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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Greetings. My name is Jeremy Johnson, Head of FP&A and Investor Relations at Ceridian. I'd like to welcome everyone to the Ceridian Fourth Quarter, 2020 Earnings Call. All participants are in listen-only mode and a question-and-answer session will follow the formal remarks.
As a reminder, this conference is being recorded.
On the call today we have Ceridian’s CEO, David Ossip; and CFO, Noémie Heuland.
Before I hand the call to David for some brief remarks, allow me to provide a disclaimer regarding forward-looking statements.
This call may include forward-looking statements about our current and future outlook, guidance, plans, expectations and intentions, results, levels of activities, performance, goals or achievements, or any other future events or developments. These statements are based on management's reasonable assumptions and beliefs in light of information currently available to us. Listeners are cautioned not to place undue reliance on such statements. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those set forth in such statements. We refer you to our previous filings with the SEC for information regarding the significant assumptions underlying forward-looking statements and certain risks and other factors that could affect our future performance and ability to deliver on these statements.
We undertake no obligation to update or revise any forward-looking statements made on this call, except as may be required by law. The fourth quarter stockholder letter, earnings release, have been furnished or filed with the SEC and will be available on the SEC's EDGAR database in the U.S. and the SEDAR database in Canada, as well as on the Ceridian investor relations website at investors.ceridian.com.
With that, I will turn the call over to David. David you are on mute.
Thanks, Jeremy. Good evening everyone. And thank you for joining our earnings call. I hope everyone is healthy and staying safe.
Before we get into Q&A, I want to spend a few minutes on some important points from our stockholder letter. First, we had a strong quarter. We delivered fourth quarter revenue results, which were above the high-end of our guidance range. Dayforce recurring revenue excluding float’s revenue grew by more than 19%, despite COVID-19 headwinds remaining elevated.
Also, we delivered on our adjusted EBITDA guidance while accelerating the pace of our investments in product and technology and sales and marketing.
Cloud recurring gross margin increased by 210 basis points to 70.9% and excluding float revenue expanded by 380 basis points.
Second, on the sales side, we did see an impact from the second wave of COVID-19 in the form of elongated sales cycles for several, large enterprise opportunities, which closed in January instead of December. While fourth quarter sales were below previous expectations, when factored together with January’s closing of those transactions, sales performance was in line with last year, which was the strongest quarter in our history.
Our sales pipeline is very strong. And we believe by the second half of 2021, our Dayforce recurring revenue growth rates, excluding float revenue will return to pre-COVID-19 levels above 25%.
Third, Dayforce Wallet continues to go very well. And we remain confident in the Wallet strategy. We continued to see strong traction in adoption. More than 100 customers are using the Wallet. And over 375 have signed up in total. Attach rates on new sales have continued to be about 80%.
In addition, data from early adopters is proving our thesis that the Wallet can have a positive impact on our customers’ businesses. Wallet customers are seeing a 5% increase in recruiting close rates, a 9% reduction in the time it takes to fill an open position as compared to our broader group of customers. Additionally, Wallet customers experienced 42% lower voluntary turnover among employees using the Wallet. These metrics will continue to strengthen and validate the value proposition of the Wallet, creating quantifiable value for our customers and their employees.
Finally, we are very excited about the acquisition of Ascender. Ascender provides payroll for more than 1,200 customers serving more than 1.3 million employees across APJ. Combined, we will serve over 1,500 customers and 2.5 million employees in the region. This positions us as the dominant contender in APJ, one of the fastest growing regions and provides a significant cross sell opportunity for Dayforce. We expect the acquisition to close in the second quarter and we'll provide greater clarity with our announcement of implications of the acquisition at that time.
I'd like to hand it back to Jeremy to open the call up for questions. Thank you.
Thanks David. As we go through the Q&A portion of this call, I'll announce your name. And at that point, we ask that you please unmute your line and ask your question and then re mute your line. We also ask that you please limit your time to one question and one follow-up.
First question comes from the line of Mark Murphy, from J.P. Morgan. Mark, please go ahead. All right, Mark doesn't seem – Mark are you on? We'll move on. The next question we're going to go to is Mark Marcon of Baird. Mark you please go ahead.
Hi, everybody. I'm wondering if you can talk a little bit more about the impact with regards to the sales in this quarter and what spilled over into January? And should we anticipate that the first quarter sales numbers are going to end up being elevated because of what was – what fell into the quarter? How should we think about that?
Yes, Mark it was a handful of very large accounts that closed in early January, as opposed to late December. What I'd say is that the customers were less reluctant to call executives back to just do the Ts & Cs. So, in all cases, we're in the final stages of contracts normally blackline just waiting for final signatures and they spilled over into January.
