SEC Info - Dayforce, Inc. - ‘10-K’ for 12/31/23

The line items affected include “customer funds” and “customer funds obligations” on our consolidated balance sheets. The line items affected also include “increase (decrease) in customer funds obligations, net,” effect of exchange rate changes on cash, restricted cash, and equivalents,” “cash, restricted cash, and equivalents,” and “restricted cash and equivalents included in customer funds,” and “effect of exchange rate changes on cash, restricted cash, and equivalents” on our consolidated statements of cash flows. i The amounts impacted by the correction are summarized as follows:

Consolidated Balance Sheets

(Selected financial statement line items only)

As reported

As restated

Change

(In millions)

Customer funds

i 4,183.2

i 4,729.5

i 546.3

Customer funds obligations

i 4,298.8

i 4,845.1

i 546.3

Consolidated Statements of Cash Flows

(Selected financial statement line items only)

Year Ended December 31,

2022

2021

As reported

As restated

Change

As reported

As restated

Change

(In millions)

Increase (decrease) in customer funds obligations, net

i 840.1

i 734.6

( i 105.5

)

( i 195.7

)

( i 111.3

)

i 84.4

Effect of exchange rate changes on cash, restricted cash, and equivalents

( i 8.1

)

( i 46.8

)

( i 38.7

)

( i 20.9

)

( i 21.3

)

( i 0.4

)

Cash, restricted cash, and equivalents at beginning of period

i 1,952.8

i 2,643.3

i 690.5

i 2,228.5

i 2,835.0

i 606.5

Cash, restricted cash, and equivalents at end of period

i 2,604.9

i 3,151.2

i 546.3

i 1,952.8

i 2,643.3

i 690.5

Restricted cash and equivalents included in customer funds

i 2,172.2

i 2,718.5

i 546.3

i 1,583.4

i 2,273.9

i 690.5

In addition, our condensed consolidated statements of cash flows for certain historical quarterly periods will be restated in future Quarterly Reports on Form 10-Q. The following changes will be reflected in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024:

Condensed Consolidated Statements of Cash Flows

(Selected financial statement line items only, unaudited)

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

As reported

As restated

Change

As reported

As restated

Change

(In millions)

Increase in customer funds obligations, net

i 2,078.1

i 2,174.4

i 96.3

i 45.0

i 100.4

i 55.4

Effect of exchange rate changes on cash, restricted cash, and equivalents

( i 7.7

)

( i 6.8

)

i 0.9

( i 1.0

)

i 63.1

i 64.1

Cash, restricted cash, and equivalents at beginning of period

i 2,604.9

i 3,151.2

i 546.3

i 2,604.9

i 3,151.2

i 546.3

Cash, restricted cash, and equivalents at end of period

i 4,697.9

i 5,341.4

i 643.5

i 2,775.9

i 3,441.7

i 665.8

Restricted cash and equivalents included in customer funds

i 4,268.5

i 4,912.0

i 643.5

i 2,288.5

i 2,954.3

i 665.8

58 | 2023 Form 10-K

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our financial statements and our reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates that could significantly affect our results of operations or financial condition include the assignment of fair values to goodwill and other intangible assets and testing for impairment; the testing of impairment of long-lived assets; the determination of our liability for pensions and postretirement benefits; the determination of fair value of equity awards granted; and the resolution of tax matters and legal contingencies. Further discussion on these estimates can be found in related disclosures elsewhere in our notes to the consolidated financial statements.

Cash and Equivalents

As of December 31, 2023 and 2022, cash and equivalents were comprised of cash held in bank accounts and investments with an original maturity of three months or less.

Concentrations

Cash deposits of client and corporate funds are maintained primarily in large credit-worthy financial institutions in the countries in which we operate. These deposits may exceed the amount of any deposit insurance that may be available through government agencies. All deliverable securities are held in custody with large credit-worthy financial institutions, which bear the risk of custodial loss. Non-deliverable securities, primarily money market securities, are held in custody by large, credit-worthy broker-dealers and financial institutions.

Trade and Other Receivables, Net

Trade and other receivables balances are presented on the consolidated balance sheets net of the allowance for doubtful accounts and the reserve for sales adjustments. We experience credit losses on accounts receivable and, accordingly, must make estimates related to the ultimate collection of the receivables. Specifically, management analyzes accounts receivable, historical bad debt experience, customer concentrations, customer creditworthiness, and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. We estimate the reserve for sales adjustment based on historical sales adjustment experience. We write off accounts receivable when we determine that the accounts are uncollectible, generally upon customer bankruptcy or the customer’s nonresponse to continued collection efforts.

Property, Plant, and Equipment, Net

Our property, plant, and equipment assets are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the shorter of the remaining lease term or estimated useful life of the related assets, which are generally as follows:


Building improvements		i 5 years
Machinery and equipment		i 4- i 6 years
Computer equipment		i 3- i 4 years

Repairs and maintenance costs are expensed as incurred. We capitalized interest of $ i 0.7 million and $ i 0.8 million in property, plant, and equipment, net during the years ended December 31, 2023 and 2022, respectively. Property, plant, and equipment assets are assessed for impairment as described under the heading “Impairment of Long-Lived Assets” below.

Business Combinations

In accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, we use the acquisition method of accounting and allocate the fair value of purchase consideration to the assets acquired and liabilities assumed based on their respective estimated fair values as of the acquisition date. Goodwill represents the excess of purchase consideration transferred over the estimated fair value of the identifiable net assets acquired in a business combination.

59 | 2023 Form 10-K

Assigning estimated fair values to the net assets acquired requires the use of significant estimates, judgments, inputs, and assumptions regarding the fair value of the assets acquired and liabilities assumed. Estimated fair values of assets acquired and liabilities assumed are generally based on available historical information, independent valuations or appraisals, future expectations, and assumptions determined to be reasonable but are inherently uncertain with respect to future events, including economic conditions, competition, the useful life of the acquired assets, and other factors. The measurement period for assigning fair values to the net assets acquired will end when the information, or the facts and circumstances, becomes available, but will not exceed one year from the date of acquisition. The judgments made in determining the estimated fair value assigned to assets acquired and liabilities assumed, as well as the estimated useful life and depreciation or amortization method of each asset, can materially impact the net earnings of the periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. During the measurement period, any purchase price allocation changes that impact the carrying value of goodwill affects any measurement of goodwill impairment taken during the measurement period, if applicable. If necessary, purchase price allocation revisions that occur outside of the measurement period are recorded within our consolidated statement of operations depending on the nature of the adjustment.

Segment Information

We operate as a single reporting unit, a single operating segment and a single reporting segment. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. Our chief operating decision maker is our chief executive officer ("CEO").

Goodwill and Intangible Assets

Goodwill represents the excess of purchase consideration transferred over the estimated fair value of the identifiable net assets acquired in a business combination. Goodwill and our indefinite-lived intangible asset, the Dayforce trade name, are not amortized against earnings, but instead are tested for impairment on an annual basis, or more frequently if certain events or circumstances occur that could indicate impairment. We perform our annual impairment assessment of goodwill and the Dayforce trade name as of October 1.

We assess goodwill for impairment by performing a qualitative review of the reporting unit. If the qualitative assessment indicates it is more likely than not the fair value of the reporting unit is less than the carrying amount, a quantitative test is applied and, the carrying amount is compared to its estimated fair value. The estimated fair value is based on our market capitalization at the testing date. If the carrying amount of the goodwill exceeds the fair value of the reporting unit, goodwill may be impaired. To the extent that the carrying amount of the reporting unit exceeds the fair value of the reporting unit, an impairment loss is recognized.

We assess our indefinite-lived intangible asset for impairment by performing a qualitative review. If the qualitative assessment indicates it is more likely than not the fair value of the asset is less than the carrying amount, a quantitative test is applied and, the carrying amount is compared to its estimated fair value. The estimate of fair value is based on a relief from royalty method which calculates the cost savings associated with owning rather than licensing the trade name. An estimated royalty rate is applied to forecasted revenue and the resulting cash flows are discounted.

Definite-lived assets are assessed for impairment as described under the heading “Impairment of Long-Lived Assets” below.

Intangible assets represent amounts assigned to specifically identifiable intangible assets at the time of an acquisition. i Definite-lived assets are amortized on a straight-line basis generally over the following periods:


Customer lists and relationships		i 4- i 12 years
Trade name		i 2- i 5 years
Technology		i 3- i 5 years

60 | 2023 Form 10-K

Internally Developed Software Costs

In accordance with ASC Topic 350, we capitalize costs associated with software developed or obtained for internal use when both the preliminary project stage is completed and our management has authorized further funding for the project, which it deems probable of completion. Capitalized software costs include only: (1) external direct costs of materials and services consumed in developing or obtaining the software; (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the project; and (3) interest costs incurred while developing the software. Capitalization of these costs ceases no later than the point at which the project is substantially complete and ready for its intended purpose. We do not include general and administrative costs and overhead costs in capitalizable costs. Research and development costs, product management, and other software maintenance costs related to software development are expensed as incurred.

We had capitalized software costs, net of accumulated amortization, of $ i 167.0 million and $ i 133.4 million as of December 31, 2023, and 2022, respectively, included in property, plant, and equipment, net in the consolidated balance sheets. We amortize software costs on a straight-line basis over the expected life of the software, generally a range of two to i seven years. Amortization of software costs totaled $ i 54.0 million, $ i 43.5 million, and $ i 37.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Impairment of Long-Lived Assets

Long-lived assets, such as property, plant, and equipment, capitalized software, and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of an asset group to the estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.

Deferred Costs

Deferred costs primarily consist of deferred sales commissions. Sales commissions paid based on the annual contract value of a signed customer contract are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions paid based on the annual contract value are deferred and then amortized on a straight-line basis over a period of benefit. As of December 1, 2022, we increased the expected period of benefit of our deferred sales commissions from five years to i ten years. This change in accounting estimate and related customer period of benefit is largely attributable to new evidence of longer customer relationships such as increases in the proportion of new customer contracts greater than i three years as well as our continued high customer retention rates. The change was made on a prospective basis.

Deferred costs included within Other assets on our consolidated balance sheets were $ i 192.1 million and $ i 151.2 million as of December 31, 2023 and 2022, respectively. Amortization expense for the deferred costs was $ i 21.0 million, $ i 48.9 million, and $ i 46.4 million for the years ended December 31, 2023, 2022, and 2021 respectively.

