David Ossip
Chairman and CEO, Ceridian

From the CEO

Dear Fellow Stockholders,

I would like to start by acknowledging what an extraordinary year of challenges 2020 was for our economy, our customers, and our employees. I am exceptionally proud of how our entire Ceridian team have responded to the dramatic change in business realities faced by all.

As a result of our combined efforts, we were able to deliver fourth quarter revenue results which were all above the high end of our guidance ranges. Dayforce recurring revenue, excluding float revenue, grew by more than 19%, despite COVID-19 headwinds remaining elevated.

We delivered on our Adjusted EBITDA guidance, while accelerating the pace of our investments in Product & Technology and Sales & Marketing.

On the fourth quarter 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 our fourth quarter in the prior year – which was the strongest quarter in our history.

Moreover, 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.

During the quarter, we received tremendous validation of our continued growth and accelerating leadership in the global HCM market. Ceridian was named a Leader in the Gartner 2020 Magic Quadrant for Cloud Human Capital Management (HCM) Suites for 1,000+ Employee Enterprises.¹

Further, Ceridian received the highest scores for the North American compliance suites, payroll admin, and the workforce management in the Gartner Critical Capabilities for Cloud HCM Suites for 1,000+ Employee Enterprises.²

For more than a decade, companies have been talking about digitization. COVID-19 has made this an imperative overnight. Organizations, globally, are focused on meeting the demands of a more fluid, frictionless, and borderless world of work. Together, these demands and shifting business challenges require a deeper level of innovation and value from an HCM system.

The result of these fundamental customer needs is that our growth opportunities continue to expand, and we will take advantage of these opportunities through increased product development and sales and marketing investments. Our investments will build on our existing, always-on, payroll engine and our single database to deliver measurable value for our customers - not just for their businesses today, but for their businesses tomorrow.

Given the immense opportunities ahead, we remain keenly focused on executing against our five strategic growth levers:

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Acquiring new customers in the markets where we have seen success to date;

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Extending the Dayforce platform, thereby allowing us to deliver more value to our current and prospective customers;

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Expanding within the Enterprise segment;

 

 

 

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Accelerating our global expansion both by serving local customers in new geographies, and by extending our scope to service global multinational customers; and finally,

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Driving incremental value for our customers by innovating in adjacent markets around our core HCM suite, such as Dayforce Wallet.

With an estimated $20 billion addressable market for Dayforce outside of North America, we continue to significantly accelerate our global expansion, and recently announced an agreement to acquire Ascender. Ascender is the trusted payroll and HCM provider for more than 1,200 customers, serving more than 1.3 million employees across Asia Pacific and Japan (APJ). Ascender also has a robust partner ecosystem of leading, global ERP vendors and system integrators (SI) to provide deeper value to its customers. With the addition of Ascender, Ceridian will serve more than 2.5 million employees across all industries and geographies in the region.

From a growth perspective, Ascender will provide a tremendous cross-sell opportunity for our HCM platform, particularly our talent and workforce modules, and will strengthen our success with global organizations that operate in the region.

We expect the acquisition to close in the second quarter, and we will provide greater clarity into the financial implications of the acquisition at that time.

Our acquisition of Ascender builds on strategic investments we’ve made in the APJ region to extend our leadership and provide unmatched value to our customer.

Last year, we acquired Singapore-based Excelity, which is already exceeding our initial expectations. And, in the fall of 2019, we added Australia-based workforce management provider RITEQ. Together, with Ascender, we will have more than 1,500 customers across the APJ region. Our deep leadership and local expertise coupled with the continued expansion of the Dayforce platform will position Ceridian as the most comprehensive HCM

 

 

their businesses for a digital world.

Over the course of 2020, we significantly grew our global customer base, especially in the Enterprise market. We formed key alliances with SI partners. We deepened and broadened our product offering with innovations like Dayforce Wallet which appeals to customers who focus on the financial well-being of their employees. We strengthened our leadership team with top talent who bring experience at scale in the global enterprise space. And, we achieved it all while staying focused on driving higher customer satisfaction.

Financial highlights

We are pleased with our strong financial and operating performance in the fourth quarter.

Despite the pandemic, we maintained very strong topline growth. Excluding float revenue, Dayforce recurring services revenue grew by more than 19%.

Cloud revenue now represents 87% of our total revenue, with Dayforce accounting for nearly 90% of our Cloud revenue.

Cloud recurring gross margin expanded by 210 basis points, despite the approximate $9.5M headwind from lower employment levels due to the pandemic at Dayforce and Powerpay customers, and $7M of lower float revenue compared to prior year.

