Summary of Dayforce (DAY) FY Conference Call - May 13, 2025 Company Overview - **Company**: Dayforce - **Industry**: Human Capital Management (HCM) Software - **Revenue**: Approximately $1.95 billion - **Customers**: About 7,000 - **Users**: Approximately 7 million on the global platform - **Core Offering**: Comprehensive HCM talent suite covering the entire employee lifecycle from hire to retire [4][5] Key Points and Arguments Product Differentiation - Dayforce's vision emphasizes compliance and a full talent suite within a single application, distinguishing it from competitors who often separate payroll and time management [7][8] - The continuous calculation of net pay allows payroll processing without waiting for time system closure, enhancing operational efficiency [8] - Dayforce has transitioned to a full HCM suite post-IPO, with significant improvements in talent capabilities [9][10] - The company is recognized as a leader in the Gartner Magic Quadrant for talent enterprise solutions, with nearly 90% of deals in the 500 to 3,500 employee segment being full suite deals [11] Managed Services and Revenue Growth - Dayforce's managed services act as the payroll department for clients, generating an additional $10 to $12 per employee per month, with a gross margin of nearly 80% [12][13] - Managed services revenue grew by 70% in Q1, indicating strong demand [13] - The average revenue per employee is currently $12.13 per month, with potential for growth through enhanced offerings [15] Sales Performance - New sales bookings grew by approximately 40% in Q4 and are expected to maintain similar growth in the first half of the year [19][30] - The sales strategy has shifted to emphasize a "12 to 1 simplification," showcasing the ROI of replacing multiple HCM solutions with Dayforce [21][22] - Customer engagement through sales summits has fostered community and peer-to-peer selling, enhancing brand loyalty [25] Market Dynamics and Employment Trends - Employment growth is modest, modeled at around 1% for the year, which is a headwind for revenue growth [38][39] - Dayforce has not seen significant impacts from tariffs on employment levels, maintaining steady growth despite economic uncertainties [38] Financial Strategy and Future Outlook - The CFO has focused on simplifying financial reporting and targeting durable revenue growth and increased profitability [56][59] - A long-term goal of achieving $1 billion in free cash flow alongside a $5 billion revenue target has been set, with current free cash flow margins expanding from 9.7% to 12% [61][64] - The company is navigating headwinds such as reduced float revenue and restructuring costs but remains optimistic about future cash flow expansion [62][64] Industry Trends - The software industry is experiencing layoffs even among companies with healthy growth, attributed to increased efficiency through AI and automation [66] - Dayforce is leveraging AI to enhance productivity across various functions, allowing for a leaner workforce [66] Additional Important Insights - The Dayforce Wallet allows employees to access earned wages during the pay period, enhancing employee engagement and retention [51][52] - The company has made significant strides in talent management capabilities, including recruiting and learning management, which are critical for client retention and upselling [42][44] This summary encapsulates the key insights from the Dayforce FY conference call, highlighting the company's strategic direction, market positioning, and financial outlook.

Core Insights - Dayforce (DAY) reported revenue of $481.8 million for the quarter ended March 2025, marking an 11.7% year-over-year increase and exceeding the Zacks Consensus Estimate by 0.87% [1] - The earnings per share (EPS) for the same period was $0.58, up from $0.43 a year ago, representing a surprise of 3.57% over the consensus estimate of $0.56 [1] Revenue Breakdown - Recurring revenue was reported at $410.50 million, which is below the four-analyst average estimate of $421.40 million, reflecting a year-over-year increase of 7.3% [4] - Revenue from professional services and other was $71.30 million, surpassing the average estimate of $55.49 million, with a significant year-over-year change of 46.1% [4] - Other recurring revenue was reported at $13.10 million, which is below the two-analyst average estimate of $15.12 million, showing a year-over-year decline of 32.8% [4] Stock Performance - Dayforce shares have returned 18% over the past month, outperforming the Zacks S&P 500 composite's return of 10.6% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Company Performance - Dayforce reported quarterly earnings of $0.58 per share, exceeding the Zacks Consensus Estimate of $0.56 per share, and up from $0.43 per share a year ago, representing an earnings surprise of 3.57% [1] - The company posted revenues of $481.8 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 0.87%, and an increase from $431.5 million year-over-year [2] - Dayforce has surpassed consensus EPS estimates for the last four quarters and has also topped consensus revenue estimates four times during the same period [2] Stock Outlook - Dayforce shares have declined approximately 19.9% since the beginning of the year, compared to a decline of 4.7% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $0.52 on revenues of $465.14 million, and for the current fiscal year, it is $2.30 on revenues of $1.93 billion [7] Industry Context - The Internet - Software industry, to which Dayforce belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Dayforce's stock performance [5]

