CDAY - Earnings call transcript Q1 2019

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Operator

Good afternoon. My name is Jesse and I'll be your conference operator today. At this time I'd like to welcome everyone to the Ceridian HCM Holding Inc.

First Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. there a remarks session. speakers' the will question-and-answer be After [Operator you. Instructions] Thank and President you Vice Johnson, Investor of Jeremy conference. Finance Relations, your may begin

Jeremy Johnson

you Thank evening. good and

Ossip; call CFO, the today, have CEO, On we Arthur David Gitajn. Ceridian's and

allow this These begin, of call expectations any forward-looking statements and guidance, This such light statements Q forward-looking the our activities, current or to we based a and information Listeners other reasonable future subject and disclaimer or currently me Before reliance us. statements. including may developments. portion assumptions or that achievements, any plans, levels statement may is and performance, management's are events our from statements materially We regarding certain A to to assumptions forward-looking to on affect and performance -- place update goals underlying future no cause intentions, forward-looking & about undue on not on beliefs results, risks those of statements. Each provide are include in refer cautioned outlook, filings statements to such available information underlying future and forward-looking the previous you for that to with We to in set uncertainties factors to be actual SEC deliver regarding or required revise and statements. by our ability these on obligation as results could made statements. differ other call, risks to except undertake and forward-looking law. could forth significant the

with well SEC's database and in and be the SEDAR report website US in The been and at XX-Q, Investor Relations MD&A the on SEC first Form investors.ceridian.com. the Canada, related will on filed statements quarterly the the the Edgar Ceridian as and on release financial as have available database quarter earnings the

discussed With over otherwise this turn remainder conference dollars I a figures all that call to in are noted. David. U.S. As call will on unless the

David Ossip

earnings quarter our thank call. everyone, you evening first Good for and Jeremy. Thanks, joining

We are first quarter pleased results XXXX. from the of with the

and During a a grew the currency with Including strong, year-over-year basis. constant XX% on momentum on by XX% and revenue basis. currency Dayforce first constant XX% cloud quarter, remained by XX% revenue growing Powerpay,

also are XX.X% services gross and to from basis negative professional by services XXX margin that expanded margin gross negative to XX.X%. We and also pleased other points recurring improved cloud XX.X%

During of the quarter the sales XX XXX strong implementation live fourth XXXX. continued and platform pace performance through quarter from our quarter customers X,XXX March new increase Dayforce we the the which XXX has added of since customers quarter net to customers employees XX, on approximately first We the net of increase with XXXX ended with and of XXXX. keep a

continue both enterprise financials, sales of we the product quarter on briefly higher details to into we to demand product to will have investment customers on call; major and markets. highlight and the more development, two but Arthur of we the sized go earnings continues quarter expect This marketing. and as discussed areas and this compared saw trend prior will year taken our first for strong be last in larger a mix live I

During product our the quarter, development. continued in we investments first

and global points Our including one New believe the to increase cash the software capitalized believe marketplace. solution recently payroll us of management the to compared in capital X.X% for to human or of of expense providing of development investment Canada, was along a our add the Sales $XX.X the pace U.S., gap quarter one with broadest native development can with revenue, in by our at solutions planned hosted first countries as gives of two and this Australian continue marketplace we payroll expect XXXX. to we the management Australian Zealand research launched our U.K. We first the Ireland and before, and next fill we We best- And Dayforce Australian as workforce Summit. per capabilities, single have XX product development million rollouts. said market. and year in in-class an be what basis to

branches of during our investments the new to to wins. first their increased our approximately quarter, to enterprise and to we which workforce pricing and We've in quarter, in a to want highlighting see We childcare also strong ability XX, sales the to a struggling some investment looking existing beat and and new They and GX XX,XXX and both comprised the few competitors and support, system. a release functionality with This Dayforce a and their experience. additional invested hospitals I some won those and manual to is our announced XX enable employees. and In management employees, we on a and were in version of enhancements signed from return expansion. of we provide XX.X% engage global better on grow we of on best planning, marketplace. management development assistant that with quarter. more expansion demand global the eight South payroll countries. a our continued and are healthcare million in pay. Again the with fit, group like by customers of XX North which and continuation improve pursuing $X services retailer brands of for segment, Human There believe In is In better also Dayforce includes our customers, won human even enterprise groups, around marketing hospital X,XXX to XX,XXX voice solution. Africa, with workforce large was spend Each contraction these return capital follow product minutes this in which Dayforce the labor improve segment Australian great of and saw talent processes in were over on Services old we the ultimately functionality, We dozens having and currently I tech had provider a by now over Dayforce a also and transform stores a a deliver of revenue. sell outlet represents Dayforce. large wins decision wanted benefits selected Dayforce They and would demand broaden market. key their different investment. We us will on Health an global processes, Education, local opportunity. leading different company employee opportunity than in to the America for with in we old first strongest highlight

standardize centralize some need. vendor health and in were across which and were systems. payroll [indiscernible] entire organization a processes could the handle big and which their of competitors who needed Some wanted They to complex

and to payroll We bring platform for management the their legacy a hospitality system importantly were engine suite the full by their able a Dayforce for system. by of Dayforce. the are management them will workforce to their quick processes build and culture. calculation over vertical, managed their to most payroll day, one we interfaces IT reduce also popular restaurant In able a won need capital number XX,XXX reduced allowed employees. a with continuous the human system retail replace service and Dayforce's team to with They manual single which pay will They greatly shorten under help be grown wanted with home checks.

