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

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.

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: ~~145,020,556~~149,237,722 shares of Common Stock, $0.01 par value per share, as of ~~May 4, 2020.~~

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:

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, ~~2019~~2020 (“~~2019~~2020 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.

March 31,

December 31,

2020

2019

(unaudited)

ASSETS

Current assets:

Cash and equivalents

$
255.3

$
281.3

Trade and other receivables, net

82.8

80.4

Prepaid expenses and other current assets

68.9

57.9

Total current assets before customer trust funds

407.0

419.6

Customer trust funds

3,649.5

3,204.1

Total current assets

4,056.5

3,623.7

Right of use lease asset

34.8

32.0

Property, plant, and equipment, net

124.6

128.3

Goodwill

1,939.5

1,973.5

Other intangible assets, net

176.5

177.9

Other assets

138.2

150.3

Total assets

$
6,470.1

$
6,085.7

LIABILITIES AND EQUITY

Current liabilities:

Current portion of long-term debt

$
9.7

$
10.8

Current portion of long-term lease liabilities

8.4

8.8

Accounts payable

34.9

43.2

Deferred revenue

26.8

25.5

Employee compensation and benefits

49.3

75.9

Other accrued expenses

18.4

13.9

Total current liabilities before customer trust funds obligations

147.5

178.1

Customer trust funds obligations

3,605.2

3,193.6

Total current liabilities

3,752.7

3,371.7

Long-term debt, less current portion

665.0

666.3

Employee benefit plans

113.9

117.2

Long-term lease liabilities, less current portion

32.8

30.1

Other liabilities

20.1

18.1

Total liabilities

4,584.5

4,203.4

Commitments and contingencies (Note 13)

Stockholders’ equity:

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

2,473.0

2,449.1

Accumulated deficit

(221.2
)

(229.8
)
Accumulated other comprehensive loss

(367.6
)

(338.4
)
Total stockholders’ equity

1,885.6

1,882.3

Total liabilities and equity

$
6,470.1

$
6,085.7

	Three Months Ended March 31,
	2021			2020
(Dollars in millions, except share and per share data, unaudited)
Revenue:
Recurring	$	196.0		$	181.5
Professional services and other		38.5			41.2
Total revenue		234.5			222.7
Cost of revenue:
Recurring		59.7			52.2
Professional services and other		44.7			42.6
Product development and management		25.8			17.6
Depreciation and amortization		11.1			9.8
Total cost of revenue		141.3			122.2
Gross profit		93.2			100.5
Selling, general, and administrative		95.6			74.2
Operating (loss) profit		(2.4	)		26.3
Interest expense, net		5.6			6.9
Other expense, net		4.6			2.6
(Loss) income before income taxes		(12.6	)		16.8
Income tax expense		6.6			8.2
Net (loss) income	$	(19.2	)	$	8.6
Net (loss) income per share:
Basic	$	(0.13	)	$	0.06
Diluted	$	(0.13	)	$	0.06
Weighted-average shares outstanding:
Basic		148,716,050			144,645,325
Diluted		148,716,050			151,178,498

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

Q1 2021 Form 10-Q

Ceridian HCM Holding Inc. and its subsidiaries (also referred to in this report as “Ceridian,” “we,” “our,” “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.~~

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 ~~2019~~2020 Form ~~10-K.~~10-K. The following notes should be read in conjunction with these policies and other disclosures in our ~~2019~~2020 Form ~~10-K.~~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 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~~On March 5, 2021, we issued $500.0 million in aggregate principal amount of 0.25% Convertible Senior Notes due 2026, and on March 16, 2021, after the initial purchasers exercised their option to purchase additional securities in full, we issued an additional $75.0 million in aggregate principal amount of 0.25% Convertible Senior Notes due 2026, resulting in an aggregate principal amount of $575.0 million (collectively, the “Notes”). The total net proceeds from the offering, after deducting initial purchase discounts and issuance costs, were $561.8 million. Please refer to Note 7, “Debt” for additional information.

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 fundingaccounting for the ~~project, which~~issuance of the Notes, we separated the Notes into liability and equity components. The carrying amounts of the liability component was calculated by measuring the fair value of similar liabilities that do not have associated convertible features using a discounted cash flow model. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes as a whole. This difference represents a debt discount that is amortized to interest expense over the respective terms of the Notes using the effective interest rate method. The equity component was recorded in additional paid-in capital and is not remeasured as long as it ~~deems probable of completion. Capitalized software~~continues to meet the conditions for equity classification.

In accounting for the related debt issuance costs, ~~include only: (1) external direct costs of materials and services consumed in developing or obtaining~~we allocated the ~~software; (2) payroll and payroll-related costs for employees who are directly associated with and who devote time~~total amount incurred to the ~~project;~~liability and ~~(3)~~equity components of the Notes based on their relative values. Issuance costs attributable to the liability component are being amortized to interest expense over the contractual term of the Notes. The issuance costs ~~incurred while developing~~attributable to the ~~software. Capitalization~~equity component were netted against the equity component representing the conversion option in additional paid-in capital.

To the extent that we receive the Notes conversion requests prior to their maturity, a portion of ~~these costs ceases no later than~~ the ~~point at~~equity component is classified as temporary equity, which is measured as the ~~project~~difference between the principal and net carrying amount of the Notes requested for conversion. Upon settlement of the conversion requests, the difference between the fair value and the amortized book value of the liability component of the Notes requested for conversion is ~~substantially complete and ready for its intended purpose. We do~~recorded as a gain or loss on early note conversion. The fair value of the Notes is measured based on a similar liability that does 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.have an associated convertible feature based on the remaining term of the Notes.

Deferred costs, which primarily consist of deferred sales commissions, included within Other assets on our condensed consolidated balance sheets were ~~$101.0~~$129.1 million and ~~$106.4~~$132.9 million as of March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, respectively. Amortization expense for the deferred costs was ~~$9.0~~$11.0 million and ~~$7.7~~$9.0 million for the three months ended March 31, ~~2020,~~2021, and ~~2019,~~2020, respectively.

~~In August 2018,~~ from the Financial Accounting Standards Board (“FASB”) issued 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

On March 1, 2021, we completed the purchase of 100% of the outstanding shares of Ascender HCM Pty Ltd. (“Ascender”) for $359.6 million, subject to working capital and other adjustments. Ascender is a payroll and human resources solutions provider in the Asia Pacific Japan region.We entered into a forward foreign currency contract to hedge the purchase price for the Ascender acquisition which was denominated in Australian dollars, resulting in the recognition of a realized gain of $4.2 million included as a component of other expense, net in our condensed consolidated statement of operations.

The financial results of Ascender have been included within our condensed consolidated financial statements from the acquisition date forward and are classified among both Cloud and Bureau solutions. For the three months ended March 31, 2021, Ascender revenue included within our condensed consolidated statement of operations was $6.7 million. The acquisition of Ascender was recorded using the acquisition method of accounting, in which the assets and liabilities assumed are recognized at their fair value. The purchase accounting has not been finalized as of March 31, 2021, but we have conducted a preliminary assessment of certain assets and liabilities related to the acquisition of Ascender. The intangible assets consist of customer relationships, trade name, and developed technology. We expect to finalize the allocation of the purchase price within the one-year measurement period. After consideration of the Ascender acquisition, management has concluded that we continue to have 1 operating and reportable segment. This conclusion aligns with how management monitors operating performance, allocates resources, and deploys capital. Pro forma financial information is not presented as the acquisition of Ascender did not qualify as a significant business combination.

The major classes of assets and liabilities to which we have preliminarily allocated the purchase price were as follows:

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

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

~~During the three months ended March 31, 2020, we did not re-measure any financial assets or~~Assets and liabilities acquired as part of a business combination and our convertible debt issuance are recorded at fair value on a nonrecurring basis. ~~During~~Please refer to Note 3, “Business Combinations,” and Note 7, “Debt” for additional information.

In certain jurisdictions, we collect funds for payment of payroll and taxes; temporarily hold such funds until payment is due; remit the ~~year ended December 31, 2019, we completed~~funds to the clients’ employees and appropriate taxing authorities; file federal, state, and local tax returns; and handle related regulatory correspondence and amendments. The assets held are intended for the specific purpose of satisfying client fund obligations and therefore are not freely available for our general business use. In the U.S. and Canada, these customer funds are held in a ~~business combination which requires the assets acquired and liabilities assumed to be measured at fair value on a nonrecurring basis.~~

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 recurring revenue was ~~$19.6~~$10.7 million and ~~$24.3~~$19.6 million for the three months ended March 31, ~~2020,~~2021, and ~~2019,~~2020, respectively. Investment income includes interest income, realized gains and losses from sales of customer ~~trust~~ funds’ investments, and unrealized credit losses determined to be unrecoverable.

The amortized cost of customer ~~trust~~ funds as of March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, is the original cost of assets acquired. The amortized cost and fair values of investments of customer ~~trust~~ funds available for sale ~~as of March 31, 2020, and December 31, 2019,~~ were as follows:

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 March 31, 2020.~~position.

Management does not believe that any individual unrealized loss was unrecoverable as of March 31, ~~2020.~~2021. 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 March 31, ~~2020,~~2021, 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.

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

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

We perform an impairment assessment of our indefinite lived 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~~to 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.

Amortization expense related to definite-lived intangible assets was ~~$0.4~~$2.2 million and ~~$4.7~~$0.4 million for the three months ended March 31, 2021, and 2020, ~~and 2019,~~ respectively.

On April 30, 2018, ~~Ceridian~~we completed the refinancing of ~~its~~our debt by entering into a new credit agreement. Pursuant to the terms of the new credit agreement, ~~Ceridian~~we became borrower of (i) a $680.0 million term loan debt facility (the ~~“2018 Term~~“Term Debt”) and (ii) a $300.0 million revolving credit facility (the ~~“2018 Revolving~~“Revolving Credit Facility”) ~~(the 2018 Term Debt and~~(collectively, the ~~2018 Revolving Credit Facility are together referred to as the “2018 Senior~~“Senior Secured Credit Facility”). The ~~2018~~obligations of Ceridian under the Senior Secured Credit Facility is secured by first priority security interests in substantially all of the assets of ~~Ceridian.~~Ceridian and the domestic subsidiary guarantors, subject to permitted liens and certain exceptions. 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 has been reduced from LIBOR plus 3.25% to LIBOR plus 3.00%, so long as the rating is maintained. On February 19, 2020, ~~Ceridian~~we 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 ~~$0.1~~$0.3 million and $0.1 million as of March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, respectively, and is included within Other accrued expenses in our condensed consolidated balance sheets.

In March 2021, we issued $575.0 million in ~~light~~aggregate principal amount of 0.25% Convertible Senior Notes due 2026 in a private offering to qualified institutional buyers pursuant to Rule 144A promulgated under the ~~current uncertainty~~Securities Act of 1933, as amended, and ~~volatility in the global financial markets resulting~~pursuant to exemptions from the ~~COVID-19 pandemic, Ceridian elected~~prospectus requirements of applicable Canadian securities laws, including the exercise in full by the initial purchasers their option to ~~borrow $295.0~~purchase an additional $75.0 million ~~under~~in aggregate principal amount of 0.25% Convertible Senior Notes due 2026 (collectively, the ~~2018 Revolving Credit Facility as~~“Notes”). The Notes bear interest at a ~~precautionary measure to increase our cash position~~rate of 0.25% per year and ~~to preserve financial flexibility. We may use a portion~~interest is payable semiannually in arrears on March 15 and September 15 of ~~the~~each year, beginning on September 15, 2021. The Notes mature on March 15, 2026, unless earlier converted, redeemed or repurchased. The total net proceeds from the ~~borrowing~~offering, after deducting initial purchase discounts and other debt issuance costs, were $561.8 million.

The Notes are unsecured obligations and do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by us or any of our subsidiaries.

The Notes will be convertible at the option of the holders at any time only under the following circumstances:

Upon conversion, we may satisfy the conversion obligation by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and subject to the terms and conditions provided in the indenture under which the Notes were issued. During the quarter ended March 31, 2021, the conditions allowing holders of the Notes to convert have not been met. The Notes were therefore not convertible during the first quarter of 2021 and are classified as a noncurrent liability in our condensed consolidated balance sheet as of March 31, 2021.