Revenue Recognition

The core principle of ASC Topic 606 is that revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. In accordance with ASC Topic 606, we perform the following steps to determine revenue to be recognized:

Identify the contract(s) with a customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligations in the contract; and

Recognize revenue when (or as) we satisfy a performance obligation.

61 | 2023 Form 10-K

The significant majority of our two major revenue sources (recurring and professional services and other) are derived from contracts with customers. Recurring revenues are primarily related to our Cloud subscription performance obligations. Professional services and other revenues are primarily related to professional services for our Cloud customers (including implementation services to activate new accounts, as well as post go-live professional services typically billed on a time and materials basis) and, to a much lesser extent, fees for other non-recurring services, including sales of time clocks and certain client reimbursable out-of-pocket expenses. Fees charged to Cloud subscription performance obligations are generally priced either on a per-employee, per-month (“PEPM”) basis for a given month or on a per-employee, per-process basis for a given process; and fees charged for professional services are typically priced on a fixed fee basis for activating new accounts and on a time and materials basis for post go-live professional services. There is typically no variable consideration related to our recurring Cloud subscriptions or our activation services, nor do they include a significant financing component, non-cash consideration, or consideration payable to a customer. Our recurring Cloud subscriptions are typically billed one month in advance while our professional services are billed over the implementation period for activation of new accounts and as work is performed for post go-live professional services.

Our Cloud services arrangements include multiple performance obligations, and transaction price allocations are based on the stand-alone selling price ("SSP") for each performance obligation. Our contract renewal rates serve as an observable input to establish SSP for our recurring Cloud subscription performance obligations. The SSP for professional services performance obligations is estimated based on market conditions and observable inputs, including hours incurred and rates charged by third parties to perform implementation services.

For our performance obligations, the consideration allocated to Cloud subscription revenues is recognized as recurring revenues, typically commencing when an instance is provisioned to the customer. The consideration allocated to professional services to activate a new account is recognized as professional services revenues based on the proportion of total work performed, using reasonably dependable estimates (in relation to progression through the implementation phase), by solution.

Recurring Revenues

For our Dayforce solutions, we primarily charge monthly recurring fees on a PEPM basis, generally one-month in advance of service, based on the number and type of solutions provided to the customer and the number of employees at the customer. We charge Powerpay customers monthly recurring fees on a per-employee, per-process basis. For our other recurring solutions, we typically charge monthly recurring fees on a per-process basis. The typical recurring customer contract has an initial term between three and i five years. Any credits related to service level commitments are recognized as incurred, as service level failures are not anticipated at contract signing. Should a customer cancel the initial contract, an early termination fee may be applicable, and revenue is recognized upon collection. We also generate recurring revenue from investment income on our Cloud recurring and other recurring customer funds before such funds are remitted to taxing authorities, customer employees, or other third parties. We refer to this investment income as float revenue. Please refer to Part II, Item 8, Note 12, “Revenue,” for a full description of our sources of revenue.

Professional Services and Other Revenues

Professional services and other revenues consist primarily of charges relating to the work performed to assist customers with the planning, design, and implementation of their solutions. Also included in professional services are any related training services, post-implementation professional services, and shipment of time clocks purchased by customers. We also generate professional services and other revenues from custom professional services and consulting services that we provide and for certain third-party services that we arrange for our Other recurring customers. Professional services revenue is primarily recognized as hours are incurred.

Costs and Expenses

Cost of Revenue

Cost of revenue consists of costs to deliver our revenue-producing services. Most of these costs are recognized as incurred, that is, as we become obligated to pay for them. Some costs of revenue are recognized in the period that a service is sold and delivered. Other costs of revenue are recognized over the period of use or in proportion to the related revenue.

62 | 2023 Form 10-K

The costs recognized as incurred consist primarily of customer service staff costs, customer technical support costs, implementation personnel costs, costs of hosting applications, consulting and purchased services, delivery services, and royalties. The costs of revenue recognized over the period of use are depreciation and amortization, rentals of facilities and equipment, and direct and incremental costs associated with deferred implementation service revenue.

Cost of recurring revenues primarily consists of costs to provide maintenance and technical support to our customers, and the costs of hosting our applications. The cost of recurring revenues includes compensation and other employee-related expenses for data center staff, payments to outside service providers, data center, and networking expenses.

Cost of professional services and other revenues primarily consists of costs to provide implementation consulting services and training to our customers, as well as the cost of time clocks. Costs to provide implementation consulting services include compensation and other employee-related expenses for professional services staff, costs of subcontractors, and travel.

Product development and management expense includes costs related to software development activities that do not qualify for capitalization, such as development, quality assurance, testing of new technologies, and enhancements to our existing solutions that do not result in additional functionality. Product development and management expense also includes costs related to the management of our solutions. Research and development expense was $ i 112.0 million, $ i 92.3 million, and $ i 81.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Depreciation and amortization related to cost of revenue primarily consists of amortization of capitalized software.

Selling and Marketing Expense

Selling and marketing expense includes costs related to maintaining a direct marketing infrastructure and sales force and other direct marketing efforts, such as marketing events, advertising, telemarketing, direct mail, and trade shows. Advertising costs are expensed as incurred. Advertising expense was $ i 14.2 million, $ i 11.3 million, and $ i 7.5 million for the years ended December 31, 2023, 2022, and 2021, respectively.

General and Administrative Expense

General and administrative expense includes costs that are not directly related to delivery of services, selling efforts, or product development, primarily consisting of corporate-level costs, such as administration, finance, legal, and human resources. Also included in this category are depreciation, and amortization of other intangible assets not reflected in cost of revenue, and the provision for doubtful accounts receivable.

Other Expense (Income), Net

Other expense (income), net includes the results of transactions that are not appropriately classified in another category. These items are primarily foreign currency translation gains and losses resulting from transactions denominated in foreign currencies and net periodic pension costs.

Income Taxes

Income taxes have been provided for using the asset and liability method. Deferred tax assets and liabilities are recorded for temporary differences between the financial reporting basis and the tax basis of assets and liabilities as adjusted for the expected benefits of utilizing net operating loss carryforwards. The impact on deferred taxes of changes in tax rates and laws, if any, applied to the years during which temporary differences are expected to be settled, is reflected in the consolidated financial statements in the period of enactment.

We classify interest and penalties related to income taxes as a component of income tax expense (benefit).

Fair Value of Financial Instruments

The carrying amounts of cash and equivalents, trade and other receivables, net, customer funds obligations, customer advance payments, and accounts payable approximate fair value because of the short-term nature of these items.

63 | 2023 Form 10-K

Share-Based Compensation

Our share-based compensation consists of stock options, restricted stock units (“RSU”), and performance-based stock units (“PSU”) and is used to compensate employees and non-employee directors. We also offer a global employee stock purchase plan ("GESPP") to eligible employees.

We measure share-based compensation cost at the grant date based on the fair value of the award and recognize the compensation expense over the requisite service period, which is the period during which an employee is required to provide services in exchange for the award, except for retirement-eligible employees with RSUs that have not given their required notice, which accelerates at the time of their retirement eligibility date. We estimate forfeitures at the time of grant based on historical data and record share-based compensation expense for those awards expected to vest.

Our GESPP allows participating employees to purchase shares of our common stock at a discount via payroll deductions. The plan is available to employees subject to certain eligibility requirements. i Participating employees may purchase common stock, on a voluntary after-tax basis, at a price that is the lower of i 85% of the fair market value of a share of common stock on (i) January 1 or (ii) the purchase date. / The plan consists of four i three-month offering periods, beginning on January 1, April 1, July 1, and October 1 of each calendar year.

The fair value of term-based stock options and our GESPP activity is estimated using the Black-Scholes standard option pricing model (“Black-Scholes model”). The fair value for RSUs and PSUs is the closing market value of the underlying stock on the day of grant. For performance-based stock options and PSUs with a market condition, a Monte Carlo simulation model is used to determine the fair value. The Monte Carlo model utilizes multiple input variables that determine the probability of satisfying the market conditions stipulated in the award.

To determine the fair value of the awards on the date of grant using the Black-Scholes model, the risk-free interest rate used was based on the implied yield currently available on U.S. Treasury zero coupon issues with remaining term equal to the contractual term of the performance-based options and the expected term of the term-based awards. The estimated volatility of our common stock is based on volatility data for selected comparable public companies, including the historical volatility of our stock price, over the expected term of our stock awards. Because we do not anticipate paying any cash dividends in the foreseeable future, we use an expected dividend yield of zero. The amount of share-based compensation expense we recognize during a period is based on the portion of the awards that are ultimately expected to vest. For most awards, we recognize stock compensation expense using the straight-line method. For awards based on a market condition, expense is recognized on a straight-line basis over the performance period, regardless of whether the market condition is satisfied as the likelihood of the market condition being met is included in the fair-value measurement of the award.

If factors change and we employ different assumptions for estimating share-based compensation expense in future periods or if we adopt a different valuation model, future periods may differ significantly from what we have recorded in the current period and could materially affect our operating results.

Pension and Other Postretirement Benefits Liability

We present information about our pension and postretirement benefit plans in Part II, Item 8, Note 10, “Employee Benefit Plans” to our consolidated financial statements. Liabilities and expenses for pensions and other postretirement benefits are determined with the assistance of third-party actuaries, using actuarial methodologies and incorporating significant assumptions, including the rate used to discount the future estimated liability, the long-term rate of return on plan assets, and several assumptions relating to the employee workforce (medical costs, retirement age, and mortality). The discount rate assumption utilizes a full yield curve approach by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The impact of a change in the discount rate of i 25 basis points would be approximately $ i 6.6 million on the liabilities and an immaterial impact on pre-tax earnings in the following year. i The long-term rate of return is estimated by considering historical returns and expected returns on current and projected asset allocations and is generally applied to a five-year average market value of assets. A change in the assumption for the long-term rate of return on plan assets of i 25 basis points would impact pre-tax earnings by approximately $ i 0.9 million.

64 | 2023 Form 10-K

Foreign Currency Translation

We have international operations whereby the local currencies serve as functional currencies. We translate foreign currency denominated assets and liabilities at the end-of-period exchange rates and foreign currency denominated statements of operations at the average exchange rates for each period. We report the effect of changes in the U.S. dollar carrying values of assets and liabilities of our international subsidiaries that are due to changes in exchange rates between the U.S. dollar and the subsidiaries’ functional currency as foreign currency translation within accumulated other comprehensive income (loss) in the accompanying consolidated statements of stockholders’ equity and comprehensive income (loss). Gains and losses from transactions and translation of assets and liabilities denominated in currencies other than the functional currency of the subsidiaries are recorded in the consolidated statements of operations within other expense (income), net.