In terms of revenue impact, obviously it's minimal because as you know, we typically recognize revenue on the whole, when the customers go live. In terms of January, we're optimistic about the actual quarter. We had a strong January obviously given the spillover from December and the pipeline still remains very strong.
Great. And can you talk a little bit about this, the pipeline we're hearing some, chatter from some systems integrators saying that there's a greater number of really, large enterprises that are looking at digitizing their HCM processes to an even greater extent than they were previously. Are you seeing that and how do you think that unfolds over the course of the year?
It's an interesting question to ask. Remember that we've been moving up into very large enterprise space over the last 18 months. So, it's hard to differentiate. If there are more opportunities out there or if it's just us being more relevant in the large enterprise space.
That being said, David, can you just say how many more opportunities you are seeing relative to what you have expected or anything along those lines?
Well, Mark, it's hard to really, again, differentiate, obviously we all see more opportunities. I don’t know, but, I guess, as you said, more large enterprises looking at digitizing their HR processes, or it's just that we are a profit contender. And there are a lot of data points in there. Obviously, we had many more large deals last year. We were included in the Gartner leadership quadrant, which obviously makes us much more relevant for that particular enterprise space as well.
Our global operating has strengthened as well year-over-year, and most of those larger opportunities to have a global component. So, we are seeing more large enterprise deals. But I can't tell you if it is from more opportunities in market or just us being included in more opportunities.
That's fair. Thank you.
The next question comes from Siti Panigrahi at Mizuho. Siti, please go ahead.
Yes, thanks for taking my question. Just in terms of the guidance I know you didn't get the full guidance for Dayforce recurring revenue 22% Q2 and second half 25%. So, David, what's your assumption in terms of unemployment rate in 2021? And in that guidance, how much of these conservatism baked into new sales versus unemployment level within your install base?
Well, about 25% of our sales is add-ons to the base. And those add-ons take two forms, either additional populations, normally from their global employees or from buying new modules. So, the majority of our growth obviously comes from the acquisition of new customers in market.
In terms of the growth rate remember it’s a very strong system of what we said last quarter. We said that we would expect to see the recovery in the second half of 2021, given that we saw sales recovery starting in about Q3 of last year.
Okay. And then wanted to follow-up on the international opportunity. Last year we talked about expanding into 20 countries, and now you mentioned about 50 countries, that seems like pretty aggressive international expansion. So, what sort of revenue contribution now you have and how should we think about the international revenue contribution going forward?
So, as we move up market into an enterprise space, we obviously see many more global opportunities. The acquisition that we did of Excelity last year had a very positive impact in helping us with global opportunities. So, we did see a lift if you like, in win rates, especially with organizations that had populations in APJ. Our upcoming acquisition of Ascender obviously will strengthen us in that regard as well. But we also have continued building out major capabilities into Germany, the UKI region has done tremendously well over the last year. So, we remain very optimistic on the global side.
Thank you, David.
Next question comes from Samad Samana, Jefferies. Samad please go ahead.
Hi, good evening. Thanks for taking my question. So, David, as always, we appreciate all the thoughtful remarks in the shareholder letter. That's always very helpful, especially when there's this much uncertainty. So, thank you for that. But, maybe in the remarks you talked about returning to pre-COVID growth levels. And so, I just wanted to triangulate maybe a little bit further on that. Does that mean that you think that the growth for Dayforce recurring ex float will get back to that 30% plus type of level that we saw in 2019 and in 1Q of 2020 before COVID hit? I'm not trying to pin you down on the timing of when that happens. I don't think any of us know, but is that you saying that 30% is achievable as a return level?
So Samad I don’t want to put a number out outside of guidance, but what I will say is that we've given a guidance number that we feel quite comfortable with. There's still a bit of uncertainty around the impacts of COVID. For example, if I look at Q4 that we just passed, we had expected to see about a $2 million recovery in terms of employment levels. So, the impact from higher employment increasing our revenue by about $2 million. In reality, we only saw about a $0.5 million – $0.5 million recovery. And so, it all depends really on what goes on with the employment levels as we move into the second half of 2021. If we see the recovery kind of solidify, then I think we can be a little bit more aggressive in looking at the growth rates in the second half of the year.
