Ceridian has taken a step closer to an initial public offering (IPO) by announcing the filing of a registration statement Form S1 with the U.S. Securities and Exchange Commission (the “SEC”).
Ceridian will launch its initial listing on both the New York and Toronto stock exchanges.
The price listed on the S-1 form puts the maximum aggregate offering price at $200 million. The valuation was made solely for the purposes of calculating the registration fee and though and is not the target price. This is likely to be at the low end.
The filing also includes some recent valuation data. Ceridian, whose Dayforce HCM product has grown at a compound annual growth rate of 60% over the last 5 years has revenues of $671 million. $400 million of that is cloud revenue. It has an adjusted EDBITDA of $118 million.
With a valuation of the business at 5x EBITDA, it value the company at around $590 million. Using the Dunn-Rankin formula this values the company at just over $2 billion. Oddly the revenue figures in the infographic ($671 million), do not match that entered later in the document ($750.7 million). If the latter figure is used the Dunn-Rankin valuation climbs to $2.26 billion.
- See comment below for explanation of this discrepancy. The correct revenue figure for the IPO is $671 million.
The next steps
The form is as yet incomplete. The percentage of common shares and the value that Ceridian will put on them has yet to be determined. Once the full prospectus is available, Goldman Sachs & Co. LLC, J.P. Morgan, Credit Suisse and Deutsche Bank Securities will act as joint lead book-running managers. Interested parties can apply to them for the prospectus. No date was given for the IPO, except for this year, but one can expect an update soon.
What does this mean
The news follows an announcement earlier this year that the company had submitted a draft S-1 in January. Since that date no suitor has appeared to come forward to offer, or certainly nothing has been made public yet. Once the valuation is public it will be interesting to see whether a last minute bid is made for the company, though this seems unlikely.
Once listed, Founder and CEO David Ossip will have a new set of shareholders to placate. Ossip sees the IPO as merely the next step on the journey for Ceridian. He wrote in a founder letter “This initial public offering is an important milestone for Ceridian… The offering will boost our financial flexibility and provide access to capital, allowing us to accelerate our plans for the future.
“We remain dedicated to building and delivering innovative technology that helps companies better engage and manage their employees, because when their employees succeed, our customers succeed — and when our customers succeed, we succeed.”
The IPO should enable Ceridian to continue its growth trajectory it began following the merger between Dayforce and Ceridian in 2012. The timing is also right as Ceridian looks to break into profitability after a net loss (after tax) of only $9.2 million, down from $102 million the previous year. The IPO will also enable Ceridian to repay part of its $1.1 billion debt and refinance the remaining loans.
The discrepancy between revenue figures given above is deliberate. The difference is Lifeworks which Ceridan propose to dispose of its shares and obligations to prior to the IPO. We received the following statement from Ceridian: .
“The $671 refers to our HCM segment revenue for 2017, while the $750.7 is our total 2017 revenue, including our LifeWorks segment. Please refer to the S-1, specifically page labeled 10 under the heading LifeWorks Disposition, for further discussion on LifeWorks. “