and as in management pleased are Constellation the we our sales continued small first the America industry briefly seeing in North for time, demand for payroll marketplace. both Dayforce to businesses. HCM strong likeliness for are recommend. ranked, their report. like of and I full most Dayforce shortlist, team the vendor and for leading performance was also of workforce to the And for solution Constellation second the Research suites would highlight rated medium report the continued place with named very reviews some recent their this Dayforce recent sized We in now category recognitions. to software

continued guidance greater of I our accomplishments and product excellence. results you to our with in Arthur discuss to committed detail. to proud We and our our it financial turn now to offer will are and

Arthur Gitajn

quarter minutes been and I'll full financial evening, the guidance about is going of take you, XXXX David good XX-Q available has then few results, The Thank and second a talk the provide for and I'm our Ceridian also everyone. Edgar to XXXX filed first we the on in year. to quarter two our details Canada XX-Q, going page Form recently a the some and to to adopted. take on just beginning SEDAR X adopted minutes website, few new I'm and website. standards Note highlight of the on SEC policies, for accounting of

flow amortized are Generally, income satisfy statements. revenue All XXX And prior net, as funds, pension and effective XXXX-XX, new in the selling held we've had and pension increasing paid line year of about which we've Form year a other and statement. period. XXXX-XX retrospective if and new on and new in now now a operating our ASC XXX, this result, of as XXX expense been XX, now adjusted now year, basis. other presentation ASC And a figures is such the expense and January being and we our adopted cash previous force ASU our ASU ASC over bonuses presented XX recognition cash the recurring have detailed calls, sales also XX-Q are profit. separate services certain as adoption been is restricted commissions standard presentation pages XXX included the ASC effect implementing to on of in the effect line First, five financial on cash adopted standard outside revenue. adopted and in as included We've trust talked impact services the to reducing standard had a restricted we've obligations, of equivalents of professional customer, revenue a expenses on the Xst

X.X%. HCM XX.X% our on Cloud and On or to X.X% platform XXXX Revenue revenue revenue our includes the from or currency solution both $XX.X revenue $XXX.X Moving X.X% basis currency revenue million results; for a currency declined both million. million or market, the XX.X% million, constant from on revenue to quarter Cloud cloud increased Canadian On million a $XXX.X increased increased small revenue constant a currency by million. $XXX.X from increased of Powerpay by XX.X%. financial by to revenue, which XX.X%. Powerpay increased on constant increased million. by which flagship includes to Powerpay $XX.X Total basis, increased by first total business Dayforce basis Bureau On Dayforce constant a $XX.X X.X%. revenue, solutions $X or basis, $XX.X million and and exclusively Dayforce cloud to our cloud

assumed The rate middle came in to affected $XXX revenue currency cloud negatively million $X.XX. just guidance range. the Canadian dollar revenues, million was at headwind, our under The weaker the million $X dollar the including exchange average for against of $XXX during exchange a dollar first rate actual guidance dollar weakened XXXX to the Canadian Our quarter and dollar US Canadian US of $X.XX.

a However, to guidance at revenue range. range. on in constant $XXX million high-end in revenue basis, of the middle the guidance of at our Total came million currency cloud came our $XXX

and was on due quarter came XX.X% by to in revenue a attributable a cloud was our high-end million planned lower guidance migrating increase customers EBITDA Of services constant Bureau $X.X increase total an Dayforce. range. XX.X% right and professional to first revenue, revenue million total cloud guidance in revenue or $X.X range primarily driven the at currency of expenses. cloud exceeded million XX% increase by revenue other revenue. the $XX.X in in to growth recurring However, our and basis, the of services a Cloud than in high-end Adjusted solid results the

of to migrations or quarter first Excluding was with from by revenue in X.X%. declined about constant of the for QX quarter line solution revenue cloud our total XX.X%, our Powerpay Powerpay, $X.X from business revenue the to basis, XX% X.X% XX% the revenue first solutions expectations. to accounted million. XXXX. in impact was currency On payroll XXXX for million Cloud market, of HR in $XX.X our revenue which small of Dayforce, and the declined Canadian compared a Bureau up

processing Monday, from year-to that year. the As first Powerpay $X of recognized December payroll year proportion in a quarter was and occurred that otherwise revenue in and processing first driven a their approximately proportion XXXX. XXXX a been of end periods. have estimate year in on of the Powerpay fourth smaller number This December of the revenue, XX, XXXX. would quarter XXXX, we XXXX, in year larger We basis of the revenue was A employee, end of by in of customer XXXX the recognized of to noted QX processing the the occurred XXst quarter per the and customers into that on timing can fourth end prior quarter million per was fact management as a XXXX, process is at Monday of recognized processed analysis, the first in discussion compared vary and pull-forward

year. pull forward, grown compared our The to by balance basis an trust points the the in $X.XX billion the have float float revenue on quarter was this basis the currency increase last the was Excluding quarter XXXX. XXXX, X.XX% would for our a funds $X.XX The X%. of on in average to constant first first during Powerpay approximately quarter of billion, compared first first average quarter customer XX during balance approximately yield of average yield