Great. And then as my follow-up, I'd like to maybe add onto to Siti's question around the international side. Clearly with the three acquisitions over the last couple of years. I'm curious if you could give us any data or at least anecdotal data points on how the uplift has looked for customers that were using Excelity, that have added on Dayforce products or Rytech [ph]. And just so we can start to think about what that the long-term opportunity looks like. So, if they were spending x dollars before what's that revenue uplifter or sales uplift look like when you've sold in your Dayforce products into their base?
I’ve been in with this as far the uplift number on the upsells to Rytech [ph] and to Excelity. But we obviously do expect a significant cross-sell opportunity. So, if I look at the Ascender opportunity and not break it down 1,200 additional customers, most of them actually are quite nice and enterprise size. That provides a significant opportunity for us to obviously migrate to Dayforce. And Ascender effectively does payroll. So, we should be able to add on workforce management and all of the various talent components as well. So, we're quite excited about the opportunity over there.
One other point about Ascender is when you combine Ascender with Excelity, we're at about 1500 customers, about 2.5 million employees paid, and we believe that positions us as the dominant leader in the APJ region, which is the fastest growing region for human capital management. So again, a very good data point, and another reason for optimism.
Great. I really appreciate you taking my questions and I'll turn it over to the next analyst. Thank you again.
Thanks. Our next question is going to come from the line of Michael Turrin. Michael, please go ahead.
Hey there. Thanks everyone. Good afternoon. Good to see everyone. Going back to just the questions on, the shape of day for us, I think, we're all just recalibrating and can appreciate the moving pieces there. Last quarter you were guiding for what looks like a slight acceleration into Q1. It looks like Q4 actually came in a touch ahead of maybe where we were modeling, but the Q1 outlook now implies maybe a slight stepdown before you move back up towards that 25% target in the second half.
So, I know David mentioned some of the enterprise impacts and there are some good details in the letter. But can you just help with level setting if there's anything else driving that change in trajectory? And maybe just touch on also how much visibility you have into that second half target level?
So, we obviously are going into the year with very good visibility. In terms of Q1 you are right, we outperformed in Q4. And if employment levels have improved the level that we had expected, you probably would have seen another about $1 million to $2 million of revenue on the Dayforce side. However, the employment levels haven't recovered to levels that we had expected at when we did the Q3 call. And so, we take that into account when we look at the Q1 guidance.
Noémie and Jeremy, anything else that you would add to that?
No, I think that's a good summary. I think the other thing I would point out is on the professional services side of the implementation, we've seen a pretty steady pace of go-live in Q4. And I think that that may have shifted some of the revenue expected from that from Q1 to Q4. But really beyond that, I think, David covered it all.
That's helpful color. If I can squeeze in just a quick follow-up on Wallet, the numbers keep moving up, it's now 100 customers using and 375 signed up. That's a pretty big, sequential step up from the 200, last quarter. Some of the stats that you laid out, are those that are helping with adoption and traction? It would seem that some of those metrics around things like retention and turnover in this environment could certainly help with adoption on something like, Wallet?
A few things on Wallet, the actual numbers are slightly higher. I think it's actually about 122 customers that are live on Wallet and 399 customers have signed up there. So obviously we’re still seeing rapid, if you like adoption of the actual Wallet.
Obviously yes, so as we see the economy moving to recovery, probably starting in the second half of the year, we expect that focus will be on talent acquisition. And the fact that Wallet significantly improves the time that it takes to find people, the time that it takes to actually the probability of closing, helps a lot and also the fact that it reduces voluntary turnover across Wallet users, right, is obviously a big selling point and not only for Wallet, but actually for Dayforce as well.
Makes sense. Thank you.
The next question comes from the line of Dan Jester. Dan, please go ahead.
Great. Thanks. Good afternoon, everyone. So, sticking with Wallet, we've seen a couple of stories about state and local authorities looking to potentially put some additional regulations around earned wage access and limit some of the fees. Is that something that you are hearing and does that have any impact on how you think about rolling out Wallet from here?
Well, Dan I appreciate the question, but that's actually how we differentiate in markets. We don’t charge the employees any fees. So, if you compare our wallets to some of the third-party wallets in markets, they charge a certain amount per month per active wallet holder or card holder. We don't do that. We don't charge any direct fees for usage of the wallet. So, there's no fees to load money in, there's no fees to effectively spend on the actual wallets either. And so, we had expected that.
And our belief is that in the longer term of construct of a pay period, which actually is narrated as weekly, bi-weekly, in some cases, even monthly no longer makes any sense. People should have access to their earned wages as they earn it.
Great. Thank you. And then just maybe turning to margins and to the comments around 2021, can you help us think about sort of the puts and takes between sort of the step-up investments and the fact that float revenue is going to be lower, would margins excluding float, could they go higher in 2021 or do the investments offset that? Thank you.