Customer highlights

We are focused on delivering value to our customers throughout their lifecycle, and thereby earning customers for life. Our modern cloud platform and our

 

 

services team of seasoned professionals is enabling us to take customers live quickly, predictably, and on-time, at a consistent pace, even amid a global pandemic where we serve our customers remotely.

 

We ended the fourth quarter with 4,906 customers live on the Dayforce platform, a net increase of 202 customers since the third quarter. And, as we continue to support larger customers at scale, trailing twelve-month Dayforce revenue per customer was $128,985, up 9% year-over-year.* Incremental Dayforce revenue per customer for the same period increased by 13% to $210,313.* And notably, we are executing while driving even higher levels of customer satisfaction.

We believe – and we’re proud to say – our unique value proposition and strong execution is what allows us to secure competitive customer wins. First, with nearly 5,000 customers, Dayforce is a mature and robust cloud platform that delivers real quantifiable value, which is highly differentiated from either the legacy or more nascent technology on the market. Second, our services team and partner ecosystem deliver critical HCM industry experience and deep knowledge of Dayforce. Together, this means that we can take customers live on time, on budget, and with a very positive customer experience.

During the quarter, we took live:

•	The largest publisher of newspapers in the US with over 250 daily papers originally deployed Dayforce to 18,000 employees in 2016. In the fourth quarter, the organization added 11,000 new employees to Dayforce via acquisition, enabling Dayforce Pay, Benefits, and Time to 29,000 employees.

•	A large manufacturer with more than 50 locations and over 5,000 employees across North America.

•	An innovative research and development company focused on self-driving vehicle technology and autonomous taxi services activated Dayforce Workforce Management and Payroll in Singapore, adding their additional Singapore-based employees into their already operational US Dayforce Payroll.

•	One of the largest privately held wholesale distributor of plumbing, heating, and industrial supplies in the US kicked off their project in June and went live in December, including all integrations.

Partner Ecosystem

Earlier this year, we shared our strategy to extend our ecosystem to broaden our global reach, expand further into the enterprise segment, and continue to deepen our industry expertise – all focused on creating even more value of Dayforce for our customers. We currently have 15 organizations signed, including 9 global partners. These relationships enhance our services delivery capacity and also provide opportunities to grow our pipeline significantly.

 

During the fourth quarter, one of Canada’s largest Provincial Ministries with over 6,500 employees selected Dayforce to modernize its workforce management and time and attendance solution. The opportunity was referred by a large global SI and is an

early example of a significant win under a SI partnership agreement.

By working with great partners, we bring together deep product and industry expertise to expand our customers’ ability to drive transformation with Dayforce at the center.

Sales highlights

We continue to deliver quantifiable value to our customers by simplifying their technology environments, rationalizing legacy platforms with our modern, single database, single rules engine solution, and providing them the runway to scale globally. Our ability to do this allows us to win against some of our largest cloud and legacy competitors in the industry.

Specifically, in North America during the fourth quarter we closed:

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An American multinational business process outsourcing provider with 56,000 employees in 23 countries selected Dayforce for global HR, workforce management, and talent management, in addition to selecting Dayforce to run its native payroll in five countries. Previously, the company was using over 100 different applications to manage its workforce and needed to reduce complexity with scalable technology that would facilitate continued global growth. Dayforce will provide an intelligent, scalable HCM solution to help the company attract and retain talent, improve HR process efficiencies, and will contribute toward driving an over 100% increase in margins.

 

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The largest quick service restaurant franchisor in the world with 2,600 corporate employees in 28 countries selected Ceridian as a partner to rebuild its global HR and payroll infrastructure in a single system. Dayforce will provide intelligent, real-time insights, and create a consistent and engaging user experience for their employees around the world.

 

 

 

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North America’s leading producer of ready-to-assemble furniture with 2,700 employees in the US and Canada selected Ceridian to elevate its employee experience. The company saw the value that on-demand pay and Dayforce Wallet would bring to its workforce by giving them immediate access to earned wages. In addition, having previously struggled with multiple systems and reporting engines, it recognized the efficiencies that a single reporting engine and real-time payroll and workforce management visibility could provide.

 

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A Canadian news media company with more than 140 brands and over 4,000 employees selected Dayforce as its first enterprise wide HCM system. The company has grown through acquisitions and was looking for a unified solution to align and automate many manual and disparate HR processes. Dayforce provides the company with greater compliance and payroll accuracy, which was a key requirement in their selection.

