Ceridian HCM Holding Inc. Q1 2023 Earnings Call

And on recent sales wins.

Speaker 1: He will give more information on recent sales wins, successful customer implementations and continued efficiencies in our organization.

Speaker 1: Jerry is also in the core and will discuss investments in innovation including new products and general AI. And now Amy will then provide insights on our quarterly performance in 2023 full-year guidance.

Speaker 1: Our begin was our financial results. We had another fantastic quarter, exceeding guidance across all revenue and profit metrics. On a constant currency basis, Dave Wolf recurring revenue grew 46% year over year. As that's a very high number, let me break it down. Dave Wolf recurring revenue excluded grew 29% on a constant currency basis.

Speaker 1: was tax modernization contributing approximately 600 basis points of growth. Adjusted EBITDA was 105.4 million or 28.4 percent of revenue. This was driven by the revenue upside and a focus on operational efficiencies.

Speaker 1: Along these lines, a just sick cloud occurring gross margin was 78.7%, which expanded 320 basis points year over year, as we continue to drive synagogues across post-inense support while doing industry leading net promoter scores.

Speaker 1: 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 involving 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 impress the results. Thank you.

Speaker 1: On the macro, the economy continues to adjust to the new ways of working. And we are finding that there are several trends that are driving selection and adoption of dayboards.

Speaker 1: First, all organizations are very focused on efficiencies. As described on previous calls, the day force was thought around to deliver in quantifiable value to our customers. This is part of our DNA. Before we build any teacher, we identify the measure at this teacher or impact.

Speaker 1: The measure must be quantifiable and convertible into a dollar benefit to the client. For example, with their fourth wallet, they have seen voluntary attrition rates declined by more than 20%. Saving our client's significant employer turnover and trading costs.

Speaker 1: Again, this drives demand and adoption of data boards. 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 day-force hub which allows customers to imagine, easily deliver and manage a streamlined communication experience for all their people across both web and mobile.

Speaker 1: The adoption of the hub has been amazing. Probably because employees use DAFORCE every day to view their schedule, 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 DAFORCE user group meeting.

Speaker 1: The hub is differentiated from competing HR portal in that it is one with the poor HR data model. This means that the person moves location, changes roles or status, the person is automatically assigned to appropriate output, 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 intro-equation percent, what's my turnover rate, what's my team engagement score.

Speaker 1: The hub also highlights any items requiring approval or attention, such as approving time-op requests, providing and performance.

Speaker 1: performance feedback, selecting benefit choices or attending a specific training. And it allows the organization to publish any company or team relevant to that person.

Speaker 1: From an admin perspective, the hub is a powerful platform that leverages a single database, the form and workflow capabilities, the deep linking to both data ports 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.

Speaker 1: and believe that it is too a driver of tables to mark 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.

Speaker 1: J4C, 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 HRE sources.

Speaker 1: and to take advantage globally of lower labor cost jurisdictions.

Speaker 1: This is exceptionally important given the current wage inflation.

Speaker 1: Another trend that is driving products and demand is compliance. Organizations globally are struggling to be compliant with wage and art, data privacy, data residency requirements, cybersecurity and internal audit and SOC's controls. As you know, Gapforce 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.

Speaker 1: A effective decision-making is essential for any organization and day-force health organizations make better decisions by providing knowledge to the right person at the right time. Day-force has hundreds of pre-built reports categorized across HR and operational categories. The reports and single database design allows data to be easy presented and visualized. This allows an organization to design, grow out and track the effectiveness of HR and operational strategies.

Speaker 1: 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.

Speaker 1: 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've also seen customers highlight employee engagement scores, 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.

Speaker 1: And it should come as no surprise that we are actively exploring ways to integrate generative AI into our platform.

Speaker 1: Our customer life cycle and our business. This is an area that I'm very excited about and me and Jail will take us there shortly. In summary, Seridian remains positioned as an innovator and a sharechake in the global HGM market.

Speaker 1: Our day-force differentiation has allowed us in many ways to ride the current macro wave successfully.

Speaker 1: 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.

Speaker 1: These events will showcase how a day falls and it will customers to transform their organization for two days world of work.

