The paragraph is the introduction to the Dayforce Fourth Quarter and Full Year 2024 Earnings Call. The Operator welcomes participants, mentions that they are in a listen-only mode, and states that a Q&A session will follow. The host, David Niederman, VP of Investor Relations, introduces the call, reiterates the listen-only mode, and notes that CEO David Ossip and CFO Jeremy Johnson are present for the call, with other executives available for Q&A. Niederman cautions that forward-looking statements may be made, which involve risks and uncertainties, and mentions the use of non-GAAP measures in the discussion. He directs listeners to the company's reports and website for details. The call is then handed over to CEO David Ossip.

The company reported a strong performance for 2024, with Q4 sales surpassing expectations and a promising start to 2025. Total revenue for 2024 was $1.76 billion, a 17% increase, and recurring revenue grew by 21%, both on a constant currency basis. The adjusted EBITDA margin improved to 28.5%, and free cash flow rose to 9.7% of revenue. For 2025, the company forecasts total revenue growth of 14% to 15% and recurring revenue growth of 15% to 17%, both excluding float and on a constant currency basis. The focus will be on higher margin areas. Free cash flow margins are expected to increase by 230 basis points to 12%, with an adjusted EBITDA margin target of 32%. Over the midterm, the company aims for over a 20% free cash flow margin and an annual EBITDA margin increase of 100 to 150 basis points.

The company expects a steady 15% revenue growth in the coming years, with profitability improvements outpacing this growth. The Chief Revenue Officer has secured significant new business deals, demonstrating the effectiveness of their sales strategies and the impact of events like Dayforce Discover on accelerating sales. The company continues to innovate in product delivery, focusing on compliance, IT simplification, data, and user experience. They have released over 900 compliance updates and received recognition from Gartner as a compliance leader. Their Dayforce Wallet experienced significant revenue growth from $12 million to over $30 million in 2024, with expectations for continued momentum in 2025. The IT simplification initiative aims to streamline HR systems into a single platform, enhancing efficiency and decision-making.

The paragraph highlights the company's leadership in Cloud HCM solutions, recognized for the fifth consecutive year in Gartner's Magic Quadrant. They launched a new talent acquisition experience by replatforming Illumi into Dayforce, enhancing learning with analytics and a vast content store. The company anticipates significant sales from learning management by 2025 and notes strong adoption of Dayforce integration studio and Copilot products, with over 60 units sold. Copilot, integrated with Experian's hub, offers AI-indexed content and workflow automation. The company plans further innovations by 2025 with AI agents. In Q4, they went live with 146 new customers, expanding their total to 6,876 customers and 7.6 million active users, showing approximately 10% year-over-year growth.

The paragraph highlights Dayforce's financial performance and strategic goals. It notes an 11% increase in recurring revenue per customer and an improvement in the gross retention rate from 97.1% to 98%. The company's profitability saw advancements in adjusted EBITDA and free cash flow, primarily due to enhanced recurring gross margins, automation, and AI-driven optimizations. It outlines plans for 2025 to further optimize costs through increased sales productivity and strategic organizational changes, with professional services expected to break even. Four key themes are emphasized: innovation, continued sales momentum, improved profitability metrics, and positioning for sustained revenue growth with a focus on a 20% plus free cash flow margin. Jeremy Johnson then reports strong Q4 results with a total revenue of $465.2 million, a 16.4% increase on a GAAP basis.

The paragraph provides financial results for the company, detailing increases in revenues and profit margins. Total revenue rose by 17% on a GAAP basis and 17.6% on a constant currency basis, with Dayforce recurring revenue seeing a 20% increase. Hour pay recurring revenue remained flat on a GAAP basis but grew by 2.6% on a constant currency basis. Professional services and other revenue grew by 18%. Gross profit increased by 28.7%, while operating profit reached $28.5 million, with recurring gross margins expanding significantly. Non-GAAP adjusted cloud recurring gross margin was 80.4%, and adjusted EBITDA was $129.2 million, marking a 30.2% increase. For the full year, total revenue hit $1.76 billion, with Dayforce recurring revenue and hour pay recurring revenue both showing substantial increases. Overall, gross profit was up by 25.6%, and adjusted EBITDA increased by 22.3%, reflecting enhanced profitability and operational efficiency.

