Ceridian HCM Proposes Terms For IPO

Quick Take

• Ceridian HCM has finalized terms for a $520 million combined private placement and IPO (NYSE:CDAY). 
• The firm, one of the oldest tech firms in the US, provides enterprises with human capital management software. It had sales of $751 million in 2017. 
• At the midpoint of the proposed range, it will have market cap of $2.8 billion and enterprise value of $3.3 billion. 
• Ceridian was struggling until it acquired Dayforce in 2012 for more than $100 million. 
• While it has strong support from insiders, it is growing more slowly than peers such as Workday, Paycom, etc. 

Company and Financials

Ceridian is a global HCM software company. Dayforce is its flagship cloud HCM platform providing HR, payroll, benefits, workforce management, and talent management functionality. The company operates a significant partner program through relationships with software integrators, consulting firms, brokers and small business sales channel partners.

Dayforce is sold through a direct sales force on a subscription per-employee, per-month (“PEPM”) basis. Subscriptions are typically structured with an initial fixed term of between three and five years, with evergreen renewal thereafter. Target customers range from 100 to over 100,000 employees across multiple industries. Dayforce has grown at a compound annual growth rate of c. 60% since 2012 and currently serves more than 3,000 customers. 

Strategic Highlights

The company's key growth pillars are as follows:

1. Grow market share in existing North American geographies.
2. Expand globally, localizing Dayforce to provide native payroll functionality in additional countries.
3. Up-sell existing customers.
4. Expand functionality, including through the use of artificial intelligence and big data.
5. Serve the on-demand / gig economy.

As part of the transaction, Ceridian will spin out to existing shareholders its interest in employee engagement and wellbeing platform LifeWorks.