Q3 2021 Ceridian HCM Holding Inc Earnings Call
Assumptions and beliefs in light of information currently available to us listeners are cautioned not to place undue.
Undue reliance on such statements.
Each forward looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those set forth in such statements. We refer you to our previous filings with the SEC for information regarding the significant assumptions underlying forward looking statements and certain risks and other factors that could affect our future performance and ability to <unk>.
These statements we undertake no obligation to update or revise any forward looking statements made on this call except for those that may be required by law.
The third quarter's stockholder letter earnings release, and Form 10-Q have been furnished or filed with the SEC and will be available on the SEC's Edgar database in the U S and the SEDAR database in Canada as well as on Ceridian Investor Relations website, and investors docs Caribbean Dot com with that I will.
Turn the call over to David Thank.
Thank you Dara and welcome everyone to our Q3 earnings call.
Let me say a few quick words about a quarter before we open it up for general Q&A.
We had a very solid quarter with continued great execution across the entire business.
<unk> recurring revenue ex.
Ex float.
Grew on a GAAP basis by 33% on a constant currency basis by <unk>, 1%.
Total revenue increased on a GAAP basis by 26% or 24% on a constant currency basis for.
For the fiscal year of 2021, we slightly increased the guidance and we narrowed the range to $1 billion in <unk>, two 1 billion and 19.
On the gross margin we saw an improvement.
The gross margin to 72, 7%, which is up to 90 basis points on a constant currency basis, and up 70 basis points on a quarter over quarter basis custom.
Customer accounts increased by about 11% year over year and the average size of the customers also increased about 11%.
On a 12 month basis, we have taken live about 523 customers.
Float balances also increased by about 25%, but float income was negatively impacted by a slight decline in the yield by 36 basis points.
Adjusted EBITDA was $39, four which is up 20 basis points on an ex <unk> basis.
On the day of course wallet, we continue to see very strong metrics. The number of customers live on <unk> now about 290 customers.
We have sold over 800 accounts at this point in time we.
We sold registration rates across the eligible employees, who have access to the wallets grow to about 29% and when we look at the top quartile of tenured customers. We see registration rates above 50% usage also wallet continues to be very healthy with an average number of transactions.
Of above 25 transactions per month.
In early October.
We are closed on an acquisition of data fusion.
Which further increases our compliance advantage and gives us specific capabilities for certified payroll reporting prevailing wage rate calculations incentive payments Union, Ralph great calculations, and very complex general Ledger reporting.
This technology is immediately available and will be integrated into <unk>.
This acquisition will obviously help accelerate our growth in construction government contracting manufacturing unionized environments, the public sector and not for profit.
Also in the first week of October we have it.
Held out first in person customer event in over two years with the first stop off the Ceridian will tour in Las Vegas.
D. CWT event, we shared our vision for <unk> to deliver the always on people platform for the global work force, which is anchored by our brand promise of making work life better.
A few highlights of the event.
We had some product announcements, including the announcements off screaming pay which is the automatic delivery of earnings and net earnings.
Employees Staples Wallets, we announced the HR service delivery, which is an end to end employee solution that provides an always on HR and compliance support.
And we also discuss Staples talent intelligence suite held new transforms a talent management positions.
Empowered by AI and data.
We plan to build on our success with our next CW CWT Tour stop in New York. This event, which was primarily focus on customers will also feature an investor track, including a session with the <unk> executive team starting at 330 PM Eastern time on Thursday November the 11th.
That portion will be webcast. So please join US you can find the information on our Investor website on how to register the eventual enjoying the session via live webcast.
I am also very pleased to share that ceridian was once again named a leader in the 2021, Gartner Magic quadrant for cloud human capital management suites or enterprises above 1000 employees.
We believe this report further validates our vision, the innovation, but april's product and our commitment to delivering quantifiable value for our customers.
Before I hand, it back to Eric I would like to close by saying how proud I am of our ceridian team across the globe.
Our engagement metrics are up.
Culture remains vibrant.
As we alongside our customers to transition to a new hybrid work environment in our purpose and our brand promise to make work life better has never been more clear and relevant Eric.
Eric back to you.
Yeah.
Thanks, David as we go through the Q&A portion of the call I will announce the name and at that point, we ask you to please.
And ask your question and then re mute your line.
He will also ask you to please limit your time to one question and one follow up.
Thank you in advance for that.
Today. The first question comes from the line of Alex Zukin of Wolf Alex. Please go ahead.
Thank you Eric.
And congrats.
Sorted and team.
Solid quarter, I guess I wanted to start out.
David by asking the question.
Around the narrowing of the guidance range and particularly as for motor letter you called out seeing some employment headwinds in your customer base of.