 

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The largest appliance and furniture store in North America with 4,800 employees selected Dayforce as its unified HCM solution. The company outgrew its existing technology, and Dayforce’s ability to scale with the company’s growth in addition to Ceridian’s demonstrated expertise in the retail industry were both differentiators in winning this deal.

 

Our wins are increasingly global and take advantage of our investments, particularly in APJ. In addition, one of our growth levers is to expand the Dayforce platform and sell into our customer base. During 2020, we had a very successful year selling add-ons to our existing customer base, both additional functionality and geographic expansion. Approximately 25% of our 2020 sales were add-ons to our existing customer base – an increase from historical levels of approximately 20%. Selling more add-ons is a testament to our ability to service new logo growth, and by virtue of the depth and success of the

 

 

relationships, it demonstrates we can benefit from expanded revenue per customer. Examples include:

 

•	One of the largest, global paint and coating manufacturers added global pay and time to expand to 10 countries, including Australia and New Zealand.

 

•	An existing paint manufacturing customer with operations in the US, Canada, and Ireland, added the full HCM suite, with global pay and time for 20 additional countries, including UK and Australia. The customer now has a platform to enhance global compliance to support nearly 4,700 employees.

 

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An Australian commercial laundry services company with 1,500 employees augmented its current use of RITEQ by purchasing the full Dayforce HCM suite including payroll, workforce management, and talent management. The company recognized the efficiencies that can be achieved by leveraging a unified HCM solution and wanted to set up a robust HR and workforce management infrastructure to support its plans for growth through acquisition in the coming years.

 

 

 

Marketing highlights

We continue to drive strong results with our digital marketing and virtual events. Our INSIGHTS conference saw record attendance, with 8 times more prospects and 2.5 times more customers attending than in 2019. The virtual format enabled us to engage more than 300 C-level attendees, which is significantly higher than in previous years. It also allowed us to reach a larger base of customers and prospects from

 

 

the EMEA and APJ regions, who were able to consume the content without the need for travel. The event was highly efficient, reaching a much larger audience at less than 30% of the cost of the live format. The experiences gained from our successful pivot to digital marketing in 2020 leave us well positioned for efficient lead and pipeline creation in 2021.

Dayforce Wallet and other product updates

Our pace of innovation remains an important differentiator for us as we continue to deliver new functionality to our customers.

In the fourth quarter, we continued to grow the Dayforce platform by building and deploying local payroll in 23 new countries for a total of 50 countries.

 

Throughout this unprecedented year of uncertainty and change, our vision for intelligent HCM, where technology meets users at the experience layer by focusing on digital moments to make work life better was validated through the delivery of important innovative products and features. In 2020, we delivered:

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Employee Safety Monitoring - Monitors the health and safety of employees across all locations, and manages risk exposure during a health crisis

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Engagement Surveys - Provides insights into employee sentiment using Machine Learning, and helps develop strategies to increase engagement

 

 

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Dayforce Touch Time Clock: Facial Recognition - Provides a zero physical interaction clock to improve health and safety in the workplace

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Dayforce Hub - An immersive Dayforce employee experience that drives engagement and alignment with organizational culture

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Benefits Intelligence - Intelligently simulates benefits plan adoption and costs based on plan design

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Dayforce Wallet - Disrupts the concept of a pay cycle and fixed pay period, allowing employees to access earned wages on-demand.

Customers are transforming the traditional pay day for their employees with on-demand payments through Dayforce Wallet. We continue to see strong market momentum with more than 100 customers already using the product and over 375 customers signed. As expected, we are seeing rolling growth in user adoption and usage. Attach rates to new sales have been over 80%, which we expect to lead to compounded growth, as we continue to drive adoption within launched customers and add new ones.

 

 

 

Dayforce Wallet customers are seeing positive impact to their businesses, with a 5% increase in recruiting close rates and a 9% reduction in the time it takes to fill an open position vs. our broader group of customers. Additionally, Dayforce Wallet customers experienced 42% lower voluntary turnover among those employees using the Wallet. These numbers continue to strengthen and validate the value

proposition of Dayforce Wallet, and they provide further examples of our focus on creating quantifiable value for our customers.  

To enhance the consumer experience and to help improve their financial wellness over the long term, we will continue to introduce new features into Dayforce Wallet, such as rewards, bill pay, and savings buckets. To increase consumer adoption, we will also make it easier and more appealing for users to make this product their primary financial account. We will be rolling out Dayforce Wallet to the Canadian market in the first quarter.

