Q3 2020 Ceridian HCM Holding Inc Earnings Call

Dave for walnuts attachment rate to new sales has been approximately 80%, which we expect to need compounded adoption as those customers are taking line.

And finally, we expect april's recurring revenue growth, excluding floating on a constant currency basis of between 18% to 19% in the fourth quarter and above 90% for the third quarter of 2021, both assuming continued gradual improvement in customer employment levels <unk> <unk>.

I'd like to hand, it back to Jeremy to open the call up for questions and answers.

Thanks, David.

And we go through the Q and a portion of this call I will now turn to name and at that point. We ask you to please on your time asked a question about renewed your line.

And we're also seeing continued momentum into queue for so very robust selling environment and I would say as far as that goes I believe that the cell in environment, it's back to pre covid levels.

So we're quite quite encouraged we solwin's not any north America, but if you go through the stockholder lesser you can see we have significant when's on a global basis, as well, which is evidence of I'll move into the enterprise market and as well expansion globally.

In addition, we saw some benefit from the accent T acquisitions. So we're now seeing influence in global customers that have populations across a T J, where we all see an increase pipeline increase conversion her increased influence.

Hello.

Heroics to having truly processes that allow you to scale the comfort company profitably.

Perfect. Thank you guys.

Thanks, Alex.

Our next question is going to come from the line.

Math cough.

J P. Morgan Hey, great afternoon, Asmat costs on behalf of Mark Murphy.

David digging a little deeper into the 11 large global enterprise deals where these global vendors.

Were at pretty good levels. So I believe the market has already shifted back into.

Buying cycle.

Dave fourth while at all that we launch a subscription fee, we are seeing an 80%, 85% attachment rate to new sales.

And then follow up to that are historically the assembly of the RBC run for Gaulieder. So I'm wondering now that you are doing on the virtual implementation. How is the pipeline looking for more later this year, we were very happy with that.

Q3.

And so as we go into Q4, we expect that speaker lines will come in on budget obviously.

Obviously, if we compared year over year. There is some impact from the first two quarters of the year in terms of sales because Q1 Q2, we typically would take license you know.

D E a top stuff and that'll be coming up I believe in this particular culture as well.

Three based on the performance of the company, we did to a true full bonus payout for I'll stop sending you. The results were actually very strong.

Great. Thank you very much.

Next question comes from the liner Michael <unk> at Wells Fargo, Mike will go ahead.

Sure hold a measure about a T.

<unk> pay payroll customers that we use in day full time and attendance went out of business.

Alright, and then we can cover it all I would've expected someone to pass on the smaller the companies are I think they're more impacted by waves too and wave three and the different types of lockdowns that you see across jurisdiction, whereas the larger companies typically have more isn't it.

Helpful.

Uhm, maybe just a quick fall on if I may know me King crabs. So the new role since we have you here almost live in in person and David My I want a break for a second just any any initial observations key priorities are areas of focus for yourself as you are coming on board and wrapping it to the girl.

Alright, Thanks for that question I'm very happy to be here actually yeah, I I'm very late by the <unk>. The culture of the company I come from a place where we.

<unk>, you know they'd it to serve our customers and that and I find that here as well and the grass is amazing I'm excited about the the opportunities to further increase our market share the.

The growth driver that David mentioned, the global expansion that moved to the enterprise are areas that I think I can bring a lot of get somebody sneaky and I'm very excited.

Excellent. Thank.

Thank you.

Our next question comes from the line of <unk> from Jeffrey <unk> go ahead.

I get evening. Thanks for taking my question. So gave it first just I'm curious you know we didn't hear much about public sector. This quarter I'm just curious yeah, even if you'd made investments following the pushing Canada as modernization side I'm curious if you have any updates on our progress booked on that front, but just more broadly I know you were say.

They could dovetail into other public sector opportunities and then one follow up.

Obviously inquisitive two different types of ex LNG types of opportunities that we believe.

We can acquire migrate detective its the Dayforce side continue building out the dayforce platform to have more major countries and diverse from so as they come up we do look at all opportunities.

Okay, and then just on the wallet on on the background is as that scales. What are you considering around the financing of that.

Two of them, we haven't spoken too much about the actual financing the moment other than our cost of funds is probably about eight to 10 basis points.

Our actual load soon we compare that to the interchange that it's about a 125 basis points less the program management fees. So that we netted about 80 basis points on a particular.

Dollar spend 6.8% type of profit.

As we go forward, we are looking at ways to actually structure. The back end of the wallet with various types of kind of banking.

If youd like avenues, and I think we'll speak a lot more about that in the second half of next year.

Okay. Thank you.

Thanks, Brian next question comes from the line of Mark Mark Brown with Baird. Mark go ahead. Please.

Everybody. Thanks for taking the question I'm wondering can you talk a little bit more about the implementation pipeline and how you see that on holding is this your progress is particularly.

You know with the calendar year start up.

Time period, and then I have a question with regards to the clients that have put in place the.

On demand payroll checks and look I think what you're asking is what is the revenue build up into next year.

And so different right because as you know we do.

Second we do start recognizing recurring revenue when a customer does live.

Q.

Q1 night, we had impact in terms of sales at the very end in kind of late March.

Q2, I think we sold the majority of the impact from Cove. It because we didnt mention in our Q2 call Q2 sales still came in.

Above our Q2 sales levels in 2019.

And Q3, obviously, we're back to the levels that we would expect the beginning of the year you have to obviously you roll that forward and typically you can look at a six to nine month implementation timeline for most customers. So in terms of revenue that trough ready was Q3 that we've just coming out you will see a slight acceleration but still.