The trust compared funds while QX, of of was of million Monday The XXXX the that business income the March $X.X As $XX.X in was are customer day and December Friday increase balance to invested last a balances. last result, XX, from was to the sheet of customer quarter value fact customer XXXX balances business XXXX. $X.X generally XX, was first Monday, compared than XX, a billion March the higher million last day funds sheet reflects the of a value balance as quarter as the trust of Friday, year. $XX.X QX, trust in XXXX. funds, billion, in first

our expand to continued also first We quarter. the margin, gross during

the recurring the services increased or customer customers XX.X% hosting recurring And cloud our live XX% continue to and of last million or realize cloud grew economies year Dayforce XX.X%, $X.X quarter years proportion from the increased also costs $XX.X While year more cloud last our costs. support recurring margin in reflecting growth gross services on quarter support of million our to by this in for first an two increase in XX.X%, than to services from to and first in XX%. of to XX.X%, scale only revenue ability

productive, improved implementation resources the year reflecting these an And services other new services. first to professional professional from margin post expect in increase We're margin revenue throughout gross XX.X% year as in continue to and profitable the negative negative we more on to revenue improve. services last become adding Our other quarter the increased address demand. on negative XX.X%, professional and to resources go-live

increased quarter development and earnings costs million. primarily higher initiatives. Adjusted increased XX.X%. to increased marketing $XX.X to calls, million expenses primarily basis public year-over-year, to adjusting year, to of company. year $X.X due from first as associated XX.X% and our reflect from in XX X.X% in other these quarter As we the first a realized profit profit expense, operating million million increased last of development sales increased administrative and EBITDA, discussed points our $XX.X to and in or of of share an by and due $X.X based X% March, in EBITDA million. adjusted severance increased was million general to to being compared charges million expenses. an $XX.X operating as quarter compensation million fees in XX.X%. marketing primarily based half last EBITDA for previous profit and offering We with the $X.X declined or up in items from expenses G&A $X.X an selling, to we quarter share to and $X.X operating first XX% $XX secondary excluded and Sales margin After million compared second on XX.X% decline Adjusted our $XX.X the basis expenses a adjusted G&A compensation up increased XX.X%. $XX year, and XX.X% million, stepped on research marketing last a and excluding by with first investments million and sales expenses revenue associated percent expenses results the or Product management to

compared certain expenses As expect we sales not was EBITDA prior guidance in during XX.X% to interest floating our million XX basis QX reflect an reflecting taxes senior comparing expense senior rate Actual rate, income second XX.X%. by points company secured from reduced our discussed an first EBITDA did rate credit to a to exceeded in BX adjusted margin quarter the high-end range, last that of the XX.X% facilities the operations last million, be we interest $X adjusted save reduction public rating annual our us in a million of which about debt year, to we March as to before the redemption and XXXX of term $X.X $XX.X our $X.X upgraded to investments R&D and last earnings were BX, million basis. which the to happy continuing I'm and on IPO, quarter from marketing. the notes will increase that call, Income year. XX, Moody's result margin report which our on XXX will basis to in period QX from in to point

reduction XXXX, sheet; in balance as and March $XX.X equivalents support million, debt to of reduction total $XXX.X of million primarily had we cash, was XX, as was benefits a to $XX.X XX, XXXX, acquisition. December decision XXXX, The a $X.X and cash the incentive payments our $XXX.X to million December Moving the XXXX. plan and XX, of million compared attributable reduction to of XX, cash March million of compared annual

in an expenditures $XX.X million QX $XX.X of million and software $X.X XXXX $X.X equipment, in QX to capitalized and which development, compared software XXXX. million, for increase XXXX. capital million, in was property $X compared million capital for million the in $X.X were technology Included expenditures Our to million and of $XX.X QX were

our underlying Turning quarter now year highlight I and XXXX, the second three outlook fiscal guidance. to to full assumptions for our critical want

adoption this XXX, First, year. January our X guidance ASC reflects effective of the

the of assumption dollar used exchange quarters. Canadian in provided dollar continues to previous exchange with for $X.XX, rate consistent guidance rate our guidance Second, a reflect US to

Third, in during Fed no our Canada U.S. of guidance Funds also the rates XXXX. assumes the or changes rates Bank

