.6
)
Effect of Exchange Rate Changes on Cash, Restricted Cash, and
   Equivalents

(1.5
)

—

(0.7
)

(2.2
)
Net increase (decrease) in cash, restricted cash, and equivalents

93.3

—

(613.1
)

(519.8
)
Elimination of cash from discontinued operations

0.5

—

—

0.5

Cash, restricted cash, and equivalents at beginning of period

94.2

—

2,317.6

2,411.8

Cash, restricted cash, and equivalents at end of period

$
188.0

$
—

$
1,704.5

$
1,892.5

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accounting policies we follow are set forth in Note 2, “Summary of Significant Accounting Policies,” to our audited consolidated financial statements in our ~~2018~~2019 Form 10-K. The following notes should be read in conjunction with these policies and other disclosures in our ~~2018~~2019 Form 10-K.

In the opinion of management, the unaudited condensed consolidated financial statements contained herein reflect all adjustments (consisting only of normal recurring adjustments, except as set forth in these notes to condensed consolidated financial statements) necessary to present fairly in all material aspects the financial position, results of operations, comprehensive ~~loss,~~income (loss), and cash flows from all periods presented. Interim results are not necessarily indicative of results for a full year.

Internally Developed Software Costs

In accordance with ASC Topic 350, we capitalize costs associated with software developed or obtained for internal use when both the preliminary project stage is completed and our management has authorized further funding for the project, which it deems probable of completion. Capitalized software costs include only: (1) external direct costs of materials and services consumed in developing or obtaining the software; (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the project; and (3) interest costs incurred while developing the software. Capitalization of these costs ceases no later than the point at which the project is substantially complete and ready for its intended purpose. We do not include general and administrative costs and overhead costs in capitalizable costs. We charge research and development costs and other software maintenance costs related to software development to earnings as incurred.

~~Revenue Recognition~~

The core principle of ASC Topic 606 is that revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. In accordance with ASC Topic 606, we perform the following steps to determine revenue to be recognized:

~~Identify the contract(s) with a customer;~~

~~Identify the performance obligations in the contract;~~

~~Determine the transaction price;~~

~~Allocate the transaction price to the performance obligations in the contract; and~~

~~Recognize revenue when (or as) we satisfy a performance obligation.~~

The significant majority of our two major revenue sources (recurring and professional services and other) are derived from contracts with customers. Recurring revenues are primarily related to our cloud subscription performance obligations. Professional services and other revenues are primarily related to professional services for our cloud customers (including implementation services to activate new accounts, as well as post-go live professional services typically billed on a time and materials basis) and, to a much lesser extent, fees for other non-recurring services, including sales of time clocks and certain client reimbursable out-of-pocket expenses. Fees charged to cloud subscription performance obligations are generally priced either on a per-employee-per-month (“PEPM”) basis for a given month or on a per-employee-per-process basis for a given process, both based on usage; and fees charged for professional services are typically priced on a fixed fee basis for activating new accounts and on a time and materials basis for post go-live professional services.

Our recurring cloud subscription performance obligations are generally priced based on the number of active customer employees, as of the signing of the contract, at the contract PEPM rate over the initial contract term. Our professional services are generally based on a fixed fee charged to our customers for activating new accounts and on a time and materials basis for post go-live professional services. There is typically no variable consideration related to our recurring cloud subscriptions or our activation services, nor do they include a significant financing component, non-cash consideration, or consideration payable to a customer. Our recurring cloud subscriptions are typically billed one month in advance while our professional services are billed over the implementation period for activation of new accounts and as work is performed for post go-live professional services.

Our cloud services arrangements include multiple performance obligations, and transaction price allocations are based on the stand-alone selling price ("SSP") for each performance obligation. Our contract renewal rates serve as an observable input to establish SSP for our recurring cloud subscription performance obligations. The SSP for professional services performance obligations is estimated based on market conditions and observable inputs, including rates charged by third parties to perform implementation services.

For our performance obligations, the consideration allocated to cloud subscription revenues is recognized as recurring revenues, typically commencing with the date the customer processes their first live payroll using the solution (referred to as the "go-live" date). The consideration allocated to professional services to activate a new account is recognized as professional services revenues based on the proportion of total work performed, using reasonably dependable estimates (in relation to progression through the implementation phase), by solution.

Deferred Costs

Deferred costs, which primarily consist of deferred sales ~~commissions. Sales~~ commissions, paid based on the annual contract value of a signed customer contract are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions paid based on the annual contract value are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be five years.

~~Deferred costs~~ included within Other assets on our condensed consolidated balance sheets were ~~$91.0~~$101.0 million and ~~$83.5~~$106.4 million as of ~~September 30, 2019,~~March 31, 2020, and December 31, ~~2018,~~2019, respectively. Amortization expense for the deferred costs was ~~$8.1~~$9.0 million and ~~$6.7~~$7.7 million for the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018, respectively, and $23.5 million and $19.2 million for the nine months ended September 30, 2019, and 2018,~~ respectively.

Recently Issued Accounting Pronouncements

In August 2018, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) No. 2018-14, “Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans,” which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This update removes disclosures that are no longer considered cost beneficial, adds disclosures identified as relevant, and clarifies certain specific requirements of disclosures to improve the effectiveness of disclosures in the notes to financial statements. The amendments in this update are effective for public business entities for fiscal years ending after December 15, 2020. ~~Early adoption is permitted.~~ The amendments in this update should be applied on a retrospective basis to all periods presented. The adoption of this guidance will not have a significant impact on our annual defined benefit plan and other postretirement plan disclosures.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform,” which provides guidance for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this guidance apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this guidance provide for an optional method in which modifications of contracts within the scope of ASC Topic 310, Receivables, and ASC Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate, in addition to several other optional methods and exceptions. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. We ~~are currently evaluating~~have not yet determined the impact of the adoption of this ~~standard.~~

~~3. Discontinued Operations~~

~~Distribution of LifeWorks Business~~

~~In the second quarter of 2018, contemporaneously with~~guidance on our IPO and concurrent private placement, we distributed our controlling financial interest in LifeWorks Corporation Ltd (“LifeWorks”) to our stockholders of record prior to the IPO on a pro rata basis in accordance with their pro rata interests in us (the “LifeWorks Disposition”). At this time, the LifeWorks Disposition represented a strategic shift in our overall business and had a significant impact on the financial statement results. Therefore, the LifeWorks business has been presented as discontinued operations in the condensed consolidated financial statements and accompanying notes for all periods presented. Our net book value related to LifeWorks of $95.7 million was recorded as a distribution through additional paid in capital within our condensed consolidated balance sheet during the second quarter of 2018.

~~The amounts in the table below reflect the operating results of LifeWorks reported as discontinued operations, as well as supplemental disclosures of the discontinued operations:~~

Three Months Ended September 30, 2018

Nine Months Ended September 30, 2018

(Dollars in millions)

Net revenues

$
—

$
28.3

Loss from operations before income taxes

—

(0.9
)
Income tax expense

(3.0
)

(13.9
)
Loss from discontinued operations, net of income taxes

$
(3.0
)

$
(14.8
)
Depreciation and amortization

$
—

$
1.4

~~4. Business Combinations~~

On September 6, 2019, we entered into a purchase agreement with the shareholders of Lusworth Holding Pty Ltd. (“RITEQ”), an Australian-based corporation, to acquire 100% of the issued and outstanding shares of RITEQ for approximately $19.4 million, subject to certain purchase price adjustments. RITEQ is a provider of workforce management solutions and operates within Australia, New Zealand, and the United Kingdom. The share purchase transaction was completed on September 13, 2019.

The financial results of RITEQ have been included within our condensed consolidated financial statements as of the acquisition date. The acquisition of RITEQ was recorded using the acquisition method of accounting and recognized the assets and liabilities assumed at their fair value. As of September 30, 2019, we have conducted a preliminary assessment of certain assets and liabilities related to the acquisition of RITEQ. We are continuing our review of these items during the measurement period, and if new information is obtained about facts and circumstances that existed at the effective date of the acquisition, the acquisition accounting will be revised to reflect the resulting adjustments to current estimate of these items.Senior Secured Credit Facility.

5.3. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of ~~September 30,~~March 31, 2020, our financial assets and liabilities measured at fair value on a recurring basis were categorized as follows:

	Total		Level 1		Level 2			Level 3
	(Dollars in millions)
Assets
Available for sale customer trust funds assets	$	1,760.5	$	—	$	1,760.5	(a)	$	—
Total assets measured at fair value	$	1,760.5	$	—	$	1,760.5		$	—

As of December 31, 2019, our financial assets and liabilities measured at fair value on a recurring basis were categorized as follows:

Total

Level 1

Level 2

Level 3

(Dollars in millions)

Assets

Available for sale customer trust funds assets

$
1,838.3

$
—

$
1,838.3

(a)

$
—

Total assets measured at fair value

$
1,838.3

$
—

$
1,838.3

$
—

~~As of December 31, 2018, our financial assets and liabilities measured at fair value on a recurring basis were categorized as follows:~~

	Total		Level 1		Level 2			Level 3		Total		Level 1		Level 2			Level 3
	(Dollars in millions)									(Dollars in millions)
Assets
Available for sale customer trust funds assets	$	1,715.0	$	—	$	1,715.0	(a)	$	—	$	1,826.8	$	—	$	1,826.8	(a)	$	—
Total assets measured at fair value	$	1,715.0	$	—	$	1,715.0		$	—	$	1,826.8	$	—	$	1,826.8		$	—

(a)	Fair value is based on inputs that are observable for the asset or liability, other than quoted prices.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

During the ~~nine~~three months ended ~~September 30, 2019, and the year ended December~~March 31, ~~2018,~~2020, we did not re-measure any financial assets or liabilities at fair value on a nonrecurring basis. During the year ended December 31, 2019, we completed a business combination which requires the assets acquired and liabilities assumed to be measured at fair value on a nonrecurring basis.

6.4. Customer Trust Funds

Investment income from invested customer trust funds, also referred to as float revenue or float, is a component of our compensation for providing services under agreements with our customers. Investment income from invested customer trust funds included in revenue was ~~$18.3~~$19.6 million and ~~$15.8~~$24.3 million for the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018, respectively, and $62.9 million and $49.6 million for the nine months ended September 30, 2019, and 2018,~~ respectively.Investment income includes interest income, realized gains and losses from sales of customer trust funds’ investments, and unrealized credit losses determined to be ~~other-than-temporary.~~unrecoverable.

The amortized cost of customer trust funds as of ~~September 30, 2019,~~March 31, 2020, and December 31, ~~2018,~~2019, is the original cost of assets acquired. The amortized cost and fair values of investments of customer trust funds available for sale as of ~~September 30, 2019,~~March 31, 2020, and December 31, ~~2018, are~~2019, were as follows:

Investments of Customer Trust Funds at ~~September 30,~~March 31, 2020

	Amortized		Gross Unrealized					Fair
	Cost		Gain		Loss			Value
	(Dollars in millions)
Money market securities, investments carried at cost and other cash equivalents	$	1,872.4	$	—	$	—		$	1,872.4
Available for sale investments:
U.S. government and agency securities		542.3		22.9		—			565.2
Canadian and provincial government securities		375.2		11.3		—			386.5
Corporate debt securities		529.8		9.3		(0.5	)		538.6
Asset-backed securities		247.0		1.8		(0.8	)		248.0
Mortgage-backed securities		17.9		0.3		—			18.2
Other securities		4.0		—		—			4.0
Total available for sale investments		1,716.2		45.6		(1.3	)		1,760.5
Invested customer trust funds		3,588.6	$	45.6	$	(1.3	)		3,632.9
Trust receivables		16.6							16.6
Total customer trust funds	$	3,605.2						$	3,649.5

Investments of Customer Trust Funds at December 31, 2019

	Amortized		Gross Unrealized					Fair		Amortized		Gross Unrealized					Fair
	Cost		Gain		Loss			Value		Cost		Gain		Loss			Value
	(Dollars in millions)									(Dollars in millions)
Money market securities, investments carried at cost and other cash equivalents	$	751.9						$	751.9	$	1,348.1	$	—	$	—		$	1,348.1
Available for sale investments:
U.S. government and agency securities		578.6		9.1		(0.4	)		587.3		542.4		7.1		(0.3	)		549.2
Canadian and provincial government securities		399.8		6.8		(0.2	)		406.4		406.7		5.4		(0.7	)		411.4
Corporate debt securities		552.9		9.4		(0.4	)		561.9		562.2		9.0		(0.3	)		570.9
Asset-backed securities		246.8		2.0		(0.4	)		248.4		270.0		1.7		(0.3	)		271.4
Mortgage-backed securities		21.8		0.2		—			22.0		19.8		0.2		(0.1	)		19.9
Other securities		12.2		0.1		—			12.3		4.0		—		—			4.0
Total available for sale investments		1,812.1	$	27.6	$	(1.4	)		1,838.3		1,805.1		23.4		(1.7	)		1,826.8
Invested customer trust funds		2,564.0	$	27.6	$	(1.4	)		2,590.2		3,153.2	$	23.4	$	(1.7	)		3,174.9
Trust receivables (a)		26.4							13.8		40.4							29.2
Total customer trust funds	$	2,590.4						$	2,604.0	$	3,193.6						$	3,204.1

(a)

The fair value of trust receivables as of ~~September 30,~~December 31, 2019, includes a loss of ~~$12.6~~$11.2 million related to unrecovered duplicate payments resulting from the September 26, 2019, isolated service incident. Ceridian is liable for these unrecovered duplicate payments and ~~will reimburse~~has reimbursed the customer trust for the resulting ~~losses.~~losses as of March 31, 2020. Please refer to Note ~~16,~~13, “Commitments and Contingencies,” for further discussion of the September 26, 2019, isolated service incident.

~~Investments of Customer Trust Funds at December 31, 2018~~

Amortized

Gross Unrealized

Fair

Cost

Gain

Loss

Value

(Dollars in millions)

Money market securities, investments carried at cost and
other cash equivalents

$
876.9

$
—

$
—

$
876.9

Available for sale investments:

U.S. government and agency securities

573.4

0.2

(11.4
)

562.2

Canadian and provincial government securities

392.5

3.4

(1.4
)

394.5

Corporate debt securities

495.0

0.5

(4.7
)

490.8

Asset-backed securities

247.1

0.2

(2.7
)

244.6

Mortgage-backed securities

8.5

—

(0.2
)

8.3

Other securities

14.7

—

(0.1
)

14.6

Total available for sale investments

1,731.2

4.3

(20.5
)

1,715.0

Invested customer trust funds

2,608.1

$
4.3

$
(20.5
)

2,591.9

Trust receivables

11.6

11.6

Total customer trust funds

$
2,619.7

$
2,603.5

1612

The following represents the gross unrealized losses and the related fair value of the investments of customer trust funds available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at ~~September 30, 2019.~~March 31, 2020.

Less than 12 months

12 months or more

Total

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

(Dollars in millions)

U.S. government and agency securities

$
(0.1
)

$
42.9

$
(0.4
)

$
104.4

$
(0.5
)

$
147.3

Canadian and provincial government securities

(0.2
)

106.8

—

—

(0.2
)

106.8

Corporate debt securities

(0.2
)

65.5

(0.1
)

38.7

(0.3
)

104.2

Asset-backed securities

(0.3
)

59.9

(a)

34.0

(0.3
)

93.9

Mortgage-backed securities

(a)

0.1

(0.1
)

5.1

(0.1
)

5.2

Other securities

—

—

(a)

8.1

—

8.1

Total available for sale investments

$
(0.8
)

$
275.2

$
(0.6
)

$
190.3

$
(1.4
)

$
465.5

	Less than 12 months					12 months or more				Total
	Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value
	(Dollars in millions)
Corporate debt securities	$	(0.5	)	$	86.6	(a)		$	31.2	$	(0.5	)	$	117.8
Asset-backed securities		(0.8	)		114.0		—		—		(0.8	)		114.0
Total available for sale investments	$	(1.3	)	$	200.6	$	—	$	31.2	$	(1.3	)	$	231.8

(a)	These investments have been in an unrealized loss position; however, the amount of unrealized loss is less than $0.05 million.

Management does not believe that any individual unrealized loss was unrecoverable as of ~~September 30, 2019, represents an other-than-temporary impairment.~~March 31, 2020. The unrealized losses are primarily attributable to changes in interest rates and not to credit deterioration. We currently do not intend to sell or expect to be required to sell the securities before the time required to recover the amortized cost.

The amortized cost and fair value of investment securities available for sale at ~~September 30, 2019,~~March 31, 2020, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or to prepay obligations with or without call or prepayment penalties.

	September 30, 2019				March 31, 2020
	Cost		Fair Value		Cost		Fair Value
	(Dollars in millions)				(Dollars in millions)
Due in one year or less	$	1,074.2	$	1,074.5	$	2,221.1	$	2,222.1
Due in one to three years		706.8		711.8		711.9		725.0
Due in three to five years		622.9		637.3		494.5		513.4
Due after five years		160.1		166.6		161.1		172.4
Invested customer trust funds	$	2,564.0	$	2,590.2	$	3,588.6	$	3,632.9

7.5. Goodwill and Intangible Assets

Goodwill

Goodwill and changes therein were as follows for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, and the year ended December 31, ~~2018~~2019 (Dollars in millions):

Balance at December 31, 2017	$	1,961.0
Translation		(33.6	)
Balance at December 31, 2018		1,927.4		$	1,927.4
Acquisitions		21.9			25.7
Translation		11.9			20.4
Balance at September 30, 2019	$	1,961.2
Balance at December 31, 2019					1,973.5
Translation					(34.0	)
Balance at March 31, 2020				$	1,939.5

~~Please refer to Note 4, “Business Combinations,” for further discussion of our RITEQ acquisition.~~

Intangible Assets

Other intangible assets consisted of the following as of ~~September 30, 2019:~~March 31, 2020:

	Gross Carrying Amount		Accumulated Amortization			Net		Estimated Life Range (Years)	Gross Carrying Amount		Accumulated Amortization			Net		Estimated Life Range (Years)
	(Dollars in millions)								(Dollars in millions)
Customer lists and relationships	$	212.9	$	(204.8	)	$	8.1	5-15	$	207.5	$	(204.0	)	$	3.5	5-15
Trade name		173.9		(2.0	)		171.9	3 and Indefinite		173.5		(1.9	)		171.6	3 and Indefinite
Technology		155.1		(153.4	)		1.7	3-4		152.4		(151.0	)		1.4	3-4
Total other intangible assets	$	541.9	$	(360.2	)	$	181.7		$	533.4	$	(356.9	)	$	176.5

We perform an impairment assessment of our trade name intangible assets as of October 1 of each year. We continue to evaluate the use of our trade names and branding in our sales and marketing efforts. If there is a fundamental shift in the method of our branding in the future, we will assess the impact on the carrying amount of our trade name intangible assets and determine whether an impairment exists. If it is determined that an impairment has occurred, it would be recognized during the period in which the decision was made to make the fundamental shift.

Other intangible assets consisted of the following as of December 31, ~~2018:~~2019:

	Gross Carrying Amount		Accumulated Amortization			Net		Estimated Life Range (Years)		Gross Carrying Amount		Accumulated Amortization			Net		Estimated Life Range (Years)
	(Dollars in millions)									(Dollars in millions)
Customer lists and relationships	$	205.4	$	(190.2	)	$	15.2	5-15		$	212.5	$	(208.2	)	$	4.3	5-15
Trade name		173.5		(1.9	)		171.6		—		174.0		(2.1	)		171.9	3 and Indefinite
Technology		152.2		(151.5	)		0.7	3-4			156.1		(154.4	)		1.7	3-4
Total other intangible assets	$	531.1	$	(343.6	)	$	187.5			$	542.6	$	(364.7	)	$	177.9

Amortization expense related to definite-lived intangible assets was ~~$4.7~~$0.4 million and $4.7 million for the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018, respectively, and $13.9 million and $14.0 million for the nine months ended September 30, 2019, and 2018,~~ respectively.

8.6. Debt

Overview

Our debt obligations consisted of the following as of the periods presented:

	September 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
	(Dollars in millions)				(Dollars in millions)
Term Debt, interest rate of 5.0% and 5.8% as of September 30, 2019, and December 31, 2018, respectively	$	673.2	$	678.3
Revolving Credit Facility ($300.0 million available capacity less amounts reserved for letters of credit, which were $2.4 million and $2.7 million as of September 30, 2019, and December 31, 2018, respectively)		—		—
Canada Line of Credit (CDN $7.0 million letter of credit capacity as of September 30, 2019, and December 31, 2018, which was fully utilized; USD $5.3 million as of September 30, 2019, and USD $5.1 million as of December 31, 2018)		—		—
Term Debt, interest rate of 3.5% and 4.8% as of March 31, 2020, and December 31, 2019, respectively					$	669.8	$	671.5
Revolving Credit Facility ($300.0 million available capacity less amounts reserved for letters of credit, which were $1.9 million and $1.9 million as of March 31, 2020, and December 31, 2019, respectively)						—		—
Canada Line of Credit (CDN $7.0 million letter of credit capacity as of March 31, 2020, and December 31, 2019, which was fully utilized; USD $5.0 million as of March 31, 2020, and USD $5.4 million as of December 31, 2019)						—		—
Financing lease liabilities (Please refer to Note 12)						11.4		12.4
Total debt		673.2		678.3		681.2		683.9
Less unamortized discount on Term Debt		1.5		1.7		1.4		1.4
Less unamortized debt issuance costs on Senior Notes and Term Debt		5.6		6.3
Less unamortized debt issuance costs on Term Debt						5.1		5.4
Less current portion of long-term debt		6.8		6.8		9.7		10.8
Long-term debt, less current portion	$	659.3	$	663.5	$	665.0	$	666.3

1814

Senior Secured Credit Facility

On April 30, 2018, Ceridian completed the refinancing of its debt by entering into a new credit agreement. Pursuant to the terms of the new credit agreement, Ceridian became borrower of (i) a $680.0 million term loan debt facility (the “2018 Term Debt”) and (ii) a $300.0 million revolving credit facility (the “2018 Revolving Credit Facility”) (the 2018 Term Debt and the 2018 Revolving Credit Facility are together referred to as the “2018 Senior Secured Credit Facility”). The 2018 Senior Secured Credit Facility is secured by substantially all assets of Ceridian. The 2018 Term Debt has a maturity date of April 30, 2025, and the 2018 Revolving Credit Facility has a maturity date of April 30, 2023. The 2018 Term Debt was initially subject to an interest rate of LIBOR plus 3.25%. As a result of a ratings upgrade on March 26, 2019, of our senior secured credit facilities by Moody’s Investors Service, from B3 to B2, the Company’s floating rate term debt interest rate ishas been reduced from LIBOR plus 3.25% to LIBOR plus 3.00%, so long as the rating is maintained.On February 19, 2020, Ceridian completed the first amendment to the 2018 Senior Secured Credit Facility in which the 2018 Term Debt interest rate was reduced from LIBOR plus 3.00% to LIBOR plus 2.50%. Further, the interest rate trigger under the applicable rating by Moody’s Investor Service was removed by the first amendment.Accrued interest related to the 2018 Senior Secured Credit Facility was $0.1million and $0.1 million as of ~~September 30, 2019,~~March 31, 2020, and December 31, ~~2018,~~2019, respectively, and is included within Other accrued expenses in our condensed consolidated balance sheets.

