UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly reporting period ended June 30, 2020

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to                    

Commission file number 001-38467

Ceridian HCM Holding Inc.

(Exact name of registrant as specified in its charter)

Delaware	46-3231686
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

3311 East Old Shakopee Road

Minneapolis, Minnesota 55425

(952) 853-8100

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	CDAY	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as the latest practicable date: 146,881,678 shares of Common Stock, $0.01 par value per share, as of July 31, 2020.

Ceridian HCM Holding Inc.

Table of Contents

		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		3
PART I. FINANCIAL INFORMATION		5
Item 1.	Condensed Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	42
PART II. OTHER INFORMATION		43
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains, or incorporates by reference, not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and that are subject to the safe harbor created by those sections. Forward-looking statements, including, without limitation, statements concerning the conditions of the human capital management solutions industry and our operations, performance, and financial condition, including, in particular, statements relating to our business, growth strategies, product development efforts, and future expenses. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “assumes,” “projects,” “could,” “may,” “will,” “should,” and similar references to future periods, or by the inclusion of forecasts or projections.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national, or global political, economic, business, competitive, market, and regulatory conditions and the following:

• the impact of the Coronavirus disease 2019 (“COVID-19”) pandemic on our business, operations, and financial results;

• our inability to attain or to maintain profitability;

• significant competition for our solutions;

• our inability to continue to develop or to sell our existing Cloud solutions;

• our inability to manage our growth effectively;

• the risk that we may not be able to successfully migrate our Bureau customers to our Cloud solutions or to offset the decline in Bureau revenue with Cloud revenue;

• the decline or slower than expected development of the market for enterprise cloud computing;

• failure of our efforts to increase use of our Cloud solutions and our other applications may not succeed;

• our failure to provide enhancements and new features and modifications to our solutions;

• failure to comply the Federal Trade Commission’s (“FTC”) ongoing consent order regarding data protection;

• system interruptions or failures, including cyber-security breaches, identity theft, or other disruptions that could compromise our information;

• our failure to comply with applicable privacy, security, data, and financial services laws, regulations and standards;

• changes in regulations governing financial services, privacy concerns, and laws or other domestic or foreign data protection regulations;

• the risk of loss caused by customer failure to repay distribution of earned net wages and associated tax amounts made on behalf of our customers for our Dayforce Wallet or other services;

• our inability to successfully expand our current offerings into new markets or further penetrate existing markets;

• our inability to meet the more complex configuration and integration demands of our large customers;

• reductions in our customers’ employment levels or other overall declines in the financial viability of our current and prospective customers;

• the risk of our customers declining to renew their agreements with us or renewing at lower performance fee levels;

• our failure to manage our technical operations infrastructure;

• our inability to maintain necessary third party relationships, and third party software licenses or there are errors in the software we license;

• our inability to protect our intellectual property rights, proprietary technology, information, processes, and know-how;

• our failure to keep pace with rapid technological changes and evolving industry standards;

• general economic, political and market forces beyond our control; or

• changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself.

3

Please refer to Part II, Item IA, “Risk Factors” of this Form 10-Q and Part I, Item IA, “Risk Factors” of our most recently filed Annual Report on Form 10-K, for the year ended December 31, 2019 (“2019 Form 10-K”), for a further description of these and other factors. Although we have attempted to identify important risk factors, there may be other risk factors not presently known to us or that we presently believe are not material that could cause actual results and developments to differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. If any of these risks materialize, or if any of the above assumptions underlying forward-looking statements prove incorrect, actual results and developments may differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. For the reasons described above, we caution you against relying on any forward-looking statements. Any forward-looking statement made by us in this Form 10-Q speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should be viewed as historical data.

4

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Ceridian HCM Holding Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions, except share data)

	June 30,			December 31,
	2020			2019
	(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	526.9		$	281.3
Trade and other receivables, net		92.9			80.4
Prepaid expenses and other current assets		70.4			57.9
Total current assets before customer trust funds		690.2			419.6
Customer trust funds		2,659.8			3,204.1
Total current assets		3,350.0			3,623.7
Right of use lease asset		37.6			32.0
Property, plant, and equipment, net		129.6			128.3
Goodwill		2,004.5			1,973.5
Other intangible assets, net		195.5			177.9
Other assets		136.7			150.3
Total assets	$	5,853.9		$	6,085.7
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	8.6		$	10.8
Current portion of long-term lease liabilities		10.2			8.8
Accounts payable		36.5			43.2
Deferred revenue		24.0			25.5
Employee compensation and benefits		56.3			75.9
Other accrued expenses		14.1			13.9
Total current liabilities before customer trust funds obligations		149.7			178.1
Customer trust funds obligations		2,594.8			3,193.6
Total current liabilities		2,744.5			3,371.7
Long-term debt, less current portion		958.6			666.3
Employee benefit plans		111.4			117.2
Long-term lease liabilities, less current portion		34.2			30.1
Other liabilities		19.5			18.1
Total liabilities		3,868.2			4,203.4
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.01 par, 500,000,000 shares authorized, 146,803,932 and    144,386,618 shares issued and outstanding as of June 30, 2020, and    December 31, 2019, respectively		1.5			1.4
Additional paid in capital		2,528.4			2,449.1
Accumulated deficit		(215.7	)		(229.8	)
Accumulated other comprehensive loss		(328.5	)		(338.4	)
Total stockholders’ equity		1,985.7			1,882.3
Total liabilities and equity	$	5,853.9		$	6,085.7

See accompanying notes to condensed consolidated financial statements.