We may not redeem the Notes prior to March 20, 2024. On or after March 20, 2024, and on or before the 30th scheduled trading day immediately preceding the maturity date, we may redeem the Notes at a cash purchase price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of our common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice; and (2) the trading day immediately before the date we send such notice. In addition, calling any Note for redemption will constitute a make-whole fundamental change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

If a “fundamental change” (as defined in the indenture under which the Notes were issued) occurs, then noteholders may require us to repurchase their notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.

In accounting for the issuance of the Notes and the related transaction costs, we separated the Notes into liability and equity components. The carrying amount of the liability component was initially calculated by measuring the fair value of similar liabilities that do not have associated convertible features utilizing the interest rate of 4.5%. The carrying amount of the equity component representing the conversion option was $108.6 million and was determined by deducting the fair value of the liability component from the par value of the Notes. This difference represents a debt discount that is amortized to interest expense over the term of the Notes using the effective interest rate method. The equity component was recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification.

Total issuance costs of $14.4 million related to the Notes was allocated between liability, totaling $11.7 million, and equity, totaling $2.7 million, in the same proportion as the allocation of the total proceeds to the liability and equity components. Issuance costs attributable to the liability component are being amortized to interest expense over the term of the Notes. The excess of the principal amount of the liability component over its carrying amount is amortized to interest expense over the contractual term of the Notes at an effective interest rate of 5.1%. The issuance costs attributable to the equity component were netted against additional paid-

in capital. The amount recorded for the equity component of the Notes was $77.7 million, net of allocated issuance costs of $2.7 million and deferred tax impact of $28.2 million.

The following table sets forth total interest expense recognized related to the Notes for the period:

In March 2021, in connection with the pricing of the Notes, we entered into capped call transactions with the option counterparties (the “Capped Calls”). The Capped Calls each have an initial strike price of $132.20 per share, and an initial cap price of $179.26 per share, both subject to certain adjustments. The capped call transactions are generally expected to reduce potential dilution to our common stock upon any conversion of the Notes and/or offset any potential cash payments we would be required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the Notes. As the Capped Calls qualify for a scope exception from derivative accounting for instruments that are both indexed to the issuer's own stock and classified in stockholder’s equity in our condensed consolidated balance sheet, we have recorded an amount of $33.0 million as a reduction to additional paid-in capital which will not be remeasured. This represents the premium of $45.0 million paid for the purchase of the Capped Calls, net of the deferred tax impact of $12.0 million.

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

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, the trading price of our common stock and the limited trades of our debt, the fair value of our debt was estimated to be ~~$636.3~~$1,203.5 million and ~~$675.1~~$657.6 million as of March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, respectively. The fair value of the Notes was determined based on the closing trading price per $1,000 of the Notes as of the last day of trading for the period. We consider the fair value of the Notes at March 31, 2021 to be a Level 2 measurement as they are not actively traded. The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates.

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

Our share-based compensation consists of performance-based stock options, term-based stock options, restricted stock units (“RSUs”), and performance-based stock units (“PSUs”). We also offer an employee stock purchase plan.

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~~initial public offering (“IPO”) and legal reorganization, all outstanding stock options under the 2007 SIP were converted into options to purchase common stock of Ceridian. As of March 31, ~~2020,~~2021, there were ~~2,500~~1,936 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 March 31, ~~2020,~~2021, there were ~~4,657,548~~2,050,635 stock options and ~~restricted stock units~~RSUs outstanding under the 2013 SIP. We do not intend to grant any additional awards under the 2007 SIP or the 2013 SIP.

On April 24, 2018, in connection with ~~the IPO,~~our initial public offering, the Board of Directors and our stockholders approved the Ceridian HCM Holding Inc. 2018 Equity Incentive Plan (“2018 EIP”), which ~~authorizes~~authorized the issuance of up to 13,500,000 shares of common stock to eligible participants through equity ~~awards.~~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~~3 percent of the number of shares of our common stock outstanding on each January 31 immediately prior to the date of increase or (ii) such number of shares of our common stock determined by the Board of Directors. OnEffective on March 31, ~~2020,~~2021, the Share Reserve was increased by ~~3 percent~~4,397,296 shares, pursuant to the terms of the ~~number of shares of common stock outstanding on January 31, 2020, or 4,335,286 shares.~~2018 EIP.

Equity awards under the 2018 EIP vest either annually or quarterly on a pro rata basis, generally over a one-, three-, or 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 March 31, ~~2020,~~2021, there were ~~9,164,882~~13,284,080 stock options, ~~restricted stock units,~~RSUs, and ~~performance stock units~~PSUs outstanding and ~~12,866,597~~13,008,498 shares available for future grants of equity awards under the 2018 EIP.

Total share-based compensation expense was $22.8 million and $12.5 million for the three months ended March 31, 2021, and 2020, respectively.

Performance-based stock option activity under the 2007 SIP, the 2013 SIP, and the 2018 EIP was as follows:

In 2020, 1,500,000 performance-based stock options (“Performance Option Award”) were granted under the 2018 EIP with an exercise price of $65.26. The vesting conditions for the Performance Option Award are based on the Company’s performance on the New York Stock Exchange (“NYSE”) with 750,000 shares available to vest when the Company’s per share closing price on the NYSE meets or exceeds $110.94, or 1.7 times the exercise price, for ten consecutive trading days, and the remaining 750,000 shares are available to vest when the Company’s per share closing price on the NYSE meets or exceeds $130.52, or 2.0 times the exercise price, for ten consecutive trading days. The Performance Option Award has a minimum time-based vesting period of 3 years. The vesting conditions must be achieved prior to May 8, 2025, or any unvested portion of the Performance Option Award will terminate. A Monte Carlo simulation model was used to determine the fair value of these performance-based stock options. The Monte Carlo model utilizes multiple input variables that determine the probability of satisfying the market conditions stipulated in the award. We have estimated an expected term of 5.3 years, based on the vesting period and contractual term.

As of March 31, 2021, there was $22.4 million of share-based compensation expense related to unvested performance-based stock option awards not yet recognized, which is expected to be recognized over a weighted average period of 3.0 years.

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

As of March 31, 2021, there was $87.2 million of share-based compensation expense related to unvested term-based stock options not yet recognized, which is expected to be recognized over a weighted average period of 1.8 years.

During the three months ended March 31, 2021, 160,620 RSUs vested. As of March 31, 2021, there were 1,522,974 unvested RSUs outstanding and 556,892 vested RSUs outstanding. As of March 31, 2021, there was $95.1 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 1.8 years.

The vesting conditions for the PSUs granted in 2020 were based on the Company’s performance criteria, including Cloud revenue and adjusted EBITDA margin goals under Ceridian HCM Holding Inc. 2020 Management Incentive Plan (the “2020 MIP”) for the incentive period of January 1, 2020 through December 31, 2020. The vesting conditions for the PSUs granted in connection with the 2020 MIP were not met for the incentive period and as a result, the PSUs did not vest and were cancelled.

The vesting conditions for the PSUs granted in 2021 are based on the Company’s performance criteria, including Cloud revenue and adjusted EBITDA margin goals under Ceridian HCM Holding Inc. 2021 Management Incentive Plan (the “2021 MIP”) for the incentive period of January 1, 2021 through December 31, 2021. The maximum incentive vesting of PSUs may not exceed 150% under the 2021 MIP. Both the Cloud revenue and adjusted EBITDA margin goals are calculated based on the 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 of Directors. Upon vesting of a PSU, a participant will receive shares of common stock of the Company. The probability

of vesting of PSUs will continue to be evaluated throughout the period, and share-based compensation expense will be recognized in accordance with that probability. As of March 31, 2021, there was $23.6 million of share-based compensation expense related to unvested PSUs not yet recognized.

On November 9, 2018, the Board of Directors approved the Ceridian HCM Holding Inc. Global Employee Stock Purchase Plan ~~(the “GESPP”~~(“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. A total of 2,015,544 shares of common stock are available for future issuances under the plan at March 31, 2021. 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 ten years, unless terminated sooner as provided under the GESPP. ~~During 2020 and subsequent years, quarterly~~Quarterly purchase periods ~~will~~ commence on January 1, April 1, July 1, and October ~~1. Shares will be~~1 and shares are purchased on the last trading day of the respective purchase periods. ~~The first~~

Our 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.~~activity was as follows:

Recurring revenue includes float revenue of $10.7 million and ~~$6.0~~$19.6 million for the three months ended March 31, 2021, and 2020, ~~and 2019,~~ respectively.

~~Performance-based option activity under the 2007 SIP and the 2013 SIP for the period was as follows:~~21 |

Q1 2021 Form 10-Q

As of March 31, 2020, there was $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 1.9 years.

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

During the three months ended March 31, 2020, 138,687 RSUs vested. As of March 31, 2020, there were 472,251 unvested RSUs outstanding and 395,338 vested RSUs outstanding. RSUs generally vest annually over a one-, three-, or ~~four-year~~ period. As of March 31, 2020, there was $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 1.7 years.

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 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 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 the 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 a PSU, a participant will receive shares of common stock of the Company. The probability of vesting of PSUs will continue to be evaluated throughout the period, and share-based compensation expense will be recognized in accordance with that probability. As of March 31, 2020, there was $10.3 million of share-based compensation expense related to unvested PSUs not yet recognized.

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

~~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.~~

The Company records a contract asset when revenue recognized for professional service performance obligations exceed the contractual amount of billings for implementation related professional services. Contract assets were ~~$47.3~~$56.8 million and ~~$43.2~~$55.2 million as of March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, 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 primarily consists of payments received in advance of revenue recognition. The changes in deferred revenue were as follows:

In accordance with ASC Topic 606, “Revenue from Contracts with Customers,” 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 March 31, ~~2020,~~2021, approximately ~~$908.3~~$914.5 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.

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 March 31, ~~2020,~~2021, we continue to record a valuation allowance of ~~$12.0~~$16.3 million against deferred tax assets primarily attributable to state net operating loss carryovers.

We recorded an income tax expense of ~~$8.2~~$6.6 million during the three months ended March 31, ~~2020,~~2021, consisting ~~primarily~~ of ~~$3.6~~$7.3 million ~~from US and foreign operations, $2.1~~related to non-deductible stock based compensation, $3.8 million ~~of state taxes in~~attributed to the ~~U.S., $1.3 million attributable to stock-based compensation, and $1.2 million of~~ base erosion anti-abuse tax (“BEAT”) in the U.S., and $2.6 million of U.S state tax expense, partially offset by a $2.6 million tax benefit from current operations, a $1.9 million reduction in tax expense attributable to unremitted foreign earnings, a $1.8 million tax reduction attributable to the release of tax reserves, and other tax benefit items of $0.8 million.

There were 0 unrecognized tax benefits as of March 31, 2021. The total amount of unrecognized tax benefits as of ~~March~~December 31, 2020 ~~and December 31, 2019,~~ were ~~$1.6~~$1.8 million, including ~~$0.2~~$0.3 million of accrued ~~interest,~~interest. We make adjustments to these reserves when facts and ~~$1.5 million, including $0.2~~circumstances change, such as the closing of tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and operating results. For the period ended March 31, 2021, we released $1.8 million of ~~accrued interest, respectively. Of~~our reserve primarily attributable to the ~~total amount~~conclusion of ~~unrecognized~~foreign tax ~~benefits as of March 31, 2020, $1.6 million represents the amount that, if recognized, would favorably impact our effective income tax rate.~~audits. It is reasonable to expect that the amount of unrecognized tax benefits ~~will~~could 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.~~2016.

Supplemental balance sheet information related to leases ~~were~~was as follows:

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.

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. During the year ended December 31, 2019, we recorded a loss of $11.2 million for the amount unrecovered, within selling, general, and administrative expense in our consolidated statement of operations. Our recovery efforts continued into 2020, resulting in collection of $0.3 million during the three months ended March 31, 2020, which was recognized as a reduction to selling, general, and administrative expense.

