The speaker, Matt Wells, welcomes listeners to Ceridian's Third Quarter 2023 Earnings Conference Call and introduces the other speakers on the call. He reminds listeners that the commentary may include forward-looking statements and references non-GAAP measures. Co-CEO David Ossip discusses the company's strong third quarter results and commitment to innovation. President of Customer and Revenue Operations Steve Holdridge provides updates on sales wins and customer implementations. Chief Product and Technology Officer Joe Korngiebel highlights key announcements from the INSIGHTS conference. CFO Noemie Heuland adds details to the company's quarterly performance and updated full year outlook.

In the third quarter, Ceridian exceeded their revenue and profitability guidance, with Dayforce recurring revenue growing by 35% at constant currency. The company's CEO, Leagh, will be leaving to become CEO of Cooper Software, but the company has a strong leadership team in place to continue their success. Dayforce recurring revenue grew by 35% and adjusted cloud recurring gross margins expanded by approximately 350 basis points year-over-year.

The third paragraph of the article discusses Ceridian's adjusted EBITDA, which saw a significant increase year-over-year. The company also raised and narrowed its growth and profitability outlook for 2023. Other highlights include a record-breaking INSIGHTS event and the announcement that Ceridian is becoming Dayforce. The company was also recognized as a leader in cloud HCM by Gartner. The CEO expresses pride in the company's achievements and the Chief Revenue Officer is credited with driving sales momentum.

Sam has successfully settled into his role and is driving strong demand and sales execution across the organization. The company has achieved its largest and most qualified pipeline to date, with 353 net new Dayforce customers brought live year-to-date. The company's strategy of shifting up market has resulted in a 75% increase in net go-lives for Dayforce customers in the enterprise segment. The company's focus on selling value back to the expanding base has led to a 97% gross revenue retention rate and a 30% increase in annual contract values from add-on sales. Nearly 50% of new sales have been attached to the full suite, validating the company's sales and product strategy. The talent solution and Dayforce Hub experience have also been well-received by customers, with 40% of the customer base now using the full suite. Dayforce Wallet has seen healthy adoption, with 80% of new sales attaching the solution and over 1,765 customers sold and 1,065 live on the card. In Q3, a major Canadian supermarket chain with 125,000 employees and 1,500 retail locations selected Dayforce as their workforce management solution.

A global European bank, a Lithuanian retail chain, a customer service organization, an analytics professional services company, and a chemical and ingredients distribution company have all chosen to upgrade their HR technology by implementing Dayforce, a platform offered by Ceridian. This has allowed them to streamline processes, expand their current partnerships, and improve their overall HR operations. Ceridian's partner network has also experienced significant growth, showcasing the company's ability to serve customers and drive sustainable growth.

The company's focus on quantifiable value with Dayforce has resulted in positive outcomes across all areas of the business. At the annual customer conference INSIGHTS, the company announced several key innovations for the Dayforce HCM Suite, including Dayforce Co-Pilot, a Generative AI assistant that automates tasks and provides real-time data insights. The company also announced Dayforce Autonomous Payroll, which uses a continuous calculation engine to run payroll simulations and eliminate manual data errors and anomalies. These innovations are already available to customers in early access and will continue to be developed over the next year.

The company is introducing new features and updates to their Dayforce platform, including AI-powered data anomaly detection, Dayforce Exchange, and Dayforce Co-Pilot. These updates reflect the company's commitment to providing efficient and productive solutions for their customers, as well as their ability to adapt to changes in technology and the workforce. The company's focus on simplicity and quantifiable value for their customers differentiates them in the market.

In the third quarter, all key metrics exceeded guidance and the company is raising its Dayforce recurring revenue, total revenue, float revenue, and adjusted EBITDA. The margin profile has also expanded due to a shift towards recurring revenue and efficiencies in the cloud business. Year-to-date operating cash flows have increased by 43% due to continued scale in the business. In Q4 and fiscal year '23, the company is adjusting its Canadian dollar outlook, resulting in a $1-2 million headwind, but still expects strong growth in Dayforce recurring revenue.