Not not being able to hire at the pace or re hire at the pace that they wanted to and it impacted the quarter I'm, assuming could impact of the guide somewhat I wanted to ask a broader question, which is how long do you anticipate this to be a headwind for the business and are we.
If we step back and from a big picture perspective look at the business, you're seeing clearly tailwind around.
The war for talent and necessitate a modernization initiatives of many HR organizations and tools, but at the same time.
Pay per employee per month that if you can't hire then you can't pay ceridian more so.
Talk to us about those two dynamics are they balancing out because new bookings are well ahead of where you thought you were going to be and we can see those numbers. We can always see the the pep and stuff, but that would be very helpful thing.
And it's great series of questions, So I'll try and break it down into different pieces.
For Q4.
We had expected last time, we spoke a one 5 million improvement.
And the headwind from employee counts.
As we pointed out in the shareholder letter, we're seeing that is taking slightly longer for our customers to fill their open job for acquisitions.
We have decreased.
The improvement of day pools to be down by about half a minute.
And that is the tightness that we've actually taken so we've widened the Q4 guidance by a corresponding by that amount. However, we have taken the beat that we had in Q3.
To the full year guidance, if you like so that gave us the increase in the actual guidance in.
In terms of the business, obviously I do believe we have been executing tremendously well.
That if I looked at it from a pipeline perspective still remains very strong.
And we are forecasting for the second half of the year.
That sales will come in quite favorable to last year and two the year before that which speaks obviously to the sales execution of the actual business.
On the implementation projects continue to be implemented at a lot of activity with our customers and I'm actually seen some tremendous feedback from our customers in terms of the NPS the customer satisfaction levels as well.
In terms of the tightness of the.
Like the hiring market.
I wish I had a.
Yeah.
Magic Merrell or something.
But at this point just looking at what we know given the employment numbers that we did see in September which remember do give us October and what we believe we saw an alternative which gives us visibility into November and what we're currently seeing in November which would give us visibility into December.
Believe our guidance range is pretty good.
Got it and I guess is this should we start thinking as we model.
As we adjust our models for next year should we start moderating our assumptions for employee tailwind in general based on these early indications and then maybe for for Nuomi also walk us through some of the adjustments around the adjusted EBITDA Guide. It implies that you are spending a little bit more I'm assuming on marketing.
Sales either hiring or activities.
And then also apologize for the multiple questions, but we do track job postings and it did look like so it is job postings declined quite a bit over the past couple of weeks that could be great. Because you all have your hiring targets, but.
But I just wanted to double check that.
Just on the hiring side, we have been hiring very aggressively throughout the year.
What I will say is that we haven't really been struggling in foreign finding fantastic candidates across the organization.
In terms of the adjusted EBITDA I'll hand, it over to Miami for all the funding goodness in that conversation.
So in our Ami all over here, yes. It shows our adjusted EBITDA for Q3, as you said were $39 four or 15.
53% of corporate revenue and for the full year, we continue to expect our adjusted EBITDA margin in the range of $15 four to 16, 9% of total revenue. This was pretty consistent with what we've said before we're continuing to invest in our product technology and so we made some exciting product announcements recently.
Your comment about hiring we're actually very successful in attracting top talent in a tight labor market.
So as you know our brand is strong and our reputation is strong as well.
We've made some significant investments in our R&D as you saw in our cash spend on R&D went up from less than 10% of our total revenue in Q3 last year to above 13, 6% this quarter.
We've ramped up our services delivery capacity, which is kind of a timing thing that you see from Q to Q4.
Ramping up to service our customers to have to go live in Q4, which is our largest go live quarter. There's a lot of very large customers going live in Q4, and we're also focused on integrating the data fusion technology into the base platform.
Other thing I would say is we've also reopened offices throughout the summer in North America, we've returned to in person meetings as well, which is very important for people. After having spent two years apart and our sales reps are traveling to meet our customers and prospects throughout the fourth quarter I always get a lot of benefits, obviously from digital selling and we continue to invest in.
Digital sales capability, that's not going to go win that was a great learning from that and then at times, but we also want ourselves.
Sales and marketing team to the heating customers and prospects on site and we've done so quite successfully.
Big asset as an example, and we continue to do that for Q4, so that explains a little bit the timing is different.
In Q4, but overall, our full year adjusted EBITDA guidance range hasn't changed and our investment priorities remain consistent.
Perfect. Thank you so much guys.
Thanks, Alex up next we've got Jared Levine from Cowen.
Thank you in terms of day for Salesforce productivity, where do we stand versus pre pandemic below when do you expect a full recovery and if we're above what kind of what's driven that improvement.
