DAYFORCE, INC. The following is a discussion and analysis of our financial condition and results of operations as of, and for, the periods presented. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and notes thereto included elsewhere in this report and in conjunction with our audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSecurities and Exchange Commission ("SEC") onFebruary 28, 2022 (our " 2021 Form 10-K "). This discussion and analysis contains forward-looking statements, including statements regarding industry outlook, our expectations for the future of our business, and our liquidity and capital resources as well as other non-historical statements. These statements are based on current expectations and are subject to numerous risks and uncertainties, including but not limited to the risks and uncertainties described in Part II, Item 1A, "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements." Our actual results may differ materially from those contained in or implied by these forward-looking statements. Any reference to a "Note" in this discussion relates to the accompanying notes to the unaudited condensed consolidated financial statements included elsewhere in this report unless otherwise indicated.
Overview
Ceridian is a global human capital management ("HCM") software company. We
categorize our solutions into two categories: Cloud and Bureau solutions. Cloud
revenue is generated from HCM solutions that are delivered via two cloud
offerings: Dayforce, our flagship cloud HCM platform, and Powerpay, a cloud
human resources ("HR") and payroll solution for the Canadian small business
market. We also continue to support customers using our legacy North America
Bureau solutions, which we generally stopped actively selling to new customers
following the acquisition of Dayforce, and customers using our acquired Bureau
solutions in Asia Pacific Japan ("APJ"). We invest in maintenance and necessary
updates to support our Bureau customers and continue to migrate them to
Dayforce. Revenue from our Cloud and Bureau solutions includes investment income
generated from holding customer funds before funds are remitted to taxing
authorities, also referred to as float revenue or float.
Dayforce provides HR, payroll, benefits, workforce management, and talent
management functionality. Our platform is used by organizations, regardless of
industry or size, to optimize management of the entire employee lifecycle,
including attracting, engaging, paying, deploying, and developing their people.
Dayforce was built as a single application from the ground up that combines a
modern, consumer-grade user experience with proprietary application
architecture, including a single employee record and a rules engine spanning all
areas of HCM. Dayforce provides continuous real-time calculations across all
modules to enable, for example, payroll administrators access to data through
the entire pay period, and managers access to real-time data to optimize work
schedules. Our platform is designed to make work life better for our customers
and their employees by improving HCM decision-making processes, streamlining
workflows, revealing strategic organizational insights, and simplifying
legislative compliance. The platform is designed to ease administrative work for
both employees and managers, creating opportunities for companies to increase
employee engagement. We are a founder-led organization, and our culture combines
the agility and innovation of a start-up with a history of deep domain and
operational expertise.
Dayforce Wallet is a digital wallet for customers' employees on the Dayforce
platform, which was launched in the U.S. in 2020 and Canada in 2021. The
Dayforce Wallet gives our customers' employees greater control over their
financial well-being by providing them with instant access to their earnings.
This on-demand pay feature allows employees more choice over when they get paid
by making any day payday. Dayforce Wallet enables workers to access their
already-earned wages anytime during the pay period, net of taxes, withholdings
and other payroll deductions. Leveraging Dayforce's continuous pay calculations,
Dayforce Wallet processes a same-day payroll each time a worker requests their
pay. The solution is compliant with federal, state, and local remittances and
requires no changes to payroll processing including the funding, timing, and
close-out of pay. The on-demand wages are loaded onto a paycard, which
customers' employees can use anywhere credit or debit cards are accepted,
generating interchange fee revenue. The Dayforce Wallet mobile app makes it easy
for customers' employees to check their pay deposits, account balance and
transaction history.
As of
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We sell Dayforce through our direct sales force on a subscription per-employee,
per-month ("PEPM") basis. Our subscriptions are typically structured with an
initial fixed term of between three and five years, with evergreen renewal
thereafter. Dayforce can serve customers of all sizes, ranging from 100 to over
100,000 employees. We have rapidly grown the Dayforce platform to 5,609 live
Dayforce customers as of March 31 , 2022.1 For the three months ended March 31,
2022 , we added 175 net new live Dayforce customers.