Recently Issued and Adopted Accounting Pronouncements

There were no recently adopted accounting standards that had a material effect on our consolidated financial statements and accompanying disclosures, and no recently issued accounting standards that are expected to have a material impact on our consolidated financial statements and accompanying disclosures.

3. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). GAAP outlines a valuation framework and creates a fair value hierarchy intended to increase the consistency and comparability of fair value measurements and the related disclosures. Certain assets and liabilities must be measured at fair value, and disclosures are required for items measured at fair value.

We measure our financial instruments using inputs from the following three levels of the fair value hierarchy. The three levels are as follows:

•

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

•

Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (that is, interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•

Level 3 inputs include unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including internal data.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our financial assets and liabilities measured at fair value on a recurring basis were categorized as follows:

Level 1

Level 2

Level 3

Total

(In millions)

Assets

Available for sale customer funds assets

—

i 2,178.3

(a)

—

i 2,178.3

Total assets measured at fair value

—

i 2,178.3

—

i 2,178.3

Liabilities

DataFuzion contingent consideration

—

i 14.9

(b)

i 14.9

Total liabilities measured at fair value

—

i 14.9

65 | 2023 Form 10-K

Level 1

Level 2

Level 3

Total

(In millions)

Assets

Available for sale customer funds assets

—

i 2,011.0

(a)

—

i 2,011.0

Total assets measured at fair value

—

i 2,011.0

—

i 2,011.0

Liabilities

DataFuzion contingent consideration

—

i 10.6

(b)

i 10.6

Total liabilities measured at fair value

—

i 10.6

(a)

Fair value is based on inputs that are observable for the asset or liability, other than quoted prices.

(b)

For the contingent consideration related to the 2021 acquisition of certain assets and liabilities of DataFuzion HCM, Inc. ("DataFuzion"), we utilized a Monte Carlo simulation model and a Black-Scholes-Merton option pricing model to estimate the fair value of the contingent liability as of December 31, 2023 and 2022, respectively. These models used certain assumptions related to risk-free rates and volatility as well as certain judgments in forecasting annual recurring revenue. The contingent consideration has been measured as Level 3 given the unobservable inputs that are significant to the measurement of liability. As of December 31, 2023, $ i 8.6 million of the contingent consideration is included within other accrued expenses in our consolidated balance sheets and as of December 31, 2023 and 2022, $ i 6.3 million and $ i 10.6 million of the contingent consideration is included within other liabilities in our consolidated balance sheets, respectively.

During the year ended December 31, 2023 and 2022, we recognized expense of $ i 4.3 million and $ i 4.6 million, respectively, within general and administrative expense in our consolidated statements of operations due to the remeasurement of the DataFuzion contingent consideration.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

During the year ended December 31, 2023 and 2022, we did not re-measure any financial assets or liabilities at fair value on a nonrecurring basis.

4. Customer Funds

Overview

In certain jurisdictions, we collect funds for payment of payroll and taxes; temporarily hold such funds until payment is due; remit the funds to the customers’ employees and appropriate taxing authorities; file federal, state, and local tax returns; and handle related regulatory correspondence and amendments. The customer assets are held in segregated accounts intended for the specific purpose of satisfying client funding obligations and therefore are not freely available for our general business use. In the U.S. and Canada, these customer funds are held in trusts.

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 i 45% to i 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 i 45% to i 55% of customer funds in fixed income portfolios with maturities ranging from 120 days to 10 years, consisting of U.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.

66 | 2023 Form 10-K

Financial Statement Presentation

Investment income from invested customer funds, also referred to as float revenue or float, is a component of our compensation for providing services under agreements with our customers. Investment income from invested customer funds included in revenue amounted to $ i 168.7 million, $ i 80.2 million, and $ i 41.1 million for the years ended December 31, 2023, 2022, and 2021, respectively. Investment income includes interest income, realized gains and losses from sales of customer funds’ investments, and unrealized credit losses determined to be unrecoverable.

The amortized cost of customer funds as of December 31, 2023, and 2022, is the original cost of assets acquired. i The amortized cost and fair values of investments of customer funds available for sale were as follows:

Amortized

Gross Unrealized

Fair

Cost

Gain

Loss

Value

(In millions)

Money market securities, investments carried at cost
and other cash equivalents

i 2,800.7

—

i 2,800.7

Available for sale investments:

U.S. government and agency securities

i 768.3

i 2.3

( i 35.1

)

i 735.5

Canadian and provincial government securities

i 448.7

i 1.3

( i 11.3

)

i 438.7

Corporate debt securities

i 664.7

i 2.6

( i 19.4

)

i 647.9

Asset-backed securities

i 208.9

i 1.0

( i 3.3

)

i 206.6

Mortgage-backed securities

i 60.3

i 0.8

( i 0.7

)

i 60.4

Other short-term investments

i 16.1

—

i 16.1

Other securities

i 76.2

i 0.1

( i 3.2

)

i 73.1

Total available for sale investments

i 2,243.2

i 8.1

( i 73.0

)

i 2,178.3

Invested customer funds

i 5,043.9

i 8.1

( i 73.0

)

i 4,979.0

Receivables

i 49.6

Total customer funds

i 5,093.5

i 5,028.6

Amortized

Gross Unrealized

Fair

Cost

Gain

Loss

Value

(In millions)

Money market securities, investments carried at cost
and other cash equivalents

i 2,698.7

—

i 2,698.7

Available for sale investments:

U.S. government and agency securities

i 721.3

—

( i 53.1

)

i 668.2

Canadian and provincial government securities

i 438.7

i 0.1

( i 17.8

)

i 421.0

Corporate debt securities

i 653.8

i 0.5

( i 35.5

)

i 618.8

Asset-backed securities

i 169.6

i 0.1

( i 6.1

)

i 163.6

Mortgage-backed securities

i 14.5

—

( i 0.7

)

i 13.8

Other short-term investments

i 57.0

—

i 57.0

Other securities

i 74.4

—

( i 5.9

)

i 68.6

Total available for sale investments

i 2,129.3

i 0.7

( i 119.1

)

i 2,011.0

Invested customer funds

i 4,828.0

i 0.7

( i 119.1

)

i 4,709.7

Receivables

i 20.0

i 19.8

Total customer funds

i 4,848.0

i 4,729.5

67 | 2023 Form 10-K

The following represents the gross unrealized losses and the related fair value of the investments of customer funds available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

Less than 12 months

12 months or more

Total

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

(In millions)

U.S. government and agency securities

( i 0.5

)

i 38.5

( i 34.6

)

i 508.3

( i 35.1

)

i 546.8

Canadian and provincial government securities

( i 0.7

)

i 101.8

( i 10.6

)

i 234.8

( i 11.3

)

i 336.6

Corporate debt securities

( i 0.2

)

i 36.6

( i 19.2

)

i 465.7

( i 19.4

)

i 502.3

Asset-backed securities

( i 0.2

)

i 39.2

( i 3.1

)

i 101.5

( i 3.3

)

i 140.7

Mortgage-backed securities

( i 0.1

)

i 3.9

( i 0.6

)

i 11.6

( i 0.7

)

i 15.5

Other securities

—

i 1.9

( i 3.2

)

i 67.1

( i 3.2

)

i 69.0

Total available for sale investments

( i 1.7

)

i 221.9

( i 71.3

)

i 1,389.0

( i 73.0

)

i 1,610.9

Management does not believe that any individual unrealized loss was unrecoverable as of December 31, 2023. The unrealized losses are primarily attributable to changes in interest rates and not to credit deterioration. We currently do not intend to sell or expect to be required to sell the securities before the time required to recover the amortized cost.

The amortized cost and fair value of investment securities available for sale at December 31, 2023, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or to prepay obligations with or without call or prepayment penalties.


	December 31, 2023
	Cost		Fair Value
	(In millions)
Due in one year or less	$	i 3,100.7	$	i 3,095.8
Due in one to three years		i 951.1		i 909.5
Due in three to five years		i 793.4		i 775.7
Due after five years		i 198.7		i 198.0
Invested customer funds	$	i 5,043.9	$	i 4,979.0

6. Leases

Our leases primarily consist of office space. Leases with an initial term of i 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning 2019 and later, we account for lease components separately from the non-lease components.

Most leases include options to renew, and the lease renewal is at our sole discretion. Therefore, the depreciable life of assets and leasehold improvements is limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We rent or sublease certain real estate to third parties. Our sublease portfolio mainly consists of operating leases for space within our office facilities.

In 2021, we sold the office building, land, and fixed assets of our St. Petersburg, Florida facility for $ i 40 million, less fees and expenses, resulting in a gain on the sale of $ i 19.1 million, which was recognized in the consolidated statements of operations within general and administrative expense. Upon the sale of the building, we entered into a i two year agreement to lease a portion of the building as of the sale date.

Supplemental balance sheet information related to leases was as follows:


Lease Type	Balance Sheet Classification	December 31, 2023		December 31, 2022
		(In millions)
ASSETS
Operating lease assets	Trade and other receivables, net	$	i 0.9	$	i 0.1
Operating lease assets	Prepaid expenses and other current assets		i 2.3		i 2.8
Operating lease assets	Right of use lease assets, net		i 19.1		i 24.3
Financing lease assets	Property, plant, and equipment, net		i 5.8		i 7.0
Total lease assets		$	i 28.1	$	i 34.2
LIABILITIES
Financing lease liabilities	Current portion of long-term debt	$	i 0.8	$	i 1.0
Operating lease liabilities	Current portion of long-term lease liabilities		i 7.0		i 10.0
Financing lease liabilities	Long-term debt, less current portion		i 6.5		i 7.4
Operating lease liabilities	Long-term lease liabilities, less current portion		i 18.9		i 23.7
Total lease liabilities		$	i 33.2	$	i 42.1

69 | 2023 Form 10-K

The components of lease expense were as follows:

Year Ended December 31,

2022

2021

Lease Cost

(In millions)

Operating lease cost

i 8.8

i 9.8

i 6.1

Financing lease cost:

Depreciation of lease assets

i 1.7

i 1.3

Interest on lease liabilities

i 0.3

Sublease income

( i 0.4

)

( i 0.5

)

( i 2.2

)

Total lease cost, net

i 10.4

i 10.9

i 5.5

Supplemental cash flow information related to leases was as follows:


	Year Ended December 31,
	2023		2022
	(In millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	i 8.1	$	i 8.7
Operating cash flows from finance leases		i 0.3		i 0.3
Financing cash flows from finance leases		i 2.0		i 1.6
Lease assets obtained in exchange for new lease liabilities:
Operating leases		i 1.9		i 7.8

The future minimum lease payments under our operating and financing leases were as follows:


Year Ended December 31,	Amount
	(In millions)
2024	$	i 10.1
2025		i 8.3
2026		i 6.5
2027		i 4.1
2028		i 3.2
Thereafter		i 5.1
Total lease payments	$	i 37.3
Less: Interest		( i 4.1	)
Total	$	i 33.2

W i eighted average remaining lease term and weighted average discount rate were as follows:


	December 31,
	2023			2022
Weighted average remaining lease term (in years)
Operating leases		i 4.0			i 3.6
Financing leases		i 7.6			i 8.3
Weighted average discount rate
Operating leases		i 5.06	%		i 4.34	%
Financing leases		i 3.91	%		i 3.88	%

70 | 2023 Form 10-K

8. Goodwill and Intangible Assets

Goodwill

Our goodwill balance was $ i 2,293.9 million and $ i 2,280.0 million as of December 31, 2023 and 2022, respectively. The change in goodwill was due to fluctuations in foreign currency exchange rates. Tax-deductible goodwill at December 31, 2023 was $ i 46.5 million.

