NYSE:DAY Dayforce Q4 2024 Earnings Report $58.95 +0.33 (+0.56%) As of 02:41 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Dayforce EPS ResultsActual EPS$0.37Consensus EPS $0.46Beat/MissMissed by -$0.09One Year Ago EPSN/ADayforce Revenue ResultsActual RevenueN/AExpected Revenue$455.00 millionBeat/MissN/AYoY Revenue GrowthN/ADayforce Announcement DetailsQuarterQ4 2024Date2/5/2025TimeBefore Market OpensConference Call DateWednesday, February 5, 2025Conference Call Time8:00AM ETUpcoming EarningsDayforce's Q1 2025 earnings is scheduled for Wednesday, May 7, 2025, with a conference call scheduled at 8:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfilePowered by Dayforce Q4 2024 Earnings Call TranscriptProvided by QuartrFebruary 5, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Greetings and welcome to Dayforce's Fourth Quarter and Full Year twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Vetterman, VP of Investor Relations. Operator00:00:27Thank you. You may begin. David NiedermanVP - Investor Relations at Dayforce00:00:30Thank you for joining, and welcome to the Dayforce fourth quarter twenty twenty four earnings call. I'm David Nederman, Vice President, Investor Relations. As a reminder, all participants are in a listen only mode and a question and answer session will follow our opening remarks. Joining me on the call today are CEO, David Ossip and CFO, Jeremy Johnson. We also have Chief Strategy Product and Technology Officer, Joe Korngable and our President and COO, Steve Holdridge, available for Q and A. David NiedermanVP - Investor Relations at Dayforce00:01:00Before I hand the call over to David, I want to remind everyone that our commentary may include forward looking statements. These statements are subject to risks and uncertainties that could cause Dayforce's results to differ materially from historical experience or present expectations. A description of some of these risks and uncertainties can be found in the reports we file with the Securities and Exchange Commission, such as the cautionary statements in our filings. Additionally, over the course of this call, we'll reference non GAAP measures to describe our performance. Please review our earnings press release and filings with the SEC for our rationale behind the use of non GAAP measures and for a full reconciliation of these GAAP to non GAAP metrics. David NiedermanVP - Investor Relations at Dayforce00:01:42These documents, in addition to a replay of this call and also a transcript, will be available on the Dayforce Investor Relations website. And with that, I'd like to turn the call over to David. David OssipChairman & CEO at Dayforce00:01:54Thanks, David, and thank you all for joining us. I'll begin with some high level commentary on our results and outlook before handing the call over to Jeremy, who'll provide more detail on our financials and guidance. We had a strong year with Q4 sales exceeding expectations and coming in above plan. Sales cycles returned to historical levels and January proved to be a strong start to 2025. Looking ahead, we expect sales growth to outpace revenue growth throughout the year. David OssipChairman & CEO at Dayforce00:02:35Our pipeline coverage gives us confidence starting the year with approximately four times coverage of pipeline compared to our sales target. We had excellent performance in 2024. Total revenue was $1,760,000,000 growing 17% on a constant currency basis. Dayforce recurring revenue excluding float grew 21% on a constant currency basis. Adjusted EBITDA margin was 28.5% expanding 140 basis points, and free cash flow was $172,000,000 or 9.7% of revenue, expanding two eighty basis points. David OssipChairman & CEO at Dayforce00:03:20As guided during our Investor Day, we expect total revenue growth in 2025 of 14% to 15%, excluding flows and on a constant currency basis. Our guidance reflects our decision to focus on higher margin areas of our business, while phasing out legacy segments. Dayforce recurring revenue, excluding float, is expected to grow 15% to 17% on a constant currency basis during 2025. In terms of our mid term operating model, we are confident in our ability to exceed the 20% free cash flow margin. Last year, we expanded free cash flow margins by two eighty basis points to 9.7%. David OssipChairman & CEO at Dayforce00:04:09In 2025, we anticipate this increasing by another two thirty basis points to 12% and for this upward trend to continue over the midterm. On an adjusted EBITDA basis, we are raising our Investor Day guidance by 100 basis points, increasing adjusted EBITDA margin guidance to 32% from 31%. Beyond 2025, over the midterm, we expect adjusted EBITDA to expand by 100 to 150 basis points per year. In the coming years, we anticipate that the total revenue growth will remain close to 15%, while profitability improvements, both free cash flow and adjusted EBITDA, will continue to outpace revenue growth. From a sales perspective, our CRO, Sam, has executed exceptionally well. David OssipChairman & CEO at Dayforce00:05:10In the last quarter, we secured several key new business wins, including a 60,000 employee grocery chain, an 18,000 employee space exploration company, and a 66,000 employee member owned retail cooperative, as well as success in expanding deals including a 60,000 employee global manufacturer and distributor of paints and coating and a global air service provider with 48,000 employees across 35 countries. Many of these deals closed within weeks of customers attending our Dayforce Discover event, a testament to the impact of the event and its role in accelerating Q4 sales. On the product side, we continue to lead in innovation and delivery. Our product roadmap is built around compliance, IT simplification, data and experience. On the compliance front, we delivered more than 900 compliance updates and were once again recognized by Gartner as a compliance leader for firms with more than 1,000 employees and for firms with more than 2,500 employees. David OssipChairman & CEO at Dayforce00:06:30Key compliance enhancements included a new workforce insight experience, machine learning driven labor forecasting and direct to bank capabilities for Dayforce Wallet. Speaking of wallet, it had a tremendous 2024 with revenue increasing from $12,000,000 to over $30,000,000 dollars We expect wallet to continue gaining momentum in 2025. Our IT simplification efforts align with our twelve:one strategy, which consolidates multiple HR Our leadership Our leadership in this area was reinforced by our recognition as a leader for the fifth consecutive year in Gartner's Magic Quadrant for cloud HCM solutions for enterprises with more than 1,000 employees. Rentaling our twelve:one value proposition, we launched a new talent acquisition experience and re platformed Illumi into Dayforce, creating a best in class learning experience with strong analytics, content creation tools and a content store featuring over 90,000 training modules. We expect learning management and content to drive significant client base sales in 2025. David OssipChairman & CEO at Dayforce00:08:04On the data and experience side, we are already seeing strong adoption of our Dayforce integration studio and CoPilot products, both of which we demonstrated at Discover. Since launching in November, we have sold more than 60 CoPilot units. CoPilot integrates with our experience hub, allowing CHROs and their teams to create engaging and immersive experience for frontline workers, managers and executives. Content within the hub is indexed using AI, enabling users to ask questions and receive contextual responses with relevant reference links. Additionally, Copilot facilitates workflow automation, such as requesting time off. David OssipChairman & CEO at Dayforce00:08:55Innovation in this area will continue in 2025 with planned releases of AI agents and other new capabilities. At the core of Dayforce is our commitment to product innovation. This is what differentiates us in the market and drives our strong win rate, high customer retention, significant add on sales and industry recognition. Turning to customers and go live, Q4 was impressive. We saw 146 net new customers go live, including a global aviation service provider with over 55,000 employees across 36 countries, a 23,000 employee American entertainment company rolling out Full Sweet Talent, a 10,500 employee UK contract catering and support service provider. David OssipChairman & CEO at Dayforce00:09:52We now have 6,876 live customers and 7,600,000 live active users on Dayforce. Both up approximately 10% year over year. Additionally, Dayforce recurring revenue per customer increased by 11% and our gross retention rate improved from an already strong 97.1% to 98%. From a profitability standpoint, our improvement in adjusted EBITDA and free cash flow was largely driven by improvements in recurring gross margin. Adjusted cloud recurring gross margins were 79.8%, expanding 150 basis points resulting from efficiency gains in our support and managed services organizations, greater automation, AI driven optimizations and a higher proportion of add on sales. David OssipChairman & CEO at Dayforce00:10:48In 2025, we will continue optimizing our cost basis by improving sales productivity, streamlining our organizational structure and leveraging lower cost jurisdictions, automation and AI. Professional services and other revenue, historically a negative margin business is expected to break even in 2025. This milestone reflects the investments we have made in automation and partnerships with system integrators. Before handing the call over to Jeremy, I want to emphasize four key themes. First, our strength lies in our ability to innovate and deliver exceptional products. David OssipChairman & CEO at Dayforce00:11:34Second, we saw robust sales performance in Q4 and are confident this momentum will continue into Q1 and throughout 2025. Third, we have made meaningful improvements across all profitability metrics and we expect these trends to continue in the coming years. Finally, we are positioning Dayforce for sustained revenue growth at levels similar to 2025, while driving towards a 20% plus free cash flow margin. I'll now pass the call to Jeremy to discuss our financial results in more detail. Jeremy, over to you. Jeremy JohnsonExecutive VP & CFO at Dayforce00:12:20Thanks, David. We are pleased with the fourth quarter results. Top line revenue growth remains strong, while we scaled the business and continued to expand cash flow margins. In the fourth quarter, total revenue was $465,200,000 up 16.4 on a GAAP basis and 17% on a constant currency basis. Excluding float, total revenue increased 17% on a GAAP basis and 17.6% on a constant currency basis. Jeremy JohnsonExecutive VP & CFO at Dayforce00:12:51And Dayforce recurring revenue, excluding float, was $307,600,000 up 20% on a GAAP basis and 20.4% on a constant currency basis, underpinned by strong go lives. Powerpay recurring revenue, excluding float, was $23,100,000 flat on a GAAP basis, but up 2.6% on a constant currency basis. And professional services and other revenue was $71,500,000 up 18% on a GAAP basis and 18.8% on a constant currency basis. Gross profit was $218,600,000 up 28.7% operating profit was 28,500,000 cloud recurring gross margin was 80%, expanding 300 basis points and on a non GAAP basis, adjusted cloud recurring gross margin was 80.4%, expanding two thirty basis points and adjusted EBITDA was $129,200,000 up 30.2% or a 27.8% margin, expanding 300 basis points. Turning to our full year results. Jeremy JohnsonExecutive VP & CFO at Dayforce00:13:59Total revenue was $1,760,000,000 up 16.3% on a GAAP basis and 16.7% on a constant currency basis. Excluding float, total revenue increased 16% on a GAAP basis and 16.3% on a constant currency basis. Dayforce recurring revenue excluding float was $1,160,000,000 up 20.4% on a GAAP basis and 20.7% on a constant currency basis. Powerpay recurring revenue excluding float was $83,700,000 up 2.2% on a GAAP basis and 3.8% on a constant currency basis and professional services and other revenue was $242,700,000 up 12.2% on a GAAP basis and 12.5% on a constant currency basis. Gross profit was $812,000,000 up 25.6%. Jeremy JohnsonExecutive VP & CFO at Dayforce00:14:58Operating profit was $104,100,000 including $84,000,000 of amortization expense related to the retired Ceridian trade name cloud recurring gross margin was 78.9% expanding 190 basis points. And on a non GAAP basis, adjusted cloud recurring gross margin was 79.8%, expanding 150 basis points. Adjusted EBITDA was $501,500,000 up 22.3% or a 28.5% margin, expanding 140 basis points and reflecting our continued improvement in gross profit margins and scale and adjusted G and A. From a cash flow perspective, full year operating cash flow was $281,100,000 up 28.1% and free cash flow was $171,500,000 up 63.2%. Free cash flow as a percent of revenue was 9.7% expanding two eighty basis points. Jeremy JohnsonExecutive VP & CFO at Dayforce00:16:05We had a solid year from a financial perspective with strong revenue growth, expanding profitability and increasing cash flow metrics. If I look back at our original 2024 guidance issued in February 2024, we met or surpassed these targets with healthy performance throughout the year. If you recall, our initial guidance for 2024 was for total revenue to grow between 1314% constant currency, and we grew 16.7% Dayforce recurring revenue ex float to grow between 2021% constant currency, and we grew 20.7% and adjusted EBITDA margin between 27.928.6% and our margin was 28.5%. We also introduced free cash flow guidance for the first time this year, saying that we expected free cash flow margin between 9.510% of revenue with conversion from adjusted EBITDA to operating cash to be in the mid to upper 50% range, while CapEx remained relatively flat year over year. And we ended at 9.7% of revenue with 56% conversion from adjusted EBITDA to operating cash flow. Jeremy JohnsonExecutive VP & CFO at Dayforce00:17:26We're pleased with our overall performance and financial results this year. During the fourth quarter, Dayforce recurring revenue, excluding float, grew at 20% on a GAAP basis or 20.4 constant currency. Included in these results was a $2,000,000 FX headwind versus our guidance range. And while we while go lives were solid, employee volumes, tax filing fees and print fees missed our expectations, and we had impacts from customer contract amendments. The contract amendments