Our Business Model
Our business model focuses on supporting the rapid growth of Dayforce and maximizing the lifetime value of our Dayforce customer relationships. Due to our subscription model, where we recognize subscription revenues ratably over the term of the subscription period, and our high customer retention rates, we have a high level of visibility into our future revenues. The profitability of a customer depends, in large part, on how long they have been a customer. We estimate that it takes approximately two years before we are able to recover our implementation, customer acquisition, and other direct costs on a new Dayforce customer contract. Over the lifetime of the customer relationship, we have the opportunity to realize additional PEPM revenue, both as the customer grows or rolls out the Dayforce solution to additional employees, and also by selling additional functionality to existing customers that do not currently utilize our full suite of capabilities. We also incur costs to manage the account, to retain customers, and to sell additional functionality. These costs, however, are significantly less than the costs initially incurred to acquire and to take customers live.
Global Events
InMarch 2020 , theWorld Health Organization declared the outbreak of coronavirus (COVID-19) to be a pandemic. The global spread of the COVID-19 pandemic created significant global volatility, uncertainty, and economic disruption. We experienced curtailed customer demand, primarily as a result of declining employment levels at our customers in certain sectors, such as retail and hospitality, as well as lower customer utilization of professional services, due to the effects of the COVID-19 pandemic. While we experienced adverse impacts on our revenue in 2021 and 2020, we ended 2021 with employment levels at our customers in-line with pre-pandemic levels. Additionally, the federal funds rate cuts by theU.S. Federal Reserve and the overnight rate target by theBank of Canada inMarch 2020 had negative effects on our float revenue in 2021 and 2020. The continued, broader implications of the pandemic on our results of operations and overall financial performance will depend on numerous evolving factors. Consequently, the extent of any potential impacts of COVID-19 remain uncertain and cannot be reasonably estimated. InFebruary 2022 , theRussian Federation ("Russia") andBelarus commenced a military action with the country ofUkraine . We are closely monitoring the unfolding events due to theRussia -Ukraine conflict and its regional and global ramifications. We do not have operations inRussia ,Ukraine orBelarus . We are monitoring any broader economic impact from the current crisis, including increased cybersecurity risks. The specific impact on our financial condition, results of operations, and cash flows is not material as of the date of these financial statements. However, to the extent that such military action spreads to other countries, intensifies, or otherwise remains active, such action could adversely affect our business, financial condition, and results of operations. Recent Events Acquisitions OnMarch 1, 2021 , we completed the purchase of 100% of the outstanding shares ofAscender HCM Pty Limited ("Ascender") for$359.6 million . Ascender is a payroll and HR solutions provider in the Asia Pacific Japan region.
On
OnOctober 4, 2021 , we completed the acquisition of certain assets and liabilities ofDataFuzion HCM, Inc. ("DataFuzion"), for$12.5 million in cash consideration and future contingent consideration payments. DataFuzion designs, implements, and supports customer specific data solutions that integrate HCM and ERP systems on their FUZE platform. OnDecember 3, 2021 , we completed the acquisition of 100% of the outstanding interests inATI ROW, LLC and ADAM HCMMEXICO ,S. de R.L. de C.V. (collectively, "ADAM HCM") for$34.5 million . ADAM HCM is a payroll and HCM company inLatin America .
1Excluding the 2021 acquisitions of Ascender and ADAM HCM
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Financing and Other
In
How We Assess Our Performance
In assessing our performance, we consider a variety of annual and quarterly performance indicators in addition to revenue and net income. Set forth below are descriptions of our quarterly key performance measures. Additional information on our annual performance measures are described in Part II, "Item 7. Management's Discussion and Analysis" under the heading "How We Assess Our Performance" contained in our 2021 Form 10-K .
