Dayforce, Inc.

Your 2023 earnings conference call. I'm Matt Wells, head of investor relations. And on the call today, we have our co-CEOs, David Ossip and Lee Turner, our CFO, Noemi Huland, and our CTO, Joe Korngabel. As a reminder, all participants are in a listen-only mode, and a question and answer session will follow our opening remarks. And 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 Ceridian's results to differ materially from historical experience or present expectation. 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 will reference non-gap measures to describe our performance please review our earnings press release and filings with sec for our rationale behind the use of non-gap measures and for a full reconciliation of these gap to non-gap metrics these documents in addition to a replay of this call will be available on the ceridian investor relations website and with that i'd like to turn the call over to david

Thank you, Matt, and thank you all for joining us today for our first quarter earnings call. Today I'll discuss our strong first quarter results and talk to our continued technology leadership in HCM. Lee will give more information on recent sales wins, successful customer implementations, and continued efficiencies in our organization. Joe is also in the call and will discuss our investments in innovation, including new products, and generative AI. And Naomi will then provide insights on our quarterly performance and 2023 full-year guidance. I'll begin with our financial results. We had another fantastic quarter, exceeding guidance across all revenue and profit metrics. On a constant currency basis, Dayforce recurring revenue grew 46% year over year. As that's a very high number, let me break it down. Dayforce recurring revenue ex-float grew 29% on a constant currency basis, with tax modernization contributing approximately 600 basis points of growth. Adjusted EBITDA was 105.4 million, or 28.4% of revenue. This was driven by the revenue upside and a focus on operational efficiencies. Along these lines, adjusted cloud recurring gross margin was 78.7%, which expanded 320 basis points year over year as we continue to drive synergies across hosting and support while delivering industry-leading net promoter scores. Adjusted operating income of 88.5 million was also up significantly as we benefited from these trends. Looking towards the rest of the year, we are raising both our revenue and probability targets for fiscal 2023. Before I discuss the macro and why we see continued traction in an evolving market, let me say thank you to our exceptional employees, partners, and customers. Obviously, Lee and I are very proud of how we live our brand promise of makes work life better every day and how this focus has led to quite simply impressive results. Thank you. On the macro, the economy continues to adjust to new ways of working, and we are finding that there are several trends that are driving selection and adoption of Dayforce. First, all organizations are very focused on efficiencies. As described on previous calls, Dayforce was built around delivering quantifiable value to our customers. This is part of our DMA. Before we build any feature, we identify the measure that this feature will impact. The measure must be quantifiable and convertible into a dollar benefit to the client. For example, with Dayforce Wallet, we have seen voluntary attrition rates decline by more than 20%, saving our clients significant employee turnover and training costs. It is this focus that has delivered strong returns to our customers and helps position Dayforce ahead of the competitors and drives data force demand even in today's macro. Also tied to efficiency is the focus on IT simplification and automation. All organizations are looking for ways to reduce the number of systems that they use as this saves duplicate hosting and licensing costs, expensive integration costs, and unnecessary internal IT resources. As you know, Dayforce is a complete human capital management system that is differentiated in its single database and continuous rule engine design. This allows organizations to eliminate duplicate system costs, simplify user experiences and reporting, and to leverage automation to speed up while further reducing costs. Again, this drives demand and adoption of Dayforce. The third industry trend is delivering an exceptional experience for all types of employees. This applies to candidates, employees, flexible workers, alumni, and pensioners. Today's global market demands that employees are connected and aligned, no matter their status or location. We have been laser focused on this. Last year, we introduced the Dayforce Hub, which allows customers to imagine, easily deliver