~~In connection with~~On April 2, 2020, in light of the ~~refinancing completed on April 30, 2018, we recognized a loss on debt extinguishment of $7.1 million within interest expense, net on our condensed consolidated statement of operations during~~current uncertainty and volatility in the ~~nine months ended September 30, 2018.~~

~~Senior Notes~~

~~Using the net proceeds received~~global financial markets resulting from the ~~IPO~~COVID-19 pandemic, Ceridian elected to borrow $295.0 million under the 2018 Revolving Credit Facility as a precautionary measure to increase our cash position and concurrent private placement, we satisfied and discharged the indenture governing our outstanding $475.0 million principal amount senior notes due 2021 (“Senior Notes”) on April 30, 2018, and the Senior Notes were redeemed on May 30, 2018. In connection with the redemptionto preserve financial flexibility. We may use a portion of the ~~Senior Notes, we recognized a loss on debt extinguishment of $18.6 million within interest expense, net on our condensed consolidated statements of operations during~~proceeds from the ~~nine months ended September 30, 2018.~~borrowing for general corporate purposes.

Future Payments and Maturities of Debt

The future principal payments and maturities of our ~~debt~~indebtedness, excluding financing lease obligations, are as follows:

Years Ending December 31,	Amount		Amount
	(Dollars in millions)		(Dollars in millions)
2019	$	1.7
2020		6.8	$	5.1
2021		6.8		6.8
2022		6.8		6.8
2023		6.8		6.8
2024				6.8
Thereafter		644.3		637.5
	$	673.2	$	669.8

Fair Value of Debt

Our debt does not trade in active markets. Based on the borrowing rates currently available to us for bank loans with similar terms and average maturities and the limited trades of our debt, the fair value of our debt was estimated to be ~~$674.4~~$636.3 million and ~~$649.5~~$675.1 million as of ~~September 30, 2019,~~March 31, 2020, and December 31, ~~2018,~~2019, respectively.

9.7. Employee Benefit Plans

The components of net periodic cost for our defined benefit pension plan and for our postretirement benefit plan are included in the following tables:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Net Periodic Pension Cost	(Dollars in millions)												(Dollars in millions)
Interest cost	$	4.5		$	4.1		$	13.6		$	12.3		$	3.2		$	4.5
Actuarial loss amortization		3.2			3.6			9.6			10.8			3.9			3.2
Less: Expected return on plan assets		(5.9	)		(6.5	)		(17.7	)		(19.5	)		(5.7	)		(5.9	)
Net periodic pension cost	$	1.8		$	1.2		$	5.5		$	3.6		$	1.4		$	1.8

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Net Periodic Postretirement Benefit	(Dollars in millions)												(Dollars in millions)
Service benefit	$	—		$	—		$	—		$	—		$	—		$	—
Interest cost		0.2			0.1			0.4			0.3			0.1			0.1
Actuarial gain amortization		(0.6	)		(0.6	)		(1.8	)		(1.8	)		(0.6	)		(0.6	)
Prior service credit amortization		(0.1	)		(0.1	)		(0.2	)		(0.3	)		(0.1	)		—
Net periodic postretirement benefit gain	$	(0.5	)	$	(0.6	)	$	(1.6	)	$	(1.8	)	$	(0.6	)	$	(0.5	)

~~10.~~8. Share-Based Compensation

Prior to November 1, 2013, Ceridian employees participated in a share-based compensation plan of the former ultimate parent of Ceridian, the 2007 Stock Incentive Plan (“2007 SIP”). Effective November 1, 2013, although most participants who held stock options under the 2007 SIP converted their options to a newly created option plan, the 2013 Ceridian HCM Holding Inc. Stock Incentive Plan, as amended (“2013 SIP”), a small number of participants maintained their stock options in the 2007 SIP. Concurrent with the IPO and legal reorganization, all outstanding stock options under the 2007 SIP were converted into options to purchase common stock of Ceridian. As of ~~September 30, 2019,~~March 31, 2020, there were 2,500 stock options outstanding under the 2007 SIP.

Stock options awarded under the 2013 SIP vest either annually on a pro rata basis over a four- or five-year period or on a specific date if certain performance criteria are satisfied and certain equity values are attained. In addition, upon termination of service, all vested options must be exercised generally within 90 days after termination, or these awards will be forfeited. The stock option awards have a 10-year contractual term and have an exercise price that is not less than the fair market value of the underlying stock on the date of grant. As of ~~September 30, 2019,~~March 31, 2020, there were ~~5,448,040~~4,657,548 stock options and restricted stock units outstanding under the 2013 SIP. We do not intend to grant any additional awards under the 2007 SIP or the 2013 SIP.

As part of the 2013 SIP, the Board of Directors approved a stock appreciation rights program that authorized the issuance of up to 600,000 stock appreciation rights. The performance criteria for all stock appreciation rights was met on April 30, 2018, resulting in the vesting and cash settlement of all outstanding stock appreciation rights. We recognized $1.5 million of share-based compensation related to the vesting of these stock appreciation rights during the nine months ended September 30, 2018.

On April 24, 2018, in connection with the IPO, the Board of Directors approved the Ceridian HCM Holding Inc. 2018 Equity Incentive Plan (“2018 EIP”), which authorizes the issuance of up to 13,500,000 shares of common stock to eligible participants through equity awards. (the “Share Reserve”). The Share Reserve may be increased on March 31 of each of the first ten calendar years during the term of the 2018 EIP, by the lesser of (i) three percent of the number of shares of our common stock outstanding on each January 31 immediately prior to the ~~data~~date of increase or (ii) such number of shares of our common stock determined by the Board of Directors. On March 31, ~~2019,~~2020, the Share Reserve was increased by ~~three~~3 percent of the number of shares of common stock outstanding on January 31, ~~2019,~~2020, or ~~4,196,193~~4,335,286 shares.

Equity awards under the 2018 EIP vest annually on a pro rata basis, generally over a four-year period. In addition, upon termination of service, all vested awards must be exercised within 90 days after termination, or these awards will be forfeited. The equity awards have a 10-year contractual term and have an exercise price that is not less than the fair market value of the underlying stock on the date of the grant. As of ~~September 30, 2019,~~March 31, 2020, there were ~~9,041,226~~9,164,882 stock options, restricted stock units, and ~~restricted~~performance stock units outstanding and ~~8,654,967~~12,866,597 shares available for future grants of equity awards under the 2018 EIP.

On November 9, 2018, the Board of Directors approved the Ceridian HCM Holding Inc. Global Employee Stock Purchase Plan (the “GESPP”), and the Company’s stockholders approved the GESPP on May 1, 2019. The GESPP authorizes the issuance of up to 2,500,000 shares of common stock to eligible participants through purchases via payroll deductions. The purchase price is the lower of (i) 85% of the fair market value of a share of common stock on the offering date (the first trading day of the offering period commencing on January 1 and concluding on December 31) or (ii) 85% of the fair market value of a share of common stock on the purchase date. The GESPP shall continue for ~~10-years,~~ten years, unless terminated sooner as provided under the GESPP. During ~~2019, shares were purchased on June 28~~2020 and ~~September 30 and will be purchased on December 31. In~~ subsequent years, quarterly purchase periods will commence on January 1, April 1, July 1, and October 1. Shares will be purchased on the last trading day of the respective purchase periods. The first GESPP purchase period of 2020 ended on March 31, 2020, resulting in the issuance of 49,802 shares of our common stock at a purchase price of $42.56.

Total share-based compensation expense was ~~$10.4~~$12.5 million and ~~$4.8~~ $6.0million for the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018, respectively, and $26.0 million and $19.5 million for the nine months ended September 30, 2019, and 2018,~~ respectively.

Performance-Based Stock Options

Performance-based option activity under the 2007 SIP and the 2013 SIP for the period was as follows:

	Shares			Weighted Average Exercise Price (per share)			Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in millions)		Shares			Weighted Average Exercise Price (per share)			Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in millions)
Performance-based options outstanding at December 31, 2018		366,377		$	13.50			3.1	$	7.7
Performance-based options outstanding at December 31, 2019												68,281		$	13.58			2.6	$	3.7
Granted		—			—			—		—		—			—			—		—
Exercised		(290,319	)		(13.48	)		—		—		(13,417	)		(13.46	)		—		—
Forfeited or expired		—			—			—		—		—			—			—		—
Performance-based options outstanding at September 30, 2019		76,058		$	13.56			2.8	$	2.7
Performance-based options exercisable at September 30, 2019		76,058		$	13.56			2.8	$	2.7
Performance-based options outstanding at March 31, 2020												54,864		$	13.61			2.4	$	2.0
Performance-based options exercisable at March 31, 2020												54,864		$	13.61			2.4	$	2.0

The performance criteria for all outstanding performance-based stock options was met on June 7, 2018, resulting in the vesting of all outstanding performance-based stock options on this date. ~~We recognized $4.8 million of share-based compensation expense related to the vesting of these performance-based stock options during the nine months ended September 30, 2018.~~ As of ~~September 30, 2019,~~March 31, 2020, there was no0 share-based compensation expense related to unvested performance-based stock options not yet recognized.

Term-Based Stock Options

Term-based option activity, including stock options under the 2007 SIP, the 2013 SIP, and the 2018 EIP, for the period was as follows:

	Shares			Weighted Average Exercise Price (per share)			Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in millions)		Shares			Weighted Average Exercise Price (per share)			Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in millions)
Term-based options outstanding at December 31, 2018		13,549,769		$	19.28			7.5	$	206.8
Term-based options outstanding at December 31, 2019												13,144,937		$	29.74			7.8	$	501.3
Granted		4,227,022			49.66			—		—		140,447			70.73			—		—
Exercised		(3,896,797	)		(17.34	)		—		—		(476,489	)		(18.84	)		—		—
Forfeited or expired		(262,923	)		(23.01	)		—		—		(51,324	)		(29.34	)		—		—
Term-based options outstanding at September 30, 2019		13,617,071		$	29.19			8.0	$	276.9
Term-based options exercisable at September 30, 2019		3,946,615		$	18.21			6.2	$	122.9
Term-based options outstanding at March 31, 2020												12,757,571		$	30.60			7.6	$	251.6
Term-based options exercisable at March 31, 2020												4,668,339		$	25.02			6.5	$	116.9

As of ~~September 30, 2019,~~March 31, 2020, there was ~~$91.2~~$75.9 million of share-based compensation expense related to unvested term-based awards not yet recognized, which is expected to be recognized over a weighted average period of ~~2.2~~1.9 years.

Restricted Stock Units

Restricted stock units (“RSUs”) activity, including RSUs under the 2013 SIP and the 2018 EIP, for the period was as follows:

	Shares
RSUs outstanding at December 31, ~~2018~~2019		~~664,073~~819,818
Granted		~~168,958~~60,325
Shares issued upon vesting of RSUs		(~~14,394~~12,500	)
Forfeited or canceled		(~~20,000~~54	)
RSUs outstanding at ~~September 30, 2019~~March 31, 2020		~~798,637~~867,589
RSUs releasable at ~~September 30, 2019~~March 31, 2020		~~272,045~~395,338

During the ~~nine~~three months ended ~~September 30, 2019, 161,439~~March 31, 2020, 138,687 RSUs vested. As of ~~September 30, 2019,~~March 31, 2020, there were ~~526,592~~472,251 unvested RSUs outstanding and ~~272,045~~395,338 vested RSUs outstanding. RSUs generally vest annually over a one-, three-, or four-year period. As of ~~September 30, 2019,~~March 31, 2020, there was ~~$14.2~~$16.5 million of share-based compensation expense related to unvested RSUs not yet recognized, which is expected to be recognized over a weighted average period of ~~2.1~~1.7 years.

~~Global Employee~~Performance Stock ~~Purchase Plan~~Units

During the three months ended March 31, 2020, 145,017 performance stock units (“PSUs”) were granted under the 2018 EIP and had a weighted average grant date fair value per share of $70.73. During the three months ended March 31, 2020, 111 PSUs were forfeited and cancelled.

The ~~first GESPP purchase~~vesting conditions for the PSUs are based on the Company’s performance against Cloud revenue and adjusted EBITDA margin goals under the Company’s 2020 Management Incentive Plan (the “2020 MIP”) for the incentive period ~~ended~~of January 1, 2020 through December 31, 2020. The maximum incentive vesting of PSUs may not exceed 125% under the 2020 MIP. Both the Cloud revenue and adjusted EBITDA margin goals are calculated based on ~~June 30, 2019, resulting in~~ the ~~issuance~~Company’s operating results, adjusted for foreign currency and interest rate impacts plus other unique impacts as approved by the Compensation Committee or the Board. Upon vesting of ~~114,627~~a PSU, a participant will receive shares of ~~our~~ common stock ~~at a purchase price of $28.70 on June 28, 2019, the last trading day~~ of the ~~quarter.~~Company. The ~~second GESPP purchase~~probability of vesting of PSUs will continue to be evaluated throughout the period, ~~ended on September 30, 2019, resulting~~and share-based compensation expense will be recognized in ~~the issuance~~accordance with that probability. As of ~~68,785 shares~~March 31, 2020, there was $10.3 million of ~~our common stock at a purchase price of $28.70.~~

~~The fair value of the stock purchase rights granted under the GESPP was estimated using the following weighted-average assumptions:~~

Nine Months Ended
September 30, 2019

Expected volatility

34.9
%
Expected dividend rate

—

Risk-free interest rate

2.3
%
Expected term (in years)

0.4

Grant date fair value per share

$
8.95

share-based compensation expense related to unvested PSUs not yet recognized.

~~11.~~9. Revenue

Our Solutions

We ~~currently~~ categorize our solutions into two ~~categories,~~categories: Cloud and ~~Bureau.~~Bureau offerings.

Cloud revenue is generated from solutions that are delivered via two cloud offerings, Dayforce and Powerpay. The Dayforce offering is differentiated from our market competition as being a single application with continuous calculation that offers a comprehensive range of functionality, including global HR, payroll, benefits, workforce management, and talent management on web and native iOS and Android platforms. Dayforce recurring revenue is primarily generated from monthly recurring fees charged on a per-employee, per-month (“PEPM”) basis and investment income generated from holding Dayforce customer funds in trust before funds are remitted to taxing authorities, Dayforce customer employees, or other third parties. Dayforce professional services and other revenue is primarily generated from implementation and post go-live professional services revenue. Other sources of Dayforce revenues include revenue from the sale, rental and maintenance of time clocks; revenue from the sale of third-party services; and billable travel expenses for Dayforce customers. The Powerpay offering is our solution designed primarily for small market Canadian customers, which typically have fewer than 20 employees. Powerpay recurring revenue is primarily generated from recurring fees charged on a per-employee, per-process basis and investment income generated from holding Powerpay customer funds in trust before funds are remitted to taxing authorities, Powerpay customer employees, or other third parties. Typical processes include the customer’s payroll runs, year-end tax packages, and delivery of customers’ remittance advices or checks. Powerpay professional services revenue is primarily generated from the setup of the Powerpay customer on their platform.

•

Cloud revenue is generated from solutions that are delivered via 2 cloud offerings, Dayforce and Powerpay. The Dayforce offering is differentiated from our market competition as being a single application with continuous calculation that offers a comprehensive range of functionality, including global HR, payroll, benefits, workforce management, and talent management on web and native iOS and Android platforms. Dayforce recurring revenue is primarily generated from monthly recurring fees charged on a per-employee, per-month (“PEPM”) basis and the allocation of investment income generated from holding Dayforce customer funds in trust before funds are remitted to taxing authorities, Dayforce customer employees, or other third parties. Dayforce professional services and other revenue is primarily generated from implementation and post go-live professional services revenue. Other sources of Dayforce revenues include revenue from the sale, rental and maintenance of time clocks; revenue from the sale of third-party services; and billable travel expenses for Dayforce customers. The Powerpay offering is our solution designed primarily for small market Canadian customers, which typically have fewer than 20 employees. Powerpay recurring revenue is primarily generated from recurring fees charged on a per-employee, per-process basis and the allocation of investment income generated from holding Powerpay customer funds in trust before funds are remitted to taxing authorities, Powerpay customer employees, or other third parties. Typical processes include the customer’s payroll runs, year-end tax packages, and delivery of customers’ remittance advices or checks. Powerpay professional services revenue is primarily generated from the setup of the Powerpay customer on their platform.

•

Bureau revenue is generated primarily from solutions delivered via a service-bureau model. These solutions are delivered via ~~three~~3 primary service lines: payroll, payroll-related tax filing services, and outsourced human resource solutions. Revenue from payroll services is generated from recurring fees charged on a per-process basis. Typical processes include the customer’s payroll runs, year-end tax packages, and delivery of customers’ remittance advices or checks. In addition to customers who use our payroll services, certain customers use our tax filing services on a stand-alone basis. Our outsourced human resource solutions are tailored to meet the needs of individual customers, and entail our contracting to perform many of the duties of a customer’s human resources department, including payroll processing, time and labor management, performance management, and recruiting. We also perform individual services for customers, such as check printing, wage attachment and disbursement, and Affordable Care Act (“ACA”) management. Additional items included in Bureau revenue are fees for custom professional services to Bureau customers; the allocation of investment income generated from holding Bureau customer funds in trust before funds are remitted to taxing authorities, Bureau customer employees, or other third parties; consulting services related to Bureau offerings; and revenue from the sale of third party services to Bureau customers.

Disaggregation of Revenue

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
	(Dollars in millions)								(Dollars in millions)
Revenue:
Cloud
Dayforce
Recurring services	$	109.4	$	82.5	$	314.7	$	237.9	$	128.1	$	102.9
Professional services and other		34.3		27.9		96.3		82.4		40.7		29.9
Total Dayforce revenue		143.7		110.4		411.0		320.3		168.8		132.8
Powerpay
Recurring services		21.6		21.0		64.0		64.7		21.8		21.5
Professional services and other		0.2		0.3		0.8		0.9		0.3		0.3
Total Powerpay revenue		21.8		21.3		64.8		65.6		22.1		21.8
Total Cloud revenue		165.5		131.7		475.8		385.9		190.9		154.6
Bureau
Recurring services		36.4		46.0		125.0		157.9		31.6		48.4
Professional services and other		0.4		0.4		1.5		2.1		0.2		0.7
Total Bureau revenue		36.8		46.4		126.5		160.0		31.8		49.1
Total revenue	$	202.3	$	178.1	$	602.3	$	545.9	$	222.7	$	203.7

Recurring services revenue includes float revenue of $19.6 million and $24.3 million for the three months ended March 31, 2020, and 2019, respectively.

Contract Balances

The Company records a contract asset when revenue recognized for professional service performance obligations exceed the ~~billings.~~contractual amount of billings for implementation related professional services. Contract assets were ~~$40.2~~$47.3 million and ~~$40.0~~$43.2 million as of ~~September 30, 2019,~~March 31, 2020, and December 31, ~~2018,~~2019, respectively. Contract assets expected to be recognized in revenue within twelve months are included within Prepaid expenses and other current assets, with the remaining contract assets included within Other assets on our condensed consolidated balance sheets.

Deferred Revenue

Deferred revenue primarily consists of ~~billings or~~ payments received in advance of revenue recognition. The changes in deferred revenue were as follows:

	Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
	(Dollars in millions)						(Dollars in millions)
Deferred revenue, beginning of period	$	23.2		$	16.5		$	25.5		$	23.2
New billings		262.0			203.4			85.7			63.6
Revenue recognized		(258.0	)		(198.7	)		(83.6	)		(63.8	)
Effect of exchange rate								(0.8	)		—
Deferred revenue, end of period	$	27.2		$	21.2		$	26.8		$	23.0

2319

Transaction Price for Remaining Performance Obligations

In accordance with ASC Topic 606, the following represents the aggregate amount of transaction price allocated to the remaining performance obligations that are unsatisfied as of the end of the reporting period. As of ~~September 30, 2019,~~March 31, 2020, approximately ~~$830.9~~$908.3 million of revenue is expected to be recognized over the next three years from remaining performance obligations, which represents contracted revenue for recurring services and fixed price professional services, primarily implementation services, that has not yet been recognized, including deferred revenue and unbilled amounts that will be recognized as revenue in future periods. In accordance with the practical expedient provided in ASC Topic 606, performance obligations that are billed and recognized as they are delivered, primarily professional services contracts that are on a time and materials basis, are excluded from the transaction price for remaining performance obligations disclosed above.

~~12. Supplementary Data to Statements of Operations~~

Other expense, net for the three months ended September 30, 2019, consisted of net periodic benefit expense, excluding service cost, of $1.3 million and foreign currency translation expense of $0.3 million. Other expense, net for the three months ended September 30, 2018, consisted of net periodic benefit expense, excluding service cost, of $0.6 million and foreign currency translation expense of $0.3 million.

Other expense, net for the nine months ended September 30, 2019, consisted of net periodic benefit expense, excluding service cost, of $3.9 million and foreign currency translation expense of $0.8 million. Other income, net for the nine months ended September 30, 2018, consisted of foreign currency translation income of $2.5 million and net periodic benefit expense, excluding service costs, of $1.8 million. For the nine months ended September 30, 2018, the foreign currency translation is primarily related to remeasurement gains and losses resulting from an intercompany payable of a U.S. subsidiary denominated in Canadian dollars. This intercompany payable was repaid in the second quarter of 2018.

