Ceridian(US:DAY)2022-11-03 03:28Financial Performance - The company reported a strong third quarter, exceeding guidance across all metrics despite headwinds from a stronger U.S. dollar [7][37] - On a constant currency basis, Dayforce recurring revenue grew 32%, and 27% excluding float [7] - Adjusted EBITDA was $63.5 million, a 61% improvement year-on-year, with an adjusted EBITDA margin of 20.1% [8][38] - Operating cash flows were $52.1 million, doubling from the previous year [10][38] Business Lines and Key Metrics - Adjusted cloud recurring gross margins were 74.8%, expanding 50 basis points year-over-year [9][30] - Year-to-date sales were significantly up, driven by net new customer wins, with deals above $1 million increasing over 50% year-over-year [24][110] - The company continues to see strong demand for Dayforce, with 38% of customers now taking the full suite [25] Market Data and Key Metrics - The EMEA region showed stellar sales performance, particularly in the mid-market, augmented by large global transactions [24] - The company is experiencing robust demand across all segments, including emerging, mid-market, and large enterprise [23][111] Company Strategy and Industry Competition - The company has been named a leader by Gartner in its Magic Quadrant for Cloud HCM Suites for organizations with over 1,000 employees [12] - The focus on innovation and technology has allowed the company to differentiate itself from competitors [12][88] - The company aims to achieve a 30% adjusted EBITDA margin and continues to invest in sales and product innovation [20][41] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the strong sales pipeline and the ability to scale operations despite macroeconomic uncertainties [47][48] - The company anticipates continued demand for Dayforce, particularly in a post-pandemic world where organizations focus on efficient growth [10][11] - Management noted that the INSIGHTS conference is expected to generate significant opportunities for future growth [85] Other Important Information - The company has delivered over 840 new features to customers in 2022 [14] - Customer retention rates remain best-in-class, with customer satisfaction scores exceeding expectations [31] - The company has eradicated pay disparity within its workforce, with over 50% of employees being female [33] Q&A Session Summary Question: Impact of macro uncertainty on pipeline and buyer decision-making - Management indicated no observed impact on pipeline or decision-making pace, with strong sales in Q3 and a robust Q4 pipeline [47] Question: Sales force productivity and retention - Management reported good retention and increased sales productivity over the last two years [48] Question: Guidance and Bureau business decline - Management explained the decline in Bureau business due to the end of life of a platform and a one-time accounting true-up [51] Question: Drivers of large deal demand - Management attributed the demand for large deals to a combination of sales force restructuring, global capabilities, and successful deployments [57] Question: Go-live expectations for large deals - Management expects a strong go-live quarter in Q4, with several large deals anticipated to go live soon [58] Question: Operating efficiencies contributing to EBITDA margin improvement - Management highlighted efficiencies in customer support and operational processes as key drivers for margin improvement [64] Question: Future M&A strategy - Management remains patient regarding M&A opportunities, focusing on regions with growth potential [112] Question: Channel partner influence on pipeline - Approximately 50% of the pipeline is influenced by partners, leading to increased win rates [116]