So, from a margin perspective, the metric we look at most is our gross profit on recurring revenue on cloud. As you know, that went up by 200 basis points or 380 basis points ex-float, in Q4. We would expect to see that metric continue to grow into 2021.
In terms of EBITDA margins, it's another year that we do have headwinds. If we do look at it if I look at just Q4 alone relative to the prior Q4, the impact of employees and employment levels, while it's about $9.5 million as compared to Q4 of 2019, and we had a float headwind of about $7 million compared to 2019.
When we look at Q1, we go in again with headwinds from the employment side I believe Jeremy correct me or Noémie, correct me if I'm wrong, probably about $6.5 million.
Yes.
And from a float perspective, I think, we actually go in at least from a Q1 perspective of about a $9 million total of float headwind. If you divide it up between Dayforce and Cloudflare, it's about $6 million and $3 million respectively. Now obviously as we start to get into Q2, Q3, Q4 on a normalized basis, it becomes a little bit more even because we are operating into COVID years.
Yes. And maybe if I could add to the color on margins and some of the investments we're making, I think, we're looking beyond 2021, as David mentioned earlier there's a lot of opportunities with customers globally, as well as customers in the markets. And we're definitely investing in our product capabilities to support those customers. And we're also investing in sales and marketing to go after that massive plan that we haven't yet tackled.
So, I think that's really important. We’re making conscious decisions to invest to fuel the growth of Dayforce recurrent in the future, because that's really where we’re betting. But I think we're also managing on the G&A side, very cautiously to get scale. So, I think, the combination of both you'll see some improvements towards the back of 2021 and more in 2022. But that's important to really focus on addressing the growth that we have. And then looking at the global opportunities and the expansion of the product capabilities, I think, that's critical for everyone to understand.
Great, appreciate all the color. Best of luck everyone.
Thank you. Thank you, Dan.
Next question is going to come from Bryan Bergin at Cowen. Bryan, please go ahead.
All right. Thanks guys. Good evening. Wanted to start with Ascender, David, can you talk about the strategy with this one as far as whether it was really targeted for the in-country expertise and to migrate the clients over to Dayforce versus more so the attractive technology that you'll layer into? And also, it seems like it's a larger field than your other recent transactions. So, I'm curious if this is a one-off or if this is a signal that you are going to be at the market for bigger transactions?
Let me start with the why Ascender. So, if I look at the Ascender 1,200 customer base and employee base, the majority actually is in Australia. In Australia they actually have two products. One of the products is in education and in government, which are new verticals for us in market. They have an exceptionally strong team when it comes to domain knowledge around payroll, which will help us significantly in the ANZ space, because as you noted, one of our constraints always for growth is just having great people around who can help, implement and support our products.
The plan for Ascender is no different than what we've spoken about historically. That the technology stack is largely dated as compared to Dayforce. And so, over a period of time, it provides a movement opportunity towards Dayforce. And as we do that, we would expect also to have the ability to upsell them on time and attendance, workforce management, talent acquisition, performance comp, engagement, and the like. So tremendous cross sell ability.
The other point about Ascender is when we combine it, as I mentioned with Excelity, we do become the dominant player in the APJ region. And if I look at the APJ region it’s probably about 25% of the global town. When you look at human capital management systems and is probably the fastest growing regions as well. So, it gives us a significant, if you like, presence inside the actual region. And already we’ve seen impact of the Excelity acquisition in helping us win, not only accounts in APJ, but other global accounts where those companies had significant headcount in the APJ region. So, it fits very, very nicely.
In terms of the future, we'll continue to look for opportunities in country where we can find great people, customers that provide that opportunity to move to Dayforce and to upsell, and to get the local knowledge if you like with inside the actual marketplace. So, what I would say about Ascender, it's very much in-line with what we communicated to the market well over a year ago.
Okay. And then a follow-up here around the bureau. Can you comment on what the bureau migration benefits to Dayforce was in fiscal 2020? And what's left in the bureau that you expect to be potentially convertible here in the future, at what point does it base out of?
The numbers for 2020 we're 5.8, 5.8, 5.1 and 4.1 – sorry, 4.4 across the year. As we go into next year, obviously we're going to start to see lower numbers as we're coming to the actual end. And by the end of 2021, there effectively should be almost no bureau revenue as it relates to payroll. Noémie or Jeremy, anything that you would add to color about what remains at the end of the year?