We performed a qualitative impairment assessment as of October 1, 2023 and concluded that it is more likely than not that the fair value of our reporting unit is more than its carrying amount.

Intangible Assets

Other intangible assets, net consist of the following:

Gross Carrying
Amount

Accumulated
Amortization

Net

Weighted Average Remaining Amortization Period

(In millions)

(In years)

Customer lists and relationships

i 302.3

( i 239.5

)

i 62.8

i 6.6

Trade name

i 183.6

( i 41.9

)

i 141.7

i 1.6

Technology

i 227.5

( i 201.8

)

i 25.7

i 2.3

Total other intangible assets

i 713.4

( i 483.2

)

i 230.2

i 3.2

Gross Carrying
Amount

Accumulated
Amortization

Net

Weighted Average Remaining Amortization Period

(In millions)

(In years)

Customer lists and relationships

i 299.8

( i 228.6

)

i 71.2

i 7.4

Trade name

i 183.4

( i 4.7

)

i 178.7

i 2.2

Technology

i 213.5

( i 181.8

)

i 31.7

i 3.2

Total other intangible assets

i 696.7

( i 415.1

)

i 281.6

i 6.1

71 | 2023 Form 10-K

In the third quarter of 2023, our Board of Directors approved plans to transition our Company’s name and branding to Dayforce, Inc. Given the significance of this transition, we assessed the impact on the carrying amount of $ i 167.2 million related to our Ceridian trade name intangible asset to determine whether an impairment exists, and/or if the asset is deemed to have a finite life and should be amortized. It was determined that the Ceridian trade name was not impaired, but the asset was deemed to have a finite life of i two years and began being amortized in the third quarter of 2023.

Amortization expense related to definite-lived intangible assets was $ i 60.5 million, $ i 30.9 million, and $ i 23.9 million for the years ended December 31, 2023, 2022, and 2021, respectively. i We estimate the future amortization of other intangible assets as follows:


Years Ending December 31,	Amount
	(In millions)
2024	$	i 103.9
2025		i 73.1
2026		i 13.0
2027		i 9.1
2028		i 8.8
Thereafter		i 17.7

Long-Lived Assets by Geographic Area

Long-lived assets consist of right of use lease assets, net, property, plant and equipment, net, goodwill, and other intangible assets, net. Long-lived assets by country consist of the following:


	December 31,
	2023		2022
	(In millions)
United States	$	i 1,796.8	$	i 1,803.5
Canada		i 526.7		i 507.4
Australia		i 244.4		i 259.3
Other		i 185.4		i 190.6
Total long-lived assets	$	i 2,753.3	$	i 2,760.8

9. Debt

Overview

Our debt obligations consist of the following:


	December 31,		December 31,
	2023		2022
	(In millions)
Term Debt, interest rate of i 8.0% and i 6.9%, respectively	$	i 644.3	$	i 651.1
Revolving Credit Facility ($ i i 300.0 / million available capacity less $ i 1.3 million and $ i 1.4 million, respectively, reserved for letters of credit)		—		—
Convertible Senior Notes, interest rate of i i 0.25 / %		i 575.0		i 575.0
Line of Credit ($ i 0.5 million and $ i 1.0 million letter of credit capacity, respectively, which were fully utilized)		—		—
Financing lease liabilities (Note 6)		i 7.3		i 8.4
Total debt		i 1,226.6		i 1,234.5
Less unamortized discount on Term Debt		i 0.4		i 0.6
Less unamortized debt issuance costs on Term Debt and Convertible Senior Notes		i 8.5		i 12.7
Less current portion of long-term debt		i 7.6		i 7.8
Long-term debt, less current portion	$	i 1,210.1	$	i 1,213.4

Accrued interest and fees related to our debt obligations were $ i 0.9 million and $ i 0.7 million as of December 31, 2023 and 2022, respectively, and are included within other accrued expenses in our consolidated balance sheets.

72 | 2023 Form 10-K

Senior Secured Credit Facility

Principal Amounts, Interest, and Maturity Dates

On April 30, 2018, we completed the refinancing of our debt by entering into a new credit agreement. Pursuant to the new credit agreement, we became borrower of (i) a $ i 680.0 million term loan debt facility (the “Term Debt”) and (ii) a $ i 300.0 million revolving credit facility (the “Revolving Credit Facility” and collectively with the Term Debt, the “Senior Secured Credit Facility”). Our obligations under the Senior Secured Credit Facility are secured by first priority security interests in substantially all of our assets and the domestic subsidiary guarantors, subject to permitted liens and certain exceptions.

The Term Debt and Revolving Credit Facility were set to mature on i April 30, 2025 and i January 29, 2025, respectively. We are required to make annual amortization payments in respect of the Term Debt in an amount equal to i 1.00% of the original principal amount thereof, payable in equal quarterly installments of i 0.25% of the original principal amount of the first lien term debt. The Revolving Credit Facility does not require amortization payments. On August 1, 2023, we completed the third amendment to our Senior Secured Credit Facility, which replaced the London Interbank Offered Rate ("LIBOR") with Secured Overnight Financing Rate ("SOFR") as the reference rate for the floating rate Term Debt interest rate. As of December 31, 2023, our floating rate on the Term Debt interest was SOFR plus i 2.5% and the applicable Term SOFR Adjustment ranged from approximately i 0.1% to i 0.4%, depending on term.

Financing Costs and Issuance Discounts

The Term Debt had associated unamortized deferred financing costs of $ i 2.1 million and $ i 3.7 million at December 31, 2023, and 2022, respectively, which are being amortized at an effective interest rate of i i 5.3 / %.

Collateral and Guarantees

The Senior Secured Credit Facility names us as the sole borrower and is unconditionally guaranteed by our domestic, wholly-owned financially material restricted subsidiaries, subject to certain customary exceptions. The Senior Secured Credit Facility is secured by a perfected first priority security interest, subject to certain exceptions (including customer funds), in substantially all of our and the subsidiary guarantors’ tangible and intangible assets. The security interest includes a pledge of the capital stock of certain of our direct and indirect material restricted subsidiaries.

Representations, Warranties and Covenants

The documents governing the Senior Secured Credit Facility contain certain customary representations and warranties. In addition, those documents contain customary covenants restricting our ability and certain of our subsidiaries’ ability to, among other things: incur additional indebtedness, issue disqualified stock and preferred stock; create liens; declare dividends; redeem capital stock; make investments; engage in a materially different line of business; engage in certain mergers, consolidations, acquisitions, asset sales, or other fundamental changes; engage in certain transactions with affiliates; enter into certain restrictive agreements; make prepayments on any subordinated indebtedness; modify junior financing documentation; and make changes to our fiscal year.

i The Senior Secured Credit Facility documents contain a requirement that we maintain a ratio of adjusted first lien debt to Credit Facility EBITDA below specified levels on a quarterly basis; however, such requirement is applicable only if more than 35% of the Revolving Credit Facility is drawn. As of December 31, 2023, no portion of the Revolving Credit Facility was drawn.

Events of Default

Events of default under the Senior Secured Credit Facility documents include, but are not limited to: failure to pay interest, principal and fees, or other amounts when due; material breach of any representation or warranty; covenant defaults; cross defaults to other material indebtedness; events of bankruptcy, invalidity of security interests; a change of control; material judgments for payment of money; involuntary acceleration of any debt; and other customary events of default. There were no events of default as of December 31, 2023.

73 | 2023 Form 10-K

Convertible Senior Notes

In March 2021, we issued $ i 575.0 million in aggregate principal amount of i 0.25% Convertible Senior Notes due 2026 in a private offering to qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act of 1933, as amended, and pursuant to exemptions from the prospectus requirements of applicable Canadian securities laws, including the exercise in full by the initial purchasers of their option to purchase an additional $ i 75.0 million in aggregate principal amount of i 0.25% Convertible Senior Notes due 2026 (collectively, the “Convertible Senior Notes”). i The Convertible Senior Notes bear interest at a rate of i 0.25% per year and interest is payable i semiannually in arrears on March 15 and September 15 of each year, beginning on i September 15, 2021 / . The Convertible Senior Notes mature on i March 15, 2026, unless earlier converted, redeemed or repurchased. The total net proceeds from the offering, after deducting initial purchase discounts and other debt issuance costs, were $ i 561.8 million.

The Convertible Senior Notes are unsecured obligations and do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by us or any of our subsidiaries.

The following table presents details of the Convertible Senior Notes:

The Convertible Senior Notes will be convertible at the option of the holders at any time only under the following circumstances:

•

During any calendar quarter commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of our common stock exceeds i 130% of the conversion price for each of at least i 20 trading days during the i 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

•

During the i five consecutive business days immediately after any i 10 consecutive trading day period (such i 10 consecutive trading day period, the “measurement period”) in which the trading price per $ i 1,000 principal amount of Convertible Senior Notes for each trading day of the measurement period was less than i 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

•

Upon the occurrence of certain corporate events or distributions on our common stock, as described in the Indenture under which the Convertible Senior Notes were issued;

•

If we call such Convertible Senior Notes for redemption; or

•

At any time from, and including, September 15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date.