Financial Data and Key Metrics Changes - Total revenue for the first quarter was $482 million, growing 14% on a constant currency basis, and 17% excluding float [8][18] - Dayforce recurring revenue, excluding float, was $323.1 million, up 14.4% on a GAAP basis and 15.9% on a constant currency basis [18] - Adjusted EBITDA margin was 32.5%, up 240 basis points year over year [8][18] - Free cash flow was $19.5 million, significantly up from negative $18.8 million last year, representing a free cash flow margin of 4% [18][20] Business Line Data and Key Metrics Changes - Professional services and other revenue was $71.3 million, up 46.1% on a GAAP basis and 49.8% on a constant currency basis [18] - Live customers on the Dayforce platform grew 5.4% to 6,029, and Dayforce recurring revenue per customer grew 11.5% to $167,600 [11] Market Data and Key Metrics Changes - The sales to existing customers grew 30% in the first quarter [10] - Bookings in Q1 were strong, expected to be up approximately 40% year over year [31] Company Strategy and Development Direction - The company continues to focus on simplifying HCM software stacks for clients, allowing them to reduce the number of applications from an average of 12 to a single Dayforce application [9] - A partnership with Microsoft was announced, placing Dayforce on the Azure marketplace, enhancing adoption for enterprise customers [11] - The company is seeing strong demand for its full suite solutions, with 50% of new deals including the complete Dayforce suite [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sales pipeline and project kickoffs, indicating a strong outlook for 2025 and 2026 [6][8] - Employment levels were in line with expectations, and customer retention rates are expected to remain stable [21] - The company anticipates three interest rate cuts in the U.S. in the latter half of the year, but maintains its full-year float revenue guidance [22][23] Other Important Information - The company announced a workforce reduction of approximately 5%, expecting $65 million in savings for 2025 and $80 million annualized [19] - A nonrecurring restructuring charge of $29.2 million was incurred in Q1, including severance and related costs [19][64] Q&A Session Summary Question: What are you hearing from your customers regarding HR and payroll projects? - Management reported strong bookings in Q1, with expectations for continued strength in April, indicating no impact from macroeconomic conditions [31] Question: How has demand strength in HRMS and payroll deals played out? - Management confirmed continued strong performance in the enterprise segment, including signing the largest deal ever with a government agency [37] Question: Can you discuss the cadence of total revenue growth? - Management noted expected deceleration in Q2 but anticipated a pickup in the second half due to seasonality and strong demand [40][42] Question: How are you seeing trends in industries affected by tariffs? - Management stated no impact from tariffs has been observed in the pipeline or employment levels [48] Question: Can you clarify the Government of Canada contract? - Management confirmed the extension of the contract with a dollar amount of $72 million for services over the next 15 months [50] Question: What factors could lead to achieving the high end of guidance? - Management indicated that strong bookings and go-lives earlier than expected could drive revenue higher [54] Question: How is the utilization of the Wallet product? - Management reported high utilization rates among unbanked employees, with an average of 25 uses per month [87] Question: How is the migration of customers from the APJ legacy business going? - Management noted aggressive migration efforts, with an average uplift of about 50% as customers transition to Dayforce [95] Question: What is the competitive landscape like? - Management highlighted improved win rates and market share growth, emphasizing the unique value proposition of their single database model [98]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $482 million, growing 14% on a constant currency basis and 11.7% on a GAAP basis [6][15] - Dayforce recurring revenue, excluding float, was $323.1 million, up 14.4% on a GAAP basis and 15.9% on a constant currency basis [16] - Adjusted EBITDA margin was 32.5%, up 240 basis points year over year [6][16] - Free cash flow was $19.5 million, significantly improved from negative $18.8 million last year [16][18] Business Line Data and Key Metrics Changes - Professional services and other revenue was $71.3 million, up 46.1% on a GAAP basis [16] - Live customers on the Dayforce platform grew 5.4% to 6,029 [10] - Dayforce recurring revenue