Sorry, Gerrick, you're talking about sales productivity.
Prior to pre Covid.
That's a difficult number to answer because I don't know if we've actually measured at pre Covid post COVID-19, but what I would say is that we are quite pleased with our sales productivity numbers and when I look towards next year I think we would expect to get even more productivity out of the actual group as you know this.
This year, we invested very heavily in building out the actual sales team we did that for a number of reasons, one obviously to move into the enterprise space.
To build out muscle in working with the system integrator relationships that we've put in place and also to build out our <unk>.
Capabilities to focus on the full HCM platform not only on the compliance modules and I would say all of that has been gained very well not only north America, but on a global basis.
Anything that you would add to that no I think you've covered it all I mean, we've invested also into self support organization with value advisor solution advisors and people, who can sell alongside system integrators and end markets.
So that's on.
And you covered most of the points David.
Okay, Great and then in terms of the pace of de force go lives in <unk> can you kind of dig into what weighed on that pace, there and do you anticipate an uptick in <unk>.
Q4 is always the bigger quarter.
Q3 is normally a lighter quarter.
So yes, we are expecting many more accounts to go live in Q4 over the Q3, which is typical for the actual period in terms of the number of accounts, it's largely being driven by the size of the accounts that will go in line. So if we take live for example at 50000 employee accounts.
If I compare that to historical trends, where we're taking life stay solvent employee counts to 50000 would count for effectively 50. So.
So when we look at it more on an LTM basis, now, which gives us more of an average type of trend for the actual business.
Perfect. Thank you.
Yeah.
Great. Thanks, Gerry next up we've got the city kind of Guy he from Mizuho City.
Hey, guys congratulations on the.
Solid quarter.
Wanted to.
Dig into the international market that used to be one of your growth driver International expansion you talked to a couple of years back knowledge, you're expanding your payroll.
Knitted payroll and then also you've talked about some of the global Windsor will.
Until this thing what you are seeing and when do you think it will be a michelle contributor to your revenue.
From international market.
Look I'll go I would say and probably about a three year basis, we're able to push it about 25% of our revenue onto a global basis.
Come quite care might take a bit longer, but we generally are moving in that direction.
<unk> have advanced relative to all of the other players in the marker in terms of global payroll and global core HR.
Obviously, you're having a lot of success in market with companies that are headquartered outside of North America as well as companies in outside North America that have global operations.
CWT, we actually discussed with the client base the nine additional countries that we're adding.
In 2022.
In terms of major payroll capability and again I think that just positions us very well and market to win. These global accounts. We definitely are seeing an increase in demand for core HR systems and talent suites and compliance modules that cut across the globe to gave organs.
Nation that single experience for all of the employees, regardless of where they live and work.
That's great and then on a follow.
Follow up too.
Therefore wallet so it's good to see the exploration and new customer signing as well as go lives this quarter versus last quarter.
You've talked about trimming they introduced in October and also.
CWT OLED, but how should we think about the ramp in their portfolio.
A few quarters and when do you think it would be reasonable for you to start disclosing other metrics like revenue or any other contribution.
We'll probably start late next year on the revenue contribution as you know is still a new business for us what I can say if I look at the business on a quarter over quarter basis, it's effectively doubling every quarter. So we're still going through the kind of the early stages of what I'll call hyper growth, albeit.
Some of the metrics that I'll point you to believe.
Believed last quarter, we spoke about the average registration across all illegible eligible employees to be about 25%, it's now over 29%.
And when we look at customers that are being live every year, we're seeing registration rates.
In the top quartile, well above 50% with a very strong usage metrics that we discussed.
There was 25 transactions that people are doing everyday living it's fast through grocery convenience gas ATM withdrawals in the life, so that excites us quite nicely in.
In the quarter as well.
Our reduced two day early to pull up to two day early deposits, which means that if you're a day pools wallet user.
Can get paid when you want to say you take out a third of your net earnings during the period Youll remaining too. So that you can get up to two days early as well and again the whole model is predicated on no direct fees to employees no membership fees no fees to the organization and every payment is a true payroll which means it.
Fully compliant you can any slip for every type of transfer the premium pay will come online as we mentioned in 2022, we believe that will obviously accelerate because the idea over there as <unk> on demand payroll having to wait for direct deposit as I work to pay automatically screens into my wallet and we're talking about.
Making access deal earnings completely instantaneous and that will obviously be paired with quite a very rich financial wellness.
Offering set with inside the actual products. So we are quite excited with it.
April's wallet by the way also has given us a tremendous advantage in market, we're still seeing attachment rates across new business, well across 80% and in every conversation that I have with clients with early clients today for <unk> wallet is top of mind.