Upon conversion, we may satisfy the conversion obligation by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and subject to the terms and conditions provided in the Indenture under which the Convertible Senior Notes were issued. On December 30, 2021, we notified the holders of the Convertible Senior Notes of our irrevocable election to settle the conversion obligations in connection with the Convertible Senior Notes submitted for conversion on or after January 1, 2022, or at maturity with a combination of cash and shares of our common stock. Generally, under this settlement method, the conversion value will be settled in cash in an amount no less than the principal amount being converted, and any excess of the conversion value over the principal amount will be settled, at the Company's election, in cash or shares of our common stock. The conditions allowing holders of the Convertible Senior Notes to convert have not been met and therefore were not convertible as of December 31, 2023.

74 | 2023 Form 10-K

We may not redeem the Convertible Senior Notes prior to March 20, 2024. On or after March 20, 2024, and on or before the 30th scheduled trading day immediately preceding the maturity date, we may redeem the Convertible Senior Notes at a cash purchase price equal to the principal amount of the Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of our common stock exceeds i 130% of the conversion price on (1) each of at least i 20 trading days, whether or not consecutive, during the i 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice; and (2) the trading day immediately before the date we send such notice. In addition, calling any Convertible Senior Note for redemption will constitute a make-whole fundamental change with respect to that Convertible Senior Note, in which case the conversion rate applicable to the conversion of that Convertible Senior Note will be increased in certain circumstances if it is converted after it is called for redemption.

If a “fundamental change” (as defined in the Indenture under which the Convertible Senior Notes were issued) occurs, then noteholders may require us to repurchase their Convertible Senior Notes at a cash repurchase price equal to the principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid interest, if any.

The Convertible Senior Notes are accounted for as a single liability, and the carrying amount of the Convertible Senior Notes was $ i 568.2 million as of December 31, 2023, with principal of $ i 575.0 million, net of issuance costs of $ i 6.8 million. The Convertible Senior Notes are included within long-term debt, less current portion in our consolidated balance sheets as of December 31, 2023. The issuance costs related to the Convertible Senior Notes are being amortized to interest expense over the contractual term of the Convertible Senior Notes at an effective interest rate of i 5.1%.

The following table sets forth total interest expense recognized related to the Convertible Senior Notes for the period:


		Year Ended December 31,
		2023		2022		2021
	(Dollars in millions)
Contractual interest expense		$	i 1.4	$	i 1.5	$	i 1.2
Amortization of debt discount (a)			—		—		i 14.0
Amortization of debt issuance costs (a)			i 2.8		i 3.1		i 1.7
Total		$	i 4.2	$	i 4.6	$	i 16.9

On January 1, 2022, we adopted Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) using the modified retrospective transition method. Under such transition, prior-period information has not been retrospectively adjusted for this change in accounting guidance. The amortization of debt discount and debt issuance costs on the Convertible Senior Notes is presented post-adoption of ASU 2020-06 as of December 31, 2023 and 2022 and is presented pre-adoption of ASU 2020-06 as of December 31, 2021.

Capped Calls

In March 2021, in connection with the pricing of the Convertible Senior Notes, we entered into capped call transactions with the option counterparties (the “Capped Calls”). The Capped Calls each have an initial strike price of $ i 132.20 per share, and an initial cap price of $ i 179.26 per share, both subject to certain adjustments. The capped call transactions are generally expected to reduce potential dilution to our common stock upon any conversion of the Convertible Senior Notes and/or offset any potential cash payments we would be required to make in excess of the principal amount of converted Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the Convertible Senior Notes. As the Capped Calls qualify for a scope exception from derivative accounting for instruments that are both indexed to the issuer's own stock and classified in stockholder’s equity in our consolidated balance sheet, we have recorded an amount of $ i 33.0 million as a reduction to additional paid-in capital, which will not be remeasured. This represents the premium of $ i 45.0 million paid for the purchase of the Capped Calls, net of the deferred tax impact of $ i 12.0 million.

75 | 2023 Form 10-K

Other Information Relating to Indebtedness

Future Payments and Maturities of Debt

The future principal payments and maturities of our indebtedness, excluding financing lease obligations, are as follows:


Years Ending December 31,	Amount
	(Dollars in millions)
2024	$	i 6.8
2025		i 637.5
2026		i 575.0
	$	i 1,219.3

We may be required to make additional payments on the Term Debt from various sources, including proceeds of certain indebtedness which may be incurred from time to time, certain asset sales, and a certain percentage of cash flow. There is an excess cash flow calculation associated with the Term Debt, and based on this calculation, we are not required to make a prepayment on the Term Debt in 2024.

Fair Value of Debt

Our debt does not trade in active markets and was considered to be a Level 2 measurement at December 31, 2023. The fair value of the Term Debt was based on the borrowing rates currently available to us for bank loans with similar terms and average maturities and the limited trades of our debt. The fair value of the Convertible Senior Notes was determined based on the closing trading price per $ i 1,000 of the Convertible Senior Notes as of the last day of trading for the period and is primarily affected by the trading price of our common stock and market interest rates. The fair value of our debt was estimated to be $ i 1.16 billion and $ i 1.14 billion as of December 31, 2023, and 2022, respectively.

10. Employee Benefit Plans

We maintain numerous benefit plans for current and former employees. As of December 31, 2023, our current active benefit plans include defined contribution plans for the majority of our employees. All of our defined benefit plans have been frozen.

Defined Contribution Plans

We maintain defined contribution plans that provide retirement benefits to the majority of our employees. Contributions are based upon the contractual obligations of each respective plan. We recognized expense of $ i 28.2 million, $ i 23.0 million, and $ i 15.4 million for the years ended December 31, 2023, 2022, and 2021, respectively, related to employer contributions to these plans.

Defined Benefit Plans

We maintain defined benefit pension plans covering certain of our current and former U.S. employees (the U.S. pension plan and nonqualified defined benefit plan, collectively referred to as our “defined benefit plans”), as well as other postretirement benefit plans for certain U.S. retired employees that include heath care and life insurance benefits.

76 | 2023 Form 10-K

Pension Benefits

The largest defined benefit pension plan (the “U.S. pension plan”) is a defined benefit plan for certain current and former U.S. employees that closed to new participants on January 2, 1995. In 2007, the U.S. pension plan was amended (1) to exclude from further participation any participant or former participant who was not employed by Ceridian or another participating employer on January 1, 2008, (2) to discontinue participant contributions, and (3) to freeze the accrual of additional benefits as of December 31, 2007. The measurement date for pension benefit plans is December 31.

Assets of the U.S. pension plan are held in an irrevocable trust and do not include any Ceridian securities. Benefits under this plan are generally calculated on final or career average earnings and years of participation in the plan. Most participating employees were required to permit salary reduction contributions to the plan on their behalf by the employer as a condition of active participation. Retirees and other former employees are inactive participants in this plan and constitute approximately i 99% of the plan participants. This plan is funded in accordance with funding requirements under the Employee Retirement Income Security Act of 1974, based on determinations of a third-party consulting actuary. Investment of the U.S. pension plan assets in Ceridian securities is prohibited by the investment policy. We did i not make any contributions in 2023 to the U.S. defined benefit plan and we do i not expect to make any contributions in 2024.

In addition to the U.S. defined benefit plan, we also sponsor a nonqualified supplemental defined benefit plan (the “nonqualified defined benefit plan”), which is unfunded and provides benefits to selected U.S. employees. We made contributions to the nonqualified defined benefit plan amounting to $ i 1.3 million in 2023 and expect to make contributions of $ i 1.2 million in 2024.

We account for our defined benefit plans using actuarial models. These models use an attribution approach that generally spreads the effect of individual events over the estimated life expectancy of the employees in such plans. These events include plan amendments and changes in actuarial assumptions such as the expected long-term rate of return on plan assets, discount rate related to the benefit obligation, and mortality rates.

One of the principal components of the net periodic pension calculation is the expected long-term rate of return on plan assets. The required use of expected long-term rate of return on plan assets may result in recognized pension income that is greater or less than the actual returns of those plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns that contribute to the settlement of the liability. Differences between actual and expected returns are recognized in the net periodic pension calculation over three years. We use long-term historical actual return information, the mix of investments that comprise plan assets, and future estimates of long-term investment returns by reference to external sources to develop our expected return on plan assets.

The discount rate assumption is used to determine the benefit obligation and the interest portion of the net periodic pension cost (credit) for the following year. We utilize a full yield curve approach for our discount rate assumption by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. As of December 31, 2023, a i 25 basis point decrease in the discount rate would result in an immaterial impact to expense for all pension plans.

At December 31, 2023, we incorporated white collar adjustments to the baseline mortality assumption as issued by the Society of Actuaries. The change in mortality assumption resulted in a $ i 13.0 million increase in the projected benefit obligation. The mortality assumption was not updated at December 31, 2022.

The funded status of defined benefit plans represents the difference between the projected benefit obligation (“PBO”) and the plan assets at fair value. The PBO of defined benefit plans exceeded the fair value of plan assets by $ i 21.5 million and $ i 11.1 million at December 31, 2023 and 2022, respectively. We are required to record the funded status as an asset or liability in our consolidated balance sheets and recognize the change in the funded status in comprehensive income, net of deferred income taxes.

77 | 2023 Form 10-K

The projected future payments to participants from defined benefit plans are as follows:


Years Ending December 31,	Amount
	(In millions)
2024	$	i 41.2
2025		i 39.3
2026		i 37.4
2027		i 35.8
2028		i 34.7
Next five years		i 143.7

The accompanying tables reflect the combined funded status and net periodic pension cost and combined supporting assumptions for the defined benefit elements of our defined benefit plans.


	Year Ended December 31,
	2023			2022
	(In millions)
Funded Status of Defined Benefit Retirement Plans at Measurement Date
Change in Projected Benefit Obligation During the Year:
Projected benefit obligation at beginning of year	$	i 383.5		$	i 503.4
Interest cost		i 17.1			i 8.8
Actuarial loss (gain)		i 21.5			( i 83.1	)
Benefits paid and plan expenses		( i 43.3	)		( i 45.6	)
Projected benefit obligation at end of year	$	i 378.8		$	i 383.5
Change in Fair Value of Plan Assets During the Year:
Plan assets at fair value at beginning of year		i 372.4			i 505.0
Actual return on plan assets		i 26.9			( i 88.4	)
Employer contributions		i 1.3			i 1.4
Benefits paid and plan expenses		( i 43.3	)		( i 45.6	)
Plan assets at fair value at end of year		i 357.3			i 372.4
Funded status of plans	$	( i 21.5	)	$	( i 11.1	)


	December 31,
	2023		2022
	(In millions)
Amounts recognized in Consolidated Balance Sheets
Current liability	$	i 1.2	$	i 1.2
Noncurrent liability		i 20.3		i 9.9
Amounts recognized in Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of tax of $ i 53.5 million and $ i 51.2 million, respectively	$	i 170.1	$	i 163.6

The overall decrease in our benefit obligation for the year ended December 31, 2023 was primarily driven by benefit payments paid and plan expenses, partially offset by the actuarial loss.