~~13.~~10. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss were as follows:

Foreign
Currency
Translation
Adjustment

Unrealized Gain
(Loss) from
Invested
Customer Trust
Funds

Pension
Liability
Adjustment

Total

(Dollars in millions)

Balance as of December 31, 2018

$
(207.5
)

$
(18.3
)

$
(150.1
)

$
(375.9
)
Other comprehensive income (loss) before income taxes
and reclassifications

17.3

42.3

(0.3
)

59.3

Income tax expense

—

(10.6
)

(1.8
)

(12.4
)
Reclassifications to earnings

—

—

7.8

7.8

Other comprehensive income

17.3

31.7

5.7

54.7

Cumulative-effect adjustment related to the adoption
of ASU 2018-02 (Please refer to Note 2)

—

0.4

(27.5
)

(27.1
)
Balance as of September 30, 2019

$
(190.2
)

$
13.8

$
(171.9
)

$
(348.3
)

	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) from Invested Customer Trust Funds			Pension Liability Adjustment			Total
	(Dollars in millions)
Balance as of December 31, 2019	$	(178.4	)	$	10.2		$	(170.2	)	$	(338.4	)
Other comprehensive income (loss) before income taxes and reclassifications		(49.1	)		23.4			0.1			(25.6	)
Income tax expense		—			(6.0	)		(0.8	)		(6.8	)
Reclassifications to earnings		—			—			3.2			3.2
Other comprehensive (loss) income		(49.1	)		17.4			2.5			(29.2	)
Balance as of March 31, 2020	$	(227.5	)	$	27.6		$	(167.7	)	$	(367.6	)

~~14.~~11. Income Taxes

Our income tax provision represents federal, state, and international taxes on our income recognized for financial statement purposes and includes the effects of temporary differences between financial statement income and income recognized for tax return purposes. Deferred tax assets and liabilities are recorded for temporary differences between the financial reporting basis and the tax basis of assets and liabilities as adjusted for the expected benefits of utilizing net operating loss carryforwards. We record a valuation allowance to reduce our deferred tax assets to reflect the net deferred tax assets that we believe will be realized. In assessing the likelihood that we will be able to recover our deferred tax assets and the need for a valuation allowance, we consider all available evidence, both positive and negative, including historical levels of pre-tax book income, expiration of net operating losses, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies, as well as current tax laws. As of September 30, 2019, we determined that we no longer have a requirement to carry a full valuation allowance against our domestic deferred tax assets that are not offset by the reversal of deferred tax liabilities. As a result of this determination, we have released $65.8 million of the valuation allowance, which has a positive impact on our income tax provision. As of September 30, 2019,March 31, 2020, we continue to record a valuation allowance of ~~$17.4~~$12.0 million against ~~certain~~ deferred tax assets ~~primarily~~ attributable to state net operating loss carryovers.

We recorded an income tax ~~benefit~~expense of ~~$57.5~~$8.2 million during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, consisting primarily of ~~$65.8~~$3.6 million ~~tax benefit~~ from US and foreign operations, $2.1 million of state taxes in the ~~release of our valuation allowance, a $5.9~~U.S., $1.3 million ~~tax benefit~~ attributable to ~~stock option exercises, partially offset by $5.5~~stock-based compensation, and $1.2 million of base erosion anti-abuse tax (“BEAT”) in the U.S.~~, $6.6 million of income tax expense from foreign operations, and other tax expenses of $2.1 million.~~

The total amount of unrecognized tax benefits as of ~~September 30, 2019,~~March 31, 2020, and December 31, ~~2018,~~2019, were ~~$1.4~~$1.6 million, including $0.2 million of accrued interest, and ~~$1.3~~$1.5 million, including $0.2 million of accrued interest, respectively. Of the total amount of unrecognized tax benefits as of ~~September 30, 2019, $1.4~~March 31, 2020, $1.6 million represents the amount that, if recognized, would favorably impact our effective income tax rate. It is reasonable to expect that the amount of unrecognized tax benefits will change in the next twelve months; however, we do not expect the change to have a significant impact on our results of operations or financial condition.

We file income tax returns in the U.S. federal jurisdiction, various states, and foreign jurisdictions. With a few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2015.

~~15.~~20

12. Leases

Our leases primarily consist of office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning 2019 and later, we account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components (e.g., common-area maintenance costs).

Most leases include options to renew, and the lease renewal is at our sole discretion. Therefore, the depreciable life of assets and leasehold improvements is limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

~~We rent or sublease certain real estate to third parties. Our sublease portfolio mainly consists of operating leases for space within our office facilities.~~

Supplemental balance sheet information related to leases were as follows:

Lease Type	Balance Sheet Classification	September 30, 2019		Balance Sheet Classification	March 31, 2020		December 31, 2019
		(Dollars in millions)			(Dollars in millions)
ASSETS
Operating lease assets	Trade and other receivables, net	$	2.7	Trade and other receivables, net	$	5.2	$	5.5
Operating lease assets	Prepaid expenses and other current assets		1.3	Prepaid expenses and other current assets		1.9		1.2
Operating lease assets	Right of use lease asset		36.8	Right of use lease asset		34.8		32.0
Financing lease assets				Property, plant, and equipment, net		8.6		8.8
Total lease assets		$	40.8		$	50.5	$	47.5
LIABILITIES
Current
Financing lease liabilities				Current portion of long-term debt	$	2.9	$	4.0
Operating lease liabilities	Short-term lease liabilities		13.3	Current portion of long-term lease liabilities		8.4		8.8
Noncurrent
Financing lease liabilities				Long-term debt, less current portion		8.5		8.4
Operating lease liabilities	Long-term lease liabilities		31.8	Long-term lease liabilities, less current portion		32.8		30.1
Total lease liabilities		$	45.1		$	52.6	$	51.3

The components of lease expense were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019 ASC Topic 842			2018 ASC Topic 840			2019 ASC Topic 842			2018 ASC Topic 840			2020			2019
Lease Cost	(Dollars in millions)												(Dollars in millions)
Operating lease cost	$	4.2		$	4.5		$	12.6		$	14.5		$	2.3		$	4.0
Financing lease cost:
Depreciation of lease assets														0.2			—
Interest on lease liabilities														0.1			—
Sublease income		(1.0	)		(1.4	)		(3.3	)		(4.7	)		(1.0	)		(1.2	)
Net lease cost	$	3.2		$	3.1		$	9.3		$	9.8
Total lease cost, net													$	1.6		$	2.8

~~Maturities of operating lease liabilities is as follows for each period presented:~~

September 30, 2019

December 31, 2018

Years Ending December 31,

ASC Topic 842

ASC Topic 840

(Dollars in millions)

2019

$
4.0

$
13.6

2020

14.3

11.8

2021

10.3

7.7

2022

10.0

7.4

2023

8.2

6.2

Thereafter

12.4

9.4

Total lease payments (a)

$
59.2

$
56.1

Less: Interest

7.5

—

Present value of lease liabilities

$
51.7

$
56.1

~~(a)~~

~~Maturities of lease liabilities have not been reduced by minimum sublease rentals of $9.6 million due in the future under noncancellable subleases.~~

~~Weighted average remaining lease term and weighted average discount rate were as follows:~~

We had operating cash outflows related to operating leases of $11.1 million for the nine months ended September 30, 2019. This represents cash paid for amounts included in the measurement of lease liabilities.

~~16.~~13. Commitments and Contingencies

~~Unrecovered Duplicate Payments~~

We identified an isolated service incident on September 26, 2019, that resulted in duplicate payments for certain of our U.S. payroll customers totaling $18.8 million. Through October 31, 2019, $12.6 million remained unrecovered, and we have recorded a loss for this amount within selling, general, and administrative expense in our condensed consolidated statement of operations for the period ended September 30, 2019. Our recovery efforts are ongoing, and future collections will be recognized as a reduction to selling, general, and administrative expense in the period recovered.

Legal Matters

We are subject to claims and a number of judicial and administrative proceedings considered normal in the course of our current and past operations, including employment-related disputes, contract disputes, disputes with our competitors, intellectual property disputes, government audits and proceedings, customer disputes, and tort claims. In some proceedings, the claimant seeks damages as well as other relief, which, if granted, would require substantial expenditures on our part.

Our general terms and conditions in customer contracts frequently include a provision indicating that we will indemnify and hold our customers harmless from and against any and all claims alleging that the services and materials furnished by us violate any third party’s patent, trade secret, copyright or other intellectual property right. We are not aware of any material pending litigation concerning these indemnifications.

Some of these matters raise difficult and complex factual and legal issues and are subject to many uncertainties, including the facts and circumstances of each particular action, and the jurisdiction, forum, and law under which each action is proceeding. Because of these complexities, final disposition of some of these proceedings may not occur for several years. As such, we are not always able to estimate the amount of our possible future liabilities, if any.

There can be no certainty that we may not ultimately incur charges in excess of presently established or future financial accruals or insurance coverage. Although occasional adverse decisions or settlements may occur, it is management’s opinion that the final disposition of these proceedings will not, considering the merits of the claims and available resources or reserves and insurance, and based upon the facts and circumstances currently known, have a material adverse effect on our financial position or results of operations.

~~17. Related Party Transactions~~21

Unrecovered Duplicate Payments

~~Management Agreements~~

~~Prior to our IPO, Ceridian was party to management agreements with affiliates~~We identified an isolated service incident on September 26, 2019, that resulted in duplicate payments for certain of our sponsors, Fidelity National Financial, Inc. (“FNF”) and THL Managers VI, LLC (“THLM”). FNF assigned its management agreement to Cannae Holdings, LLC (“Cannae”) in November 2017. Pursuant to these management agreements, Cannae and THLM each, respectively, agreed to provide us with financial advisory, strategic, and general oversight services. These management agreements provided thatU.S. payroll customers totaling $18.8 million. During the year ended December 31, 2019, we pay annual management fees to each of Cannae and THLM in an amount equal to the greater of (a) $0.9 million, or (b) 0.5 percent of Adjusted EBITDA. Adjusted EBITDA, for purposes of the management agreements, was EBITDA as defined in the 2014 Senior Secured Credit Facility, further adjusted to exclude the payments made pursuant to the management agreements and certain stock options or other equity compensation.

We recorded a ~~management fee expense in~~loss of $11.2 million for the amount unrecovered, within selling, general, and administrative expense in our consolidated statement of ~~$12.0 million for the nine months ended September 30, 2018, related to these management agreements. In April 2018, the management agreements terminated upon consummation~~operations. Our recovery efforts continued into 2020, resulting in collection of ~~our IPO. Upon termination, the management agreement provided that we pay a termination fee equal to the net present value of the management fee for a seven-year period, which was $11.3 million.~~

~~Service and Vendor Related Agreements~~

Ceridian is a party to a service agreement with CompuCom Systems, Inc. (“CompuCom”), an investment portfolio company of THL Partners. Pursuant to the service agreement, CompuCom agrees to provide us with service desk and desk side support services. Pursuant to this arrangement, we made payments to CompuCom totaling $0.4 million and $0.6$0.3 million during the three months ended ~~September 30, 2019,~~March 31, 2020, which was recognized as a reduction to selling, general, and ~~2018, respectively, and $1.3 million and $1.3 million during the nine months ended September 30, 2019, and 2018, respectively.~~administrative expense.

~~Other~~14. Related Party Transactions

~~On July 23, 2018,~~ Ronald F. Clarke ~~was appointed to~~is a member of our Board of Directors. Mr. Clarke has been the chief executive officer of FleetCor Technologies Inc. (“FleetCor Technologies”) since August 2000 and its chairman of the board of directors since March 2003. We provide services to FleetCor Technologies or one of its wholly owned affiliates through certain commercial arrangements entered into in the ordinary course of business, which include provision of Dayforce HCM services ~~reseller or referral arrangements whereby we resell or refer FleetCor Technologies services to its customers,~~ and other administrative services. For these services, we have recorded revenue of ~~$0.2~~$0.3 million and ~~$0.5~~$0.2 million for the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018, respectively, and $0.6 million and $1.8 million for the nine months ended September 30, 2019, and 2018,~~ respectively.

We provide Dayforce and related services to The Stronach Group, for which we recorded revenueof $0.1 million and $0.1 million for the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and $0.2 million and $0.2 million for the nine months ended September 30, 2019, and 2018,~~ respectively. Alon Ossip, the brother of our chief executive officer, David Ossip, is the chief executive officer, ~~(on leave),~~ and is currently a minority shareholder, of The Stronach Group.

We provide payroll-related tax filings services to ~~FNF~~Fidelity National Financial, Inc., a related party until August 2019 due to certain shared board members, for which we recorded revenue of ~~$0.1 million and $0.1~~$0.1 million for the three months ended ~~September 30, 2019, and 2018, respectively, and $0.3 million and $0.3 million for the nine months ended September 30, 2019, and 2018, respectively.~~ March 31, 2019.

We provide Dayforce and related services to certain investment portfolio companies of ~~THLM~~THL Managers VI, LLC and ~~Cannae.~~Cannae Holdings, Inc., which are considered related parties due to certain shared board members. Revenue from these ~~portfolio companies~~related parties was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

(Dollars in millions)

American Blue Ribbon Holdings, LLC

$
0.5

$
0.5

$
1.4

$
1.5

Essex Bargain Hunt Superstores

0.2

0.1

0.4

0.4

Guaranteed Rate

0.2

—

0.7

0.2

System One Holdings LLC

—

0.1

—

0.4

Philips Feed Services

0.1

0.1

0.2

0.2

	Three Months Ended March 31,
	2020		2019
	(Dollars in millions)
American Blue Ribbon Holdings, LLC	$	0.5	$	0.5
Essex Technology Group, LLC		0.1		0.1
Guaranteed Rate, Inc.		0.2		0.3

~~18.~~15. Net Income ~~(Loss)~~ per Share

We compute net income ~~(loss)~~ per share of common stock using the treasury stock method.

Basic net income (loss) per share is computed by dividing net income (loss) attributable to Ceridian available to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

For the calculation of diluted net income (loss) per share, net income (loss) per share is adjusted by the effect of dilutive securities, including awards under our share-based compensation plans. Diluted net income (loss) per share is computed by dividing the resulting net income (loss) attributable to Ceridian available to common stockholders by the weighted-average number of fully diluted common shares outstanding. During the nine months ended September 30, 2018, our potential dilutive shares, such as stock options, RSUs, and shares of senior and junior convertible preferred stock were not included in the computation of diluted net loss per share as the effect of including these shares in the calculation would have been anti-dilutive.

The numerators and denominators of the basic and diluted net income ~~(loss)~~ per share computations ~~are~~were calculated as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

*As Adjusted

*As Adjusted

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

Numerator:

Net income (loss) attributable to Ceridian

$
62.7

$
4.2

$
80.2

$
(58.5
)
Less: Loss from discontinued operations

—

(3.0
)

—

(14.8
)
Net income (loss) from continuing operations attributable
   to Ceridian

62.7

7.2

80.2

(43.7
)
Less: Senior Preferred Stock dividends declared

—

—

—

7.7

Net income (loss) from continuing operations attributable
   to Ceridian available to common stockholders

$
62.7

$
7.2

$
80.2

$
(51.4
)
Denominator:

Weighted-average shares outstanding - basic

142,780,819

137,768,764

141,369,339

105,730,178

Effect of dilutive equity instruments

6,372,408

7,295,934

6,910,604

—

Weighted-average shares outstanding - diluted

149,153,227

145,064,698

148,279,943

105,730,178

Net income (loss) per share from continuing operations
   attributable to Ceridian - basic

$
0.44

$
0.05

$
0.57

$
(0.49
)
Net loss per share from discontinued operations - basic

$
—

$
(0.02
)

$
—

$
(0.14
)
Net income (loss) per share attributable to Ceridian - basic

$
0.44

$
0.03

$
0.57

$
(0.63
)
Net income (loss) per share from continuing operations
   attributable to Ceridian - diluted

$
0.42

$
0.05

$
0.54

$
(0.49
)
Net loss per share from discontinued operations - diluted

$
—

$
(0.02
)

$
—

$
(0.14
)
Net income (loss) per share attributable to Ceridian - diluted

$
0.42

$
0.03

$
0.54

$
(0.63
)

	Three Months Ended March 31,
	2020		2019
	(Dollars in millions, except share and per share data)
Numerator:
Net income	$	8.6	$	11.2

Denominator:
Weighted-average shares outstanding - basic		144,645,325		140,149,271
Effect of dilutive equity instruments		6,533,173		6,892,957
Weighted-average shares outstanding - diluted		151,178,498		147,042,228

Net income per share - basic	$	0.06	$	0.08
Net income per share - diluted	$	0.06	$	0.08

2822

The following potentially dilutive weighted-average shares were excluded from the calculation of diluted net income ~~(loss)~~ per share because their effect would have been anti-dilutive:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Senior convertible preferred stock		—		—		—		7,358,603
Junior convertible preferred stock		—		—		—		25,508,456
Stock options		4,185,519		148,370		3,099,587		14,127,557		121,381		1,059,230
Restricted stock units		11,957		—		12,821		561,836		21,869		—

2916. Subsequent Events

On May 6, 2020, we entered into a share purchase agreement with Everstone Capital Partners II LLC and Arunasalam Jeyakumar to purchase 100% of the outstanding shares of Excelity Global Solutions Pte. Ltd. (“Excelity”). Excelity is a human capital management service provider in the Asia-Pacific region. We expect this transaction will close in the second quarter of 2020.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition and results of operations as of, and for, the periods presented. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and notes thereto included elsewhere in report and in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, ~~2018,~~2019, in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the Securities and Exchange Commission (“SEC”) on February 28, ~~2019~~2020 (our ~~“2018~~“2019 Form 10-K”). This discussion and analysis contains forward-looking statements, including statement regarding industry outlook, our expectations for the future of our business, and our liquidity and capital resources as well as other non-historical statements. These statements are based on current expectations and are subject to numerous risks and uncertainties, including but not limited to the risks and uncertainties described in Part II, Item 1A, “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by these forward-looking statements. Any reference to a “Note” in this discussion relates to the accompanying notes to the unaudited condensed consolidated financial statements included elsewhere in this report unless otherwise indicated.

Overview

Ceridian is a global human capital management (“HCM”) software company. We categorize our solutions into two categories: Cloud and Bureau solutions. Cloud revenue is generated from HCM solutions that are delivered via two cloud offerings: Dayforce, our flagship cloud HCM platform, and Powerpay, a cloud HR and payroll solution for the Canadian small business market. We also continue to support customers using our Bureau solutions, which we generally stopped actively selling to new customers following the acquisition of Dayforce in 2012. Revenue from our Cloud and Bureau solutions include an allocation of investment income generated from holding customer funds in trust before funds are remitted to taxing authorities, also referred to as float revenue or float. We invest in maintenance and necessary updates to support our Bureau customers and continue to migrate them to Dayforce.

Dayforce provides HR, payroll, benefits, workforce management, and talent management functionality. Our platform is used by organizations, regardless of industry or size, to optimize management of the entire employee lifecycle, including attracting, engaging, paying, deploying, and developing their people. Dayforce was built as a single application from the ground up that combines a modern, consumer-grade user experience with proprietary application architecture, including a single employee record and a rules engine spanning all areas of HCM. Dayforce provides continuous real-time calculations across all modules to enable, for example, payroll administrators access to data through the entire pay period, and managers access to real-time data to optimize work schedules. Our platform is designed to make work life better for our customers and their employees by improving HCM decision-making processes, streamlining workflows, exposing strategic organizational insights, and simplifying legislative compliance. The platform is designed to ease administrative work for both employees and managers, creating opportunities for companies to increase employee engagement. We are a founder-led organization, and our culture combines the agility and innovation of a start-up with a history of deep domain and operational expertise.

In 2020, we launched the Dayforce Wallet, which gives our customers’ employees greater control over their financial well-being by providing them with instant access to their earnings. This on-demand pay feature allows employees more choice over when they get paid by making any day payday. Dayforce Wallet enables workers to access their already-earned wages anytime during the pay period, net of taxes, withholdings and other payroll deductions. Leveraging Dayforce’s continuous pay calculations, Dayforce Wallet processes a same-day payroll each time a worker requests their pay. The solution is compliant with federal, state, and local remittances and requires no changes to payroll processing including the funding, timing, and close-out of pay.

We sell Dayforce through our direct sales force on a subscription per-employee, per-month (“PEPM”) basis. Our subscriptions are typically structured with an initial fixed term of between three and five years, with evergreen renewal thereafter. Dayforce can serve customers of all sizes, ranging from 100 to over 100,000 employees. We have rapidly grown the Dayforce platform to ~~more than 4,150~~4,480 live Dayforce customers as of ~~September 30, 2019.~~March 31, 2020. For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, we added ~~over 160 and 450~~117 net new live Dayforce ~~customers, respectively.~~customers.

On April 30, 2018, we completed our initial public offering ("IPO"), in which we issued and sold 21,000,000 shares of common stock at a public offering price of $22.00 per share. We granted the underwriters a 30-day option to purchase an additional 3,150,000 shares of common stock at the offering price, which was exercised in full. A total of 24,150,000 shares of common stock were issued in our IPO. Concurrently with our IPO, we issued an additional 4,545,455 shares of our common stock in a private placement at $22.00 per share. We received gross proceeds of $631.3 million from the IPO and concurrent private placement before deducting underwriting discounts, commissions, and other offering related expenses.

We applied a portion of the net proceeds from the IPO to satisfy and to discharge the indenture governing our outstanding $475.0 million principal amount senior notes due 2021, and they were redeemed on May 30, 2018 (“Senior Notes”). Concurrently, we also refinanced our remaining debt under our (i) $702.0 million (original principal amount) senior term debt and (ii) $130.0 million revolving credit facility, including accrued interest and related costs and expenses, with new senior credit facilities consisting of a $680.0 million term loan debt facility and a $300.0 million revolving credit facility. Please refer to Note 8, “Debt,” for further discussion of the debt transactions.

