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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly reporting period ended September 30, 2022

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

For the transition period from to

Commission file number 001-38467

img214255384_0.jpg 

 

Ceridian HCM Holding Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

46-3231686

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer

Identification Number)

3311 East Old Shakopee Road

Minneapolis, Minnesota 55425

(952) 853-8100

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

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.01 par value

 

CDAY

 

New York Stock Exchange

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

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

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as the latest practicable date: 153,594,867 shares of common stock, $0.01 par value per share, as of October 27, 2022.

 

 


Table of Contents

 

Ceridian HCM Holding Inc.

Table of Contents

 

 

 

Page

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

3

 

 

PART I. FINANCIAL INFORMATION

4

 

 

 

Item 1.

Condensed Consolidated Financial Statements (unaudited)

4

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

46

 

 

 

Item 4.

Controls and Procedures

47

 

 

PART II. OTHER INFORMATION

48

 

 

 

Item 1.

Legal Proceedings

48

 

 

 

Item 1A.

Risk Factors

48

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

 

 

 

Item 3.

Defaults Upon Senior Securities

48

 

 

 

Item 4.

Mine Safety Disclosures

48

 

 

 

Item 5.

Other Information

48

 

 

 

Item 6.

Exhibits

49

 

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Table of Contents

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Consequently, 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. In particular:

 

our inability to manage our growth effectively or execute on our growth strategy;
our failure to provide new or enhanced functionality and features;
our inability to successfully compete in the market in which we operate and expand our current offerings into new markets or further penetrate existing markets due to competition;
our inability to offer and deliver high-quality technical support, implementation and professional services;
system breaches, interruptions or failures, including cyber-security breaches, identity theft, or other disruptions that could compromise customer information or sensitive company information;
our failure to comply with applicable privacy, security, data, and financial services laws, regulations and standards, including our ongoing consent order with the Federal Trade Commission regarding data protection;
our failure to properly update our solutions to enable our customers to comply with applicable laws;
our failure to manage our aging technical operations infrastructure;
our inability to maintain necessary third-party relationships, and third-party software licenses, and identify errors in the software we license;
our inability to attract and retain senior management employees and highly skilled employees;
the impact of our outstanding debt obligations on our financial condition, results of operations, and value of our common stock; or
the duration and scope of the Coronavirus disease 2019 (“COVID-19”) pandemic, including the uncertainty around the surge of different variants and the actions that governmental authorities may take in all the jurisdictions where we operate.

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, 2021 (“2021 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 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.

3 | img214255384_1.jpg Q3 2022 Form 10-Q


Table of Contents

 

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Ceridian HCM Holding Inc.

Condensed Consolidated Balance Sheets

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

(Dollars in millions, except share data)

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and equivalents

 

$

408.4

 

 

$

367.5

 

Restricted cash

 

 

0.8

 

 

 

1.9

 

Trade and other receivables, net

 

 

155.4

 

 

 

146.3

 

Prepaid expenses and other current assets

 

 

107.3

 

 

 

92.6

 

Total current assets before customer funds

 

 

671.9

 

 

 

608.3

 

Customer funds

 

 

4,335.3

 

 

 

3,535.8

 

Total current assets

 

 

5,007.2

 

 

 

4,144.1

 

Right of use lease asset

 

 

27.5

 

 

 

29.4

 

Property, plant, and equipment, net

 

 

144.7

 

 

 

128.2

 

Goodwill

 

 

2,261.8

 

 

 

2,323.6

 

Other intangible assets, net

 

 

298.4

 

 

 

332.5

 

Other assets

 

 

266.8

 

 

 

208.4

 

Total assets

 

$

8,006.4

 

 

$

7,166.2

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

8.1

 

 

$

8.3

 

Current portion of long-term lease liabilities

 

 

14.9

 

 

 

11.3

 

Accounts payable

 

 

56.7

 

 

 

51.7

 

Deferred revenue

 

 

42.6

 

 

 

48.7

 

Employee compensation and benefits

 

 

