Dayforce, Inc.

Hello, and welcome to Ceridian's fourth quarter 2022 earnings conference call. I'm Matt Wells, head of investor relations. And on the call today, we have our co-CEOs, David Ossip and Lee Turner, and our CFO, Noemi Huland. As a reminder, all participants are enlisted And a question and answer session will follow the opening remarks. Before I hand the call over to David, I want to remind everyone that our commentary may include forward-looking statements. These statements are subject to risks and uncertainties that could cause Ceridian's results to differ materially from historical experience or present expectation. A description of some of these risks and uncertainties can be found in the reports we file with the Securities and Exchange Commission, such as the cautionary statements in our filings. Additionally, over the course of this call, we will reference non-GAAP measures to describe our performance. Please review our earnings press release and filings with the SEC for our rationale behind the use of non-GAAP measures and for a full reconciliation of these GAAP to non-GAAP metrics. Both our earnings press release and SEC filings are available on the Ceridian Investor Relations website. As a final note, a replay of this call will also be available on our Investor Relations website. And with that, I'd like to turn the call over to David.

Thank you, Matt, and thank you all for joining us today for our Q4 earnings call. Today, I'll discuss our exceptional results for the quarter and fiscal year and talk to our continued strength in technology that positions us for 2023 and beyond. Lee will give more information on our successful customer implementations and recent organizational changes that will help drive efficiency and continued growth. Naomi will then provide insights on our Q4 performance, 2023 full-year guidance, and reaffirm our medium-term goal of becoming a $2 billion revenue company with industry-leading cloud recurring gross margins of 80% and adjusted EBITDA of 30% by 2025. I'll begin with our financial results. I'm happy to report that we closed Q4 in fiscal year 2022 with strong momentum and financial performance. For Q4, we exceeded our guidance across all metrics. On a constant currency basis, default recurring revenue grew 35% and 24% excluding float. Our adjusted EBITDA was $67.7 million, or 20.1% of revenue, with cloud recurring gross margins expanding by 250 basis points on an adjusted basis to 76.2%. Cash flows from operating activities were 41.8 million, a significant improvement from a year ago. Our annual day force growth retention rate remains best in class at 97.1%, and our cloud annual recurring revenue surpassed $1 billion, growing 34% year over year. In 2022, Cerulean demonstrated efficiency in its operations while achieving impressive revenue growth and enhancing profitability. We also saw healthy sales growth in 2022, from both new customers and add-on sales to the base. This provides an excellent setup for 2023, as evidenced by our strong 2023 fiscal year guidance, while Dayball's recurring revenue growth at constant currency of 25 to 27% and adjusted EBITDA of 24 to 25%. I'm very proud of what our team has achieved and the value that we have all created for our customers. On this note, I would like to thank our employees and partners for their commitment and contributions to another successful quarter and fiscal year. It is our team, our differentiated tech, and just the sheer size of the addressable global HCM market that drives my optimism, my confidence, and my motivation to seize the growth opportunity ahead of us. Our brand promise of makes work life better has never been more relevant. This has been evidenced in the hundreds of customer conversations that I've had throughout the year. It is evident that every company, We strive to boost efficiency and productivity by adapting to the new reality of work. And our emphasis on providing tangible value through actual, verifiable investment returns has resulted in numerous customer success stories and increased demand for dayboards. Next, I will discuss our product innovation that continues to set us apart in the market. First, the size of our target market continues to expand. as we add new modules to the Dayforce platform and by expanding our global payroll capabilities. Today, we offer the most comprehensive HCM suite in the market that is also unique in its payroll capabilities for 57 countries. This allows us to deliver a differentiated solution to enterprise and global customers. Another significant area of differentiation is that Dayforce is a single solution with a single database and single continuous calculation engine. This means that Dayforce offers greater efficiencies and compliance than any other solution in the market. It is our continuous calculation engine that enabled us to launch Dayforce Wallet, which lets employees get paid when they want improving their financial wellness and reducing employee turnover and costs for our customers. Over 1,450 customers, an increase of 500 year-over-year, have signed up for Dayforce Wallet, and 889, an increase of 462 year-over-year, are live. The average registration rate is trending above 45% of eligible users, and the typical wallet user interacts with