Speaker 1: Now I'll turn the call over to Lee. Lee, the floor is all yours.

Speaker 2: Thank you, David. At going your comments, I'm pleased to report that seriting continues to deliver both top and bottom line results, demonstrating the durability of our business and our focus on efficiency, productivity, and operational scale.

Speaker 2: 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 live.

Speaker 2: in addition to providing context on what continues to drive our success.

Speaker 2: In Q1, we saw strong growth across the entire Ceridian community.

Speaker 2: In fact, this quarter we surpassed 6,000 customers on the day-force platform with 52% of our sales this quarter representing full suite. So put this into context. Over the course of the past five years, we've effectively doubled our customer footprint.

Speaker 2: while continuing to build modules into our leading HCAM platforms that are increasingly appealing across every segment. On top of that, we have strong, go live activity discordr.

Speaker 2: Together with our partners, we brought lives over 180 new customers.

Speaker 2: ensuring that we continue to help organizations around the world and across industry drive efficiency and transformation in this very complex environment.

Speaker 2: This momentum, in addition to a healthy back-to-the-base sales motion, which is tracking well against our full-year target of 25-30% add-on sales, drives a very durable growth formula that underpins our results.

Speaker 2: Now I'm going to get into a few notable Q1 wins and go lunch.

Speaker 2: 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 11,000 employees, the Dayforce

Speaker 2: legacy platform with day force workforce management, industry solutions, and benefits to help reduce operating risk and increase data visibility.

Speaker 2: 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 Day Force to improve the experience and increase the scalability across its 18,000 contingent workers in the United States.

Speaker 2: Management in Ireland and in Denmark.

Speaker 2: 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 US population.

Speaker 2: 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.

Speaker 2: We now have more than 1,540 customers that have signed onto the wallet with over 930 laws. Registration rates have surpassed 50 percent and we've seen loads triple year-over-year to 315 million in Q1. Reflecting continued demand.

Speaker 2: and healthy usage across the entire customer base. Wallet 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 PEP model is being rolled out, is very, very positive. For those of you who don't know,

Speaker 2: pay cycles in the new care 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,

Speaker 2: software partners, and of course our system integrator partners.

Speaker 2: And we're seeing the impact of their work in the momentum behind our pipeline, our kickoff, and our go-life.

Speaker 2: 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 Holdrich.

Speaker 2: 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.

Speaker 2: It's clear that this is absolutely the right model for us to further activate our growth levers in this environment and we remain

Speaker 2: focused on creating best-in-class operational effectiveness across the entire customer life cycle with proven leaders and programs that will continue to help us win.

Speaker 2: As David teed up up front, one avenue we're leveraging to drive these efficiencies is threading AI across our business.

Speaker 2: 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.

Speaker 2: 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.

Speaker 2: We have a proof of concept that currently involves training the model with Ceridian's product knowledge base, release notes, and implementation guides. We're optimistic that this will improve key metrics, including rep productivity, response times, customer satisfaction, and overall employee empowerment and engagement.

Speaker 2: 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.

Speaker 2: In closing, the macro environment is very favorable to us and the demand for day force has never been higher. Market leading companies with strong balance sheets are focusing on the fundamentals and they are investing.

Speaker 2: 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.

Speaker 2: We have the right team, the right go-to-market strategy, and the absolute right value proposition.

Speaker 2: And together with our partners, we are uniquely capable of helping our customers and prospective customers not just survive in this environment, but thrive.

Speaker 2: 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. With that, I'll turn it over to Joe to walk you more deeply through our product momentum and AI roadmap.

Speaker 1: Joe, over to you. Thank you, Leigh. Our momentum continued to climb within our people platform in Q1 as we successfully delivered timely and impactful innovations to our customers.

Speaker 3: The most impactful and important part of our roadmap ahead is our continued AI and machine learning investments.

Speaker 3: In Q1, our use of generative AI within our products progressive-stanchiling and is beginning to deliver quantifiable value for our customers and their employees with this technology.

Speaker 3: from even before a candidate starts in their career, all the way through every step along the way in their career, generative AI technology is transforming our entire HCM suite. Let me highlight a couple of examples we are working on with our customers.