So will to rate our guidance. any Bank Fed upside be Canada Funds of or increases

to adjusted reaffirming respect EBITDA. for we on guidance the cloud the February and provided with Now revenue, revenue, XXXX for we X, fiscal are full full year XXXX, year ranges total

to in a and constant of to $XXX is currency of Total $XXX million is to of on expected is $XXX the million. Specifically $XXX revenue million. the to basis, to range revenue $XXX million, expected range be EBITDA million expected to cloud adjusted range in million be in $XXX be the

of second in to time XXXX, I'm of For to to quarter the open million, total operator we in million $XXX Q&A to the CEO live begin before the to like please the to $XX this expect Ceridian $XXX million you $XXX range line the $XXX million, revenue to be million. to provide range much. be be of range Thank revenue the we EBITDA few cloud and for the a questions. million in would very going of $XX Ossip, session. proceed. adjusted remarks At ask David David, to of

David Ossip

Arthur. Thank the more believe of color in you, business going. are provide to little into I depth areas like lot would of Dayforce five where There acceleration terms a is and bit are QX, which go in that into of I a we where the

year-over-year at the day accelerated you XX.X%, end year, rate the year guidance, close between Dayforce. expect to QX. Dayforce we you if look that growth QX and the imply XX.X% our by can growth be on XX%, to And of First, to fiscal from

QX, and in of that you at XXXX revenue negative that number QX to QX increased -- customer, in the look customers in current we've seen added is, XX improvement item the we same $XXX,XXX of XXXX. to and over it recurring the time increase of for we XX.X% $XXX,XXX rate, the was the well. the revenue also Dayforce of Dayforce the approximately professional XXXX, the we adding same same profit that negative XX.X% The And we XXXX at XXX the we prior increased revenue $XXX,XXX to average added the if the last the In an At and year-over-year. the customers of in months, at XX X%. XXXX, and revenue time. QX customer that if was customer XXX. in we've increase per the Similarly from of been during cloud increased in saw saw were increased look more from second in the incremental months, acceleration QX an cloud also The QX time $XXX,XXX of of to customers, customer we've increasing the to customers, obviously gross on margin growth XX.X% And margin. services XX.X% increase that as

obviously for on open we the happy side very the questions. Operator, on summary, it we're like I'd the to results and business. quite confident in the So are future with up for Dayforce

Operator

from [Operator Zukin Instructions] with Piper Your Alex Jaffray. first question comes

open. is line Your

Alex Zukin

taking the for question. Thanks

of changes So just team for about maybe you first a David. the there of helpful. commentary And maybe talk maybe anecdotal organization? terms the would Any And bookings the up I've into is from Arthur. in color follow Can then any to how for field be how sales in year made got you the a quick the responding started some perspective?

David Ossip

speak with to Thanks, Alex, nice you.

the we've think year that year. a very question the of as in saw last QX We of that So QX by is year, last this that strong first very, into of know you continued fact answered and QX bookings. seen I

a increasing led better kickoff like and growth if you as to we've Alongside made the of had expected projects coming organization QX of is side. where which have the changes rate that the well confidence sales on results in the we than of in So QX, in both Dayforce new from. that sales is record the

Alex Zukin

lines. of maybe of can some bottom then of for and top seasonality both And the the you kind on business the Arthur; speak to

you into maybe make seasonality the that aspects, can it. it variability like to in had bit we QX of I the just think some QX, a quarter impacts different the model But properly of seems about of or know calibrated? talk and are the some FX our little Powerpay from so sure you between consensus the revenue the can models models our of maybe a linearity

Arthur Gitajn

mask -- a bit, you've little foreign on of were disguise Dayforce, two Powerpay. I both exchange think items hit performance the think strong that that and and Well, I

a the for as the a remarks, increase about XX of constant first to revenue cloud of to dollar revenue on been Foreign as XXXX, we generally in a number this would increased currency revenue exchange weakened have was the a had have basis December Canada, XXXX XX% year-over-year, point customers at January Powerpay X.X%. revenue U.S. December number since last about the dollar. Powerpay the chose number the and of recognized that we our $X And certain their on about December, in by shift X% Powerpay revenues million otherwise in recognized that now customers affected process Canadian on relative payroll I XXst. in and XX% processes in is of as Monday about of in low And particular. in years, of explained weeks a

So really I mask two those strong items think the performance Dayforce. underlying of

Alex Zukin

Perfect. Thank you.