and manage a streamlined communication experience for all their people across both web and mobile. The adoption of the hub has been amazing, probably because employees use Dayforce every day to view their schedules, swap shifts, record time and see their pay. In other words, we always have the attention of the employee. A few weeks ago, I attended the Dayforce user group meeting where three customers proudly showcased their hubs. I was exceptionally impressed, mostly because it's apparent that customers love the product. The hub is differentiated from competing HR portal in that it is one with the core HR data model. This means if a person moves location, changes roles or status, the person is automatically assigned to the appropriate hub group. And so the experience for that individual is always right and relevant. And in terms of relevancy, what I mean is that the Hub shows the HR metrics relevant to that person, such as what's my intra-week wage percent, what's my turnover rate, what's my team engagement score. The Hub also highlights any items requiring approval or attention, such as approving time off requests, providing and performance performance feedback, selecting benefit choices, or attending a specific training. And it allows the organization to publish any company or team news relevant to that person. From an admin perspective, a hub is a powerful platform that leverages a single database, perform and workflow capabilities, the deep linking to both day force and third party systems. This allows customers and partners to build engaging and meaningful employee experiences. As you can tell, I'm quite excited about the hub and believe that it is too a driver of Dayforce's demand and traction. The fourth industry trend is growth. Many of our customers have grown either organically or through acquisition. In both cases, growth drives complexity and often that complexity becomes a barrier to future growth. Dayforce as a global people platform allows organizations to apply best practices such as standardization, job harmonization, shared services, and globalization that allows companies to move quicker, to grow without adding as many HR resources, and to take advantage globally of lower labor cost jurisdictions. This is exceptionally important given the current wage inflation. Dayforce is differentiated by its global HR, payroll, and workforce management capabilities. And again, this too drives demand and adoption. Another trend that is driving product demand is compliance. Organizations globally are struggling to be compliant with wage and hour, data privacy, data residency requirements, cybersecurity, and internal audit and SOX controls. As you know, Dayforce is recognized in this regard. We are a leader in compliance and so this too has led to increased demand and adoption. The last trend is decision-making. Effective decision-making is essential for any organization and Dayforce helps organizations make better decisions. by providing knowledge to the right person at the right time. Dayforce has hundreds of pre-built reports categorized across HR and operational categories. The reports and single database design allows data to be easily presented and visualized. This allows an organization to design, roll out, and track the effectiveness of HR and operational strategies. The reports can be delivered through dashboards, messages, hub info cards, or via intelligent nudges. And the nudges can be used to encourage employees to take action on operational HR tasks. I have seen customers highlight intra-week wage percent, overtime, and attendance numbers that allow their operational managers to make same-day decisions to run their businesses more efficiently and more profitably. I have also seen customers highlight employee engagement stalls, turnover rates, time and cost to hire that provide valuable insights into HR trends so that their leaders can identify areas for improvement and make the necessary changes. And it should come as no surprise that we are actively exploring ways to integrate generative AI into our platforms. our customer lifecycle, and our business. This is an area that I'm very excited about, and Lee and Jay will take us there shortly. In summary, Ceridian remains positioned as an innovator and a share-taker in the global HCM market. Our Daedalus differentiation has allowed us in many ways to ride the current macro wave successfully. And before I turn the call over to Lee, I'd like to welcome partners, customers, and prospects to our upcoming summits in Chicago, Atlanta, and Toronto. These events will showcase how Dayforce enables customers to transform their organization for today's world of work. Now I'll turn the call over to Leigh. Leigh, the floor is all yours.