No, I'm not on that, David. I think you covered it all. But I’ll just add that, the other point I would make on the acquisition and why it's very relevant for us is on the global operating model that we are trying to build, I mean, we've been so far North American, Canadian company centered around serving customers globally. And now if you start to add Excelity, right now like Ascender, we're really building a region in APJ to serve our customers locally with our robust partners, ecosystem and we have a strong leadership that's going to come on Board as well with deep knowledge of the customer. So, I think that's also very critical for us in that regard as we're building a real global company. So I just wanted to highlight that point as well. [Indiscernible]
Thank you.
Thanks, Bryan. Next question comes from the line of Mark Murphy, Mark – JPM. Please go ahead.
Thank you, Jeremy. Thank you for bearing with me. Nice to see you. David, the – going back to the comment about the impact from the second wave of COVID certainly understandable. Can you help us understand maybe how many transactions in total you were looking at or the dollar value bookings that closed in January? And I think more importantly is your suspicion. Are you trying to convey that you are past the period where there would be those kinds of disruptions sound that way based on your commentary, but just with vaccines rolling out and kind of the infections trending a little lower. Do you think that that might benefit of a one-off?
Mark, I would say at the end of last year, we started to see fatigue if you like any customer teams. What I mean by that is that we didn't have the same urgency that we typically have at end of the year where it's all hands on deck from the customer to get the contract signed. So even though we were at black lines with the actual customers getting that final signature. It was a little bit more effort than we've seen beforehand. So shortly after the new year those transactions close, we're talking about a handful of customers, three or four large transactions that moved over into the January.
In terms of COVID, we didn't see the recovery that we had expected in Q4. And as I mentioned, we had thought that the headwinds in terms of employment numbers would improve between $1 million to $2 million in Q4. In reality, we only saw about $0.5 million of recovery. And so we are still seeing impact of COVID if you like in Q1, in terms of employment counts. We do believe by the second half of the year, we should be through that in the U.S., already I would say it looks like, and we've seen the numbers being published that the employment numbers in the U.S. seem to be going up. Canada though is a little bit behind because I think the vaccine rollout in Canada hasn't been as successful as it is in the U.S.
Okay. If I can sneak in a quick follow-up. I think the growth in the Dayforce revenue per customer that you've listed here 8.5% during 2020. It's quite impressive if that has to be well above your peer group. Is it possible to just unpack that in terms of how much is a larger customers you brought on that are lifting that average up versus how much of that is the existing base – kind of absorbing more of your technologies?
If I look at the ratios at the end of the year, it still it was about 53% in kind of the mid major markets and about 35% in the enterprise side. What we are seeing though is tremendous upsell across our customer base. Now, if I go back a year ago, when we spoke about add-ons, we typically were speaking about additional modules that we're adding to the customer. Now, we're also seeing the impact of global. So last year, the add-ons were about 20%. If I look at Q4, we were at 25%. And I would say that’s probably is the impact of the global employee populations that we're actually adding on to Dayforce.
The other point that I've mentioned that if I look at the actual growth in terms of employment counts, we obviously are up about 9%, I believe in terms of the average size in Q4. But remember that is off the taking into account, the employment headwinds that we typically wouldn't have had and the float headwinds. So if you actually corrected from that, I think it actually would have been even more significant.
Other metrics already do think more impressive than even in a COVID year, our retention rate remained around 96% on cloud. And if I look at our net retention rate we remained at about 106%, and I think those are very, very strong numbers.
Excellent. Thank you very much.
Next question comes from the line of Arvind Ramnani from Piper Sandler. Arvind, please go ahead.
Hi. Thanks for taking my question. Yes, I wanted to really kind of go back to a digital wallet. You have provided some good color on it. And also, sort of my research has suggested that reception for on demand pay continues to grow and you'll really have a compelling solution. Can you talk about some of your customer conversations in terms of – a customer kind of looking at your digital wallet as a reason to choose Ceridian versus the competitor, how much is it helping on the win rates? And even if the metrics are not high in terms of actual usage, is this kind of like a secure driver where at the early stages and the next two years will become fairly mainstream.
It definitely is having an impact on our win rate on Dayforce as I mentioned, we've seen about an 80% attachment rate of wallet to new customers. The metrics that we now also have – if I look at, remember when we build a module we've used the same methodology from the very onset, which is what are the KPIs we can impact that the customer through use of the actual – through the use of the actual module and how does an improvement in that KPI translate into dollar or money benefit for the customer.
