The paragraph introduces a conference call for Dayforce's third quarter 2024 earnings. It features remarks from David Niederman, Vice President of Investor Relations, who mentions that the call will include CEO David Ossip and CFO Jeremy Johnson, along with other key executives for Q&A. Niederman also cautions that the call will contain forward-looking statements subject to risks and uncertainties, advises on the use of non-GAAP measures, and notes that related documents and a replay of the call will be accessible on the investor relations website. David Ossip is then introduced to provide an overview of the company's results and guidance.

In the third quarter, the company achieved strong financial results with notable growth in recurring revenue, total revenue, and adjusted EBITDA. Cloud recurring gross margin improved, and cash flow increased significantly. The company ended the quarter with 6,730 customers on the Dayforce platform, with revenue per customer rising. Recent product innovations have enhanced their competitive position, and the market opportunity remains significant as organizations seek modern HCM solutions. Despite some elongated sales, the company is confident in its fourth-quarter guidance, supported by their go-live plans and expanding sales efforts.

The paragraph outlines a strong Q4 sales pipeline with a coverage ratio of 4x sales opportunities to targets, attributed to several growth drivers like the expansion of the Dayforce platform, targeting large customers, and leveraging integrated channels. Additionally, sales to existing customers are a significant growth driver, with add-on sales making up 37% of total bookings, particularly through the Talent Intelligence suite. The company is preparing for the Dayforce Discover event and an Investor Day in Las Vegas. The financial performance in Q3 was strong, with Dayforce recurring revenue reaching $333.2 million, a 19.2% increase, and total revenue of $440 million, a 16.6% rise. The company saw substantial growth in professional services revenue at 23% and a 25.4% increase in gross profit on a GAAP basis.

The paragraph discusses the financial performance and strategic wins of a company, highlighting a $20.8 million operating profit that includes expenses related to the Ceridian trade name and a 2021 acquisition. The cloud recurring gross margin improved, with an adjusted EBITDA of $126.1 million, showing growth and efficiency gains. Operating cash flows surged to $91.8 million, and free cash flow dramatically increased to $63.4 million. Year-to-date figures also showed significant improvements. Additionally, the Dayforce Wallet is performing well, with revenues set to double. Notable sales wins include contracts with a North American hospitality company, an Australian retailer, and a global manufacturing leader. Key implementations include a British hotel and restaurant company and a US manufacturer, each adopting various Dayforce solutions for their extensive workforce.

The paragraph outlines a UK fashion retailer's implementation of Dayforce HR and associated financial impacts. It highlights recent business activities and financial strategies, such as a receivables securitization facility and a $30 million share repurchase plan. Additionally, the company provides full-year financial guidance, forecasting growth in Dayforce recurring revenue and total revenue, and projects an adjusted EBITDA margin between 28.2% and 28.9%. The company remains confident in its cash flow targets and steady capital expenditures, aiming for a free cash flow margin between 9.5% and 10% of revenue, with float revenue expected to reach $192 million.

In this paragraph, the company provides its financial outlook for the fourth quarter and upcoming years. For Q4, they anticipate Dayforce recurring revenue of $311 million to $316 million, representing a growth of 21% to 23%. Total revenue is expected to be $452 million to $457 million, with an adjusted EBITDA of $120 million to $135 million. The weakening Canadian dollar is noted as a headwind. For 2025, they project total revenue growth excluding float between 14% and 15%, an adjusted EBITDA margin above 31%, and a free cash flow margin above 12%. The company's Investor Day on November 12th will focus on strategy and growth plans, aiming for $5 billion in revenue and $1 billion in free cash flow. During the Q&A, Kevin Mcveigh from UBS asks about the confidence behind the 2025 guidance and the scaling free cash flow conversion.