Live Dayforce Customers
We use the number of live Dayforce customers as an indicator of future revenue and the overall performance of the business and to assess the performance of our implementation services. We had 5,609 customers live on Dayforce as ofMarch 31, 2022 , compared to 5,039 customers live on Dayforce as ofMarch 31 , 2021.2
Dayforce Recurring Revenue Per Customer
We use Dayforce recurring revenue per customer as an indicator of the average size of our Dayforce recurring customer. Dayforce recurring revenue per customer was$110,947 for the trailing twelve months endedMarch 31, 2022 , compared to$101,230 for the comparable period in 2021.3 To calculate Dayforce recurring revenue per customer, we start with Dayforce recurring revenue on a constant currency basis by applying the same exchange rate to all comparable periods for the trailing twelve months and exclude float revenue, the impact of lower employment levels due to COVID-19 pandemic in 2021 and 2020, and Ascender and ADAM HCM revenue. This amount is divided by the number of live Dayforce customers at the end of the trailing twelve month period, excluding Ascender and ADAM HCM. We calculate and monitor Dayforce recurring revenue per customer on a quarterly basis. Our Dayforce recurring revenue per customer may fluctuate as a results of a number of factors, including the number of live Dayforce customers and the number of customers purchasing the full HCM suite. We have not reconciled the Dayforce recurring revenue per customer because there is no directly comparable GAAP financial measure.
2 Excluding the 2021 acquisitions of Ascender and ADAM HCM 3 Excluding float revenue, the impact of lower employment levels in 2021 and 2020 due to the COVID-19 pandemic, Ascender and ADAM HCM revenue and on a constant currency basis
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Constant Currency Revenue
We present revenue on a constant currency basis to assess how our underlying
business performed, excluding the effect of foreign currency rate fluctuations.
We believe this non-GAAP financial measure is useful to management and
investors. We have calculated revenue on a constant currency basis by applying
the average foreign exchange rate in effect during the comparable prior period.
Please refer to the "Results of Operations" section below for further
information on constant currency revenue. The average U.S. dollar to Canadian
dollar foreign exchange rate was $1.27 , with a daily range of $1.25 to $1.29 ,
for the three months ended March 31, 2022 , compared to $1.27 , with a daily range
of $1.24 to $1.29 for the three months ended March 31, 2021 . As of March 31,
2022 , the U.S. dollar to Canadian dollar foreign exchange rate was $1.25 .
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin
We believe that EBITDA, Adjusted EBITDA and Adjusted EBITDA margin, non-GAAP financial measures, are useful to management and investors as supplemental measures to evaluate our overall operating performance. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are components of our management incentive plan and are used by management to assess performance and to compare our operating performance to our competitors. We define EBITDA as net income (loss) before interest, taxes, depreciation, and amortization, and Adjusted EBITDA as EBITDA, as adjusted to exclude foreign exchange gain (loss), share-based compensation expense and related employer taxes, severance charges, restructuring consulting fees, and certain other non-recurring items. Adjusted EBITDA margin is determined by calculating the percentage that Adjusted EBITDA is of total revenue. Management believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are helpful in highlighting management performance trends because EBITDA, Adjusted EBITDA and Adjusted EBITDA margin exclude the results of decisions that are outside the normal course of our business operations. Please refer to the
"Results of Operations" section below for a discussion of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin.