And so when I look at the actual wallet metrics that we're not able to look at, and we get that by looking at wallet users versus the general population of our customers, and we obviously have almost 5,000 customers now, so we have a big a group that we do to test, and we're seeing the benefit on the talent acquisition side and on retention side. And just the retention side alone. I mean, if you actually run through the numbers, you get a 42% reduction in voluntary turnover. Maybe you just make the math easy. You say, okay, a person makes a $50,000. We're looking at typically a 10% voluntary attrition rates at a company.
If they have a 1,000 employees, that means that they typically would lose about a 100 people per year. If we can impact that by reducing that by 40%, that means that we can save them 40 people. The cost of replacing each of those people is probably 25% of their salary. So $12,500 per person, times 40 people right then. And that's obviously a big number. That's about a 100,000 just from the use of the wallet in that particular customer. So you're beginning to see the ROI. And again, it ties back to that whole premise.
We have to create quantifiable value for our customers. Now with wallet, we extend that onto the employee side as well, because when an employee actually begins to use the wallet, they get access to their funds continually. So if you have a credit card bill that comes due in the middle of the month between pay periods, this allows you to pay off your credit card, as opposed to doing the minimum payment, paying the interest of 22% and the full balance. I'd also if you are someone who is really a non-bank employee or your paycheck to paycheck, it allows you to avoid those very expensive fees of going to payday loan or to actually other types of expensive types of borrowing.
And when we look at the way that we built the wallet at leverages, that continuous pay engine that we have with inside Dayforce, remember as we compare to any other competitor in markets with us, we have one system with one rule engine. So that's continually throughout the pay period, we calculate your net earnings. The wallet allows the employee to see how much they've made net of all the deductions and taxes added to the Dayforce wallet, go off and spend it, we don't charge the customer, anything for the use of the wallet. We don't have them change the way that they fund their payroll. They still fund at the end of the actual payroll cycle. We don't charge the employee any direct fees or the usage of the actual wallet to load money onto the actual wallet or to actually do the spend. So again, we've created tremendous value for the employees of our customers, as well as for the – our customer base. And that is a big differentiation relative to anyone else in market.
Yes, absolutely. That's an incredible success. And I appreciate that providing the detailed metrics. Given that the high ROI, philosophically will wallet always be essentially a free product or at some point when they brought in of usage, there may be some fees , or are you just going to look at like changing…
I think fundamentally, we would have just a – kind of let’s call an ESG, a challenge of actually charging employees for the usage of the wallet. I think that would go counter to what we were trying to do. Remember our brand promise is to make work life better. And I don't think charging those employees, especially those employees who can't afford to pay, a usage of the wallet. I think that is actually ethically wrong. So the intent of it here is to make sure that we design the wallet in the way that we can benefit from the interchange at least in North America that funds the wallets and allows us to make a nice profit through the use of the wallet.
Great. Yes, I really appreciate it. Thank you.
Thanks Arvind. Our next question comes from Josh Reilly was in for Scott Berg at Needham.
Thank you. So I was curious, what are you guys seeing with usage trends on the platform during the pandemic now that you have several quarters of data points here? Are there any modules that might be surging at inactivity or upselling better than the pre-pandemic period? And then are you using any of that data in the sales process to cross sell complementary modules?
So we've probably seen a lift in terms of add-ons, as I've mentioned in 2020. In 2019, we averaged about 20% of our monthly sales were add-on to the base that grew to 25% in 2020. And part of that was the global add to the employee basis that we obviously did see as well additional module add-ons. And the type of add on to be typically saw were typically key things around learning management, performance management, the compensation, the engagement surveys.
If I look into 2021, we're very optimistic about what we're going to see in terms of the hub and the hub plus that are coming out. I believe we'll continue to see benefits from the benefit intelligence that we released at the end of last year, which again, focus on that quantifiable values and very, very strong ROI for the customers. And so Josh, yes, we did see obviously more usage across the modules and it was a general trend for more digitization across our customer base.
Okay, great. And then just one follow up, international outside of Canada obviously has been growing as an opportunity here, given the M&A activity and investments in native payroll. How should we think about what regions we're going to be targeting for sales and marketing investments here in 2021? Obviously, we focused on APJ, but is there anything else that we should be aware of where there's a pretty meaningful opportunity here? Thanks.
Well, obviously, we're building out major phase for Germany at the moment. We've been quite successful in market with our workforce management product inside that particular region. And so you'll see us do a lot more investments in Germany and the surrounding countries.
Next question comes from the line of Yao Chew of Credit Suisse. Yao, please go ahead.
Thanks for taking my question. David, I have one philosophical one for you on M&A. I can't imagine you're the only one hunting for these assets out there. Can you help us explain how Ceridian is differentiated or advantage as a buyer versus the either sponsors or local acquires and we be looking at the same assets that you are?