were isolated to a few customers and represented changes to terms that caused the reallocation of contract consideration, increasing PS and other revenue and reducing recurring revenue. Jeremy JohnsonExecutive VP & CFO at Dayforce00:18:08Specifically, the impact from employee volumes was approximately $1,000,000 the contract amendments were approximately $1,000,000 and the tax filing fees and print fees were each about $500,000 Excluding these items, our Dayforce recurring revenue growth would have been in the middle of our guidance range. We have not changed our previously issued revenue guidance for 2025, which I'll dive into more next. A few other callouts about 2024 before I move on to our guidance. During 2024, Illumi revenue added approximately 190 basis points of growth to our Dayforce recurring revenue ex float and 110 basis points of growth to our total revenue. And during 2024, we executed $36,000,000 of our $500,000,000 share repurchase plan and are pleased that we have the profitability and flexibility to return capital to our shareholders and manage dilution from share based compensation while maintaining investment in the business. Jeremy JohnsonExecutive VP & CFO at Dayforce00:19:11Now turning to guidance. For the full year, we expect total revenue, excluding float, to grow at a constant currency rate of 14% to 15%. At current FX spot rates, we estimate this to be $1,745,000,000 to $1,760,000,000 or 11.9% to 12.8% growth on a GAAP basis Dayforce recurring revenue, excluding float, to grow between 1517% constant currency. At current FX spot rates, we estimate this to be $1,315,000,000 to $1,340,000,000 or about 13.4% to 15.5% on a GAAP basis float revenue of $180,000,000 representing an effective yield of 3.6% and balanced growth in the mid to low single digits adjusted EBITDA margin of 32% of revenue, free cash flow margin of 12% of revenue. And in 2025, we now expect PS and other revenue to grow slightly faster than Dayforce recurring revenue, excluding float, during 2025 as we continue to implement projects from the strong demand we saw in 2024 and as we continue to work on some larger projects, including the Government of Canada. Jeremy JohnsonExecutive VP & CFO at Dayforce00:20:27For the first quarter, we expect total revenue, excluding float, to grow 15% to 17% on a constant currency basis. At current FX spot rates, we estimate this to be $421,000,000 to $427,000,000 or growth of approximately 13.5% to 15% quote revenue of $53,000,000 representing an effective yield of 3.7% and balanced growth of mid single digits and adjusted EBITDA margin of 31% to 32% of revenue. With regard to FX rates in 2025, we expect our revenue to be approximately 70% U. S. Dollar based, 21% Canadian dollar based, 4% to 5% Australian dollar based and 3% to 4% British pound based, with the rest spread across multiple currencies. Jeremy JohnsonExecutive VP & CFO at Dayforce00:21:17With the U. S. Dollar strengthening against each of these currencies and with the proportion of our UK and Australia based revenue increasing, we will begin providing FX rates assumed in guidance for each of these currencies compared to the dollar. For our current guidance, the U. S. Jeremy JohnsonExecutive VP & CFO at Dayforce00:21:32Dollar to the Canadian foreign exchange rate used is 1.44, the U. S. Dollar to British pound foreign exchange rate is 0.81 and the U. S. Dollar to Australian dollar foreign exchange rate is 1.61. Jeremy JohnsonExecutive VP & CFO at Dayforce00:21:50Specifically, current foreign exchange rates are driving about 200 basis points of headwind to our full year 2025 revenue growth ranges. A few other things to call out before we close out the call. On share repurchases, we still anticipate continuing to purchase shares in 2025 with the goal of minimizing dilution to our shares outstanding from stock based compensation. Our current estimate is that we plan to repurchase more than 1,000,000 shares during 2025, effectively doubling our 2024 purchases. Later today, we are launching a repricing deal for our existing $650,000,000 Term Loan B with the goal of reducing the interest rate from our current levels of SOFR plus $250,000,000 to something lower. Jeremy JohnsonExecutive VP & CFO at Dayforce00:22:38And with regard to our $575,000,000 convertible debt, which matures in March of twenty twenty six, we're currently planning to retire this at maturity in 2026 with cash and liquidity on hand. Now with that, we can begin the Q and A portion of our call. Operator00:22:59Thank you. Today's first question is coming from Siti Panagrahi of Susuho Securities. Please go ahead. Siti PanigrahiEquity Research Analyst at Mizuho Financial Group00:23:33Hi. Good morning and thanks for taking my question. Jeremy, for Q4 Dayforce recruiting and Explored, could you elaborate the points that impacted miss? And is it something a surprise? And also is it one time or should we expect that in this year, too? David OssipChairman & CEO at Dayforce00:23:56Sidney, nice to speak with you. Let me start before I hand it over to Jeremy. I'd like to make four points that I think are quite key. First of all, Q4 sales and January sales were both up considerably on a year over year basis. Both were record, growing at over two times the revenue growth of the company. David OssipChairman & CEO at Dayforce00:24:21So we're quite optimistic on sales performance and sales momentum. As you know, generally when we have a very strong Q4, we see a bit of a headwind going into Q1 and we do not expect that this year. Sales is strong. Second, we're holding the revenue guidance for the company. That's the guidance that we gave at Investor Day. David OssipChairman & CEO at Dayforce00:24:46And at the same time, we're increasing the EBITDA guide for the company by 100 basis points. We're seeing meaningful profit strengthening across all aspects, so adjusted EBITDA, gross margins and as well as free cash flow. In fact, if you look at it on an adjusted EBITDA basis, you can see that on an ex flow basis, we're expecting adjusted EBITDA to go up by five sixty basis points inside the year. And finally, we are positioning Dayforce for sustained growth around the current levels, moving towards a 20% free cash flow basis. In regards to Dayforce recurring in Q4, there were three aspects that Jeremy can go into detail on those. David OssipChairman & CEO at Dayforce00:25:36All of them, I would say, are one time items that do not impact the future of the company. Some of them had to do with amendments to contracts. There was some FX inside there as well. And as people obviously are moving to more digitization, there has been some impact on the printing and the shipping types of fees. Jeremy, do you want to give some details to that? Jeremy JohnsonExecutive VP & CFO at Dayforce00:26:01Definitely, yes. So David mentioned the FX, which we can put aside and talk constant currency. And ultimately, there's three drivers to the slightly lower numbers, roughly all equal weighted. First, I'd say it's lower employee volumes than expected. Second, it's print fees and tax filing fees. Jeremy JohnsonExecutive VP & CFO at Dayforce00:26:21And third, these contract amendments that shifted revenue into professional services and other and away from recurring. All of them are small on a dollar basis. On employee volumes, as you probably know, we historically see some seasonal spike in Q4 employee volumes around the holidays, and that seasonality was slightly muted this year compared to the past. And on the print, the tax filing fees, that's revenue that's invoiced as used, and therefore, it's a little bit more difficult to forecast. We saw some lower consumption this quarter, meaning, for example, less printing than historical levels. Jeremy JohnsonExecutive VP & CFO at Dayforce00:26:55And on the contract amendments, it's honestly a typical customer motion that we see frequently as customers grow with us and grow their HCM needs with us. It's a type of flexibility and partially what drives our strong gross retention of 98%. We're constantly working with our customers to ensure they're satisfied. And with large customers, when they add services or products, we're required to reallocate that contract consideration between PS and other and recurring. And this quarter, we saw some more services added, which is a good thing for the business, and the tailwinds in PS and other and the headwind in recurring revenue. Siti PanigrahiEquity Research Analyst at Mizuho Financial Group00:27:33Yes. Thanks for that color. And David, that's impressive. And I think your fourth point on the key themes driving sustainable revenue growth at this level, 25, That's definitely impressive when you compare to your peers who are more in the low double digit. But help us understand what are the factors assumed in that level of confidence to drive this level of growth? David OssipChairman & CEO at Dayforce00:28:01We are seeing a strong sales momentum. Again, if I look towards December, it was a record month. And then we saw the strength continue into January. And as you know, I typically give a bit of a color as to how the current quarter is going. The other number I'll point to, if you look at the cloud ARR growth in 2024, it was up 17.9%. David OssipChairman & CEO at Dayforce00:28:32And remember, our business is very predictable. If I look at day four recurring across the 2024, we were within 30 basis points of the guide that we gave at the start of the very year, which I think is quite remarkable for a business of this scale. Operator00:29:00Thank you. The next question is coming from Mark Murphy of JPMorgan Chase. Please go ahead. Mark MurphyManaging Director at JP Morgan00:29:05Thank you so much. Congratulations on the strong sales performance at year end. That's great to hear. Jeremy, I have two quick questions. First of all, Jeremy, regarding the employee volumes that you said came in slightly below expectations, you mentioned the Q4 holiday spike was muted. Mark MurphyManaging Director at JP Morgan00:29:25Do you attribute that to the timing of the holidays where both Christmas and New Year's were falling midweek on Wednesday? In other words, a temporary blip or do you see some other type of effect that might linger a bit into Q1? Jeremy JohnsonExecutive VP & CFO at Dayforce00:29:40No, I didn't see at that level of detail anything that I would point to that said would linger into Q1. As I said, historically, we do see that Q4 seasonal spike around the holidays. I think that slightly muted, but then also we did have some extreme weather events in the Southeast this year, during Q4. And it's a tough thing for us to forecast and to guide. And historically, we've been pretty accurate. Jeremy JohnsonExecutive VP & CFO at Dayforce00:30:12And I think we still were very accurate. It just was slightly below our expectations, unfortunately. Mark MurphyManaging Director at JP Morgan00:30:22Okay, understood. And then, David, thinking back to the fall, you had mentioned some willingness to consider more transformative M and A. And since then, we've seen Paychex announcing its intent to acquire Paycor. Is it safe to assume that Ceridian would have seen too much overlap with Paycor or isn't as interested in going down market? And therefore perhaps you didn't spend much time considering it? Mark MurphyManaging Director at JP Morgan00:30:55And could you shed any light on just whether that acquisition might affect the landscape or open up any opportunities for you as they try Mark MurphyManaging Director at JP Morgan00:31:04to merge the two organizations? David OssipChairman & CEO at Dayforce00:31:07We don't compete against Paychex and we don't compete against Paycor. It is down market from us. I would expect in the down market side that there should be consolidation because I don't think there's much differentiation in product. Mark, what differentiates Dayforce is our ability to innovate and deliver product. David OssipChairman & CEO at Dayforce00:31:29And you see that across the gains that we're having in terms of competitive wins in market, the strength of the Q4 and the January sales of it. So to answer your question, no, I don't think there'll be any impact to Dayforce. Mark MurphyManaging Director at JP Morgan00:31:46Thank Mark MurphyManaging Director at JP Morgan00:31:48you. Operator00:31:49Thank you. The next question is coming from Raymond Benschow of Barclays. Please go ahead. Raimo LenschowAnalyst at Barclays Capital00:31:55Hey, thank you and congrats from me as well on a great sales quarter. And how do we think about the sales kind of feeding into revenue next year? Obviously, like strong quarter, if I look at the guidance for Dayforce, that was slightly below consensus, it maybe might have missed a little bit by us. But like the contracts that you signed, were they kind of contracted longer go lives, etcetera, is that kind of an impact we should consider? Thank you. David OssipChairman & CEO at Dayforce00:32:23Hey, Ramo. We had strong performance across segments. So we saw large enterprise, which for us is above 12,000 employees perform well. We saw the major market have considerable strength as well and we even saw our emerging business, which goes up to about 1,000 employees, also do very, very nicely. The Australian APJ also performed very well. David OssipChairman & CEO at Dayforce00:32:52So there wasn't really a concentration in any one segment. Given our scale, we typically have, I would say, well over 1,000 ongoing customer implementations. And as you know, when we plan out or model out our revenue, we look at it from a individual go live milestone of each of those specific projects. By the way, the go live number as well in the quarter was very, very strong. The number was, I think, what was it, Jeremy, one hundred and forty something? Jeremy JohnsonExecutive VP & CFO at Dayforce00:33:31Yes. We added 146 net new customers during the quarter. David OssipChairman & CEO at Dayforce00:33:36Which I thought was actually very great. So we go in really with a strong Dayforce recurring. I mentioned a bit earlier, the annual recurring revenue of cloud went up by 17.9%. So it just flows throughout the system. Raimo LenschowAnalyst at Barclays Capital00:33:54Okay, perfect. And then Jeremy, one for you. I saw the EBITDA raise, so well done on that one. But you didn't raise the cash flow number, which is where a lot of investors will focus on. Can you talk a little bit about the puts and takes getting EBITDA higher, but not the cash