~~The IPO, private placement, and debt refinancing had the following impacts to our results of operations and cash during the three months ended June 30, 2018:~~

Impact to
Statement of
Operations

Impact to Cash

(Dollars in millions)

Gross proceeds from the IPO and private placement

$
631.3

Costs capitalized within stockholders’ equity

(36.3
)
Redemption of Senior Notes

(475.0
)
Debt refinancing fees, reflected as a reduction to long-term
   debt

(3.6
)
IPO and debt refinancing related expenses reflected
   within results of operations:

Cost of revenue

$
(2.1
)

Selling, general, and administrative

(23.2
)

Impact on operating profit

$
(25.3
)

Interest expense

(25.7
)

Impact on net loss

$
(51.0
)

(51.0
)
Non-cash IPO-related share-based compensation expense

8.1

Non-cash interest expense adjustments

(4.9
)
Cash to balance sheet from the IPO and private placement

$
68.6

Proceeds from issuance of the new $680.0 million Senior
   Term Debt

680.0

Repayment of the $702.0 million Senior Term Debt

(657.0
)
Cash to balance sheet from the IPO, private placement
   and debt refinancing

$
91.6

Contemporaneously with the IPO and concurrent private placement, we distributed our interest in LifeWorks to our existing stockholders of record prior to the IPO on a pro rata basis in accordance with their pro rata interests in us (“LifeWorks Disposition”). As a result of the LifeWorks Disposition, we no longer have any material obligation under the LifeWorks joint venture agreement. Please refer to Note 3, “Discontinued Operations,” for further discussion of the LifeWorks Disposition.

Our Business Model

Our business model focuses on supporting the rapid growth of Dayforce and maximizing the lifetime value of our Dayforce customer relationships. Due to our subscription model, where we recognize subscription revenues ratably over the term of the subscription period, and high customer retention rates, we have historically had a high level of visibility into our future revenues. The profitability of a customer depends, in large part, on how long they have been a customer. Because in our business model, PEPM subscription fees are not charged until the customer goes live, and because we incur costs in advance of receiving PEPM revenue that are not fully offset by our implementation fees, we estimate that it takes an average of ~~2.5~~2 years before we are able to recover our implementation, customer acquisition, and other direct costs on a new Dayforce customer contract. As the proportion of Dayforce customers who have been live for two or more years increases, our related profitability increases. ~~The following sets forth the number of live Dayforce customers at the end of each quarter presented:~~

September

June 30,

March 31,

December

September

June 30,

March 31,

December

30, 2019

2019

2019

31, 2018

30, 2018

2018

2018

31, 2017

Live Dayforce
   customers

4,169

4,006

3,851

3,718

3,465

3,308

3,154

3,001

Dayforce customers
   live for two or more
   years

2,855

2,690

2,480

2,339

2,148

2,014

1,872

1,770

Proportion of
   Dayforce customers
   live for two or more
   years

68
%

67
%

64
%

63
%

62
%

61
%

59
%

59
%

Over the lifetime of the customer relationship, we have the opportunity to realize additional PEPM revenue, both as the customer grows or rolls out the Dayforce solution to additional employees, and also by selling additional functionality. We incur on-going costs to manage the account, to support customers, and to sell additional functionality. These costs, however, are significantly less than the costs initially incurred to acquire and to implement the customer.

During the remainder of 2020, we anticipate adverse effects to our revenue streams, primarily as a result of declining employment levels at our customers in certain sectors, such as retail and hospitality, due to the effects of the COVID-19 pandemic. Additionally, the federal funds rate cuts by the U.S. Federal Reserve have had and will continue to have negative effects on our float revenue.

How We Assess Our Performance

In assessing our performance, we consider a variety of performance indicators in addition to revenue and net income. Set forth below is a description of our key performance measures.

Live Dayforce Customers

We use the number of customers live on Dayforce as an indicator of future revenue and the overall performance of the business and to assess the performance of our implementation services. We had ~~4,169~~4,480 customers live on Dayforce as of ~~September 30, 2019,~~March 31, 2020, compared to ~~3,465~~3,851 customers live on Dayforce as of ~~September 30, 2018. Please refer~~March 31, 2019.

Constant Currency Revenue

We present revenue on a constant currency basis to assess how our underlying business performed, excluding the ~~“Our Business Model” section above for~~effect of foreign currency rate fluctuations. We believe this non-GAAP financial measure is useful to management and investors. We have calculated revenue on a constant currency basis by applying the ~~number of live Dayforce customers at~~average foreign exchange rate in effect during the ~~end of the quarters presented.~~comparable prior period.

Adjusted EBITDA and Adjusted EBITDA margin

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 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 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 and related employer taxes, severance charges, restructuring consulting fees, ~~transaction costs,~~ and certain other non-recurring charges. Adjusted EBITDA margin is determined by calculating the percentage that Adjusted EBITDA is of ~~Total Revenue.~~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. Please refer to the “Results of Operations” section below for a discussion of Adjusted EBITDA and Adjusted EBITDA margin.

3225

Results of Operations

Three Months Ended ~~September 30, 2019~~March 31, 2020 Compared With Three Months Ended ~~September 30, 2018~~March 31, 2019

	Three Months Ended
	September 30,						Increase/ (Decrease)						% of Revenue						Three Months Ended
	2019			2018			Amount			%			2019			2018			March 31,						Increase/ (Decrease)						% of Revenue
				As Adjusted (b)															2020			2019			Amount			%			2020			2019
	(Dollars in millions)																		(Dollars in millions)
Revenue:
Recurring services			��
Cloud	$	131.0		$	103.5		$	27.5			26.6	%		64.8	%		58.1	%	$	149.9		$	124.4		$	25.5			20.5	%		67.3	%		61.1	%
Bureau		36.4			46.0			(9.6	)		(20.9	)%		18.0	%		25.8	%		31.6			48.4			(16.8	)		(34.7	)%		14.2	%		23.8	%
Total recurring services		167.4			149.5			17.9			12.0	%		82.7	%		83.9	%		181.5			172.8			8.7			5.0	%		81.5	%		84.8	%
Professional services and other		34.9			28.6			6.3			22.0	%		17.3	%		16.1	%		41.2			30.9			10.3			33.3	%		18.5	%		15.2	%
Total revenue		202.3			178.1			24.2			13.6	%		100.0	%		100.0	%		222.7			203.7			19.0			9.3	%		100.0	%		100.0	%
Cost of revenue:
Recurring services
Cloud		39.0			35.4			3.6			10.2	%		19.3	%		19.9	%		41.0			37.2			3.8			10.2	%		18.4	%		18.3	%
Bureau		10.4			13.7			(3.3	)		(24.1	)%		5.1	%		7.7	%		11.2			13.7			(2.5	)		(18.2	)%		5.0	%		6.7	%
Total recurring services		49.4			49.1			0.3			0.6	%		24.4	%		27.6	%		52.2			50.9			1.3			2.6	%		23.4	%		25.0	%
Professional services and other		37.6			32.5			5.1			15.7	%		18.6	%		18.2	%		42.6			35.3			7.3			20.7	%		19.1	%		17.3	%
Product development and management		17.5			14.5			3.0			20.7	%		8.7	%		8.1	%		17.6			15.2			2.4			15.8	%		7.9	%		7.5	%
Depreciation and amortization		9.0			8.5			0.5			5.9	%		4.4	%		4.8	%		9.8			8.7			1.1			12.6	%		4.4	%		4.3	%
Total cost of revenue		113.5			104.6			8.9			8.5	%		56.1	%		58.7	%		122.2			110.1			12.1			11.0	%		54.9	%		54.1	%
Gross profit		88.8			73.5			15.3			20.8	%		43.9	%		41.3	%		100.5			93.6			6.9			7.4	%		45.1	%		45.9	%
Selling, general, and administrative expense		82.3			57.3			25.0			43.6	%		40.7	%		32.2	%
Selling, general, and administrative																				74.2			66.2			8.0			12.1	%		33.3	%		32.5	%
Operating profit		6.5			16.2			(9.7	)		(59.9	)%		3.2	%		9.1	%		26.3			27.4			(1.1	)		(4.0	)%		11.8	%		13.5	%
Interest expense, net		7.8			8.8			(1.0	)		(11.4	)%		3.9	%		4.9	%		6.9			8.9			(2.0	)		(22.5	)%		3.1	%		4.4	%
Other expense, net		1.6			0.9			0.7			77.8	%		0.8	%		0.5	%		2.6			1.6			1.0			62.5	%		1.2	%		0.8	%
(Loss) income from continuing operations before income taxes		(2.9	)		6.5			(9.4	)		(144.6	)%		(1.4	)%		3.6	%
Income tax benefit		(65.6	)		(0.7	)		(64.9	)		(9271.4	)%		(32.4	)%		(0.4	)%
Income from continuing operations		62.7			7.2			55.5			770.8	%		31.0	%		4.0	%
Loss from discontinued operations		—			(3.0	)		3.0			100.0	%		—			(1.7	)%
Income before income taxes																				16.8			16.9			(0.1	)		(0.6	)%		7.5	%		8.3	%
Income tax expense																				8.2			5.7			2.5			43.9	%		3.7	%		2.8	%
Net income	$	62.7		$	4.2			58.5			1392.9	%		31.0	%		2.4	%	$	8.6		$	11.2		$	(2.6	)		(23.2	)%		3.9	%		5.5	%
Adjusted EBITDA (a)	$	46.4		$	36.4		$	10.0			27.5	%		22.9	%		20.4	%	$	55.2		$	49.8		$	5.4			10.8	%		24.8	%		24.4	%
Adjusted EBITDA margin (a)		22.9	%		20.4	%		2.5	%		12.4	%								24.8	%		24.4	%		0.4	%		1.6	%

(a)	Please refer to the “Non-GAAP Measures” section for a discussion and reconciliation of Adjusted EBITDA and Adjusted EBITDA margin, a non-GAAP financial ~~measure.~~

~~(b)~~

~~Please refer to Note 2 of the notes to the condensed consolidated financial statements for a summary of adjustments.~~measures.

Revenue.The following table sets forth certain information regarding our revenues for the three months ended ~~September 30, 2019,~~March 31, 2020, compared with the three months ended ~~September 30, 2018.~~March 31, 2019.

Three Months Ended September 30,

Percentage
change in
revenue as
reported

Impact of
changes in
foreign
currency (a)

Percentage
change in
revenue on
constant
currency basis
(a)

2019

2018

2019 vs. 2018

2019 vs. 2018

As Adjusted (b)

(Dollars in millions)

Revenue:

Cloud

Dayforce

Recurring services

$
109.4

$
82.5

32.6
%

(0.4
)%

33.0
%
Professional services and other

34.3

27.9

22.9
%

(0.3
)%

23.2
%
Total Dayforce revenue

143.7

110.4

30.2
%

(0.3
)%

30.5
%
Powerpay

Recurring services

21.6

21.0

2.9
%

(0.9
)%

3.8
%
Professional services and other

0.2

0.3

(33.3
)%

(33.3
)%

—

Total Powerpay revenue

21.8

21.3

2.3
%

(1.4
)%

3.7
%
Total Cloud revenue

165.5

131.7

25.7
%

(0.5
)%

26.2
%
Bureau

Recurring services

36.4

46.0

(20.9
)%

(0.3
)%

(20.6
)%
Professional services and other

0.4

0.4

—

—

—

Total Bureau revenue

36.8

46.4

(20.7
)%

(0.3
)%

(20.4
)%
Total revenue

$
202.3

$
178.1

13.6
%

(0.4
)%

14.0
%

	Three Months Ended March 31,				Percentage change in revenue as reported			Impact of changes in foreign currency (a)			Percentage change in revenue on constant currency basis (a)
	2020		2019		2020 vs. 2019						2020 vs. 2019
	(Dollars in millions)
Revenue:
Dayforce recurring services, excluding float	$	114.0	$	87.6		30.1	%		(0.3	)%		30.4	%
Dayforce float		14.1		15.3		(7.8	)%		(—	)%		(7.8	)%
Total Dayforce recurring services		128.1		102.9		24.5	%		(0.2	)%		24.7	%
Powerpay recurring services, excluding float		19.0		18.3		3.8	%		(—	)%		3.8	%
Powerpay float		2.8		3.2		(12.5	)%		(—	)%		(12.5	)%
Total Powerpay recurring services		21.8		21.5		1.4	%		(—	)%		1.4	%
Total Cloud recurring services		149.9		124.4		20.5	%		(0.2	)%		20.7	%
Dayforce professional services and other		40.7		29.9		36.1	%		(0.4	)%		36.5	%
Powerpay professional services and other		0.3		0.3		(—	)%		(—	)%		(—	)%
Total Cloud professional services and other		41.0		30.2		35.8	%		(0.3	)%		36.1	%
Total Cloud revenue		190.9		154.6		23.5	%		(0.2	)%		23.7	%
Bureau recurring services, excluding float		28.9		42.6		(32.2	)%		(0.3	)%		(31.9	)%
Bureau float		2.7		5.8		(53.4	)%		(—	)%		(53.4	)%
Total Bureau recurring services		31.6		48.4		(34.7	)%		(0.2	)%		(34.5	)%
Bureau professional services and other		0.2		0.7		(71.4	)%		(—	)%		(71.4	)%
Total Bureau revenue		31.8		49.1		(35.2	)%		(0.2	)%		(35.0	)%
Total revenue	$	222.7	$	203.7		9.3	%		(0.2	)%		9.5	%

Dayforce	$	168.8	$	132.8		27.1	%		(0.2	)%		27.3	%
Powerpay		22.1		21.8		1.4	%		(—	)%		1.4	%
Total Cloud revenue	$	190.9	$	154.6		23.5	%		(0.2	)%		23.7	%

Dayforce, excluding float	$	154.7	$	117.5		31.7	%		(0.2	)%		31.9	%
Powerpay, excluding float		19.3		18.6		3.8	%		(—	)%		3.8	%
Cloud revenue, excluding float		174.0		136.1		27.8	%		(0.3	)%		28.1	%
Cloud float		16.9		18.5		(8.6	)%		(—	)%		(8.6	)%
Total Cloud revenue	$	190.9	$	154.6		23.5	%		(0.2	)%		23.7	%

(a)	~~Please refer to the “Non-GAAP Measures” section for additional information~~We have calculated revenue on ~~our~~a constant currency ~~revenue, a non-GAAP financial measure.~~

~~(b)~~

~~Please refer to Note 2 of~~basis by applying the ~~notes to~~average foreign exchange rate in effect during the ~~condensed consolidated financial statements for a summary of adjustments.~~comparable prior period.

Total revenue increased ~~$24.2~~$19.0 million, or ~~13.6%~~9.3%, to ~~$202.3~~$222.7 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$178.1~~$203.7 million for the three months ended ~~September 30, 2018.~~March 31, 2019. This increase was primarily attributable to an increase in Cloud revenue of ~~$33.8~~$36.3 million, or ~~25.7%~~23.5%, from ~~$131.7~~$154.6 million for the three months ended ~~September 30, 2018,~~March 31, 2019, to ~~$165.5~~$190.9 million for the three months ended ~~September 30, 2019.~~March 31, 2020. The Cloud revenue increase was driven by an increase of ~~$27.5~~$25.5 million, or ~~26.6%~~20.5%, in Cloud recurring services revenue, and ~~$6.3~~$10.8 million, or ~~22.3%~~35.8%, in Cloud professional services and other revenue. The increase in Cloud recurring services revenue of ~~$27.5~~$25.5 million was due to ~~$19.8~~$21.3 million from new customers, add-ons, and revenue uplift from migrations of Bureau customers, net of customer losses; ~~$5.0~~$5.8 million from the migration of Bureau customers; ~~and $2.7~~partially offset by a $1.6 million ~~from increased~~decline in float revenue related to Cloud recurring services revenue.

The increase in Cloud revenue of $33.8 million was partially offset by a decline in Bureau revenue of $9.6 million, or 20.7%. Of the $9.6 million decline in Bureau revenue for the three months ended September 30, 2019, approximately 52% was attributable to customer migrations to Dayforce. Excluding the impact of migrations to Dayforce, Bureau revenue declined by $4.6 million, or 9.9%.27

On a constant currency basis, total revenue grew 14.0%, reflecting a 26.2% increase in Cloud revenue, partially offset by a 20.4% decline in Bureau revenue. Cloud revenue growth reflected a 27.0% increase in Cloud recurring services revenue and a 23.0% increase in Cloud professional services and other revenue. Please refer to the “Non-GAAP Measures” section for additional information on our constant currency revenue.

~~Cloud revenue by solution.~~Cloud revenue was ~~$165.5~~$190.9 million for the three months ended ~~September 30, 2019,~~March 31, 2020, an increase of ~~$33.8~~$36.3 million, or ~~25.7%~~23.5%, compared to ~~Cloud~~the three months ended March 31, 2019. Dayforce revenue increased 27.1%, and Powerpay revenue increased 1.4% for the three months ended ~~September 30, 2018. Dayforce revenue increased 30.2%, and Powerpay revenue increased 2.3% for~~March 31, 2020, as compared to the three months ended September 30, 2019, as compared to revenues for the three months ended September 30, 2018. On a constant currency basis, Dayforce revenue increased 30.5%, and Powerpay revenue increased 3.7% for the three months ended September 30,March 31, 2019. Our new business sales to Dayforce and Powerpay customers comprised approximately ~~85%~~84% of our increase in Cloud revenue for the three months ended ~~September 30, 2019,~~March 31, 2020, and approximately ~~15%~~16% consisted primarily of customer migrations to Dayforce from our Bureau solutions. As we migrate our Bureau customers to Dayforce, we typically experience a revenue increase from such customers driven by increased product density on the Dayforce platform.

34Bureau revenue declined $17.3 million, or 35.2%, for the three months ended March 31, 2020. Of the $17.3 million decline, approximately 34% was attributable to customer migrations to Dayforce. Excluding the impact of migrations to Dayforce, Bureau revenue declined by $11.5 million, or 23.4%.

Excluding float revenue and on a constant currency basis, total revenue grew 13.4%, reflecting a 28.1% increase in Cloud revenue, partially offset by a 32.6% decline in Bureau revenue. Excluding float revenue and on a constant currency basis, Cloud revenue growth reflected a 25.8% increase in Cloud recurring services revenue and a 36.1% increase in Cloud professional services and other revenue. Excluding float revenue and on a constant currency basis, Dayforce revenue increased 31.9%, reflecting a 30.4% increase in Dayforce recurring service revenue and a 36.5% increase in Dayforce professional services and other revenue. Excluding float revenue and on a constant currency basis, Powerpay revenue increased 3.8%, reflecting a 3.8% increase in Powerpay recurring service revenue.

Float ~~revenue.~~ ~~Investment income from invested customer trust funds~~revenue included in recurring services revenue was ~~$18.3~~$19.6 million and ~~$15.8~~$24.3 million for the three months ended ~~September 30,~~March 31, 2020, and 2019, respectively. Float revenue allocated to Cloud revenue and ~~2018, respectively.~~Dayforce revenue was $16.9 million and $14.1 million, respectively, for the three months ended March 31, 2020. The average float balance for our customer trust funds for the three months ended ~~September 30, 2019,~~March 31, 2020, was ~~$3,117.5~~$4,093.3 million, compared to ~~$2,965.9~~$4,075.4 million for the three months ended ~~September 30, 2018.~~March 31, 2019. On a constant currency basis, the average float balance for our customer trust funds ~~increased 5.5%~~ for the three months ended ~~September 30, 2019, compared to~~March 31, 2020, was consistent with the three months ended ~~September 30, 2018.~~March 31, 2019. The average yield was ~~2.33%~~1.93% during the three months ended ~~September 30, 2019, an increase~~March 31, 2020, a decline of 2249 basis points compared to the average yield induring the three months ended ~~September 30, 2018~~. March 31, 2019, primarily due to reductions in the U.S. Federal Reserve federal funds rate and the Bank of Canada overnight rate target. For the three months ended ~~September 30, 2019,~~March 31, 2020, approximately ~~39%~~31% of our average float balance consisted of Canadian customer trust funds, compared to approximately ~~40%~~33% for the three months ended ~~September 30, 2018.~~March 31, 2019. Based on current market conditions, portfolio composition and investment practices, a 100 basis point change in market investment rates would result in approximately $18 million of change in float revenue over the ensuing twelve month period. There are no incremental costs of revenue associated with changes in float revenue.

Cost of revenue. Total cost of revenue for the three months ended ~~September 30, 2019,~~March 31, 2020, was ~~$113.5~~$122.2 million, an increase of ~~$8.9~~$12.1 million, or ~~8.5%~~11.0%, compared to the three months ended ~~September 30, 2018.~~March 31, 2019. Recurring services cost of revenue for the three months ended ~~September 30, 2019, was consistent~~March 31, 2020, increased $1.3 million, or 2.6% compared with the three months ended ~~September 30, 2018.~~March 31, 2019, primarily due to additional costs incurred to support the growing Dayforce customer base, partially offset by reductions in Bureau costs. Professional services and other cost of revenue increased ~~$5.1~~$7.3 million, or ~~15.7%~~20.7%, for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to the three months ended ~~September 30, 2018,~~March 31, 2019, primarily due to additional costs incurred to implement new customers.

In accordance with ASC 350, we are required to capitalize certain software development costs. Please refer to Note 2, “Summary of Significant Accounting Policies,” for further discussion of our accounting policy for internally developed software costs. Costs related to software development activities that do not qualify for capitalization, such as development, quality assurance, testing of new technologies, enhancements to our existing solutions that do not result in additional functionality, and costs related to the management of our solutions are presented as product development and management expense. The increase in productProduct development and management expense ~~of $3.0~~increased $2.4 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to the three months ended ~~September 30, 2018, reflected~~March 31, 2019, reflecting increases in Dayforce product development efforts, including ~~the~~costs to build out ofthe Dayforce Wallet and our international ~~offerings;~~offerings that are not eligible for capitalization; and increases in product management labor costs. For the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018,~~ our investment in software development was ~~$17.4~~$17.2 million and ~~$14.4~~$15.1 million, respectively, consisting of ~~$8.7~~$8.1 million and ~~$7.5~~$7.8 million, of research and development expense, which is included within product development and management expense, and ~~$8.7~~$9.1 million and ~~$6.9~~$7.3 million in capitalized software development costs, respectively.

