Ceridian HCM Holding Inc.

The stable outlook on Ceridian reflects S&P Global Ratings' expectation that the company will maintain adjusted debt-to-EBITDA of about 5.5-6.0x over the next 12 months reflecting the company's ability to gain market share in a competitive market and increasing exposure to a profitable customer base. In our view, the company's strong growth from its cloud-based products and maturing cloud customer base should spur EBITDA growth and modest free cash flow generation. We could raise the rating over the next 12 months if the company's adjusted debt-to-EBITDA improves and is sustained below 5x. In this scenario, we would expect that the company to exhibit sustainable cash flow growth from its cloud-based products and gain market share in the HCM market by

...Successful cloud-based offering leads to improved cash flow visibility. S&P Global Ratings expects Ceridian HCM Holdings Inc.'s increasing revenue exposure (about 72% in fiscal 2018) to cloud-based subscription offerings should support the company's topline growth, which will offset the declines from Ceridian's legacy product offering (bureau). We estimate the company's adjusted EBITDA and EBITDA margins to improve over the next 12 months driven by topline growth from the Dayforce cloud product, which enjoys high customer retention rate (above 95%) and an increasing proportion of a profitable customer base. As a result, we expect the company's growing cloud recurring revenue base to provide stable free cash flow in a highly competitive and fragmented human capital management (HCM) market....

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