Great. Thanks, David.
Yes.
Next up is Mark Marcon with Baird Mark.
Hey, good afternoon, everybody and congratulations on the great. So Dave <unk> results.
<unk> had a number of of Cigna.
Significant wins I'm, just wondering if you could characterize a little bit.
Who you ended up winning from like you mentioned.
Luxury global automotive companies largest car rental organization I mean, those are all really large enterprises. There are a number of international ones, who are you, replacing how is the scope of the opportunities changing in terms of the pipeline.
How's the.
<unk> from Gartner impacting your ability to sell.
Mark the first thing I would say is we're seeing more and more customers larger customers buy the full HCM suite I believe the number is 36% of clients today bought in by a full HCM suite and so the takeaway from that is that we are now being seen not only as a compliance play a compliance being payroll benefits time.
And workforce management, but also a leader in talent intelligence core HR data analytics and all of the other pieces that comprise a very rich and robust and engaging.
System for employees as we've gone upmarket, we obviously are seeing more add backs against the ERP and I'm quite proud of our success over that we do also compete.
Against the more traditional human capital management, and payroll customers and obviously our win rates over there are quite nicely.
In terms of the wins, usually we replace in a more legacy type of payroll or time solution are declined server or mainframe based we're also seeing the replacement of more legacy based ERP systems that might be on prem or not true cloud.
And obviously, we replace a lot of different point solutions when it comes to the various types of talent modules.
That's great and then you've got a lot of different growth opportunities.
Government International.
Digital wallet.
How is that going to impact.
Your investment.
Perspective for next year, how should we think about EBIT.
EBITDA margins in the short term relative to you know.
All of the investment opportunities that you have.
Look our focus is on growth, we still have a relatively small market share whether it be in North America on a global basis that we believe are try to the companies to invest more on growth on increasing the actual EBITDA.
All going to continue to invest in product and technology sales and marketing.
In terms of our five growth factors, which we always speak about number one acquiring new customers. We are obviously doing very well still have a long way to go to a lot of white space.
Two increasing the actual platform.
With respect to about some really tremendous innovation in terms of what we bring into market and that allows us to expand the platform go back to the base and remember add ons remain at around 25%.
Every single quarter moving into the enterprise space I've spoken about that but it is not only moving into the enterprise space on our payroll benefits and time perspective, we really outspoken about moving into the enterprise space on a full.
HCM basis again, 36% of customers are now buying the full HCM suite.
We've spoken a lot about the global opportunity and in a number of years I expect about 25% of our revenue to come from the global basis, and then of course, we have the adjacent markets, which is the day force wallet, which there is a lot of excitement in the metrics are very good in terms of long term growth of the company. We are obviously very excited and as you.
And when it comes down to the annual budget. There are a lot of considerations and tradeoffs as to which of the five different growth vectors, we emphasize.
Shall we just this I'm sorry.
We're also looking at the the cloud recurring gross margin, which is one of the key indicator for us.
Because that's really what's going to fuel the long term sustainability and profitability of the business and the indicators keeps going up it was up 290 basis points, excluding close this quarter and so that's really what we're looking at some scale as well.
So investors should probably deemphasize looking at EBITA margin from a short term perspective over the next year, just given all the investment opportunities and really focus on the on.
On the recurring.
Cloud gross margin.
Sure.
I think Amy.
Amy emphasize degree important points is one that we have continued to talk about from the time, we went public that it's a metric that we look at internally.
She is whether or not the growth the recurring gross margin is expanding alongside revenue.
And I would say that is growing up very nicely SME mentioned, it's up 290 basis points or almost 3% on a constant currency basis year over year.
Even given the headwinds that we still have from the.
I'm, sorry from the employment headwinds.
Great. Thank you.
Great. Thank you Mark next up is Matthew Pfau from William Blair Matt.
Yeah, great. Thanks, guys.
At the World Tour, you discussed the elastic workforce in some functionality that ceridian was potentially working on in that area in terms of connecting employers with.
Employees, maybe you can just provide some more comments on your vision in that area and how you think about that market opportunity.
Thanks, Matthew I have spoken about this for quite some time I already spoke about the tables 10 technology, having three sequential steps with delivery.
First step was to build out the continuous engine that would allow us to calculate net earnings.
Someone worked and Thats, obviously quite a difficult thing to do and we believe we have quite a competitive measure around us and that we can do that and the others cant.
The second step was creating the payment rails, so that not only would recalculate net earnings in real time, but we could also pay people in real time and that came down to de pools wallet and we've seen great traction.
The third part was well if I download the <unk> wallet and we know who you are through the <unk> process. We know you have the right to work we know what Youll certifications, all we know that you're safe.