flow? Raimo LenschowAnalyst at Barclays Capital00:34:11Talk to that maybe a little bit. Thank you. Jeremy JohnsonExecutive VP & CFO at Dayforce00:34:14Yes. It's a great call, Raimo. We are raising the adjusted EBITDA guidance by 100 basis points from our previous guide of 31 to 32. That represents three fifty basis points of expansion. But if you actually exclude the float headwind, it's five sixty basis points of expansion year over year. Jeremy JohnsonExecutive VP & CFO at Dayforce00:34:35We're doing that through cost control and efficiency. If you think about last year, we invested heavily in sales and marketing, and we're reaping the benefits of the productivity from those investments. In 2025, we're leaning into greater automation. We're leaning into AI driven optimizations across the organization. And we're optimizing our cost base by streamlining our organizational structure and leveraging lower cost jurisdictions. Jeremy JohnsonExecutive VP & CFO at Dayforce00:35:02This is our first year that we're kind of really providing a full free cash flow guidance at the beginning of the year here. And I have optimism in this number, but I wanted just kind of hold it at where we're at for now. Raimo LenschowAnalyst at Barclays Capital00:35:18Okay, perfect. Thank you. Operator00:35:22Thank you. The next question is coming from Mark Marcon of Baird. Please go ahead. Mark MarconSenior Research Analyst at Baird00:35:28Hey, good morning and thanks for taking my questions. David, at the very beginning, you mentioned that January was very strong. You also mentioned that sales cycles were going back to historic levels. I assume you mean that they aren't lengthening. And how unusual is it to have a really strong January? Mark MarconSenior Research Analyst at Baird00:35:54Typically, a lot of sales come in towards the end of the quarter. So wondering what that bodes and how much of that was basically an after effect of the really successful meetings that you had in Vegas? David OssipChairman & CEO at Dayforce00:36:09That's actually quite good insight over there, Mark. We saw an acceleration of sales following our Discover event. They just are numerous examples of where we had organizations come to the actual event and within, I would say, four to eight weeks following the event, we were able to complete the actual contracts. I think the way that the organization showed and the product showed at Discover this year was just spectacular. So we're very pleased with it. David OssipChairman & CEO at Dayforce00:36:44Generally, if we have a very strong Q4, you typically would go into Q1 with a bit of a headwind because it's tough to reach people in January following the December kind of craziness that you normally have. So if you see strong sales performance in January following an exceptional December, it is something that I did want to call out. It gives us a lot of confidence on the sales momentum, Sonny. Mark MarconSenior Research Analyst at Baird00:37:18With regards to just the sales cycles being shortened, do you think that's specific to you? Or is that just a general tonal change that's occurred now that we have some clarity with regards to interest rates as well as the election? David OssipChairman & CEO at Dayforce00:37:37I do think there is an impact of the new administration. I think But again, I'm not an economist. What I can talk about is what we're seeing in our business. And in our business, we are seeing buyers making purchasing decisions quicker than they did last year. Mark MarconSenior Research Analyst at Baird00:38:01Great. And then can you talk a little bit just on the line of elections? We're not the only country that's having elections. Obviously, Canada is going to schedule some elections coming up. Is there any impact with regards to the Canadian contract that's coming through either from the elections or from any sort of change with regards to procurement processes in Canada? Mark MarconSenior Research Analyst at Baird00:38:28And do you have any early thoughts just with regards to given that you've got operations in Canada as well as The U. S. And joint headquarters, how do you think about any sort of potential tariff impact? Steve HoldridgePresident & COO at Dayforce00:38:43Hey, Mark. This is Steve Holdridge. Let me take the first part of that and then David may want to talk about the broader Canada environment. In terms of the government of Canada, no, the short answer is we don't expect any impact. We're continuing to work towards our deadlines with the most recent order in contract targeting April 2025. Steve HoldridgePresident & COO at Dayforce00:39:01We're on track to achieve those milestones. We don't see we don't expect anything from the announced changes at the Prime Minister level. We continue to have support. I mean, frankly, we've been at this for four years and leaders at all levels of government want to make sure people are paid properly and the payroll choice does not get politicized. So, we continue to be confident in business as usual. David OssipChairman & CEO at Dayforce00:39:25Regarding the impact of potential tariffs between The U. S. And Canada, it's difficult to project that. I suppose the biggest impact would be on the FX rate between The U. S. David OssipChairman & CEO at Dayforce00:39:39And Canada. So we do have a there would be a revenue impact in terms of U. S. Dollars reporting. We are hedged probably about 70% on the cost side against that. David OssipChairman & CEO at Dayforce00:39:57So from a adjusted EBITDA percentage, I don't think there would be any impact. Mark MarconSenior Research Analyst at Baird00:40:03Great. And then just one last one. A number of really nice wins here. Can you talk a little bit about who you ended up capturing these folks from? David OssipChairman & CEO at Dayforce00:40:15Yes. As I mentioned last time and for those of you who attended Discover, we typically nowadays compete mostly against the ERPs. And we seem to be taking away shares from the competitor that we would have competed against most historically. I would say that if I look at Q4, the majority of the wins were takeaways from them always competing against one of the ERPs. Mark MarconSenior Research Analyst at Baird00:40:52Congratulations on a terrific sales quarter. Thank you. Operator00:40:57Thank you. The next question is coming from Samad Samana of Jefferies. Please go ahead. Samad SamanaManaging Director at Jefferies Financial Group00:41:04Hey, good morning. Thanks for taking my questions. I appreciate it as always. Maybe first, just on the first quarter, I didn't Jeremy, I didn't see a 1Q Dayforce recurring ex float guide. I may have just missed it. Samad SamanaManaging Director at Jefferies Financial Group00:41:19I apologize if I did. But is this a change in guidance philosophy? Should we only expect an annual outlook going forward? And I guess any comments on the cadence of Dayforce recurring ex float growth as we think about the year? Jeremy JohnsonExecutive VP & CFO at Dayforce00:41:33Hey, Samad. Good to speak with you. Yes, look, we're giving Dayforce recurring revenue ex flow guidance for the full year along with the addition of that free cash flow guidance for the full year. As we've grown larger over the years and also established our very strong focus on free cash flow generation, it made sense internally to focus on total top line adjusted EBITDA and free cash flow margin in dollars. And it's really how we're running the business internally and how we measure our own success. Jeremy JohnsonExecutive VP & CFO at Dayforce00:42:03So we felt it appropriate to reflect this in our communications with investors. We'll obviously still report on those numbers and the like, but ultimately, we think this is how we're managing the business and makes a lot of sense to go Jeremy JohnsonExecutive VP & CFO at Dayforce00:42:20forward here. Samad SamanaManaging Director at Jefferies Financial Group00:42:21Understood. It makes a lot of sense. And then, David, you gave some commentary on the midterm growth expectations beyond 2025. And obviously, this is coming off of the heels of the Analyst Day where you gave specific long term targets. I guess maybe just as we think about how Dayforce recurring XPLOD is expected for 2025, Any comments maybe on what you're thinking there for the midterm targets or what you've assumed? Samad SamanaManaging Director at Jefferies Financial Group00:42:51I just wanted to make sure I have clarity on what we should expect to remain at these levels going forward and how the view on Dayforce recurring is? David OssipChairman & CEO at Dayforce00:43:01Yes. As I mentioned in the call, we expect them to hold. If I look at the total revenue ex float basis, I would expect we should be able to sustain about a 15% growth rate into the midterm as we move towards that 20% plus free cash flow. On Dayforce recurring, remember that the business today is almost all cloud. If I look at the total other recurring business, you really are looking at about $43,000,000 somewhere around there for the full year. David OssipChairman & CEO at Dayforce00:43:38So kind of as we kind of enter life those types of platforms and do the migrations to Dayforce, you'll see that line decline by about 40% year over year in constant currency. And we believe it's time to simplify how we report to the actual market. And the goal over here would be to have the total revenue growing around that 15% at the same time that we get above 20% on a free cash flow basis. We're quite confident that we can do that and that allows us really to keep that focus on driving profitability as we reach this level of scale. Samad SamanaManaging Director at Jefferies Financial Group00:44:16Great. And then maybe just one last one for me. I know the sales organization is doing well. Clearly, you gave us some comments around sales activity, but in the fourth quarter and the first month of the year. How should we think about how the coverage that four:one that you mentioned, how does that compare to this time entering 2024, so this time last year? Samad SamanaManaging Director at Jefferies Financial Group00:44:40And should we think about that holding fairly constant Samad SamanaManaging Director at Jefferies Financial Group00:44:44at current levels? David OssipChairman & CEO at Dayforce00:44:46We try and model the business at about a four times sales coverage level. It ties to the investments that we actually put in marketing, pipeline development, early sales types of activities, the summits and etcetera. If your number is too high, your sales cost would go up. And again, as we're trying to improve the actual profitability, one of the fact one of the constraining factors is the sales and marketing expense. David OssipChairman & CEO at Dayforce00:45:19If you look at the actual numbers, you can see that from a sales and marketing productivity level, we're driving more efficiencies or higher sales productivity. If you look at the guide for the year, we've got into around 16% versus about 17% last year. And that really drives the size of your pipeline and the expected conversion. The sales productivity numbers that we're seeing now, I would say, are very close to best in class for enterprise software. So we're very happy from the productivity of the actual sales force. Samad SamanaManaging Director at Jefferies Financial Group00:45:57Great. Thank you, everybody. Operator00:46:00Thank you. The next question is coming from Scott Berg of Needham and Company. Please go ahead. Scott BergManaging Director at Needham & Company00:46:07Hi, everyone. Congrats for me on the strong sales quarter as well. I guess two things. David, wanted to start with your newly announced Digforce AI, each and strategy that you talked about at the conference. Wanted to see how customers responded to that. Scott BergManaging Director at Needham & Company00:46:23I know it's early, probably just enabling the sales force and everything with that effectively. But agents are kind of the craze in our software space this year. I just want to see how you guys might be benefiting from that. David OssipChairman & CEO at Dayforce00:46:35So Scott, we've as I think mentioned in my core script, we saw about 60 unit sales of our co pilot after we announced it at Discover, so basically in November, December. So we're seeing a nice uptake of our AI products in market. And I do believe it does differentiate us relative to others because we're not talking about future capability. We're talking about already generally available functionality that's inside the actual product. It's becoming front and central in the way that we actually position the product. David OssipChairman & CEO at Dayforce00:47:19In terms of agents, we've had some agents in market for that time, typically around initiation of workflows like time away from work and the others. So I think you'll see that continue. Joe, I'm not sure if you're on the call, but if you'd like to add a bit more color about some of the enhancements we're doing around the agents. Joe KorngiebelEVP & Chief Strategy, Product, and Technology Officer at Dayforce00:47:41Yes. No, thank you for the question and appreciate the insight. For us, really the next portion of how we can help customers realize value with Dayforce is with the promise of AI, but we're realizing that promise. Like David said, the 60 new sales just came in a month and a half and customers are seeing that value and the differentiation of delivered AI innovation. The agents that we deliver in the year ahead will go across our entire suite from HR through our talent modules, even down to analytics where reports a report writer will automatically build you the reports you need in an instant, just saving your company time and energy. Joe KorngiebelEVP & Chief Strategy, Product, and Technology Officer at Dayforce00:48:18So look for more innovation as we move ahead. It's a big, big differentiator for us as we hit 20.5 at speed. Jeremy JohnsonExecutive VP & CFO at Dayforce00:48:27Understood. Helpful. And then David, on your commentary around partner excuse me, your strong sales pipelines going into this year, you've been pushing on the partner ecosystem over the last maybe twelve to twenty four months and spend it at the company. How positively your partners kind of impacting your view on the improved sales environment? And then as we think about your PS margins going forward, I know obviously some of that's being pushed to partners. Jeremy JohnsonExecutive VP & CFO at Dayforce00:48:52That