Operator

question Mark Morgan. with from next JP Your Murphy comes

open. Your line is

Mark Murphy

last Is had very comments. to a you regarding And at by growth say a other ability higher just level, confident on-board the to last leveraging point more fair the very Thank dollar in vectors David, increment? both kind than your year made high last ASP customers year? a of it much. than larger those you you're year. this words of grow In in to prepared that also

David Ossip

a customers seen in value. higher to larger distribution that have dollar we've a Mark, shift

the if constant is is as probably market to seen Arthur services year. Related on this and volume, we've -- somewhat after amount go So keep up we're confident you like speak I growth the rate somewhat strengthen that of can't out, continue dollar that the you as we will we as year. expect to also what to well, but be prior professional to will obviously we the throughout I expect in mentioned, the that that margins revenue will years. the we volume in recurring There dollars would accelerate. to other on-board to going but expect that flatten and more

in the revenue, more historically. obviously at the revenue have on-boarding on-boarding And so than much becoming we many efficient are quicker cases and we

Mark Murphy

did not recurring you will from Yes, thank clarifying. that or go-lives that to you is in increase did sequential Arthur, than differently, expected benefit amount good accelerate. to then QX for volume It if other of the currency growth hear in just wanted said I anything the QX realize And Dayforce revenue? ask record cloud the dollar the restrict you

Arthur Gitajn

Dayforce were performance. No. And Mark, the with we very happy

look it actually XX.X% XX.X% in a on sequential QX from currency gone 'XX in you to of constant we've basis, the If quarters. from

you the very So see really sales go-live and the of QX strong the in coming impact. impact into QX and

haven't believing we'll gives us We close of yet, impact sales to QX, what well. up the confidence that's the XX.X% seen yet really as the XX%, QX, of the QX and year in that the growth see Dayforce rate end from

Mark Murphy

at this believe is believe $X.XX understood. rate, I'm you the Arthur, if correctly I you're using I Okay, last US $X.XX. still looking One said one. but the on the dollar, spot dollar Canadian

a guess I just currently? rate not And wanted spot is using reason clarify, I so the to there you're

Arthur Gitajn

discussion Yes. We this. had a about lot of

average in the It four in the the $X.XX be rate $X.XX. XXXX, rate So for preparing turns actual years. it was year, we $X.XX the just to for we exchange the last guidance year, the exchange was actual out rate At time clear, we last used XXXX. it were exchange at was were

on So we to as at strong at If as quarter a decided may I years, continues have point dollar fluctuations. US in revisit the XX it be in it's last that this it. currency been quarter. look every where we'll we'd now stick position lowering the we Canadian be in the $X.XX. the to the and But has think the We which is we're dollar, based raising want weakest to with guidance don't next

Mark Murphy

much very makes you and It Thank understood. on sense. Okay, congrats everything.

Operator

comes and Company. Justin question Blair Your William next Furby from with

open. is line Your

Justin Furby

of net David, if growth you looks like the services, the you're what quick services then talking or -- the closer some is that currency. revenue mid driven an strip two on you at slight to of guess, recurring between a it got lines work some of drives just a to in the the and of or that I've and you that's course Is expect of sort throughout that 'XXs I acceleration out follow-up. look year. the recurring acceleration And to Dayforce deliver that Dayforce

David Ossip

general Arthur kind driven both; can of to it's two. been the provide in the by So, breakdown comments of as

Arthur Gitajn

Yes.

compares So year, million. QX last growth $XX.X this growth year. other. recurring last increased And million million currency constant but and a had in to Dayforce tremendous And revenue Dayforce professional continued in $XXX.X actual basis growth we this is less. had this $XX.X recurring of the year to -- incremental additional year services an on The we've increase

So, not but are only increasing increases the increasing. is it

Justin Furby

said your in think your of rest dynamic Maybe the that and low the there you year? of recurring growth that of think I about as year? we the that sort another guess sort the Is is in right was changes way, the move something of sort way is Or services 'XXs. to cloud mid throughout cloud teens

David Ossip

on side, the professional They if professional to going like services the Because this the other services. currently is you on be more this growth in come recurring whereas, year constant. services Dayforce and more the rapid year, believe from and XX% very versus it growth year had side the the other. and we the about on business the the professional will is XX% recurring I somewhat last about revenue Currently, of

the from we do because the get on side, recurring you'll versus higher coming the the XX%, Dayforce a the because the growth slide growth professional XX% more on you dollars but recurring services. So also see of rate of from both

Justin Furby

Or thinking embedded can sort we pull you're And in give mid-single-digit a year on that's Powerpay, for I this then there? expecting, sense that still know forward there grower? you Okay, a balance be Thanks. some what of is but should your of what's guidance as like of the throughout helpful. just

David Ossip

correct. that's Yes,

client we the Let year me just said. repeat December processes Powerpay, the revenue Arthur when This recognize XXst, the fell what on -- pay. Monday.

And that so, XX% Powerpay on was revenue versus approximately recognized process and XXXX their customers about for elected Monday first that $X the XXXX of in pay million XXXX. of to so

it'll remainder year. landed of the year. a revenue the would rate up be be of that expect in the adjust you about for remainder the have believe the that to for If constant at for you We within the mid-single-digits somewhat in growth X% currency. We range would

end going Powerpay which some the an online upscale that year, the for capability. do towards have provide of new features this come are to Now we business,

believe new stream to that the the it the can of year. come second low But we into bring still half on do business So requires the we products double-digit. in the

Operator

comes Instructions] Baird. with Your R.W. from next [Operator question Mark Marcon

Your line is open.