~~Ronald F. Clarke is a member of our Board of Directors. Mr. Clarke has been the chief executive officer of~~We provide services to FleetCor Technologies Inc. (“FleetCor Technologies”) ~~since August 2000 and its chairman of the~~a related party due to a shared board ~~of directors since March 2003. We provide services to FleetCor Technologies or one of its wholly owned affiliates~~member, through certain commercial arrangements entered into in the ordinary course of business, which include provision of Dayforce ~~HCM~~ services and other administrative services. For these services, we have recorded revenue of ~~$0.3~~$0.1 million and ~~$0.2~~$0.3 million for the three months ended March 31, ~~2020,~~2021, and ~~2019,~~2020, respectively.

We are party to a service agreement with The Dun and Bradstreet Corporation (“Dun and Bradstreet”), a related party due to certain shared board members. Pursuant to the service agreement, we made payments to Dun and Bradstreet totaling $0.3 million for the three months ended March 31, 2021.

We provide Dayforce and related services to The Stronach Group, for which we recorded revenue of $0.1 million ~~and $0.1 million~~ for the three months ended March 31, ~~2020, and 2019, respectively. Alon Ossip, the~~2020. The brother of our chief executive officer ~~David Ossip, is~~was the chief executive officer, and is currently a minority shareholder, of The Stronach Group.

We provide Dayforce and related services to Verve Senior Living, for which we recorded revenue of $0.2 million for the three months ended March 31, 2020. Our chief executive officer and the brother of our chief executive officer are currently minority shareholders of Verve Senior Living.

We provide payroll-related tax filings services to Fidelity National Financial, Inc. (“FNF”), a related party ~~until August 2019~~ due to ~~certain~~a shared board ~~members,~~member, for which we recorded revenue of $0.1 million for the three months ended March 31, ~~2019.~~2020.

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

We compute net income (loss) per share of common stock using the treasury stock method. The ~~numerators and denominators of the~~ basic and diluted net income (loss) per share computations were calculated as follows:

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:

~~On May 6, 2020,~~The shares underlying the conversion option in the Notes were not considered in the calculation of diluted net income (loss) per share as the effect would have been anti-dilutive. Based on the initial conversion price, the entire outstanding principal amount of the Notes as of March 31, 2021 would have been convertible into approximately 4.3 million shares of our common stock. Since we expect to settle the principle amount of the Notes in cash, we use the treasury stock method for calculating any potential dilutive effect on diluted net income per share, if applicable. As a result, only the amount by which the conversion value exceeds the aggregate principal amount of the Notes (the “conversion spread”) is considered in the diluted earnings per share computation. The conversion spread has a dilutive impact on diluted net income per share when the average market price of our common stock for a given period exceeds the initial conversion price of $132.20 per share for the Notes. We excluded the potentially dilutive effect of the conversion spread of the Notes as the average market price of our common stock during the three months ended March 31, 2021 was less than the conversion price of the Notes. In connection with the issuance of the Notes, we entered into ~~a share purchase agreement with Everstone Capital Partners II LLC and Arunasalam Jeyakumar to purchase 100%~~Capped Calls, which were not included for purposes of calculating the number of diluted shares 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.as their effect would have been anti-dilutive.

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 this report and in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, ~~2019,~~2020, in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange Commission (“SEC”) on February ~~28, 2020~~26, 2021 (our ~~“2019~~“2020 Form 10-K”). This discussion and analysis contains forward-looking statements, including ~~statement~~statements 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.

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 HRhuman resources (“HR”) and payroll solution for the Canadian small business market. We also continue to support customers using our legacy North America Bureau solutions, which we generally stopped actively selling to new customers following the acquisition of Dayforce in ~~2012.~~2012, and customers using our acquired Bureau solutions. 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~~revealing 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 in the U.S., 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 employers’ payroll processing including the funding, timing, and close-out of pay. The on-demand wages are loaded onto a paycard, which customers’ employees can use anywhere credit or debit cards are accepted, generating interchange fee revenue.

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 ~~4,480~~5,039 live Dayforce customers as of March 31, ~~2020.~~2021. For the three months ended March 31, ~~2020,~~2021, we added ~~117~~133 net new live Dayforce customers.

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, weWe estimate that it takes ~~an average~~approximately two

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.~~

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.~~functionality to existing customers that do not currently utilize our full platform. We also incur ~~on-going~~ costs to manage the account, to ~~support~~retain customers, and to sell additional functionality. These costs, however, are significantly less than the costs initially incurred to acquire and to implement the customer.

In March 2020, the ~~remainder~~World Health Organization declared the outbreak of ~~2020, we anticipate adverse effects~~coronavirus (COVID-19) to ~~our revenue streams,~~be a pandemic. The global spread of the COVID-19 pandemic has continued to create global volatility, uncertainty, and economic disruption. We have experienced and may continue to experience curtailed customer demand, primarily as a result of declining employment levels at our customers in certain sectors, such as retail and hospitality, as well as lower customer utilization of professional services, due to the effects of the COVID-19 pandemic. Additionally, the federal funds rate cuts by the U.S. Federal Reserve and the overnight rate target by the Bank of Canada have had and will continue to have negative effects on our float revenue. The broader implications of the pandemic on our results of operations and overall financial performance remain uncertain. Please refer to the “Results of Operations” section below for further discussion of the financial impacts of the COVID-19 pandemic during the three months ended March 31, 2021.

On March 1, 2021, we completed the purchase of 100% of the outstanding shares of Ascender HCM Pty Ltd (“Ascender”), a payroll and HR solutions provider in the Asia Pacific Japan region, for $359.6 million. The financial results of Ascender have been included in our consolidated results of operations from the acquisition date forward and are classified within both Cloud and Bureau solutions based on nature of services provided.

In March, 2021, we issued $575.0 million in aggregate principal amount of 0.25% Convertible Senior Notes due 2026 (the “Notes”), including the exercise in full by the initial purchasers of the Notes of their option to purchase an additional $75.0 million principal amount of the Notes.

On May 29, 2020, we completed the purchase of 100% of the outstanding shares of Excelity Global Solutions Pte. Ltd. (“Excelity”) for $77.2 million. Excelity is a payroll and HR solutions provider in the Asia Pacific region.

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.

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 5,039 customers live on Dayforce as of March 31, 2021, compared to 4,480 customers live on Dayforce as of March 31, ~~2020, compared to 3,851 customers live on Dayforce as of March 31, 2019.~~2020.

We present revenue on a constant currency basis to assess how our underlying business performed, excluding the effect of foreign currency rate ~~fluctuations. We~~fluctuations, which 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 average foreign exchange rate in effect during the comparable prior period. The average U.S. dollar to Canadian dollar foreign exchange rate was $1.27, with a daily range of $1.24 to $1.29, for the three months ended March 31, 2021, compared to $1.34, with a daily range of $1.30 to $1.45 for the three months ended March 31, 2020. As of March 31, 2021, the U.S. dollar to Canadian dollar foreign exchange rate was $1.26.

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 ~~gains or losses on assets and liabilities held in a~~ foreign ~~currency other than the functional currency of a company subsidiary,~~exchange gain (loss), share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, and certain other non-recurring charges. Adjusted EBITDA margin is determined by calculating the percentage that Adjusted EBITDA is of total revenue. Management believes that Adjusted EBITDA and Adjusted EBITDA margin are helpful in highlighting management performance trends because Adjusted EBITDA and Adjusted EBITDA margin exclude the results of decisions that are outside the normal course of our business operations. Please refer to the ~~“Results~~“Results of Operations” section below for a discussion of Adjusted EBITDA and Adjusted EBITDA margin.

Three Months Ended March 31, ~~2020~~2021 Compared With Three Months Ended March 31, ~~2019~~2020

	Three Months Ended																		Three Months Ended
	March 31,						Increase/ (Decrease)						% of Revenue						March 31,						Increase/ (Decrease)						% of Revenue
	2020			2019			Amount			%			2020			2019			2021			2020			Amount			%			2021			2020
	(Dollars in millions)																		(Dollars in millions)
Revenue:
Recurring services
Recurring
Cloud	$	149.9		$	124.4		$	25.5			20.5	%		67.3	%		61.1	%	$	165.6		$	149.9		$	15.7			10.5	%		70.6	%		67.3	%
Bureau		31.6			48.4			(16.8	)		(34.7	)%		14.2	%		23.8	%		30.4			31.6			(1.2	)		(3.8	)%		13.0	%		14.2	%
Total recurring services		181.5			172.8			8.7			5.0	%		81.5	%		84.8	%
Total recurring																				196.0			181.5			14.5			8.0	%		83.6	%		81.5	%
Professional services and other		41.2			30.9			10.3			33.3	%		18.5	%		15.2	%		38.5			41.2			(2.7	)		(6.6	)%		16.4	%		18.5	%
Total revenue		222.7			203.7			19.0			9.3	%		100.0	%		100.0	%		234.5			222.7			11.8			5.3	%		100.0	%		100.0	%
Cost of revenue:
Recurring services
Recurring
Cloud		41.0			37.2			3.8			10.2	%		18.4	%		18.3	%		46.1			41.0			5.1			12.4	%		19.7	%		18.4	%
Bureau		11.2			13.7			(2.5	)		(18.2	)%		5.0	%		6.7	%		13.6			11.2			2.4			21.4	%		5.8	%		5.0	%
Total recurring services		52.2			50.9			1.3			2.6	%		23.4	%		25.0	%
Total recurring																				59.7			52.2			7.5			14.4	%		25.5	%		23.4	%
Professional services and other		42.6			35.3			7.3			20.7	%		19.1	%		17.3	%		44.7			42.6			2.1			4.9	%		19.1	%		19.1	%
Product development and management		17.6			15.2			2.4			15.8	%		7.9	%		7.5	%		25.8			17.6			8.2			46.6	%		11.0	%		7.9	%
Depreciation and amortization		9.8			8.7			1.1			12.6	%		4.4	%		4.3	%		11.1			9.8			1.3			13.3	%		4.7	%		4.4	%
Total cost of revenue		122.2			110.1			12.1			11.0	%		54.9	%		54.1	%		141.3			122.2			19.1			15.6	%		60.3	%		54.9	%
Gross profit		100.5			93.6			6.9			7.4	%		45.1	%		45.9	%		93.2			100.5			(7.3	)		(7.3	)%		39.7	%		45.1	%
Selling, general, and administrative		74.2			66.2			8.0			12.1	%		33.3	%		32.5	%		95.6			74.2			21.4			28.8	%		40.8	%		33.3	%
Operating profit		26.3			27.4			(1.1	)		(4.0	)%		11.8	%		13.5	%
Operating (loss) profit																				(2.4	)		26.3			(28.7	)		(109.1	)%		(1.0	)%		11.8	%
Interest expense, net		6.9			8.9			(2.0	)		(22.5	)%		3.1	%		4.4	%		5.6			6.9			(1.3	)		(18.8	)%		2.4	%		3.1	%
Other expense, net		2.6			1.6			1.0			62.5	%		1.2	%		0.8	%		4.6			2.6			2.0			76.9	%		2.0	%		1.2	%
Income before income taxes		16.8			16.9			(0.1	)		(0.6	)%		7.5	%		8.3	%
(Loss) income before income taxes																				(12.6	)		16.8			(29.4	)		(175.0	)%		(5.4	)%		7.5	%
Income tax expense		8.2			5.7			2.5			43.9	%		3.7	%		2.8	%		6.6			8.2			(1.6	)		(19.5	)%		2.8	%		3.7	%
Net income	$	8.6		$	11.2		$	(2.6	)		(23.2	)%		3.9	%		5.5	%
Net (loss) income																			$	(19.2	)	$	8.6		$	(27.8	)		(323.3	)%		(8.2	)%		3.9	%
Adjusted EBITDA (a)	$	55.2		$	49.8		$	5.4			10.8	%		24.8	%		24.4	%	$	44.5		$	55.2		$	(10.7	)		(19.4	)%		19.0	%		24.8	%
Adjusted EBITDA margin (a)		24.8	%		24.4	%		0.4	%		1.6	%								19.0	%		24.8	%		(5.8	)%		(23.4	)%