it about 25 times a month. Dayforce Wallet remains a key competitive differentiator with high attachment rates to new sales and frequent usage among employees. We expect Dayforce Wallet revenues of approximately 14 million in 2023, which is growing over 100% year over year. On the data side, intelligence is central to DayPulse, and we continue to integrate AI seamlessly into the platform. Our newly released intelligence search allows managers and employees to get answers to their questions easily and quickly. Also, our DayPulse people analytics features provides customers with metrics and analytics across the entire employee lifecycle, covering DEI, performance, compensation, fly-throughs, benefits, and more. We have also added intelligent automation to Dayforce Recruiting, making the talent acquisition process more efficient and accurate. And we have improved our best-in-class user experience to meet changing work needs, including a focus on mobile experiences. With the launch of mobile benefits enrollment, employees can fully manage the benefits on their mobile devices. And the experience hub which we released last year, allows our customers to easily put their branding on the application and personalize content and communications for specific groups. And we continue to offer differentiated features at the very core of Dayforce that extend across the suite to meet the demands of the modern workplace. For example, our Dayforce skills engine, the backbone of Dayforce talent intelligence, creates an open standards-based approach to skills It is the skills engine that allows us to match candidates to open jobs. And we are using this tech to build the ideal talent marketplace. We showed this upcoming solution at Insights. It will help customers increase the flexibility of their staffing models and adapt to the future world of work. And finally, Ceridian Tech Services has always stood out due to its competitiveness. In 2022, we modernized the architecture of our North American tax systems, and now customers can access the tax solution through the same technology as the Dayforce Cloud Platform. This will enhance our differentiation and drive more growth. Once more, we are very proud of the progress we are making with our distinctive product line. which once again has been recognized as a leader in the 2022 Gartner Magic Quadrant for Cloud HCM Suites for 1,000-plus employee enterprises, with us being the only pure-play HCM vendor named as such. In conclusion, our product innovation, broad reach, and impressive performance this past year gives us great assurance in our ability to achieve sustained profitable growth. Now I'll turn the call over to Lee. Lee, the floor is yours.

Thank you, David. Like you, I am so pleased that Ceridian continues to perform beyond expectations, and even in this complex operating environment. Last year, we adjusted our business to a more balanced growth and profitability plan. We shifted our operating model to leverage our APJ resources, and this allowed us to continue investing in and growing the business. And in 2022, Ceridian operated above the rule of 40 with total revenue growing by 24% in constant currency and adjusted EBITDA being 20.1%. And as David mentioned, our guide for 2023 continues to improve on the rule of 40. On the investment side, we continue to hire meaningfully, and especially so in sales, marketing, and engineering, which has allowed us to drive the innovation that David spoke to and the sales results that I am going to speak to. And we did all of this while at the same time meaningfully globalizing our business and the way in which we support and service our customers, driving customer NPS scores up across both our support and services businesses, while also decreasing the number of support tickets logged in-year by 13% and maintaining our world-class retention rates of 97.1%. We grew our partner ecosystem significantly in 2022, now with more than 170 partners globally. Today, more than 40% of our global bookings are supported by partners, and 14% of our kickoffs in-year were also completed by partners. And that's a trend that will continue to increase significantly in 2022 and beyond. We are seeing the effect of our partners in our pipeline as well. Our pipeline coverage is strong and the maturity of our pipeline and level of qualification is high. In 2022, we saw triple digit growth in our global markets and our average overall deal size increased by 22 percent in 2022, signaling our growth upmarket while maintaining our leadership in small and medium sized companies. Companies of all sizes, segments and parts of the globe are reaching for digital transformation, efficiency and globalization of their employee base to drive the efficiencies required to support growth. And these tailwinds are not going anywhere. In fact, IDC says that technology budgets are growing in 2023, with fast spend increasing by approximately 15% year on year. Our growth levers will continue to prove to be the right ones at the right time. We enter the year with a seasoned and efficient sales organization, We have reps with time and territory and strong pipelines, particularly as we continue to make demonstrable strides in the large enterprise market. Over 25% of our sales were back to