Mark Marcon

a Good and domestically bit afternoon, of talk about particularly both the internationally, Arthur. in some David you're opportunities with you've if and had, could events regards little customer and wondering wins. you some seeing light pipeline of to the was new of that the recent that I

Just look? how how pipeline is spreading, the does buzz much the

David Ossip

the remains healthy. Mark, very pipeline

we've in we healthy LA, As one insights Sydney, customer followed we see events. said, be we event have believe Fort This in very attendance the in had very summits, of larger we a a In in terms in Chicago and strong a by October. have our event and seeing New August in followed event that'll Australia. one in in product. June Miami, we May, in for Lauderdale, one a We're very York by at in UK, the we year demand partner customer had

see evidence more about communicated we will I what the and we are in results seeing a with focus also strong successes our we for we're upmarket but continue remainder of of very very And strong sales accounts, see QX, results evidence of last sales only we're saw confident strategic the we that year. XXXX, continue strong the where pipeline results consistent as to on also year You the a in seeing results. sales not the in mentioned

Mark Marcon

you professional should year. think gross can margins talk the about unfold through how little we the as bit then, we a about And

up number ramp had implementation capabilities. to had wins of you've the and a You've obviously

the think think So that -- professional of relative term the this about you've from the for guidance embedded how what's in in we about do this some as we terms to and mentioned then year, previously? things of margins longer

David Ossip

we QX we strengthening what Yes, of headcount. to would XX.X% that are to did still is I consistent gross and out What QX professional margin communicated of XX.X%. also negative we've other very We negative before. services point increase saw

of Arthur services implementation the mention I think did in that professional team.

improvement we're points So additional that XXX of the having includes basis actually headcount there. the

a as to obviously of to increased we'll kind breakeven We getting the negative margin, expect the probably that that and of seen XX.X% in in the strengthen year, low negative of we've would year objective communicated productivity future end throughout we've probably single-digit Group. previously, years. So with

Mark Marcon

in impact think of kind how How term. when impact the relative we newer domestic expansion? we've looking -- Whether as being it's think think those we will that international do be Australia. profitable margin performance. U.K., initiatives? at from think the dragged, about we're profitability should about Is of we But, the long about this of how we some the had the obviously, to ramps -- the do those Should

David Ossip

going You global of a see side. aren't negative the to impact

of got will it's on take like, implementation. that get and of a responsibility partners we this gone margins, with we've that. QX in number partner live fact, see product. They In customers Australia In the for QX to if UK model we're the you to a using because have higher offloaded actually year, for

both We also resources able implementations teams who which than we in to we base in a the Australia, America. Mauritius, do by are domestic have in and cost North are teams obviously have those lower have that UK in the augmented have and the local

will other believe impact global So, the and professional the that margin. don't expansion we services

Operator

Deutsche next Your comes Bank. with from question Michael Turrin

Your open. is line

Michael Turrin

afternoon Good and thanks.

year. of added Go-Live's we the last maybe is you what QX lower Dayforce customers during quarter number, On touch which in saw solid but the XXX a a than

in remind at any strength XX had there number we You us saw inside some Could numbers obviously impact that around number? nicely. all and also you the seasonality I'm QX referenced of just some to the wondering in QX up trailing month the the of if

Arthur Gitajn

recall if on of that call, Michael. have Hi go-live you a large really the I seasons. great last you That's two kind earnings And, explained question.

January basically you You and have have July.

And had here over went thinking got be then so, you've year live. when year QX, more last this perspective, QX. that a from accounts a QX of of look a perspective the The we XXX from at And we training XXX. really it you should XXX --

those numbers you live of 'XX had customers period. two add you to go-live. that and XXX and if if And that at about XXX QX together, compare QX of you're 'XX went you that XXX So during

So see again the between increase to the probably next a of expect it's week. somewhat a big day And by -- smaller number. be in piece. go-live We would QX, dependent would QX

Monday live which customers So going was being the fact up gone on that of you could to January the December year, being week that the live in December would that landed have of first that XX, that Monday in Monday, the XX. the have

week the as depending the on side of And ends impact into bit float unfortunately a the day well QX creates on numbers. in of movement day to QX, both some inside process the little that so go of piece have we for go-live, And of the of as also go-live. Powerpay the could see the the where period but week you'll

to I rather number out last you at encourage of months because XX the So probably a is the a term, days would good look it evens longer week.