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

	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)			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			2021		2020		2021 vs. 2020						2021 vs. 2020
	(Dollars in millions)													(Dollars in millions)
Revenue:
Dayforce recurring services, excluding float	$	114.0	$	87.6		30.1	%		(0.3	)%		30.4	%
Dayforce recurring, excluding float														$	137.6	$	114.0		20.7	%		1.5	%		19.2	%
Dayforce float		14.1		15.3		(7.8	)%		(—	)%		(7.8	)%		7.7		14.1		(45.4	)%		0.7	%		(46.1	)%
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	%
Total Dayforce recurring															145.3		128.1		13.4	%		1.4	%		12.0	%
Powerpay recurring, excluding float															18.4		19.0		(3.2	)%		5.2	%		(8.4	)%
Powerpay float		2.8		3.2		(12.5	)%		(—	)%		(12.5	)%		1.9		2.8		(32.1	)%		3.6	%		(35.7	)%
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	%
Total Powerpay recurring															20.3		21.8		(6.9	)%		5.0	%		(11.9	)%
Total Cloud recurring															165.6		149.9		10.5	%		2.0	%		8.5	%
Dayforce professional services and other		40.7		29.9		36.1	%		(0.4	)%		36.5	%		36.8		40.7		(9.6	)%		2.2	%		(11.8	)%
Powerpay professional services and other		0.3		0.3		(—	)%		(—	)%		(—	)%		0.3		0.3		(—	)%		33.3	%		(33.3	)%
Total Cloud professional services and other		41.0		30.2		35.8	%		(0.3	)%		36.1	%		37.1		41.0		(9.5	)%		2.5	%		(12.0	)%
Total Cloud revenue		190.9		154.6		23.5	%		(0.2	)%		23.7	%		202.7		190.9		6.2	%		2.1	%		4.1	%
Bureau recurring services, excluding float		28.9		42.6		(32.2	)%		(0.3	)%		(31.9	)%
Bureau recurring, excluding float															29.3		28.9		1.4	%		1.4	%		(—	)%
Bureau float		2.7		5.8		(53.4	)%		(—	)%		(53.4	)%		1.1		2.7		(59.3	)%		(—	)%		(59.3	)%
Total Bureau recurring services		31.6		48.4		(34.7	)%		(0.2	)%		(34.5	)%
Total Bureau recurring															30.4		31.6		(3.8	)%		1.3	%		(5.1	)%
Bureau professional services and other		0.2		0.7		(71.4	)%		(—	)%		(71.4	)%		1.4		0.2		600.0	%		(—	)%		600.0	%
Total Bureau revenue		31.8		49.1		(35.2	)%		(0.2	)%		(35.0	)%		31.8		31.8		(—	)%		1.3	%		(1.3	)%
Total revenue	$	222.7	$	203.7		9.3	%		(0.2	)%		9.5	%	$	234.5	$	222.7		5.3	%		1.9	%		3.4	%

Dayforce	$	168.8	$	132.8		27.1	%		(0.2	)%		27.3	%	$	182.1	$	168.8		7.9	%		1.6	%		6.3	%
Powerpay		22.1		21.8		1.4	%		(—	)%		1.4	%		20.6		22.1		(6.8	)%		5.4	%		(12.2	)%
Total Cloud revenue	$	190.9	$	154.6		23.5	%		(0.2	)%		23.7	%	$	202.7	$	190.9		6.2	%		2.1	%		4.1	%

Dayforce, excluding float	$	154.7	$	117.5		31.7	%		(0.2	)%		31.9	%	$	174.4	$	154.7		12.7	%		1.6	%		11.1	%
Powerpay, excluding float		19.3		18.6		3.8	%		(—	)%		3.8	%		18.7		19.3		(3.1	)%		5.7	%		(8.8	)%
Cloud revenue, excluding float		174.0		136.1		27.8	%		(0.3	)%		28.1	%		193.1		174.0		11.0	%		2.1	%		8.9	%
Cloud float		16.9		18.5		(8.6	)%		(—	)%		(8.6	)%		9.6		16.9		(43.2	)%		1.2	%		(44.4	)%
Total Cloud revenue	$	190.9	$	154.6		23.5	%		(0.2	)%		23.7	%	$	202.7	$	190.9		6.2	%		2.1	%		4.1	%

The COVID-19 pandemic has had an adverse impact on our revenue streams during the three months ended March 31, 2021, primarily in the form of lower employment levels at our customers, lower float revenue resulting from reductions in the U.S. Federal Reserve federal funds rate and the Bank of Canada overnight rate target, lower average float balances for our customer funds, and lower demand for professional services, among other effects. We estimate the impact of lower employment levels at our customers was an approximately $7.5 million decline to our revenue for the three months ended March 31, 2021, of which approximately $6 million was related to Dayforce and approximately $1.5 million was related to Powerpay. In addition, we estimate the impact to float revenue was approximately $9.0 million for the three months ended March 31, 2021 and was due to rate reductions during the first quarter of 2020.

Total revenue increased ~~$19.0~~$11.8 million, or ~~9.3%~~5.3%, to $234.5 million for the three months ended March 31, 2021, compared to $222.7 million for the three months ended March 31, ~~2020, compared to $203.7 million for the three months ended March 31, 2019.~~2020. This increase was primarily attributable to an increase in Cloud revenue of ~~$36.3~~$11.8 million, or ~~23.5%~~6.2%, from ~~$154.6 million for the three months ended March 31, 2019, to~~ $190.9 million for the three months ended March 31, ~~2020.~~2020, to $202.7 million for the three months ended March 31, 2021. Bureau revenue remained flat at $31.8 million, which included $4.6 million of Ascender revenue and $7.1 million of Excelity revenue for the three months ended March 31, 2021. The Cloud revenue increase was driven by an increase of ~~$25.5~~$15.7 million,

or ~~20.5%~~10.5%, in Cloud recurring ~~services~~ revenue, ~~and $10.8~~partially offset by a decline of $3.9 million, or ~~35.8%~~9.5%, in Cloud professional services and other revenue. The increase in Cloud recurring services revenue of $25.5 million was due to $21.3 million from new customers, add-ons, and revenue uplift from migrations of Bureau customers, net of customer losses; $5.8 million from the migration of Bureau customers; partially offset by a $1.6 million decline in float revenue related to Cloud recurring services revenue.

Cloud revenue was $190.9 million for the three months ended March 31, 2020, an increase of $36.3 million, or 23.5%, compared to the three months ended March 31, 2019. Dayforce revenue increased 27.1%, and Powerpay revenue increased 1.4% for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019. Our new business sales to Dayforce and Powerpay customers comprised approximately 84% of our increase in Cloud revenue for the three months ended March 31, 2020, and approximately 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.

Bureau 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%~~8.2%, reflecting ~~a 28.1%~~an 8.9% increase in Cloud revenue ~~partially offset by~~and a ~~32.6% decline~~4.1% increase in Bureau revenue. Excluding float revenue and on a constant currency basis, Cloud revenue growth reflected a ~~25.8%~~15.3% increase in Cloud recurring ~~services~~ revenue and a ~~36.1% increase~~12.0% decline in Cloud professional services and other revenue.

Dayforce revenue increased 7.9%, and Powerpay revenue declined 6.8% for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. Powerpay is designed primarily for small market Canadian customers, which typically have fewer than 20 employees, and these customers have been more adversely affected by the COVID-19 pandemic than larger Dayforce customers.For the three months ended March 31, 2021, Ascender revenue included within Dayforce revenue was $2.1 million. Excluding float revenue and on a constant currency basis, Dayforce revenue increased ~~31.9%~~11.1%, reflecting a ~~30.4%~~19.2% increase in Dayforce recurring ~~service~~ revenue ~~and a 36.5% increase~~partially offset by an 11.8% decline 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.~~declined 8.8%.

Float revenue included in recurring ~~services~~ revenue was $10.7 million and $19.6 million for the three months ended March 31, 2021, and ~~$24.3~~2020, respectively. Float revenue allocated to Cloud revenue was $9.6 million and $16.9 million for the three months ended March 31, 2021, and 2020, respectively. The average float balance for our customer funds for the three months ended March 31, 2021, was $4,331.9 million, compared to $4,093.3 million for the three months ended March 31, 2020, and 2019, respectively. Float revenue allocated to Cloud revenue and 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 March 31, 2020, was $4,093.3 million, compared to $4,075.4 million for the three months ended March 31, 2019.an increase of 5.8%. On a constant currency basis, the average float balance for our customer ~~trust~~ funds for the three months ended March 31, ~~2020, was consistent with~~2021, increased 1.7% compared to the three months ended March 31, ~~2019.~~2020. The average yield was ~~1.93%~~1.02% during the three months ended March 31, ~~2020,~~2021, a decline of 4991 basis points compared to the average yield during the three months ended March 31, ~~2019, primarily due to reductions in the U.S. Federal Reserve federal funds rate and the Bank of Canada overnight rate target.~~2020. For the three months ended March 31, ~~2020,~~2021, approximately ~~31%~~30% of our average float balance consisted of ~~Canadian~~international customer ~~trust~~ funds, compared to approximately ~~33%~~31% for the three months ended 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.2020.

Cost of revenue. Total cost of revenue for the three months ended March 31, ~~2020,~~2021, was ~~$122.2~~$141.3 million, an increase of ~~$12.1~~$19.1 million, or ~~11.0%~~15.6%, compared to the three months ended March 31, ~~2019.~~2020. Recurring ~~services~~ cost of revenue for the three months ended March 31, ~~2020,~~2021, increased ~~$1.3~~$7.5 million, or ~~2.6%~~14.4%, compared with the three months ended March 31, ~~2019,~~2020, primarily due to additional costs ~~incurred~~related to global expansion, including Ascender costs classified among both Cloud and Bureau and Excelity costs classified as Bureau, and costs to support the growing Dayforce customer ~~base, partially offset by reductions in Bureau costs.~~base. Professional services and other cost of revenue increased ~~$7.3~~$2.1 million, or ~~20.7%~~4.9%, for the three months ended March 31, ~~2020,~~2021, compared to the three months ended March 31, ~~2019,~~2020, primarily due to additional costs incurred to ~~implement~~take new ~~customers.~~customers live.

Product development and management expense increased ~~$2.4~~$8.2 million for the three months ended March 31, ~~2020,~~2021, compared to the three months ended March 31, ~~2019, reflecting increases in~~2020. The increase reflects additional personnel costs and Dayforce product development efforts ~~including costs to build out the Dayforce Wallet and our international offerings~~ that are not eligible for ~~capitalization;~~capitalization and ~~increases in product management labor~~additional stock-based compensation and severance costs. For the three months ended March 31, ~~2020,~~2021, and ~~2019,~~2020, our investment in software development was ~~$17.2~~$26.2 million and ~~$15.1~~$17.2 million, respectively, consisting of ~~$8.1~~$15.2 million and ~~$7.8~~$8.1 million, of research and development expense, which is included within product development and management expense, and ~~$9.1~~$11.0 million and ~~$7.3~~$9.1 million in capitalized software development costs, respectively.

Depreciation and amortization expense associated with cost of revenue increased by ~~$1.1~~$1.3 million for the three months ended March 31, ~~2020,~~2021, compared to the three months ended March 31, ~~2019,~~2020, as we continue to capitalize Dayforce related and other development costs and subsequently to amortize these costs.

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

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.

Total gross margin for the three months ended March 31, ~~2020, was consistent with~~2021, declined 540 basis points compared to total gross margin for the three months ended March 31, ~~2019,~~2020, and gross profit ~~increased~~declined by ~~$6.9~~$7.3 million, or ~~7.4%, as we continued~~7.3%. The $7.3 million decline in gross profit was primarily attributable to ~~leverage our investment~~the $8.9 million decline in ~~people and processes~~float revenue for the three months ended March 31, 2021, compared to ~~realize economies of scale, while also developing and expanding our service offerings.~~the three months ended March 31, 2020.

Cloud recurring ~~services~~ gross margin was 72.2% for the three months ended March 31, 2021, compared to 72.6% for the three months ended March 31, ~~2020, compared to 70.1%~~2020. Excluding float revenue, Cloud recurring gross margin was 70.4% for the three months ended March 31, ~~2019.~~2021, compared to 69.2% for the three months ended March 31, 2020. The increase in Cloud recurring ~~services~~ gross margin, excluding float revenue, reflects an increase in the proportion of Dayforce customers live for more than two years, which increased from ~~64% as of March 31, 2019, to~~ 70% as of March 31, 2020, to 76% as of March 31, 2021, 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%~~64.6% for the three months ended March 31, ~~2019,~~2020, to ~~64.6%~~55.3% for the three months ended March 31, 2021, primarily due to lower Bureau recurring revenue, including lower high margin float revenue, as well as the acquisitions of Excelity, which is classified as a Bureau solution, and Ascender, which has both Cloud and Bureau solutions. Professional services and other gross margin was (16.1)% for the three months ended March 31, 2021, compared to (3.4)% for the three months ended March 31, 2020, reflecting lower ~~allocated float~~ revenue ~~and a higher proportion~~from clocks shipments of ~~customer support costs to support~~approximately $2 million. In the ~~end-of-life process of~~first quarter last year, revenue from clocks shipments was the highest quarter in our Bureau payroll products. Professional services and other gross margin was (3.4)% for the three months ended March 31, 2020, improving from (14.2)% for the three months ended March 31, 2019, reflecting continued productivity improvements in implementing new customers.history.

