In the second quarter of 2020, Ceridian reported strong financial results and exceeded guidance across all revenue and profitability metrics. CEO David Ossip, CFO Noemie Heuland, and COO Leagh Turner discussed the company's commitment to innovation in the HCM space, sales wins, successful customer implementations, and continued scale across the organization. Additionally, the company raised its full year outlook.

Ceridian reported strong financial results in the second quarter, with Dayforce recurring revenue growing 39% on a constant currency basis and adjusted EBITDA expanding by 640 basis points year-over-year. Adjusted cloud recurring gross margins of 78.1% increased 177 basis points year-over-year and the company had record operating cash flows of $82 million in the quarter. Ceridian is confident that their focus on durable and profitable growth will lead to continued success and value creation as they have seen healthy adoption of their talent solution and Dayforce Wallet across their customer base.

Dayforce has seen continued progress in the use of generative AI, with their AI support tool now answering over 85% of directed questions. They have also developed an extendable formula-based global payroll engine that allows for rapid adoption of new native Dayforce global payroll for most countries across the Middle East and Europe. They are also progressing with customers on their major payroll expansion into Germany and expect it to be generally available in Q1 of next year.

Davin highlighted the success of Ceridian in the global HCM market, citing the increase of net depos customers, doubling of customers with over 6,000 employees, and a 17% increase in average deal size. He also announced Noemie's departure and invited customers, prospects, and partners to their Insights conference in Las Vegas. Leagh Turner echoed Davin's comments, emphasizing the strong momentum of the business and how they are uniquely positioned to take advantage of the complex macro environment, the need for a more connected workforce, and the new social contract between employee and employer.

In this era of AI, jobs and work are being transformed, and Dayforce is helping customers drive this transformation. Dayforce has 6,300 customers and 50% of new sales are full suite. Add-on sales are trending ahead of expectations, and the company has realigned their revenue and customer experience organizations. They have also appointed Sam Alkharrat as Chief Revenue Officer, who has 30 years of experience as a global enterprise SaaS leader.

In Q2, Dayforce and Ceridian saw several new customer wins and go-lives, including a European aviation services company, a professional services company, a consumer goods manufacturer, and a jewelry company. Additionally, a multinational DAX 30 chemical and consumer goods company, a pet care conglomerate, and a luxury automotive manufacturer all launched Dayforce to their workforces. This is a testament to the success of Dayforce and Ceridian, and their ability to attract top talent globally.

In Q2, Ceridian announced the evolution of their partner network to better align with customers' needs and saw Deloitte Australia, PwC U.K. and RSM accelerate the growth of their Dayforce offerings. They also joined the Ernst & Young Global Alliance Partner program. In terms of product, they made advances in four areas: experiences, openness, compliance, and intelligence. This included features like Flex Time pay, Dayforce Integration Studio, Dayforce Career Explorer, and the Burnout Dashboard. They are also making progress in integrating AI across their business, with tools for talent management and career pathing.

Ceridian has invested in its employees to ensure they are AI literate, which has been recognized by Newsweek as one of the top 100 most loved workplaces. The company has also been awarded as one of USA TODAY's Americas climate leaders, earned a AA ESG rating from MSCI, and been praised by customers as being the "Holy Grail of modern HR technology". Noemi has been thanked for her leadership and counsel in the past years.

Noemie Heuland reported that Ceridian's second quarter metrics exceeded guidance, with Dayforce recurring revenue growing 39% at constant currency and adjusted cloud recurring gross margins up 78.1%, expanding 177 basis points year-over-year. Operating cash flows were a record $82 million, and Ceridian expects Dayforce recurring revenue ex float to grow 26-27% in the third quarter and 27-28% for the year.

Ceridian has seen tremendous growth and scale since 2020 and their results reflect the resilience of their business and progress towards their financial goals. They have raised their revenue and EBITDA guidance for Q3 and the full year, with 17-18% growth at constant currency for Q3 and 21-22% for the full year, and adjusted EBITDA of $89-91 million for Q3 and $384-392 million for the full year. They are investing in sales and marketing to prepare for their largest quarter, Q4, in terms of new sales and go-lives. The current CFO is leaving to pursue other opportunities, but will ensure a smooth transition.

David Ossip answered a question about the EBITDA reflecting a 10% increase in productivity as a result of AI. He clarified that they had flowed through the full beat into both their Dayforce recurring revenue ex float and their EBITDA, raising the Dayforce revenue ex float by $10 million and the adjusted EBITDA by 15.5%. He also mentioned that leveraging AI and generative AI is part of their strategy and would be included in the efficiencies they would expect for the remainder of the year. Mark Marcon then asked about the guide for the recurring Dayforce revenue ex float, and David mentioned that there would be some acceleration in the fourth quarter relative to the third quarter.