Michael Turrin

but QX of these high-end appreciate color is where below where then some of That's we were despite The EBITDA helpful Arthur. modeling. -- you guiding numbers touch below for came maybe headwinds, David, it number were the I FX the And like QX one the above a in looks there.

and there have if number to as if wondering you or might that call So expenses to be saw FX impacts shifted from well? QX any just that and related out QX may any

Arthur Gitajn

in sales again basis, quarterly research the QX full is are it in second $XX year. marketing to and again, the adjusted accelerated a to by year what and XX.X%. year in for EBITDA grow our decline. to accounts the to for lapping But No, XX we to points and guidance the increase full marketing XXX margin R&D XX.X% on we and and which investments the business And increase. year we're half to EBITDA as That's we reaffirming, development continue we're of points to quarter million, basis to sales adjusted EBITDA expand to basis full and even investing expect $XX million before

Operator

Your next Zelnick question with comes Suisse. Credit from Brad

Your line open. is

Brad Zelnick

now me in against a they so Great, Ultimate showing financial competitive deceleration. them rates and digesting results way? changing market released much Software win thanks ago that changing perspective fitting perceptible in. just David, What's any for or and hours take a private with couple from of the

David Ossip

As would upmarket. going but last the rate -- I before, a as still on out I we've I said directly number in sales we've of imagine seen a pointed I our success as very we've scale. acceleration what's seen very seeing And we've seen have over in Dayforce there. an at to and longer. seeing speak with if we're strong very some healthy an an acceleration not demand, from seeing successes we're may can't still And come of very, quarters strong move we're growth But seen the far as market. Ultimate,

Brad Zelnick

the follow-up you increasingly most could this versus average I model success with experiencing modules driven adoption if us with the module give how consistent customer broader very And nicely ask revenue customer by with up and of increasing just size is one Can this you're per are quarter, -- much which sense of large ticking customers. seeing momentum? a

David Ossip

average Sure, the is what call it's in we piece. a strategic seeing combination wins many and market of above seeing in size, both. we But X,XXX increase we definitely which are an more are

approximately of revenue, management, In of high management, we've ACV cetera. add-ons, growth high where terms recruiting, of the professional some revenue rates attachment the or base, document from existing et mentioned management, comes or to before in see you modules uptick performance as services as well XX% expect the and would additional terms learning where actually it's would we be

Operator

[Operator The comes from question Lenschow Instructions] Raimo with next Barclays.

Your line is open.

Raimo Lenschow

thinking to there? a about little like and can invest mentioned as talk the versus deeper what's you go talk bit go you of in into my new certain kind Can as et taking little a Like, for question. -- where you can about more country you cetera. Ireland going your country? area into process Thanks a what drives bit a Can internationally, next then you talk you expand

David Ossip

So about think really Zealand. a And really the region. completing next New two we countries it and as are Ireland

Canada. So if we kind we the U.S. of think the about and U.S. say

you it's think U.K., U.K. the If about and the Ireland.

think you Australia, talk ANZ. If about you about

to hanging marketplaces. the And sense add makes increase the to low UK the rate Australian adjacent a fruit those lot and and of two order so in market, market success it in

beyond As that, we look have of clusters to where of we basically success go customers. we

to South like mentioned. And be countries could into as success management expansion Africa. to the side. haven't possibilities where Africa although would we the could we've had there then So We Southern made potential tremendous in customer I include very countries expand Germany, large decisions, be obviously workforce another on signed It Asia.

Raimo Lenschow

what's I expensed. of if capitalization have driving, getting what's of R&D question you And follow-up getting bit one can capitalized What's the there? that to I versus little talk may. kind about quick a policy what's your

Arthur Gitajn

queue, software development software all internal We use we're to because requires and the a our it's basis, but for internal capitalized our XXX, Sure. actually costs of company is on cloud offers true that this with developed us subscription associated include ASC in software for use.

in point compared of The development that that quarter point, our QX you. expenses compared pure product first QX million are reflected the and numbers flat. I -- development after The software. expenses it's when to in point million $X.X $X.X can Then research development this the management we expense, stage that $X.X portion year completed, year. And that development between this which this $X.X revenue got before stage to the to when authorized $X.X will products out capitalized million So the that both funding quarter $X.X -- the occurs capitalize completed million was software year a million the we've the and last phase, probable, And R&D then 'XX. incur in is last under QX in incur for was we before project million those compared was the essentially reaches we the break to application after expense. preliminary and project be got cost projects we deemed are product

David Ossip

investment when both. R&D at we speak, internally the them about of talk actually actually Yes. And and combination Raimo, we

Raimo Lenschow

sense. makes it Yes,

you. Okay, perfect. Thank

Operator

Your with next Samad Jefferies. question comes from Samana

open. Your line is

Samad Samana

evening, taking question. Good thanks for my

investments. is priorities And bit a increased summits, in reps events in higher ask Ceridian's versus then you market? as the terms more curious about international? generally I'm think about and that So I reps rest sales branding XXXX, America versus sales little the wanted sales on more of to hiring brand North in it for the of the focused presence

David Ossip

That's actually a question. good quite

actually from QX if from it know, declined we and XX.X% marketing expense, to You QX went look at to XX.X%. it actually sales

is the year. from about last of However, QX XX.X% up X.X%

particular means Global the going domestic in terms larger are are fact Global. those if year-over-year versus the significantly at numbers the North UK North those versus skewed to we've in a in increase quite markets. you to America North in presence look markets In that obviously be But investing America, of of Australia, the got America percentage and we

others In relative terms of marketing spend, which summits, slightly but is to quite the inside modest includes the it market. the up it's still

