Ceridian (NYSE:CDAY) Beats Q4 Sales Targets, Stock Soars

Petr Huřťák /
2023/02/08 4:38 pm EST

Online payroll and human resource software provider Ceridian (NYSE:CDAY) reported Q4 FY2022 results beating Wall St's expectations, with revenue up 19.1% year on year to $336.1 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $361 million at the midpoint, 4.86% above what analysts were expecting. Ceridian made a GAAP loss of $5.2 million, improving on its loss of $9.5 million, in the same quarter last year.

Is now the time to buy Ceridian? Access our full analysis of the earnings results here, it's free.

Ceridian (CDAY) Q4 FY2022 Highlights:

  • Revenue: $336.1 million vs analyst estimates of $325.1 million (3.39% beat)
  • EPS (non-GAAP): -$0.03 vs analyst estimates of $0.12 (-$0.15 miss)
  • Revenue guidance for Q1 2023 is $361 million at the midpoint, above analyst estimates of $344.3 million
  • Management's revenue guidance for upcoming financial year 2023 is $1.49 billion at the midpoint, beating analyst estimates by 3.2% and predicting 19.6% growth (vs 21.8% in FY2022)
  • Free cash flow of $12.2 million, down 74.7% from previous quarter
  • Customers: 5,993, up from 5,848 in previous quarter
  • Gross Margin (GAAP): 40.2%, down from 41.8% same quarter last year

Founded in 1992 as an outsourced payroll processor and transformed after the 2012 acquisition of Dayforce, Ceridian (NYSE:CDAY) is a provider of cloud based payroll and HR software targeted at mid-sized businesses.

HR software benefits from dual trends around costs savings and ease of use. First is the SaaS-ification of businesses, large and small, who much prefer the flexibility of cloud-based, web-browser delivered software paid for on a subscription basis than the hassle and expense of purchasing and managing on-premise enterprise software. Second is the consumerization of business software, whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy to use platforms.

Sales Growth

As you can see below, Ceridian's revenue growth has been strong over the last two years, growing from quarterly revenue of $222.8 million in Q4 FY2020, to $336.1 million.

Ceridian Total Revenue

This quarter, Ceridian's quarterly revenue was once again up 19.1% year on year. We can see that the company increased revenue by $20.5 million quarter on quarter. That's a solid improvement on the $14.4 million increase in Q3 2022, so shareholders should appreciate the re-acceleration of growth.

Guidance for the next quarter indicates Ceridian is expecting revenue to grow 23.1% year on year to $361 million, in line with the 25.1% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $1.49 billion at the midpoint, growing 19.6% compared to 21.7% increase in FY2022.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Customer Growth

You can see below that Ceridian reported 5,993 customers at the end of the quarter, an increase of 145 on last quarter. That is a little better customer growth than last quarter and in line with what we have seen in previous quarters, demonstrating the company has the sales momentum required to drive continued growth. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is running smoothly.

Ceridian Customers

Key Takeaways from Ceridian's Q4 Results

With a market capitalization of $11.5 billion, more than $431.9 million in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by the very optimistic revenue guidance Ceridian provided for the next quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 7.48% on the results and currently trades at $80.28 per share.

Should you invest in Ceridian right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.