breakeven viewpoint, is that like for the full year in terms of your guidance or do you just break over that kind of get to that breakeven line at 1.1 quarter during the year? Thanks. David OssipChairman & CEO at Dayforce00:49:04Yes. So, first of all, thanks for noticing that. Yes, the improvement in the professional services and other, which we expect to be about breakeven this year, is largely the result of the investments we've made with the system integrators and the success that we're seeing in them actually priming the implementation. So we're very excited about It's the metric that we look at internally to determine if we're seeing success across the SI channels. Obviously, with that, you would expect that to be partially behind what we're seeing in terms of pipeline development, conversion of actual sales as they help influence the actual deals. David OssipChairman & CEO at Dayforce00:49:48So it's going quite nicely. Operator00:50:00Thank you. We'll move on to the next question. The next question is coming from Steve Enders of Citi. Please go ahead. Steve EndersAnalyst at Citigroup00:50:07Okay, great. Thanks for taking the questions this morning. I guess maybe just to start, I wanted to talk about some of the assumptions that maybe you're making for '25 from a high macro level in terms of like employment cadence and maybe some rate cut assumptions and kind of what's being accounted for in there? And I guess secondarily, if there's maybe any accounted for based on some of those factors you called out that impacted the 4Q Dave Warsh performance? Jeremy JohnsonExecutive VP & CFO at Dayforce00:50:43Yes. Thanks, Steve. It's good to speak with you. Yes, we can go into a couple of those assumptions. I think specifically on the rate cuts, we assume bank consensus to kind of inform our forecast there. Jeremy JohnsonExecutive VP & CFO at Dayforce00:50:56So Canada just cut rates by 25 basis points at the January and U. S. Held flat. So with those cuts kind of built in, you would expect or we would expect about one rate cut in The U. S. Jeremy JohnsonExecutive VP & CFO at Dayforce00:51:08In the middle of the year at about 25 basis points. And we'd also expect Canada rate cuts are to continue at about 25 basis points each meeting until October, so about five more cuts this year. With all of that, you think we think we'll kind of net out to a yield of about 3.6% on average balances growing in the low to mid single digits this year on the float side of things. As far as the other assumptions on employment levels, we'd expect that to kind of be in the very low single digits from a growth rate perspective and certainly are using what we learned in Q4 to inform our forecast and guidance in 2025. Steve EndersAnalyst at Citigroup00:51:55Okay, perfect. No, I appreciate the commentary there. Steve EndersAnalyst at Citigroup00:52:00And then I just Steve EndersAnalyst at Citigroup00:52:01want to ask on the pro services performance and that outpacing the growth for the Dayforce recurring growth this year. Can you just maybe help us think through some of the factors impacting that? Like is that a reflection of some of the managed services capabilities that were highlighted at the Analyst Day that kind of pulling through more? Yes, kind of like what factors should we be thinking about in there and kind of what continues moving forward? Jeremy JohnsonExecutive VP & CFO at Dayforce00:52:30Yes. I think first and foremost is we had a really strong sales Q4 to cap off a really strong sales year in 2024. And we haven't I think with that, you see strong sales comes with implementation and services work. And that's kind of the tip of the spear there, if you will. We've also got some of the larger projects that we're working through and large customers that we'll continue to do work for. Jeremy JohnsonExecutive VP & CFO at Dayforce00:52:55And then if you think about the productivity, I think it's really a few primary drivers. It's, as David mentioned, the systems integrated relationships that Jeremy JohnsonExecutive VP & CFO at Dayforce00:53:02we've Jeremy JohnsonExecutive VP & CFO at Dayforce00:53:03matured. We're doing also a greater proportion of value added services alongside those systems integrators. And we're driving efficiency into our implementation process. We talked about this at the November Investor Day, but a few years ago, we began building out these SI relationships, and we're really pleased with how these have come together and how we're driving that efficiency across that implementation process. Steve EndersAnalyst at Citigroup00:53:28Okay, great. Thanks for taking the questions. Operator00:53:32Thank you. The next question is coming from Kevin MacVay of UBS. Please go ahead. Kevin McVeighManaging Director at UBS Group00:53:38Great. Thank you. Hey, I think you talked about the wallet basically $30,000,000 in $2,024,000,000 Kevin McVeighManaging Director at UBS Group00:53:45dollars up from $12,000,000 Kevin McVeighManaging Director at UBS Group00:53:46in $2,023,000,000 dollars Is that adoption or increased usage? And any way to think about what that can contribute in 2025? David OssipChairman & CEO at Dayforce00:53:55Yes. In 2024, we released AFT and IFT capabilities to the wallet, and we saw quite good adoption of those types of movements of money. In 2025, we just launched direct to bank. So what direct to bank is if you do an on demand pay, the employee can now select to pass that money to one of their existing debit cards attached to an existing checking or savings account. And we're seeing that actually take off quite nicely as well. David OssipChairman & CEO at Dayforce00:54:33We also, obviously, as you would expect, continue to see increased adoption in terms of more organizations and more employees use the Apple Wallet as well. So we would expect the momentum on the wallet to continue this year. Kevin McVeighManaging Director at UBS Group00:54:51Great. And then at this point, are the SIs driving any sales volume to date or is that still something that probably starts in 'twenty five? David OssipChairman & CEO at Dayforce00:55:03Yes, we are. As I think I answered, I think, well, Scott who asked the question, we're seeing nice traction with the system integrators, obviously strengthened year over year. And you can see that reflected in the professional services and other margin, which as we move the implementations more to the SIs, the professional services and other margin now moves towards breakeven. Jeremy JohnsonExecutive VP & CFO at Dayforce00:55:30But we're also seeing increased amplification of the brand and increased pipeline with not only the SIs, but with our community advisory partners and our technology partners. Kevin McVeighManaging Director at UBS Group00:55:41Great. Thank you. Operator00:55:46Thank you. The next question is coming from Alex Zukin of Wolfe Research. Please go ahead. Alex ZukinAnalyst at Wolfe Research LLC00:55:52Hey, guys. Thanks for taking the question. Maybe just the Canadian government deal, can you guys remind us how that's going to play into the fiscal twenty twenty five guide given kind of the slightly longer ramp time? And Jeremy, maybe just I know we're not guiding today for us recurring, but maybe help just from a modeling standpoint, how we should think about that flowing through the year maybe relative to last year? Jeremy JohnsonExecutive VP & CFO at Dayforce00:56:17Yes. Alex, good to speak with you. Look, on the Canadian government deal, I think as Steve kind of spoke to a little bit is we're continuing to work towards those deadlines that we talked about in the most recent timelines, which is targeting April 2025. We're on track to achieve those milestones and that's more on the kind of recurring side of things. On the professional services, we have been seeing work and we've been doing work and we continue to do work with the government of Canada. Jeremy JohnsonExecutive VP & CFO at Dayforce00:56:49On the recurring side of things, I think you'll see kind of a continuous cadence there or consistent cadence with how things have looked in the past and stopping short of giving kind of full guidance. I think that 15% to 17% constant currency number for the full year is a good guide and we should kind of remain in those balance for the quarterly basis as well. Alex ZukinAnalyst at Wolfe Research LLC00:57:15Got it. And then David, maybe just I'll re ask one of the earlier questions, but I think when you were when you had spoken last time on the earnings call, you kind of talked about a just watching out for lengthening sales cycles as you go upmarket as those deals take more time to actually execute on. But it seems like something changed in that visibility given the December and January. So I'm just curious, is it the demand environment? Is it something you figured out on the execution? Alex ZukinAnalyst at Wolfe Research LLC00:57:49Is it tailwinds from AI? Like what changed in your from your perspective from ninety days ago to now with respect to that visibility? David OssipChairman & CEO at Dayforce00:58:03I think that the impact of Discover, our client conference, did have an impact in terms of purchasing cycles. So I think the work that the product and technology team has done in really differentiating very clearly Dave Halls relative to the others had impact. As Steve mentioned, I think the branding work that we invested in last year is also getting us more mind sharing. It's making it easier for us to get the final approvals in the very large types of deals. Third, I do think that the sales team really is performing very well and I'm very proud of the way that they go to market and the way that they tell the story and the way that they show the product. David OssipChairman & CEO at Dayforce00:58:54As well, I think that as an organization, Dayforce and our day makers, the way that we interact and partner with our customers is reflected. You can see that as well in the retention rate that is now 98% on Dayforce, which has got to be best in market. And then lastly, as I mentioned, I do think on the macro side that there's much more optimism across business leaders about the economy and that is helping with purchasing cycles as well. Operator00:59:29Thank you. Our final question today is coming from Brad Reback of Stifel. Please go ahead. Brad RebackManaging Director at Stifel Financial00:59:36Great. Thanks very much. Maybe two quick ones. Did you all mention what the percent of new sales back to the base was? Jeremy JohnsonExecutive VP & CFO at Dayforce00:59:45We haven't yet, but it was above 40%. Forty two % was the number this past year, and we're really pleased with that. David OssipChairman & CEO at Dayforce00:59:53And we also saw the same number actually, 42% of full suite deals as well. That's right. Jeremy JohnsonExecutive VP & CFO at Dayforce00:59:59Yes. Brad RebackManaging Director at Stifel Financial01:00:00Great. And then, Jeremy, given some of the unusual puts and takes in 4Q things that snuck up on you a bit, have you taken a different guidance philosophy, maybe increased conservatism at all as it relates to 1Q in all of '25? Thanks. Jeremy JohnsonExecutive VP & CFO at Dayforce01:00:19Yes. Look, I think we've ultimately taken what we learned in Q4 and used that to inform our guidance for the future. I think we still kind of give tight ranges, but you can ultimately see that we're kind of giving these constant currency growth ranges and then setting down the FX rate that we're using and then trying to be really clear about the float assumptions there. And you think about the total revenue growing 14% to 15% to ex float on a constant currency basis and Dayforce recurring revenue at 15% to 17%, and we're really pleased with those numbers and our ability to do that and while we're also expanding margins on net adjusted EBITDA and free cash flow. Brad RebackManaging Director at Stifel Financial01:01:06That's great. Thank you very much. Operator01:01:09Thank you. This brings us to the end of the question and answer session. I would like to turn the floor back over to Mr. Asim for closing comments. David OssipChairman & CEO at Dayforce01:01:17Great, Joe. Thanks, everyone, for joining us. Sorry for those of you that we didn't get to ask for questions today, but we'll have the one on one follow in. Just a few pieces I'd like to end with. One, again, reiterating the sales momentum we saw in Q4 that continued into January and our confidence in sales for Q1 and for the year. David OssipChairman & CEO at Dayforce01:01:38The second is I want to reiterate that we're holding the revenue guide for the year while increasing the adjusted EBITDA by 100 basis points and that we are seeing that meaningful improvement in profitability across all aspects. And lastly, we are positioning Dayforce in the midterm for sustained growth around the current levels while moving towards that 20% plus free cash flow. Again, thank you, everyone, for joining us today. Operator01:02:07Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the web cast at this time and enjoy the rest of your day.Read moreParticipantsExecutivesDavid NiedermanVP - Investor RelationsDavid OssipChairman & CEOJeremy JohnsonExecutive VP & CFOSteve HoldridgePresident & COOJoe KorngiebelEVP & Chief Strategy, Product, and Technology OfficerAnalystsSiti PanigrahiEquity Research Analyst at Mizuho Financial GroupMark MurphyManaging Director at JP MorganRaimo LenschowAnalyst at Barclays CapitalMark MarconSenior Research Analyst at BairdSamad SamanaManaging Director at Jefferies Financial GroupScott BergManaging Director at Needham & CompanySteve EndersAnalyst at CitigroupKevin McVeighManaging Director at UBS GroupAlex ZukinAnalyst at Wolfe Research LLCBrad RebackManaging Director at Stifel FinancialPowered by Conference Call Audio Live Call not available Earnings Conference CallDayforce Q4 202400:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsPress Release(8-K)Annual report(10-K) Dayforce Earnings Headlines3 Stocks Estimated To Be Trading Below Their Intrinsic Value In April 2025May 1 at 12:45 AM | uk.finance.yahoo.comWhat You Need to Know Ahead of Dayforce's Earnings ReleaseApril 25, 2025 | msn.comBuffett’s favorite chart just hit 209% – here’s what that means for goldA Historic Gold Announcement Is About to Rock Wall Street For months, sharp-eyed analysts have watched the quiet buildup behind the scenes. Now, in just days, the floodgates are set to open. The greatest investor of all time is about to validate what Garrett Goggin has been saying for months: Gold is entering a once-in-a-generation mania. Front-running Buffett has never been more urgent — and four tiny miners could be your ticket to 100X gains.May 2, 2025 | Golden Portfolio (Ad)KeyCorp Has Lowered Expectations for Dayforce (NYSE:DAY) Stock PriceApril 25, 2025 | americanbankingnews.comEarth Day 2025 marks record number of US companies going greenApril 23, 2025 | msn.comThe Analyst Verdict: Dayforce In The Eyes Of 9 ExpertsApril 23, 2025 | nasdaq.comSee More Dayforce Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Dayforce? