Ceridian(DAY) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Dayforce recurring revenue reached $333 million, up 19% year-over-year, with total revenue of$ 440 million increasing by 17% [6][10] - Cloud recurring gross margin improved to 79%, up 200 basis points, while adjusted cloud recurring gross margin was 79.9%, up 160 basis points [6][11] - Adjusted EBITDA was $126 million, reflecting an 18% increase, with an adjusted EBITDA margin of 28.7%, up 30 basis points [6][11] - Year-to-date operating cash flow was$ 200 million, up 54%, and free cash flow was $117 million, up 184% [7][11] Business Line Data and Key Metrics Changes - Powerpay recurring revenue, excluding float, was$ 20.2 million, up 3.1% on a GAAP basis [11] - Professional services and other revenue increased to $64.1 million, up 23% [11] - Add-on sales comprised approximately 37% of total bookings in the quarter, with solid growth across the Talent Intelligence suite [8][46] Market Data and Key Metrics Changes - The company ended the third quarter with 6,730 customers live on the Dayforce platform, with average recurring revenue per customer up 15% [7] - The float balances increased by 12% year-over-year, despite a slight decrease in yield rate [25] Company Strategy and Development Direction - The company is focused on healthy growth combined with profitability metrics and cash flow generation, emphasizing the competitive advantage of the Dayforce platform [6][7] - The strategy includes expanding the Dayforce platform to include a broad set of HCM offerings and targeting larger customers [8] - The company aims for long-term ambitions of$ 5 billion in revenue and $1 billion in free cash flow as a leader in the HCM space [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fourth quarter guidance, supported by strong go-live plans and a robust sales pipeline [8][15] - The company anticipates a normalization of deal timelines as macroeconomic conditions stabilize [25] - Initial guidance for 2025 indicates total revenue growth, excluding float, between 14% and 15% on a constant currency basis, with adjusted EBITDA margin above 31% [15][66] Other Important Information - The company executed a receivables securitization facility, selling$ 30.1 million of Wallet receivables to optimize cash movements [14] - A new brand campaign was launched to position the company more as an HR technology provider, focusing on the Dayforce product [36] Q&A Session Summary Question: What gave the confidence to offer the initial 2025 guidance? - Management highlighted the high degree of certainty based on recurring revenue and go-live forecasts [18] Question: Can you discuss major wins from the past quarter? - Management noted competitive processes for major deals, emphasizing the value proposition of simplifying HR stacks [24] Question: How do you see the partner channel evolving? - Management reported positive engagement with partners, leveraging them for sales and implementation [53] Question: What are the expectations for float revenue in 2025? - Management indicated a potential headwind of $25 million to$ 30 million for float revenue next year [48] Question: Can you elaborate on the Wallet's growth potential? - Management projected Wallet revenue to exceed $30 million this year, with expectations for continued growth [62]