Dayforce, Inc.

Good morning, and thank you for joining. Welcome to the Dayforce 4th Quarter 2023 Earnings Conference Call. I'm Matt Wells, Head of Investor Relations. On the call today, we have our CEO, David Osip, and our CFO, Jeremy Johnson. We're also joined by our Chief Product and Technology Officer, Joe Korngabel, and our President, Steve Holdridge. As a reminder, all participants are in a listen-only mode, and a question and answer session will follow our opening remarks. 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 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 gap to non-gap metrics. These documents, in addition to 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.

Thanks, Matt, and thank you all for joining us. Next to me, I have Steve, who will review key customer go-lives and sales wins in the quarter. Joe, who will highlight platform innovation and discuss our acquisition of Illumi. And I'm delighted to welcome Jeremy back as our CFO. Jeremy will provide details to our quarterly performance and initial 2024 outlook. Last fall, we shared our intention to transition from Ceridian to DevOps with a goal to simplify and strengthen our brand. And I'm excited to announce that our brand evolution is now a reality. As one united brand, Dayforce, we firmly believe that we can amplify our promise to make work life better. Today's new workforce is boundless, fluid, always on, and borderless. Our changing world of work makes running an organization more complex than ever, and we're committed to helping organizations conquer that complexity. That's why we chose this moment to evolve and simplify our brand from two in the market to one, We selected Dayforce because over the years, Dayforce has grown into a trusted global platform, setting a new standard for the human capital management industry. Our customers know the Dayforce name to represent innovation, collaboration and transformation. The brand represents our future and we design everything for that ever-changing future, together with our customers, helping them transform their organizations and set the pace for their industries. I'm incredibly excited and proud of the path I see for us ahead, united with one powerful brand that represents our products company community at their best. Turning to our fiscal results, total revenue was 1.51 billion and grew 23% year over year in constant currency. This was underpinned by the strong growth in Dayforce recurring revenue of 37% in constant currency. Dayforce recurring revenue ex-float grew 29% ex-float in constant currency and reflects the strong second half go lives, particularly of large enterprise customers, coupled with industry-leading retention rates and sustained employment volumes. Adjusted cloud recurring gross margins of 78.3%, continued to expand, showcasing the scale and efficiency of our platform. Adjusted EBITDA margins of 27.1% or 410 million reflects the flywheel of our cloud revenue and gross margin expansion coupled with efficient OPEX. And we had record operating cash flows of 219.5 million, a conversion of 54% from adjusted EBITDA that reflects our focus on driving our profit into cash. Our customer base remains healthy and resilient. We ended the year with over 6.84 million employees live on the Dayforce platform, an increase of approximately 900,000 employees added year over year. Net-go lives of large enterprise customers, or those with over 6,000 employees, increased 64% year over year, demonstrating our ability to shift up markets. default recurring revenue per customer of 147,000 was also up 21% year over year. And throughout the year, we also maintained our industry leading retention rates of 97.1%. This is a metric I'm particularly proud of as it showcases our ability to continually deliver value to our customers while helping them make work life better for their employees. Turning to guidance, our initial Fiscal 24 guidance contemplates dayfalls recurring revenue explode growth of 20% to 21% and assumes a normalized employee cadence covered with continued go-live activity across our larger customers. Adjusted EBITDA margin at midpoint of 28.3% assumes our continued expansion of gross margins in addition to one-time costs associated with our rebrand and the Illumi integrations. And conversion of adjusted EBITDA to operating cash flow is expected above the mid 50% range. In summary, we had a very strong 2023 and I'm excited for the year ahead. I'd like to thank our strong community, our customers, partners, and our employees, our daymakers. Steve, over to you.

Thanks, David. I am also truly excited for what lies ahead for Dayforce, our customers, our partners, and our daymakers across the globe. Two weeks ago, we held our largest ever sales kickoff in Orlando, 800 plus attendees, 100 partner attendees, which was double last year, 10,000 hours of sales training, all focused on accelerating sales coverage and effectiveness in 2024. Throughout the year, we continue to attach the full suite to nearly 50% of new sales. And today, 40% of Dayforce customers have adopted full suite. Add-on sales back to the base continue to trend in line around 30% of sales bookings consistent with prior quarters. Dayforce Wallet also saw healthy traction with 1,150 customers live and 1,860 new customers added. Average wallet registrations continue to tick up, now above 60%, along with healthy wallet usage of about 25 times per month. We surpassed $3 billion in total Dayforce Wallet loads earlier this year, compared to $1 billion at the start of 2023. Last year, we brought in Sam Alcarad as Chief Revenue Officer to take our sales function to the next level, and we are already seeing significant benefits from his leadership, including strong talent infusion, enhanced pipeline size and quality, improved conversion rates, deal execution rigor, and stronger go-to-market alignment. However, we did also see longer sales cycles and more decision gates in Q4, impacting our sales performance relative to our aggressive goals. That said, in 2023, we saw 50% year-over-year growth in pipeline generation. We entered 2024 with a record pipeline coverage ratio and started the year strongly with January sales ahead of our targets. Before I move to key sales and go-lives, I'd like to also share the recent announcement from the Government of Canada that their extensive testing of the Dayforce platform has led them to conclude that Dayforce is a technically viable option for the next modern HR and pay system. This is another testament of the ability of Dayforce to handle complexity at scale in our multi-year partnership with the Government of Canada. Now, turning the key sales winds from across the globe in Q4. LAR, one of the world's leading catering services companies with 90,000 employees globally, has chosen Dayforce to support its U.S. and U.K.-based employees. Viva Energy, a leading convenience retailer, commercial services, and energy infrastructure business, growing to more than 13,000 employees, selected Dayforce for a full suite of HCM technology to support its growth in retail. a global designer and manufacturer of innovative furnishings and workspace solutions, partnered with Davos to transform payroll operations for more than 11,000 employees across 30 countries. A global sports fashion retailer with 75,000 employees expanded its use of Dayforce to include 21,000 employees in the U.S. An innovative and fast-growing electric vehicle manufacturer selected the full Dayforce platform to support 7,000 employees in the U.S. Now turning to our record Q4 go-lives, one of the world's largest global shipping and logistics organization with over a half million employees completed its phase one development to over 33,000 employees, along with tax services for its entire U.S. employee population. a multinational manufacturer of consumer and industrial brands with over 50,000 employees successfully continued its dayforce implementation and is now live in 22 countries with 27,000 employees. A leading consumer goods company with 28,000 employees in 40 countries completed phase one of its global dayforce implementation with the deployment of workforce management and payroll in Hong Kong and Thailand. A global European bank with 70,000 employees in 50 countries continued its Dayforce deployment to employees in the U.S. and Canada. Sabre Health, a senior care service provider with 14,000 employees across the U.S., went live with the full Dayforce suite. And one of the world's leading mining and infrastructure companies with 13,000 employees being paid across the globe continued its multi-phase global Dayforce implementation. I'm now pleased to hand off to my colleague, my innovation partner, Joe Kornkabel, our Chief Product and Technology Officer. Joe, over to you.