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Results of Operations
Three Months Ended March 31, 2022 Compared With Three Months Ended March 31,
2021
Three Months Ended March 31, Increase/(Decrease) % of Revenue
2022 2021 Amount % 2022 2021
(Dollars in millions)
Revenue:
Recurring
Cloud $ 210.2 $ 165.6 $ 44.6 26.9 % 71.7 % 70.6 %
Bureau 37.7 30.4 7.3 24.0 % 12.9 % 13.0 %
Total recurring 247.9 196.0 51.9 26.5 % 84.5 % 83.6 %
Professional services and 45.4
other 38.5 6.9 17.9 % 15.5 % 16.4 %
Total revenue 293.3 234.5 58.8 25.1 % 100.0 % 100.0 %
Cost of revenue:
Recurring
Cloud 64.6 46.1 18.5 40.1 % 22.0 % 19.7 %
Bureau 17.7 13.6 4.1 30.1 % 6.0 % 5.8 %
Total recurring 82.3 59.7 22.6 37.9 % 28.1 % 25.5 %
Professional services and 54.5
other 44.7 9.8 21.9 % 18.6 % 19.1 %
Product development and
management 40.4 25.8 14.6 56.6 % 13.8 % 11.0 %
Depreciation and 13.0
amortization 11.1 1.9 17.1 % 4.4 % 4.7 %
Total cost of revenue 190.2 141.3 48.9 34.6 % 64.8 % 60.3 %
Gross profit 103.1 93.2 9.9 10.6 % 35.2 % 39.7 %
Selling, general, and 122.0
administrative 95.6 26.4 27.6 % 41.6 % 40.8 %
Operating loss (18.9 ) (2.4 ) (16.5 ) (687.5 )% (6.4 )% (1.0 )%
Interest expense, net 5.8 5.6 0.2 3.6 % 2.0 % 2.4 %
Other (income) expense, (0.3 )
net 4.6 (4.9 ) (106.5 )% (0.1 )% 2.0 %
Loss before income taxes (24.4 ) (12.6 ) (11.8 ) (93.7 )% (8.3 )% (5.4 )%
Income tax expense 3.0 6.6 (3.6 ) (54.5 )% 1.0 % 2.8 %
Net loss $ (27.4 ) $ (19.2 ) $ (8.2 ) (42.7 )% (9.3 )% (8.2 )%
Net profit margin (a) (9.3 )% (8.2 )%
(1.1 )% (13.4 )%
Adjusted EBITDA (b)
29.0 % 19.6 % 19.0 %
Adjusted EBITDA margin (b) 19.6 % 19.0 % 0.6 % 3.2 %
(a)
Net profit margin is determined by calculating the percentage that net income
(loss) is of total revenue.
(b)
Please refer to the "Non-GAAP Measures" section for a discussion and
reconciliation of Adjusted EBITDA and Adjusted EBITDA margin, non-GAAP financial
measures.
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Revenue. The following table sets forth certain information regarding our revenues for the periods presented:
Percentage
change in
Percentage Impact of revenue on
change in changes in constant
revenue as foreign currency
Three Months Ended March 31, reported currency (a) basis (a)
2022 2021 2022 vs. 2021 2022 vs. 2021
(Dollars in millions)
Revenue:
Dayforce recurring, excluding $ 137.6
float $ 180.3 31.0 % 0.4 % 30.6 %
Dayforce float 8.3 7.7 7.8 % (- )% 7.8 %
Total Dayforce recurring 188.6 145.3 29.8 % 0.4 % 29.4 %
Powerpay recurring, excluding 19.4 18.4
float 5.4 % (0.6 )% 6.0 %
Powerpay float 2.2 1.9 15.8 % (- )% 15.8 %
Total Powerpay recurring 21.6 20.3 6.4 % (0.5 )% 6.9 %
Total Cloud recurring 210.2 165.6 26.9 % 0.3 % 26.6 %
Dayforce professional services 41.6 36.8
and other 13.0 % (0.6 )% 13.6 %
Powerpay professional services
and other 0.2 0.3 (33.3 )% (- )% (33.3 )%
Total Cloud professional 41.8 37.1 12.7 % (0.5 )% 13.2 %
services and
other
Total Cloud revenue 252.0 202.7 24.3 % 0.1 % 24.2 %
Bureau recurring, excluding 36.8 29.3
float 25.6 % (1.0 )% 26.6 %
Bureau float 0.9 1.1 (18.2 )% (- )% (18.2 )%
Total Bureau recurring 37.7 30.4 24.0 % (1.0 )% 25.0 %
Bureau professional services 3.6 1.4
and other 157.1 % (- )% 157.1 %
Total Bureau revenue 41.3 31.8 29.9 % (0.9 )% 30.8 %
Total revenue $ 293.3 $ 234.5 25.1 % (- )% 25.1 %
Dayforce $ 230.2 $ 182.1 26.4 % 0.2 % 26.2 %
Powerpay 21.8 20.6 5.8 % (0.5 )% 6.3 %
Total Cloud revenue $ 252.0 $ 202.7 24.3 % 0.1 % 24.2 %
Dayforce, excluding float
27.2 % 0.2 % 27.0 % Powerpay, excluding float 19.6 18.7 4.8 % (0.5 )% 5.3 % Cloud float 10.5 9.6 9.4 % (- )% 9.4 % Total Cloud revenue$ 252.0 $ 202.7 24.3 % 0.1 % 24.2 %
Cloud recurring, excluding
28.0 % 0.3 % 27.7 %
Bureau recurring, excluding 36.8 29.3
float 25.6 % (1.0 )% 26.6 %
Total recurring, excluding 236.5 185.3
float 27.6 % 0.1 % 27.5 %
Total revenue, excluding float
26.0 % (- )% 26.0 % (a)
We have calculated revenue on a constant currency basis by applying the average foreign exchange rate in effect during the comparable prior period.