Summary

As I reflect back on 2020, I can tell you that Ceridian is stronger, more agile, and more customer focused today than it was a year ago.  

Overall, despite the economic headwind from the pandemic, our execution and financial performance exceeded expectations. We are uniquely positioned to help customers navigate this new world of work, and demand for Dayforce remains strong.

We are encouraged by the resilience we are seeing in our customer base. We see this both in terms of employees returning to work and in our customers’ focus on accelerating their digital transformation initiatives.

We have a strong balance sheet, and we will continue to invest in the growth of Dayforce and our business in 2021.

Looking forward, we have tremendous underlying momentum in the business, and we believe we are well-positioned to gain share and to drive scale coming out of the crisis.

On behalf of the Board and leadership team, I want to thank the team for delivering against our growth agenda, for delivering value to our customers and their employees, and for delivering value to you: our fellow stockholders.

 

Noémie Heuland
EVP and Chief Financial Officer

From the CFO

The financial highlights and business outlook below are on a year-over-year basis and reported in U.S. dollars, unless otherwise stated.

Revenue

While we continued to experience pandemic related headwinds, our financial performance in the fourth quarter of 2020 was strong:

•	Dayforce recurring services revenue increased by $16.6 million, or 14.5%, to $130.9 million. Excluding float revenue and on a constant currency basis, Dayforce recurring services revenue increased by 19.3%.

•	Dayforce professional services and other revenue declined by $4.6 million, or 10.4%, to $39.8 million.

•	Dayforce revenue increased by $12.0 million, or 7.6%, to $170.7 million. Excluding float revenue and on a constant currency basis, Dayforce revenue increased by 10.2%.

•	Revenue from Powerpay, our solution for small businesses in Canada, declined by $2.3 million, or 9.0%, to $23.2 million. Excluding float revenue and on a constant currency basis, Powerpay revenue declined by 7.6%.

•	Cloud revenue, which includes both Dayforce and Powerpay, increased by $9.7 million, or 5.3%, to $193.9 million. Excluding float revenue and on a

constant currency basis, Cloud revenue increased by 7.9%.

•	Total revenue increased by $1.0 million, or 0.5%, to $222.8 million. Excluding float revenue and on a constant currency basis, total revenue increased by 3.3%.

The average float balance for our customer trust funds during the fourth quarter was approximately $3,145.5 million, compared to $3,137.9 million in the fourth quarter last year. The average yield on our float balance was 1.33% during the fourth quarter of 2020, a decline of 85 basis points compared to the average yield in the fourth quarter of 2019. The decline was primarily attributable to reductions in the U.S. Federal Reserve federal funds rate of 25 basis points in the fourth quarter of 2019 and 150 basis points in the first quarter of 2020, as well as a reduction in the Bank of Canada overnight rate target of 150 basis points in the first quarter of 2020. As a result, float revenue from invested customer trust funds was $10.6 million in the fourth quarter, compared to $17.3 million in the fourth quarter last year. The allocation of float revenue to Dayforce and Cloud revenue was $7.1 million and $9.3 million, respectively, in the fourth quarter of 2020.

Impact of COVID-19

As anticipated and previously disclosed, the COVID-19 pandemic has had an adverse impact on revenue during the fourth quarter, primarily in the form of lower employment levels at our customers, lower float revenue resulting from reductions in the U.S. Federal Reserve federal funds rate and the Bank of Canada overnight rate target, lower average float balances, lower demand for professional services, and customer delays in implementation services.

We estimate that lower employment levels at our customers adversely affected fourth quarter revenue by approximately $9.5 million, of which approximately $7.5 million was related to Dayforce and approximately $2 million was related to Powerpay.

 

 

In addition, we estimate the impact of lower float revenue from reductions in interest rates and lower average float balances was approximately $6 million.

As a result of the COVID-19 pandemic and our successful transition to a virtual working environment, we evaluated our lease portfolio and made the decision to close certain office locations in the U.S. and Canada. The employees in the impacted offices fully transitioned to virtual work by the end of fiscal 2020. In the fourth quarter of 2020, we recognized $16.8 million of charges within general and administrative expense related to the abandonment of the leases associated with these office locations, and this charge was excluded from Adjusted EBITDA. As a result of the office closures, we expect to realize lease expense savings beginning in 2021.