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Dayforce and other key companies, straight to your email. Email Address About DayforceDayforce (NYSE:DAY)., together with its subsidiaries, operates as a human capital management (HCM) software company in the United States, Canada, and internationally. It offers Dayforce, a cloud HCM platform that provides human resources, payroll and tax, workforce management, wallet, benefits, and talent intelligence functionalities; and Powerpay, a cloud HR and payroll solution for the small business market. The company also provides payroll and payroll-related services; and implementation and professional services. It sells its solutions through direct sales force and third-party channels. The company was formerly known as Ceridian HCM Holding Inc. and changed its name to Dayforce Inc. in February 2024. 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PresentationSkip to Participants Operator00:00:00Greetings and welcome to Dayforce's Fourth Quarter and Full Year twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Vetterman, VP of Investor Relations. Operator00:00:27Thank you. You may begin. David NiedermanVP - Investor Relations at Dayforce00:00:30Thank you for joining, and welcome to the Dayforce fourth quarter twenty twenty four earnings call. I'm David Nederman, Vice President, Investor Relations. As a reminder, all participants are in a listen only mode and a question and answer session will follow our opening remarks. Joining me on the call today are CEO, David Ossip and CFO, Jeremy Johnson. We also have Chief Strategy Product and Technology Officer, Joe Korngable and our President and COO, Steve Holdridge, available for Q and A. David NiedermanVP - Investor Relations at Dayforce00:01:00Before I hand the call over to David, I want to remind everyone that our commentary may include forward looking statements. These statements are subject to risks and uncertainties that could cause Dayforce's results to differ materially from historical experience or present expectations. A description of some of these risks and uncertainties can be found in the reports we file with the Securities and Exchange Commission, such as the cautionary statements in our filings. Additionally, over the course of this call, we'll reference non GAAP measures to describe our performance. Please review our earnings press release and filings with the SEC for our rationale behind the use of non GAAP measures and for a full reconciliation of these GAAP to non GAAP metrics. David NiedermanVP - Investor Relations at Dayforce00:01:42These documents, in addition to a replay of this call and also a transcript, will be available on the Dayforce Investor Relations website. And with that, I'd like to turn the call over to David. David OssipChairman & CEO at Dayforce00:01:54Thanks, David, and thank you all for joining us. I'll begin with some high level commentary on our results and outlook before handing the call over to Jeremy, who'll provide more detail on our financials and guidance. We had a strong year with Q4 sales exceeding expectations and coming in above plan. Sales cycles returned to historical levels and January proved to be a strong start to 2025. Looking ahead, we expect sales growth to outpace revenue growth throughout the year. David OssipChairman & CEO at Dayforce00:02:35Our pipeline coverage gives us confidence starting the year with approximately four times coverage of pipeline compared to our sales target. We had excellent performance in 2024. Total revenue was $1,760,000,000 growing 17% on a constant currency basis. Dayforce recurring revenue excluding float grew 21% on a constant currency basis. Adjusted EBITDA margin was 28.5% expanding 140 basis points, and free cash flow was $172,000,000 or 9.7% of revenue, expanding two eighty basis points. David OssipChairman & CEO at Dayforce00:03:20As guided during our Investor Day, we expect total revenue growth in 2025 of 14% to 15%, excluding flows and on a constant currency basis. Our guidance reflects our decision to focus on higher margin areas of our business, while phasing out legacy segments. Dayforce recurring revenue, excluding float, is expected to grow 15% to 17% on a constant currency basis during 2025. In terms of our mid term operating model, we are confident in our ability to exceed the 20% free cash flow margin. Last year, we expanded free cash flow margins by two eighty basis points to 9.7%. David OssipChairman & CEO at Dayforce00:04:09In 2025, we anticipate this increasing by another two thirty basis points to 12% and for this upward trend to continue over the midterm. On an adjusted EBITDA basis, we are raising our Investor Day guidance by 100 basis points, increasing adjusted EBITDA margin guidance to 32% from 31%. Beyond 2025, over the midterm, we expect adjusted EBITDA to expand by 100 to 150 basis points per year. In the coming years, we anticipate that the total revenue growth will remain close to 15%, while profitability improvements, both free cash flow and adjusted EBITDA, will continue to outpace revenue growth. From a sales perspective, our CRO, Sam, has executed exceptionally well. David OssipChairman & CEO at Dayforce00:05:10In the last quarter, we secured several key new business wins, including a 60,000 employee grocery chain, an 18,000 employee space exploration company, and a 66,000 employee member owned retail cooperative, as well as success in expanding deals including a 60,000 employee global manufacturer and distributor of paints and coating and a global air service provider with 48,000 employees across 35 countries. Many of these deals closed within weeks of customers attending our Dayforce Discover event, a testament to the impact of the event and its role in accelerating Q4 sales. On the product side, we continue to lead in innovation and delivery. Our product roadmap is built around compliance, IT simplification, data and experience. On the compliance front, we delivered more than 900 compliance updates and were once again recognized by Gartner as a compliance leader for firms with more than 1,000 employees and for firms with more than 2,500 employees. David OssipChairman & CEO at Dayforce00:06:30Key compliance enhancements included a new workforce insight experience, machine learning driven labor forecasting and direct to bank capabilities for Dayforce Wallet. Speaking of wallet, it had a tremendous 2024 with revenue increasing from $12,000,000 to over $30,000,000 dollars We expect wallet to continue gaining momentum in 2025. Our IT simplification efforts align with our twelve:one strategy, which consolidates multiple HR Our leadership Our leadership in this area was reinforced by our recognition as a leader for the fifth consecutive year in Gartner's Magic Quadrant for cloud HCM solutions for enterprises with more than 1,000 employees. Rentaling our twelve:one value proposition, we launched a new talent acquisition experience and re platformed Illumi into Dayforce, creating a best in class learning experience with strong analytics, content creation tools and a content store featuring over 90,000 training modules. We expect learning management and content to drive significant client base sales in 2025. David OssipChairman & CEO at Dayforce00:08:04On the data and experience side, we are already seeing strong adoption of our Dayforce integration studio and CoPilot products, both of which we demonstrated at Discover. Since launching in November, we have sold more than 60 CoPilot units. CoPilot integrates with our experience hub, allowing CHROs and their teams to create engaging and immersive experience for frontline workers, managers and executives. Content within the hub is indexed using AI, enabling users to ask questions and receive contextual responses with relevant reference links. Additionally, Copilot facilitates workflow automation, such as requesting time off. David OssipChairman & CEO at Dayforce00:08:55Innovation in this area will continue in 2025 with planned releases of AI agents and other new capabilities. At the core of Dayforce is our commitment to product innovation. This is what differentiates us in the market and drives our strong win rate, high customer retention, significant add on sales and industry recognition. Turning to customers and go live, Q4 was impressive. We saw 146 net new customers go live, including a global aviation service provider with over 55,000 employees across 36 countries, a 23,000 employee American entertainment company rolling out Full Sweet Talent, a 10,500 employee UK contract catering and support service provider. David OssipChairman & CEO at Dayforce00:09:52We now have 6,876 live customers and 7,600,000 live active users on Dayforce. Both up approximately 10% year over year. Additionally, Dayforce recurring revenue per customer increased by 11% and our gross retention rate improved from an already strong 97.1% to 98%. From a profitability standpoint, our improvement in adjusted EBITDA and free cash flow was largely driven by improvements in recurring gross margin. Adjusted cloud recurring gross margins were 79.8%, expanding 150 basis points resulting from efficiency gains in our support and managed services organizations, greater automation, AI driven optimizations and a higher proportion of add on sales. David OssipChairman & CEO at Dayforce00:10:48In 2025, we will continue optimizing our cost basis by improving sales productivity, streamlining our organizational structure and leveraging lower cost jurisdictions, automation and AI. Professional services and other revenue, historically a negative margin business is expected to break even in 2025. This milestone reflects the investments we have made in automation and partnerships with system integrators. Before handing the call over to Jeremy, I want to emphasize four key themes. First, our strength lies in our ability to innovate and deliver exceptional products. David OssipChairman & CEO at Dayforce00:11:34Second, we saw robust sales performance in Q4 and are confident this momentum will continue into Q1 and throughout 2025. Third, we have made meaningful improvements across all profitability metrics and we expect these trends to continue in the coming years. Finally, we are positioning Dayforce for sustained revenue growth at levels similar to 2025, while driving towards a 20% plus free cash flow margin. I'll now pass the call to Jeremy to discuss our financial results in more detail. Jeremy, over to you. Jeremy JohnsonExecutive VP & CFO at Dayforce00:12:20Thanks, David. We are pleased with the fourth quarter results. Top line revenue growth remains strong, while we scaled the business and continued to expand cash flow margins. In the fourth quarter, total revenue was $465,200,000 up 16.4 on a GAAP basis and 17% on a constant currency basis. Excluding float, total revenue increased 17% on a GAAP basis and 17.6% on a constant currency basis. Jeremy JohnsonExecutive VP & CFO at Dayforce00:12:51And Dayforce recurring revenue, excluding float, was $307,600,000 up 20% on a GAAP basis and 20.4% on a constant currency basis, underpinned by strong go lives. Powerpay recurring revenue, excluding float, was $23,100,000 flat on a GAAP basis, but up 2.6% on a constant currency basis. And professional services and other revenue was $71,500,000 up 18% on a GAAP basis and 18.8% on a constant currency basis. Gross profit was $218,600,000 up 28.7% operating profit was 28,500,000 cloud recurring gross margin was 80%, expanding 300 basis points and on a non GAAP basis, adjusted cloud recurring gross margin was 80.4%, expanding two thirty basis points and adjusted EBITDA was $129,200,000 up 30.2% or a 27.8% margin, expanding 300 basis points. Turning to our full year results. Jeremy JohnsonExecutive VP & CFO at Dayforce00:13:59Total revenue was $1,760,000,000 up 16.3% on a GAAP basis and 16.7% on a constant currency basis. Excluding float, total revenue increased 16% on a GAAP basis and 16.3% on a constant currency basis. Dayforce recurring revenue excluding float was $1,160,000,000 up 20.4% on a GAAP basis and 20.7% on a constant currency basis. Powerpay recurring revenue excluding float was $83,700,000 up 2.2% on a GAAP basis and 3.8% on a constant currency basis and professional services and other revenue was $242,700,000 up 12.2% on a GAAP basis and 12.5% on a constant currency basis. Gross profit was $812,000,000 up 25.6%. Jeremy JohnsonExecutive VP & CFO at Dayforce00:14:58Operating profit was $104,100,000 including $84,000,000 of amortization expense related to the retired Ceridian trade name cloud recurring gross margin was 78.9% expanding 190 basis points. And on a non GAAP basis, adjusted cloud recurring gross margin was 79.8%, expanding 150 basis points. Adjusted EBITDA was $501,500,000 up 22.3% or a 28.5% margin, expanding 140 basis points and reflecting our continued improvement in gross profit margins and scale and adjusted G and A. From a cash flow perspective, full year operating cash flow was $281,100,000 up 28.1% and free cash flow was $171,500,000 up 63.2%. Free cash flow as a percent of revenue was 9.7% expanding two eighty basis points. Jeremy JohnsonExecutive VP & CFO at Dayforce00:16:05We had a solid year from a financial perspective with strong revenue growth, expanding profitability and increasing cash flow metrics. If I look back at our original 2024 guidance issued in February 2024, we met or surpassed these targets with healthy performance throughout the year. If you recall, our initial guidance for 2024 was for total revenue to grow between 1314% constant currency, and we grew 16.7% Dayforce recurring revenue ex float to grow between 2021% constant currency, and we grew 20.7% and adjusted EBITDA margin between 27.928.6% and our margin was 28.5%. We also introduced free cash flow guidance for the first time this year, saying that we expected free cash flow margin between 9.510% of revenue with conversion from adjusted EBITDA