Total revenue increased$58.8 million , or 25.1%, to$293.3 million for the three months endedMarch 31, 2022 , compared to$234.5 million for the three months endedMarch 31, 2021 . This increase was primarily attributable to an increase in Cloud revenue of$49.3 million , or 24.3%, from$202.7 million for the three months endedMarch 31, 2021 , to$252.0 million for the three months endedMarch 31, 2022 . The Cloud revenue increase was driven by an increase of$44.6 million , or 26.9%, in Cloud recurring revenue and an increase of$4.7 million , or 12.7%, in Cloud professional services and other revenue. Cloud revenue growth was driven by both an increase in customers live on the Dayforce platform and an increase in recurring revenue per customer, as well as the addition of the Cloud revenue generated from acquired businesses during 2021. Bureau revenue increased$9.5 million for the three months endedMarch 31, 2022 , primarily driven by the addition of the Bureau revenue generated from acquired businesses during 2021.
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Excluding float revenue and on a constant currency basis, total revenue grew 26.0%, reflecting a 24.9% increase in Cloud revenue and a 32.6% increase in Bureau revenue. Excluding float revenue and on a constant currency basis, Cloud revenue growth reflected a 27.7% increase in Cloud recurring revenue and a 13.2% increase in Cloud professional services and other revenue. Dayforce revenue increased 26.4%, and Powerpay revenue increased 5.8% for the three months endedMarch 31, 2022 , as compared to the three months endedMarch 31, 2021 . Excluding float revenue and on a constant currency basis, Dayforce revenue increased 27.0%, reflecting a 30.6% increase in Dayforce recurring revenue and a 13.6% increase in Dayforce professional services and other revenue. Excluding float revenue and on a constant currency basis, Powerpay revenue increased 5.3%. Float revenue included in recurring revenue was$11.4 million and$10.7 million for the three months endedMarch 31, 2022 , and 2021, respectively. Float revenue associated with Cloud revenue was$10.5 million and$9.6 million for the three months endedMarch 31, 2022 , and 2021, respectively. The average float balance for our customer funds for the three months endedMarch 31, 2022 , was$5,088.9 million , compared to$4,331.9 million for the three months endedMarch 31, 2021 , an increase of 17.5%. On a constant currency basis, the average float balance for our customer funds for the three months endedMarch 31, 2022 , increased 20.4% compared to the three months endedMarch 31, 2021 . The average yield was 0.91% during the three months endedMarch 31, 2022 , a decline of 11 basis points compared to the average yield during the three months endedMarch 31, 2021 . For both the three months endedMarch 31, 2022 and 2021, approximately 30% of our average float balance consisted of customer funds outside of theU.S. , primarily our Canadian customer funds. Cost of revenue. Total cost of revenue for the three months endedMarch 31, 2022 , was$190.2 million , an increase of$48.9 million , or 34.6%, compared to the three months endedMarch 31, 2021 . Recurring cost of revenue for the three months endedMarch 31, 2022 , increased$22.6 million , or 37.9%, compared with the three months endedMarch 31, 2021 , primarily due to the integration of our APJ acquisitions, specifically$11.2 million of costs associated with re-balancing our resources across our global footprint resulting in one-time severance and restructuring costs. Further, the increase in recurring cost of revenue is due to additional costs related to global expansion and costs to support the growing Dayforce customer base. Professional services and other cost of revenue increased$9.8 million , or 21.9%, for the three months endedMarch 31, 2022 , compared to the three months endedMarch 31, 2021 , primarily due to costs incurred to take