The paragraph highlights the company's strong financial performance for the year, with significant growth in operating and free cash flow, revenue, and profitability. The organization surpassed its original 2024 guidance targets, achieving higher-than-expected growth in total revenue and Dayforce recurring revenue, alongside a solid adjusted EBITDA margin. Free cash flow as a percentage of revenue met expectations, and conversion from adjusted EBITDA to operating cash flow was within the anticipated range. In the fourth quarter, Dayforce recurring revenue excluding Flow also showed solid growth, despite facing a $2 million foreign exchange headwind and some challenges with customer contract amendments. The company remains pleased with its overall financial results for the year.

The paragraph discusses financial performance and guidance for a company, focusing on the impact of various factors on revenue. In 2024, Illumina revenue contributed significant growth to Dayforce recurring revenue and total revenue. The company executed $36 million of its share repurchase plan. For the full year, they anticipate total revenue excluding float to grow by 14% to 15%, translating to $1.745 billion to $1.76 billion on a GAAP basis, with Dayforce recurring revenue expected to rise by 15% to 17%. Float revenue is projected at $180 million with a 3.6% yield, and adjusted EBITDA margin is targeted at 32% of revenue. In 2025, Professional Services (PS) and other revenue are expected to grow faster than Dayforce recurring revenue, aided by ongoing projects, including with the government of Canada. For the first quarter, revenue excluding float is forecasted to grow by 15% to 17%.

The paragraph discusses financial projections and strategies for the company, highlighting expected revenue growth of 13.5% to 15% and an adjusted EBITDA margin of 31% to 32%. It outlines the currency composition of the company's revenue and the impact of current foreign exchange rates, which pose a 200 basis point headwind to 2025 revenue growth. The company plans to continue share repurchases in 2025 to counteract stock-based compensation dilution, aiming to repurchase over a million shares, doubling the 2024 figure. Additionally, it plans to reprice a $650 million term loan to lower interest rates and intends to retire $575 million in convertible debt due in 2026 with cash on hand. The paragraph concludes by opening the floor for questions.

In the paragraph, Siti Panigrahi from Susquehanna Securities asks about the factors affecting the Q4 Dayforce recurring performance and whether they are one-time issues or expected to continue. David Ossip responds by highlighting four key points: Q4 and January sales were significantly up year-over-year, leading to increased sales momentum without expected Q1 headwinds; revenue guidance is being maintained, while EBITDA guidance has been raised due to strengthening profits; and the company is positioning Dayforce for sustained growth with improved free cash flow. Jeremy is expected to elaborate on three one-time items affecting Dayforce recurring in Q4, which include contract amendments and foreign exchange impacts.

The paragraph discusses the factors impacting lower revenue numbers due to a shift towards digitization. Jeremy Johnson outlines three main drivers: lower-than-expected employee volumes typically spiking during Q4 but muted this year, reduced consumption of printed and tax filing fees, and contract amendments reallocating revenue to professional services rather than recurring sources. Contract amendments are common as customers expand their needs, contributing to high customer retention. Although some shifts led to decreased recurring revenue, increased professional services show growth, supporting sustainable revenue growth into 2025.

In the paragraph, David Ossip reports strong sales momentum with record performance in December and continued strength into January, highlighting a notable 17.9% growth in cloud ARR for 2024. He emphasizes the predictability of the business, mentioning an 80 basis points increase in Dayforce recurring revenue as per their guidance. During a Q&A, Mark Murphy from JPMorgan Chase congratulates them on their sales performance and asks Jeremy Johnson about slightly lower-than-expected employee volumes due to muted Q4 holiday spikes. Jeremy attributes this to mid-week holidays and extreme weather events in the southeast, but does not foresee lingering effects into Q1, noting their accurate forecasting despite challenges.