72.6

 

 

 

77.3

 

Other accrued expenses

 

 

24.2

 

 

 

24.7

 

Total current liabilities before customer funds obligations

 

 

219.1

 

 

 

222.0

 

Customer funds obligations

 

 

4,456.6

 

 

 

3,519.9

 

Total current liabilities

 

 

4,675.7

 

 

 

3,741.9

 

Long-term debt, less current portion

 

 

1,214.1

 

 

 

1,124.4

 

Employee benefit plans

 

 

19.3

 

 

 

20.7

 

Long-term lease liabilities, less current portion

 

 

23.0

 

 

 

32.7

 

Other liabilities

 

 

23.1

 

 

 

19.0

 

Total liabilities

 

 

5,955.2

 

 

 

4,938.7

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.01 par, 500,000,000 shares authorized, 153,526,336 and
   
151,995,031 shares issued and outstanding, respectively

 

 

1.5

 

 

 

1.5

 

Additional paid in capital

 

 

2,918.4

 

 

 

2,860.0

 

Accumulated deficit

 

 

(367.4

)

 

 

(309.2

)

Accumulated other comprehensive loss

 

 

(501.3

)

 

 

(324.8

)

Total stockholders’ equity

 

 

2,051.2

 

 

 

2,227.5

 

Total liabilities and equity

 

$

8,006.4

 

 

$

7,166.2

 

 

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

 

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Operations

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

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

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

$

263.8

 

 

$

215.0

 

 

$

762.8

 

 

$

619.1

 

Professional services and other

 

 

51.8

 

 

 

42.2

 

 

 

147.3

 

 

 

123.0

 

Total revenue

 

 

315.6

 

 

 

257.2

 

 

 

910.1

 

 

 

742.1

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

 

77.1

 

 

 

66.0

 

 

 

234.4

 

 

 

191.1

 

Professional services and other

 

 

61.0

 

 

 

48.9

 

 

 

172.6

 

 

 

140.9

 

Product development and management

 

 

44.8

 

 

 

36.6

 

 

 

125.0

 

 

 

94.2

 

Depreciation and amortization

 

 

13.7

 

 

 

12.6

 

 

 

40.0

 

 

 

37.5

 

Total cost of revenue

 

 

196.6

 

 

 

164.1

 

 

 

572.0

 

 

 

463.7

 

Gross profit

 

 

119.0

 

 

 

93.1

 

 

 

338.1

 

 

 

278.4

 

Selling, general, and administrative

 

 

122.7

 

 

 

109.1

 

 

 

367.2

 

 

 

316.5

 

Operating loss

 

 

(3.7

)

 

 

(16.0

)

 

 

(29.1

)

 

 

(38.1

)

Interest expense, net

 

 

7.4

 

 

 

10.0

 

 

 

19.9

 

 

 

25.5

 

Other expense, net

 

 

5.9

 

 

 

3.4

 

 

 

11.4

 

 

 

16.2

 

Loss before income taxes

 

 

(17.0

)

 

 

(29.4

)

 

 

(60.4

)

 

 

(79.8

)

Income tax expense (benefit)

 

 

4.0

 

 

 

(8.5

)

 

 

7.8

 

 

 

(13.9

)

Net loss

 

$

(21.0

)

 

$

(20.9

)

 

$

(68.2

)

 

$

(65.9

)

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.14

)

 

$

(0.14

)

 

$

(0.45

)

 

$

(0.44

)

Diluted

 

$

(0.14

)

 

$

(0.14

)

 

$

(0.45

)

 

$

(0.44

)

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

153,184,846

 

 

 

150,450,595

 

 

 

152,691,008

 

 

 

149,083,666

 

Diluted

 

 

153,184,846

 

 

 

150,450,595

 

 

 

152,691,008

 

 

 

149,083,666

 

 

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

 

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(Dollars in millions, unaudited)

 

Net loss

 

$

(21.0

)

 

$

(20.9

)

 

$

(68.2

)

 

$

(65.9

)