The other comprehensive (income) loss related to pension benefit plans was as follows:


	Year Ended December 31,
	2023			2022			2021
	(In millions)
Net actuarial loss	$	i 17.0		$	i 21.2		$	i 9.9
Amortization of net actuarial loss		( i 8.2	)		( i 13.6	)		( i 17.3	)
Tax (benefit) expense		( i 2.3	)		( i 1.9	)		i 2.0
Other comprehensive loss (income), net of tax	$	i 6.5		$	i 5.7		$	( i 5.4	)

78 | 2023 Form 10-K


	Year Ended December 31,
	2023			2022			2021
Assumptions Used in Calculations
Discount rate used to determine net benefit cost		i 4.84	%		i 2.36	%		i 1.87	%
Expected return on plan assets		i 5.20	%		i 3.30	%		i 2.70	%
Discount rate used to determine benefit obligations		i 4.65	%		i 4.84	%		i 2.36	%

Year Ended December 31,

2022

2021

(In millions)

Net Periodic Pension Cost

Interest cost

i 17.1

i 8.8

i 6.7

Actuarial loss amortization

i 8.2

i 13.6

i 17.3

Less: Expected return on plan assets

( i 22.3

)

( i 15.9

)

( i 13.1

)

Net periodic pension cost

i 3.0

i 6.5

i 10.9

Our overall investment strategy for the U.S. pension plan is to achieve a mix of approximately i 86% for liability hedging purposes, i 13% of investments for long-term growth, and i 1% for near-term benefit payments. Target asset allocations are based upon actuarial and capital market studies performed by experienced outside consultants. The target allocations for the long-term growth assets are i 58% public equity, i 25% fixed income, and i 17% alternative investments. Specifically, the target allocation is managed through investments in fixed income securities, equity funds, collective investment funds, partnerships and other investment types. The underlying equity securities include exposure to large/mid-cap companies and small-cap companies. Fixed income securities include emerging market debt and high yield debt securities. The alternative investment strategy is allocated to investments in hedge funds. The liability hedging portfolio fair value is intended to move in a direction that substantially offsets the increase or decrease in the plan liabilities resulting from changes in interest rates. To achieve this objective, the portfolio will invest in corporate debt securities, U.S. Treasury strips and various interest rate derivatives contracts. We hire outside managers to manage all assets of the U.S. defined benefit plan.

In determining the fair values of the defined benefit plan’s assets, we calculate the fair value of certain investments using net asset value ("NAV") per share. Mutual funds are valued at the NAV, which is based on the readily determinable fair value of the underlying securities owned by the fund. The NAV unit price is quoted on a private market or one that is not active. The NAV represents the value at which the defined benefit plan initiates a transaction. These investments do not have any significant unfunded commitments, conditions or restrictions on redemption, or any other significant restriction on their sale.

The fair values of our defined benefit plan’s assets by asset category were as follows:

Level 1

Level 2

Level 3

Total

(In millions)

Investments, at fair value:

Short-term investments

i 19.2

—

i 19.2

Government securities

—

i 6.2

—

i 6.2

Corporate debt securities

—

i 285.8

—

i 285.8

Collective investment funds

—

i 46.1

—

i 46.1

Total investments, at fair value

i 19.2

i 338.1

—

i 357.3

Level 1

Level 2

Level 3

Total

(In millions)

Investments, at fair value:

Short-term investments

i 17.2

—

i 17.2

Government securities

—

i 6.3

—

i 6.3

Corporate debt securities

—

i 301.8

—

i 301.8

Collective investment funds

—

i 47.1

—

i 47.1

Total investments, at fair value

i 17.2

i 355.2

—

i 372.4

79 | 2023 Form 10-K

Postretirement Benefits

We provide health care and life insurance benefits for eligible retired employees, including individuals who retired from operations we subsequently sold or discontinued. We sponsor several health care plans in the U.S. for both pre- and post-age 65 retirees. The contributions to these plans differ for various groups of retirees and future retirees. Most retirees outside of the U.S. are covered by governmental health care programs, and our cost is not significant. The measurement date for postretirement benefit plans is December 31.

The discount rate assumption is used to determine the benefit obligation and the interest portion of the net periodic postretirement cost (credit) for the following year. We utilize a full yield curve approach for our discount rate assumption by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. As of December 31, 2023, a i 25 basis point decrease in the discount rate would result in an immaterial impact on expense for the postretirement plan.

The accompanying tables present the amounts and changes in the aggregate benefit obligation and the components of net periodic postretirement benefit cost for U.S. plans. We fund these costs as they become due.


	Year Ended December 31,
	2023			2022
	(In millions)
Funded Status of Postretirement Health Care and Life Insurance Plans
Change in Benefit Obligation:
At beginning of year	$	i 8.8		$	i 12.6
Interest cost		i 0.4			i 0.2
Participant contributions		—			i 0.6
Actuarial gain		( i 0.3	)		( i 3.1	)
Benefits paid		( i 0.4	)		( i 1.5	)
At end of year	$	i 8.5		$	i 8.8
Change in Plan Assets:
At beginning of year	$	—		$	—
Company contributions		i 0.4			i 0.9
Participant contributions		i 0.4			i 0.6
Benefits paid		( i 0.8	)		( i 1.5	)
At end of year		—			—
Funded Status	$	( i 8.5	)	$	( i 8.8	)


	December 31,
	2023			2022
	(In millions)
Amounts recognized in Consolidated Balance Sheets
Current liability	$	i 1.5		$	i 1.6
Noncurrent liability		i 7.0			i 7.2
Amounts recognized in Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss (income), net of tax of $( i 4.7) million and $( i 5.4) million, respectively	$	( i 7.1	)	$	( i 8.4	)

The other comprehensive (income) loss related to postretirement benefits was as follows:


	Year Ended December 31,
	2023			2022			2021
	(In millions)
Net actuarial gain	$	( i 0.3	)	$	( i 3.1	)	$	( i 0.8	)
Amortization of net actuarial gain		i 2.3			i 1.9			i 2.2
Tax (benefit) expense		( i 0.7	)		i 0.4			( i 0.4	)
Other comprehensive loss (gain), net of tax	$	i 1.3		$	( i 0.8	)	$	i 1.0

80 | 2023 Form 10-K


	Year Ended December 31,
	2023			2022			2021
	(In millions)
Net Periodic Postretirement Benefit
Interest cost	$	i 0.4		$	i 0.2		$	i 0.1
Actuarial gain amortization		( i 2.3	)		( i 1.9	)		( i 2.0	)
Prior service credit amortization		—			—			( i 0.2	)
Net periodic postretirement benefit gain	$	( i 1.9	)	$	( i 1.7	)	$	( i 2.1	)

i The assumed health care cost trend rate represents the rate at which health care costs are assumed to increase. The assumed health care cost trend rate used in measuring the benefit obligation in 2023 is i 7.7% for pre-age 65 retirees and i 8.3% for post-age 65 retirees. These rates are assumed to decrease gradually to the ultimate health care cost trend rate of i 4.5% in i 2032 for both groups. /


	Year Ended December 31,
	2023			2022			2021
Assumptions Used in Calculations
Weighted average discount rate used to determine net periodic postretirement cost (credit)		i 4.72	%		i 2.00	%		i 1.42	%
Weighted average discount rate used to determine benefit obligation at measurement date		i 4.52	%		i 4.72	%		i 2.00	%

The projected future postretirement benefit payments and future receipts from the federal subsidy for each of the next five years and the five-year period following are as follows:


Years Ending December 31,	Payments		Receipts
	(In millions)
2024	$	i 1.6	$	—
2025		i 1.3		—
2026		i 1.2		—
2027		i 1.0		—
2028		i 0.9		—
Next five years		i 3.0		—

11. Share-Based Compensation

In 2018, our Board of Directors approved the Ceridian HCM Holding Inc. 2018 Equity Incentive Plan (as amended, "2018 EIP"), which serves as a successor to the 2013 Ceridian HCM Holding Inc. Stock Incentive Plan, (as amended, "2013 SIP") (collectively, the "Plans"). Most of our equity awards under the 2013 SIP and 2018 EIP vest either annually or quarterly on a pro rata basis, generally over a one-, three-, four-, or i five-year period or on a specific date if certain performance criteria are satisfied and certain equity values are attained. In addition, upon termination of service, all vested awards must be exercised generally within i 90 days after termination, or these awards will be forfeited. The equity awards have a i 10-year contractual term, and the stock options have an exercise price that is not less than the fair market value of the underlying common stock on the date of grant.

As of December 31, 2023, there were i 11,991,895 stock options, RSUs, and PSUs outstanding and i 12,175,694 shares available for future grants of equity awards under the Plans. Share-based compensation expense was $ i 136.7 million, $ i 144.8 million, and $ i 113.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

81 | 2023 Form 10-K

Performance-Based Stock Options

Performance-based stock option activity was as follows:

Weighted
Average
Exercise
Price
(per share)

Weighted
Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
Value
(in millions)

Outstanding at December 31, 2020

i 1,844,279

i 64.55

i 9.2

i 77.5

Exercised

( i 65,882

)

( i 47.23

)

—

Forfeited or expired

( i 1,347

)

—

Outstanding at December 31, 2021

i 1,777,050

i 64.72

i 8.3

i 70.6

Exercised

( i 14,755

)

( i 13.46

)

—

Forfeited or expired

( i 1,857

)

—

Outstanding at December 31, 2022

i 1,760,438

i 66.10

i 7.4

i 0.1

Exercised

( i 5,657

)

( i 48.25

)

—

Forfeited or expired

—

Outstanding at December 31, 2023

i 1,754,781

i 65.26

i 6.4

i 3.3

Exercisable at December 31, 2023

i 254,781

i 65.26

i 6.6

i 0.5

In 2020, i 1,500,000 performance-based stock options (“Performance Option Award”) were granted with an exercise price of $ i 65.26. i The vesting conditions for the Performance Option Award are based on our performance on the New York Stock Exchange (“NYSE”) with (i) i 750,000 shares available to vest when our per share closing price on the NYSE meets or exceeds $ i 110.94, or 1.7 times the exercise price, for ten consecutive trading days (“Performance Metric #1”) and (ii) the remaining i 750,000 shares available to vest when our per share closing price on the NYSE meets or exceeds $ i 130.52, or 2.0 times the exercise price, for ten consecutive trading days (“Performance Metric #2”, collectively with Performance Metric #1, the “Performance Metrics”). The vesting conditions of the Performance Metrics must be achieved prior to May 8, 2025, or any unvested portion of the Performance Option Award will terminate. Further, no portion of the Performance Option Award were allowed to vest and become exercisable until May 8, 2023 (the “Time-Based Metric”). The shares underlying Performance Metric #1, which was achieved on October 6, 2021, vested and became exercisable on May 8, 2023. / The shares underlying Performance Metric #2 have met the Time-Based metric, but if Performance Metric #2 has not been met on or prior to May 8, 2025, these shares will be terminated. We have estimated an expected term of i 5.3 years, based on the vesting period and contractual term.

