Ceridian HCM : Q4(opens in new window)Stockholder Letter

Q4 2021

Stockholder letter

Intelligence at work

David Ossip

Chair and Co-CEO, Ceridian

Dear Fellow Stockholders,

I am very pleased to report that we closed fiscal year 2021 with strong momentum and financial performance. Dayforce recurring revenue, excluding float revenue, grew by 32% in the fourth quarter and by 29% for the full year.

The end of a fiscal year provides an important opportunity to report not just on the accomplishments of the recent year but also to address the potential of the future.

This is especially true as we position Ceridian for 2022 and beyond. While we hope and expect that the impact of the pandemic will recede, it will nonetheless leave a lasting impact in what our customers need from us to redefine their workforce experience. I believe all business leaders would agree - many aspects of how we worked previously will not ever return. Given that reality, and as I look into the future, I am invigorated by the potential for our growth opportunities to expand on multiple fronts.

The future of work is here now and that requires our solutions to provide an ever more sophisticated experience for our customers. They are transitioning into a new world of work that is more fluid, borderless, skills-based, augmented, and always-on than ever before.

1			Q4 2021 Stockholder letter

Our vision to be the always-on people platform for the global workforce is the foundation of our growth potential. This vision supports our customers as they adjust to becoming more agile, resilient, and better equipped to respond to the new workforce reality that puts workers in the driver's seat.

This significant trend in the new world of work, coupled with another major trend of organizations accelerating their transition into cloud solutions, puts Ceridian at the center of two dynamic market forces where our customers benefit greatly from the power of our modern Dayforce platform along with the deep expertise of our services and partner ecosystem teams that help ensure their success.

During my many meetings with customers over the past months, I have been particularly struck by how much we can help them and by how much they recognize the value we provide.

I am especially pleased that our focus on delivering value to our customers has allowed us to deliver strong financial and operating results, while we are simultaneously building for future growth through our investments in people and products.

Turning to our results - as mentioned, in the fourth quarter, Dayforce recurring revenue, excluding float revenue, grew by 32%. In addition, total revenue grew by 27%, exceeding our guidance for the quarter.

Sales performance in the quarter was very strong. We saw continued growth and momentum in both the size and volume of sales transactions.

Go-live performance also was tremendous. We took live and activated a record amount of recurring revenue across 207 customers.

We also achieved two remarkable milestones for our company:

• More than $1 billion in total revenue, which exceeded our guidance.
• More than 5 million active employees on the Dayforce platform, an increase of 21% year- over-year.*
• • Excluding the 2021 acquisitions of Ascender and ADAM HCM

Customer satisfaction was at record levels. Cloud revenue retention rate, including Dayforce and Powerpay, increased by 100 basis points to 96.8%.

Our five strategic levers continued to guide our execution and overall growth agenda:

• Acquiring new customers in the markets where we have seen success to date;
• Extending the Dayforce platform, allowing us to deliver more value to our current and prospective customers;
• Expanding within the enterprise segment;
• Accelerating our global expansion both by serving local customers in new geographies, and by extending our scope to service global multinational customers; and
• Driving incremental revenue from our customers by innovating in adjacent markets around our core HCM suite, such as Dayforce Wallet.

As we have further defined and advanced our product vision, we also continue to take the necessary steps within our business to maintain high growth as a global HCM leader.

We are making strategic investments in our product to continue building the full-suite capabilities of Dayforce. We believe our proven ability to innovate in response to the changing dynamics of our industry will continue to accelerate our market leadership.

We are building a strong partner ecosystem to further enhance our well-defined implementation process and enhance the quantifiable value our customers have come to expect from Ceridian and the Dayforce platform.

We are capitalizing on the strategic acquisitions we have made in Asia Pacific Japan (APJ) with Ascender and Excelity. In early 2022, we took some actions to balance our workforce across our global offices. This will strengthen our ability to service our global customers, and over time, increase our overall profitability.

2			Q4 2021 Stockholder letter

"Our vision to be the always-on people platform for the global workforce is the foundation of our growth potential

+32%

growth in Dayforce recurring revenue, excluding float revenue

5,434

customers live on Dayforce1

+207 new customers taken live in Q4

+170 bps

increase in cloud recurring gross margin, excluding float revenue

+100 bps

improvement in cloud revenue retention rate1,2

1. Excluding the 2021 acquisitions of Ascender and ADAM HCM
2. Including Dayforce and Powerpay

With all components of our plan working together, we are taking full advantage of this significant growth opportunity in front of us, helping customers around the world win in the new world of work.