I think a lot of it comes down to what we can actually offer the employees of those particular customers. I think if you look at us compared to where they typically would land ups, the companies where a lot more attractive option. And then if you look at the history of Ceridian today, I've already started with the acquisition of Dayforce. And if you look at how we leveraged the people from Dayforce myself, and would be an example of that in creating really a significant career opportunities with insight is really an organization.
And as Noémie mentioned, a large part of doing the Ascender acquisition was that we are now beginning to transition from that North American company operating globally to really a more of a regional model, and essentially gives us really critical mass that's inside the APJ region, which again, further differentiates us from the other players inside the actual market. On the global side, I do believe we have a significant opportunity to be differentiated in terms of our technology platform and how we can actually – if you like leverage the people that we see inside country to win more and more customers.
Thank you. That's great. And if I may just have one quick follow-up on the pricing environment, can you speak at a high level just how pricing has trended more broadly and the competitive dynamic? Are you seeing rationalizing the marketplace? Do expect pricing to recover from what you might call depressed second half COVID levels? How you just conceptually approach pricing and competition again?
I don't think that pricing really changed in 2020 as compared to 2019. What I would say that came down to more to contract terms as us and others provide a more flexible terms to our customers. I was talking Q2 of last year. It's just given me inherent risk of COVID.
Thank you. That's very helpful.
Thanks Yao. Next question comes from Kevin Kumar was in for Chris Merwin at Goldman Sachs.
Hi, thanks for taking my question. Question on power pay. How should we think about COVID and employment impacts to that business and the trajectory of growth? Should we think of it similar to Dayforce seeing kind of a rebound in the back half of 2021?
I think the power pay is going to be under more pressure than Dayforce because it largely is – what only is a small business in Canada. And if we look at Canada, the largest markets that we have, which would be Toronto and Montreal are both under lockdown. So we all see more revenue pressure on power pay that we are seen on Dayforce. To kind of a quantify it when we actually look towards Q1 the headwind, I believe for power pay Jeremy is going to be what about a $3 million or so?
Yes, that’s correct.
Going into Q1, whereas we looked at Dayforce, which is a much more significant revenue stream in aggregate it's about 6.5 million. So it's obviously a power pay. It's still feeling COVID much more than we are seeing with Dayforce. And now I think the recovery is largely determined on the Canadians really good the act together in terms of vaccine distribution. And currently it looks like the expectation is that they'll be able to provide vaccines to everyone who wants it by the end of the Q3, which is somewhat in line with the U.S., although it’s going to start probably a quarter later.
Great. Thanks a lot, David,
Thanks, Kevin. Next question comes from Brad Clark at BMO.
Thank you for taking my question. Just want to revisit cloud revenue retention rate kicked down a little bit compared to 2020. I just want to understand how much was employment impacting that metric versus other factors in the market. Thank you.
Sure. So the employment would actually impact really, the net retention rate. It's just actively remained constant around one out of six, about time he added to be add-on less the employment numbers you basically netted to the same amount. In terms of the actual retention rate came in at kind of 95.8 relative to 96.3 the year before or 96, the year before that. So largely around 96% over the last three years, it was impacted by some of the small business losses that we saw on Dayforce that were linked to very small power pay customers that went out of business.
Thank you.
Next question comes from Matt Pfau at William Blair. Matt, please go ahead.
Hey guys. Thanks for taking my question. Just wanted to ask on the international expansion strategy. So you kind of seem to be taking two different approaches with Europe, a bit more organic in terms of the build-out and Asia-Pac a bit more driven by acquisition. So maybe just the rationale behind the different strategies there, and then also in terms of the partner program, any difference in how you think about that between the two different regions?
Yes, so I'm actually – in reality, they are not that different. I would say if I look at UKI [ph] we built out native payroll for first UK, and then we extended into Ireland and we’ve been very successful, but we started with a little bit more momentum given the history that we had inside the country beforehand. In Australia, we thought it all by building nature, time and payroll for the ANZ market, we then did an acquisition of RITEQ which largely was to get people who understood the workforce management side to allow us to continue doing implementation inside the region.
Excelity and Ascender slightly different, because we were expanding our scope outside of ANZ into the broader APJ type of region. And particularly with Ascender, we're picking up a wonderful team of really experienced people in the ANZ marketplace that we do believe will further differentiated but also allow us to continue to grow inside that region. When we look more broadly on the global market, you'll continue to see that rebuilding our major pay for Germany. That doesn't mean that we weren't look for similar types of assets around that particular type of region. We still have to start looking towards Latin America and other parts of Europe. The world's a big place, lots and lots of opportunities out there. And I do believe that the Dayforce global strategy from a technology platform perspective is very differentiated with the other players in market.