We also know inside the day force application, what all the local jurisdictional rules off of things like overtime minimum wages premium pay and alike and.
And we also have the capability through the day pools app to allow you to clock in clock out by a year locations in that case, what we can do is we can make it very easy for organization to publish their vacancy.
A vacancy it could be a number of hours say a shift that has to be worked.
It could be a task such as the delivery or it could be a longer term assignments. They had three or four week programming assignment.
And along with the vacancy the organization could publish the competencies required and possibly even some lending management contract.
We can then allow all of the <unk> wallet users to look at their app and much like there'll be looking for rewards around them there'll be able to see the vacancies.
Which they have the right competencies they could learn about the vacancy through the learning management content.
<unk> get matched and when they actually show up they would show a QR code to thought payments lockout and as soon as the ALS are approved they would actually get paid and us as ceridian would be responsible for doing all the necessary remittances will be an oral for year end filings all of the different types of money movement and you would go now from just one.
And you have an instant access to your earnings, but you would have the ability to actually find work where it can get paid in real time, which we believe matches where the workforce is going so we're quite excited with that opportunity. We've started the actual research and to build out and the partnership that I think will enable us to do that obviously leveraging <unk>.
Stuff that we already have through the <unk> continuous calculation engine of <unk> wallet payment rails.
Yeah.
Got it got it and then just to follow up on some other features that you discussed that the world tour, specifically around some of the AI and self service features how do you think about those from an ROI perspective, when youre selling to prospective customers and does that have an important point of the conversation.
So Matthew everything we build retired back down to our Kpis that we can impact and customer and as we've always said that <unk> needs to be measured measurable and convertible into a money saving for us we use the term quantifiable value and I believe we're ranked number one in industry in terms of delivering strong ROI.
Right.
Let me talk about the day pools wallet, we talk about some very strong metrics that show basically to keep decreasing our attrition rates.
The decrease in the first 90 day attrition rates.
Good time to actually hire somewhat.
So as we actually build it out as always along the same lines in terms of the talent intelligence.
What we are saying today is the market operates in something called talent 1.0, and at a high level to me is really people operating this list management framework.
If I'm Jean recruiting I.
Look at our list of candidates for a particular job requisition by software I filter that lift accordingly, I find that candidate that offline to act on and then I'll go through a number of sequential steps, usually montney drove manually driven.
And talent two points here is that we're beginning to release now we're moving more to a recommendation and prediction type of model very similar to for instance, when you've gone through Amazon or Netflix and those system direct demand either products that you would like or movie shows with television shows that meet your requirements. We're doing the same now on the talent side, so when I get to.
That list of candidates is not a list, but a set of recommended candidates.
The system has predicted will be a good match based on who the hiring managers and through the recruiter and then even once we have that we can go and use a lot of automation like align that candidate yourself schedule. When the candidate interacts with the assistance, we can engage with technology.
If the candidate is applying for one particular type of job based on the candidate he is applying and the available job requisitions, we can recommend back to the candid where they may be a good fit for other opportunities and at that point in time get them to engage and or even complete the application for them. So it's effectively used in.
Mel models on AI models.
And look at what's being done currently in talent in order to engage with people in a much more natural manner that they would typically expect.
In terms of the.
Service desk over there there's a lot of information that the de pool system has as you know we've already moved into natural Workspaces that you can now engage with the system through teams or through slack and a very.
Natural way, we can now allow the employee to ask questions about policy what is the vacation policy as opposed to just how many days do I have.
My eligible for something and by doing that we can take a lot of load of the HR Department and again, given that's driven off of ml type of model will continue to evolve continually learns and becomes more of a natural way of interacting with this is.
So obviously a lot of excitement to get around intelligence and data. If you do come to the renewal tool, which you obviously came in Vegas, but for others.
You'll see Jerry talked about that and we'll actually have a few demonstrations of the technology, which is really exciting.
Perfect. Thanks, David.
Yeah.
Thanks, Matthew up next we've got some odd samana from Jefferies Smart.
Hey, good evening, Thanks for taking my questions I appreciate it as always so maybe David first for you just as I think about the international side. The company has done M&A around that and clearly the commentary this quarter was positive around around traction how should we think about maybe international bookings or like new book dollars.
In this quarter versus prior quarters, and maybe how should we think about international as a percentage of new books dollars going forward.
I don't think we've actually included that in the actual numbers or didn't have them off hand, but all of this the global business continues to do very well.
Not only on the sales side, but if I look at global implementations, we're seeing a lot of success, both in EMEA and across AAP, Jay in terms of getting customers live and referenced Apple.
As we go into the upmarket space is almost a certainty.