Samad Samana

that the capture business customers you last Then are quarter those for you'll the you Bureau given to year. the has Dayforce, those view the maybe one if left for the profile slightly side? know for company guide and more just that the for Arthur, about think in Are mid-market. Just when churn on size in larger curious. I rate the the on Bureau we any its terms expectations updated of there's curious and of think But percentage expect then this maybe capture, in of I'm

Arthur Gitajn

customers. cloud about of XX% revenue that's, increase we migrations and from million provided to guidance Bureau XX% quarter $XX.X cloud XX%, our the $X.X million and to come in saw that of from is revenue the came we Bureau expect The about we that increase this of from

isolate -- But whole Bureau, to Bureau about talking at whole well. you so in cloud we're if the business While Powerpay and we and continues the about forth. perform to very looked talk tend

$XX.X revenue more cost than is million you times at additional the incremental revenue. X increasing of look If of the

calculate and up margin we the increased with the in the last for as business as we're our now was first R&D, $XX.X incremental to year $XXX,XXX QX million. having And implementation XX% gross is problem whole happy from on even share have in per revenue net diluted in quarter. our resources investments So, to adding stepping the income earnings the

Operator

with Goldman question Chris Merwin from next Your Sachs. comes

Your line is open.

Chris Merwin

my taking much questions. very for Thanks

you're assumed contemplated there growth revenue any David with And revenue on or then earlier on-demand was you've follow-up know to. employee incremental, recently. just question tell for to second account question that relatively further on you strategic your us guided a in Can a seeing with as guidance out increase Just is maybe what for you and per that that really customer. rolled for on full success meaningful I what to pay, customer year

curious far, coming what you. how feedback we Thank been just and so the has about product? tailwinds So from be should maybe that from thinking customers

Arthur Gitajn

Sure.

average forecast forecasting basis. provide revenue guidance in account-by-account perspective, So and the from built for the an up customer we first we actually didn't from a

go-live at the and of accounts looked and and the get know when we days is the services recurring we go-live, we revenue to have recognized we life of each obviously access So of that. the the implementation professional the expected of revenue over they work-in-process

numbers. the out last over seen forecast five But consistent basically we you've that trend quarters a reported. we've how that's so And the

to QX that XXX.X XXX.X to in So per in to to to of total customer to QX XXX.X that increased QX if back XXX.X XXX revenue -- in I QX XXX.X XXX.X QX at XXX.X in in of to in to XXXX. $XXX,XXX 'XX. QX in the QX look 'XX go in in I of to customers QX if you had XXX.X QX -- increased for QX

the So consistently you've out. nine we've now of reported that last for kind increase seen the quarters

talk longer factor it a on-demand In business. when growth term about for terms pay, the about of I on-demand again I pay, as think

to which of success it largely more up effectively is that latter and winning by we more verticals is play. customers, the now, the we starts this XXXX which successful the to terms currently although we've half at year, the which revenue. selling some in going more in is in X,XXX effectively market, to in strategic more what of which driven call In So growth see major being again of add-on those accounts the customers success four begun X,XXX, in back winning already business, rate markets, for goes employees

the XXXX next the impact you'll on impact should middle from the as side we year, from the and strategic from see half impact probably we strategic seeing towards latter side. well of more see into some begin to go global we As accounts into year, the the go you'll the global impact XXXX, successes, as on-demand of to see as on you'll the then some more into and start

So of as to the Dayforce acceleration at and the growth again curves all Dayforce growth XXXX, the sustain growth see rate. to think if about of and of separate rate I it look I importance we're that beginning them is in really the of

Operator

with from question of comes Matthew next the Citi. Your Wells line

Your open. line is

Matthew Wells

one's taking believe large headcount you're implementation deals? and for seeing your Arthur just pipeline my in are question, on you're Thanks more Is Or function current this overall? that seeing I you activity and you adding David. flagged for When earlier complexity call. of it a that the

David Ossip

the thanks for So, questions.

XXXX number between meet services last and implementation the that reduced XXXX headcount had the actually and So other. now to professional we've success professional just sales quarters. the We're over adding in of we headcount basically

As in I and record QX. mentioned we QX project kickoffs had again in

handle requirement volume And and so, just the obviously business. it's to project a the

Matthew Wells

like here original it and looks comes math doing I'm and a that be I have just about to was QX, $X.X that for incremental thinking I FX sure the for correctly. And quick a I'm make million. to follow-up cloud just since X% guidance should issued want about headwind you out Arthur. about

Arthur Gitajn

Yes.

Operator

over at call to time. questions now There are closing this no further I'll turn the David remarks. for back

David Ossip

at you we're you everyone with today. Again, of thank the with much. I will on in very and one, forward seeing future confident very results joining Conference Dayforce I to investors the and look for very think of you one be the forward we're Dayforce business. in those in look in everyone. pleased weeks, I for the all, business speaking the the us JP the us to Great, who joining a Thank few

Operator

today's call. This concludes conference

disconnect. You may now

Dayforce (DAY) 5 May 192019 Q1 Earnings call transcript