Ceridian's Q4 float revenue guidance of $39 million is expected to remain stable, with a 18-19% growth in total revenue at constant currency. The company's focus on recurring revenue and building partnerships is expected to drive margin expansion, with a projected adjusted EBITDA margin of 27% for fiscal year '23. The company plans to amortize the Ceridian tree name over a 2-year period and does not anticipate investments in the Dayforce brand to affect their path to fiscal year '25 margin targets. More details on 2024 guidance will be provided in February. The company received positive feedback on their strong quarter.

The speaker has two questions for the company. The first question is about the source of the margin upside in the company's recent revenue and adjusted EBITDA. The speaker is wondering if there are any unusual factors to consider in the future. The second question is about the impact of Leagh's departure on the company's sales, as she was instrumental in selling to larger enterprises globally. The speaker congratulates Leagh on becoming CEO of Coupa, but is curious about how her departure will affect sales. The speaker also notes that the company's shift towards high-margin recurring revenue has contributed to their strong financial results. The company's CEO, David Ossip, responds by explaining that the shift towards recurring revenue and the use of system integrator partners has led to a strong overall margin. He also expresses confidence in the company's sales team, led by Sam, in the wake of Leagh's departure.

In paragraph 11, Steve mentions that the team at the company is made up of experts in the enterprise and large enterprise market. He expresses confidence and commitment to the business. The following question from Siti Panigrahi asks about the demand environment and pipeline for enterprise deals, to which David responds that the pipeline is growing and go-lives are on track. Siti also asks about the growth opportunity for the payroll sector, to which David mentions the company's near-term guidance for reaching $2 billion in revenue by 2025 and achieving 30% adjusted EBITDA and 80% gross margins.

The speaker believes that the company is on track and will continue to give near-term guidance to the marketplace. They expect to be at a 45% rule next year and have not seen a change in the payroll sector. They mention having over 20 modules available to customers and investing in the global cycle for more growth opportunities. The speaker also mentions the company's consistent focus on five growth levers since 2018. The next question is about the company's involvement in its partner ecosystem and the speaker attributes their success to having a high degree of integrity in conversations with system integration partners. They have been developing in the SI channel for several years.

The company has seen over 50% of deals initiated in the quarter and is positioning SIs as the first choice for implementation. The shift towards recurring revenue has led to increased profitability. The company is proud of the record number of partners attending the insights conference and their positive impact on deals and pipeline. The global reach of SI partners is also beneficial. The collaborative design of the program allows for collaboration and support for partners, as well as investment in their enablement.

The speaker discusses their company's success in the HCM industry and how their partners have had a better experience with them compared to other players. They also mention their focus on add-on sales and expanding their platform, with high attachment rates for critical modules such as recruiting and compliance. The company plans to double down on attachment in their sales plan for the next year.

The company is confident that they can increase add-on sales to customers. They are progressing well with the Canadian government opportunity and are waiting for their procurement processes. Customers and prospects are excited about the company's AI announcements and there is a lot of interest in using AI for various use cases. The company is ahead of others in delivering generative AI and their brand promise is to make work life better.

The company is using AI, specifically generative AI, to help with efficiency and productivity. They are working with customers to identify areas where AI can make a meaningful difference, such as generating reports and providing instant access to data. Customers at their user conference were receptive and excited about the potential of this technology. The company's architecture, a single data platform, allows for co-creation with customers. The company's CEO, David, is well-known in the HR payroll industry.

In a recent discussion, a company in the payroll industry mentioned that increased automation and improved payroll processes are creating a revenue headwind for them. This has raised questions about whether Ceridian, a cloud human capital management company, also generates revenue from batch processing or fixing payroll errors. However, Ceridian does not charge for batch processing and instead uses generative AI and autonomous payroll to make the process more efficient. This differs from other competitors who may charge for basic capabilities like allowing employees to view their pay slips online.