to operating cash to be in the mid to upper 50% range, while CapEx remained relatively flat year over year. And we ended at 9.7% of revenue with 56% conversion from adjusted EBITDA to operating cash flow. Jeremy JohnsonExecutive VP & CFO at Dayforce00:17:26We're pleased with our overall performance and financial results this year. During the fourth quarter, Dayforce recurring revenue, excluding float, grew at 20% on a GAAP basis or 20.4 constant currency. Included in these results was a $2,000,000 FX headwind versus our guidance range. And while we while go lives were solid, employee volumes, tax filing fees and print fees missed our expectations, and we had impacts from customer contract amendments. The contract amendments were isolated to a few customers and represented changes to terms that caused the reallocation of contract consideration, increasing PS and other revenue and reducing recurring revenue. Jeremy JohnsonExecutive VP & CFO at Dayforce00:18:08Specifically, the impact from employee volumes was approximately $1,000,000 the contract amendments were approximately $1,000,000 and the tax filing fees and print fees were each about $500,000 Excluding these items, our Dayforce recurring revenue growth would have been in the middle of our guidance range. We have not changed our previously issued revenue guidance for 2025, which I'll dive into more next. A few other callouts about 2024 before I move on to our guidance. During 2024, Illumi revenue added approximately 190 basis points of growth to our Dayforce recurring revenue ex float and 110 basis points of growth to our total revenue. And during 2024, we executed $36,000,000 of our $500,000,000 share repurchase plan and are pleased that we have the profitability and flexibility to return capital to our shareholders and manage dilution from share based compensation while maintaining investment in the business. Jeremy JohnsonExecutive VP & CFO at Dayforce00:19:11Now turning to guidance. For the full year, we expect total revenue, excluding float, to grow at a constant currency rate of 14% to 15%. At current FX spot rates, we estimate this to be $1,745,000,000 to $1,760,000,000 or 11.9% to 12.8% growth on a GAAP basis Dayforce recurring revenue, excluding float, to grow between 1517% constant currency. At current FX spot rates, we estimate this to be $1,315,000,000 to $1,340,000,000 or about 13.4% to 15.5% on a GAAP basis float revenue of $180,000,000 representing an effective yield of 3.6% and balanced growth in the mid to low single digits adjusted EBITDA margin of 32% of revenue, free cash flow margin of 12% of revenue. And in 2025, we now expect PS and other revenue to grow slightly faster than Dayforce recurring revenue, excluding float, during 2025 as we continue to implement projects from the strong demand we saw in 2024 and as we continue to work on some larger projects, including the Government of Canada. Jeremy JohnsonExecutive VP & CFO at Dayforce00:20:27For the first quarter, we expect total revenue, excluding float, to grow 15% to 17% on a constant currency basis. At current FX spot rates, we estimate this to be $421,000,000 to $427,000,000 or growth of approximately 13.5% to 15% quote revenue of $53,000,000 representing an effective yield of 3.7% and balanced growth of mid single digits and adjusted EBITDA margin of 31% to 32% of revenue. With regard to FX rates in 2025, we expect our revenue to be approximately 70% U. S. Dollar based, 21% Canadian dollar based, 4% to 5% Australian dollar based and 3% to 4% British pound based, with the rest spread across multiple currencies. Jeremy JohnsonExecutive VP & CFO at Dayforce00:21:17With the U. S. Dollar strengthening against each of these currencies and with the proportion of our UK and Australia based revenue increasing, we will begin providing FX rates assumed in guidance for each of these currencies compared to the dollar. For our current guidance, the U. S. Jeremy JohnsonExecutive VP & CFO at Dayforce00:21:32Dollar to the Canadian foreign exchange rate used is 1.44, the U. S. Dollar to British pound foreign exchange rate is 0.81 and the U. S. Dollar to Australian dollar foreign exchange rate is 1.61. Jeremy JohnsonExecutive VP & CFO at Dayforce00:21:50Specifically, current foreign exchange rates are driving about 200 basis points of headwind to our full year 2025 revenue growth ranges. A few other things to call out before we close out the call. On share repurchases, we still anticipate continuing to purchase shares in 2025 with the goal of minimizing dilution to our shares outstanding from stock based compensation. Our current estimate is that we plan to repurchase more than 1,000,000 shares during 2025, effectively doubling our 2024 purchases. Later today, we are launching a repricing deal for our existing $650,000,000 Term Loan B with the goal of reducing the interest rate from our current levels of SOFR plus $250,000,000 to something lower. Jeremy JohnsonExecutive VP & CFO at Dayforce00:22:38And with regard to our $575,000,000 convertible debt, which matures in March of twenty twenty six, we're currently planning to retire this at maturity in 2026 with cash and liquidity on hand. Now with that, we can begin the Q and A portion of our call. Operator00:22:59Thank you. Today's first question is coming from Siti Panagrahi of Susuho Securities. Please go ahead. Siti PanigrahiEquity Research Analyst at Mizuho Financial Group00:23:33Hi. Good morning and thanks for taking my question. Jeremy, for Q4 Dayforce recruiting and Explored, could you elaborate the points that impacted miss? And is it something a surprise? And also is it one time or should we expect that in this year, too? David OssipChairman & CEO at Dayforce00:23:56Sidney, nice to speak with you. Let me start before I hand it over to Jeremy. I'd like to make four points that I think are quite key. First of all, Q4 sales and January sales were both up considerably on a year over year basis. Both were record, growing at over two times the revenue growth of the company. David OssipChairman & CEO at Dayforce00:24:21So we're quite optimistic on sales performance and sales momentum. As you know, generally when we have a very strong Q4, we see a bit of a headwind going into Q1 and we do not expect that this year. Sales is strong. Second, we're holding the revenue guidance for the company. That's the guidance that we gave at Investor Day. David OssipChairman & CEO at Dayforce00:24:46And at the same time, we're increasing the EBITDA guide for the company by 100 basis points. We're seeing meaningful profit strengthening across all aspects, so adjusted EBITDA, gross margins and as well as free cash flow. In fact, if you look at it on an adjusted EBITDA basis, you can see that on an ex flow basis, we're expecting adjusted EBITDA to go up by five sixty basis points inside the year. And finally, we are positioning Dayforce for sustained growth around the current levels, moving towards a 20% free cash flow basis. In regards to Dayforce recurring in Q4, there were three aspects that Jeremy can go into detail on those. David OssipChairman & CEO at Dayforce00:25:36All of them, I would say, are one time items that do not impact the future of the company. Some of them had to do with amendments to contracts. There was some FX inside there as well. And as people obviously are moving to more digitization, there has been some impact on the printing and the shipping types of fees. Jeremy, do you want to give some details to that? Jeremy JohnsonExecutive VP & CFO at Dayforce00:26:01Definitely, yes. So David mentioned the FX, which we can put aside and talk constant currency. And ultimately, there's three drivers to the slightly lower numbers, roughly all equal weighted. First, I'd say it's lower employee volumes than expected. Second, it's print fees and tax filing fees. Jeremy JohnsonExecutive VP & CFO at Dayforce00:26:21And third, these contract amendments that shifted revenue into professional services and other and away from recurring. All of them are small on a dollar basis. On employee volumes, as you probably know, we historically see some seasonal spike in Q4 employee volumes around the holidays, and that seasonality was slightly muted this year compared to the past. And on the print, the tax filing fees, that's revenue that's invoiced as used, and therefore, it's a little bit more difficult to forecast. We saw some lower consumption this quarter, meaning, for example, less printing than historical levels. Jeremy JohnsonExecutive VP & CFO at Dayforce00:26:55And on the contract amendments, it's honestly a typical customer motion that we see frequently as customers grow with us and grow their HCM needs with us. It's a type of flexibility and partially what drives our strong gross retention of 98%. We're constantly working with our customers to ensure they're satisfied. And with large customers, when they add services or products, we're required to reallocate that contract consideration between PS and other and recurring. And this quarter, we saw some more services added, which is a good thing for the business, and the tailwinds in PS and other and the headwind in recurring revenue. Siti PanigrahiEquity Research Analyst at Mizuho Financial Group00:27:33Yes. Thanks for that color. And David, that's impressive. And I think your fourth point on the key themes driving sustainable revenue growth at this level, 25, That's definitely impressive when you compare to your peers who are more in the low double digit. But help us understand what are the factors assumed in that level of confidence to drive this level of growth? David OssipChairman & CEO at Dayforce00:28:01We are seeing a strong sales momentum. Again, if I look towards December, it was a record month. And then we saw the strength continue into January. And as you know, I typically give a bit of a color as to how the current quarter is going. The other number I'll point to, if you look at the cloud ARR growth in 2024, it was up 17.9%. David OssipChairman & CEO at Dayforce00:28:32And remember, our business is very predictable. If I look at day four recurring across the 2024, we were within 30 basis points of the guide that we gave at the start of the very year, which I think is quite remarkable for a business of this scale. Operator00:29:00Thank you. The next question is coming from Mark Murphy of JPMorgan Chase. Please go ahead. Mark MurphyManaging Director at JP Morgan00:29:05Thank you so much. Congratulations on the strong sales performance at year end. That's great to hear. Jeremy, I have two quick questions. First of all, Jeremy, regarding the employee volumes that you said came in slightly below expectations, you mentioned the Q4 holiday spike was muted. Mark MurphyManaging Director at JP Morgan00:29:25Do you attribute that to the timing of the holidays where both Christmas and New Year's were falling midweek on Wednesday? In other words, a temporary blip or do you see some other type of effect that might linger a bit into Q1? Jeremy JohnsonExecutive VP & CFO at Dayforce00:29:40No, I didn't see at that level of detail anything that I would point to that said would linger into Q1. As I said, historically, we do see that Q4 seasonal spike around the holidays. I think that slightly muted, but then also we did have some extreme weather events in the Southeast this year, during Q4. And it's a tough thing for us to forecast and to guide. And historically, we've been pretty accurate. Jeremy JohnsonExecutive VP & CFO at Dayforce00:30:12And I think we still were very accurate. It just was slightly below our expectations, unfortunately. Mark MurphyManaging Director at JP Morgan00:30:22Okay, understood. And then, David, thinking back to the fall, you had mentioned some willingness to consider more transformative M and A. And since then, we've seen Paychex announcing its intent to acquire Paycor. Is it safe to assume that Ceridian would have seen too much overlap with Paycor or isn't as interested in going down market? And therefore perhaps you didn't spend much time considering it? Mark MurphyManaging Director at JP Morgan00:30:55And could you shed any light on just whether that acquisition might affect the landscape or open up any opportunities for you as they try Mark MurphyManaging Director at JP Morgan00:31:04to merge the two organizations? David OssipChairman & CEO at Dayforce00:31:07We don't compete against Paychex and we don't compete against Paycor. It is down market from us. I would expect in the down market side that there should be consolidation because I don't think there's much differentiation in product. Mark, what differentiates Dayforce is our ability to innovate and deliver product. David OssipChairman & CEO at Dayforce00:31:29And you see that across the gains that we're having in terms of competitive wins in market, the strength of the Q4 and the January sales of it. So to answer your question, no, I don't think there'll be any impact to Dayforce. Mark MurphyManaging Director at JP Morgan00:31:46Thank Mark MurphyManaging Director at JP Morgan00:31:48you. Operator00:31:49Thank you. The next question is coming from Raymond Benschow of Barclays. Please go ahead. Raimo LenschowAnalyst at Barclays Capital00:31:55Hey, thank you and congrats from me as well on a great sales quarter. And how do we think about the sales kind of feeding into revenue next year? Obviously, like strong quarter, if I look at the guidance for Dayforce, that was slightly below consensus, it maybe might have missed a little bit by us. But like the contracts that you signed, were they kind of contracted longer go lives, etcetera, is that kind of an impact we should consider? Thank you. David OssipChairman & CEO at Dayforce00:32:23Hey, Ramo. We had strong performance across segments. So we saw large enterprise, which for us is above 12,000 employees perform well. We saw the major market have considerable strength as well and we even saw our emerging business, which goes up to about 1,000 employees, also do very, very nicely. The Australian APJ also performed very well. David OssipChairman & CEO at Dayforce00:32:52So there wasn't really a concentration in any one segment. Given our scale, we typically have, I would say, well over 1,000 ongoing customer implementations. And as you know, when we plan out or model out our revenue, we look at it from a individual go live milestone of each of those specific projects. By the way, the go live number as well in the quarter was very, very strong. The number was, I think, what was it, Jeremy, one