per customer grew 11.5% to $167,600 [10] Market Data and Key Metrics Changes - The sales to existing customers grew 30% in Q1 [8] - Significant new business wins included contracts with major companies across various sectors, indicating healthy growth across segments and geographies [8][9] Company Strategy and Development Direction - The company continues to focus on simplifying HCM software stacks for clients, allowing them to reduce applications from an average of 12 to a single Dayforce application [7] - A partnership with Microsoft was announced, placing Dayforce on the Azure marketplace to enhance customer adoption [10] - The company is investing in AI capabilities, with 50% of new deals including the AI Copilot feature [11][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sales momentum and pipeline for 2025 and 2026, with bookings expected to be up approximately 40% year over year in the first half of 2025 [27][28] - Employment levels were in line with expectations, and customer retention rates are expected to remain stable [19][20] - The company anticipates three interest rate cuts in the U.S. in the latter half of the year, which may impact float revenue [20] Other Important Information - The company announced a workforce reduction of approximately 5% as part of an efficiency plan, expecting $65 million in savings for 2025 [17][60] - The Government of Canada signed a $72 million contract extension for digital services, indicating ongoing confidence in the project [47][81] Q&A Session Summary Question: What are you hearing from customers regarding HR and payroll projects? - Bookings in Q1 were strong, with expectations for the first half to be up approximately 40% year over year, indicating confidence in future performance [27][28] Question: How has demand strength in HRMS and payroll deals played out? - Demand remains strong, with significant deals signed in Q1, including the largest deal ever with a government agency [35][36] Question: Can you discuss the cadence of total revenue growth? - A deceleration in total revenue growth is expected in Q2, followed by a pickup in the second half due to seasonality and strong demand [38][39] Question: How are you seeing trends in industries affected by tariffs? - No impact from tariffs has been observed, and the pipeline remains healthy [45] Question: Can customers use Azure credits to purchase Dayforce? - Yes, customers can utilize their Azure credits for purchases, enhancing the partnership's value [45] Question: What is the expected utilization of the Wallet product? - High utilization rates are observed, particularly among unbanked employees, with an average of 25 uses per month [86] Question: How is the migration from the APJ legacy business to Dayforce progressing? - Migration is ongoing, with an expected uplift of about 50% as customers transition to the Dayforce platform [93][94] Question: What is the competitive landscape like? - The company has seen an increase in win rates, indicating strong product performance and market share growth [97][98]

Revenue and Customer Growth - Total revenue increased by $50.3 million, or 11.7%, to $481.8 million for the three months ended March 31, 2025, compared to $431.5 million for the same period in 2024[124] - The number of live Dayforce customers increased by 5.4% to 6,929 at March 31, 2025, from 6,575 at March 31, 2024[124] - Dayforce recurring revenue per customer grew to $167,600 for the trailing twelve months ended March 31, 2025, compared to $150,362 for the comparable period in 2024[124] Expenses and Profitability - Costs of recurring services increased by $10.0 million, or 11.3%, primarily due to a $6.3 million increase in labor and employee benefit expenses[126] - Costs of professional services increased by $15.2 million, or 23.0%, primarily due to a $15.0 million increase in labor and benefit expenses[127] - Operating profit decreased by $9.7 million, or 23.8%, to $31.0 million for the three months ended March 31, 2025[122] - Operating profit for the three months ended March 31, 2025, was $31.0 million, down from $40.7 million in the prior year, as revenue growth was offset by higher labor and benefits expenses[133] - General and administrative expenses increased by $15.1 million, or 27.0%, for the three months ended March 31, 2025, compared to the same period in 2024[131] - Selling and marketing expenses rose by $8.4 million, or 10.7%, for the three months ended March 31, 2025, primarily due to increased labor and benefit expenses[130] Net Income and Cash Flow - Net income increased by $7.8 million, or 109.9%, to $14.9 million for the three months ended March 31, 2025[122] - For the three months ended March 31, 2025, net income was $14.9 million, an increase from $7.1 million for the same period in 2024, primarily due to increased revenue and lower interest expenses[138] - The net income for the same period was $14.9 million, resulting in a net income margin of 3.1%[157] - Net cash provided by operating activities increased to $49.6 million for the three months ended March 31, 2025, compared to $9.1 million for the same period in 2024[145] - Free cash flow for Q1 2025 