Thank you, David. Echoing your comments, I'm pleased to report that Ceridian continues to deliver both top and bottom line results demonstrating the durability of our business and our focus on efficiency, productivity, and operational scale. Before turning the call over to Joe to talk about our product momentum and roadmap, I'd like to highlight a handful of recent sales wins and go-lives, in addition to providing context on what continues to drive our success. In Q1, we saw strong growth across the entire Ceridian community. In fact, this quarter, we surpassed 6,000 customers on the Dayforce platform with 52% of our sales this quarter representing full suite. To put this into context, over the course of the past five years, we've effectively doubled our customer footprint while continuing to build modules into our leading HCM platform that are increasingly appealing across every segment. On top of this, we had strong go-live activity this quarter. Together with our partners, we brought live over 180 new customers, ensuring that we continue to help organizations around the world and across industry drive efficiency and transformation in this very complex environment. This momentum, in addition to a healthy back to the base sales motion, which is tracking well against our full year target of 25 to 30% add on sales, drives a very durable growth formula that underpins our results. Now I'm going to get into a few notable Q1 wins and go lives. In Q1, new customer wins include a humanitarian aid and community services not for profit in Australia, which chose Dayforce to support its 27,800 employees with plans to double this number over the course of the next five years. A US provider of voice and data network communications with 11,500 employees in 30 states chose Dayforce as a single HCM platform to drive efficiency and manage workforce complexity. And the Canadian operations of one of the world's largest global automotive companies, with 8,000 Canadian employees, replaced its legacy platform with Dayforce Workforce Management, industry solutions, and benefits to help reduce operating risk and increase data visibility. Also, some notable organizations that we took live over the course of the last quarter include a global leader in contingent workforce management, which recently launched Dayforce to improve the experience and increase the scalability across its 18,000 contingent workers in the United States. One of the world's largest payment processing corporations with over 15,000 employees in 79 countries went live with Dayforce HR, payroll and workforce management in Ireland and in Denmark. And a multi-brand retail company with approximately 11,000 employees at over 650 locations in the US and Canada, went live with Dayforce HR, benefits, time, advanced scheduling, and learning for its U.S. population. Within this momentum, we continue to see Dayforce Wallet as a differentiated solution that best ties together our unique product leadership and ability to innovate. We now have more than 1,540 customers that have signed onto the wallet with over 930 lives. Registration rates have surpassed 50% and we've seen loads triple year over year to 350 million in Q1, reflecting continued demand and healthy usage across the entire customer base. While it remains a competitive differentiator for our sales team with over 80% attach rates to new sales wins and early traction in the UK, where our PEPM model is being rolled out is very, very positive. And for those of you who don't know, pay cycles in the UK are monthly, so an on-demand solution offers real in-market differentiation. Also fueling our momentum is the vibrancy of our growing partner ecosystem, as we're seeing great progress across every single channel, including influence partners, private equity partners, software partners, and of course, our system integrator partners. And we're seeing the impact of their work in the momentum behind our pipeline, our kickoffs, and our go-lives. The energy of this community is very strong and we're excited to make the most of it as we host our Ceridian Partners Summit this month in Chicago. Related to that, I'd be remiss not to update you on the progress we're seeing from aligning our revenue and customer experience organizations together under Steve Holderich, which we announced to you last quarter. I'm happy to report that Steve and his team are doing a great job and we're seeing his leadership bear fruit in terms of driving alignment and efficiency across our teams and for our customers. It's clear that this is absolutely the right model for us to further activate our growth levers in this environment and we remain focused on creating best in class operational effectiveness across the entire customer lifecycle with proven leaders and programs that will continue to help us win. As David teed up up front, one avenue we're leveraging to drive these efficiencies is threading AI across our business. More specifically, near term, we believe there's a strong fit for generative AI to augment our customer support organization. allowing them to serve customer needs more efficiently and proactively. We have a proof of concept that currently involves training the model with Ceridian's product knowledge base, release notes, and implementation guides. And we're optimistic that this will improve key metrics, including rep productivity, response times, customer satisfaction, and overall employee empowerment and engagement. While this project is still in beta, early results have been very promising and we believe that this is just the absolute beginning for the application of predictive and autonomous tech in our internal and customer facing environments. In closing, the macro environment is very favorable to us and the demand for dayforce has never been higher. Market leading companies with strong balance sheets are focusing on the fundamentals and they are investing and we are taking share. This quarter gives me great confidence in our ability to continue to execute against our medium and long-term goals. We have the right team, the right go-to-market strategy, and the absolute right value proposition. And together with our partners, we are uniquely capable of helping our customers and prospective customers not just survive in this environment, but thrive. In closing, like David, I'd like to thank our customers, our investors, our shareholders, and most of all, our people for allowing us to seize this opportunity. And with that, I'll turn it over to Joe to walk you more deeply through our product momentum and AI roadmap. Joe, over to you.