Dayforce, Inc.

Greetings and welcome to Dayforce's fourth quarter and full year 2024 earnings call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Letterman, VP of Investor Relations. Thank you. You may begin.

Thank you for joining, and welcome to the Dayforce 4th Quarter 2024 Earnings Call. I'm David Niederman, Vice President, Investor Relations. As a reminder, all participants are in a listen-only mode, and a question-and-answer session will follow our opening remarks. Joining me on the call today are CEO David Ossip and CFO Jeremy Johnson. We also have Chief Strategy Product and Technology Officer Joe Korngabel and our President and COO Steve Holdridge available for Q&A. 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 Day Force'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 GAAP to non-GAAP metrics. These documents, in addition to a replay of this call and also a transcript, will be available on the Dayforce Investor Relations website. And with that, I'd like to turn the call over to David.

Thanks, David, and thank you all for joining us. I'll begin with some high-level commentary on our results and outlook before handing the call over to Jeremy, who will provide more detail on our financials and guidance. We had a strong year, with Q4 sales exceeding expectations and coming in above plan. Sales cycles returned to historical levels, and January proved to be a strong start to 2025. Looking ahead, we expect sales growth to outpace revenue growth throughout the year. Our pipeline coverage gives us confidence, starting the year with approximately four times coverage of pipeline compared to our sales target. We had excellent performance in 2024. Total revenue was 1.76 billion, growing 17% on a constant currency basis. Day four's recurring revenue excluding float, grew 21% on a constant currency basis. Adjusted EBITDA margin was 28.5%, expanding 140 basis points. And free cash flow was 172 million, or 9.7% of revenue, expanding 280 basis points. As guided during our investor day, We expect total revenue growth in 2025 of 14 to 15%, excluding float and on a constant currency basis. Our guidance reflects our decision to focus on higher margin areas of our business while phasing out legacy segments. Day four recurring revenue, excluding float, is expected to grow 15 to 17% on a constant currency basis during 2025. In terms of our mid-term operating model, we are confident in our ability to exceed a 20% free cash flow margin. Last year, we expanded free cash flow margins by 280 basis points to 9.7%. In 2025, we anticipate this increasing by another 230 basis points to 12%, and for this upward trend to continue over the mid-term. On an adjusted EBITDA basis, we are raising our investor day guidance by 100 basis points, increasing adjusted EBITDA margin guidance to 32% from 31%. Beyond 2025, over the midterm, we expect adjusted EBITDA to expand by 100 to 150 basis points per year. In the coming years, we anticipate that the total revenue growth will remain close to 15%, while profitability improvements, both free cash flow and adjusted EBITDA, will continue to outpace revenue growth. From a sales perspective, our CRO, Sam, has executed exceptionally well. In the last quarter, we secured several key new business wins, including a 60,000-employee grocery chain, an 18,000-employee space exploration company, and a 66,000-employee member-owned retail cooperative, as well as success in expanding deals, including a 60,000-employee global manufacturing distributor of paints and coating and a global air service provider with 48,000 employees across 35 countries. Many of these deals closed within weeks of customers attending our Dayforce Discover event, a testament to the impact of the event and its role in accelerating Q4 sales. On the product side, we continue to lead in innovation and delivery. Our product roadmap is built around compliance, IT simplification, data, and experience. On the compliance front, We delivered more than 900 compliance updates and were once again recognized by Gartner as a compliance leader for firms with more than 1,000 employees and for firms with more than 2,500 employees. E-compliance enhancements included a new workforce insight experience, machine learning-driven labor forecasting, and direct-to-bank capabilities for Dayforce Wallet. Speaking of Wallet, it had this tremendous 2024, with revenue increasing from 12 million to over 30 million. We expect Wallet to continue gaining momentum in 2025. Our IT simplification efforts align with our 12 to 1 strategy, which consolidates multiple HR systems into a single day-force platform. This approach reduces integration manual workarounds, and operational complexity while improving efficiency and decision-making. Our leadership in this area was reinforced by our recognition as a leader for the fifth consecutive year in Gartner's magic quadrant for cloud HCM solutions for enterprises with more than 1,000 employees. Presenting our 1221 value proposition, we launched a new talent acquisition experience and replatformed Illumi into Dayforce, creating a best-in-class learning experience with strong analytics, content creation tools, and a content store featuring over 90,000 training modules. We expect learning management and content to drive significant client-based sales in 2025. On the data and experience side, we are already seeing strong adoption of our Dayforce integration studio and copilot products, both of which we demonstrated at Discover. Since launching in November, we have sold more than 60 copilot units. Copilot integrates with our experience hub, allowing CHROs and their teams to create engaging and immersive experience for frontline workers, managers, and executives. Content within the hub is indexed using AI, enabling users to ask questions and receive contextual responses with relevant reference links. Additionally, CodePilot facilitates workflow automation, such as requesting time off. Innovation in this area will continue in 2025 with planned releases of AI agents and other new capabilities. At the core of Dayforce is our commitment to product innovation. This is what differentiates us in the market and drives our strong win rates, high customer retention, significant add-on sales, and industry recognition. Turning to customers and go-lives. Q4 was impressive. We saw 146 net new customers go live. including a global aviation service provider with over 55,000 employees across 36 countries, a 23,000-employee American entertainment company rolling out full suite talent, a 10,500-employee UK contract catering and support service provider. We now have 6,876 live customers and $7.6 million live active users on Dayforce. Both up approximately 10% year-over-year. Additionally, Dayforce recurring revenue per customer increased by 11%, and our gross retention rate improved from an already strong 97.1% to 98%. From a probability standpoint, our improvement in adjusted EBITDA and pre-cash flow was largely driven by improvements in recurring gross margin. Adjusted cloud recurring gross margins were 79.8%, expanding 150 basis points, resulting from efficiency gains in our support and managed services organizations, greater automation, AI-driven optimizations, and a higher proportion of add-on sales. In 2025, we will continue optimizing our cost basis by improving sales productivity, streamlining our organizational structure, and leveraging lower cost jurisdictions, automation, and AI. Professional services and other revenue, historically a negative margin business, is expected to break even in 2025. This milestone reflects the investments we have made in automation and partnerships with system integrators. Before handing the call over to Jeremy, I want to emphasize four key themes.