David Ossip and Leagh Turner discussed how the scalability and profitability of the business is increasing with existing clients, with Dayforce recurring gross margins up 174 basis points year-over-year. They also noted that they have a 10-year lead in global operations and that Q2 results were very even across the regions, with large transactions being sold in every region.

David Ossip and Leagh Turner reported that the number of deals in the segment of 6,000 employees and above has increased by 125% year-over-year, and the deal size is up 17%. They also reported that the Dayforce platform has been expanded to countries in Africa and the Middle East, and that sales performance in large enterprise and enterprise was strong in the quarter.

David Ossip and Leagh commented on the macro, pointing out that employment levels have been higher than expected and that they have an optimistic view of the macro. Leagh then went on to discuss the addition of Sam, an exceptional technician, who will help the company make a few tweaks to their go-to-market strategy. Michael Turrin asked for more details on the differences between regions and market segments, as well as the visibility into Q4 deals. Leagh noted that they believe they will have a strong second half on top of a strong first half.

Leagh Turner explains that the company has seen great success in the first quarter with a 76% increase in the number of consultants trained and in the ecosystem. With the addition of Sam, who has great experience in sales, customer experience and analyzing and assessing how to grow a sales ecosystem, the company is looking to accelerate growth even further with influence partners, third-party revenue partners and additional relationships. The macroeconomic environment is favorable to the company as customers look for efficiency and are trying to figure out the future of work. The company is able to help customers navigate this change and will continue to do so as the trend continues to emerge.

David Ossip and Leagh Turner discussed the ease of movement towards Dayforce and the upselling of the talent and workforce management component. They also discussed the progress of the partner ecosystem, which has grown significantly in the past three years and now influences two-thirds of their sales wins. They expect the pipeline to continue to increase due to the network effect.

Dayforce is seeing success in its technology and demand, leading to more projects being kicked off by SIs, which is reflected in the total revenue line. The company is focusing on becoming a scalable software company and leveraging its SI partners to do the majority of the implementation. This quarter saw wins with customers with thousands of employees, confirming the direction Dayforce is taking.

David Ossip and Leagh Turner discuss the success of their company in delivering quantifiable value to their customers in terms of HR digital transformation, IT simplification, and the use of AI and analytics. They have pushed up into the enterprise and large enterprise space and have experienced success in doing so. Sam joining the team is seen as a positive move as it allows for more enterprise-level strategic focus.

Leagh Turner suggests making minor modifications at the midyear point, such as adding resources to move faster into a full suite company, in order to drive greater increment in the back half of the year. David Ossip explains that the average number of modules across the customer base is up 4x relative to 2021, and the number of go-lives in the upper market segment is up 125% per year. Both of these factors are contributing to the 17% growth in deal sizes.

David Ossip discusses the challenges that competitors face when trying to replicate the global payroll system that his company has built. He states that it is not possible to take a U.S. product and retrofit it for a global setting, and that there are many complexities that need to be taken into consideration, such as data elements, cloud environment, processes, and who is allowed to access the data.

Time and attendance calculations, overtime, scheduling, premiums, and penalty pay vary greatly from country to country. Benefits, language acts, record of employment, and money movement systems also differ widely. The company has been built to be global from the beginning, and Joe has been working on language localization within the platform.

Leagh Turner provides an update on the Phoenix payroll system project in Canada, which has been testing exceptionally and is preparing an initial findings report to present to cabinet for consideration. Alex Pennae, who had left the government and gone to industry, has been named Deputy Minister responsible for pay and will help support the path forward.

David Ossip and Matthew Wells are discussing the consolidation of the partner ecosystem and the upcoming launch of the ideal marketplace. David Ossip explains that larger partners such as PwC and Deloitte are purchasing regional partners in order to handle the demand for their product. He also updates Robert Simmons on the progress of the ideal marketplace, which is expected to go live with the first charter customers this year. Lastly, David Ossip explains that the back to the base sales are turning ahead of expectations due to the change in go-to-market and segmentation of the sales, as well as the dedicated overlay team.

The company has a weekly meeting to go over accounts that are currently under implementation and assign a risk to each one. They also have a quarterly forecast that the services group is held accountable for and has been successful. Steve Holdridge adds that they have good visibility into the progress of the accounts.

Jackson Ader and Leagh Turner discussed the possibility of new customers signing up for a full suite of services and the timeline for getting customers to do so. Leagh Turner explained that they position a full suite right away and assess the customer's needs to determine the maximum value they can contribute, and that customers are often receptive to expanding their relationship once they see the value of the services provided. Matthew Wells concluded the call by thanking everyone for joining and saying they would catch up over the quarter.

This summary was generated with AI and may contain some inaccuracies.