Ceridian(CDAY) - 2025 Q2 - Quarterly Results

Q2 2025 Performance and Outlook This section provides an overview of Dayforce's Q2 2025 financial and operational performance, management's strategic commentary, and future business outlook and guidance Management Commentary Management highlighted strong bookings growth, emphasizing system simplification and AI advantages, and reinforced confidence in achieving the $1 billion free cash flow target by 2031 - Year-to-date bookings have grown over 40% year-over-year, indicating strong sales momentum[4] - The company believes it is well-positioned for AI due to its single-database HCM platform and strong data privacy foundation, which provides a structural advantage[4] - Management has increased confidence in its ability to achieve its long-term target of $1 billion in free cash flow by 2031[4] Financial Highlights for the Second Quarter 2025 Dayforce reported strong Q2 2025 growth with total revenue up 9.8% and recurring revenue up 13.6%, alongside significant profitability improvements and expanded Adjusted EBITDA margin Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $464.7M | $423.3M | +9.8% | | Total Revenue (ex-float) | $417.3M | $374.4M | +11.5% | | Dayforce Recurring Revenue (ex-float) | $315.5M | $277.7M | +13.6% | | Operating Profit | $42.3M | $14.1M | +199.3% | | Adjusted Operating Profit | $124.9M | $94.9M | +31.6% | | Net Income (Loss) | $21.3M | ($1.8M) | N/A | | Adjusted Net Income | $98.2M | $76.2M | +28.9% | | Diluted EPS | $0.13 | ($0.01) | N/A | | Adjusted Diluted EPS | $0.61 | $0.48 | +27.1% | | Adjusted EBITDA | $147.2M | $116.3M | +26.6% | | Adjusted EBITDA Margin | 31.7% | 27.5% | +420 bps | - The number of customers live on the Dayforce platform grew to 6,984 as of June 30, 2025, a 4.9% increase year-over-year[7] - For the six months ended June 30, 2025, net cash provided by operating activities was $162.3 million, a significant increase from $108.3 million in the same period of 2024. Free cash flow nearly doubled to $106.6 million[7] Recent Business Highlights The company secured major new customer relationships, including the Government of Canada, and delivered key product enhancements with AI-powered features and compliance updates - The Government of Canada is moving forward with Dayforce for a significant HR and Pay transformation project[15] - Key customer wins include a global apparel leader (37,000 employees) adopting the full suite and a U.S. infrastructure provider (10,000 employees) selecting Managed Payroll and other solutions[15] - Product development continued with enhancements such as AI-powered skills-based learning, mobile-first features for frontline workers, and over 230 compliance updates[15] Business Outlook Dayforce issued Q3 and full-year 2025 guidance projecting double-digit revenue growth and raised its free cash flow margin outlook due to favorable legislative changes Third Quarter 2025 Guidance The company provides specific financial guidance for the third quarter of 2025, including projections for total revenue, recurring revenue, and Adjusted EBITDA margin Q3 2025 Guidance | Metric | Guidance Range | Implied Growth (GAAP) | | :--- | :--- | :--- | | Total Revenue | $476M - $486M | N/A | | Total Revenue, ex-float | $434M - $444M | 10.1% - 12.6% | | Dayforce Recurring Revenue, ex-float | $329M - $339M | 12.7% - 16.1% | | Float Revenue | $42M | N/A | | Adjusted EBITDA Margin | 30.0% - 30.5% | N/A | Full Year 2025 Guidance The company outlines its financial guidance for the full fiscal year 2025, including total revenue, recurring revenue, Adjusted EBITDA margin, and an updated free cash flow margin Full Year 2025 Guidance | Metric | Guidance Range | Implied Growth (GAAP) | | :--- | :--- | :--- | | Total Revenue | $1,935M - $1,955M | N/A | | Total Revenue, ex-float | $1,749M - $1,769M | 12.1% - 13.4% | | Dayforce Recurring Revenue, ex-float | $1,324M - $1,344M | 14.2% - 15.9% | | Float Revenue | $186M | N/A | | Adjusted EBITDA Margin | 32% | N/A | | Free Cash Flow Margin | 13.5% - 14.0% | N/A | - Free cash flow margin guidance was increased from 12.0% to a range of 13.5% to 14.0%, reflecting the positive impact of the 'One Big Beautiful Bill Act' on future cash tax remittances[21] Foreign Exchange Assumptions The company's Q3 and FY 2025 guidance incorporates specific foreign exchange rate assumptions for the Canadian dollar, Australian dollar, and Great British pound Key Foreign Exchange Rate Assumptions for 2025 Guidance | Currency Pair | Q3 2025 Guidance Rate | FY 2025 Guidance Rate | FY 2024 Actual Rate | | :--- | :--- | :--- | :--- | | U.S. dollar to Canadian dollar | 1.38 | 1.40 | 1.37 | | U.S. dollar to Australian dollar | 1.56 | 1.56 | 1.52 | | U.S. dollar to Great British pound | 0.76 | 0.77 | 0.78 | Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, for the reported periods Condensed Consolidated