hundred and forty something? Jeremy JohnsonExecutive VP & CFO at Dayforce00:33:31Yes. We added 146 net new customers during the quarter. David OssipChairman & CEO at Dayforce00:33:36Which I thought was actually very great. So we go in really with a strong Dayforce recurring. I mentioned a bit earlier, the annual recurring revenue of cloud went up by 17.9%. So it just flows throughout the system. Raimo LenschowAnalyst at Barclays Capital00:33:54Okay, perfect. And then Jeremy, one for you. I saw the EBITDA raise, so well done on that one. But you didn't raise the cash flow number, which is where a lot of investors will focus on. Can you talk a little bit about the puts and takes getting EBITDA higher, but not the cash flow? Raimo LenschowAnalyst at Barclays Capital00:34:11Talk to that maybe a little bit. Thank you. Jeremy JohnsonExecutive VP & CFO at Dayforce00:34:14Yes. It's a great call, Raimo. We are raising the adjusted EBITDA guidance by 100 basis points from our previous guide of 31 to 32. That represents three fifty basis points of expansion. But if you actually exclude the float headwind, it's five sixty basis points of expansion year over year. Jeremy JohnsonExecutive VP & CFO at Dayforce00:34:35We're doing that through cost control and efficiency. If you think about last year, we invested heavily in sales and marketing, and we're reaping the benefits of the productivity from those investments. In 2025, we're leaning into greater automation. We're leaning into AI driven optimizations across the organization. And we're optimizing our cost base by streamlining our organizational structure and leveraging lower cost jurisdictions. Jeremy JohnsonExecutive VP & CFO at Dayforce00:35:02This is our first year that we're kind of really providing a full free cash flow guidance at the beginning of the year here. And I have optimism in this number, but I wanted just kind of hold it at where we're at for now. Raimo LenschowAnalyst at Barclays Capital00:35:18Okay, perfect. Thank you. Operator00:35:22Thank you. The next question is coming from Mark Marcon of Baird. Please go ahead. Mark MarconSenior Research Analyst at Baird00:35:28Hey, good morning and thanks for taking my questions. David, at the very beginning, you mentioned that January was very strong. You also mentioned that sales cycles were going back to historic levels. I assume you mean that they aren't lengthening. And how unusual is it to have a really strong January? Mark MarconSenior Research Analyst at Baird00:35:54Typically, a lot of sales come in towards the end of the quarter. So wondering what that bodes and how much of that was basically an after effect of the really successful meetings that you had in Vegas? David OssipChairman & CEO at Dayforce00:36:09That's actually quite good insight over there, Mark. We saw an acceleration of sales following our Discover event. They just are numerous examples of where we had organizations come to the actual event and within, I would say, four to eight weeks following the event, we were able to complete the actual contracts. I think the way that the organization showed and the product showed at Discover this year was just spectacular. So we're very pleased with it. David OssipChairman & CEO at Dayforce00:36:44Generally, if we have a very strong Q4, you typically would go into Q1 with a bit of a headwind because it's tough to reach people in January following the December kind of craziness that you normally have. So if you see strong sales performance in January following an exceptional December, it is something that I did want to call out. It gives us a lot of confidence on the sales momentum, Sonny. Mark MarconSenior Research Analyst at Baird00:37:18With regards to just the sales cycles being shortened, do you think that's specific to you? Or is that just a general tonal change that's occurred now that we have some clarity with regards to interest rates as well as the election? David OssipChairman & CEO at Dayforce00:37:37I do think there is an impact of the new administration. I think But again, I'm not an economist. What I can talk about is what we're seeing in our business. And in our business, we are seeing buyers making purchasing decisions quicker than they did last year. Mark MarconSenior Research Analyst at Baird00:38:01Great. And then can you talk a little bit just on the line of elections? We're not the only country that's having elections. Obviously, Canada is going to schedule some elections coming up. Is there any impact with regards to the Canadian contract that's coming through either from the elections or from any sort of change with regards to procurement processes in Canada? Mark MarconSenior Research Analyst at Baird00:38:28And do you have any early thoughts just with regards to given that you've got operations in Canada as well as The U. S. And joint headquarters, how do you think about any sort of potential tariff impact? Steve HoldridgePresident & COO at Dayforce00:38:43Hey, Mark. This is Steve Holdridge. Let me take the first part of that and then David may want to talk about the broader Canada environment. In terms of the government of Canada, no, the short answer is we don't expect any impact. We're continuing to work towards our deadlines with the most recent order in contract targeting April 2025. Steve HoldridgePresident & COO at Dayforce00:39:01We're on track to achieve those milestones. We don't see we don't expect anything from the announced changes at the Prime Minister level. We continue to have support. I mean, frankly, we've been at this for four years and leaders at all levels of government want to make sure people are paid properly and the payroll choice does not get politicized. So, we continue to be confident in business as usual. David OssipChairman & CEO at Dayforce00:39:25Regarding the impact of potential tariffs between The U. S. And Canada, it's difficult to project that. I suppose the biggest impact would be on the FX rate between The U. S. David OssipChairman & CEO at Dayforce00:39:39And Canada. So we do have a there would be a revenue impact in terms of U. S. Dollars reporting. We are hedged probably about 70% on the cost side against that. David OssipChairman & CEO at Dayforce00:39:57So from a adjusted EBITDA percentage, I don't think there would be any impact. Mark MarconSenior Research Analyst at Baird00:40:03Great. And then just one last one. A number of really nice wins here. Can you talk a little bit about who you ended up capturing these folks from? David OssipChairman & CEO at Dayforce00:40:15Yes. As I mentioned last time and for those of you who attended Discover, we typically nowadays compete mostly against the ERPs. And we seem to be taking away shares from the competitor that we would have competed against most historically. I would say that if I look at Q4, the majority of the wins were takeaways from them always competing against one of the ERPs. Mark MarconSenior Research Analyst at Baird00:40:52Congratulations on a terrific sales quarter. Thank you. Operator00:40:57Thank you. The next question is coming from Samad Samana of Jefferies. Please go ahead. Samad SamanaManaging Director at Jefferies Financial Group00:41:04Hey, good morning. Thanks for taking my questions. I appreciate it as always. Maybe first, just on the first quarter, I didn't Jeremy, I didn't see a 1Q Dayforce recurring ex float guide. I may have just missed it. Samad SamanaManaging Director at Jefferies Financial Group00:41:19I apologize if I did. But is this a change in guidance philosophy? Should we only expect an annual outlook going forward? And I guess any comments on the cadence of Dayforce recurring ex float growth as we think about the year? Jeremy JohnsonExecutive VP & CFO at Dayforce00:41:33Hey, Samad. Good to speak with you. Yes, look, we're giving Dayforce recurring revenue ex flow guidance for the full year along with the addition of that free cash flow guidance for the full year. As we've grown larger over the years and also established our very strong focus on free cash flow generation, it made sense internally to focus on total top line adjusted EBITDA and free cash flow margin in dollars. And it's really how we're running the business internally and how we measure our own success. Jeremy JohnsonExecutive VP & CFO at Dayforce00:42:03So we felt it appropriate to reflect this in our communications with investors. We'll obviously still report on those numbers and the like, but ultimately, we think this is how we're managing the business and makes a lot of sense to go Jeremy JohnsonExecutive VP & CFO at Dayforce00:42:20forward here. Samad SamanaManaging Director at Jefferies Financial Group00:42:21Understood. It makes a lot of sense. And then, David, you gave some commentary on the midterm growth expectations beyond 2025. And obviously, this is coming off of the heels of the Analyst Day where you gave specific long term targets. I guess maybe just as we think about how Dayforce recurring XPLOD is expected for 2025, Any comments maybe on what you're thinking there for the midterm targets or what you've assumed? Samad SamanaManaging Director at Jefferies Financial Group00:42:51I just wanted to make sure I have clarity on what we should expect to remain at these levels going forward and how the view on Dayforce recurring is? David OssipChairman & CEO at Dayforce00:43:01Yes. As I mentioned in the call, we expect them to hold. If I look at the total revenue ex float basis, I would expect we should be able to sustain about a 15% growth rate into the midterm as we move towards that 20% plus free cash flow. On Dayforce recurring, remember that the business today is almost all cloud. If I look at the total other recurring business, you really are looking at about $43,000,000 somewhere around there for the full year. David OssipChairman & CEO at Dayforce00:43:38So kind of as we kind of enter life those types of platforms and do the migrations to Dayforce, you'll see that line decline by about 40% year over year in constant currency. And we believe it's time to simplify how we report to the actual market. And the goal over here would be to have the total revenue growing around that 15% at the same time that we get above 20% on a free cash flow basis. We're quite confident that we can do that and that allows us really to keep that focus on driving profitability as we reach this level of scale. Samad SamanaManaging Director at Jefferies Financial Group00:44:16Great. And then maybe just one last one for me. I know the sales organization is doing well. Clearly, you gave us some comments around sales activity, but in the fourth quarter and the first month of the year. How should we think about how the coverage that four:one that you mentioned, how does that compare to this time entering 2024, so this time last year? Samad SamanaManaging Director at Jefferies Financial Group00:44:40And should we think about that holding fairly constant Samad SamanaManaging Director at Jefferies Financial Group00:44:44at current levels? David OssipChairman & CEO at Dayforce00:44:46We try and model the business at about a four times sales coverage level. It ties to the investments that we actually put in marketing, pipeline development, early sales types of activities, the summits and etcetera. If your number is too high, your sales cost would go up. And again, as we're trying to improve the actual profitability, one of the fact one of the constraining factors is the sales and marketing expense. David OssipChairman & CEO at Dayforce00:45:19If you look at the actual numbers, you can see that from a sales and marketing productivity level, we're driving more efficiencies or higher sales productivity. If you look at the guide for the year, we've got into around 16% versus about 17% last year. And that really drives the size of your pipeline and the expected conversion. The sales productivity numbers that we're seeing now, I would say, are very close to best in class for enterprise software. So we're very happy from the productivity of the actual sales force. Samad SamanaManaging Director at Jefferies Financial Group00:45:57Great. Thank you, everybody. Operator00:46:00Thank you. The next question is coming from Scott Berg of Needham and Company. Please go ahead. Scott BergManaging Director at Needham & Company00:46:07Hi, everyone. Congrats for me on the strong sales quarter as well. I guess two things. David, wanted to start with your newly announced Digforce AI, each and strategy that you talked about at the conference. Wanted to see how customers responded to that. Scott BergManaging Director at Needham & Company00:46:23I know it's early, probably just enabling the sales force and everything with that effectively. But agents are kind of the craze in our software space this year. I just want to see how you guys might be benefiting from that. David OssipChairman & CEO at Dayforce00:46:35So Scott, we've as I think mentioned in my core script, we saw about 60 unit sales of our co pilot after we announced it at Discover, so basically in November, December. So we're seeing a nice uptake of our AI products in market. And I do believe it does differentiate us relative to others because we're not talking about future capability. We're talking about already generally available functionality that's inside the actual product. It's becoming front and central in the way that we actually position the product. David OssipChairman & CEO at Dayforce00:47:19In terms of agents, we've had some agents in market for that time, typically around initiation of workflows like time away from work and the others. So I think you'll see that continue. Joe, I'm not sure if you're on the call, but if you'd like to add a bit more color about some of the enhancements we're doing around the agents. Joe KorngiebelEVP & Chief Strategy, Product, and Technology Officer at Dayforce00:47:41Yes. No, thank you for the question and appreciate the insight. For us, really the next portion of how we can help customers realize value with Dayforce is with the promise of AI, but we're realizing that promise. Like David said, the 60 new sales just came in a month and a half and customers are seeing that value and the differentiation of delivered AI innovation. The agents that we deliver in the year ahead will go across our entire suite from HR through our talent modules, even down to analytics where reports a report writer will automatically build you the reports you need in an instant, just saving your company time and energy. Joe KorngiebelEVP & Chief