As of December 31, 2023, there was i no unrecognized expense related to unvested performance-based stock options.

82 | 2023 Form 10-K

Performance Stock Units

PSU activity was as follows:


	Shares
Outstanding at December 31, 2020		i 135,220
Granted		i 348,483
Vested and released		( i 2,050	)
Forfeited or canceled		( i 162,908	)
Outstanding at December 31, 2021		i 318,745
Granted		i 582,662
Vested and released		( i 168,414	)
Forfeited or canceled		( i 26,526	)
Outstanding at December 31, 2022		i 706,467
Granted		i 662,723
Vested and released		( i 272,592	)
Forfeited or canceled		( i 318,574	)
Outstanding at December 31, 2023		i 778,024
Releasable at December 31, 2023		—

In 2023, 2022, and 2021, we granted PSU awards under our Management Incentive Plan ("MIP") for the incentive period of January 1 through December 31, and also as part of long-term incentive ("LTI") grants to certain members of management. These awards are primarily earned based upon performance of key financial metrics, and certain LTI awards granted in 2023 are earned based upon our total shareholder return, a market condition, as compared to an indexed shareholder return over the course of a fiscal based i three-year performance period, starting in the year of grant. Earned awards typically vest in the quarter following the conclusion of the performance period.

One-third of the LTI PSUs granted in 2022 and 2021 vested in the first quarter of 2023 and one-third are expected to vest in the first quarter of 2024. Based on the performance achieved, most of the MIP PSUs granted in 2023 are expected to vest in the first quarter of 2024 and one-third of the LTI awards based upon the performance of key financial metrics are expected to vest in i March 2024. Share based compensation was recognized in accordance with the achievement levels.

As of December 31, 2023, there was $ i 15.4 million of share-based compensation expense not recognized related to unvested LTI PSUs that have a i three-year vesting period, which is expected to be recognized over a weighted average period of i 1.9 years.

Term-Based Stock Options

Term-based stock option activity was as follows:

Weighted
Average
Exercise
Price
(per share)

Weighted
Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
Value
(in millions)

Outstanding at December 31, 2020

i 10,983,074

i 40.47

i 7.8

i 725.9

Granted

i 759,126

i 84.07

—

Exercised

( i 2,942,465

)

( i 26.71

)

—

Forfeited or expired

( i 283,866

)

( i 48.62

)

—

Outstanding at December 31, 2021

i 8,515,869

i 48.87

i 7.3

i 473.4

Granted

i 81,145

i 56.29

—

Exercised

( i 931,520

)

( i 32.14

)

—

Forfeited or expired

( i 369,408

)

( i 58.59

)

—

Outstanding at December 31, 2022

i 7,296,086

i 50.59

i 6.4

i 117.4

Granted

—

Exercised

( i 875,140

)

( i 40.55

)

—

Forfeited or expired

( i 206,948

)

( i 70.65

)

—

Outstanding at December 31, 2023

i 6,213,998

i 51.34

i 5.5

i 110.8

Exercisable at December 31, 2023

i 5,567,406

i 48.65

i 5.4

i 110.3

83 | 2023 Form 10-K

Other information pertaining to term-based options was as follows:


	Year Ended December 31,
	2023	2022		2021
Weighted average grant date fair value per share	n/a	$	i 24.12	$	i 33.09

The fair value of the term-based stock options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:


	Year Ended December 31,
	2023	2022			2021
Expected volatility	n/a		i 40.7	%		i 35.8	%
Expected dividend rate	n/a		i —			i —
Risk-free interest rate	n/a		i 2.6	%		i 1.3	%

For most stock options granted under the Plans, we estimated an expected term of i 7.0 years, based on the vesting period and contractual life. As of December 31, 2023, there was $ i 9.2 million of share-based compensation expense related to unvested term-based awards not yet recognized, which is expected to be recognized over a weighted average period of i 0.2 years.

Restricted Stock Units

RSU activity was as follows:


	Shares
Outstanding at December 31, 2020		i 1,389,385
Granted		i 890,852
Vested and released		( i 262,239	)
Forfeited or canceled		( i 82,059	)
Outstanding at December 31, 2021		i 1,935,939
Granted		i 1,624,345
Vested and released		( i 504,586	)
Forfeited or canceled		( i 164,881	)
Outstanding at December 31, 2022		i 2,890,817
Granted		i 1,775,638
Vested and released		( i 1,056,901	)
Forfeited or canceled		( i 364,462	)
Outstanding at December 31, 2023		i 3,245,092
Releasable at December 31, 2023		—

Other information pertaining to RSUs was as follows:


	Year Ended December 31,
	2023		2022		2021
Weighted average grant date fair value per share	$	i 71.66	$	i 69.35	$	i 85.08

As of December 31, 2023, there was $ i 115.1 million of share-based compensation expense related to unvested RSUs not yet recognized, which is expected to be recognized over a weighted average period of i 1.4 years.

84 | 2023 Form 10-K

Global Employee Stock Purchase Plan

GESPP activity was as follows:


	Year Ended December 31,
	2023		2022		2021
Shares issued		i 243,669		i 243,043		i 153,235
Weighted average purchase price (per share)	$	i 52.33	$	i 48.59	$	i 81.69

A total of i 1,415,089 shares of common stock are remaining for issuance under the GESPP plan as of December 31, 2023.

The fair value was estimated using the following weighted average assumptions:


	Year Ended December 31,
	2023			2022			2021
Expected volatility		i 44.8	%		i 29.3	%		i 33.7	%
Expected dividend rate		i —			i —			i —
Risk-free interest rate		i 4.6	%		i 0.2	%		i 0.1	%
Expected term (in years)		i 0.3			i 0.3			i 0.3
Grant date fair value per share	$	i 15.11		$	i 21.16		$	i 22.07

12. Revenue

Our Solutions

We categorize our solutions into three categories: Cloud recurring, other recurring (formerly referred to as Bureau), and professional services and other. We also generate recurring revenue from investment income on our Cloud recurring and other recurring customer funds before such funds are remitted to taxing authorities, customer employees, or other third parties. We refer to this investment income as float revenue.

Cloud Recurring

Cloud recurring revenue is primarily generated from solutions that are delivered via i two Cloud offerings, Dayforce and Powerpay. The Dayforce offering is a single application with continuous calculation that offers a full suite of capabilities, including global HR, payroll and tax, workforce management, benefits, and talent intelligence. Dayforce recurring revenue is primarily generated from monthly recurring fees charged on a PEPM basis. We also offer Dayforce Wallet, which is a digital payment solution that gives employees instant access to their net earnings through on-demand pay requests via a paycard, which generates interchange fee revenue when used.

In addition to customers who use our payroll services, certain customers use our tax filing services on a stand-alone basis; which we recently modernized the technology platforms used to provide stand-alone tax services. Beginning in 2023, with the technology migration complete, we classified recurring revenues from stand-alone tax customers as Dayforce recurring revenue.

We offer Powerpay for Canadian organizations with fewer than i 100 employees. The majority of Powerpay revenue is generated from recurring fees charged on a per-employee, per-process basis. Typical processes include the customer’s payroll runs, year-end tax packages, and delivery of customers’ remittance advices or checks. Powerpay can typically be implemented on a remote basis within one to three days, at which point we start receiving recurring fees.

85 | 2023 Form 10-K

Other Recurring

Other recurring revenue is generated primarily from solutions delivered via a service-bureau model. These solutions are delivered via i three primary service lines: payroll, payroll-related tax filing services, and outsourced human resource solutions. Revenue from payroll services is generated from recurring fees charged on a per-process basis. Typical processes include the customer’s payroll runs, year-end tax packages, and delivery of customers’ remittance advices or checks. In addition to customers who use our payroll services, prior to modernizing the technology platforms utilized for stand-alone tax services, certain customers used our legacy tax filing services on a stand-alone basis through 2022. Our outsourced human resource solutions are tailored to meet the needs of individual customers, and entail our contracting to perform many of the duties of a customer’s human resources department, including payroll processing, time and labor management, performance management, and recruiting.

Professional Services and Other

Professional services and other revenue is primarily generated from implementation and post go-live professional services revenue. Other sources of professional services revenue includes revenue from the sale, rental and maintenance of time clocks; revenue from the sale of third-party services, and billable travel expenses. Other professional services is generated from the performance of individual services for customers, such as check printing, wage attachment and disbursement, and Affordable Care Act (“ACA”) management.

Disaggregation of Revenue

Revenue by solution and category was as follows:

Year Ended December 31,

2022

2021

(In millions)

Revenue:

Recurring revenue:

Dayforce recurring

i 1,111.1

i 815.2

i 626.6

Powerpay recurring

i 100.3

i 93.2

i 86.3

Total Cloud recurring

i 1,211.4

i 908.4

i 712.9

Other recurring

i 85.9

i 139.2

i 137.8

Total recurring revenue

i 1,297.3

i 1,047.6

i 850.7

Professional services and other

i 216.4

i 198.6

i 173.5

Total revenue

i 1,513.7

i 1,246.2

i 1,024.2

Recurring revenue includes float revenue of $ i 168.7 million, $ i 80.2 million, and $ i 41.1 million for the year ended December 31, 2023, 2022, and 2021 respectively.