In the paragraph, Mark Murphy asks David Ossip about Ceridian's interest in the merger of Paychex and Paycor and its potential impact on Ceridian's product, Dayforce. David Ossip responds by stating that Ceridian does not compete with Paychex or Paycor as they operate in a different market segment. He expects consolidation in the down-market sector where Paycor operates due to a lack of product differentiation. However, he believes Dayforce, differentiated by its innovative capabilities, will remain unaffected by the merger. Raimo Lenschow from Barclays then congratulates on Ceridian’s strong sales quarter and inquires about the sales translating into future revenue, mentioning that Dayforce's guidance seemed slightly below expectations. David responds by highlighting Ceridian's strong performance across segments, including large enterprises.

The article discusses the strength observed in major markets and the positive performance of the company's emerging business and the Australian APJ segment, indicating broad success without concentration in a single area. They manage over a thousand customer implementations, focusing on go-live milestones for revenue planning. The company saw an increase in annual recurring revenue by 17.9%. The conversation shifts to financial metrics, where Jeremy Johnson explains raising the adjusted EBITDA guidance due to cost control and efficiency, despite not raising the cash flow projection. This improvement is attributed to past investments in sales and marketing, increased automation, and AI-driven optimizations.

The paragraph discusses the company's strategic efforts to optimize its costs by streamlining its organizational structure and utilizing lower-cost jurisdictions. It highlights the company's first year of providing full free cash flow guidance with cautious optimism. During a Q&A, David Ossip mentions that sales in January were unusually strong, defying the typical trend where sales usually pick up at the end of the quarter. This success is attributed to the positive impact of the company's Discover event, where they secured numerous contracts shortly after. Although it's common to experience a slowdown in January following a strong December, the robust sales performance gives confidence in their sales management.

In the paragraph, Mark Marcon and David Ossip discuss the observed shortening of sales cycles, attributing it partly to the new administration's influence and improved clarity on interest rates and elections. Steve Holdridge addresses concerns about potential impacts from upcoming Canadian elections on their contracts and procurement processes. He states that they do not expect any impacts, and they're on track to meet the April 2025 contract deadlines. Holdridge emphasizes the non-political nature of payroll processes and the continued support from various government levels, assuring business will proceed as usual.

The paragraph is from a discussion involving David Ossip and others about the impacts of potential tariffs between the US and Canada on their business. Ossip mentions that approximately 21% of their revenue is from Canada, which could affect US dollar reporting due to FX rate changes. However, they are hedged about 70% on the cost side, suggesting no major impact on adjusted EBITDA percentage. Ossip also discusses their competitive landscape, noting that they are winning business from ERPs, historically their main competitors. Mark Marcon and Samad Samana commend their strong sales quarter. Jeremy Johnson explains their focus on giving annual guidance for Dayforce recurring revenue and free cash flow due to the company's growth and focus on cash flow generation.

The paragraph discusses a strategic focus on certain financial metrics, including total top line, adjusted EBITDA, and free cash flow margin. The company believes this approach aligns with how they manage and measure business success. David Ossip, likely an executive, comments on midterm growth expectations beyond 2025, emphasizing a 15% growth rate in revenue excluding float and over 20% in free cash flow. He notes that the business is mostly cloud-based and expects a decline in other recurring business due to migrations to Dayforce. They aim to simplify financial reporting as they target these growth metrics.

The article discusses the company's focus on achieving profitability as it scales, maintaining a sales coverage model of four times to balance costs and productivity. David Ossip highlights their efficient sales and marketing strategies, which are improving their sales productivity, now close to being among the best in enterprise software. The company's sales productivity has been enhanced, and they anticipate a slight decrease in sales and marketing expenditure from 17% last year to 16% this year. Samad Samana and Scott Berg, the latter from Needham and Company, acknowledge the strong sales performance. Scott Berg also inquires about customer reactions to the company's new CI agent strategy introduced at a conference, despite it being in its early stages.