Items of other comprehensive loss before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

(48.5

)

 

 

(19.7

)

 

 

(80.3

)

 

 

4.3

 

Change in unrealized loss from invested customer funds

 

 

(33.0

)

 

 

(8.4

)

 

 

(139.9

)

 

 

(30.5

)

Change in pension liability adjustment (a)

 

 

2.9

 

 

 

3.8

 

 

 

8.9

 

 

 

11.4

 

Other comprehensive loss before income taxes

 

 

(78.6

)

 

 

(24.3

)

 

 

(211.3

)

 

 

(14.8

)

Income tax benefit, net

 

 

(8.0

)

 

 

(1.3

)

 

 

(34.8

)

 

 

(5.1

)

Other comprehensive loss after income taxes

 

 

(70.6

)

 

 

(23.0

)

 

 

(176.5

)

 

 

(9.7

)

Comprehensive loss

 

$

(91.6

)

 

$

(43.9

)

 

$

(244.7

)

 

$

(75.6

)

 

(a)
The amount of the pension liability adjustment recognized in the condensed consolidated statements of operations within other expense, net was $2.9 million and $3.8 million during the three months ended September 30, 2022, and 2021, respectively, and $8.7 million and $11.3 million during the nine months ended September 30, 2022, and 2021, respectively.

 

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

 

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Stockholders’ Equity

 

 

 

Common Stock

 

 

Additional
Paid In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

$

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

 

 

(Dollars in millions, except share data, unaudited)

 

Balance as of December 31, 2021

 

 

151,995,031

 

 

$

1.5

 

 

$

2,860.0

 

 

$

(309.2

)

 

$

(324.8

)

 

$

2,227.5

 

Cumulative-effect adjustments related to the adoption of ASU 2020-06

 

 

 

 

 

 

 

 

(77.7

)

 

 

10.0

 

 

 

 

 

 

(67.7

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(27.4

)

 

 

 

 

 

(27.4

)

Issuance of common stock under share-based compensation plans

 

 

535,418

 

 

 

 

 

 

6.0

 

 

 

 

 

 

 

 

 

6.0

 

Share-based compensation

 

 

 

 

 

 

 

 

35.5

 

 

 

 

 

 

 

 

 

35.5

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15.6

 

 

 

15.6

 

Change in unrealized gain, net of tax of ($18.4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(51.0

)

 

 

(51.0

)

Change in pension liability adjustment, net of tax of $0.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.3

 

 

 

2.3

 

Balance as of March 31, 2022

 

 

152,530,449

 

 

$

1.5

 

 

$

2,823.8

 

 

$

(326.6

)

 

$

(357.9

)

 

$

2,140.8

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(19.8

)

 

 

 

 

 

(19.8

)

Issuance of common stock under share-based compensation plans

 

 

503,145

 

 

 

 

 

 

7.3

 

 

 

 

 

 

 

 

 

7.3

 

Share-based compensation

 

 

 

 

 

 

 

 

38.8

 

 

 

 

 

 

 

 

 

38.8

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(47.4

)

 

 

(47.4

)

Change in unrealized gain, net of tax of ($10.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27.5

)

 

 

(27.5

)

Change in pension liability adjustment, net of tax of $0.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.1

 

 

 

2.1

 

Balance as of June 30, 2022

 

 

153,033,594

 

 

$

1.5

 

 

$

2,869.9

 

 

$

(346.4

)

 

$

(430.7

)

 

$

2,094.3

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(21.0

)

 

 

 

 

 

(21.0

)

Issuance of common stock under share-based compensation plans

 

 

492,742

 

 

 

 

 

 

9.3

 

 

 

 

 

 

 

 

 

9.3

 

Share-based compensation

 

 

 

 

 

 

 

 

39.2

 

 

 

 

 

 

 

 

 

39.2

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(48.5

)

 

 

(48.5

)

Change in unrealized loss, net of tax of ($8.8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24.2

)

 

 

(24.2

)

Change in pension liability adjustment, net of tax of $0.8