Speaker 3: A talent acquisition copilot for recruiters. This assists with the authoring of job titles and job descriptions for requisitions instantly.

Speaker 3: and provides a domain-specific large language model that provides them a personalized company-specific chatbot experiences for a candidate. It gets them the answers to their questions instantly that they might have about their potential employment. Things like job details, benefits questions, company culture information, and resources they need, they're answered instantly. This naturally extends into a career co-pilot for employees.

Speaker 3: This saves them time and improves their productivity by helping with things like writing personalized quarterly goals.

Speaker 3: authoring performance reviews, yes, those time-wasting performance reviews are now a copilot, a system that provides much greater productivity with, and generating personalized learning paths that are based on the data that we have around a person's career, especially their skills with our Dayforce skills engine.

Speaker 3: We're also looking to leverage our strength in payroll and workforce management compliance with a pay and compliance co-pilot.

Speaker 3: This is for administrators to help shield our customers from operational risk. We're mining business process data so that we can automatically draft HR policies and we can work as a co-pilot to help automate payroll so we can find anomalies in the data before you even run payroll and really help to realize the vision of autonomous payroll.

Speaker 3: driving to resolution of these open anomalies and driving airs down to zero with your payroll.

Speaker 3: As always, we're embarking on this journey with our customers and keeping data stewardship at the forefront of what we're doing from security to privacy to governance to algorithm transparency and fair practices. Keeping that in the foreground, you see our architectural approach of a single database.

Speaker 3: without multiple systems are stitching together acquisitions that really fragment your data and provide it impossible to have a clean set of data for these powerful algorithms and they're really the source behind generative AI. This is a unique advantage for us in the data age.

Speaker 3: And as a trusted compliance leader for our customers, we are transforming the industry with this innovation. Really, we're doing it with responsible innovation together to redefine the value and impact that our HCM platform can have on making work life better for our customers and their employees.

Speaker 3: I'm incredibly excited about our future ahead in really raising the bar for what our HCM can do for our customers in this time of efficiency and productivity. But now let's look at the financials of our quarter with Noemi. Noemi, over to you. Thank you, Jo. We enter the year with healthy top line momentum underpinned by day force recurring revenue growth of 46% at...

Speaker 4: to expand, helping drive adjusted EBITDA of $105.4 million or 28.4% margin ahead of our initial guidance.

Speaker 4: Operating cash flow of 11.3 million reflects a mix of typical Q1 cash outflows and some one-time items that we expect will normalize throughout the year.

Speaker 4: For example, there was a $13 million one-time reserve established for the National Trust Bank that impacted cash flows in the quarter.

Speaker 4: If normalized for this trend, upgrading cash flows would have been in the range of $25 million, reflecting typical seasonality.

Speaker 4: Looking ahead to RISQ2, there are a handful of items that like to highlight that impact sequential growth.

Speaker 4: First, are they forced recurring revenue X-float for Q2 for 23-24% growth at constant currency, reflect sustained employment trends observing Q1 in addition to about 400 basis points of growth driven by our tax modernization? It's worth noting that tax modernization does amount to about 3.5 million sequential headwind versus Q1.

Speaker 4: We are raising our top-line expectations for the year and now expect day force recurring revenue explode growth in the range of 26% to 27% constant currency.

Speaker 4: Reflecting sustained employment trends, end goal eyes weighted towards the second half of the year.

Speaker 4: And as the team previously mentioned, we continue to see healthy usage and customer trends for the day for Spollet. And as such, we expect to exit 2023 with an ARR in the range of $14 to $16 million on the heels of improving efficiency across the organization.

Speaker 4: We are raising our adjusted EBITDA outlook for the year by 6 million at the low end and 4 million at the high. Of note, we continue to expect conversion of full year adjusted EBITDA to operating cash flows of about 50%. Before I pass the call to Matt, I'd like to echo David and Leigh in saying that as a company...

Speaker 5: panagrahi from azuhau. Great. Thanks for taking my question. David, it's a really impressive Q1. It's great across all metrics. And even if you look at the Air Force Recording Revenue X-Load and X-TAC migration, that's almost 7, 8 million bait.

