Dayforce Inc (NYSE:DAY) Q1 2024 Earnings Call Transcript May 1, 2024

Dayforce Inc misses on earnings expectations. Reported EPS is $0.43 EPS, expectations were $0.45. Dayforce Inc isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Jeremy Johnson: Welcome to the Dayforce First Quarter 2024 Earnings Call. I am Jeremy Johnson, our CFO, and joining me on the call today is CEO, David Ossip, Chief Product and Technology Officer, Joe Korngiebel; and our President, Steve Holdridge. [Operator Instructions] Now, before 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 filed 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. These documents, in addition or a replay of this call, will be available on the Dayforce Investor Relations website. And with that, I’d like to turn the call over to David.

A software developer looking out a window while confidently typing away on their laptop.

David Ossip: Thanks, Jeremy, and thank you all for joining us. Next to me, I have Steve, who will review customer and market highlights, Joe, who will highlight platform innovation, and then we'll hand the call back to Jeremy to provide details to our first quarter performance and updated full-year outlook. In the first quarter, I'm pleased to report another strong quarter for Dayforce. We grew both revenue and profit materially, and we exceeded guidance across all key revenue and profitability metrics. Dayforce recurring revenue of $337 million, was up 24% including float, and 23% excluding float, and total revenue of $431.5 million increased 16%. On the profitability side, GAAP gross profit was $205 million, up 28% from last year, cloud recurring gross margin was 79%, up 170 basis points versus last year, and adjusted cloud recurring gross margin was 80%, up 130 basis points versus last year.

Adjusted EBITDA was $130 million, up 23%, representing an adjusted EBITDA margin of 30.1%, up 170 basis points versus last year. We remain confident in the business, with strong momentum across sales, product, and operations, and we have raised our guidance across all key metrics. As we look at the rest of the year and well beyond it, the HCM market opportunity is very large and continues to expand. Estimates of global HCM and managed payroll spending are currently in the $50 billion to $60 billion range and growing at over 10% annually, based on a Dayforce analysis of IDC data. This continues to be a resilient and durable market of growth. Dayforce is well positioned to capitalize on this opportunity in front of us, as organizations of all sizes across the world need to be more productive and to optimize their technology and processes.

Leaders need to create quantifiable value for their organizations and better experiences for their people with the platforms they choose, and Dayforce meets that demand by providing simplicity at scale. Simplicity at scale is at the core of our product innovation, particularly as we accelerate with our AI capabilities, with Dayforce Co-Pilot for both our customers, and inside our organization. As we've discussed, our approach to AI is built on our foundation of trusted compliance and a single source of data. We launched the chartered version of Dayforce Co-Pilot, and have seen our initial customers and their employees utilize Co-Pilot as an AI teammate to help supercharge productivity. We believe there are numerous use cases across our customer base to help them gain a competitive advantage by using Dayforce Co-Pilot.

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