Selling, general, and administrative expense. Selling, general, and administrative expense increased ~~$8.0~~$21.4 million for the three months ended March 31, ~~2020,~~2021, compared to the three months ended March 31, ~~2019.~~2020. 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 ~~$1.9~~by $10.2 million. This adjusted increase reflects ~~a $4.5 million~~an increase ~~in sales and marketing, primarily employee related costs, partially offset by a reduction~~ of ~~$2.6~~$5.4 million in general and administrative expense and $4.8 million in sales and marketing expense, both of which are primarily ~~customer list amortization expense.~~driven by employee-related costs. Please refer to the ~~“Non-GAAP~~“Non-GAAP Measures” section for additional information on the excluded items.

~~Operating profit.~~We realized operating profit of $26.3 million for the three months ended March 31, 2020, compared to $27.4 million for the three months ended 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 $44.2 million and $36.7 million for the three months ended March 31, 2020, and 2019, respectively. This $7.5 million adjusted increase was primarily due to an increase in gross profit.

Interest expense, net. Interest expense, net was ~~$6.9~~$5.6 million and ~~$8.9~~$6.9 million for the three months ended March 31, 2021, and 2020, ~~and 2019, respectively, which declined~~respectively. The decrease was primarily due to a reduction in LIBOR rates generally as well as our term ~~debt interest 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.~~ loan repricing completed on February 19, 2020.

Other expense, net. For the three months ended March 31, ~~2020,~~2021, and ~~2019,~~2020, we incurred other expense, net of $4.6 million and $2.6 million, ~~and $1.6~~respectively. Other expense, net was primarily comprised of $2.2 million ~~respectively, which was comprised~~of net periodic pension expense, $1.9 million of foreign currency translation loss, and $0.5 million of asset impairment charges for the three months ended March 31, 2021. For the three months ended March 31, 2020, other expense, net was primarily comprised of $1.8 million of foreign currency translation loss and $0.8 million of net periodic pension expense.

Income tax expense. For the three months ended March 31, ~~2020,~~2021, and ~~2019,~~2020, we recorded an income tax expense of ~~$8.2~~$6.6 million and ~~$5.7~~$8.2 million, respectively. The ~~$2.5~~$1.6 million ~~increase~~reduction in income tax expense was primarily due to ~~a $4.6~~the $6.2 million tax benefit ~~recognized during~~from current operations and a $1.9 million tax benefit attributable to unremitted foreign earnings, partially offset by a $6.0 million tax expense increase attributable to non-deductible stock-based compensation.

Net (loss) income. We realized net loss of $19.2 million for the three months ended March 31, ~~2019, that was not repeated during the three months ended March 31, 2020 and a $4.4 million increase in tax expense attributable~~2021, compared to share-based compensation, partially offset by a $4.6 million reduction in tax expense attributable to the Global Intangible Low Tax Income tax (“GILTI”), and a $2.4 million reduction in the tax expense attributable to the base erosion anti-abuse tax (“BEAT”).

~~Net income.~~ ~~We realized~~ net income of $8.6 million for the three months ended March 31, ~~2020, compared~~2020.

Adjusted EBITDA. Adjusted EBITDA declined by $10.7 million to ~~$11.2~~$44.5 million, for the three months ended March 31, ~~2019.~~

~~Adjusted EBITDA.~~ ~~Adjusted EBITDA increased by $5.4 million to $55.2 million, for the three months ended March 31, 2020,~~2021, compared to the three months ended March 31, ~~2019,~~2020, and Adjusted EBITDA margin was 19.0% for the three months ended March 31, 2021, compared with Adjusted EBITDA margin of 24.8% for the three months ended March 31, ~~2020, compared with Adjusted EBITDA margin~~2020. Please refer to the “Non-GAAP Measures” section for additional information on the excluded items.

Our primary sources of liquidity are our existing cash and equivalents, cash provided by operating activities, borrowings under our ~~credit facilities,~~Revolving Credit Facility, and proceeds from debt issuances and equity offerings. As of March 31, ~~2020,~~2021, we had cash and equivalents of ~~$255.3~~$339.6 million and ~~availability under~~ our ~~revolving credit facility of $300.0 million. No cash amounts were drawn on the revolving credit facility as of March 31, 2020. Our~~ total debt balance was ~~$681.2~~$1,248.3million.

On March 5, 2021, we completed the private offering of $500.0 million asNotes, and on March 16, 2021, the initial purchasers exercised their full option to purchase an additional $75.0 million Notes, resulting in an aggregate principal amount of ~~March 31, 2020.~~ $575.0 million. The total net proceeds from the offering, after deducting initial purchase discounts and issuance costs, were $561.8 million. In connection with the Notes, we entered into capped call transactions which are expected to reduce the potential dilution of our common stock upon any conversion of the Notes and/or offset any cash payments we could be required to make in excess of the principal amount of converted Notes. We used an aggregate amount of $45.0 million of the net proceeds of the Notes to purchase the capped calls. Please refer to Note 6,7, “Debt,” to our condensed consolidated financial statements for further information on our ~~debt.~~

~~Our primary liquidity needs are~~Notes, and the related indenture. We used the remainder of the net proceeds from the offering (i) to ~~funding of general business requirements, including~~repay $295.0 million principal amount under the ~~payment of~~Revolving Credit Facility and pay related accrued interest and ~~principal on our debt, capital expenditures, pension contributions, and product development.~~(ii) for general corporate purposes, which may include potential investments in businesses or acquisitions of companies that we may identify in the future.

On February 19, 2020, ~~Ceridian~~we 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 6,7, “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~~Senior Secured 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.~~Facility.

Our ~~customer trust funds~~primary liquidity needs are ~~held and invested with the primary objectives being~~related to ~~protect the principal balance and to ensure adequate liquidity to meet cash flow requirements. In accordance with these objectives, we maintain approximately 47%~~funding 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.~~requirements, including the payment of interest and principal on our debt, capital expenditures, and product development. As of March 31, 2021, we held $2.0 million of restricted cash as collateral for bank guarantees. The bank guarantees provide financial assurance that we will fulfill certain lease obligations. The cash is restricted as to withdrawal or use while the related bank guarantee is outstanding.

We believe that our cash flow from operations, available cash and equivalents, and remaining 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,~~indebtedness, 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~~indebtedness 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.

30Our customer 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 52% of customer 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 48% of customer 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 to meet payment obligations, we also have financing arrangements and may pledge fixed income securities for short-term financing. The assets held for customers are intended for the specific purpose of satisfying client fund obligations and therefore are not freely available for our general business use.

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.

Net cash used in operating activities, excluding customer fund activity, was $4.5 million during the three months ended March 31, 2021, primarily attributable to net working capital reductions of $28.5 million and net loss of $19.2 million, largely offset by the net impact of adjustments for certain non-cash items of $43.2 million, including $22.8 million of non-cash share-based compensation expense and $15.0 million of depreciation and amortization. The net working capital reductions included a $24.7 million reduction in liabilities for employee compensation and benefits due to payments of accrued commissions and incentive compensation, an $8.1 million increase in accounts receivable due to timing of receipts, a $7.1 million increase in prepaid expenses and other current assets, primarily due to payments for annual maintenance contracts, partially offset by an increase of $8.6 million of accrued taxes primarily due to tax accruals. Included within net cash flows provided by operating activities for the three months ended March 31, 2021, was ~~$1.4~~$4.4 million in cash interest payments on our long-term debt and $0.2 million in cash tax payments, net of refunds.

Net cash used in operating activities, excluding customer funds activity, was $9.8 million during the three months ended March 31, 2020, primarily attributable to net working capital adjustments, partially offset by net income of $8.6 million and the net impact of adjustments for certain non-cash items of $30.3 million, 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~~The net working capital reductions included a $26.4 million reduction in liabilities for employee compensation and benefits due to payments of accrued incentive and compensation and a $7.5 million increase in assets for prepaid expenses and other current assets, primarily due to annual maintenance contracts. Included within net cash flows provided by operating activities for the three months ended March 31, 2020, was $7.8 million in cash interest payments on our long-term debt and $2.9 million in cash tax payments.

During the three months ended March 31, ~~2019,~~2021, net cash used in investing activities, excluding customer funds activity, was ~~primarily attributable to a~~$369.8 million, consisting of acquisition costs, net ~~reduction in~~of cash ~~as a result~~acquired of ~~changes in working capital of $40.6 million, partially offset by net income of $11.2~~$354.5 million and ~~certain non-cash items, primarily $14.4~~capital expenditures of $15.3 million. Our capital expenditures included $11.9 million ~~of depreciation~~for software and ~~amortization~~technology and ~~$6.0~~$3.4 million ~~of non-cash share-based compensation expense. The net $40.6 million change in working capital included reductions of $16.9 million in liabilities~~ for ~~employee compensation~~property and benefits, primarily due to payments of accrued incentive compensation; $8.1 million in liabilities for accrued taxes, primarily due to cash tax payments of $15.5 million; and $7.0 million of increases in prepaid expenses and other assets, primarily due to annual maintenance contracts. Included within net cash flows used in operating activities for the three months ended March 31, 2019, was $6.6 million in cash interest payments on our long-term debt.equipment.

During the three months ended March 31, 2020, net cash used in investing activities, excluding customer ~~trust fund~~funds 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, excluding customer trust fund activity, was $24.1 million, related to capital expenditures of $13.9 million and acquisition costs, net of cash acquired of $10.2 million. Our capital expenditures included $9.9 million for software and technology and $4.0 million for property and equipment.

Net cash provided by financing activities, excluding the change in customer ~~trust~~fund obligations, was $526.7 million during the three months ended March 31, 2021. This cash inflow is primarily attributable to proceeds from the issuance of our Notes of $561.8 million, proceeds from issuance of common stock upon exercise of stock options of $11.3 million, partially offset by the purchase of the capped calls related to the Notes of $45.0 million and payments on our long-term debt obligations of $1.3 million.

Net cash provided by financing activities, excluding the change in customer fund obligations, was $8.7 million during the three months ended March 31, 2020. This cash inflow is primarily attributable to proceeds from the issuance of common stock under share-based compensation plans of $11.4 million, partially offset by payments on our long-term debt obligations of $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, excluding the change in customer trust fund obligations, was $18.4 million during the three months ended March 31, 2019. This cash inflow is primarily attributable to proceeds from the issuance of common stock upon exercise of stock options of $20.1 million, partially offset by principal payments on our long-term debt obligations of $1.7 million.

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. As of March 31, 2021, our remaining performance obligations were approximately $914.5 million. Please refer to Note 9,10, “Revenue,” to our condensed consolidated financial statements for further discussion of our remaining performance obligations.

As of March 31, ~~2020,~~2021, we did not have any “off-balance sheet arrangements” (as such term is defined in Item 303 of Regulation S-K).

During the three months ended March 31, ~~2020,~~2021, there were no significant changes to our critical accounting policies and estimates as described in the consolidated financial statements contained in our ~~2019~~2020 Form 10-K.