new customers live as well as expansion of our capabilities to serve international customers. Product development and management expense increased$14.6 million for the three months endedMarch 31, 2022 , compared to the three months endedMarch 31, 2021 . The increase reflects additional personnel costs, severance, and share-based compensation. For the three months endedMarch 31, 2022 , and 2021, our investment in software development was$37.7 million and$26.2 million , respectively, consisting of$22.6 million and$15.2 million , of research and development expense, which is included within product development and management expense, and$15.1 million and$11.0 million in capitalized software development costs, respectively. Depreciation and amortization expense associated with cost of revenue increased by$1.9 million for the three months endedMarch 31, 2022 , compared to the three months endedMarch 31, 2021 , as we continue to capitalize Dayforce related and other development costs and subsequently amortize these costs.
Gross profit. The following table presents total gross margin and solution gross margins for the periods presented:
Three Months Ended March 31,
2022 2021
Total gross margin 35.2 % 39.7 %
Gross margin by solution:
Cloud recurring 69.3 % 72.2 %
Bureau recurring 53.1 % 55.3 %
Professional services and other (20.0 )% (16.1 )%
Total gross margin is defined as total gross profit as a percentage of total
revenue, which is inclusive of product development and management costs, as well
as depreciation and amortization associated with cost of revenue. Gross margin
for each solution in the table above is defined as total revenue less cost of
revenue for the applicable solution as a percentage of total revenue for that
related solution, which is exclusive of any product development and management
or depreciation and amortization cost allocations.
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Total gross margin for the three months endedMarch 31, 2022 , declined 450 basis points compared to total gross margin for the three months endedMarch 31, 2021 due to increased severance related to the re-balancing of our resources across our global footprint and share-based compensation, as well as continued development and expansion of our service offerings. Gross profit increased by$9.9 million , or 10.6% for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 , primarily due to the$58.8 million or 25.1% increase in revenue which outpaced the increase in cost of revenue. Cloud recurring gross margin was 69.3% for the three months endedMarch 31, 2022 , compared to 72.2% for the three months endedMarch 31, 2021 . The decrease in cloud recurring gross margin is primarily due to the integration of our APJ acquisitions, specifically a re-balancing of our resources across our global footprint resulting in one-time severance and restructuring costs. Excluding the impact of share-based compensation and related employer taxes, severance expense, and certain other non-recurring items, cloud recurring gross margin increased by 220 basis points, primarily due to an increase in the proportion of Dayforce customers live for more than two years, which increased from 76% as ofMarch 31, 2021 , to 80% as ofMarch 31, 2022 , and was also attributable to economies of scale in hosting and customer support as we continue to take customers live on Dayforce. Bureau recurring gross margin declined from 55.3% for the three months endedMarch 31, 2021 , to 53.1% for the three months endedMarch 31, 2022 , reflecting a higher proportion of customer support costs to support the end-of-life of our legacy Bureau payroll services, as well as lower margins on acquired Bureau services. Professional services and other gross margin was (20.0)% for the three months endedMarch 31, 2022 , compared to (16.1)% for the three months endedMarch 31, 2021 , reflecting additional costs to take new customers live, expansion of our capabilities to serve