was $19.5 million, representing a free cash flow margin of 4.0%[160] Debt and Cash Position - The company had total debt of $1,226.4 million as of March 31, 2025[139] - Total cash, restricted cash, and equivalents at the end of the period was $3,473.0 million, down from $4,899.2 million at the end of March 31, 2024[144] - Net cash used in investing activities was $120.1 million for the three months ended March 31, 2025, compared to $290.7 million in the same period of 2024[146] Adjusted Metrics - Adjusted EBITDA for Q1 2025 was $80.9 million, with an adjusted EBITDA margin of 32.5%[157] - The company reported a diluted net income per share of $0.09 for Q1 2025, compared to $0.04 in Q1 2024[159] - Adjustments to operating profit for Q1 2025 included $26.6 million in restructuring expenses[161] Performance Obligations and Pension - Remaining performance obligations as of March 31, 2025, were approximately $1.28 billion, representing contracted revenue not yet recognized[150] - The effective discount rate for pension obligations in 2024 ranged from 5.06% to 5.35%[172] - The expected rate of return on plan assets for qualified pension benefits in 2025 is 5.10%[172] Foreign Currency Impact - The company does not anticipate a material impact from a hypothetical 10% change in foreign currency exchange rates[164]

Financial Performance - Dayforce's total revenue for Q1 2025 was $481.8 million, an increase of 11.7% year-over-year, or 13.6% on a constant currency basis[7]. - Recurring revenue, excluding float, reached $323.1 million, up 14.4% year-over-year, or 15.9% on a constant currency basis[7]. - Net income for the quarter was $14.9 million, compared to $7.1 million in the previous year, resulting in a net profit margin of 3.1%[7]. - Adjusted EBITDA was $156.7 million, with an adjusted EBITDA margin of 32.5%, compared to 30.1% in the prior year[7]. - Operating cash flow was $49.6 million, significantly up from $9.1 million, leading to an operating cash flow margin of 10.3%[7]. - Total revenue for Q1 2025 was $481.8 million, representing an 11.7% increase compared to $431.5 million in Q1 2024[27]. - Net income for Q1 2025 was $14.9 million, compared to $7.1 million in Q1 2024, marking a significant increase[27]. - For the three months ended March 31, 2025, Dayforce reported an operating profit of $31.0 million, representing a margin of 6.4%, compared to an operating profit of $40.7 million and a margin of 9.4% for the same period in 2024[36]. - Dayforce's EBITDA for Q1 2025 was $80.9 million, with an EBITDA margin of 32.5%, compared to $80.5 million and a margin of 30.1% in Q1 2024[36]. - The adjusted net income for Q1 2025 was $28.7 million, with an adjusted net profit margin of 19.5%, while in Q1 2024, adjusted net income was $68.0 million, reflecting a margin of 15.8%[36]. Customer Metrics - Dayforce had 6,929 customers live on its platform as of March 31, 2025, reflecting a 5.4% year-over-year increase[7]. - Recurring services revenue increased to $410.5 million, up 7.3% from $382.7 million year-over-year[30]. - Dayforce's recurring revenue per customer is a key metric, although specific figures were not disclosed in the provided content[44]. Cash Flow and Guidance - Dayforce's free cash flow margin is projected to be 12% for FY 2025[14]. - The guidance for free cash flow for the twelve months ending December 31, 2025, is projected to be between $229 million and $234 million, with a free cash flow margin expected between 11.9% and 12.1%[38]. - Free cash flow for the three months ended March 31, 2025, was $19.5 million, with a free cash flow margin of 4.0%, while in Q1 2024, free cash flow was negative at $(18.8) million[38]. - The company reported a net cash provided by operating activities of $49.6 million for Q1 2025, compared to $9.1 million in Q1 2024[29]. - Dayforce's net cash provided by operating activities for Q1 2025 was $49.6 million, significantly higher than $9.1 million in Q1 2024[38]. Expenses and Liabilities - The company incurred $26.6 million in restructuring expenses for Q1 2025, impacting adjusted operating profit and net income[36]. - Share-based compensation expense increased to $46.0 million in Q1 2025 from $38.0 million in Q1 2024[34]. - Total assets increased to $9,499.5 million as of March 31, 2025, up from $9,117.0 million at the end of 2024[25]. - Total liabilities rose to $6,907.4 million in Q1 2025, compared to $6,570.7 million in Q4 2024[25]. - Cash and equivalents at the end of Q1 2025 were $557.3 million, a decrease from $579.7 million at the end of 2024[25]. Partnerships and Future Outlook - Dayforce announced an expanded partnership with Microsoft, making its platform available in the Microsoft Azure Marketplace[13]. - The company expects continued growth in recurring services and professional services, with a focus on expanding market presence and product development[30]. - The company plans to achieve total revenue guidance of $1,929 million to $1,944 million for FY 2025, representing a 12.1% to 13.1% increase on a GAAP basis[11]. Interest Expense - Dayforce's interest expense for Q1 2025 was $7.9 million, compared to $13.3 million in Q1 2024[36].