The paragraph discusses the company's strong financial planning and confidence in their forecasting due to high recurring revenue and accurate guidance. They emphasize their focus on profitability, aiming for adjusted EBITDA above 31% and free cash flow above 12%. Jeremy Johnson highlights efforts to leverage the business's profitability, while Kevin Mcveigh mentions the company's share buyback strategy to manage stock-based compensation dilution. Jeremy confirms ongoing buybacks with potential for opportunistic actions if the market allows. The paragraph ends with Mark Marcon congratulating the company on their strong results.

David Ossip discusses recent major wins for his company in the North American hospitality sector and an Australian retailer. The hospitality deal was competitive, involving a payroll-focused organization and an ERP competitor. The company's strength lies in simplifying and broadening HR platforms, which appeals to organizations with many frontline workers. This simplification can lead to reduced costs and increased efficiency. Their compliance capabilities, recognized by Gartner for the fifth consecutive year, were crucial in winning the hospitality deal, as the client faced ongoing compliance challenges.

The paragraph discusses the company's pipeline and deal dynamics in Q3. They entered the quarter with a strong 4x coverage ratio for their annual contract value (ACV) target. Deal lengths increased by 25% due to more required sign-offs from various departments, larger deal sizes, and a cautious approach from organizations due to the macroeconomic environment. Mark Marcon inquires about the potential impact of declining interest rates and decreased election uncertainty on deal timelines. David Ossip responds that timelines eventually normalize, with delayed deals moving to future quarters. Employment growth is at 1.5% year-over-year, which aligns with expectations, and float balances increased by 12% year-over-year.

The paragraph is part of a financial earnings call where Samad Samana from Jefferies asks Jeremy Johnson about the outlook for Dayforce's recurring revenue excluding float for 2025. Jeremy clarifies that they're not providing specific breakout guidance for Dayforce at this time, as it is still three months ahead of their usual guidance schedule. He mentions that Dayforce's recurring revenue excluding float is projected to grow by 21% for the current year, partly due to a tailwind from eloomi. He also notes that future revenue considerations include factors like interest rate cuts, foreign exchange rates, and the fourth quarter's performance. Samad then turns to David for a follow-up question regarding AI, noting its significance at the HR Tech conference.

The paragraph discusses the early use cases and effects of AI features in an HCM (Human Capital Management) platform, led by David Ossip. The company has introduced Dayforce Co-Pilot, which allows users to upload various documents into a content management hub, enabling the system to answer questions based on those documents. This feature is expected to lead to a 5-7% increase in monetization. Additionally, the platform uses AI for crafting job descriptions, grading candidates with a proprietary ML model, matching candidates to jobs, and predicting employee turnover by analyzing work patterns.

The paragraph discusses a company's use of AI and machine learning in its products, particularly for compensation adjustments and labor forecasting, noting its recognition by groups like Gartner. The speaker invites others to an upcoming customer conference, highlighting new AI use cases. In a Q&A section, Siti Panigrahi from Mizuho Securities asks about the company's Q4 guidance, specifically regarding Dayforce's recurring growth and any exceptions or pipelines. David Ossip and Jeremy Johnson respond, indicating confidence in achieving over 21% growth due to accounts already live, while emphasizing no changes in guidance from the previous quarter.

In the paragraph, David Ossip discusses the company's financial performance, noting that they exceeded revenue expectations by $12 million and increased their fiscal year guidance by $8 million. On the EBITDA side, they beat expectations by $5 million but only raised the full-year guidance by $1 million due to $2 million in positive float balances and $2 million in timing differences related to professional services. Additionally, David mentions a new brand campaign focused on the Dayforce product, reflecting the company's current focus and anticipating further simplification around Dayforce by 2025.

The paragraph discusses the company's focus on improving profitability by prioritizing higher-profit cloud revenue and reducing reliance on end-of-life products. During a conversation, Scott Berg from Needham & Company inquires about the company's financial performance, particularly regarding the adjusted EBITDA guidance despite a better-than-expected third-quarter float revenue. Jeremy Johnson responds by highlighting strategic investments and tough decisions being made for future benefits in revenue and profitability. He notes a significant expansion in Q3 adjusted EBITDA, excluding float, and indicates that the company's guidance suggests full-year growth in adjusted EBITDA margins.

