Summary of Dayforce (DAY) Conference Call - August 11, 2025 Company Overview - **Company**: Dayforce (DAY) - **Industry**: Human Capital Management (HCM) Software Key Points Demand and Revenue Performance - Dayforce is experiencing strong demand with three consecutive quarters of over 40% bookings growth, starting from Q4 of the previous year [4] - Current recurring revenue growth is at approximately 14% in constant currency, indicating a disparity between bookings and revenue growth [4][5] - Forecast for Q3 recurring revenue growth is expected to be between 13% to 16%, and for Q4, between 16% to 19% [6] Customer Dynamics - The company has a gross retention rate of 98% for enterprise customers, while smaller customers experience higher churn rates [12] - The average revenue per customer is currently $170,000, with expectations for this figure to increase as larger customers are onboarded [13] - Add-on sales constitute 40% of total sales, with managed services accounting for 17% [7] Product and Technology Advancements - Dayforce has launched an AI assistant that enhances user experience by allowing employees to query company-specific information [24][25] - The AI assistant has been attached to 50% of sales year-to-date, indicating strong market resonance [26] - Future plans include launching 30 AI agents to automate various tasks for users [27] Market Position and Competitive Landscape - Dayforce is positioned as a competitor to Workday and ADP, focusing on larger enterprise customers [37] - The company has successfully secured contracts with significant clients, including the Government of Canada and a large U.S. Federal agency [35][36] - Dayforce aims to replace multiple vendor solutions with its comprehensive platform, which is seen as a competitive advantage [38] Financial Performance and Projections - Free cash flow margin has improved to 13.5% to 14%, with a target of reaching $1 billion in free cash flow by 2031 [42][43] - The company aims to expand free cash flow margins by 100 to 200 basis points annually, with confidence in controlling costs and improving cash realization [44][45] Additional Insights - The company emphasizes the importance of AI in the industry, viewing it as a critical factor for future success [29] - Dayforce's strategy includes focusing on larger customers while maintaining strong relationships with systems integrators [32][33] This summary encapsulates the key insights and data points from the Dayforce conference call, highlighting the company's current performance, future outlook, and strategic initiatives.

Financial Data and Key Metrics Changes - Dayforce's recurring revenue excluding float grew by 14% on a constant currency basis, reaching $315.5 million [5][25] - Adjusted EBITDA margin increased by 420 basis points to 31.7%, with adjusted EBITDA at $147.2 million, up 27% [5][25] - Free cash flow for the quarter was $87.1 million, representing 18.7% of revenue, and year-to-date free cash flow increased by 500 basis points to $106.6 million [5][6][25] Business Line Data and Key Metrics Changes - Professional services revenue rose by 23% to $71.6 million, indicating strong demand for services [25] - New client bookings across all segments performed well, with bookings growing over 40% year-to-date [8][27] - Back to base sales strategy saw sales to existing customers grow over 50%, representing 40% of total bookings [9] Market Data and Key Metrics Changes - The demand environment remains strong, with year-to-date bookings growth over 40% [27] - Employment levels at customers have shown moderate growth, estimated at just under 1% [27][81] - Foreign exchange rates improved against the U.S. Dollar in Canada, the UK, and Australia, positively impacting guidance [27] Company Strategy and Development Direction - The company aims to grow Dayforce recurring revenue above 15% and has increased free cash flow margins guidance from 12% to between 13.5% to 14% [6][29] - Dayforce is focusing on consolidating an average of 12 systems into one, enhancing customer value and operational efficiency [7][19] - The company is positioning itself as an AI leader, integrating AI across its suite and enhancing product offerings [15][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving $1 billion in free cash flow by 2031, supported by strong operational performance and market demand [6][32] - The company noted that the macroeconomic environment remains favorable for its business, particularly in sectors like hospitality and retail [81] - Management highlighted the importance of a single data model for AI capabilities, which differentiates Dayforce from competitors [19][72] Other Important Information - The company repurchased $20.8 million of common stock during the second quarter, bringing the year-to-date total to $51.2 million [26] - The government of Canada selected Dayforce for HR and payroll transformation, marking a significant contract win [14][49] Q&A Session Summary Question: Sales growth from system integrator partners - System integrator-led sales were up 80% for the first half of the year, with strong full suite attachment rates [36][39] Question: Bookings translating to revenue and go-live initiatives - Onboarding a new client typically takes about 12 months, with add-ons happening quicker than new clients [42][43] Question: AI product introduction and pricing - The company is launching around 30 AI agents, with significant potential to reintroduce these to current clients [47][50] Question: Impact of the One Big Beautiful Bill Act on R&D - The act allows immediate expensing of domestic R&D costs, providing a cash tax benefit of $40 million to $50 million this year [56][58] Question: Phasing of the Government of Canada contract - The contract is expected to phase through the back half of the year, with about half of the revenue recognized so far [96][97] Question: Sales strategy and hiring plans - The company is leaning into hiring additional sellers to capitalize on strong sales momentum [100]