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 before interest, taxes, depreciation, and amortization, as adjusted to exclude foreign exchange gain (loss) ~~on assets and liabilities held in a foreign currency other than the functional currency of a company subsidiary,~~, share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, and 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,~~ net income, earnings per share, or any other performance measures derived in accordance with GAAP, or as measures of operating cash flows or liquidity. Our presentation of Adjusted EBITDA 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 ~~operating profit,~~ or any other performance measures derived in accordance with GAAP, and are subject to important limitations. Our use of the terms Adjusted EBITDA 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:~~

•

are that Adjusted EBITDA and Adjusted EBITDA margin do not reflect the following:

•

our cash expenditures or future requirements for capital expenditures or contractual commitments;

•

~~Adjusted EBITDA and Adjusted EBITDA margin do not reflect~~ changes in, or cash requirements for, our working capital needs;

•

~~Adjusted EBITDA and Adjusted EBITDA margin do not reflect~~ any charges for the assets being depreciated and amortized that may need to be replaced in the future;

•

~~Adjusted EBITDA and Adjusted EBITDA margin do not reflect~~ the impact of share-based compensation 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~~ 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.

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~~net income to Adjusted EBITDA for the periods presented:

	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
	(Dollars in millions)						(Dollars in millions)
Operating profit	$	26.3		$	27.4
Other expense, net		(2.6	)		(1.6	)
Net (loss) income							$	(19.2	)	$	8.6
Interest expense, net								5.6			6.9
Income tax expense								6.6			8.2
Depreciation and amortization		11.8			14.4			15.0			11.8
EBITDA (a)		35.5			40.2			8.0			35.5
Intercompany foreign exchange loss		1.8			0.3
Foreign exchange loss								1.9			1.8
Share-based compensation (b)		12.7			6.0			23.0			12.7
Severance charges (c)		4.0			2.1			2.1			4.0
Restructuring consulting fees (d)		1.5			1.2			7.8			1.5
Other non-recurring charges (e)		(0.3	)		—			1.7			(0.3	)
Adjusted EBITDA	$	55.2		$	49.8		$	44.5		$	55.2
Adjusted EBITDA margin		24.8	%		24.4	%		19.0	%		24.8	%

(a)	We define EBITDA as net income or loss before interest, taxes, and depreciation and amortization.

(b)	Represents share-based compensation expense and related employer taxes.

(c)	Represents costs for severance compensation paid to employees whose positions have been eliminated 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 ~~gain on unrecovered~~(1) in 2021 the difference between the historical five-year average pension expense and the current period actuarially determined pension expense associated with the planned termination of the frozen U.S. pension plan and related changes in investment strategy associated with protecting the now fully funded status, (2) charges of $0.3 million during 2021 related to the

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abandonment of certain leased facilities, and (3) recovery in 2020 of duplicate payments associated with ~~our~~an isolated service incident. ~~Please refer to Note 13, “Commitments and Contingencies,” for further discussion.~~

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

	Three Months Ended March 31, 2020										Three Months Ended March 31, 2021
	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	$	52.2	$	0.8	$	0.8	$	—	$	50.6
Recurring											$	59.7		$	2.3	$	0.7	$	—	$	56.7
Professional services and other		42.6		0.5		0.8		—		41.3		44.7			1.9		—		—		42.8
Product development and management		17.6		0.9		0.3		—		16.4		25.8			3.1		0.2		—		22.5
Depreciation and amortization		9.8		—		—		—		9.8		11.1			—		—		—		11.1
Total cost of revenue		122.2		2.2		1.9		—		118.1		141.3			7.3		0.9		—		133.1
Sales and marketing		40.7		2.2		0.8		—		37.7		46.1			2.8		0.8		—		42.5
General and administrative		33.5		8.3		1.3		1.2		22.7		49.5			12.9		0.4		8.1		28.1
Operating profit		26.3		12.7		4.0		1.2		44.2
Operating (loss) profit												(2.4	)		23.0		2.1		8.1		30.8
Other expense, net		2.6		—		—		1.8		0.8		4.6			—		—		3.3		1.3
Depreciation and amortization		11.8		—		—		—		11.8		15.0			—		—		—		15.0
EBITDA	$	35.5	$	12.7	$	4.0	$	3.0	$	55.2	$	8.0		$	23.0	$	2.1	$	11.4	$	44.5

(a)

Other operating expenses includes ~~intercompany~~foreign exchange loss, restructuring consulting fees, the difference between the historical five-year average pension expense and the current period actuarially determined pension expense associated with the planned termination of the frozen U.S. pension plan and related changes in investment strategy associated with protecting the now fully funded status, and charges related to the abandonment of certain leased facilities.

	Three Months Ended March 31, 2020
	As reported		Share-based compensation		Severance charges		Other operating expenses (a)		Adjusted
	(Dollars in millions)
Cost of revenue:
Recurring	$	52.2	$	0.8	$	0.8	$	—	$	50.6
Professional services and other		42.6		0.5		0.8		—		41.3
Product development and management		17.6		0.9		0.3		—		16.4
Depreciation and amortization		9.8		—		—		—		9.8
Total cost of revenue		122.2		2.2		1.9		—		118.1
Sales and marketing		40.7		2.2		0.8		—		37.7
General and administrative		33.5		8.3		1.3		1.2		22.7
Operating profit		26.3		12.7		4.0		1.2		44.2
Other expense, net		2.6		—		—		1.8		0.8
Depreciation and amortization		11.8		—		—		—		11.8
EBITDA	$	35.5	$	12.7	$	4.0	$	3.0	$	55.2

(a)	Other operating expenses includes foreign exchange loss, restructuring consulting fees, and other non-recurring charges.

Three Months Ended March 31, 2019

As Reported

Share-based
compensation

Severance
charges

Other
operating
expenses (a)

Adjusted

(Dollars in millions)

Cost of revenue:

Recurring services

$
50.9

$
0.4

$
0.2

$
—

$
50.3

Professional services and other

35.3

0.2

0.2

—

34.9

Product development and management

15.2

0.5

0.1

—

14.6

Depreciation and amortization

8.7

—

—

—

8.7

Total cost of revenue

110.1

1.1

0.5

—

108.5

Sales and marketing

35.2

1.0

1.0

—

33.2

General and administrative

31.0

3.9

0.6

1.2

25.3

Operating profit

27.4

6.0

2.1

1.2

36.7

Other expense, net

1.6

—

—

0.3

1.3

Depreciation and amortization

14.4

—

—

—

14.4

EBITDA

$
40.2

$
6.0

$
2.1

$
1.5

$
49.8

~~(a)~~

~~Other operating expenses includes intercompany foreign exchange loss and restructuring consulting fees.~~

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ITEM 3. QUANTITATIVE AND 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,~~certain jurisdictions, we collect funds for payment of payroll and taxes; temporarily hold such funds in ~~trust~~segregated accounts 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 may 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 high quality bank deposits, securities issued by the government and provinces of Canada, as well as highly rated Canadian ~~banks~~bank, corporate, asset-backed, and ~~corporations, asset-backed trusts,~~mortgage securities.

Based on current market conditions, portfolio composition and ~~mortgages.~~investment practices, a 100 basis point increase in market investment rates would result in approximately $19 million increase in float revenue over the ensuing twelve month period. There are no incremental costs of revenue associated with changes in float revenue.

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 unrecoverable.

We do not believe that ~~an increase or decrease~~a change 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.

A 100 basis point increase in LIBOR rates would result in an approximately $7 million increase in our interest expense, net over the ensuing twelve-month period.

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 ~~2019,~~2020, we contributed ~~$18.0~~$105.0 million to ~~our~~the U.S. pension ~~plan.~~plan, which represented $17.0 million of required minimum contributions and $88.0 million of voluntary contributions. The effective discount rate used in accounting for pension and other benefit obligations in ~~2019~~2020 ranged from ~~2.52%~~1.42% to ~~2.81%~~1.87%. The expected rate of return on plan assets for qualified pension benefits in ~~2020~~2021 is ~~5.70%~~2.70%.

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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, 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 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.

Changes in Internal Control over Financial Reporting

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 remote execution, we continue to evaluate and may make changes that may materially affect our internal controls over financial reporting. There were no changes to our internal controls over financial reporting during the three months ended March 31, ~~2020,~~2021, that have materially affected, or that are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II. OTHER 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 ~~13,~~14, “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

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.~~2020. 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~~2020 with the exception of the items listed ~~below.~~

~~Our business has been adversely affected~~below, related to the issuance of the Notes and ~~will likely continue to be adversely affected by the COVID-19 pandemic.~~related Capped Calls in March 2021.

The ~~global spread of~~accounting method for the ~~COVID-19 pandemic has created significant global volatility, uncertainty, and economic disruption. The COVID-19 pandemic began to~~Notes could adversely affect our operations in March 2020. The extent to which the COVID-19 pandemic will continue to adversely affect our business, operations, and financial 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 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 customer trust funds. The effects of the 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~~The accounting method for reflecting the Notes on our balance sheet, accruing interest expense for the Notes and reflecting the underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.

Under applicable accounting principles, the initial liability carrying amount of the Notes was the fair value of a similar debt instrument that does not have a conversion feature, valued using our cost of capital for straight, non-convertible debt. We reflect the difference between the net proceeds from the offering of the Notes and the initial carrying amount as a debt discount for accounting purposes, which is amortized into interest expense over the term of the Notes. As a result of this amortization, the interest expense that we recognize for the Notes for accounting purposes will be greater than the cash interest payments we will pay on the Notes, which will result in lower reported income or higher reported loss. The lower reported income or higher reported loss resulting from this accounting treatment could depress the trading price of our common stock and the Notes. However, in August 2020, the Financial Accounting Standards Board published an ASU, which we refer to as ASU 2020-06, that in certain cases will eliminate the separate accounting for the debt and equity components as described above. ASU 2020-06 will be effective for SEC-reporting entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. However, early adoption is permitted in certain circumstances for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. When effective, we expect to qualify for the elimination of the separate accounting described above which, as a result, will reduce the interest expense that we expect to recognize for the Notes for accounting purposes.

In addition, because we intend to settle conversions by paying the conversion value in cash up to the principal amount being converted and any excess in shares, we expect to be eligible to use the treasury stock method to reflect the shares underlying the Notes in our diluted earnings per share. Under this method, if the conversion value of the Notes exceeds their principal amount for a reporting period, then we will calculate our diluted earnings per share assuming that all the Notes were converted and that we issued shares of our common stock to settle the excess. However, if reflecting the Notes in diluted earnings per share in this manner is anti-dilutive, or if the conversion value of the Notes does not exceed their principal amount for a reporting period, then the shares underlying the Notes will not be reflected in our diluted earnings per share. In addition, if accounting standards change in the future and we are not permitted to use the treasury stock method, then our diluted earnings per share may decline. For example, ASU 2020-06 amends these accounting standards, effective as of the dates referred to above, to change the criteria to qualify for application of the treasury stock method for convertible instruments and instead may require application of the “if-converted” method. Under the “if-converted” method, diluted earnings per share would generally be calculated assuming that all the Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive. If we are required to apply the “if-converted” method, it may reduce our reported diluted earnings per share.

Furthermore, if any of the conditions to the convertibility of the Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the Notes as a current, rather than long-term, liability. This reclassification could be required even if no noteholders convert their Notes and could materially reduce our reported working capital.

The Capped Calls may affect the value of the Notes and our ~~business~~common stock.

In connection with the pricing of the Notes, we entered into the Capped Calls. Please refer to Note 7, “Debt” for additional information. The Capped Calls are expected generally to reduce the potential dilution to our common stock upon any conversion of the Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.

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In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following any conversion of the Notes, any repurchase of the Notes by us on any fundamental change repurchase date, any redemption date, or any other date on which the Notes are retired by us, in each case if we exercise our option to terminate the relevant portion of the Capped Calls. This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Notes, which could affect the ability of a noteholder to convert the Notes and, to the extent the activity occurs during any observation period related to a conversion of Notes, could affect the number of shares of common stock, if any, and value of the consideration that a noteholder will receive upon conversion of the Notes.

In addition, if any such Capped calls fails to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock and the value of the Notes.

The Capped Calls are separate transactions (in each case that we entered into with the option counterparties), are not part of the terms of the Notes and will not change the holders’ rights under the Notes. A noteholder will not have any rights with respect to the Capped Calls.

We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of the Notes or our common stock. In addition, we do not make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

We are subject to counterparty risk with respect to the Capped Calls, and the Capped Call may not operate as planned.

The option counterparties are financial institutions, and we are subject to the risk that they might default under the Capped Calls. Our exposure to the credit risk of the option counterparties is not secured by any collateral. Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many financial institutions, including the bankruptcy filing by Lehman Brothers Holdings Inc. and its various affiliates. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a ~~variety~~claim equal to our exposure at that time under our transactions with that option counterparty. Our exposure will depend on many factors, but, generally, the increase in our exposure will be correlated with increases in the market price or the volatility of ~~U.S.~~our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and ~~international laws~~more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of any option counterparty.