Speaker 5: But my question about the Q2 guidance, just wondering, are you seeing any changes in terms of customer go live or employment level or even, you know, pipeline, or is it mostly a factor of conservative guidance?

Speaker 1: which is kind of a slight change in your strategy. So any caller will be helpful. Hi, Siddy. If you want to queue to try to see the knowledge of our business.

Speaker 1: In Q4 and Q1, we have the year end processes that add additional recurring revenue. We called that out by the way at the end of last year. We mentioned that the DTM.

Speaker 1: The tax modernization would be $11 million in Q1, dropping to $7.5 million in Q2. And that is the delta that you see between Q1 and Q2.

Speaker 1: So it is nothing other than typical seasonality. As reference, I'll point you back to the last year of normality.

Speaker 1: which was in the first half of 2020 and you'll see the $4 million reduction between Q1 and Q2. It's a typical pattern that you can expect from us.

Speaker 5: That's a fair point and good color. And just a follow up, you talked about a lot of large deals last year wondering how is the goal life trend? You talked about second half mostly goal life. So how is the training so far? Is there on track or any color available? Yeah, we're very pleased by the way with the guidelines.

Speaker 1: Q1, slightly ahead of what our forecast was. We're very confident in the go-live forecast for the remainder of the year. If you look at the implied acceleration rate on day four recurring for the second half of the year, you'll see that the numbers are there, again, consistent with what we reported with our Q4 earnings score.

Speaker 6: Great, thank you.

Speaker 7: And we'll take our next question from Mark Markhone of Barron. Hey, good afternoon everybody. And congratulations to the team on the big increase in terms of profitability. One thing I was really impressed by was you ended up having a 53% increase in terms of gross profit. And we'll take our next question from Mark Markhone.

Speaker 7: on a year over year basis across the consolidated operations. And yet SG&A was essentially flat to down a little bit leading to this rapid increase in terms of operating profit on a gap basis. Can you talk a little bit about the areas of leverage, particularly for a global market edition.

Speaker 1: are appreciated. As you know, we've been quite focused on the bottom line in driving efficiencies across the business. First of all, I'd point out that if you look at the most important metric, which is the cloud recurring gross margin, that was up 320 basis points year over year to 78.7. Moreover, we appreciate that because they

Speaker 1: One of our targets that we've communicated to the market is getting that number to above 80%. And you can see that we have obviously a direct line in sight to that.

Speaker 1: as well right across SGNA. You'll notice that on the GNA line itself, you see much more probability in Q1 of last year. We were at 11.9%, and that's now dropped down to 10.6%. You'll see the sales and marketing efficiencies as well flow directly.

Speaker 1: through with about a 400 basis points improvement year over year as the changes that we've made in terms of sales and marketing are driving additional productivity. And then there is a little bit of seasonality towards that as well. Q1 typically a lighter quarter for us from the marketing stance that builds up as we go into the summers and insights towards the end of the year.

Speaker 7: That's great. Really great to see. And then the other thing that was really impressive is just the number of international and multinational wins. Can you talk a little bit more about.

Speaker 7: you know, your ability to really differentiate yourself and where that market opportunity is, what inning we're in with regards to seeing these multinationals take on a modern HCM platform. And, you know, how should we think also about the time to go live for those multinational operations.

Speaker 1: How should we think about that as it flows through the revenue for the balance of this year and going into next year and the following year? So I believe we're differentiated in our global approach from a core HR model We've done a tremendous number of investments over the last probably about four or five years in that We're very comprehensive in terms of our global coverage in terms of core HR down to the core HR model.

Speaker 1: of capability. The hub experience as well has become a very large differentiator which has become in the central means of communication and engagement for global organizations to do comms across their entire business. And what's nice about the hub is that it's one with the underlying global transition to international community around stronger workforceszier. Manufacturer's Village from abroad are

Speaker 1: live. We aren't seeing much of a difference. The only real difference is that we're not constrained to quarterly go-lives with the global deployments. We can go live typically on a monthly basis.

Speaker 2: is that Mark, if you look at our press release.

Speaker 2: Six of eight of the goal lives that we announced are global multinationals. You see the same reflected in our sales wins. And as David talked about right off the jump, you know, and we talked about this last quarter, as organizations look for efficiency and scale, they're globalizing their employee base, and we are set to capture share.