Strategy, Product, and Technology Officer at Dayforce00:48:18So look for more innovation as we move ahead. It's a big, big differentiator for us as we hit 20.5 at speed. Jeremy JohnsonExecutive VP & CFO at Dayforce00:48:27Understood. Helpful. And then David, on your commentary around partner excuse me, your strong sales pipelines going into this year, you've been pushing on the partner ecosystem over the last maybe twelve to twenty four months and spend it at the company. How positively your partners kind of impacting your view on the improved sales environment? And then as we think about your PS margins going forward, I know obviously some of that's being pushed to partners. Jeremy JohnsonExecutive VP & CFO at Dayforce00:48:52That breakeven viewpoint, is that like for the full year in terms of your guidance or do you just break over that kind of get to that breakeven line at 1.1 quarter during the year? Thanks. David OssipChairman & CEO at Dayforce00:49:04Yes. So, first of all, thanks for noticing that. Yes, the improvement in the professional services and other, which we expect to be about breakeven this year, is largely the result of the investments we've made with the system integrators and the success that we're seeing in them actually priming the implementation. So we're very excited about It's the metric that we look at internally to determine if we're seeing success across the SI channels. Obviously, with that, you would expect that to be partially behind what we're seeing in terms of pipeline development, conversion of actual sales as they help influence the actual deals. David OssipChairman & CEO at Dayforce00:49:48So it's going quite nicely. Operator00:50:00Thank you. We'll move on to the next question. The next question is coming from Steve Enders of Citi. Please go ahead. Steve EndersAnalyst at Citigroup00:50:07Okay, great. Thanks for taking the questions this morning. I guess maybe just to start, I wanted to talk about some of the assumptions that maybe you're making for '25 from a high macro level in terms of like employment cadence and maybe some rate cut assumptions and kind of what's being accounted for in there? And I guess secondarily, if there's maybe any accounted for based on some of those factors you called out that impacted the 4Q Dave Warsh performance? Jeremy JohnsonExecutive VP & CFO at Dayforce00:50:43Yes. Thanks, Steve. It's good to speak with you. Yes, we can go into a couple of those assumptions. I think specifically on the rate cuts, we assume bank consensus to kind of inform our forecast there. Jeremy JohnsonExecutive VP & CFO at Dayforce00:50:56So Canada just cut rates by 25 basis points at the January and U. S. Held flat. So with those cuts kind of built in, you would expect or we would expect about one rate cut in The U. S. Jeremy JohnsonExecutive VP & CFO at Dayforce00:51:08In the middle of the year at about 25 basis points. And we'd also expect Canada rate cuts are to continue at about 25 basis points each meeting until October, so about five more cuts this year. With all of that, you think we think we'll kind of net out to a yield of about 3.6% on average balances growing in the low to mid single digits this year on the float side of things. As far as the other assumptions on employment levels, we'd expect that to kind of be in the very low single digits from a growth rate perspective and certainly are using what we learned in Q4 to inform our forecast and guidance in 2025. Steve EndersAnalyst at Citigroup00:51:55Okay, perfect. No, I appreciate the commentary there. Steve EndersAnalyst at Citigroup00:52:00And then I just Steve EndersAnalyst at Citigroup00:52:01want to ask on the pro services performance and that outpacing the growth for the Dayforce recurring growth this year. Can you just maybe help us think through some of the factors impacting that? Like is that a reflection of some of the managed services capabilities that were highlighted at the Analyst Day that kind of pulling through more? Yes, kind of like what factors should we be thinking about in there and kind of what continues moving forward? Jeremy JohnsonExecutive VP & CFO at Dayforce00:52:30Yes. I think first and foremost is we had a really strong sales Q4 to cap off a really strong sales year in 2024. And we haven't I think with that, you see strong sales comes with implementation and services work. And that's kind of the tip of the spear there, if you will. We've also got some of the larger projects that we're working through and large customers that we'll continue to do work for. Jeremy JohnsonExecutive VP & CFO at Dayforce00:52:55And then if you think about the productivity, I think it's really a few primary drivers. It's, as David mentioned, the systems integrated relationships that Jeremy JohnsonExecutive VP & CFO at Dayforce00:53:02we've Jeremy JohnsonExecutive VP & CFO at Dayforce00:53:03matured. We're doing also a greater proportion of value added services alongside those systems integrators. And we're driving efficiency into our implementation process. We talked about this at the November Investor Day, but a few years ago, we began building out these SI relationships, and we're really pleased with how these have come together and how we're driving that efficiency across that implementation process. Steve EndersAnalyst at Citigroup00:53:28Okay, great. Thanks for taking the questions. Operator00:53:32Thank you. The next question is coming from Kevin MacVay of UBS. Please go ahead. Kevin McVeighManaging Director at UBS Group00:53:38Great. Thank you. Hey, I think you talked about the wallet basically $30,000,000 in $2,024,000,000 Kevin McVeighManaging Director at UBS Group00:53:45dollars up from $12,000,000 Kevin McVeighManaging Director at UBS Group00:53:46in $2,023,000,000 dollars Is that adoption or increased usage? And any way to think about what that can contribute in 2025? David OssipChairman & CEO at Dayforce00:53:55Yes. In 2024, we released AFT and IFT capabilities to the wallet, and we saw quite good adoption of those types of movements of money. In 2025, we just launched direct to bank. So what direct to bank is if you do an on demand pay, the employee can now select to pass that money to one of their existing debit cards attached to an existing checking or savings account. And we're seeing that actually take off quite nicely as well. David OssipChairman & CEO at Dayforce00:54:33We also, obviously, as you would expect, continue to see increased adoption in terms of more organizations and more employees use the Apple Wallet as well. So we would expect the momentum on the wallet to continue this year. Kevin McVeighManaging Director at UBS Group00:54:51Great. And then at this point, are the SIs driving any sales volume to date or is that still something that probably starts in 'twenty five? David OssipChairman & CEO at Dayforce00:55:03Yes, we are. As I think I answered, I think, well, Scott who asked the question, we're seeing nice traction with the system integrators, obviously strengthened year over year. And you can see that reflected in the professional services and other margin, which as we move the implementations more to the SIs, the professional services and other margin now moves towards breakeven. Jeremy JohnsonExecutive VP & CFO at Dayforce00:55:30But we're also seeing increased amplification of the brand and increased pipeline with not only the SIs, but with our community advisory partners and our technology partners. Kevin McVeighManaging Director at UBS Group00:55:41Great. Thank you. Operator00:55:46Thank you. The next question is coming from Alex Zukin of Wolfe Research. Please go ahead. Alex ZukinAnalyst at Wolfe Research LLC00:55:52Hey, guys. Thanks for taking the question. Maybe just the Canadian government deal, can you guys remind us how that's going to play into the fiscal twenty twenty five guide given kind of the slightly longer ramp time? And Jeremy, maybe just I know we're not guiding today for us recurring, but maybe help just from a modeling standpoint, how we should think about that flowing through the year maybe relative to last year? Jeremy JohnsonExecutive VP & CFO at Dayforce00:56:17Yes. Alex, good to speak with you. Look, on the Canadian government deal, I think as Steve kind of spoke to a little bit is we're continuing to work towards those deadlines that we talked about in the most recent timelines, which is targeting April 2025. We're on track to achieve those milestones and that's more on the kind of recurring side of things. On the professional services, we have been seeing work and we've been doing work and we continue to do work with the government of Canada. Jeremy JohnsonExecutive VP & CFO at Dayforce00:56:49On the recurring side of things, I think you'll see kind of a continuous cadence there or consistent cadence with how things have looked in the past and stopping short of giving kind of full guidance. I think that 15% to 17% constant currency number for the full year is a good guide and we should kind of remain in those balance for the quarterly basis as well. Alex ZukinAnalyst at Wolfe Research LLC00:57:15Got it. And then David, maybe just I'll re ask one of the earlier questions, but I think when you were when you had spoken last time on the earnings call, you kind of talked about a just watching out for lengthening sales cycles as you go upmarket as those deals take more time to actually execute on. But it seems like something changed in that visibility given the December and January. So I'm just curious, is it the demand environment? Is it something you figured out on the execution? Alex ZukinAnalyst at Wolfe Research LLC00:57:49Is it tailwinds from AI? Like what changed in your from your perspective from ninety days ago to now with respect to that visibility? David OssipChairman & CEO at Dayforce00:58:03I think that the impact of Discover, our client conference, did have an impact in terms of purchasing cycles. So I think the work that the product and technology team has done in really differentiating very clearly Dave Halls relative to the others had impact. As Steve mentioned, I think the branding work that we invested in last year is also getting us more mind sharing. It's making it easier for us to get the final approvals in the very large types of deals. Third, I do think that the sales team really is performing very well and I'm very proud of the way that they go to market and the way that they tell the story and the way that they show the product. David OssipChairman & CEO at Dayforce00:58:54As well, I think that as an organization, Dayforce and our day makers, the way that we interact and partner with our customers is reflected. You can see that as well in the retention rate that is now 98% on Dayforce, which has got to be best in market. And then lastly, as I mentioned, I do think on the macro side that there's much more optimism across business leaders about the economy and that is helping with purchasing cycles as well. Operator00:59:29Thank you. Our final question today is coming from Brad Reback of Stifel. Please go ahead. Brad RebackManaging Director at Stifel Financial00:59:36Great. Thanks very much. Maybe two quick ones. Did you all mention what the percent of new sales back to the base was? Jeremy JohnsonExecutive VP & CFO at Dayforce00:59:45We haven't yet, but it was above 40%. Forty two % was the number this past year, and we're really pleased with that. David OssipChairman & CEO at Dayforce00:59:53And we also saw the same number actually, 42% of full suite deals as well. That's right. Jeremy JohnsonExecutive VP & CFO at Dayforce00:59:59Yes. Brad RebackManaging Director at Stifel Financial01:00:00Great. And then, Jeremy, given some of the unusual puts and takes in 4Q things that snuck up on you a bit, have you taken a different guidance philosophy, maybe increased conservatism at all as it relates to 1Q in all of '25? Thanks. Jeremy JohnsonExecutive VP & CFO at Dayforce01:00:19Yes. Look, I think we've ultimately taken what we learned in Q4 and used that to inform our guidance for the future. I think we still kind of give tight ranges, but you can ultimately see that we're kind of giving these constant currency growth ranges and then setting down the FX rate that we're using and then trying to be really clear about the float assumptions there. And you think about the total revenue growing 14% to 15% to ex float on a constant currency basis and Dayforce recurring revenue at 15% to 17%, and we're really pleased with those numbers and our ability to do that and while we're also expanding margins on net adjusted EBITDA and free cash flow. Brad RebackManaging Director at Stifel Financial01:01:06That's great. Thank you very much. Operator01:01:09Thank you. This brings us to the end of the question and answer session. I would like to turn the floor back over to Mr. Asim for closing comments. David OssipChairman & CEO at Dayforce01:01:17Great, Joe. Thanks, everyone, for joining us. Sorry for those of you that we didn't get to ask for questions today, but we'll have the one on one follow in. Just a few pieces I'd like to end with. One, again, reiterating the sales momentum we saw in Q4 that continued into January and our confidence in sales for Q1 and for the year. David OssipChairman & CEO at Dayforce01:01:38The second is I want to reiterate that we're holding the revenue guide for the year while increasing the adjusted EBITDA by 100 basis points and that we are seeing that meaningful improvement in profitability across all aspects. And lastly, we are positioning Dayforce in the midterm for sustained growth around the current levels while moving towards that 20% plus free cash flow. Again, thank you, everyone, for joining us today. Operator01:02:07Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the web cast at this time and enjoy the rest of your day.Read moreParticipantsExecutivesDavid NiedermanVP - Investor RelationsDavid OssipChairman & CEOJeremy JohnsonExecutive VP & CFOSteve HoldridgePresident & COOJoe KorngiebelEVP & Chief Strategy, Product, and Technology OfficerAnalystsSiti PanigrahiEquity Research Analyst at Mizuho Financial GroupMark MurphyManaging Director at JP MorganRaimo LenschowAnalyst at Barclays CapitalMark MarconSenior Research Analyst at BairdSamad SamanaManaging Director at Jefferies Financial GroupScott BergManaging Director at Needham & CompanySteve EndersAnalyst at CitigroupKevin McVeighManaging Director at UBS GroupAlex ZukinAnalyst at Wolfe Research LLCBrad RebackManaging Director at Stifel FinancialPowered by