Balance Sheets As of June 30, 2025, Dayforce's balance sheet showed total assets of $8.50 billion, a decrease from year-end 2024, while total stockholders' equity increased Balance Sheet Summary (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and equivalents | $625.2 | $579.7 | | Total current assets | $5,314.3 | $5,983.5 | | Total assets | $8,500.8 | $9,117.0 | | Total current liabilities | $5,117.8 | $5,314.8 | | Total liabilities | $5,798.5 | $6,570.7 | | Total stockholders' equity | $2,702.3 | $2,546.3 | Condensed Consolidated Statements of Operations For Q2 2025, total revenue grew 9.8%, operating profit significantly improved, and net income turned positive at $21.3 million Statement of Operations Summary - Three Months Ended June 30 (in millions) | Account | 2025 | 2024 | | :--- | :--- | :--- | | Total revenue | $464.7 | $423.3 | | Total costs and expenses | $422.4 | $409.2 | | Operating profit | $42.3 | $14.1 | | Net income (loss) | $21.3 | $(1.8) | | Diluted net income (loss) per share | $0.13 | $(0.01) | Statement of Operations Summary - Six Months Ended June 30 (in millions) | Account | 2025 | 2024 | | :--- | :--- | :--- | | Total revenue | $946.5 | $854.8 | | Operating profit | $73.3 | $54.8 | | Net income | $36.2 | $5.3 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, operating cash flow increased to $162.3 million, with significant cash usage in financing activities Cash Flow Summary - Six Months Ended June 30 (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $162.3 | $108.3 | | Net cash used in investing activities | $(180.3) | $(383.5) | | Net cash (used in) provided by financing activities | $(919.5) | $7.7 | Supplemental Data and Non-GAAP Measures This section provides supplemental financial data, including detailed revenue breakdowns, share-based compensation, and reconciliations of GAAP to non-GAAP financial measures with their explanations Revenue Financial Measures Q2 2025 revenue breakdown shows Dayforce recurring revenue grew 13.6% and total revenue excluding float increased by 11.5%, while float revenue decreased Q2 2025 Revenue Breakdown (in millions) | Revenue Source | Q2 2025 | Q2 2024 | % Change (GAAP) | % Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Dayforce recurring | $315.5 | $277.7 | 13.6% | 13.5% | | Float | $47.4 | $48.9 | (3.1)% | (2.9)% | | Professional services | $71.6 | $58.3 | 22.8% | 23.0% | | Total revenue | $464.7 | $423.3 | 9.8% | 9.8% | | Total revenue, ex-float | $417.3 | $374.4 | 11.5% | 11.5% | Share-Based Compensation Expense Total share-based compensation expense increased to $48.4 million in Q2 2025 and $94.4 million for the first six months of the year Share-Based Compensation Expense (in millions) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30 | $48.4 | $40.8 | | Six Months Ended June 30 | $94.4 | $78.8 | Reconciliation of GAAP to Non-GAAP Financial Measures The company provides detailed reconciliations, adjusting GAAP operating profit of $42.3 million to an adjusted $124.9 million and GAAP net income to $98.2 million Q2 2025 GAAP to Non-GAAP Reconciliation (in millions) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Operating Profit | $42.3 | +$82.6 | $124.9 | | Net Income | $21.3 | +$76.9 | $98.2 | | EBITDA | $98.6 | +$48.6 | $147.2 (Adjusted EBITDA) | Reconciliation of Free Cash Flow Free cash flow for the six months ended June 30, 2025, was $106.6 million, representing an 11.3% margin, a significant increase from the prior year Free Cash Flow - Six Months Ended June 30 (in millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $162.3 | $108.3 | | Capital expenditures | $(55.7) | $(54.4) | | Free cash flow | $106.6 | $53.9 | | Free cash flow margin | 11.3% | 6.3% | Explanation of Non-GAAP Financial Measures Dayforce explains its non-GAAP measures, such as Adjusted EBITDA and Free Cash Flow, as useful for evaluating operating performance and internal budgeting - Management uses non-GAAP measures to assess operating performance by excluding results of decisions outside normal business operations and for internal budgeting and forecasting[45] - Key non-GAAP adjustments include share-based compensation expense, amortization of acquisition-related intangible assets, and certain other items like restructuring expenses[47] Forward-Looking Statements and Risk Factors This section outlines forward-looking statements and key risk factors, including competition, security breaches, and evolving AI regulations, that could impact future results - The press release contains forward-looking statements, including financial guidance for Q3 and FY 2025, which are not guarantees of future performance[22] - Key identified risk factors include competition, ability to manage growth, information security breaches, reliance on strategic relationships, and failure to comply with laws and regulations, including those related to AI[22][26]