Depreciation and amortization expense associated with cost of revenue increased by ~~$0.5~~$1.1 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to the three months ended ~~September 30, 2018,~~March 31, 2019, as we continue to capitalize Dayforce related and other development costs and subsequently amortize these costs.

Gross profit.The following table ~~below~~ presents total gross margin and solution gross margins for the periods presented:

	Three Months Ended September 30,
	2019			2018			Three Months Ended March 31,
				As Adjusted (a)			2020			2019
Total gross margin		43.9	%		41.3	%		45.1	%		45.9	%
Gross margin by solution:
Cloud recurring services		70.2	%		65.8	%		72.6	%		70.1	%
Bureau recurring services		71.4	%		70.2	%		64.6	%		71.7	%
Professional services and other		(7.7	)%		(13.6	)%		(3.4	)%		(14.2	)%

~~(a)~~

~~Please refer to Note 2 of the notes to the condensed consolidated financial statements for a summary of adjustments.~~

Total gross margin is defined as total gross profit as a percentage of total revenue, inclusive of product development and management costs, as well as depreciation and amortization associated with cost of revenue. Gross margin for each solution in the table above is defined as total revenue less cost of revenue for the applicable solution as a percentage of total revenue for that related solution, exclusive of any product development and management or depreciation and amortization cost allocations.

~~The overall 13.6% increase in revenue outpaced~~Total gross margin for the ~~8.5% increase in cost of revenue,~~three months ended March 31, 2020, was consistent with total gross margin for the three months ended March 31, 2019, and gross profit increased by ~~$15.3~~$6.9 million, or ~~20.8%~~7.4%, as we continued to leverage our investment in people and processes to realize economies of scale, while also developing and expanding our service ~~offerings internationally.~~offerings.

Cloud recurring services gross margin was ~~70.2%~~72.6% for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~65.8%~~70.1% for the three months ended ~~September 30, 2018.~~March 31, 2019. The increase in Cloud recurring services gross margin reflects an increase in the proportion of Dayforce customers live for more than two years, which increased from ~~62%~~64% as of ~~September 30, 2018,~~March 31, 2019, to ~~68%~~70% as of ~~September 30, 2019,~~March 31, 2020, and was also attributable to consistent configuration that has enabled us to continue to realize economies of scale in hosting and customer support. Bureau recurring services gross margin declined from 71.7% for the three months ended March 31, 2019, to 64.6% for the three months ended March 31, 2020, reflecting lower allocated float revenue and a higher proportion of customer support costs to support the end-of-life process of our Bureau payroll products. Professional services and other gross margin was ~~(7.7)~~(3.4)% for the three months ended ~~September 30, 2019,~~March 31, 2020, improving from ~~(13.6)~~(14.2)% for the three months ended ~~September 30, 2018,~~March 31, 2019, reflecting continued productivity improvements in implementing new customers.

Selling, general, and administrative expense. Selling, general, and administrative expense increased ~~$25.0~~$8.0 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to the three months ended ~~September 30, 2018.~~March 31, 2019. Excluding the impact of share-based compensation and related employer taxes, restructuring consulting fees, severance expense, and certain other non-recurring charges; selling, general, and administrative expenses would have increased ~~$6.7~~$1.9 million. This adjusted increase ~~of $6.7 million was primarily related to~~reflects a ~~$6.2~~$4.5 million increase in sales and marketing, ~~expenses.~~primarily employee related costs, partially offset by a reduction of $2.6 million in general and administrative expense, primarily customer list amortization expense. Please refer to the “Non-GAAP Measures” section for additional information on the excluded items.

Operating profit.We realized operating profit of ~~$6.5~~$26.3 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$16.2~~$27.4 million for the three months ended ~~September 30, 2018.~~March 31, 2019. Excluding the impact of share-based compensation and related employer taxes, restructuring consulting fees, severance expense, and certain other non-recurring charges; operating profit would have been ~~$32.8~~$44.2 million and ~~$22.7~~$36.7 million for the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018,~~ respectively. This ~~$10.1~~$7.5 million adjusted increase was primarily due to ~~a $24.2 million~~an increase in ~~revenue and~~ gross ~~margin improvements.~~profit.

Interest expense, net. Interest expense, net was ~~$7.8~~$6.9 million and ~~$8.8~~$8.9 million for the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018,~~ respectively, which declined primarily due to ~~an increase~~a reduction in our term debt interest ~~income.~~rate. A 100 basis point change in LIBOR rates would result in an approximately $7 million change in our interest expense, net over the ensuing twelve-month period.

Other expense, net. For the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018,~~ we incurred other expense, net of ~~$1.6~~$2.6 million and ~~$0.9~~$1.6 million, respectively, which was ~~primarily~~ comprised of foreign currency translation loss and net periodic pension expense.

Income tax ~~benefit.~~expense. For the three months ended ~~September 30,~~March 31, 2020, and 2019, ~~and 2018,~~ we recorded an income tax ~~benefit~~expense of ~~$65.6~~$8.2 million, and ~~$0.7,~~$5.7 million, respectively. The ~~$64.9 million increase reflects a tax benefit of $65.8 million from the release of our valuation allowance, a $6.0~~$2.5 million increase in ~~the~~income tax expense was primarily due to a $4.6 million tax benefit ~~from~~recognized during the ~~tax deduction related to stock option exercises,~~three months ended March 31, 2019, that was not repeated during the three months ended March 31, 2020 and a ~~$1.7~~$4.4 million increase in tax expense attributable to share-based compensation, partially offset by a $4.6 million reduction in tax expense attributable to the Global Intangible Low ~~Taxed~~Tax Income tax (“GILTI”), ~~partially offset by~~and a ~~$4.4~~$2.4 million ~~increase~~reduction in ~~state~~the tax ~~expenses, a $2.1 million increase for enacted tax rate changes, a $1.2 million increase in~~expense attributable to the base erosion anti-abuse tax (“BEAT”) in the U.S., and other tax expense increases of $0.9 million. BEAT and GILTI were enacted as a part of the 2017 Tax Reform. The IRS continues to issue 2017 Tax Reform administrative guidance, which could impact tax expense related to these Tax Reform provisions in future periods. Please refer to Note 14, “Income Taxes,” for additional information on the release of our valuation allowance..

~~Loss from discontinued operations.~~ As a result of the LifeWorks Disposition, the financial results of the LifeWorks business have been included within discontinued operations for all periods presented. For the three months ended September 30, 2018, the loss from discontinued operations of $3.0 million was related to income tax expense incurred as a result of the LifeWorks Disposition.29

Net income. We realized net income of ~~$62.7~~$8.6 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$4.2~~$11.2 million for the three months ended ~~September 30, 2018.~~March 31, 2019.

Adjusted EBITDA. Adjusted EBITDA increased by ~~$10.0~~$5.4 million to ~~$46.4~~$55.2 million, for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to the three months ended ~~September 30, 2018,~~March 31, 2019, and Adjusted EBITDA margin was ~~22.9%~~24.8% for the three months ended ~~September 30, 2019,~~March 31, 2020, compared with ~~the~~ Adjusted EBITDA margin of ~~20.4%~~24.4% for the three months ended ~~September 30, 2018.~~March 31, 2019.

~~Nine Months Ended September 30, 2019 Compared With Nine Months Ended September 30, 2018~~

Nine Months Ended September 30,

Increase/ (Decrease)

% of Revenue

2019

2018

Amount

%

2019

2018

As Adjusted (b)

(Dollars in millions)

Revenue:

Recurring services

Cloud

$
378.7

$
302.6

76.1

25.1
%

62.9
%

55.4
%
Bureau

125.0

157.9

(32.9
)

(20.8
)%

20.8
%

28.9
%
Total recurring services

503.7

460.5

43.2

9.4
%

83.6
%

84.4
%
Professional services and other

98.6

85.4

13.2

15.5
%

16.4
%

15.6
%
Total revenue

602.3

545.9

56.4

10.3
%

100.0
%

100.0
%
Cost of revenue:

Recurring services

��

Cloud

114.0

102.6

11.4

11.1
%

18.9
%

18.8
%
Bureau

35.0

46.7

(11.7
)

(25.1
)%

5.8
%

8.6
%
Total recurring services

149.0

149.3

(0.3
)

(0.2
)%

24.7
%

27.3
%
Professional services and other

107.1

98.7

8.4

8.5
%

17.8
%

18.1
%
Product development and management

49.1

43.3

5.8

13.4
%

8.2
%

7.9
%
Depreciation and amortization

26.7

25.7

1.0

3.9
%

4.4
%

4.7
%
Total cost of revenue

331.9

317.0

14.9

4.7
%

55.1
%

58.1
%
Gross profit

270.4

228.9

41.5

18.1
%

44.9
%

41.9
%
Selling, general, and administrative expense

217.8

193.1

24.7

12.8
%

36.2
%

35.4
%
Operating profit

52.6

35.8

16.8

46.9
%

8.7
%

6.6
%
Interest expense, net

25.2

74.4

(49.2
)

(66.1
)%

4.2
%

13.6
%
Other expense (income), net

4.7

(0.7
)

5.4

771.4
%

0.8
%

(0.1
)%
Income (loss) from continuing operations
before income taxes

22.7

(37.9
)

60.6

159.9
%

3.8
%

(6.9
)%
Income tax (benefit) expense

(57.5
)

6.3

(63.8
)

(1012.7
)%

(9.5
)%

1.2
%
Income (loss) from continuing operations

80.2

(44.2
)

124.4

281.4
%

13.3
%

(8.1
)%
Loss from discontinued operations

—

(14.8
)

14.8

100.0
%

—

(2.7
)%
Net income (loss)

80.2

(59.0
)

139.2

235.9
%

13.3
%

(10.8
)%
Net loss attributable to noncontrolling
interest

—

(0.5
)

0.5

100.0
%

—

(0.1
)%
Net income (loss) attributable to Ceridian

$
80.2

$
(58.5
)

138.7

237.1
%

13.3
%

(10.7
)%
Adjusted EBITDA (a)

$
140.2

$
118.8

21.4

18.0
%

23.3
%

21.8
%
Adjusted EBITDA margin (a)

23.3
%

21.8
%

1.5
%

6.8
%

~~(a)~~

~~Please refer to the “Non-GAAP Measures” section for a discussion and reconciliation of Adjusted EBITDA, a non-GAAP financial measure.~~

~~(b)~~

~~Please refer to Note 2 of the notes to the condensed consolidated financial statements for a summary of adjustments.~~

~~Revenue.The following table sets forth certain information regarding our revenues for the nine months ended September 30, 2019, compared with the nine months ended September 30, 2018.~~

Nine Months Ended September 30,

Percentage
change in
revenue as
reported

Impact of
changes in
foreign
currency (a)

Percentage
change in
revenue on
constant
currency basis
(a)

2019

2018

2019 vs. 2018

2019 vs. 2018

As Adjusted (b)

(Dollars in millions)

Revenue:

Cloud

Dayforce

Recurring services

$
314.7

$
237.9

32.3
%

(0.8
)%

33.1
%
Professional services and other

96.3

82.4

16.9
%

(0.7
)%

17.6
%
Total Dayforce revenue

411.0

320.3

28.3
%

(0.8
)%

29.1
%
Powerpay

Recurring services

64.0

64.7

(1.1
)%

(3.3
)%

2.2
%
Professional services and other

0.8

0.9

(11.1
)%

(11.1
)%

—

Total Powerpay revenue

64.8

65.6

(1.2
)%

(3.4
)%

2.2
%
Total Cloud revenue

475.8

385.9

23.3
%

(1.2
)%

24.5
%
Bureau

Recurring services

125.0

157.9

(20.8
)%

(0.7
)%

(20.1
)%
Professional services and other

1.5

2.1

(28.6
)%

—

(28.6
)%
Total Bureau revenue

126.5

160.0

(20.9
)%

(0.7
)%

(20.2
)%
Total revenue

$
602.3

$
545.9

10.3
%

(1.1
)%

11.4
%

~~(a)~~

~~Please refer to “Non-GAAP Measures” section for additional information on our constant currency revenue, a non-GAAP financial measure.~~

~~(b)~~

~~Please refer to Note 2 of the notes to the condensed consolidated financial statements for a summary of adjustments.~~

Total revenue increased $56.4 million, or 10.3%, to $602.3 million for the nine months ended September 30, 2019, compared to $545.9 million for the nine months ended September 30, 2018. This increase was primarily attributable to an increase in Cloud revenue of $89.9 million, or 23.3%, from $385.9 million for the nine months ended September 30, 2018, to $475.8 million for the nine months ended September 30, 2019. The Cloud revenue increase was driven by an increase of $76.1 million, or 25.1%, in Cloud recurring services revenue, and $13.8 million, or 16.6%, in Cloud professional services and other revenue. The increase in Cloud recurring services revenue of $76.1 million was due to $49.3 million from new customers, add-ons, and revenue uplift from migrations of Bureau customers, net of customer losses; $14.0 million from the migration of Bureau customers; and $12.8 million from increased float revenue related to Cloud recurring services revenue.

The increase in Cloud revenue of $89.9 million was partially offset by a decline in Bureau revenue of $33.5 million, or 20.9%. Of the $33.5 million decline in Bureau revenue for the nine months ended September 30, 2019, approximately 42% was attributable to customer migrations to Dayforce. Excluding the impact of migrations to Dayforce, Bureau revenue declined by $19.5 million, or 12.2%.

On a constant currency basis, total revenue grew 11.4%, reflecting a 24.5% increase in Cloud revenue, partially offset by a 20.2% decline in Bureau revenue. Cloud revenue growth reflected a 26.5% increase in Cloud recurring services revenue and a 17.4% increase in Cloud professional services and other revenue. Please refer to the “Non-GAAP Measures” section for additional information on our constant currency revenue.

~~Cloud revenue by solution.~~ Cloud revenue was $475.8 million for the nine months ended September 30, 2019, an increase of $89.9 million, or 23.3%, compared to cloud revenue for the nine months ended September 30, 2018. Dayforce revenue increased 28.3%, and Powerpay revenue declined 1.2% for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018. On a constant currency basis, Dayforce revenue increased 29.1%, and Powerpay revenue increased 2.2% for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018. Powerpay revenue is recognized on a per-employee, per-process basis, and the timing of customer processing at year- end can vary from year to year. A larger proportion of year-end processing occurred in the fourth quarter of 2018 and a smaller proportion of year-end processing occurred in the first quarter of 2019 as compared to the comparable periods in the prior year. This pull-forward of revenue into the fourth quarter of 2018

was driven by the fact that December 31 was a Monday, and a number of customers processed their first 2019 payroll on Monday, December 31, 2018. We estimate that approximately $1 million in Powerpay revenue that would otherwise have been recognized in the first quarter of 2019 was recognized in the fourth quarter of 2018. Excluding this pull-forward, Powerpay revenue on a constant currency basis would have grown by approximately 4%. Our new business sales to Dayforce and Powerpay customers comprised 84% of our increase in Cloud revenue for the nine months ended September 30, 2019, and the remaining 16% consisted primarily of customer migrations to Dayforce from our Bureau solutions. As we migrate our Bureau customers to Dayforce, we typically experience of revenue increase from such customers driven by increased product density on the Dayforce platform.

~~Float revenue.~~ Investment income from invested customer trust funds included in recurring services revenue was $62.9 million and $49.6 million for the nine months ended September 30, 2019, and 2018, respectively. The average float balance for our customer trust funds for the nine months ended September 30, 2019, was $3,524.9 million, compared to $3,457.5 million for the nine months ended September 30, 2018. On a constant currency basis, the average float balance for our customer trust funds increased 3.2% for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018. The average yield was 2.39% during the nine months ended September 30, 2019, an increase of 48 basis points compared to the average yield in the nine months ended September 30, 2018. For the nine months ended September 30, 2019, approximately 36% of our average float balance consisted of Canadian customer trust funds, compared to approximately 37% for the nine months ended September 30, 2018. Based on current market conditions, portfolio composition and investment practices, a 100 basis point change in market investment rates would result in approximately $18 million of change in float revenue over the ensuing twelve month period.

~~Cost of revenue.~~ Total cost of revenue for the nine months ended September 30, 2019, was $331.9 million, an increase of $14.9 million, or 4.7%, compared to the nine months ended September 30, 2018. Recurring services cost of revenue for the nine months ended September 30, 2019, was consistent with the nine months ended September 30, 2018. Professional services and other cost of revenue increased $8.4 million, or 8.5% for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, primarily due to additional costs incurred to implement new customers.

In accordance with ASC 350, we are required to capitalize certain software development costs. Please refer to Note 2, “Summary of Significant Accounting Policies,” for further discussion of our accounting policy for internally developed software costs. Costs related to software development activities that do not qualify for capitalization, such as development, quality assurance, testing of new technologies, enhancements to our existing solutions that do not result in additional functionality, and costs related to the management of our solutions are presented as product development and management expense. The increase in product development and management expense of $5.8 million for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, reflected increases in Dayforce product development efforts, including the build out of our international offerings; and increases in product management labor costs. For the nine months ended September 30, 2019, and 2018, our investment in software development was $48.1 million and $40.9 million, respectively, consisting of $24.6 million and $21.5 million, of research and development expense, which is included within product development and management expense, and $23.5 million and $19.4 million in capitalized software development, respectively.

Depreciation and amortization expense associated with cost of revenue increased by $1.0 million for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, as we continue to capitalize Dayforce related and other development costs and subsequently amortize those costs.

~~The table below presents total gross margin and solution gross margins for the periods presented:~~

Nine Months Ended September 30,

2019

2018

As Adjusted (a)

Total gross margin

44.9
%

41.9
%
Gross margin by solution:

Cloud recurring services

69.9
%

66.1
%
Bureau recurring services

72.0
%

70.4
%
Professional services and other

(8.6
)%

(15.6
)%

~~(a)~~

~~Please refer to Note 2 of the notes to the condensed consolidated financial statements for a summary of adjustments.~~

The overall 10.3% increase in revenue outpaced the 4.7% increase in cost of revenue, and gross profit increased by $41.5 million, or 18.1%, as we continued to leverage our investment in people and processes to realize economies of scale.

Cloud recurring services gross margin was 69.9% for the nine months ended September 30, 2019, compared to 66.1% for the nine months ended September 30, 2018. The increase in Cloud recurring services gross margin reflects an increase in the proportion of Dayforce customers live for more than two years, which increased from 62% as of September 30, 2018, to 68% as of September 30, 2019, and was also attributable to consistent configuration that has enabled us to realize economies of scale in customer support and hosting costs. Professional services and other gross margin was (8.6)% for the nine months ended September 30, 2019, improving from (15.6)% for the nine months ended September 30, 2018, reflecting continued productivity improvements in implementing new customers.

~~Selling, general, and administrative expense.~~ Selling, general, and administrative expense increased $24.7 million for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018. Excluding the impact of share-based compensation and related employer taxes, sponsor management fees, restructuring consulting fees, transaction costs associated with our IPO and debt refinancing, severance expense, and certain other non-recurring charges; selling, general, and administrative expenses would have increased $21.1 million. This adjusted increase of $21.1 million was primarily due to a $17.7 million increase in sales and marketing expense and increased costs associated with being a public company. Please refer to the “Non-GAAP Measures” section for additional information on the excluded items.

~~Operating profit.~~ Operating profit increased $16.8 million to $52.6 million, for the nine months ended September 30, 2019, from $35.8 million for the nine months ended September 30, 2018. Excluding the impact of share-based compensation and related employer taxes, sponsor management fees, restructuring consulting fees, transaction costs associated with our IPO and debt refinancing, severance expense, and certain other non-recurring charges; operating profit would have been $100.2 million and $78.2 million for the nine months ended September 30, 2019, and 2019, respectively. This $22.0 million adjusted increase was primarily due to a $56.4 million increase in revenue and gross margin improvements.

~~Interest expense, net.~~ Interest expense, net for the nine months ended September 30, 2019, was $25.2 million, compared to $74.4 million for the nine months ended September 30, 2018. This reduction in interest expense, net was primarily due to the refinancing of our debt during the nine months ended September 30, 2018, and an increase in interest income during the nine months ended September 30, 2019. The refinancing of our debt resulted in a $25.7 million loss on extinguishment of debt and a $21.6 million reduction in interest expense due to the extinguishment of our Senior Notes, representing five months of interest on the Senior Notes in the prior year. A 100 basis point change in LIBOR rates would result in an approximately $7 million change in our interest expense, net over the ensuing twelve-month period. Please refer to Note 8, “Debt,” for additional information.

~~Other expense (income), net.~~ For the nine months ended September 30, 2019, we incurred $4.7 million of other expense, net, compared to $0.7 million of other income, net, for the nine months ended September 30, 2018. The other expense, net, for the nine months ended September 30, 2019, was primarily comprised of net periodic pension expense of $3.9 million. The other income, net for the nine months ended September 30, 2018, was comprised of foreign currency translation gains of $2.5 million, partially offset by net periodic benefit plan expense of $1.8 million. The foreign currency translation gains were primarily related to an intercompany payable of a U.S. subsidiary denominated in Canadian dollars, this intercompany payable was repaid in the second quarter of 2018.

~~Income tax (benefit) expense.~~ For the nine months ended September 30, 2019, we recorded an income tax benefit of $57.5 million, compared to income tax expense of $6.3 million for the nine months ended September 30, 2018. The $63.8 million change reflects a tax benefit of $65.8 million from the release of our valuation allowance, a $7.8 million reduction in tax expense attributable to GILTI, a $7.7 million increase in the tax benefit from the tax deduction related to stock option exercises, and other tax expense reductions of $2.1 million, partially offset by a $12.7 million increase in tax expense attributable to improved operating results, a $2.8 million increase in state tax expense, a $2.1 million increase for enacted tax rate changes, and a $2.0 million increase in BEAT. BEAT and GILTI were enacted as a part of the 2017 Tax Reform. The IRS continues to issue 2017 Tax Reform administrative guidance, which could impact tax expense related to these Tax Reform provisions in future periods. Please refer to Note 14, “Income Taxes,” for additional information on the release of our valuation allowance.