Gross margin

In the fourth quarter of 2020, Cloud recurring services gross margin increased 210 basis points to 70.9%, compared to 68.8% in the fourth quarter last year, as we continued to realize economies of scale in customer support and hosting costs. Excluding float revenue, Cloud recurring services gross margin expanded by 380 basis points. Professional services and other margin declined from 5.9% in the fourth quarter last year to (4.1)%, reflecting lower utilization of employees during the COVID-19 pandemic. Activations were $23.7 million, or 59% of Cloud professional services and other revenue, compared to $26.4 million, or 59% of Cloud professional services and other revenue in the fourth quarter last year. Post go-live professional services and other revenue were $11.8 million, or 29% of Cloud professional services and other revenue, compared to $10.5 million, or 23% of Cloud professional services and other revenue in the fourth quarter last year.

Net (loss) income and net (loss) income per share

Net loss in the fourth quarter of 2020 was $17.3 million, or $(0.12) per diluted share, compared to net

 

 

loss of $1.5 million, or ($0.01) per diluted share, in the fourth quarter of last year. The difference is primarily due to $16.8 million in one-time charges related to the abandonment of certain leased facilities in the fourth quarter of 2020. Adjusted net income in the fourth quarter of 2020 was $14.0 million, or $0.09 per diluted share, compared to $12.1 million, or $0.08 per diluted share, in the fourth quarter of last year.

Adjusted EBITDA

Adjusted EBITDA declined by 25.5% to $33.1 million in the fourth quarter of 2020. Excluding float revenue, Adjusted EBITDA declined by 17.0%, and Adjusted EBITDA margin contracted by 270 basis points, reflecting adverse effects of the COVID-19 pandemic on our revenue and continued investment in product development and sales and marketing.

Full year 2020 revenue and gross margin

Despite the impact of COVID-19 on our 2020 results, we are pleased by our full year 2020 financial performance:

•	Dayforce recurring services revenue increased by $71.2 million, or 16.6%, to $500.2 million. Excluding float revenue and on a constant currency basis, Dayforce recurring services revenue increased by 22.7%.

•	Dayforce revenue increased by $79.1 million, or 13.9%, to $648.8 million. Excluding float revenue and on a constant currency basis, Dayforce revenue increased by 18.1%.

•	Total revenue increased by $18.4 million, or 2.2%, to $842.5 million. Excluding float revenue and on a constant currency basis, total revenue increased by 6.4%.

•	Cloud recurring services gross margin increased 160 basis points to 71.2%, compared to 69.6% in 2019. Excluding float revenue, Cloud recurring services gross margin expanded 330 basis points.

Other key performance metrics

Annual Cloud revenue retention rate was 95.8% in 2020, compared to 96.3% in 2019.

2020 Cloud annualized recurring revenue (“ARR”) was $617.9 million as of December 31, 2020, an increase of 6.2%, or $35.9 million, from December 31, 2019.

Balance sheet and liquidity

As of December 31, 2020, we had cash and equivalents of $188.2 million, and availability under our revolving credit facility of $300.0 million. Our total debt balance was $667.8 million as of December 31, 2020.

In October 2020, we contributed $105.0 million to our largest U.S. pension plan, which represented $17.0 million of required minimum contributions and $88.0 million of voluntary contributions. We believe that this contribution will mitigate the market risk associated with plan investments, and it will improve our cash flow from operations and free cash flow beginning in fiscal year 2021.

In December 2020, we repaid the amount on our revolving credit facility, which we had drawn down in April 2020.

 

 

 

 

 

 

Business Outlook

First quarter 2021 guidance

While we are not providing full year guidance due to the ongoing COVID-19 pandemic and the uncertain impact to employment levels, based on information available to us as of February 9, 2021, we are issuing the following guidance for the first quarter of 2021:

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Dayforce recurring services revenue of $141 million to $142 million, or an increase of approximately 10% to 11% on a GAAP basis and 9% to 10% on a constant currency basis. Excluding float revenue, Dayforce recurring services revenue is expected to grow approximately 18% to 19% on both a GAAP and constant currency basis.

•	Dayforce revenue of $176 million to $178 million, or an increase of approximately 4% to 5% on both a GAAP and constant currency basis. Excluding float revenue, Dayforce revenue is expected to grow approximately 10% to 11% on a GAAP basis and 9% to 10% on a constant currency basis.

•	Cloud revenue of $194 million to $197 million, or an increase of approximately 2% to 3% on a GAAP basis and 1% to 2% on a constant currency basis. Excluding float revenue, Cloud revenue is expected to grow approximately 7% to 9% on a GAAP basis and 6% to 8% on a constant currency basis.