On impact from the Q2 sales into Q4 as we get into Q1, you'll start to see a little bit more acceleration and by the second half of next year, we should be back to the previous growth rates that we so that's great and then with regards to the clients that have put in place the digital wallet on the 60 that you mentioned what sort of.

Well I think our win rates have remained quite strong obviously as you pointed out the key vendors are going through quite a lot of changes one trying to transition from a service based organization into or software organization and the other obviously again through tremendous.

And what I expect will be tremendous merge.

Merger or types of challenges and a little bit over obscurity as to product strategy.

In market and so we.

We have been fortunate.

To be in the situation, where we are we have a very stable product with a very high customer satisfaction schools, we can take our customers live predictably.

And we have obviously this continuous calculation engine, which leads into the ability to pay people immediately and all of that as it relates to a very strong competitive positions.

Great. Thank you very much.

Thanks, Mark next question comes from the line of Raimo Lenschow at Barclays frame out go ahead.

Thanks.

That.

David can you talk a little bit about.

If you look international and and look at the expansion there obviously.

Obviously, we would like Europe is going a little bit back into kind of lockdown scenarios et cetera.

Okay, I understand a little bit what are you seeing them, how will that potentially impact you are not potentially impact you given that you've got happy working.

Actually for quite a while already anyway.

Yes, a lot about the level of growth at the moment is really coming out of the countries, where we have nature is payroll and so in terms of the UK, we're still seeing a very robust pipeline and level of sales activity and we were very pleased with the traction that we got in Q3 and Q2.

In the UK and the same is true across AMC will we have the dayforce nature product and as I mentioned, we're seeing a positive impact from the PJ. We believe from HFT dayforce connected pay integrations with gigs energy components. So I think we're okay from that perspective.

Germany, we've been successful, but remember we are not going to launch nature payroll for Germany until next year. So I think where we're somewhat fine from that perspective, yes, and then one follow up like two last week. We obviously have the the big HR Tech Conference and you guys showed really up in the share of Sidoti.

But in terms of customer satisfaction et cetera.

The one thing that was interesting blueberries, they had a lot stronger customer demand and customers around more to 2000 seats and below actually I don't know if you saw that which were slightly surprising to me that if there is some potential notion to kind of goal also that direction, because historically have been more.

You know in that three to 5000 that moving higher but it was interesting to see is to spend and 10 was actually very strong for you on the way down as well as just kind of maybe some commentary on that one yes.

The product is truly differentiated in market.

And it is a very big market and remember the the whole design of the application was can we identify batched phase work flows that shouldn't exist with today's technology and can we sold them elegantly and if you do that it doesn't matter if you're a 500 employee company or a 50000.

Employee company, you're going to get tremendous efficiency improvements and those of efficiency improvements by the way here a user off the system means you're taking frustration.

Now to the user experience of having to wait for batch based processes or do duplicate data entry will as I mentioned with the other under.

Great. Thanks, guys.

Next question comes from the line of Ya Chu at Credit Suisse. Yeah go ahead.

Everyone. Thanks for taking my question again, great to see the execution execution and hope everyone is staying safe.

I had a question around capital allocation given the success of the M&A Youve done with right checking accelerate do you think this current environment opens up more potential M&A opportunities and is this the right time to be more opportunistic, especially in areas, where there's dedicated growth efforts either in enterprise or overseas.

That's actually a great question and thank you for asking its something that we did 18 family all the time.

That.

We know that we have about a three 4% market share in major markets and much less than that in terms of enterprise and global.

And so just staying true to our current growth strategies, which again are acquiring new customers going back to the custom based and selling them additional modules.

Moving into the enterprise space extending into global where we have major payroll and where we have the we have the access to the A. BJ pieces, and then going into adjacent markets like the day fourth quarter. It just by focusing on those five avenues, we can still drive tremendous grower.

Sometimes we do come across opportunities like 70 or life right kick that allow us to accelerate our entrance into an emerging market that for each of those we have to look at it as to what else. We have to give up because we don't have unlimited budget to build everything that we would like to do.

Increased sales and marketing expenses, where we can get proper return and get the necessary integration piece and thats. The discussions that we have internally all the time.

That's great. Thank you and if I could have a quick follow up here wanted to clarify the comment in the letter around the 80 small market customer losses.

Each with fewer than 100 employees.

He is all due to custom is going out of business or any of them competitive losses is there any vertical or geographic exposure here and how should we frame or think about this churn issue going forward are we passed the worst of it is isolated to the smaller customers just any guide posts that would be helpful. Yeah. So let me just give a true runner, but none of them put the proper.

Walks around this this is in relation to kids Canadian.

How pay payroll cost him is.

Hey, you Staples workforce management.

So they are predominantly and power pay customers typically with very few employees.

And because any time and attendance capability, which isn't going to power pay product. They use a day for our workforce management.

Each of those customers that we're talking about these other customers that were impacted most by co bid so you're talking about the mom and pop Oh mom and pop shops, the very small kind of a hospitality retail outlets that simply did not survive courage.

Great. Thank you very much.

Next question comes from the line of Scott Fletcher I see I see Scott go ahead.

Hi, sorry, I was on mute person I can.

I actually because of the endless here I think I've got all my questions covered off so I'm. Okay. Thank you.

Thank you Scott.

Our next question comes from the line of Arvind Ramnani.

Hyper Sandler.

I apologize Arvind actually not on right now. The next question comes from the line of Chris. So that's three at a very fast Chris go ahead.

Hi, everyone. Thanks, I'd also I got my questions covered off thank you.

We have no other questions in the queue.

And that concludes the call for today. Thank you everyone for joining our third quarter 2020 earnings call.

I look forward to talking to you soon thanks, everyone have a good night.

Okay.