~~Loss from discontinued operations.~~ As a result of the LifeWorks Disposition, the financial results of the LifeWorks business have been included within discontinued operations for all periods presented. For the nine months ended September 30, 2018, loss from discontinued operations was $14.8 million, primarily related to income tax expense incurred as a result of the LifeWorks Disposition.

~~Net income (loss) attributable to Ceridian.~~ Net income was $80.2 million for the nine months ended September 30, 2019, which included a tax benefit of $65.8 from the release of our valuation allowance. Net loss attributable to Ceridian was $58.5 million for the nine months ended September 30, 2018, which included $51.0 million of expenses related to our IPO and debt refinancing transactions.

~~Adjusted EBITDA.~~ Adjusted EBITDA increased by $21.4 million to $140.2 million, for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, and Adjusted EBITDA margin was 23.3% for the nine months ended September 30, 2019, compared with 21.8% for the nine months ended September 30, 2018.

Liquidity and Capital Resources

Our primary sources of liquidity are our existing cash and equivalents, cash provided by operating activities, borrowings under our credit facilities, and proceeds from equity offerings. As of ~~September 30, 2019,~~March 31, 2020, we had cash and equivalents of ~~$270.9~~$255.3 million and availability under our revolving credit facility of $300.0 million. No cash amounts were drawn on the revolving credit facility ~~and $2.4 million in letters of credit were issued under the facility~~ as of ~~September 30, 2019.~~March 31, 2020. Our total ~~principal~~ debt balance was ~~$673.2~~$681.2 million as of ~~September 30, 2019.~~

On March 26, 2019, Moody’s Investor Service upgraded the rating of our senior secured credit facilities from B3 to B2, which reduced the floating rate term debt interest rate from LIBOR plus 3.25% to LIBOR plus 3.00%, so long as the rating is maintained. This 25 basis point rate reduction will result in a savings of approximately $1.7 million over the ensuing twelve-month period.31, 2020. Please refer to Note 8,6, “Debt,” to our condensed consolidated financial statements, for further information on our debt.

Our primary liquidity needs are related to funding of general business requirements, including the payment of interest and principal on our debt, capital expenditures, pension contributions, and product development.

On February 19, 2020, Ceridian completed the first amendment to the 2018 Senior Secured Credit Facility, in which the 2018 Term Debt interest rate was reduced from LIBOR plus 3.00% to LIBOR plus 2.50%. Further, the interest rate trigger under the applicable rating by Moody’s Investor Service was removed by the first amendment.The 50 basis point rate reduction will result in savings of approximately $3.4 million over the ensuing twelve-month period. Please refer to Note 6, “Debt,” to our condensed consolidated financial statements, for further information on our debt.

On April 2, 2020, in light of the current uncertainty in the global capital markets resulting from the COVID-19 pandemic, Ceridian elected to borrow $295.0 million under the 2018 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.

Our customer trust funds are held and invested with the primary objectives being to protect the principal balance and to ensure adequate liquidity to meet cash flow requirements. In accordance with these objectives, we maintain approximately 47% of customer trust funds in liquidity portfolios with maturities ranging from one to 120 days, consisting of high-quality bank deposits, money market mutual funds, commercial paper, or collateralized short-term investments; and we maintain approximately 53% of customer trust funds in fixed income portfolios with maturities ranging from 120 days to 10 years, consisting of U.S. Treasury and agency securities, Canada government and provincial securities, as well as highly rated asset-backed, mortgage-backed, municipal, corporate and bank securities. To maintain sufficient liquidity in the trust to meet payment obligations, we also have financing arrangements and may pledge fixed income securities for short-term financing. The assets held in trust are intended for the specific purpose of satisfying client fund obligations and therefore are not freely available for our general business use.

We believe that our cash flow from operations, availability under our revolving credit facility, and available cash and equivalents will be sufficient to meet our liquidity needs for the foreseeable future. We anticipate that to the extent that we require additional liquidity, it will be funded through the issuance of equity, the incurrence of additional debt, or a combination thereof. We cannot assure you that we will be able to obtain this additional liquidity on reasonable terms, or at all. Additionally, our liquidity and our ability to meet our obligations and to fund our capital requirements are also dependent on our future financial performance, which is subject to general economic, financial, and other factors that are beyond our control. Accordingly, we cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available from additional debt or otherwise to meet our liquidity needs. Although we have no specific current plans to do so, if we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions, which would result in additional expenses or dilution.

4130

Statements of Cash Flows

Changes in cash flows due to purchases of customer trust fund marketable securities and proceeds from the sale or maturity of customer trust fund marketable securities, as well as the carrying value of customer trust fund accounts as of period end dates can vary significantly due to several factors, including the specific day of the week the period ends, which impacts the timing of funds collected from customers and payments made to satisfy customer obligations to employees, taxing authorities, and others. The customer trust funds are fully segregated from our operating cash accounts and are evaluated and tracked separately by management. Therefore, we have provided the table below excluding the cash flows and restricted cash and equivalents held within our customer trust funds to provide supplemental information regarding the cash flows related to our core business.

	Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
				As Adjusted (a)			(Dollars in millions)
Net cash provided by (used in) operating activities - continuing operations, excluding customer trust funds	$	43.4		$	(14.8	)
Net cash used in operating activities, excluding customer trust funds							$	(9.8	)	$	(8.8	)
Net cash used in investing activities, excluding customer trust funds		(67.8	)		(28.7	)		(15.6	)		(24.1	)
Net cash provided by financing activities, excluding customer trust funds		71.6			141.6			8.7			18.4
Effect of exchange rate changes on cash and equivalents		5.9			(1.5	)		(9.3	)		3.0
Net increase in cash and equivalents - continuing operations		53.1			96.6
Net cash used in operating activities - discontinued operations		—			(3.3	)
Net increase in cash and equivalents		53.1			93.3
Elimination of cash from discontinued operations		—			0.5
Net decrease in cash and equivalents								(26.0	)		(11.5	)
Cash and equivalents at beginning of period		217.8			94.2			281.3			217.8
Cash and equivalents at end of period		270.9			188.0			255.3			206.3

Net customer trust funds restricted cash used in operating activities		(18.8	)		—
Net customer trust funds restricted cash used in investing activities		(57.0	)		13.1
Net customer trust funds restricted cash provided by operating activities								11.2			—
Net customer trust funds restricted cash provided by (used in) investing activities								24.9			(93.5	)
Net customer trust funds restricted cash provided by financing activities		(54.5	)		(625.5	)		480.8			1,916.1
Effect of exchange rate changes on restricted cash and equivalents		1.3			(0.7	)		(5.2	)		0.9
Net decrease in restricted cash and equivalents		(129.0	)		(613.1	)
Net increase in restricted cash and equivalents								511.7			1,823.5
Restricted cash and equivalents included in customer trust funds at beginning of period		888.5			2,317.6			1,377.3			888.5
Restricted cash and equivalents included in customer trust funds at end of period		759.5			1,704.5			1,889.0			2,712.0

Net decrease in cash, restricted cash, and equivalents		(75.9	)		(519.3	)
Net increase in cash, restricted cash, and equivalents								485.7			1,812.0
Cash, restricted cash, and equivalents at beginning of period		1,106.3			2,411.8			1,658.6			1,106.3
Cash, restricted cash, and equivalents at end of period	$	1,030.4		$	1,892.5		$	2,144.3		$	2,918.3

~~(a)~~

~~Please refer to Note 2 of the notes to the condensed consolidated financial statements for a summary of adjustments.~~

Operating Activities

Net cash provided by operating activities, ~~from continuing operations, excluding customer trust fund activity,~~ was ~~$43.4~~$1.4 million during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, primarily attributable to net income of ~~$80.2~~$8.6 million ~~with~~and the net impact of adjustments for certain non-cash items ~~primarily $75.9~~of $30.3 million, ~~of deferred income tax benefit, $43.9 million of depreciation and amortization, and $26.0~~including $12.5 million of non-cash share-based compensation expense and $11.8 million of depreciation and amortization. These items were partially offset by a ~~net working capital~~$26.4 million reduction of $37.3 million. The deferred income tax benefit of $75.9 million was primarily related to a tax benefit of $65.8 million from the release of our valuation allowance. The net $37.3 million change in working capital included reductions in liabilities ~~of $18.5 million~~ for employee compensation and benefits ~~primarily~~ due to ~~pension contributions; $10.4~~payments of accrued incentive and compensation and a $7.5 million ~~for accrued taxes, primarily due to cash tax payments partially offset by additional provision accruals; and increases~~increase in assets ~~of $10.1 million~~ for prepaid expenses and other current assets, primarily due to annual maintenance contracts. Included within net cash flows provided by operating activities for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, was ~~$28.9 million in cash tax payments, $28.9~~$7.8 million in cash interest payments on our long-term debt and ~~$18.0~~$2.9 million in ~~pension contributions.~~cash tax payments.

Net cash used in operating activities ~~from continuing operations~~ of ~~$14.8~~$8.8 million during the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, was primarily attributable to a net ~~loss from continuing operations~~reduction in cash as a result of ~~$44.2 million and a net change~~changes in working capital of ~~$51.1~~$40.6 million, partially offset by net income of $11.2 million and certain non-cash items, primarily ~~$42.4~~$14.4 million of depreciation and amortization ~~a $25.7~~and $6.0 million ~~loss on extinguishment~~ of ~~debt, primarily attributable to a call premium and debt issuance costs, and $18.0 million of~~non-cash share-based compensation expense. The net ~~$51.1~~$40.6 million change in working capital included reductions of ~~$27.7~~$16.9 million in liabilities for employee compensation and benefits, primarily due to payments of accrued incentive compensation; ~~$15.5~~$8.1 million in liabilities for accrued ~~interest~~taxes, primarily ~~as a result~~due to cash tax payments of ~~$55.1~~$15.5 million; and $7.0 million of increases in ~~cash interest payments on our long-term debt; and $8.4 million in accounts payable~~prepaid expenses and other ~~accrued expenses.~~assets, primarily due to annual maintenance contracts. Included within net cash flows used in operating activities for the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, was ~~$17.7~~$6.6 million in cash ~~taxes paid and $18.5 million in pension payments.~~interest payments on our long-term debt.

Investing Activities

During the ~~nine~~three months ended ~~September 30,~~March 31, 2020, net cash used in investing activities, excluding customer trust fund activity, was $15.6 million, related to capital expenditures. Our capital expenditures included $10.7 million for software and technology and $4.9 million for property and equipment.

During the three months ended March 31, 2019, net cash used in investing activities, ~~from continuing operations,~~ excluding customer trust fund activity, was ~~$67.8~~$24.1 million, related to capital expenditures of ~~$38.4~~$13.9 million and acquisition costs, net of cash acquired of ~~$29.4~~$10.2 million. Our capital expenditures included ~~$27.6~~$9.9 million for software and technology and ~~$10.8~~$4.0 million for property and equipment.

During the nine months ended September 30, 2018, net cash used in investing activities from continuing operations, excluding customer trust fund activity, was $28.7 million, related to capital expenditures. Our capital expenditures included $21.9 million for software and technology and $6.8 million for property and equipment.

Financing Activities

Net cash provided by financing activities, ~~from continuing operations,~~ excluding the change in customer trust fund obligations, was ~~$71.6~~$8.7 million during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. This cash inflow is primarily attributable to proceeds from the issuance of common stock under share-based compensation plans of ~~$76.7~~$11.4 million, partially offset by payments on our long-term debt obligations of ~~$5.1~~$2.7 million. The payments on our long-term debt obligations included $1.7 million in payments towards our Senior Term Loan and $1.0 million in payments towards our financing lease obligations.

Net cash provided by financing activities, ~~from continuing operations,~~ excluding the change in customer trust fund obligations, was ~~$141.6~~$18.4 million during the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. This cash inflow is primarily attributable to ~~the net proceeds received from our IPO and concurrent private placement of $595.0 million, a net increase in the principal of our term loan of $23.0 million, and~~ proceeds from the issuance of common stock upon exercise of stock options of ~~$22.2~~$20.1 million, partially offset by ~~payment to redeem~~principal payments on our ~~Senior Notes~~long-term debt obligations of ~~$475.0 million and payment of debt refinancing costs of $23.3~~$1.7 million.

~~Cash Flows from Discontinued Operations~~

During the nine months ended September 30, 2018, net cash used in discontinued operations was $3.3 million. The net cash used in discontinued operations was primarily related to changes in working capital.

Backlog

Backlog is equivalent to our remaining performance obligations, which represents contracted revenue for recurring services and fixed price professional services, primarily implementation services, that has not yet been recognized, including deferred revenue and unbilled amounts that will be recognized as revenue in future periods. Please refer to Note ~~11,~~9, “Revenue,” to our condensed consolidated financial statements for further discussion of our remaining performance obligations.

Off-Balance Sheet Arrangements

As of ~~September 30, 2019,~~March 31, 2020, we did not have any “off-balance sheet arrangements” (as such term is defined in Item 303 of Regulation S-K).

Critical Accounting Policies and Estimates

~~Our~~During the three months ended March 31, 2020, there were no significant changes to our critical accounting ~~policy on revenue recognition has been updated~~policies and estimates as ~~a result of~~described in the adoption of ASU No. 2016-02. For discussion of our new revenue recognition policy and recently adopted accounting pronouncements, please refer to Note 2, “Summary of Significant Accounting Policies,” to our condensed consolidated financial statements ~~included herein.~~contained in our 2019 Form 10-K.

Non-GAAP Measures

~~Constant Currency Revenue~~

The following tables set forth certain information regarding our revenue on a constant currency basis for the three and nine months ended September 30, 2019, compared with the three and nine months ended September 30, 2018. We present revenue on a constant currency basis to assess how our underlying business performed excluding the effect of foreign currency rate fluctuations. We calculate revenue on a constant currency basis by applying a fixed planning rate of $1.30 Canadian dollar to $1.00 U.S. dollar foreign exchange rate to revenue originally booked in Canadian dollars for all applicable periods.

Three Months Ended September 30,

Increase/ (Decrease)

2019

2018

Amount

%

(Dollars in millions)

Constant Currency Revenue:

Cloud

Dayforce

Recurring services

$
109.6

$
82.4

$
27.2

33.0
%
Professional services and other

34.5

28.0

6.5

23.2
%
Total Dayforce revenue

144.1

110.4

33.7

30.5
%
Powerpay

Recurring services

22.0

21.2

0.8

3.8
%
Professional services and other

0.3

0.3

—

—

Total Powerpay revenue

22.3

21.5

0.8

3.7
%
Total Cloud revenue

166.4

131.9

34.5

26.2
%
Bureau

Recurring services

36.6

46.1

(9.5
)

(20.6
%)
Professional services and other

0.4

0.4

—

0.0
%
Total Bureau revenue

37.0

46.5

(9.5
)

(20.4
%)
Total constant currency revenue

$
203.4

$
178.4

$
25.0

14.0
%

Nine Months Ended September 30,

Increase/ (Decrease)

2019

2018

Amount

%

(Dollars in millions)

Constant Currency Revenue:

Cloud

Dayforce

Recurring services

$
316.0

$
237.5

$
78.5

33.1
%
Professional services and other

96.8

82.3

14.5

17.6
%
Total Dayforce revenue

412.8

319.8

93.0

29.1
%
Powerpay

Recurring services

65.4

64.0

1.4

2.2
%
Professional services and other

0.9

0.9

—

—

Total Powerpay revenue

66.3

64.9

1.4

2.2
%
Total Cloud revenue

479.1

384.7

94.4

24.5
%
Bureau

Recurring services

125.8

157.4

(31.6
)

(20.1
%)
Professional services and other

1.5

2.1

(0.6
)

(28.6
%)
Total Bureau revenue

127.3

159.5

(32.2
)

(20.2
%)
Total constant currency revenue

$
606.4

$
544.2

$
62.2

11.4
%

Adjusted EBITDA and Adjusted EBITDA Margin

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~~and Adjusted EBITDA margin are components of our management incentive plan and ~~Adjusted EBITDA and Adjusted EBITDA margin~~ are used by management to assess performance and to compare our operating performance to our competitors. We define Adjusted EBITDA as net income ~~(loss)~~ before interest, taxes, depreciation, and amortization, as adjusted to exclude ~~net income (loss) from discontinued operations, sponsor management fees, non-cash charges for asset impairments,~~ gain (loss) on assets and liabilities held in a foreign currency other than the functional currency of a company subsidiary, share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, ~~transaction costs,~~ and certain other non-recurring 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 control of operating management.

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 these items. 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, ~~(loss),~~ operating profit, ~~(loss),~~ or any other performance measures derived in accordance with GAAP, and are subject to important limitations. Our use of the terms Adjusted EBITDA 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 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 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 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 and related employer taxes upon our results of operations;~~

•

Adjusted EBITDA and Adjusted EBITDA margin do not reflect the impact of share-based compensation and related employer taxes 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;~~

•

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;

~~Adjusted EBITDA and Adjusted EBITDA margin do not reflect our income tax expense or the cash requirements to pay our income taxes; and~~

•

Adjusted EBITDA and Adjusted EBITDA margin do not reflect our income tax expense or the cash requirements to pay our income taxes; and

~~Adjusted EBITDA and Adjusted EBITDA margin do not reflect certain other non-recurring charges.~~

•

Adjusted EBITDA and Adjusted EBITDA margin do not reflect certain other non-recurring charges.

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.

The following table reconciles operating profit to Adjusted EBITDA for the periods presented:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			Three Months Ended March 31,
				As Adjusted (g)						As Adjusted (g)			2020			2019
	(Dollars in millions)												(Dollars in millions)
Operating profit	$	6.5		$	16.2		$	52.6		$	35.8		$	26.3		$	27.4
Other (expense) income, net		(1.6	)		(0.9	)		(4.7	)		0.7
Other expense, net														(2.6	)		(1.6	)
Depreciation and amortization		14.9			14.3			43.9			42.4			11.8			14.4
EBITDA from continuing operations (a)		19.8			29.6			91.8			78.9
Sponsorship management fees (b)		—			—			—			12.0
Intercompany foreign exchange loss (gain)		0.3			0.3			0.8			(2.5	)
Share-based compensation		11.4			4.8			27.0			19.5
EBITDA (a)														35.5			40.2
Intercompany foreign exchange loss														1.8			0.3
Share-based compensation (b)														12.7			6.0
Severance charges (c)		0.8			1.1			4.4			4.1			4.0			2.1
Restructuring consulting fees (d)		1.5			0.6			3.6			3.1			1.5			1.2
Other non-recurring charges (e)		12.6			—			12.6			—			(0.3	)		—
Transaction costs (f)		—			—			—			3.7
Adjusted EBITDA	$	46.4		$	36.4		$	140.2		$	118.8		$	55.2		$	49.8
Adjusted EBITDA margin		22.9	%		20.4	%		23.3	%		21.8	%		24.8	%		24.4	%

(a)	We define EBITDA ~~from continuing operations~~ as net income ~~(loss)~~ before interest, taxes, and depreciation and ~~amortization, and net income (loss) from discontinued operations.~~amortization.

(b)

Represents ~~expenses related to our management, monitoring, consulting, transaction, and advisory fees~~share-based compensation expense and related ~~expenses paid to the affiliates of our sponsors pursuant to the management agreement with THLM and Cannae. In April 2018, the management agreements terminated upon consummation of our IPO.~~employer taxes.

(c)	Represents costs for severance compensation paid to employees whose positions have been eliminated ~~resulting primarily from the shift of business from our Bureau solutions to our Cloud solutions.~~or who have been terminated not for cause.

(d)	Represents consulting fees and expenses incurred during the periods presented in connection with any acquisition, investment, disposition, recapitalization, equity offering, issuance or repayment of debt, issuance of equity interests, or refinancing.

(e)	Represents ~~loss~~gain on unrecovered duplicate payments associated with our isolated service incident. Please refer to Note ~~16,~~13, “Commitments and Contingencies,” for further discussion.

~~(f)~~

~~Represents expenses related to the IPO and refinancing of our debt that were not eligible for capitalization.~~

~~(g)~~

~~Please refer to Note 2 of the notes to the condensed consolidated financial statements for a summary of adjustments.~~

The following tables present a reconciliation of our reported results to our non-GAAP Adjusted EBITDA basis for all periods presented:

	Three Months Ended September 30, 2019										Three Months Ended March 31, 2020
	As Reported		Share-based compensation		Severance charges		Other operating expenses (a)		Adjusted		As Reported		Share-based compensation		Severance charges		Other operating expenses (a)		Adjusted
	(Dollars in millions)										(Dollars in millions)
Cost of revenue:
Recurring services	$	49.4	$	0.9	$	0.3	$	—	$	48.2	$	52.2	$	0.8	$	0.8	$	—	$	50.6
Professional services and other		37.6		0.5		—		—		37.1		42.6		0.5		0.8		—		41.3
Product development and management		17.5		1.0		—		—		16.5		17.6		0.9		0.3		—		16.4
Depreciation and amortization		9.0		—		—		—		9.0		9.8		—		—		—		9.8
Total cost of revenue		113.5		2.4		0.3		—		110.8		122.2		2.2		1.9		—		118.1
Sales and marketing		35.5		1.3		0.5		—		33.7		40.7		2.2		0.8		—		37.7
General and administrative		46.8		7.7		—		14.1		25.0		33.5		8.3		1.3		1.2		22.7
Operating profit		6.5		11.4		0.8		14.1		32.8		26.3		12.7		4.0		1.2		44.2
Other expense, net		1.6		—		—		0.3		1.3		2.6		—		—		1.8		0.8
Depreciation and amortization		14.9		—		—		—		14.9		11.8		—		—		—		11.8
EBITDA from continuing operations	$	19.8	$	11.4	$	0.8	$	14.4	$	46.4
EBITDA											$	35.5	$	12.7	$	4.0	$	3.0	$	55.2

(a)	Other operating expenses includes intercompany foreign exchange loss, ~~(gain),~~ restructuring consulting fees, and ~~loss on unrecovered duplicate payments.~~other non-recurring charges.