Group 1 - Analysts forecast that Dayforce (DAY) will report quarterly earnings of $0.56 per share, reflecting a year-over-year increase of 30.2% [1] - Expected revenues for Dayforce are projected to be $477.63 million, indicating a 10.7% increase compared to the same quarter last year [1] - The consensus EPS estimate has remained unchanged over the past 30 days, indicating that analysts have not revised their initial projections [2] Group 2 - Revisions to earnings estimates are crucial for predicting investor actions regarding the stock, as there is a strong correlation between earnings estimate trends and short-term price performance [3] - Analysts expect 'Revenue- Recurring' to be $421.40 million, showing a year-over-year change of +10.1% [5] - 'Revenue- Professional services and other' is anticipated to reach $55.49 million, reflecting a year-over-year increase of +13.7% [5] - 'Other recurring' revenue is forecasted to be $15.12 million, indicating a year-over-year decline of -22.5% [5] Group 3 - The total cloud recurring revenue is expected to reach $410.24 million, suggesting a year-over-year increase of +13% [6] - Dayforce shares have returned +14% over the past month, outperforming the Zacks S&P 500 composite's +11.5% change [6] - With a Zacks Rank 2 (Buy), Dayforce is anticipated to outperform the overall market in the near future [6]

Core Viewpoint - Dayforce (DAY) is expected to report first-quarter 2025 results on May 7, with projected revenues indicating growth despite potential foreign currency headwinds [1][7]. Revenue Expectations - DAY anticipates first-quarter 2025 revenues between $421 million and $427 million, reflecting a growth of 13.5-15% on a GAAP basis and 15.5-17% on a constant-currency basis [1]. - The consensus estimate for DAY's first-quarter revenues is $477.63 million, representing a year-over-year increase of 10.69% [1]. Earnings Projections - The Zacks Consensus Estimate for DAY's first-quarter earnings is set at 56 cents per share, indicating a year-over-year growth of 30.23% [2]. - DAY has beaten the Zacks Consensus Estimate for earnings in three of the last four quarters, with an average surprise of 21.50% [2]. Sales Pipeline and Growth Factors - Dayforce entered 2025 with a sales pipeline nearly four times its quarterly sales target, indicating strong demand and customer engagement [3]. - January sales growth outpaced revenue growth, suggesting healthy momentum in deal activity and client acquisition [3]. Profitability and Margin Enhancement - The company projects an adjusted EBITDA increase to 32% in the first quarter of 2025, supporting margin enhancement and overall performance [4]. AI and Product Development - Dayforce is enhancing its AI capabilities and regulatory support through tools like Dayforce Co-Pilot, which is expected to boost platform adoption and contribute to revenue growth [5]. Recurring Revenue and Client Retention - The ability to grow recurring revenue per customer by 11% and achieve a gross retention rate of 98% in Q4 2024 indicates strong product value and client confidence [6]. Currency Impact - Unfavorable foreign currency fluctuations, particularly with Canadian dollar-denominated revenues, are expected to reduce 2025 revenues by 200 basis points, impacting top-line growth in Q1 [7].

Core Insights - Dayforce, Inc. has announced the availability of its Dayforce platform on the Microsoft Azure Marketplace, enhancing accessibility for customers [1][4] - The integration allows for seamless unification of enterprise resource planning (ERP) and human capital management (HCM) on a single platform, promoting operational excellence [2][3] - The collaboration aims to help organizations streamline procurement and deployment, maximizing value and efficiency in operations [4] Company Overview - Dayforce is a global leader in human capital management technology, focusing on improving work life for customers and employees [6] - The Dayforce platform integrates HR, payroll, workforce management, talent, and analytics into a single user-friendly experience [3][6] - The platform is designed to deliver quantifiable value across various regions, including North America, Europe, the Middle East and Africa, and Asia-Pacific and Japan [3] Market Context - The Azure Marketplace serves as an online platform for buying and selling cloud solutions, facilitating connections between companies and innovative cloud-based solutions [4] - The partnership with Microsoft Azure is expected to enhance operational efficiency and economic value for customers, allowing them to spend smarter [4]