We're always studying our global systems, whether as I mentioned, they are globally headquartered companies or whether they are based in North America in some instances, we actually see both if you look at the shareholder letter.
We actually speak about a automotive company headquartered out of Germany, No actually two separate processes. We went through one was for B.
The deal is that they have.
Across Germany, and the other one was for their kind of more global manufacturing operations. So we're seeing kind of a benefit from having both of those and obviously as you go through the risk profile and become a vendor for the <unk>.
Overall organization, there's a lot of a benefit to a lot of growth we see across the globe.
Great.
On the Canadian Federal government it.
It was great to see that that's been brought back now is that as the world reopens.
Is that included in the guidance for the fourth quarter is there any revenue contribution from that and then just how should think about the impact of that on maybe the near term EBITDA outlook, maybe even into 2022 or just how should we think about the margins and margin impact from that.
A little bit of service revenue and a small amount of subscription revenue inside the actual quarter, but I wouldnt call out auctions being material.
Where we are with the government of Canada, we're in the midst of the planning phases.
For the experimental pilots.
For the first departments inside the government.
Obviously, the majority of that work effort in terms of executing across the pilot will happen in 2022.
It's also obviously that the GLC will require more departments.
To be included in the pilot.
To test the various elements of the actual system. So it's likely that the number of departments will be expanded more thoroughly.
As we move forward as well.
Great and then maybe just if I could squeeze in.
Third one which is just.
I know I heard the question about the employment recovery I wanted to ask a different way given just how many companies you are exposed to so regularly as the CEO of a large HR payroll company is when you think about the hiring within the base.
Is it is it a safe assumption and everybody will get back to the same levels, where they were all else equal before the pandemic.
I guess I'm just curious how much if there is a automation or if theres hiring quite a shifted where they're more efficient and don't need to get back at those levels is that something we should think about it as long as as far as far as same store sales growth goes within the installed base.
You asked me scenario do you think that Orlando with employment levels above where they were at pre pandemic.
A number of factors or do you think the economy is growing very very quickly.
And so companies are not.
Hiring back to their previous levels, but all hiring above the levels.
The second part is I do think there are a lot of new companies that have into the economy that didn't exist pre the pandemic and those companies are actually hiring as well.
So I do think we'll move back to very full employment on one side the economy as we go into 2022.
Great. Thanks, so much David.
Thank you so much up next we've got Arvin RNG nanny with Piper Sandler.
Harvest Hi.
Yeah, David I want to ask a.
But more about the <unk> wallet.
You provided a lot of color on it is.
A question on the first one is but a couple of question, having a different spot advised.
You know what are some of the secondary demand do.
Benefits of their fourth quarter wallet I mean, it seemed the revenue portion is.
Would it be interesting when you start to provided in next year, but can you just talk about some of the secondary of like impact on win rates everyday to charge clients more on engagement.
Some of the secondary benefits would be great.
First is obviously our win rate goes up because what we are allowing companies to do is to move to paying people immediately without them having to change the way that they fund their payroll and without any cost to them in terms of subscription fees or fees to their employees. So it's a tremendous benefit to both the organization.
And.
To their employees in fact.
Organization creep there from a weekly or biweekly payroll to a monthly payroll and got a onetime lift of working capital as well I don't want you to additional benefit.
I think thats, becoming very important.
The second is what I would say is that the desire to get paid immediately is becoming a requirement in business today is no longer optional for the economy moving there and we have that protect them I think anyone else in the market in that every time, we moved some money we do a true payroll that is fully com.
Flying to the federal and the state will Prudential basis in Canada, and I think that's very very strong as well.
When we're going to have some deals we actually are seeing them very focused on the day falls wallet there've been some cases, where would that has allowed us to maintain or actually increase price interest based on the advantage that we have.
Inside the market and the last piece as well is that I do believe it does help our brand with the employees of our customers.
And so I would expect over time that we become the preferred choice of HCM solution not only for the organizations, but for the worker as well.
Perfect and then.
Our <unk> for the first cluster of impact.
What is the sort of revenue model emanate from what I've understood. It.
Maybe like a change of any bps or something.
So two questions one is what does the business model.
And Anderson <unk>.
Fee associated with them.
And then just to the debit card to pay for it but in a situation where someone both let's say $1000 $800 is going to go into my bank account $200 with GMI debit card as their revenue to begin even from that 800 that goes goes into the bank account. There are first of all currently we don't see many.
Transfers all see actual costs were actually seeing is day to day spending from the cards.
And as you mentioned about 25 transactions per month average probably about $30 per transaction, usually on day to day living.
When someone doesn't ACTH transfer, which again, we don't see much of that there isn't any fee.