The paragraph features a discussion on financial performance and projections for the company. Scott Berg questions Jeremy Johnson about the expected operational efficiencies for fiscal 2025, noting a projected adjusted EBIT margin expansion despite potential challenges. Johnson confirms that the focus will remain on efficiency and productivity, continuing existing strategies like improving recurring gross margins and scaling adjusted G&A expenses, along with enhancing sales and marketing productivity. Bhavin Shah from Deutsche Bank inquires about the add-on bookings, which, despite being healthy, have slightly decreased to 37%. David Ossip notes that this figure is still positive.

The article paragraph discusses the growth in the company's suite deals, with 51% full suite deals in the quarter and 46% of the customer base now having suite deals, indicating a positive trend. The company aims to move client base sales to around 50% on a long-term basis. Bhavin Shah inquires about the outlook on float and yield for next year. Jeremy Johnson responds, noting that while balances are expected to continue growing, yields may decrease due to rate cuts in the US and Canada. However, the company's laddering strategy helps stabilize these yields. David Ossip mentions a potential $25 million to $30 million headwind in float next year from a modeling perspective.

In the paragraph, the speakers discuss the financial guidance for 2025, focusing on revenue, EBITDA growth, and free cash flow amidst challenges like labor rates, deal cycles, and exchange rates. They express confidence in their ability to achieve a 14% to 15% revenue growth on a constant currency basis, with an adjusted EBITDA margin above 31%. However, uncertainties like currency exchange rates, interest rates, and market conditions could impact their projections. Despite these uncertainties, they express optimism about their performance and revenue growth for the upcoming year.

In the paragraph, the conversation revolves around the positive impact and involvement of partners in the business, with a focus on their role in sales and implementation. David Ossip mentions the strong presence and engagement of system integrators and other partners, highlighted by their participation in Discover. Jeremy Johnson discusses assumptions for 2025, indicating expectations for stable employment levels and consistent sales cycles, expressing confidence in a solid Q4 performance. Brad Reback inquires about the first month's performance, to which David Ossip responds that while it hasn't closed yet, early indicators show a promising year-over-year improvement.

The paragraph discusses the growth and performance of the Wallet. Despite a slowdown in customer go-lives, the Wallet has experienced strong growth, with Dayforce revenue increasing from $12.5 million last year to an expected over $30 million this year, and an ARR anticipated in the 40s for next year. New features like savings and goals, AFT and IFT, as well as cashless tips have been introduced, aiding in the Wallet's monetization and adoption. The company notes significant user engagement with these features, indicating successful integration and utilization within their customer base.

The paragraph discusses updates related to the Dayforce Wallet in the hospitality sector, highlighting its capability to process tips on a gross basis and an upcoming feature called BYOC, allowing users to use existing debit cards. This is expected to aid monetization and revenue growth. In a Q&A section, Jeremy Johnson mentions a $20-$25 million pension settlement included in the 2025 financial guidance, expected in the third or fourth quarter. When questioned by Jason Celino about the 2025 guidance, Jeremy clarifies that it isn't more conservative than usual, but rather lacks the detailed focus typically provided in February.

The paragraph discusses the company's approach to financial guidance and profitability, emphasizing their confidence in their business model. They are focusing on differentiated revenue streams between Dayforce recurring and other services, and have provided preliminary guidance for 2025 to highlight their focus on profitability. The company has scaled up, resulting in significant growth in adjusted EBITDA and free cash flow. They aim to increase their EBITDA margin by 100 basis points and continue expanding cash flows by simplifying their product offerings to focus on cloud products, Dayforce and Powerpay. They are confident in achieving an 80% or higher gross margin in cloud recurring revenue.