	Three Months Ended September 30, 2018										Three Months Ended March 31, 2019
	As Reported As Adjusted (b)		Share-based compensation		Severance charges		Other operating expenses (a)		Adjusted		As Reported		Share-based compensation		Severance charges		Other operating expenses (a)		Adjusted
	(Dollars in millions)										(Dollars in millions)
Cost of revenue:
Recurring services	$	49.1	$	0.3	$	0.3	$	—	$	48.5	$	50.9	$	0.4	$	0.2	$	—	$	50.3
Professional services and other		32.5		0.2		0.1		—		32.2		35.3		0.2		0.2		—		34.9
Product development and management		14.5		0.3		—		—		14.2		15.2		0.5		0.1		—		14.6
Depreciation and amortization		8.5		—		—		—		8.5		8.7		—		—		—		8.7
Total cost of revenue		104.6		0.8		0.4		—		103.4		110.1		1.1		0.5		—		108.5
Sales and marketing		28.2		0.7		—		—		27.5		35.2		1.0		1.0		—		33.2
General and administrative		29.1		3.3		0.7		0.6		24.5		31.0		3.9		0.6		1.2		25.3
Operating profit		16.2		4.8		1.1		0.6		22.7		27.4		6.0		2.1		1.2		36.7
Other expense, net		0.9		—		—		0.3		0.6		1.6		—		—		0.3		1.3
Depreciation and amortization		14.3		—		—		—		14.3		14.4		—		—		—		14.4
EBITDA from continuing operations	$	29.6	$	4.8	$	1.1	$	0.9	$	36.4
EBITDA											$	40.2	$	6.0	$	2.1	$	1.5	$	49.8

(a)	Other operating expenses includes intercompany foreign exchange loss ~~(gain)~~ and restructuring consulting fees.

~~(b)~~

~~Please refer to Note 2 of the notes to the condensed consolidated financial statements for a summary of adjustments.~~

Nine Months Ended September 30, 2019

As Reported

Share-based
compensation

Severance
charges

Other
operating
expenses (a)

Adjusted

(Dollars in millions)

Cost of revenue:

Recurring services

$
149.0

$
2.1

$
1.1

$
—

$
145.8

Professional services and other

107.1

1.2

0.4

—

105.5

Product development and management

49.1

2.2

0.1

—

46.8

Depreciation and amortization

26.7

—

—

—

26.7

Total cost of revenue

331.9

5.5

1.6

—

324.8

Sales and marketing

105.6

3.6

1.9

—

100.1

General and administrative

112.2

17.9

0.9

16.2

77.2

Operating profit

52.6

27.0

4.4

16.2

100.2

Other expense, net

4.7

—

—

0.8

3.9

Depreciation and amortization

43.9

—

—

—

43.9

EBITDA from continuing operations

$
91.8

$
27.0

$
4.4

$
17.0

$
140.2

~~(a)~~

~~Other operating expenses includes intercompany foreign exchange loss (gain), restructuring consulting fees, and loss on unrecovered duplicate payments.~~

Nine Months Ended September 30, 2018

As Reported
As Adjusted (b)

Share-based
compensation

Severance
charges

Other
operating
expenses (a)

Adjusted

(Dollars in millions)

Cost of revenue:

Recurring services

$
149.3

$
1.7

$
1.1

$
—

$
146.5

Professional services and other

98.7

1.0

0.7

—

97.0

Product development and management

43.3

0.9

0.1

—

42.3

Depreciation and amortization

25.7

—

—

—

25.7

Total cost of revenue

317.0

3.6

1.9

—

311.5

Sales and marketing

86.9

3.5

1.0

—

82.4

General and administrative

106.2

12.4

1.2

18.8

73.8

Operating profit

35.8

19.5

4.1

18.8

78.2

Other (income) expense, net

(0.7
)

—

—

(2.5
)

1.8

Depreciation and amortization

42.4

—

—

—

42.4

EBITDA from continuing operations

$
78.9

$
19.5

$
4.1

$
16.3

$
118.8

~~(a)~~

~~Other operating expenses includes sponsor management fees, intercompany foreign exchange loss (gain), restructuring consulting fees, and transaction costs.~~

~~(b)~~

~~Please refer to Note 2 of the notes to the condensed consolidated financial statements for a summary of adjustments.~~

ITEM 3. QUANTITATIVE AND ~~QUALITATIVE~~QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks related to foreign currency exchange rates, interest rates, and pension obligations. We seek to minimize or to manage these market risks through normal operating and financing activities. These market risks may be amplified by events and factors surrounding the COVID-19 pandemic. We do not trade or use instruments with the objective of earning financial gains on the market fluctuations, nor do we use instruments where there are not underlying exposures.

Foreign Currency Risk. Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Canadian Dollar. Due to the relative size of our international operations to date, we have not instituted an active hedging program. We expect our international operations to continue to grow in the near term, and we are monitoring the foreign currency exposure to determine if we should begin a hedging program.

Interest Rate Risk. In connection with our U.S. and Canadian payroll and tax filing services, we collect funds for payment of payroll and taxes; temporarily hold such funds in trust until payment is due; remit the funds to the customers’ employees and appropriate taxing authority; file federal, state and local tax returns; and handle related regulatory correspondence and amendments. We invest the U.S. customer trust funds in high- quality bank deposits, money market mutual funds, or collateralized short-term investments. We also invest these funds in U.S. Treasury and agency securities, as well as highly rated asset-backed, mortgage-backed, municipal, and corporate securities. Our Canadian customer trust funds are invested in securities issued by the government and provinces of Canada, highly rated Canadian banks and corporations, asset-backed trusts, and mortgages.

We do not enter into investments for trading or speculative purposes. Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectation due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our securities as “available for sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be ~~other-than-temporary.~~unrecoverable.

We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. Fluctuations in the value of our investment securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income, and are realized only if we sell the underlying securities.

Pension Obligation Risk. We provide a pension plan for certain current and former U.S. employees that closed to new participants on January 2, 1995. In 2007, the U.S. pension plan was amended (1) to exclude from further participation any participant or former participant who was not employed by the company or another participating employer on January 1, 2008, (2) to discontinue participant contributions, and (3) to freeze the accrual of additional benefits as of December 31, 2007. In applying relevant accounting policies, we have made critical estimates related to actuarial assumptions, including assumptions of expected returns on plan assets, discount rates, and health care cost trends. The cost of pension benefits in future periods will depend on actual returns on plan assets, assumptions for future periods, contributions, and benefit experience. In ~~2018,~~2019, we contributed ~~$18.5~~$18.0 million to our pension plan. The effective discount rate used in accounting for pension and other benefit obligations in ~~2018~~2019 ranged from ~~3.70%~~2.52% to ~~3.92%~~2.81%. The expected rate of return on plan assets for qualified pension benefits in ~~2019~~2020 is ~~6.00%~~5.70%.

4935

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures, as defined in Rule 13(a)-15(e) of the Exchange Act, are controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q pursuant to Rule 13a-15(b) of the Exchange Act. Based on that evaluation, ~~and due to the material weakness in internal control over financial reporting described below,~~ our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of the period covered by this Form 10-Q are ~~not~~ effective. While our disclosure controls and procedures are designed to provide reasonable assurance of their effectiveness, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected.

We have not engaged an independent registered accounting firm to perform an audit of our internal control over financial reporting as of any balance sheet date or for any period reported in our financial statements, although we have engaged such a firm to provide audit and review services relating to the Company’s financial statements for the current fiscal year ending December 31, 2019. Presently, we are an “Emerging Growth Company” (“EGC”) as that term is defined in each of Section 2(a)(19) of the Securities Act and Section 3(a)(80) of the Exchange Act, which means that our management is not required to perform an annual assessment of the effectiveness of our internal control over financial reporting. Because we now expect our EGC status to end on or before December 31, 2019, we believe that management will be required to conduct an ICFR assessment for the current fiscal year, and the company to include management’s report in our Annual Report on Form 10-K for the fiscal year ending December 31, 2019. Should this occur, our independent public registered accounting firm will be required to attest to and report on management’s assessment of the effectiveness of the Company’s internal control over financial reporting in connection with its audit of our annual financial statements to be included in such Form 10-K.

We identified an isolated service incident on September 26, 2019, that resulted in duplicate payments for certain of our U.S. payroll customers totaling $18.8 million. We have recorded a loss for the full amount of unrecovered duplicate payments as of September 30, 2019, less funds subsequently recovered through October 31, 2019. Our recovery efforts are ongoing, and future collections will be recognized as a reduction to selling, general, and administration expense in the period recovered.

As a result of the above, we identified a material weakness in our internal control over financial reporting as we have determined that our controls to detect duplicate payments, in advance of funding, were ineffective due to not sufficiently designing controls to detect such duplicate payments. As a result of this material weakness, we concluded that our internal control over financial reporting was ineffective as of September 30, 2019. We have subsequently implemented additional monitoring controls to detect and to prevent duplicate payments in advance of funding.

We have performed additional analyses and other procedures to enable management to conclude that, notwithstanding the existence of the material weakness described above, the condensed consolidated financial statements and related footnotes included in this Form 10-Q fairly present, in all material respects, our financial condition, results of operations, and cash flows for the periods presented in conformity with U.S. GAAP. Please refer to Note 16 to the condensed consolidated financial statements for additional information.

Changes in Internal Control over Financial Reporting

~~Except~~Due to the COVID-19 pandemic, we now have more employees working from home. While our internal controls over financial reporting are designed to allow for ~~the material weakness discussed above, there have been~~remote execution, we continue to evaluate and may make changes that may materially affect our internal controls over financial reporting. There were no ~~other~~ changes to our internal ~~control~~controls over financial reporting during the three months ended ~~September 30, 2019,~~March 31, 2020, that have materially affected, or that are reasonably likely to materially affect, our internal ~~control~~controls over financial reporting.

5036

PART II. ~~OTHE~~ROTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, we believe would individually or taken together have a material adverse effect on our business, financial condition or liquidity. Discussion of Legal Matters is incorporated by reference from Part I, Item 1, Note ~~16,~~13, “Commitments and Contingencies,” of this Form 10-Q and should be considered an integral part of Part II, Item 1, “Legal Proceedings”.

ITEM 1A. RISK FACTORS

~~We expect that our~~In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019 will include the below risk factor. Other than the below, there~~2019. There have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A, of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 with the exception of the items listed below.

Our business has been adversely affected and will likely continue to be adversely affected by the COVID-19 pandemic.

The global spread of the COVID-19 pandemic has created significant global volatility, uncertainty, and economic disruption. The COVID-19 pandemic began to adversely affect our ~~principal risks that we believe are material~~operations in March 2020. The extent to which the COVID-19 pandemic will continue to adversely affect our business, ~~results of~~ operations, and financial ~~condition,~~results will depend on numerous evolving factors that we may not be able to accurately predict, including but not limited to:

•

the duration and scope of the pandemic;

•

governmental, business, and individuals’ actions that have been and continue to be taken in response to the pandemic;

•

the impact of the pandemic on economic activity and actions taken in response;

•

the declining employment levels of our customers;

•

the effect on our customers’ demand for or the delays in implementing our services;

•

our ability to sell and to provide our services to our current and future customers, including as a result of travel restrictions and people working from home;

•

the ability of our customers to pay for our services or to make us whole for advances of earned net wages and associated tax amounts made on their behalf by us; and

•

our ability to safely and efficiently navigate our employees’ return to the workplace and adapt to the evolving business environment resulting from the COVID-19 pandemic.

Existing or potential customers have and may continue to reduce employee headcount, to slow down decision-making, to delay planned work, or to seek to modify existing agreements, especially those customers significantly adversely affected by the ~~risk factors previously disclosed~~pandemic’s economic impact in areas where we have significant concentrations, including the retail and hospitality sectors.

Further, the effects of the pandemic have and may continue to reduce our float revenue as our customers employ fewer employees and as governments take actions to stimulate the global economy, such as the U.S. Federal Reserve and Bank of Canada lowering interest rates. A sustained downturn in the financial markets and asset values may have the effect of reducing our float revenue, or limiting our ability to liquidate securities held in our ~~2018 Form 10-K which is accessible on~~customer trust funds. The effects of the ~~SEC’s website at www.sec.gov.~~

~~Our recently identified material weakness in~~pandemic, including remote working arrangements for employees, may also impact our financial reporting systems and internal control over financial reporting, including our ability to ensure information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Any of these consequences of the pandemic could cause or contribute to the risks and uncertainties enumerated in the Form 10-K. As we cannot predict the duration or scope of the COVID-19 pandemic, the anticipated negative financial impact to our business, financial condition, results of operations and/or stock price cannot be reasonably estimated, but could be material and could last for an extended period of time.

Our quarterly results of operations may fluctuate significantly and may not fully reflect the underlying performance of our business.

Our quarterly results of operations, including the levels of our revenues, gross margin, profitability, cash flow, and deferred revenue, may vary significantly in the future, and period-to-period comparisons of our results of operations may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Fluctuation in quarterly results may negatively impact the value of our common stock. Factors that may cause fluctuations in our quarterly financial results include, without limitation:

•

our ability to attract new Cloud customers;

•

our ability to replace declining Bureau revenue with Cloud revenue;

•

the addition or loss of large Cloud customers, including through acquisitions or consolidations;

•

the addition or loss of employees by our Cloud customers;

•

the timing and number of paydays in a period;

•

the adoption of the Dayforce Wallet by customers and their employees;

•

the losses, if any, caused by customer failure to repay advances we make on their behalf for our Dayforce Wallet or other services;

•

the timing of recognition of revenues;

•

the tenure of our Cloud customers during that period;

•

the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure;

•

network outages or security breaches;

•

general economic, industry, and market conditions;

•

customer renewal rates;

•

increases or decreases in the number of elements of our services or pricing changes upon any renewals of customer agreements;

•

changes in our pricing policies or those of our competitors;

•

the mix of applications sold during a period;

•

seasonal variations in sales of our applications, which has historically been highest in the fourth quarter of a calendar year;

•

fluctuation in market interest rates, which impacts debt interest expense as well as float revenue;

•

the timing and success of new application and service introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic partners; and

•

the impact of new accounting rules.

Our Dayforce Wallet program presents the potential for our employer customers or employee customers to become the victim of fraud or other similar illegal behavior.

As part of the Dayforce Wallet program, our third-party financial institution partner will issue payroll cards and execute transactions for each Dayforce Wallet account. These transactions give rise to the potential for fraud against our employer customers or employee customers when they are used for bill payments, purchases and peer-to-peer transfers. Our third-party financial institution partner has responsibility for managing potential payment fraud to which the Dayforce Wallet users are subject. If any of our employer customers or employee customers become victims of fraud or similar illegal behavior, we might face legal liabilities and other losses that could have a material adverse effect on our business, financial condition, and results of operations.

Our solutions and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, data protection, and information security. Any failure by us or our third party service providers, as well as the failure of our platform or services, to ~~remediate such material weakness~~comply with applicable laws and ~~maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act~~regulations could have a material adverse effect on our business, financial condition, and results of operations.

We are ~~required, pursuant~~subject to ~~Section 404~~a variety of U.S. and international laws and regulations, including regulation by various federal government agencies, including the ~~Sarbanes-Oxley Act~~FTC, and state and local agencies.

Privacy and Data Protection Laws

The United States and various state and foreign governments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security, and storage of ~~2002,~~personal identifiable information (“PII”) of individuals; and the FTC and many state attorneys general are applying federal and state consumer protection laws to impose standards on the online collection, use and dissemination of data. Self-regulatory obligations, other industry standards, policies, and other legal obligations may apply to our collection, distribution, use, security, or storage of PII or other data relating to individuals. In addition, most states and some foreign governments have enacted laws requiring companies to notify individuals of data security breaches involving certain types of PII. These obligations may be interpreted and applied in an inconsistent manner from one jurisdiction to another and may conflict with one another, other regulatory requirements, or our internal practices. Any failure or perceived failure by us to comply with U.S., E.U., or other foreign privacy or security laws, regulations, policies, industry standards, or legal obligations, or any security incident that results in the unauthorized access to, or acquisition, release, or transfer of, PII may result in governmental enforcement actions, litigation, fines and penalties, or adverse publicity and could cause our customers to lose trust in us, which could harm our reputation and have a material adverse effect on our business, financial condition, and results of operations.

We expect that there will continue to be new proposed laws, regulations, and industry standards concerning privacy, data protection and information security in the United States, Canada, the European Union, and other jurisdictions, and we cannot yet determine the impact such future laws, regulations, and standards may have on our business. For example, in May 2018, the General Data Protection Regulation came into force, bringing with it a complete overhaul of E.U. data protection laws: the new rules supersede E.U. data protection legislation, impose more stringent E.U. data protection requirements, and provide for greater penalties for non-compliance. Changing definitions of what constitutes PII may also limit or inhibit our ability to operate or to expand our business, including limiting strategic partnerships that may involve the sharing of data. Also, some jurisdictions require that certain types of data be retained on servers within these jurisdictions. Our failure to comply with applicable laws, directives, and regulations may result in enforcement action against us, including fines and imprisonment, and damage to our reputation, any of which may have an adverse effect on our business and operating results. Further, the E.U. requires that certain data transfer mechanisms be put in place before PII can be transferred from the E.U. to another jurisdiction. These validity of these mechanisms- namely the Privacy Shield, which permits US-based participating companies such as ~~amended,~~Ceridian to ~~furnish a report~~move PII from the E.U. to the US; and the EU Standard Contractual Clauses, which Ceridian uses extensively- continue to be challenged by ~~management on, among~~civil society before E.U. regulators and courts of law. Should these mechanisms be invalidated, Ceridian may not be able to transfer customers’ PII and its own from Europe to the U.S. and other ~~things, the effectiveness~~jurisdictions to run its business and deliver services to customers.

If our service is perceived to cause, or is otherwise unfavorably associated with, violations of privacy or data security requirements, it may subject us or our customers to public criticism and potential legal liability. Public concerns regarding PII processing, privacy and security may cause some of our ~~internal control over financial reporting~~customers’ end users to be less likely to visit their websites or otherwise interact with them. If enough end users choose not to visit our customers’ websites or otherwise interact with them, our customers could stop using our platform. This, in turn, may reduce the value of our services and slow or eliminate the growth of our business. Existing and potential privacy laws and regulations concerning privacy and data security and increasing sensitivity of consumers to unauthorized processing of PII may create negative public reactions to technologies, products, and services such as ours.

Evolving and changing definitions of what constitutes PII and / or “Personal Data” within the United States, Canada, the European Union, and elsewhere, especially relating to the classification of internet protocol, or IP addresses, machine or device identification numbers, location data and other information, may limit or inhibit our ability to operate or to expand our business. Future laws, regulations, standards and other obligations could impair our ability to collect or to use information that we utilize to provide email delivery and marketing services to our customers, thereby impairing our ability to maintain and to grow our customer base and to increase revenue. Future restrictions on the collection, use, sharing, or disclosure of our customers’ data or additional requirements for express or implied consent of customers for the ~~first fiscal year beginning after~~use and disclosure of such information may limit our ability to develop new services and features.

Financial Services Laws

The United States and various state and foreign governments have adopted regulations which may be applicable to our Dayforce Wallet or other services with which we and/or or our third-party providers must comply. The obligations include undertakings imposed, for example, by state money transmission laws, commercial lending laws, the ~~effective date~~Office of Foreign Asset Control, the Bank Secrecy Act, Gramm-Leach-Bliley Act and the National Automated Clearing House Association. Any failure or perceived failure by us or one of our ~~IPO,~~third party providers to comply with financial services laws, regulations, policies, industry standards, or legal obligations, may result in governmental enforcement actions, litigation, fines and penalties, or adverse publicity, and could cause our customers to lose trust in us, which ~~is the year ended December 31, 2019,~~could harm our reputation and ~~in each year thereafter. Our auditors will also need to attest~~have a material adverse effect on our business, financial condition, and results of operations.

We rely on third party service providers for many aspects of our business, including, but not limited to, the ~~effectiveness~~operation of data centers; the execution of Automated Clearing House, or ACH, and wire transfers to support our ~~internal control over financial reporting in~~customer payroll and tax services; the ~~future to~~monitoring of applicable laws; the ~~extent that we are no longer~~printing and delivery of checks; serving as an ~~emerging growth company, as defined by the JOBS Act, and are not a smaller reporting company.~~

~~In the third quarter of 2019, we identified a material weakness related to an isolated service incident that resulted in duplicate payments for certain~~independent trustee of our U.S. ~~payroll customers. As~~client funds trust; and providing program management and other financial related services for our Dayforce Wallet program. If any third-party service providers on which we rely experience a disruption, go out of business, experience a decline in quality, or terminate their relationship with us, we could experience a material adverse effect on our business, financial condition, and results of operation.

We rely on third party service providers for many integral aspects of our business. A failure on the part of any of our third-party service providers to fulfill their contracts with us could result in a material adverse effect on our business, financial condition, and results of operation. We depend on our third parties for many services, including, but not limited to:

Upkeep of data centers

We host Dayforce and Powerpay applications and serve all of our customers from data centers operated by third party providers, primarily NaviSite, in Boston, Massachusetts; Redhill, England; Santa Clara, California; Toronto, Canada; Vancouver, Canada; Woking, England; Sydney, Australia; London, England; and Oregon. We also host Dayforce Australia in Microsoft Azure in Melbourne, Australia and Sydney, Australia. While we control and have ~~determined~~access to our servers and all of the components of our network that are located in our ~~controls~~external data centers, we do not control the operation of these facilities. The owners of our data center facilities have no obligation to ~~detect duplicate payments were ineffective. As a result of this material weakness,~~renew their agreements with us on commercially reasonable terms, or at all. These parties may also seek to cap their maximum contractual liability resulting in us being financially responsible for losses caused by their actions or omissions. Additionally, we ~~concluded that~~host our internal control over financial reporting was ineffective as of September 30, 2019. Although we have subsequently implemented additional monitoring controls to detect and to prevent duplicate payments in advance of funding, remediation will not be considered complete until the applicable controls have operated effectively for a sufficient period of time. We expect the material weakness will be fully remediated before December 31, 2019. However, we cannot guarantee that this material weakness will be remediated orsystems through data centers that we ~~will not have additional material weaknesses~~operate and lease or own in ~~the future. Please see Part I., Item 4. “Controls~~Atlanta, Georgia; Fountain Valley, California; Louisville, Kentucky; and Procedures” for a complete description of this material weakness and remediation. Additionally, this material weakness could impact our customer relationships and result in additional loss and reputational risk. In 2017, we identified a material weakness related to our assessment of valuation allowance and classification of deferred tax liabilities associated with intangible assets for 2016 and prior periods. We remediated the material weakness and did not have a material weakness in connection with the 2017 audit. We may identify additional material weaknesses in internal controls in future periods.St. Petersburg, Florida. If we are unable to ~~maintain adequate internal control over financial reporting~~renew our agreements with our third party providers or to renew our leases on commercially reasonable terms, or if one of our data center operators is acquired, we ~~identify additional material weaknesses~~may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and possible service interruption in connection with any such transfer. Both our ~~internal control over~~third party data centers and data centers that we lease and operate are subject to break-ins, sabotage, intentional acts of vandalism, and other misconduct. Any such acts could result in a breach of the security of our or our customers’ data.