Got it. And then in terms of the partner strategy, any difference between the different regions?
All right. Yes. That's a great question. I'm sorry. Noémie mentioned that beforehand. Another very attractive piece of Ascender and Excelity were both the software partners and the SI partnerships that we picked up with that. And just on the SI side, we've made tremendous progress in terms of building out a network of system integrators, many of them being the large global SIs. If we look at it, I would say it's not pretty differentiated by a region but largely by size of customer. But as we begin to play more and more in the large enterprise space, you'll see us doing much more work with the large system integrators. And the shareholder letter report are one example which was a government opportunity that we actually partnered with a system integrator. In fact, they are leading and they let contracts for that particular account.
Great. Thank you.
Thanks, Matt. Our next question comes from the line of Chris Silvestre from Veritas. Chris, please go ahead.
Good afternoon. Thanks a lot for taking the question. Just another one on wallet, if you don't mind. Of course like the digital wallet spaces is very active right now. And Ceridian seems to be in a very privileged position with what seems like a captive audience. So just wondering whether you see an opportunity to add some more of the typical wallet functionality that's proven really popular over the past year and helped some of these other wallets kind of achieve by reality and really explosive growth, like peer to peer transfers. And I know this is more of a stretch, but digital currencies and whatnot. So that's kind of part one and I know you need critical mass which leads me to my second question. Why not a whole lot of wallets, I mean, what…
Sorry. Yes, Chris, you seem to have frozen up on the second part of your question. But terms of your first question, yes, we are adding the typical wallet features that you would see things like Powerpay peer-to-peer transfers, OCT transfers. [ph] The another area that we do have a large differentiation is really around direct deposit. And so as we're adding more and more pay card capability to the actual wallet technology should allow us to actually capture even more, if you like usage of the actual wallet. What I will say about wallet is we brought on a very seasoned individual in Q4. He joined us from Green Dot. Seth is obviously a wonderful tremendous experience on the consumer side as a potential to wallet technology. Chris, I see you still there. It looks like you're having network issues, but you want to try, maybe ask your second part of your question again.
Yes. Sorry about that. So the second question is, I guess, I know you need some like critical mass for some of the peer-to-peer stuff, and I'm just wondering why not accelerate the roll out of wallet? I mean, what prevents you from reaching out to all the customers and just turning it on right away for anyone who wants to use it? Is it just what's the limiting factor there?
Remember we only launched the wallet in May of last year. And so for us, it's making sure that we do it properly. We create value for our customers and for employees that we make sure that the experience is tremendous. Remembering from our perspective, when we look at building a product and we talk about user experience, we don't just think, hey, we have to have a really easy to use mobile app, which we do. We think really, how do we benefit the employee by giving them continual access to their and wages without charging them any types of fees and focus on the use cases of which are most attractive to them. But if I go out a year from now, I think you'll see it, the features in our wallet be very much on par with some of the other wallet vendors that you'll see in markets. Of importance for the end of Q1, we are launching now in Canada. So at the end of Q1, we'll launch the wallets in Canada as well.
Got it. Thank you.
Excuse me. And our last question comes from the line of Stephanie Price at CIBC. Stephanie, please go ahead.
Hi, thanks for taking my question. Just curious if you're seeing any change in the pace of implementations where the smaller – the larger deals just given the second wave of COVID that we're going through here?
Stephanie, I think Noémie actually mentioned that earlier as well. We actually saw an acceleration of implementations in Q4. What I will say is I think, again, we're differentiated in market in that we have a robust technology. Almost 5,000 customers using Dayforce today. When a customer signs up, we have a very high confidence that we can take the customer live on time and on budget and with a very good customer experience. And if I look at our net promoter scores on implementation year-over-year, they were up significantly. So even during this COVID period, not have we been able to only accelerate implementations, but we also have seen much better implementation experiences as measured by NPS.
Right. And maybe just one up. Just curious where the composition of bookings in Q4 versus Q3, any sense of where you think kind of the strongest demand across the client size?
It's a hard question. We continue to do very well in major markets, but obviously we're seeing a lot of success in the enterprise space as well. So I would say it's very much in line with what we saw in Q3 and probably earlier in the year as well.
Great. Thank you very much.
You are welcome.
That concludes the earnings call for today. I want to thank you for joining and for the excellent questions and wish everyone have a happy – have a good evening. Thank you very much.
Thank you, everyone. Have a great one.