Revenue by Geographic Area

The country in which the revenue is recorded is determined by the legal entity with which the customer has contracted. Revenue by country was as follows:

Year Ended December 31,

2022

2021

(In millions)

United States

i 989.5

i 784.1

i 624.4

Canada

i 331.0

i 288.6

i 254.2

Other

i 193.2

i 173.5

i 145.6

Total revenue

i 1,513.7

i 1,246.2

i 1,024.2

86 | 2023 Form 10-K

Contract Balances

We record a contract asset when revenue recognized for professional services or cloud recurring subscription performance obligations exceed the contractual amount of billings for implementation related professional services and recurring subscriptions. Contract assets were $ i 89.0 million and $ i 68.5 million as of December 31, 2023 and 2022, respectively. Contract assets expected to be recognized in revenue within twelve months are included within Prepaid expenses and other current assets, with the remaining contract assets included within Other assets on our consolidated balance sheets.

Deferred Revenue

Deferred revenue primarily consists of payments received in advance of revenue recognition. The changes in deferred revenue were as follows:


	Year Ended December 31,
	2023			2022
	(In millions)
Deferred revenue, beginning of period	$	i 41.2		$	i 48.7
New billings		i 836.4			i 673.6
Revenue recognized		( i 838.1	)		( i 679.2	)
Effect of exchange rate		i 0.7			( i 1.9	)
Deferred revenue, end of period	$	i 40.2		$	i 41.2

Transaction Price for Remaining Performance Obligations

As of December 31, 2023, approximately $ i 1.22 billion of revenue is expected to be recognized over the next i three years from remaining performance obligations, which represents contracted revenue for recurring services and fixed price professional services, primarily implementation services, that has not yet been recognized, including deferred revenue and unbilled amounts that will be recognized as revenue in future periods. i In accordance with the practical expedient provided in ASC Topic 606, performance obligations that are billed and recognized as they are delivered, primarily professional services contracts that are on a time and materials basis, are excluded from the transaction price for remaining performance obligations disclosed above.

Customer Information

i i No single customer accounted for i 2% or more of our consolidated revenue for any of the periods presented. /

14. Income Taxes

Years Ended December 31,

2022

2021

(In millions)

Components of Earnings and Taxes from Operations

Income (loss) before income taxes:

U.S.

i 109.3

( i 0.7

)

( i 73.6

)

International

( i 13.3

)

( i 62.2

)

( i 16.7

)

Total

i 96.0

( i 62.9

)

( i 90.3

)

Income tax expense (benefit):

Current:

U.S.

i 7.4

i 4.5

i 0.9

State and local

i 4.0

i 1.9

i 0.4

International

i 25.7

i 5.8

i 22.3

Total current income tax expense

i 37.1

i 12.2

i 23.6

Deferred:

U.S.

i 12.3

i 7.8

( i 22.3

)

State and local

( i 4.6

)

( i 2.1

)

( i 5.0

)

International

( i 3.6

)

( i 7.4

)

( i 11.2

)

Total deferred income tax expense (benefit)

i 4.1

( i 1.7

)

( i 38.5

)

Total income tax expense (benefit)

i 41.2

i 10.5

( i 14.9

)

88 | 2023 Form 10-K


	Year Ended December 31,
	2023			2022			2021
Effective Tax Rate Reconciliation
Federal statutory tax rate		i 21.0	%		i 21.0	%		i 21.0	%
Change in valuation allowance		i 10.2			i 2.5			( i 0.7	)
State income taxes, net of federal benefit		i 4.7			i 0.8			i 5.9
Share-based compensation		i 12.1			( i 25.6	)		( i 3.5	)
International tax rate differential		i 0.9			i 0.2			( i 2.4	)
Disallowed officers compensation		i 2.6			—			—
Foreign capital gain income		—			—			( i 1.3	)
Unremitted foreign earnings		—			—			i 2.9
Acquisition costs		—			—			( i 2.3	)
Base erosion tax		i 2.7			( i 5.7	)		( i 1.6	)
U.S. tax on international inclusions		( i 8.3	)		( i 11.3	)		—
Reserve for tax contingencies		i 1.0			—			i 2.1
Tax credits		( i 5.9	)		—			—
Change in tax rate		—			i 1.6			—
Unutilized tax benefits		—			—			( i 3.4	)
Other		i 1.9			( i 0.2	)		( i 0.2	)
Total tax rate		i 42.9	%		( i 16.7	)%		i 16.5	%

Our income tax provision represents federal, state, and international taxes on our income recognized for financial statement purposes and includes the effects of temporary differences between financial statement income and income recognized for tax return purposes. Deferred tax assets and liabilities are recorded for temporary differences between the financial reporting basis and the tax basis of assets and liabilities. We record a valuation allowance to reduce our deferred tax assets to reflect the net deferred tax assets that we believe will be realized. In assessing the likelihood that we will be able to recover our deferred tax assets and the need for a valuation allowance, we consider all available evidence, both positive and negative, including historical levels of pre-tax book income, expiration of net operating losses, changes in our debt and equity structure, expectations and risks associated with estimates of future taxable income, ongoing prudent and feasible tax planning strategies, as well as current tax laws. As of December 31, 2023, we have a valuation allowance of $ i 55.0 million against certain deferred tax assets primarily consisting of $ i 27.2 million attributable to foreign net operating loss carryovers and $ i 24.6 million attributable to other deferred tax assets primarily consisting of foreign intangible assets.


	December 31,
	2023			2022
	(In millions)
Tax Effect of Items That Comprise a Significant Portion of the Net Deferred Tax Asset and Deferred Tax Liability
Deferred tax asset:
Employment related accruals	$	i 31.3		$	i 27.8
Intangibles		i 15.4			i 13.5
Software development costs		i 51.6			i 14.9
Depreciation		i 18.1			i 11.2
Customer funds		i 17.0			i 31.2
Other		i 23.3			i 33.7
Foreign tax credit carryover and other credit carryovers		i 5.0			i 0.3
Net operating loss carryforwards		i 82.7			i 120.8
Total gross deferred tax asset		i 244.4			i 253.4
Valuation allowance		( i 55.0	)		( i 44.1	)
Total deferred tax asset	$	i 189.4		$	i 209.3
Deferred tax liability:
Intangibles	$	( i 49.5	)	$	( i 60.8	)
Deferred contract costs		( i 45.5	)		( i 33.5	)
Other		( i 12.9	)		( i 19.0	)
Total deferred tax liability		( i 107.9	)		( i 113.3	)
Net deferred tax asset	$	i 81.5		$	i 96.0

89 | 2023 Form 10-K


	December 31,
	2023		2022
	(In millions)
Net Deferred Tax by Geography
U.S.	$	i 66.8	$	i 79.8
International		i 14.7		i 16.2
Total	$	i 81.5	$	i 96.0

As of December 31, 2023, we had federal, state, and foreign net operating loss carryovers, which will reduce future taxable income when utilized. Approximately $ i 28.4 million in net federal tax benefit is available from the loss carryovers. The federal net operating loss tax benefit has an indefinite carryover period. The state loss carryovers and foreign loss carryovers will result in a tax benefit of approximately $ i 23.2 million and $ i 31.1 million, respectively, when utilized. The state net operating loss carryovers will begin to expire in 2024. The majority of the foreign operating loss carryovers have an indefinite carryover period. The $ i 5.0 million tax credit carryover consists primarily of foreign research credits that will begin to expire in 2042.

We file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. i With a few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2019.

The following table summarizes the activity for unrecognized tax benefits:


	Year Ended December 31,
	2023		2022
	(In millions)
Federal, State and Foreign Tax
Beginning unrecognized tax balance	$	—	$	—
Increase in current period positions		i 1.0		—
Ending unrecognized tax benefits	$	i 1.0	$	—

The total amount of unrecognized tax benefits as of December 31, 2023, was $ i 1.0 million. The $ i 1.0 million represents the amount that, if recognized, would impact our effective income tax rate as of December 31, 2023. We make adjustments to these reserves when facts and circumstances change, such as the closing of tax audits or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and operating results.

As of December 31, 2023, we have $ i 442.8 million of unremitted foreign earnings. We consider all the unremitted earnings to be indefinitely reinvested. Because all unremitted earnings are considered to be indefinitely reinvested, no deferred tax liability has been recorded. It is not practical to make a determination of any unrecognized tax liability because of the complexities of the hypothetical calculation.

17. Capital Stock and Net Income (Loss) per Share

As of December 31, 2023 and 2022, there were i i 156.3 / million and i i 153.9 / million shares of common stock issued and outstanding, respectively.

Holders of our common stock are entitled to the rights set forth as follows. Directors are elected by a plurality of the votes entitled to be cast except as set forth below with respect to directors to be elected by the holders of common stock. Our stockholders do not have cumulative voting rights. Except as otherwise provided in our restated certificate of incorporation or as required by law, all matters to be voted on by our stockholders other than matters relating to the elections and removal of directors must be approved by a majority of the shares present in person or by proxy at the meeting and entitled to vote on the subject matter or by a written resolution of the stockholders representing the number of affirmative votes required for such matter at a meeting.

Our stockholders have no preemptive or other rights to subscribe for additional shares. All holders of our common stock are entitled to share equally on a share-for-share basis in any assets available for distribution to common stockholders upon our liquidation, dissolution or winding up. All outstanding shares are validly issued, fully paid and nonassessable.

Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

For the calculation of diluted net income (loss) per share, net income (loss) per share is adjusted by the effect of dilutive securities, including awards under our share-based compensation plans. Diluted net income (loss) per share is computed by dividing the resulting net income (loss) by the weighted average number of fully diluted common shares outstanding. In the years ended December 31, 2022, and 2021 our potential dilutive shares, such as term-based stock options, RSUs, and PSUs were not included in the computation of diluted net loss per share as the effect of including these shares in the calculation would have been anti-dilutive.

The basic and diluted net income (loss) per share computations were calculated as follows:


	Years Ended December 31,
	2023		2022			2021
	(In millions, except per share data)
Numerator:
Net income (loss)	$	i 54.8	$	( i 73.4	)	$	( i 75.4	)

Denominator:
Weighted average shares outstanding - basic		i 155.3		i 152.9			i 150.4
Effect of dilutive equity instruments		i 3.2		—			—
Weighted average shares outstanding - diluted		i 158.5		i 152.9			i 150.4

Net income (loss) per share - basic	$	i 0.35	$	( i 0.48	)	$	( i 0.50	)
Net income (loss) per share - diluted	$	i 0.35	$	( i 0.48	)	$	( i 0.50	)

The following potentially dilutive shares were excluded from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive:

Year Ended December 31,

2022

2021

(In millions)

Stock options

i 2.4

i 5.6

i 5.9

Restricted stock units

—

i 0.5

i 0.6

Performance stock units

—

i 1.4

i 0.5

93 | 2023 Form 10-K