Two the actual employee next year, we will moving towards a cool OTT transference or instant transfers and every day. There is a our ability to charge for that usually it is 50 basis points up to a small cap.
That is charged with that particular type of transfer what we are seeing in terms of the usage of the wallet is becoming quite disruptive to the credit card industry.
Instead of using their credit card, we are seeing a lot of the employees are now using the day post card instead.
That way. They are obviously are more on top of their finances, Madonna and get into a situation where they are paying the 22% on the balance of the actual statements at the end of the month, it's a big benefit from them in terms of additional revenue opportunities as we move into next year, we start moving into things like rewards and will probably move into the air.
As like buy now pay later and all of those types of opportunities gives us the ability to increase our take rate for example on their award we would expect to get about 90 basis points on the actual spend for that particular type of item that was covered by their award in a buy now pay later basis.
They would obviously be a revenue share with our partner over that.
Yeah.
I appreciate it and looking forward to the next peak.
Hosting.
Great. Thank you.
Thanks, Kevin next up is Michael true from Wells Fargo.
Hey, there good afternoon. Thanks for taking the question I know there was one here earlier already and appreciate the seasonal dynamics in the model, but the net go live number does look a little lighter than what we were expecting and I'm wondering if that's at all tied to labor constraints, either on services or the partner side or if it is true.
Really reflective of a move up market and towards partners and if so if that suggests that maybe you're likely to see even more of a Q4 seasonal weighting in the model.
Either this year or just on a go forward basis. My course, largely tied to just the size of customers. Okay. So I wouldn't read anything serious and last year, we used to say look here on a half year basis because of evens out between quarters.
Obviously, you always have the Q4 as being the biggest quarter because in the U S customers want to avoid that first quarter reconciliation.
So the Q4, we're expecting obviously a very healthy go live.
Quite honestly internally, we track it at a dollar value of go lives. So we looked at their pep them go lives in the quarter, we don't really focus on the actual.
The other part about that the number isn't really what I'll call a pure number because when you have a customer that goes live in a different country. If they have contracted through a different type of entity.
It could be viewed as from a finance as a go live second go live whereas from a system perspective, we would actually view it as one system.
So again I would encourage you to look at the LTM basis.
More than anything else I wouldn't read too much in it.
Do you want to give us the peplum go lives metric, David we'll take that too but maybe.
They know us.
That's a question for Amy.
The customer is.
But maybe you could talk about just the incremental day fourth metric. That's now above 200, K. So I'm just wondering if there is a feeling at all there. If you think that continues to trend higher.
Given you are just hitting new highs.
The milestones there as well.
The way I look at it it's a rectangle and on the X axis you have the number of employees, which obviously is growing all the time and then on the Y axis is the pep and the pricing that we get for those and as we increased number of modules that we have with the customer. We go up on that why access as well and so I would expect that to continue.
You're going up.
Great. Thank you very much.
Great. Thank you Michael next up we've got Brad Clark from BMO Brad.
Alright. Thank you guys for taking my question I wanted to focus on the payroll strategy, you announced a lot of new countries to build out for 2022 looks like a walk down the path and go on a broader level just wanted to see if you can discuss your strategy around payroll rollout and when and how.
Do you expect to see the impact of the new payroll on wanting to airports customers. Thank you sure. So Brad Great question. Currently we're actually focus I would say all three regions.
The first region would be North America, and obviously youll, probably see us move into Mexico in the short term as well to cover and complete the North America rollout.
That obviously will have impact on manufacturing customers with inside North America.
The second area. We're quite focused is on EMEA, we put a very good presence is in there in the UK and Ireland are seeing really tremendous traction in Germany, and we're launching the nature of payroll solution for Germany next year as well and we're seeing quite a lot of interest in that once we have Germany, where obviously you are going to.
Band into the other dock countries surrounding Germany, you'd get a broader footprint across EMEA.
The third area as you pointed out is across a P. J.
Obviously the reason we're doing that is that we do have a lot of it would be cool Bureau customers our customers through the acquisitions of extend the earnings ability and REIT Tech.
And as we build out the native capabilities for those regions that gives us a opportunity to go back to the base and not any move there at their payroll onto day for us, but also add on things like time and attendance workforce management core HR and all of the talent modules, which all.
<unk> is a very large revenue opportunity for us also within a P. J, we've got quite well.
Kind of integrated go to market. So we have sales and marketing across the region, a big presence across areas like Singapore.
N Z in other areas across the also have service and implementation capabilities in market, which means we can get to market quite quickly and as we move into 2022, you'll start to see us focus more on the recall the migration and the upsell of the incumbent base, which is about 500 customers Henry.