The company's continuous calculation engine has been successful in delivering efficiencies and reducing time for the payroll team. They prioritize innovation and improving work life for people. The company is not concerned about batch-based processes impacting revenue. The Wallet initiative is on track to hit its ARR target, with registration rates above 55% and a high App Store rating. New capabilities will be released in Q1 of next year, and the company has seen a significant amount of money moving through the wallet. They also have the ability to do direct deposit for employees who are not eligible for on-demand pay.

During a conference call, Bhavin Shah from Deutsche Bank asked about the monetization plans for Workday's Autonomous Payroll and generative AI services. CEO David Ossip explained that these services will likely increase the company's win rate and could potentially lead to an increase in platform fees. COO Joe Korngiebel added that Co-Pilot, the generative AI tool, will be offered as an additional product and can enhance employee productivity by automating tasks and answering common questions. Workday plans to monetize Co-Pilot by offering it as a separate SKU on top of their core suite of products.

The company is introducing new SKUs in their product suite, which will help drive revenue growth. The CEO and other executives believe that their generative AI technology will command a premium price in the market and attract customers. The company is still finalizing the packaging and pricing for their Autonomous Payroll product, which is a key component of their modern payroll offering. The company also sees potential for revenue growth in their global payroll services.

The company is focused on providing modern payroll solutions and is disrupting itself to adapt to the changing workforce and business landscape. They have had a strong quarter and are onboarding some of their largest customers yet. The system scalability is performing well, thanks to their hyperscale payroll project, which utilizes data and horizontal scaling. They have a partnership with Microsoft and can easily spin up new containers to serve larger customers.

The company's success is due to new customers going live and their ability to provide a horizontal scale and improved user experience. The company has been working on these improvements for several years and is now seeing them pay off with large-scale customers. The CEO notes that the company's strong return on investment is attractive to customers in a market with rising inflation and higher cost of capital. The company's quick implementation also allows for a quicker return on investment for customers.

Ceridian's platform expansion has resulted in cost savings for new customers who can purchase additional modules without having to pay for another database or hosting environment. This simplification has led to a strong return on investment and a record level of pipeline. The company is confident in meeting its 2025 targets and is focused on expanding its full suite purchases. The company is also utilizing generative AI to drive efficiencies and margin, and plans to double down on add-on sales next year.

The company's pricing strategy focuses on providing the right modules to customers for a strong ROI, allowing for future product sales and price optimization. They also use generative AI in their operations and for customer support, which has resulted in a 10% efficiency improvement. This has also led to a better customer experience and increased EPS. The company plans to continue using AI in a more proactive manner in the future.

In the paragraph, Noemie Heuland discusses the drivers for enhanced profitability and how they will lead to increased cash flow over time. She also mentions a little bit of favorability in AR for Q3, which was primarily driven by billings. The company remains committed to their conversions for the remainder of the year. Another topic discussed is the traction of Dayforce Wallet in international markets, specifically the UK, where there has been good adoption among customers.

The speaker discusses the company's success in the mid-market, which they consider to be the enterprise segment for other players. This success is attributed to improvements in user experience, data and AI, and talent offerings, as well as strong returns on investment and partnerships with system integrators. The company has also been able to secure large deals with companies with tens of thousands of employees.

The speaker explains that Ceridian is expanding its customer base through various growth factors, including acquiring new customers, expanding the use of modules within existing customers, targeting the enterprise market, going global, and developing new products. They mention specific examples of large companies that have bought multiple modules from Ceridian, and they see potential for further expansion in these areas. The expansion process often takes several years for these large customers.

Ceridian's confidence in their long-term view is strengthened by their clear line of sight to future revenue streams and their track record of executing against them. The company's global payroll adoption is a strong differentiator in the marketplace, and the progress of their new payroll engine in the Middle East is going well. The ideal marketplace, a differentiated idea, is making good progress and was featured at INSIGHTS.

The company has its first customers using the ideal talent marketplace and expects three customers by the end of the year. They plan to start building out the go-to market and hope to have a CFO announced by the start of the next year.

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