Problems faced by our third party data center locations, with the telecommunications network providers with whom we or they contract, or with the systems by which our telecommunications providers allocate capacity among their customers, including us, could adversely affect the experience of our customers. Our third party data centers operators could decide to close their facilities without adequate notice. In addition, any financial ~~reporting~~difficulties, such as bankruptcy, faced by our third party data centers operators or any of the service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict. Additionally, if our data centers are unable to ~~adequately remediate~~keep up with our growing needs for capacity, this could adversely affect the growth of our business. Any changes in third party service levels at our data centers or any security breaches, errors, defects, disruptions, or other performance problems with our applications could adversely affect our reputation, damage our customers’ stored files, result in lengthy interruptions in our services, or otherwise result in damage or losses to our customers for which they may seek compensation from us. Interruptions in our services might reduce our revenues, cause us to issue refunds to customers for prepaid and unused subscription services, subject us to potential liability, or adversely affect our renewal rates.

Processing of electronic funds transfers

We currently have agreements with four banks in the United States, two banks in Canada, and one financial payments company in the United Kingdom to execute electronic funds transfers to support our customer payroll and tax services in the United States, Canada, and the United Kingdom. If one or more of these parties fails to process electronic funds transfers on a timely basis, or at all, then our relationship with our customers could be harmed and we could be subject to claims by a customer with respect to the failed transfers, with little or no recourse to the banks. In addition, these parties have no obligation to renew their agreements with us on commercially reasonable terms, or at all, and transferring to alternative providers could prove time-consuming and costly. If these parties terminate their relationships with us, restrict or fail to increase the dollar amounts of funds that they will process on behalf of our customers, their doing so may impede our ability to process funds and could have a material ~~weaknesses~~adverse effect on our business, financial condition, and results of operations.

Check printing and delivery

In Canada, we rely on a third party vendor to print payroll checks, and in Canada and the United States we rely on third party couriers, such as Federal Express and Purolator, to ship printed reports, year-end slips, and pay checks to our customers. Relying on third party check printers and couriers puts us at risk from disruptions in their operations, such as employee strikes, inclement weather, and their ability to perform tasks on our behalf. If these vendors fail to perform their tasks, we could incur liability or suffer damages to our reputation, or both. If we are forced to use other third party couriers, transferring to these competitor couriers could prove time-consuming, our costs could increase and we may not be able to meet shipment deadlines. Moreover, we may not be able to obtain terms as favorable as those we currently use, which could further increase our costs.

Monitoring of changes to applicable laws

We and our third party providers must monitor for any changes or updates in laws that are ~~identified,~~applicable to the solutions that we or our third party providers provide to our customers. In addition, we are reliant on our third party providers to modify the solutions that they provide to our customers to enable our clients to comply with changes to such laws and regulations. If our third party providers fail to reflect changes or updates in applicable laws in the solutions that they provide to our customers, we could be subject to negative customer experiences, harm to our reputation, loss of customers, claims for any fines, penalties or other damages suffered by our customers, and other financial harm.

Trustee of U.S. client funds trust

In the United States, we rely on a state-chartered trust company to serve as the independent trustee of our clients’ funds trust. Our client funds are held in accounts in the name of the clients’ fund trust and our independent trustee, in order to maintain bankruptcy remoteness of those funds from us. We rely on our independent trustee to maintain regulatory compliance with all applicable laws. It may be difficult to find a replacement trustee for our clients’ funds trust in the event the trustee terminates its relationship with us or fails to perform under our agreement with the trustee. If that were to occur, we may be unable to ~~report~~provide the Dayforce Wallet or our standard payroll services to our customers and their employees, which could harm our relationship with our customers and their employees, could subject us to claims by a customer, their employees, and regulatory sanctions with respect to the failure, and could result in a material adverse effect on our business, financial ~~information accurately~~condition, and results of operations.

Program manager of our U.S. Dayforce Wallet program

We rely on a ~~timely basis, may suffer adverse~~third party financial institution to serve as the issuing bank, the program manager and perform other financial related services with respect to our Dayforce Wallet product. In that regard, the third party financial institution, among other things, maintains our omnibus wallet funds account and performs the necessary regulatory ~~consequences~~and payments processing activity required by the Dayforce Wallet platform. We do not have the necessary regulatory approvals to hold wallet funds in or ~~violations of applicable stock exchange listing rules, may breach~~move funds from an account, nor do we have access to the ~~covenants~~payment systems needed to move the funds from the omnibus wallet funds account and the omnibus card holder account. As a result, if our third party financial institution partner fails to perform under our ~~credit facilities,~~agreement with it, or terminates its agreement with us, we may be unable to provide the Dayforce Wallet service to our customers until we enter into a new relationship with a new third party financial institution, which could harm our relationship with our customers and ~~incur additional costs. There~~their employees, could ~~also be~~subject us to claims by a ~~negative reaction~~customer, their employees, and regulatory sanctions with respect to the failure, and could result in a material adverse effect on our business, financial condition, and results of operations.

A failure on the ~~financial markets due to a loss~~part of ~~investor confidence in us and the reliability~~any of our third party service providers could result in a material adverse effect on our business, financial ~~statements,~~condition, and results of operations.

For our Dayforce Wallet service, we advance earned net wages and associated tax amounts on behalf of customers in connection with the “on demand pay” payroll feature of the service in order to provide their employees access to earned wages in advance of their standard payroll cycles. A customer may fail to satisfy its obligation to repay us for those advanced monies which could have a material adverse effect on our business, financial condition, and results of operations.

In contrast to our standard payroll processing business where a customer’s account is generally debited prior to any disbursement on its behalf, in the case of our “on demand pay” service, credit is provided to our customers and funds are advanced on the customers’ behalf in order to fund the customers’ employees’ interim earned net wage payroll demands (including associated source and other deductions) with the requirement that the customers will repay the advance on the date of their ordinary payroll run. These advances may or may not have priority over other creditors of our customers, and our security interest and/or other credit protection measures may be inadequate to make us whole. There is, therefore, a risk that our customers do not pay back the amounts we have already paid on their behalf, and in that event, we may possess limited legal recourse to recoup those funds from our customers. In the event of a customer’s failure to repay us, we may be required to seek additional sources of short-term liquidity, which may not be available on reasonable terms, or suffer credit losses, which could have a material adverse effect on our business, financial condition, and results of operations.

Regulatory requirements placed on our software and services could impose increased costs on us, delay or prevent our introduction of new products and services, and impair the function or value of our existing products and services.

Our existing products and services may become subject to increasing regulatory requirements, or our new products and services may subject us to increased regulatory requirements, and as these requirements proliferate, we may be required to change or adapt our products and services to comply. Changing regulatory requirements might render our products and services obsolete or might block us from developing new products and services. New products or services, such as the Dayforce Wallet, in turn subject us to incrementally new regulatory requirements, such as the need to obtain, maintain and comply with commercial lending licenses or other requirements in certain jurisdictions. These increased regulatory demands might in turn impose additional costs upon us to comply or to further develop our products and services. It might also make introduction of new products and services more costly or more time-consuming than we currently anticipate and could even prevent introduction by us of new products or services or cause the continuation of our existing products or services to become more costly. Accordingly, such regulatory requirements could have a material adverse effect on our business, financial condition, and results of operations.

Catastrophic events may disrupt our business.

Our data centers are located in Atlanta, Georgia; Fountain Valley, California; Louisville, Kentucky; St. Petersburg, Florida. Additionally, our data centers hosted by third parties and our corporate offices are located in Boston, Massachusetts; Melbourne, Australia; Minneapolis, Minnesota; Redhill, England; Santa Clara, California; Sydney, Australia; Toronto, Canada; Vancouver, Canada; Woking, England; London, England; and Oregon. Any location in any part of the world is susceptible to natural disasters or other risks beyond our control and its third party contractors that could impact operations. For example, the west coast of the United States contains active earthquake zones, the Midwest is subject to periodic tornadoes, and the east coast is subject to seasonal hurricanes and snowstorms. Additionally, we employ a substantial number of employees located in the Republic of Mauritius, which is subject to seasonal hurricanes, and the geographic remoteness of the location may create additional delays in recovery from any catastrophic event. Additionally, we rely on our network and third party infrastructure and enterprise applications, internal technology systems, and our website for our development, marketing, operational support, hosted services and sales activities. In the event of a major earthquake, tornado, hurricane, pandemic or other public health emergency or catastrophic event, such as fire, power loss, telecommunications failure, cyber-attack, war, or terrorist attack in any of our domestic or international locations, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our services, breaches of data security and loss of critical data, all of which could have a material adverse effect on our business, financial condition, and results of operations.

Customer funds and wage funds of their employees that our trustees and third-party financial institution partners hold in trust are subject to market, interest rate, credit, and liquidity risks. The loss of these funds could have a material adverse effect on our business, financial condition, and results of operations.

Both our trustees (in the case of customer funds held in our U.S. clients’ funds trust and our Canada payroll trust) and our third party financial institution partner (in the case of employee wage funds held on their behalf as part of the U.S. Dayforce Wallet program) may invest funds in one of more of the following high-quality bank deposits, money market mutual funds, commercial paper, collateralized short-term investments, U.S. Treasury and agency securities, Canada government and provincial securities, as well as highly rated asset-backed, mortgage-backed, municipal, corporate, and bank securities. Nevertheless, these assets are subject to general market, interest rate, credit, and liquidity risks. These risks may be exacerbated, individually or in unison, during periods of unusual financial market volatility. We are required to fund the payroll and wage funds of our customers and their employees regardless of any loss realized on those investments affecting the principal funds held. In the event of a global financial crisis, such as that experienced in 2008, we could be faced with a severe constriction of the availability of liquidity, which could impact our ability to fund payrolls. Any loss of principal, or inability to access customer funds could have an adverse impact on our cash position and results of operations and could require us to obtain additional sources of liquidity, and could have a material adverse effect on our business, financial condition, and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

5142

ITEM 6. E~~XHIBITS~~EXHIBITS

(a) Exhibits

The following exhibits are filed or furnished as a part of this report:

Exhibit No.		Description

~~10.1~~ 10.1*		Second Amendment to Employment Agreement, effective February 3, 2020, between Christopher R. Armstrong and Ceridian HCM, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on February 5, 2020).

10.2*		Amendment to Employment Agreement, effective February 3, 2020, between Leagh R. Turner and Ceridian Canada Ltd. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Company on February 5, 2020).

10.3*		Form of Restricted Stock Unit Award Agreement (February 9, 2020) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on February 10, 2020).

10.4**		First Amendment to Senior Secured Credit Agreement, dated February 19, 2020, between Ceridian HCM Holding Inc., as borrowers, the lenders party thereto, Deutsche Bank AG New York Branch (as administrative agent and collateral agent).

10.5		Waiver Agreement, dated ~~as of September 6, 2019,~~February 27, 2020, by and among Ceridian HCM Holding Inc., Cannae Holdings, LLC and certain funds affiliated with Thomas H. Lee Partners, L.P. (incorporated by reference to Exhibit 10.1 to the Current Report ~~filed~~ on Form 8-K filed by the Company on ~~September 6, 2019, dated September 4, 2019)~~March 2, 2020).

10.6		Letter Agreement by and among Ceridian HCM Holding Inc. and Cannae Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on April 3, 2020).

~~31.1~~ 10.7*		Form of Performance Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Company on March 2, 2020).

10.8*		Ceridian HCM Holding Inc. 2020 Management Incentive Plan (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Company on March 2, 2020).

31.1**		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~31.2~~ 31.2**		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~32.1~~ 32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~32.2~~ 32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~101.INS**		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

~~101.SCH~~101.SCH**		Inline XBRL Taxonomy Extension Schema Document

~~101.CAL~~101.CAL**		Inline XBRL Taxonomy Extension Calculation Linkbase Document

~~101.DEF~~101.DEF**		Inline XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB~~101.LAB**		Inline XBRL Taxonomy Extension Label Linkbase Document

~~101.PRE~~101.PRE**		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104**		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Management compensatory plan or arrangement.

**	Filed herewith.

5243

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CERIDIAN HCM HOLDING INC.

Date: ~~November 7, 2019~~May 6, 2020	By:	/s/ David D. Ossip
		Name:	David D. Ossip
		Title:	Chief Executive Officer
			(Principal Executive Officer)

Date: ~~November 7, 2019~~May 6, 2020	By:	/s/ Arthur Gitajn
		Name:	Arthur Gitajn
		Title:	Executive Vice President and Chief Financial Officer
			(Principal Financial ~~Officer and~~Officer)
			~~Principal Accounting Officer)~~

5344

	Senior Preferred Stock						Junior Preferred Stock						Common Stock				Additional Paid In			Accumulated			Accumulated Other Comprehensive			Total Stockholders			Non-controlling			Total
	Shares			$			Shares			$			Shares		$		Capital			Deficit			Loss			Equity			Interest			Equity
Balance as of December 31, 2017		16,802,144		$	184.8			58,244,308		$	0.6			65,285,962	$	0.7	$	1,565.4		$	(267.3	)	$	(311.0	)	$	1,173.2		$	37.8		$	1,211.0
Net income		—			—			—			—			—		—		—			0.6			—			0.6			(0.5	)		0.1
Issuance of common stock under share-based compensation plans		—			—			—			—			88,347		—		—			—			—			—			—			—
Senior preferred dividends declared		—			5.3			—			—			—		—		—			(5.3	)		—			—			—			—
Share-based compensation		—			—			—			—			—		—		2.9			—			—			2.9			—			2.9
Foreign currency translation		—			—			—			—			—		—		—			—			(16.4	)		(16.4	)		(0.2	)		(16.6	)
Change in unrealized loss, net of tax of ($0.8)		—			—			—			—			—		—		—			—			(12.6	)		(12.6	)		—			(12.6	)
Change in pension liability adjustment, net of tax of $0.0		—			—			—			—			—		—		—			—			2.9			2.9			—			2.9
Balance as of March 31, 2018		16,802,144		$	190.1			58,244,308		$	0.6			65,374,309	$	0.7	$	1,568.3		$	(272.0	)	$	(337.1	)	$	1,150.6		$	37.1		$	1,187.7
Net loss		—			—			—			—			—		—		—			(63.3	)		—			(63.3	)		—			(63.3	)
Issuance of common stock		—			—			—			—			28,695,455		0.3		594.7			—			—			595.0			—			595.0
Issuance of common stock under share-based compensation plans		—			—			—			—			1,148,801		—		14.1			—			—			14.1			—			14.1
Senior preferred dividends declared		—			2.4			—			—			—		—		—			(2.4	)		—			—			—			—
Conversion of senior and junior preferred shares		(16,802,144	)		(192.5	)		(58,244,308	)		(0.6	)		42,246,650		0.4		192.7			—			—			—			—			—
LifeWorks Disposition		—			—			—			—			—		—		(95.7	)		—			0.7			(95.0	)		(37.3	)		(132.3	)
Share-based compensation		—			—			—			—			—		—		10.5			—			—			10.5			—			10.5
Foreign currency translation		—			—			—			—			—		—		—			—			(10.4	)		(10.4	)		0.2			(10.2	)
Change in unrealized loss, net of tax of ($0.6)		—			—			—			—			—		—		—			—			(4.5	)		(4.5	)		—			(4.5	)
Change in pension liability adjustment, net of tax of $0.0		—			—			—			—			—		—		—			—			2.9			2.9			—			2.9
Balance as of June 30,2018		—		$	—			—		$	—			137,465,215	$	1.4	$	2,284.6		$	(337.7	)	$	(348.4	)	$	1,599.9		$	—		$	1,599.9
Net income		—			—			—			—			—		—		—			4.2			—			4.2			—			4.2
Issuance of common stock under share-based compensation plans		—			—			—			—			584,503		—		7.8			—			—			7.8			—			7.8
Share-based compensation		—			—			—			—			—		—		4.9			—			—			4.9			—			4.9
Foreign currency translation		—			—			—			—			—		—		—			—			10.2			10.2			—			10.2
Change in unrealized loss, net of tax of ($0.9)		—			—			—			—			—		—		—			—			(5.1	)		(5.1	)		—			(5.1	)
Change in pension liability adjustment, net of tax of $0.0		—			—			—			—			—		—		—			—			2.9			2.9			—			2.9
Balance as of September 30, 2018		—		$	—			—		$	—			138,049,718	$	1.4	$	2,297.3		$	(333.5	)	$	(340.4	)	$	1,624.8		$	—		$	1,624.8

	Three Months Ended September 30, 2018
	As previously reported			ASC Topic 606 Adjustments			ASU 2017-07 Adjustments			As adjusted
Condensed Consolidated Statement of Operations	(Dollars in millions, except per share data)
Revenue:
Recurring services	$	157.2		$	(7.7	)	$	—		$	149.5
Professional services and other		22.4			6.2			—			28.6
Total revenue	$	179.6		$	(1.5	)	$	—		$	178.1
Selling, general, and administrative expense		59.4			(1.5	)		(0.6	)		57.3
Operating profit		15.6			—			0.6			16.2
Other expense, net		0.3			—			0.6			0.9
Income tax benefit		(0.9	)		0.2			—			(0.7	)
Net income	$	4.4		$	(0.2	)	$	—		$	4.2
Net income per share, basic and diluted	$	0.03		$	—		$	—		$	0.03

	Nine Months Ended September 30, 2018
	As previously reported			ASC Topic 606 Adjustments			ASU 2017-07 Adjustments			As adjusted
Condensed Consolidated Statement of Operations	(Dollars in millions, except per share data)
Revenue:
Recurring services	$	480.8		$	(20.3	)	$	—		$	460.5
Professional services and other		65.3			20.1			—			85.4
Total revenue	$	546.1		$	(0.2	)	$	—		$	545.9
Selling, general, and administrative expense		200.3			(5.4	)		(1.8	)		193.1
Operating profit		28.8			5.2			1.8			35.8
Other income, net		(2.5	)		—			1.8			(0.7	)
Income tax expense		5.8			0.5			—			6.3
Net loss attributable to Ceridian	$	(63.2	)	$	4.7		$	—		$	(58.5	)
Net loss per share attributable to Ceridian, basic and diluted	$	(0.67	)	$	0.04		$	—		$	(0.63	)

	Nine Months Ended September 30, 2019
Expected volatility		34.9	%
Expected dividend rate		—
Risk-free interest rate		2.3	%
Expected term (in years)		0.4
Grant date fair value per share	$	8.95

	September 30, 2019		December 31, 2018
Years Ending December 31,	ASC Topic 842		ASC Topic 840
	(Dollars in millions)
2019	$	4.0	$	13.6
2020		14.3		11.8
2021		10.3		7.7
2022		10.0		7.4
2023		8.2		6.2
Thereafter		12.4		9.4
Total lease payments (a)	$	59.2	$	56.1
Less: Interest		7.5		—
Present value of lease liabilities	$	51.7	$	56.1

	Impact to Statement of Operations			Impact to Cash
	(Dollars in millions)
Gross proceeds from the IPO and private placement				$	631.3
Costs capitalized within stockholders’ equity					(36.3	)
Redemption of Senior Notes					(475.0	)
Debt refinancing fees, reflected as a reduction to long-term debt					(3.6	)
IPO and debt refinancing related expenses reflected within results of operations:
Cost of revenue	$	(2.1	)
Selling, general, and administrative		(23.2	)
Impact on operating profit	$	(25.3	)
Interest expense		(25.7	)
Impact on net loss	$	(51.0	)		(51.0	)
Non-cash IPO-related share-based compensation expense					8.1
Non-cash interest expense adjustments					(4.9	)
Cash to balance sheet from the IPO and private placement				$	68.6
Proceeds from issuance of the new $680.0 million Senior Term Debt					680.0
Repayment of the $702.0 million Senior Term Debt					(657.0	)
Cash to balance sheet from the IPO, private placement and debt refinancing				$	91.6

	September			June 30,			March 31,			December			September			June 30,			March 31,			December
	30, 2019			2019			2019			31, 2018			30, 2018			2018			2018			31, 2017
Live Dayforce customers		4,169			4,006			3,851			3,718			3,465			3,308			3,154			3,001
Dayforce customers live for two or more years		2,855			2,690			2,480			2,339			2,148			2,014			1,872			1,770
Proportion of Dayforce customers live for two or more years		68	%		67	%		64	%		63	%		62	%		61	%		59	%		59	%

	Nine Months Ended September 30, 2019
	As Reported		Share-based compensation		Severance charges		Other operating expenses (a)		Adjusted
	(Dollars in millions)
Cost of revenue:
Recurring services	$	149.0	$	2.1	$	1.1	$	—	$	145.8
Professional services and other		107.1		1.2		0.4		—		105.5
Product development and management		49.1		2.2		0.1		—		46.8
Depreciation and amortization		26.7		—		—		—		26.7
Total cost of revenue		331.9		5.5		1.6		—		324.8
Sales and marketing		105.6		3.6		1.9		—		100.1
General and administrative		112.2		17.9		0.9		16.2		77.2
Operating profit		52.6		27.0		4.4		16.2		100.2
Other expense, net		4.7		—		—		0.8		3.9
Depreciation and amortization		43.9		—		—		—		43.9
EBITDA from continuing operations	$	91.8	$	27.0	$	4.4	$	17.0	$	140.2

~~September 30, 2019~~

~~Weighted average remaining lease term (in years)~~

~~Operating leases~~

~~Weighted average discount rate~~

~~Operating leases~~