international customers, and increased share-based compensation. Selling, general, and administrative expense. Selling, general, and administrative expense increased$26.4 million for the three months endedMarch 31, 2022 , compared to the three months endedMarch 31, 2021 . Excluding the impact of share-based compensation and related employer taxes, restructuring consulting fees, severance expense, amortization of acquisition-related intangible assets, and certain other non-recurring items, selling, general, and administrative expenses increased by$17.5 million . This adjusted increase reflects an increase of$8.9 million in general and administrative expense and$8.6 million in sales and marketing expense, both of which are primarily driven by employee-related costs. The increase in general and administrative expense is also driven by additional expense recognized in relation to our recent acquisitions. The increase in sales and marketing expense primarily represents investment in our sales force in order to support our growth initiatives. Please refer to the "Non-GAAP Measures" section for additional information on the excluded items. Interest expense, net. Interest expense, net was relatively consistent at$5.8 million and$5.6 million for the three months endedMarch 31, 2022 , and 2021, respectively. Other (income) expense, net. For the three months endedMarch 31, 2022 , and 2021, we realized other income, net of$0.3 million and incurred other expense, net of$4.6 million , respectively. Other income, net was comprised of foreign currency translation gain, partially offset by net periodic pension expense for the three months endedMarch 31, 2022 . For the three months endedMarch 31, 2021 , other expense, net was comprised of foreign currency translation loss and net periodic pension expense. Income tax expense. For the three months endedMarch 31, 2022 , and 2021, we recorded income tax expense of$3.0 million and$6.6 million , respectively. The$3.6 million decrease in income tax expense was primarily due to the$4.7 million tax benefit from current operations, partially offset by$1.0 million of other tax expenses and benefits. Net loss. We realized net loss of$27.4 million for the three months endedMarch 31, 2022 , compared to$19.2 million for the three months endedMarch 31, 2021 . The increase in net loss is primarily due to higher share-based compensation, investments in product development and selling capabilities, and further integration of the APJ acquisitions, specifically a re-balancing of our resources across our global footprint. For the three months endedMarch 31, 2022 and 2021, net profit margin was (9.3)% and (8.2)%, respectively. Adjusted EBITDA. Adjusted EBITDA increased by$12.9 million to$57.4 million , for the three months endedMarch 31, 2022 , compared to the three months endedMarch 31, 2021 , and Adjusted EBITDA margin was 19.6% for the three months endedMarch 31, 2022 , compared with Adjusted EBITDA margin of 19.0% for the three months ended March 31, 2021. Please refer to the "Non-GAAP Measures" section for a discussion and reconciliation of Adjusted EBITDA and Adjusted EBITDA margin and additional information on the excluded items.
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Liquidity and Capital Resources
Our primary sources of liquidity are our existing cash and equivalents, cash provided by operating activities, availability under our Revolving Credit Facility, and proceeds from debt issuances and equity offerings. As ofMarch 31, 2022 , we had cash and equivalents of$354.8 million and our total debt balance was$1,240.5 million .
Our primary liquidity needs are related to funding of general business requirements, including the payment of interest and principal on our debt, capital expenditures, product development, and funding Dayforce Wallet on demand pay requests. From time to time, we have made investments in businesses or acquisitions of companies, which are also liquidity needs.