The paragraph discusses the strong and well-qualified sales pipeline for the year, noting the significant contributions from the revenue operations and HR teams in enhancing pipeline quality and creating opportunities to sell more to existing clients. It highlights developments in product packaging and pricing, particularly with compliance modules and talent modules, which effectively double pricing potential. Additionally, managed services are identified as a key growth driver, with margins similar to cloud services, contributing an additional $10 to $12 in pricing. The expansion of the platform, including AI components like Co-Pilot, is expected to generate substantial growth opportunities across the client base.

In the paragraph, Raimo Lenschow from Barclays inquires about the progress in the partner channel, mentioning Capgemini as an example. David Ossip and Steve Holdridge indicate they do not have an agreement with Capgemini but highlight a recent agreement with another top global systems integrator (SI). Ossip notes strong growth in SI channels, emphasizing the importance of their sponsorship and participation in events like Discover in November. Lenschow also seeks clarification on potential elongation issues despite a strong sales pipeline and unchanged macro conditions, wondering if investor concerns about these remarks are overemphasized.

In the paragraph, David Ossip discusses the business outlook, emphasizing a preference for viewing it on a half-year basis rather than quarterly due to factors like vacation timings. He notes that there is no significant change observed in the business trends between the first and second halves of the year. As the company moves upmarket and offers broader suites, the sales process has become longer because of more stakeholders and customers needing to manage existing contracts. The second half of the year, particularly December, is crucial as most customers finalize their contracts then. The focus will be on handling a high volume of opportunities and executing necessary sales steps effectively. Raimo Lenschow acknowledges this explanation, and the operator then introduces Alex Zukin for the next question.

In the paragraph, David Ossip addresses a question regarding the elongation of the sales cycle, clarifying that it is more due to their move upmarket rather than a shift in overall demand. He explains that larger, more global, and suite deals naturally take longer to finalize due to increased complexity and sign-off requirements. Despite this elongation, the company maintains its Q4 guidance with increased visibility into future quarters. Additionally, Ossip highlights positive trends, such as the 15% year-over-year increase in the average size of Dayforce recurring customers and a successful client base sales strategy, contributing to consistent sales performance.

The paragraph discusses the company's focus on profitability and free cash flow for 2025, emphasizing business simplification and targeting better revenue streams through products like Dayforce and Powerpay. The speaker notes that this strategy should positively impact the bottom line, aligning with market expectations for increased profitability next year. They also clarify an earlier point about a projected $25 million to $30 million headwind from "float," explaining that while growth has been positive, they anticipate the yield to be flat or slightly below this year's 4% to 4.1% in the following year, translating to the financial headwind. In the dialogue, there's also a question about potential recovery in fiscal bookings following extended sales experienced in Q3, with optimism based on year-over-year growth through October.

In the discussion, David Ossip addresses a query about sales cycle elongation, clarifying that no particular segment of deals, especially smaller ones, stood out in terms of extended cycles. Their focus is on larger deals, primarily with companies having over 1,000 employees. He highlights that the fourth quarter heavily relies on December sales, indicating a strong pipeline with good attendance at related events. When asked about the adoption of AI-based tools in HR, Ossip suggests positive signs of productivity within the sales team, although monetization in HR lags behind areas like software development and customer service.

In the paragraph, David Ossip discusses the integration of Generative AI (GenAI) into various enterprise applications, emphasizing its initial development in Microsoft's tools and its expansion into broader use cases. He highlights their company's positioning as a market leader with the Co-Pilot GenAI offering, which enhances customer value by reducing HR inquiries, subscription fees, and full-time employee needs while improving user experience and organizational insights. Ossip mentions that their GenAI product, showcased at Discover, excites customers and underscores the company's commitment to delivering significant value.

David Ossip expresses gratitude to attendees and looks forward to seeing them at the Investor Day and Discover event. He anticipates a positive experience with exciting product showcases and community enhancements around the Dayforce platform. The operator concludes the teleconference, thanking participants and signaling the end of the call.

This summary was generated with AI and may contain some inaccuracies.