We achieved two remarkable milestones: More than $1 billion in total revenue and more than 5 million active employees on the Dayforce platform

Formalizing our leadership structure

Delivering strong results today, while building for the future, is due to the outstanding team we have built at Ceridian. In particular, through Leagh Turner's leadership and execution in her role as President and Chief Operating Officer, we have been able to scale our organization to support the aggressive growth we have delivered.

Since Leagh joined us in the third quarter of 2018:

• Dayforce recurring revenue excluding float has more than doubled;
• Cloud recurring gross margin has increased by 640 basis points; and
• The number of Dayforce customers has increased by 57%, while the average incremental revenue per customer* has increased by more than 80%.

Regardless of challenges like COVID-19 and operating through a pandemic, we have continued to grow, and the company has never been more successful.

Equally important, Leagh has been a talent magnet, helping us recruit new and develop existing executives to create an incredible team that has the necessary skills and operating experience to lead us into our next phase of growth.

That's why I am excited to announce her promotion to Co-CEO and her appointment to the Board of Directors. In her new role, Leagh will continue to report to me, as Chair and Co-CEO.

3			Q4 2021 Stockholder letter

As we focus on the future, this step formalizes how Leagh and I have run the company together during the last three years.

To be clear, I love Ceridian; I'm not going anywhere, and I've never been more committed and excited about our future. In fact, this structure will help

me go even deeper into key areas of growth for the business. I want to increase my capacity to keep Ceridian in the forefront of innovation. I will be deeply focused on product innovation and the massive opportunity in front of us with Dayforce Wallet, including our ability to expand the Wallet to the extended workforce.

Additionally, I am going to continue to spend significant time with prospects and our incredible community of customers. As I detailed above, we are in the middle of the most significant workforce transformation in decades, and Ceridian has never been more relevant and necessary as organizations of all sizes navigate these changes.

Together, Leagh and I will lead Ceridian into its next chapter of growth. We believe this is what a modern, future-focused company should look like

In this expanded role for Leagh, she will be able to continue to fully drive the end-to-end operations and strong execution that is fundamental to Ceridian's growth. She also will continue to expand our talent base, leveraging her tremendous ability to identify and recruit leaders, who are at the center of our success.

Together, Leagh and I will lead Ceridian into its next chapter of growth. We believe this is what a modern, future-focused company should look like.

Financial highlights

We had strong financial and operating performance in the fourth quarter. We maintained strong topline growth driven by Dayforce recurring revenue, which

• Excluding float revenue, Ascender and ADAM HCM revenue, and
  COVID-19 volume impact, on a constant currency basis.

grew by 32% excluding float revenue, or 31% on a constant currency basis.

Sales performance was significantly above the fourth quarter of 2020 as well as pre-COVID levels.

We increased annual cloud retention rate by 100 basis points to 96.8%.

Cloud recurring gross margin was 72.2%, up 130 basis points compared to the fourth quarter of 2020. Excluding float revenue cloud recurring gross margin expanded by 170 basis points.

From a profitability standpoint, Adjusted EBITDA was $38.7 million, or 13.7% of revenue.

Customer highlights

We are focused on delivering value to our customers throughout their lifecycle, and thereby earning customers for life. Our modern cloud platform, in combination with our services team and partner ecosystem, enable us to take customers live quickly, predictably, and on-time at a consistent pace.

As we noted previously, our go-live performance was very strong. We took live a record amount of recurring revenue across 207 customers.1 We ended the fourth quarter with 5,434 customers live on the Dayforce platform, an 11% increase compared to the fourth quarter of 2020.1 We are successfully selling the broader HCM suite, and our trailing twelvemonth Dayforce recurring revenue per customer for the same period was $108,631 up 10%2 year- over-year. Incremental Dayforce recurring revenue per customer for the same period increased to $201,326.2

During the quarter, we took some notable companies live on Dayforce with key customers, including:

• A leading managed care provider that serves over 25 million members in the U.S. recently went live with Dayforce to more than 50,000 employees across the U.S.

1. Excluding the 2021 acquisitions of Ascender and ADAM HCM.
2. Excluding float revenue, Ascender and ADAM HCM revenue, and
   COVID-19 volume impact, on a constant currency basis.

4			Q4 2021 Stockholder letter

A leading managed care provider with more than 50,000 employees across the U.S. went live with Dayforce

Intelligence at work