As ofMarch 31, 2022 , we held$1.9 million of restricted cash as collateral for bank guarantees. The bank guarantees provide financial assurance that we will fulfill certain lease obligations. The cash is restricted as to withdrawal or use while the related bank guarantee is outstanding. OnFebruary 26, 2021 , we elected to borrow$295.0 million under the Revolving Credit Facility to fund our acquisition of Ascender onMarch 1, 2021 . We repaid the$295.0 million draw onMarch 5, 2021 with proceeds from the issuance of our Convertible Senior Notes. InMarch 2021 , we issued$575.0 million in aggregate principal amount of 0.25% Convertible Senior Notes due 2026. The total net proceeds from the offering, after deducting initial purchase discounts and issuance costs, were$561.8 million . In connection with the Convertible Senior Notes, we entered into capped call transactions which are expected to reduce the potential dilution of our common stock upon any conversion of the Convertible Senior Notes and/or offset any cash payments we could be required to make in excess of the principal amount of converted Convertible Senior Notes. We used an aggregate amount of$45.0 million of the net proceeds of the Convertible Senior Notes to purchase the Capped Calls. Please refer to Note 7, "Debt," to our condensed consolidated financial statements for further information on our Convertible Senior Notes, and the related indenture. We used the remainder of the net proceeds from the offering (i) to repay$295.0 million principal amount under the Revolving Credit Facility and pay related accrued interest and (ii) for general corporate purposes. OnDecember 15, 2021 , we completed the second amendment to the Senior Secured Credit Facility, in which the maturity date of the Revolving Credit Facility was extended fromApril 30, 2023 toJanuary 29, 2025 . We believe that our cash flow from operations, available cash and equivalents, and availability under our Revolving Credit Facility will be sufficient to meet our liquidity needs for the foreseeable future. Dayforce Wallet on demand pay requests are currently funded from our operating cash balances, until it is reimbursed by the customers through their normal payroll funding cycles. We evaluate the creditworthiness of each customer utilizing the Dayforce Wallet feature. We anticipate that to the extent that we require additional liquidity, it will be funded through the issuance of equity, the incurrence of additional indebtedness, or a combination thereof. We cannot provide assurance that we will be able to obtain this additional liquidity on reasonable terms, or at all. Additionally, our liquidity and our ability to meet our obligations and to fund our capital requirements and Dayforce Wallet on demand pay requests are also dependent on our future financial performance, which is subject to general economic, financial, and other factors that are beyond our control. Accordingly, we cannot provide assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available from additional indebtedness or otherwise to meet our liquidity needs. If we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions, which would result in additional expenses or dilution. Our customer funds are held and invested with the primary objectives being to protect the principal balance and to ensure adequate liquidity to meet cash flow requirements. Accordingly, we maintain on average approximately 45% to 55% of customer funds in liquidity portfolios with maturities ranging from one to 120 days, consisting of high-quality bank deposits, money market mutual funds, commercial paper, or collateralized short-term investments; and we maintain on average approximately 45% to 55% of customer funds in fixed income portfolios with maturities ranging from 120 days to 10 years, consisting ofU.S. Treasury and agency securities,Canada government and provincial securities, as well as highly rated asset-backed, mortgage-backed, municipal, corporate, and bank securities. To maintain sufficient liquidity to meet payment obligations, we also have financing arrangements and may pledge fixed income securities for short-term financing. The customer assets are held in segregated accounts intended for the specific purpose of satisfying client fund obligations and therefore are not freely available for our general business use.
33 | [[Image Removed: img214249619_1.jpg]] Q1 2022 Form 10-Q --------------------------------------------------------------------------------
Table of Contents
Statements of Cash Flows
Changes in cash flows due to purchases of customer fund marketable securities
and proceeds from the sale or maturity of customer fund marketable securities,
as well as the carrying value of customer fund accounts as of period end dates
can vary significantly due to several factors, including the specific day of the
week the period ends, which impacts the timing of funds collected from customers
and payments made to satisfy customer obligations to employees, taxing
authorities, and others. The customer funds are fully segregated from our
operating cash accounts and are evaluated and tracked separately by management.
The table below summarizes the activity within the condensed consolidated
statements of cash flows:
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