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Total revenue of $220 million to $224 million, or a decline of approximately 1% to an increase of approximately 1% on a GAAP basis and a decline of approximately 2% to flat on a constant currency basis. Excluding float revenue, total revenue is expected to grow approximately 4% to 6% on a GAAP basis and 3% to 5% on a constant currency basis.

•	Float revenue of approximately $6 million within Dayforce revenue, $8 million within Cloud revenue, and $9 million within total revenue.

•	Adjusted EBITDA of $32 million to $36 million.

We have not reconciled the Adjusted EBITDA range for the first quarter of 2021 to the directly comparable

GAAP financial measure because applicable information for the future period, on which this reconciliation would be based, is not readily available due to uncertainty regarding, and the potential variability of, depreciation and amortization, share-based compensation expense and related employer taxes, changes in foreign currency exchange rates, and other items.

Full Year 2021 outlook

In the second quarter of 2021, we expect Dayforce recurring services revenue growth, excluding float revenue and on a constant currency basis, to be above 22% compared to the second quarter of 2020, assuming no improvement or reduction from first quarter 2021 customer employment levels.

In the second half of 2021, we expect Dayforce recurring services revenue growth, excluding float revenue and on a constant currency basis, to be above 25% compared to the respectively third and fourth quarters of 2020. This assumes recovery in employment levels beginning in July 2021 and continuing through the end of 2021.

We have not included the impact of the Ascender acquisition in our 2021 outlook but will update our outlook after closing – which we expect to occur in the second quarter.

Adjusted EBITDA outlook

As we look forward to 2021, we are faced with the reality that our high-margin float revenue will continue to decline as a result of the lower interest rate environment, and that there will be a continued COVID-19 pandemic employment headwind to our revenue. Even in the face of these realities, we continue to invest in Product Development as well as Sales & Marketing, with the goal of achieving sustained high levels of Dayforce recurring revenue growth into the future. Specifically, the investments will focus on the following primary objectives: Dayforce Wallet and other innovations in payroll, expanding our global footprint, advances in the

openness and extensibility of the Dayforce platform, and growing our network of system integrator relationships. We expect our continued investment will result in reduced Adjusted EBITDA margins in 2021.

Dayforce

We previously disclosed that we had observed a 3% decline in employment levels at our customers through October 2020. We have not seen the gradual improvement we were expecting during the fourth quarter. Thus, employment levels have remained consistently 3% below pre-COVID-19 levels through the end of January.

We had estimated an impact to our fourth quarter 2020 results of between $6 and $7 million as a result of lower employment levels, but due to the resurgence of the virus in November and December, we observed a $7.5 million impact to our Dayforce recurring revenue.

In our first quarter 2021 guidance, we have assumed an approximate negative impact of between $6 million to $7 million to our Dayforce recurring services revenue, which would represent a sequential $1 million improvement compared to the fourth quarter of 2020.

The proportion of inactive Dayforce employees to total Dayforce employees remained at approximately 4% as of the end of January, equal to the levels we observed in October, but representing an improvement from approximately 11% at the peak of the pandemic in April 2020.

The COVID-19 pandemic is expected to continue impacting customer implementations and the demand for Dayforce professional services and other revenue during the first quarter of 2021.

 

Powerpay

Approximately 40% of the Powerpay recurring services revenue is from per-check fees, and approximately 30% of the Powerpay recurring services revenue is from base fees charged per pay-run per customer. The remaining 30% of Powerpay recurring services revenue is from ancillary fees, which are generally recognized in line with per-check fees.

During the first quarter of 2021, we believe Powerpay will be negatively impacted by approximately $3 million due to a decline in both the number of employees paid and the number of customers running payroll, as a result of lockdown orders in place across Canada.

Bureau

Fourth quarter Bureau revenue included approximately $7 million of Excelity revenue. The overall decline in Bureau recurring services revenue during the fourth quarter was a result of ongoing customer migrations to Dayforce as well as a reduction of employment levels and float revenue due to the COVID-19 pandemic.

Bureau recurring services gross margin declined year-over-year due to lower Bureau recurring services revenue and the acquisition of Excelity which had a lower recurring services gross margin. The expected continuous decline in Bureau revenue coupled with the fixed costs to maintain the end-of-life platform will continue to affect the Bureau recurring services gross margin.

Foreign exchange impacts

Our 2021 guidance assumes an average U.S. dollar to Canadian dollar foreign exchange rate of $1.30, compared to an average rate of $1.34 in the first quarter of 2020 and for the full year of 2020.