In addition, the Capped Calls are complex, and ~~regulations, including those regarding privacy, data protection,~~they may not operate as planned. For example, the terms of the Capped Calls may be subject to adjustment, modification, or in some cases, renegotiation if certain corporate or other transactions occur. Accordingly, these transactions may not operate as we intend if we are required to adjust their terms as a result of transactions in the future or upon unanticipated developments that may adversely affect the functioning of the Capped Calls.

Provisions in the indenture under which the Notes were issued could delay or prevent an otherwise beneficial takeover of us.

Certain provisions in the Notes and ~~information security. Any failure by~~the indenture, dated as of March 5, 2021, between Wells Fargo Bank, National Association, as trustee, and us (the “Indenture”) could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change (as defined in the Indenture), then noteholders will have the right to require us to repurchase their Notes for cash. In addition, if a takeover constitutes a make-whole fundamental change (as defined in the Indenture), then we may be required to temporarily increase the conversion rate (as defined in the Indenture). In either case, and in other cases, our obligations under the Notes and the Indenture could increase the cost of acquiring us or ~~our~~otherwise discourage a third party ~~service providers, as well as the failure~~from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our ~~platform~~common stock may view as favorable.

Conversion of the Notes may dilute the ownership interest of existing stockholders.

The conversion of some or ~~services,~~all of the Notes will dilute the ownership interests of existing stockholders to ~~comply with applicable laws and regulations~~the extent we deliver shares of our common stock upon conversion of any of the Notes. Any sales in the public market of the common stock issuable upon such conversion could ~~have a material adverse effect on~~adversely affect our ~~business,~~common stock’s prevailing market prices. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and results of operations.

~~We are subject~~Under certain circumstances, noteholders may convert their Notes at their option prior to the scheduled maturities. Upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion, we will be obligated

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to make cash payments. In addition, noteholders will have the right to require us to repurchase their Notes upon the occurrence of a ~~variety~~fundamental change at a repurchase price equal to 100% of ~~U.S.~~the principal amount of the Notes to be repurchased, plus accrued and ~~international laws and regulations, including regulation by various federal government agencies,~~unpaid interest, if any, to, but not including, the ~~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 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 resultsfundamental change repurchase date (as defined 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~~Indenture). Although it is 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,intention and we ~~cannot yet determine~~currently expect to settle the ~~impact such future laws, regulations,~~conversion value of the Notes in cash up to the principal amount and ~~standards~~any excess in shares, there is a risk that we may not have ~~on our business. For example, in May 2018,~~enough available cash or be able to obtain financing at the ~~General Data Protection Regulation came into force, bringing with it a complete overhaul~~time we are required to make repurchases 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 limitNotes surrendered therefor or ~~inhibit~~Notes being converted. In addition, our ability to ~~operate~~make payments may be limited by law, by regulatory authority, or ~~to expand~~by agreements governing 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.~~future indebtedness. Our failure to ~~comply with applicable laws, directives, and regulations may result in enforcement action against us, including fines and imprisonment, and damage~~repurchase Notes when the Indenture requires the repurchase or to pay any cash payable on future conversions of the Notes as required by the Indenture would constitute a default under the Indenture. A default under the Indenture or the fundamental change itself could also lead to a default under agreements governing our ~~reputation, any~~future indebtedness. If the repayment 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 Ceridian to move PII from the E.U. to the US; and the EU Standard Contractual Clauses, which Ceridian uses extensively- continuerelated indebtedness were to be ~~challenged by civil society before E.U. regulators and courts of law. Should these mechanisms be invalidated, Ceridian~~accelerated after any applicable notice or grace periods, we may not ~~be able~~have sufficient funds to ~~transfer customers’ PII~~repay the indebtedness and ~~its own from Europe~~repurchase the Notes or make cash payments upon conversions thereof. In addition, even if noteholders do not elect to ~~the U.S. and other 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 customers’ end users to be less likely to visitconvert 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 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 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 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 could harm our reputation and 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 operation of data centers; the execution of Automated Clearing House, or ACH, and wire transfers to support our customer payroll and tax services; the monitoring of applicable laws; the printing and delivery of checks; serving as an independent trustee of our U.S. 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,Notes, we could ~~experience~~be required under applicable accounting rules to reclassify all or a ~~material adverse effect on our business, financial condition, and results~~portion of ~~operation.~~

~~We rely on third party service providers for many integral aspects~~the outstanding principal of ~~our business. A failure on~~ the ~~part of any of our third-party service providers to fulfill their contracts with us could~~Notes as a current, rather than long-term, liability, which would 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~~reduction 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 access to our servers and all of the components of our network that are located in our external data centers, we do not control the operation of these facilities. The owners of our data center facilities have no obligation to 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 host our internal systems through data centers that we operate and lease or own in Atlanta, Georgia; Fountain Valley, California; Louisville, Kentucky; and St. Petersburg, Florida. If we are unable to 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 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 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 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 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 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~~net working capital.

We and our third party providers must monitor for any changes or updates in laws that are 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 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 condition, and results of operations.

~~Program manager of our U.S. Dayforce Wallet program~~

We rely on a 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 and payments processing activity required by the Dayforce Wallet platform. We do not have the necessary regulatory approvals to hold wallet funds in or move funds from an account, nor do we have access to the 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 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 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 condition, and results of operations.

~~A failure on the part of any of our third party service providers could result in a material adverse effect on our business, financial 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.

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ITEM 6. EXHIBITS

(a) Exhibits

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

Exhibit No.		Description

10.13.1*		~~Second Amendment~~Fourth Amended and Restated Certificate of Incorporation of Ceridian HCM Holding Inc.

4.1		Indenture, dated as of March 5, 2021, between Ceridian HCM Holding Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by the Company on March 5, 2021).

4.2		Form of 0.25% Convertible Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by the Company on March 5, 2021).

10.1		Form of Capped Call Transaction Confirmation (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on March 5, 2021).

10.2**		Employment Agreement, effective July 30, 2020, between Joseph B. Korngiebel and Ceridian HCM, Inc.

10.3**		Separation Agreement, Release, and Consulting Agreement, effective February 16, 2021, between Scott A. Kitching and Ceridian Canada Ltd.

10.4**		Employment Agreement, effective February ~~3, 2020,~~26, 2021, between ~~Christopher R. Armstrong~~RakeshSubramanian and Ceridian HCM, Inc.

10.5**		Amendment to Employee Agreement, effective March 15, 2021, between Rakesh Subramanian and Ceridian HCM, Inc.

10.6*		2021 Management Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on February ~~5, 2020)~~26, 2021).

10.210.7		~~Amendment to Employment~~Form of Performance Stock Unit Award Agreement ~~effective~~(for awards made after February ~~3, 2020, between Leagh R. Turner and Ceridian Canada Ltd.~~25, 2021) (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 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 on Form 8-K filed by the Company on 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)~~26, 2021).

10.710.8		Form of ~~Performance~~ Stock ~~Unit~~Option 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~~(for awards made after February 25, 2021) (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Company on ~~March 2, 2020)~~February 26, 2021).

10.9*		Form of Restricted Stock Unit Award Agreement (for awards made after February 25, 2021) (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by the Company on February 26, 2021).

10.10*		Form of Restricted Stock Unit Award Agreement (for Canadian executive awards made after February 25, 2021) (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed by the Company on February 26, 2021).

10.11*		Form of Performance Stock Unit Award Agreement (for Canadian executive awards made after February 25, 2021) (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed by the Company on February 26, 2021).

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**		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**		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**		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**		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**		Inline XBRL Taxonomy Extension Schema Document

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

42 | Q1 2021 Form 10-Q

Table of Contents

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

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

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.

43 | Q1 2021 Form 10-Q

Table of Contents

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: May ~~6, 2020~~5, 2021	By:	/s/ David D. Ossip
		Name:	David D. Ossip
		Title:	Chief Executive Officer
			(Principal Executive Officer)

Date: May ~~6, 2020~~5, 2021	By:	/s/ ~~Arthur Gitajn~~Noémie C. Heuland
		Name:	~~Arthur Gitajn~~Noémie C. Heuland
		Title:	Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

44 | Q1 2021 Form 10-Q

		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART I. FINANCIAL INFORMATION		54

Item 1.	Condensed Consolidated Financial Statements (unaudited)	54

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2426

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3537

Item 4.	Controls and Procedures	3638

PART II. OTHER INFORMATION		3739

Item 1.	Legal Proceedings	3739

Item 1A.	Risk Factors	3739

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4241

Item 3.	Defaults Upon Senior Securities	4241

Item 4.	Mine Safety Disclosures	4241

Item 5.	Other Information	4241

Item 6.	Exhibits	4342

	March 31,			December 31,
	2021			2020
(Dollars in millions, except share data)	(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	339.6		$	188.2
Restricted cash		2.0			—
Trade and other receivables, net		122.5			101.1
Prepaid expenses and other current assets		84.1			73.9
Total current assets before customer funds		548.2			363.2
Customer funds		4,284.0			3,759.4
Total current assets		4,832.2			4,122.6
Right of use lease asset		35.4			27.9
Property, plant, and equipment, net		142.2			136.4
Goodwill		2,311.5			2,031.8
Other intangible assets, net		311.2			195.0
Other assets		166.3			187.6
Total assets	$	7,798.8		$	6,701.3
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	8.2		$	7.2
Current portion of long-term lease liabilities		14.9			10.5
Accounts payable		42.5			38.9
Deferred revenue		43.7			24.4
Employee compensation and benefits		47.3			64.6
Other accrued expenses		26.6			20.5
Total current liabilities before customer funds obligations		183.2			166.1
Customer funds obligations		4,237.3			3,697.8
Total current liabilities		4,420.5			3,863.9
Long-term debt, less current portion		1,115.4			660.6
Employee benefit plans		23.7			24.4
Long-term lease liabilities, less current portion		40.8			33.6
Other liabilities		39.1			20.6
Total liabilities		5,639.5			4,603.1
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.01 par, 500,000,000 shares authorized, 148,913,387 and 148,571,412 shares issued and outstanding, respectively		1.5			1.5
Additional paid in capital		2,685.3			2,606.5
Accumulated deficit		(253.0	)		(233.8	)
Accumulated other comprehensive loss		(274.5	)		(276.0	)
Total stockholders’ equity		2,159.3			2,098.2
Total liabilities and equity	$	7,798.8		$	6,701.3

	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

	Three Months Ended March 31,
	2021			2020
(Dollars in millions, except share data)	(unaudited)
Net (loss) income	$	(19.2	)	$	8.6
Items of other comprehensive loss before income taxes:
Change in foreign currency translation adjustment		11.0			(49.1	)
Change in unrealized (loss) gain from invested customer funds		(16.7	)		23.4
Change in pension liability adjustment (a)		3.8			3.3
Other comprehensive loss before income taxes		(1.9	)		(22.4	)
Income tax (benefit) expense, net		(3.4	)		6.8
Other comprehensive income (loss) after income taxes		1.5			(29.2	)
Comprehensive loss	$	(17.7	)	$	(20.6	)