The paragraph discusses the integration and success of AI products within a company, particularly focusing on the sales of their Copilot feature, which saw 60 unit sales shortly after its announcement at an event called Discover. David Ossip highlights that this AI functionality is currently available and distinguishes their product from competitors. The company's use of agents in workflow processes, such as time management, is expected to continue expanding. Joseph Korngiebel emphasizes the value and differentiation brought by their AI innovations, planning to extend AI agent capabilities across their product suite, enhancing efficiency from HR to analytics. The discussion suggests AI will be a significant competitive advantage for the company moving into 2025.

In the article paragraph, David Ossip discusses the positive impact of their partner ecosystem, particularly system integrators, on their sales pipeline and professional services margins. He notes that their investments in these partnerships are leading to successful implementations and helping to drive sales conversions. These improvements are expected to result in break-even margins for professional services this year. Following this, Steve Enders from Citi asks about the assumptions being made for 2025 regarding employment trends, rate cuts, and high-level macroeconomic factors.

The paragraph discusses financial forecasts and assumptions related to interest rate changes and business performance for Dayforce and its professional services. Jeremy Johnson mentions incorporating assumptions of rate cuts in Canada and expectations of a US rate cut, projecting a 3.6% yield and low to mid-single-digit growth in average balances. There is an emphasis on using Q4 performance insights to inform guidance for 2025. Additionally, Steve Enders inquires about the strong growth in pro services compared to Dayforce's recurring growth, suggesting this may be due to enhanced managed services capabilities, and Jeremy highlights the strong sales performance in Q4 2024.

The paragraph discusses the company's progress and future expectations regarding its sales and service implementations. It highlights the efficiency driven by matured system integrator relationships and value-added services, resulting in improved implementation processes. Additionally, in response to Kevin McVeigh's question, David Ossip outlines the increase in wallet usage, with a rise from $12 million in 2023 to $30 million in 2024, and mentions new capabilities like direct-to-bank transfers for on-demand pay that are gaining traction. Ossip expects continued momentum and adoption of the wallet in 2025.

In the paragraph, Alex Zukin from Wolfe Research asks about the impact of a Canadian government deal on the fiscal 2025 guidance, given a longer ramp time. Jeremy Johnson responds by stating that they are on track to meet an April 2025 timeline for recurring revenue milestones with the Canadian government. He notes that professional services work is ongoing and suggests that the recurring revenue will maintain a consistent pattern similar to past trends, though he stops short of providing full guidance. David Ossip earlier mentioned that system integrators (SIs) are making progress, contributing to professional services margins nearing breakeven, with increased brand presence and pipeline development including community advisory and technology partners.

In the paragraph, Alex Zukin asks David Ossip about the changes in the company's visibility regarding sales cycles, noting a shift since their last earnings call. David attributes improved purchasing cycles to several factors, including the impact of their Discover client conference, differentiation of their Dayforce product, successful branding efforts, a strong sales team, and a high customer retention rate of 98%. Additionally, David notes increased optimism among business leaders about the economy, which also aids purchasing cycles.

In this segment of a conference call, Brad Reback from Stifel asks two questions about the company's sales performance and guidance strategy. Jeremy Johnson reports that over 40% of new sales went back to the existing customer base, and mentions a similar percentage for suite deals. In response to guidance strategies following unusual factors in Q4, Johnson explains that the company has used its Q4 experiences to inform future guidance, maintaining tight ranges and focusing on constant currency growth rates. He expresses satisfaction with anticipated revenue and margin expansion. The session concludes with David Ossip reiterating strong sales momentum and confidence in future sales for Q1 and the year, despite not being able to address all questions during the call.

The speaker emphasizes that they are maintaining their revenue guidance for the year while increasing the adjusted EBITDA by 100 basis points. They note significant improvements in profitability across all areas and are positioning Dayforce for continued growth, aiming for over 20% free cash flow in the midterm. The event concludes with a thank you to the participants.

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