5

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Operations

(Unaudited, dollars in millions, except share and per share data)

	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Revenue:
Recurring services	$	159.1		$	163.5	$	340.6		$	336.3
Professional services and other		33.5			32.8		74.7			63.7
Total revenue		192.6			196.3		415.3			400.0
Cost of revenue:
Recurring services		49.3			48.7		101.5			99.6
Professional services and other		37.9			34.2		80.5			69.5
Product development and management		17.0			16.4		34.6			31.6
Depreciation and amortization		9.8			9.0		19.6			17.7
Total cost of revenue		114.0			108.3		236.2			218.4
Gross profit		78.6			88.0		179.1			181.6
Selling, general, and administrative		74.6			69.3		148.8			135.5
Operating profit		4.0			18.7		30.3			46.1
Interest expense, net		6.6			8.5		13.5			17.4
Other expense, net		0.3			1.5		2.9			3.1
(Loss) income before income taxes		(2.9	)		8.7		13.9			25.6
Income tax (benefit) expense		(8.4	)		2.4		(0.2	)		8.1
Net income	$	5.5		$	6.3	$	14.1		$	17.5
Net income per share:
Basic	$	0.04		$	0.04	$	0.10		$	0.12
Diluted	$	0.04		$	0.04	$	0.09		$	0.12
Weighted-average shares outstanding:
Basic		145,593,019			141,149,009		145,119,172			140,651,902
Diluted		151,444,901			148,331,846		151,321,093			147,761,174

See accompanying notes to condensed consolidated financial statements.

6

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, dollars in millions)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020			2019
Net income	$	5.5	$	6.3	$	14.1		$	17.5
Items of other comprehensive income (loss) before income taxes:
Change in foreign currency translation adjustment		21.6		11.5		(27.5	)		23.8
Change in unrealized gain from invested customer trust funds		20.1		17.3		43.5			39.2
Change in pension liability adjustment (1)		3.3		2.5		6.6			5.0
Other comprehensive income before income taxes		45.0		31.3		22.6			68.0
Income tax benefit, net		5.9		0.9		12.7			3.6
Other comprehensive income after income taxes		39.1		30.4		9.9			64.4
Comprehensive income	$	44.6	$	36.7	$	24.0		$	81.9

(1) The amount of the pension liability adjustment recognized in the condensed consolidated statements of operations within other expense, net was $3.3 million and $2.6 million during the three months ended June 30, 2020, and 2019, respectively, and $6.6 million and $5.2 million during the six months ended June 30, 2020, and 2019, respectively. 

See accompanying notes to condensed consolidated financial statements.

7

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, dollars in millions, except share data)

	Common Stock				Additional Paid In		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		$		Capital		Deficit			Loss			Equity
Balance as of December 31, 2019		144,386,618	$	1.4	$	2,449.1	$	(229.8	)	$	(338.4	)	$	1,882.3
Net income		—		—		—		8.6			—			8.6
Issuance of common stock under share-based compensation plans		551,328		—		11.4		—			—			11.4
Share-based compensation		—		—		12.5		—			—			12.5
Foreign currency translation		—		—		—		—			(49.1	)		(49.1	)
Change in unrealized gain, net of tax of $6.0		—		—		—		—			17.4			17.4
Change in pension liability adjustment, net of tax of $0.8		—		—		—		—			2.5			2.5
Balance as of March 31, 2020		144,937,946	$	1.4	$	2,473.0	$	(221.2	)	$	(367.6	)	$	1,885.6
Net income		—		—		—		5.5			—			5.5
Issuance of common stock under share-based compensation plans		1,865,986		0.1		40.1		—			—			40.2
Share-based compensation		—		—		15.3		—			—			15.3
Foreign currency translation		—		—		—		—			21.6			21.6
Change in unrealized gain, net of tax of $5.1		—		—		—		—			15.0			15.0
Change in pension liability adjustment, net of tax of $0.8		—		—		—		—			2.5			2.5
Balance as of June 30, 2020		146,803,932	$	1.5	$	2,528.4	$	(215.7	)	$	(328.5	)	$	1,985.7

	Common Stock				Additional Paid In		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		$		Capital		Deficit			Loss			Equity
Balance as of December 31, 2018		139,453,710	$	1.4	$	2,325.6	$	(335.6	)	$	(375.9	)	$	1,615.5
Cumulative-effect adjustment to accumulated deficit related to    the adoption of ASU 2018-02		—		—		—		27.1			(27.1	)		—
Net income		—		—		—		11.2			—			11.2
Issuance of common stock under share-based compensation plans		1,221,622		—		20.1		—			—			20.1
Share-based compensation		—		—		6.0		—			—			6.0
Foreign currency translation		—		—		—		—			12.3			12.3
Change in unrealized gain, net of tax of $2.7		—		—		—		—			19.2			19.2
Change in pension liability adjustment, net of tax of $0.0		—		—		—		—			2.5			2.5
Balance as of March 31, 2019		140,675,332	$	1.4	$	2,351.7	$	(297.3	)	$	(369.0	)	$	1,686.8
Net income		—		—		—		6.3			—			6.3
Issuance of common stock under share-based compensation plans		1,266,734		—		24.0		—			—			24.0
Share-based compensation		—		—		9.6		—			—			9.6
Foreign currency translation		—		—		—		—