KazantsevAlexander - Fotolia
The Ceridian IPO -- expected to raise more than $200 million to pay down debt and spin off the company's wellness subsidiary -- is likely to bolster the fast-growing HCM software and services vendor's position in the HR tech industry.
The initial public offering (IPO) puts the company on a more direct footing with key competitors in the cloud-based SaaS human capital management (HCM) and benefits administration business, such as Benefitfocus, Ultimate Software and publicly owned Workday.
IPO had been expected
Ceridian -- which is officially based in Minneapolis, but largely managed from Toronto -- filed registration documents for the IPO with the Securities and Exchange Commission (SEC) March 26, to be listed on the New York and Toronto Stock Exchanges.
The Ceridian IPO, which was expected after the company announced in January 2018 that it was in the preliminary stages of going public, will generate cash to help pay down more than $1 billion in debt to Ceridian's private equity owners.
From its beginnings in 1957 as a descendant of Control Data Corp. to its acquisition of the Dayforce WFM company in 2012, Ceridian -- formerly a declining, on-premises-based payroll vendor -- has become a significant HR tech player with its Dayforce HCM platform.
Ceridian evolution to cloud
Under CEO David Ossip, who founded Dayforce, Ceridian has transformed itself into a cloud-only purveyor of HCM, WFM, payroll and benefits administration systems.
"This initial public offering is an important milestone for Ceridian. I invite you to share in our journey as we continue our mission to innovate and to make work life better," Ossip said in a founder letter included in Ceridian's Form S-1 IPO registration statement with the SEC. "The offering will boost our financial flexibility and provide access to capital, allowing us to accelerate our plans for the future."
Ceridian declined requests for an interview for this story.
Brent Skinner, principal HCM industry analyst at Boston-based Nucleus Research, author of several research reports on Ceridian, said the Ceridian IPO is another positive development in the company's evolution.
"They've done a phenomenal job over the last five or six years. The IPO is the intuitive next logical step for Ceridian," Skinner said. "It's definitely going to have a positive impact for their brand, which is already firmly established in the marketplace."
Brent Skinnerprincipal HCM industry analyst, Nucleus Research
According to Ceridian, the company's total revenue increased from $704.2 million in 2016 to $750.7 million in 2017. Total cloud revenue from Dayforce installations went from $297.8 million in 2016 to $404.3 million in 2017, an increase of 35.8%.
By comparison, Workday's total revenue was $1.5 billion last year, according to the vendor's fourth-quarter earnings report for 2017. Kronos' revenue was $1.3 billion in 2017, the company said.
According to the Ceridian IPO filing, the company is distributing to existing stockholders its interest in wellness software vendor LifeWorks, which it has partly owned in a joint venture with the former WorkAngel, the original developer of the wellness and employee recognition and incentives platform.
LifeWorks spun off
LifeWorks, which had $79.9 million in revenue in 2017, will become a fully independent company. As a result of no longer counting on that revenue, Ceridian said it would incur about $3.2 million in taxes and assign $96 million in net operating losses to the spinoff.
Ceridian said, in addition to using IPO proceeds to pay down debt, it will also refinance the remaining portion of its $702 million in debt.
Ceridian was acquired in 2007 for $5.3 billion by Thomas H. Lee Partners and Fidelity National Financial, which took the company private.
Last year saw Ceridian join the ranks of major HCM vendors adding third-party development integration, machine learning, artificial intelligence, big data and predictive analytics capabilities to its main systems.
The company said it has more than 3,000 customers using Dayforce.