the base in fiscal year 2022, and 39% of our customers have bought our Dayforce suite. retention rates in excess of 97%, this positions us well for durable growth over the medium term. These are proof points that our platform strategy works. Continued innovation and happy, satisfied customers are the combination that drives profitable long-term growth. Now, let me get into some of the specifics of our Q4 customer wins and go-lives. From a customer wins perspective, a global auto parts manufacturer with 40,000 employees in North America chose to further unify its workforce on a single HCM platform with Dayforce. This deal was brought to us by a partner and the business process transformation that will follow will be done by both the partner and Ceridian. a multinational hotel and restaurant company based in the UK, selected Dayforce to fuel its growth and transformation by leveraging a modern, intuitive and engaging experience for its 38,000 employees. A U.S. consumer goods manufacturer with 35,000 employees globally chose Dayforce for its Latin American and Asia Pacific operations, standardizing on a single global solution for payroll and workforce management and driving a more efficient and lean organization. a major global airline based in Canada with 22,000 employees, focused on driving efficiency in their global payroll and WFM processes, selected Ceridian and one of our key global partners to transform this part of the business. This deal was brought to us by that same partner. We also took live some notable companies in the last quarter. A global professional services firm recently went live with Dayforce, streamlining payroll and taxes for 55,000 employees in the US and Canada. This customer went from signing to live in less than nine months. They had very sophisticated requirements and excellent teaming between both Ceridian and the customer made this possible. They also happen to be one of our partners. one of the world's largest express transportation and shipping companies migrated to dayforce for a modern payroll experience for 12 000 employees a leading global retailer successfully migrated to dayforce for hr payroll and workforce management for 10 000 employees in the united kingdom and a major American cargo and passenger airline launched Dayforce for payroll time and attendance and managed benefits for 7,400 employees. For those of you following us for some time, you will have noted that virtually all of the customers mentioned have employees in excess of 10,000. A few years ago, this would have been an anomaly, and now it's the norm. We've been relentlessly focused on scaling this business, and this is one of the results. Speaking of scale, as we look ahead to fiscal year 2023, I'm very pleased to share the promotion of Steve Holdridge to President, Global Customer and Revenue Operations. In this new role, Steve will lead our entire global field operations. We have always known that this was the structure we intended to move toward, and this is the right time to bring our sales, revenue, and customer functions together to drive toward our growth goals and to continue delivering the quantifiable value that we promise through every single touchpoint of the customer experience. To support this new structure, we've also allocated additional resources to marketing in support of our brand and go-to-market efforts. We are providers of real business transformation, and at a time when every single customer everywhere is searching for a partner to help them convert efficiency into growth, Steve is absolutely the right leader to bring these teams together and to help us meet this moment of opportunity. His track record is exemplary, both since he joined Ceridian and in his years prior to joining us. A true global transformation leader, well known in the industry and well loved inside our four walls. I would like to personally take this opportunity to congratulate Steve on behalf of all of us at Ceridian for this latest endorsement of his leadership. Before I turn it over to Noemi, I would like to thank Rocky Submaranian, who will leave our business on March 3rd. Rocky was instrumental in leading our revenue organization to truly sell the value of transformation, working side by side with Steve to ensure that the quantifiable value we commit to in the sales process is realized when our customer goes live and again when they renew. He set us up for this next stage in our evolution, and we are grateful for his numerous contributions, and we wish him well. In closing, the demand environment remains healthy. Our pipeline is strong, the market opportunity is growing, our ecosystem is expanding and succeeding, and our renewal rates remain best in class. When customers reach for transformation and sustained efficiency, we are the answer that powers their growth, accelerates their productivity, and reduces their cost. Above all else, we have the right team further aligned to deliver, who I would be completely remiss if I didn't stop to thank, along with our customers and our shareholders for their steadfast commitment to our brand promise and purpose. to make work-life better. And with that, I will turn it over to Noemi to walk you more deeply through the quarter and the year and to review our guidance. Noemi?