	Three Months Ended March 31,
	2021			2020
	(Dollars in millions, unaudited)
Net (loss) income	$	(19.2	)	$	8.6
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Deferred income tax benefit		0.6			4.1
Depreciation and amortization		15.0			11.8
Amortization of debt issuance costs and debt discount		1.1			0.3
Provision for doubtful accounts		0.4			0.5
Net periodic pension and postretirement cost		2.2			0.8
Non-cash share-based compensation		22.8			12.5
Other		1.1			0.3
Changes in operating assets and liabilities excluding effects of acquisitions and divestitures:
Trade and other receivables		(8.1	)		(4.5	)
Prepaid expenses and other current assets		(7.1	)		(7.5	)
Accounts payable and other accrued expenses		(2.1	)		(2.0	)
Deferred revenue		4.9			2.1
Employee compensation and benefits		(24.7	)		(26.4	)
Accrued interest		0.4			—
Accrued taxes		8.6			0.9
Other assets and liabilities		(0.4	)		(0.1	)
Net cash (used in) provided by operating activities		(4.5	)		1.4
Cash Flows from Investing Activities
Purchase of customer funds marketable securities		(148.5	)		(24.6	)
Proceeds from sale and maturity of customer funds marketable securities		97.4			49.5
Expenditures for property, plant, and equipment		(3.4	)		(4.9	)
Expenditures for software and technology		(11.9	)		(10.7	)
Acquisition costs, net of cash and restricted cash acquired		(338.3	)		—
Net cash (used in) provided by investing activities		(404.7	)		9.3
Cash Flows from Financing Activities
Decrease in customer funds obligations, net		513.2			480.8
Proceeds from issuance of common stock under share-based compensation plans		11.3			11.4
Repayment of long-term debt obligations		(1.3	)		(2.7	)
Proceeds from revolving credit facility		295.0			—
Repayment of revolving credit facility		(295.0	)		—
Proceeds from issuance of convertible senior notes, net of issuance costs		561.8			—
Purchases of capped calls related to convertible senior notes		(45.0	)		—
Net cash provided by financing activities		1,040.0			489.5
Effect of exchange rate changes on cash, restricted cash, and equivalents		3.4			(14.5	)
Net increase in cash, restricted cash, and equivalents		634.2			485.7
Cash, restricted cash, and equivalents at beginning of period		2,228.5			1,658.6
Cash, restricted cash, and equivalents at end of period	$	2,862.7		$	2,144.3
Reconciliation of cash, restricted cash, and equivalents to the condensed consolidated balance sheets
Cash and equivalents	$	339.6		$	255.3
Restricted cash		2.0			—
Restricted cash and equivalents included in customer funds		2,521.1			1,889.0
Total cash, restricted cash, and equivalents	$	2,862.7		$	2,144.3

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

	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

Standard	Issuance Date	Description	Adoption Date	Effect on the Financial Statements
Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740)	December 2019	These amendments simplify the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies certain aspects of the current guidance to improve consistent application among reporting entities.	January 2021	The adoption of this standard did not have a significant impact on our financial statements.
ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)	August 2020	This amendment simplifies the accounting for convertible instruments by removing certain separation models required under current GAAP.	January 2022	We are currently evaluating the impact of the adoption of this amendment.
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	March 2020	This amendment provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments 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.	Not yet adopted	This amendment may be elected over time through December 31, 2022 as reference rate reform activities occur. We do not expect the adoption of this guidance to have a significant impact on our financial statements.

										March 31, 2021
	Total		Level 1		Level 2			Level 3		Level 1		Level 2			Level 3		Total
	(Dollars in millions)									(Dollars in millions)
Assets
Available for sale customer trust funds assets	$	1,760.5	$	—	$	1,760.5	(a)	$	—
Available for sale customer funds assets										$	—	$	2,163.0	(a)	$	—	$	2,163.0
Total assets measured at fair value	$	1,760.5	$	—	$	1,760.5		$	—	$	—	$	2,163.0		$	—	$	2,163.0

										December 31, 2020
	Total		Level 1		Level 2			Level 3		Level 1		Level 2			Level 3		Total
	(Dollars in millions)									(Dollars in millions)
Assets
Available for sale customer trust funds assets	$	1,826.8	$	—	$	1,826.8	(a)	$	—
Available for sale customer funds assets										$	—	$	1,719.1	(a)	$	—	$	1,719.1
Total assets measured at fair value	$	1,826.8	$	—	$	1,826.8		$	—	$	—	$	1,719.1		$	—	$	1,719.1

	March 31, 2021
	Amortized		Gross Unrealized					Fair
	Cost		Gain		Loss			Value
	(Dollars in millions)
Money market securities, investments carried at cost and other cash equivalents	$	2,105.0	$	—	$	—		$	2,105.0
Available for sale investments:
U.S. government and agency securities		541.9		17.7		(2.3	)		557.3
Canadian and provincial government securities		400.2		12.4		(0.1	)		412.5
Corporate debt securities		420.3		15.5		(0.3	)		435.5
Asset-backed securities		192.7		3.9		—			196.6
Mortgage-backed securities		7.4		0.1		—			7.5
Other short-term investments		509.3		—		—			509.3
Other securities		44.5		—		(0.2	)		44.3
Total available for sale investments		2,116.3		49.6		(2.9	)		2,163.0
Invested customer funds		4,221.3	$	49.6	$	(2.9	)		4,268.0
Receivables		16.0							16.0
Total customer funds	$	4,237.3						$	4,284.0

	Less than 12 months					12 months or more				Total					March 31, 2021
	Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Less than 12 months					12 months or more				Total
	(Dollars in millions)														Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value
															(Dollars in millions)
U.S. government and agency securities															$	(2.3	)	$	140.7	$	—	$	—	$	(2.3	)	$	140.7
Canadian and provincial government securities																(0.1	)		7.0		—		—		(0.1	)		7.0
Corporate debt securities	$	(0.5	)	$	86.6	(a)		$	31.2	$	(0.5	)	$	117.8		(0.3	)		23.5		—		—		(0.3	)		23.5
Asset-backed securities		(0.8	)		114.0		—		—		(0.8	)		114.0		—			16.9		—		—		—			16.9
Other securities																(0.2	)		38.4		—		—		(0.2	)		38.4
Total available for sale investments	$	(1.3	)	$	200.6	$	—	$	31.2	$	(1.3	)	$	231.8	$	(2.9	)	$	226.5	$	—	$	—	$	(2.9	)	$	226.5

	March 31, 2020				March 31, 2021
	Cost		Fair Value		Cost		Fair Value
	(Dollars in millions)				(Dollars in millions)
Due in one year or less	$	2,221.1	$	2,222.1	$	3,000.7	$	3,006.4
Due in one to three years		711.9		725.0		678.7		705.7
Due in three to five years		494.5		513.4		403.9		410.9
Due after five years		161.1		172.4		138.0		145.0
Invested customer trust funds	$	3,588.6	$	3,632.9
Invested customer funds					$	4,221.3	$	4,268.0

Balance at December 31, 2018	$	1,927.4
Acquisitions		25.7
				(Dollars in millions)
Balance at December 31, 2019				$	1,973.5
Acquisition					42.7
Translation		20.4			15.6
Balance at December 31, 2019		1,973.5
Balance at December 31, 2020					2,031.8
Acquisition					275.7
Translation		(34.0	)		4.0
Balance at March 31, 2020	$	1,939.5
Balance at March 31, 2021				$	2,311.5

									March 31, 2021
	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	$	207.5	$	(204.0	)	$	3.5	5-15	$	296.0	$	(213.4	)	$	82.6	5-15
Trade name		173.5		(1.9	)		171.6	3 and Indefinite		184.8		(2.7	)		182.1	3-5 and Indefinite
Technology		152.4		(151.0	)		1.4	3-4		204.1		(157.6	)		46.5	3-4
Total other intangible assets	$	533.4	$	(356.9	)	$	176.5		$	684.9	$	(373.7	)	$	311.2

	Initial Conversion Rate per $1,000 Principal	Initial Conversion Price per Share

Notes	7.5641 shares		$132.20

	March 31, 2021
	(Dollars in millions)
Principal amount	$	575.0
Less:
Unamortized debt discount		107.9
Unamortized debt issuance costs		11.5
Net carrying amount	$	455.6

	Three Months Ended March 31, 2021
	(Dollars in millions)
Contractual interest expense	$	0.1
Amortization of debt discount		0.7
Amortization of debt issuance costs		0.1
Total	$	0.9

Years Ending December 31,	Amount		Amount
	(Dollars in millions)		(Dollars in millions)
2020	$	5.1
2021		6.8	$	5.1
2022		6.8		6.8
2023		6.8		6.8
2024		6.8		6.8
2025				637.5
Thereafter		637.5		575.0
	$	669.8	$	1,238.0

	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, 2020		1,844,279		$	64.55			9.2	$	77.5
Granted		0			0			—		—
Exercised		(2,500	)		(13.46	)		—		—
Forfeited or expired		0			0			—		—
Performance-based options outstanding at March 31, 2021		1,841,779		$	64.62			9.0	$	36.2
Performance-based options exercisable at March 31, 2021		23,051		$	13.81			1.4	$	1.6

	Shares
RSUs outstanding at December 31, 2020		1,389,385
Granted		720,854
Shares issued upon vesting of RSUs		(27,207	)
Forfeited or canceled		(3,166	)
RSUs outstanding at March 31, 2021		2,079,866
RSUs releasable at March 31, 2021		556,892

	Shares
PSUs outstanding at December 31, 2020		135,220
Granted		336,214
Shares issued upon vesting of PSUs		0
Forfeited or canceled		(135,313	)
PSUs outstanding at March 31, 2021		336,121
PSUs releasable at March 31, 2021		0

	~~Shares~~
~~RSUs outstanding at December 31, 2019~~		~~819,818~~
~~Granted~~		~~60,325~~
~~Shares issued upon vesting of RSUs~~		~~(12,500~~	)
~~Forfeited or canceled~~		~~(54~~	)
~~RSUs outstanding at March 31, 2020~~		~~867,589~~
~~RSUs releasable at March 31, 2020~~		~~395,338~~

	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) from Invested Customer Trust Funds			Pension Liability Adjustment			Total			Foreign Currency Translation Adjustment			Unrealized Gain (Loss) from Invested Customer Funds			Pension Liability Adjustment			Total
	(Dollars in millions)												(Dollars in millions)
Balance as of December 31, 2019	$	(178.4	)	$	10.2		$	(170.2	)	$	(338.4	)
Balance as of December 31, 2020													$	(159.7	)	$	38.4		$	(154.7	)	$	(276.0	)
Other comprehensive income (loss) before income taxes and reclassifications		(49.1	)		23.4			0.1			(25.6	)		11.0			(16.7	)		—			(5.7	)
Income tax expense		—			(6.0	)		(0.8	)		(6.8	)		—			4.4			(1.0	)		3.4
Reclassifications to earnings		—			—			3.2			3.2			—			—			3.8			3.8
Other comprehensive (loss) income		(49.1	)		17.4			2.5			(29.2	)		11.0			(12.3	)		2.8			1.5
Balance as of March 31, 2020	$	(227.5	)	$	27.6		$	(167.7	)	$	(367.6	)
Balance as of March 31, 2021													$	(148.7	)	$	26.1		$	(151.9	)	$	(274.5	)

Lease Type	Balance Sheet Classification	March 31, 2020		December 31, 2019		Balance Sheet Classification	March 31, 2021		December 31, 2020
		(Dollars in millions)					(Dollars in millions)
ASSETS
Operating lease assets	Trade and other receivables, net	$	5.2	$	5.5	Trade and other receivables, net	$	2.8	$	5.4
Operating lease assets	Prepaid expenses and other current assets		1.9		1.2	Prepaid expenses and other current assets		2.3		2.2
Operating lease assets	Right of use lease asset		34.8		32.0	Right of use lease asset		35.4		27.9
Financing lease assets	Property, plant, and equipment, net		8.6		8.8	Property, plant, and equipment, net		9.2		8.0
Total lease assets		$	50.5	$	47.5		$	49.7	$	43.5
LIABILITIES
Current
Financing lease liabilities	Current portion of long-term debt	$	2.9	$	4.0	Current portion of long-term debt	$	1.3	$	0.4
Operating lease liabilities	Current portion of long-term lease liabilities		8.4		8.8	Current portion of long-term lease liabilities		14.9		10.5
Noncurrent
Financing lease liabilities	Long-term debt, less current portion		8.5		8.4	Long-term debt, less current portion		9.0		8.4
Operating lease liabilities	Long-term lease liabilities, less current portion		32.8		30.1	Long-term lease liabilities, less current portion		40.8		33.6
Total lease liabilities		$	52.6	$	51.3		$	66.0	$	52.9

	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Lease Cost	(Dollars in millions)						(Dollars in millions)
Operating lease cost	$	2.3		$	4.0		$	1.2		$	2.3
Financing lease cost:
Depreciation of lease assets		0.2			—			0.3			0.2
Interest on lease liabilities		0.1			—			0.1			0.1
Sublease income		(1.0	)		(1.2	)		(0.6	)		(1.0	)
Total lease cost, net	$	1.6		$	2.8		$	1.0		$	1.6