Jim.
No I mean anything that you would add to that no.
No you covered it all.
Yeah.
Great. Thank you.
Thank you Brad next step as Robert Symons from D. A Davidson and welcome to the Colorado.
Thanks for taking the questions. So you talked about wallet monetization, but for stream day.
When it gets them going into wallet and so, but it's not going to be any charges simply what does the revenue model there.
It's the same model is Robert It is screaming pay comes on board next year, it's effectively the same as on demand pay so the current experience at the moment as I look at my mobile device. It tells me how much net earnings have.
And so that is what is micros that all of my taxes and deductions and then I can elect to say I'd like $50 attitude, Mike Dave with volatile cog when I do that I'll wait for about five to 10 seconds, and then 5% to 10 seconds retainer calculation going back about a year.
We're actually creating an earnings slip and we're actually funding the cog immediately but it's about a 10 second wage and the user needs to look at their balance before they spend.
We're screaming pay I elected to screen my pay and as I N. The money flows onto my wallet at the end of every day I don't have to do the on demand transaction. When it goes up the card we still get exactly the same into change when they go off and spend or through the other types of transactions on the card.
Got it okay. So I thought it was interesting that they can kind of I guess, that's not correct Erika as onto the day for US got it. Okay. And then do you have any preview what youre going to you, giving us next week at the Investor correct.
Well the Investor track, what we actually want you to do is provide an opportunity for the investors to meet the executive team.
So in the executive track, we will have it moderated by Lee China.
Lee will also have Joe or Colm gable chief product and technology off there sorry, I will have Chris Armstrong, our chief customer officer.
Obviously, we'll have maybe we'll have Eric will have Seth Ross here, who heads up our consumer group Eric.
Eric can only drill something I missed in the group.
We wanted to have quite a.
Allow people to have a dialogue.
With a broader set of the executive team.
Yeah, that's right. There's a couple of other executives and then what we've done is we've curated the actual customer sessions earlier and kind of selected a few that we think will be most applicable to investors.
Okay, great. Thank you very much.
Great. Thank you Robert and for our last question of the night.
<unk> Shah from Deutsche Bank.
Great. Thanks for taking my question I mean, just maybe focusing on the SA partnerships that provide us a lot.
What you're seeing in terms of are these.
These guys, adding more to the pipeline opportunities is this something that we should expect as we go into next year once they start probably more deals.
It's actually a great question on that obviously, we're seeing the number of opportunities brought to us by the size go up sizable.
Lance margin honestly, we started or factor based on zero. So you can expect to see very rapid increases on a percentage basis, but we're very happy with the growth of the pipeline and that has been influenced by the size. So that's the first piece we're seeing.
Second piece is we have a clock more S size priming de force implementations, which allows us to continue growing especially on a global basis without having to necessarily continue to build out our own services group in terms. It allows us to focus on really Jim what we do upgrades, which is build great software.
<unk> deliver great software and <unk> service to create software.
In terms of the partner network, we are well above 20 Si partners.
We have resources who are trained.
At GWG in Vegas, we had a very good show and buy them.
I believe we will see quite a few of them at the New York event as well.
Got it Super helpful. Just a quick follow up on wallet I mean nice to see the continued growth in terms of go lives and the adoption from the employee base, but maybe can you provide any information on what you're seeing in terms of your customers providing more of a employees pay check available too in terms of on an on demand basis, whether you're seeing them increase it from 30% to 50.
Percent or 50 to 70, and like what's that trend and like yeah.
Yeah.
Yeah.
Two types of customers, those who put guardrails that are limited to 50% and others that give full access.
And I look at the overall population it appears about 30% of individuals who use the wallet move their wages onto the water before the end of the pay period.
They use it for direct deposit can be seen the direct deposit business actually go quite nicely. They get access to those funds two days earlier than they normally would as well.
To answer your question I don't think it actually is being driven by the organization.
Given that you natural amount of movement onto the water it seems to be about 30% of the actual wages.
Once we start getting the screaming off pay I would expect that to go higher.
We're also starting to emphasize now the direct deposit side and so if you get the direct deposit you effectively get all of it at the end the actual periods as well.
Got it Super helpful. Congrats on the strong quarter. Thanks very much appreciate it.
Eric just to pass it back to you.
Yeah, Thanks, David and with that question that concludes our call for Tonight. So on behalf of Nuomi, David and the rest of the Ceridian executive team. We thank you very much for your time. This evening and we look forward to continuing the conversation throughout the quarter.
Great. Thank you, everyone and I look forward to speaking to many of you Tonight and tomorrow and I hope to see a lot of you next week as well. Thank you very much.
Yes.
No.