Speaker 1: and the local size in the different countries is really...

Speaker 1: much more advanced than it was a year ago and it's continuing to advance as we go forward. In fact a few weeks ago I was in Dallas attending one of the large global SI conferences where they had their global partners come to Dallas to discuss ways that we can actually build out the partnership.

Speaker 1: And that's driving a lot of the lead gen that we have and they are doing most of the deployments on a global basis.

Speaker 3: That's fantastic. Thank you. And our next question comes from Bob and Shah of Deutsche Bank. Great, thanks for taking my question. Just one for now. Just looking at Dayforce Recurring Revenue per customer, it looks like it accelerated on a year-over-year growth basis this quarter.

Speaker 8: think about the continued benefit of attaching more modules versus kind of continuously seeing traction on market.

Speaker 1: Yeah, so to put the numbers in perspective, it went from a basically 196,000 per incremental customer to 225,000, which was up about 14% year over year. Obviously, that is part of the actual beat that you see. That tied to we also had a very good go live quarter, with 186 customers go live relative to 175. 175,000 GOX to 275,000. That that was capped at going from some

Speaker 1: the year before, which was also up about 10%. But that we would expect that to continue.

Speaker 8: Got it. And then maybe just on the float balance side of things, I mean, that kind of decelerated and gross. Any way to think about how should we should be thinking about that float balance throughout the rest of the year?

Speaker 1: The flow balance in Q1 does go up relative to the other quarters.

Speaker 1: In terms of the remainder of the year in terms of float, it was up about 3% in Q1 year over year. If I'm looking towards the remainder of the year, I would probably use that as a good guide map. From a math perspective it would be slightly higher I think in Q2. But I think from a planning perspective use the 3%. The bonus is not such a beanless in market than they were previously.

Speaker 9: much and congrats on all the success in the market share gains. I was wondering if you could first clarify that just on the disclosure about the 600 basis points tailwind from tax migrations. You've made that I think a couple of quarters in a row. We've always had some degree of tailwind from the Bureau migrations for many, many years.

Speaker 9: Are we getting to the end of that process where we would have a minimal tailwind in a year or two or is that something that you think should continue and you've just decided to be calling it out kind of more clearly on the earnings press release?

Speaker 9: Are we getting to the end of that process where we would have a minimal tailwind in a year or two, or is that something that you think should continue and you've just decided to be calling it out kind of more clearly on the earnings press release?

Speaker 1: So it's part of the move to the day for technology, right? With the tax, we went from old bureau tech to moving around to the day for platform.

Speaker 1: There are some other components still within what we're now calling other revenue as opposed to Bureau revenue. You've got the pieces that are tied to the extender and the excellency acquisitions, which I think you know there's about $85 million in the APJ revenue stream for fiscal 2023.

Speaker 1: that over time as well will be moved over to the day of full side. In the nearer term as well, we're looking at modernizing some of the underlying tech on the powerplay. And so at some point in time, that also will become part of day four.

Speaker 9: Okay, so sounds like some of this is going to continue into the future. I think you still have a couple of years left, Jim.

Speaker 9: Yeah, a couple years left. Okay, thank you. And then David, can you clarify, there was a great discussion in there about all the co-pilots and wonderful insights on using them in many ways. Are your generative AI co-pilots built on Microsoft, Chat GPT as a large language model or?

Speaker 3: We of course as an enterprise company have to keep data privacy, data security, data governance, and most importantly data ethics in the forefront of what we're doing. So we're building large language models leveraging some of the open source capabilities that are coming out of the great work that's happening in the industry right now. A lot of what the industry is doing are really giving back some of the great technology and things that you're seeing just in the media everywhere. But we don't use it right off of the shelf. We use it, we bring it into our house, and we make sure we put it within our tech stack so we can still have that single source of truth for our customers in the right way we govern the data, make sure we're just stewards of our customers' data and we do it together responsibly.

Speaker 3: Like I said, you heard in the overall call, I see a transformation of our industry happening in front of us. And I think with the way we are architected, we have a distinct advantage. We don't cobble together a bunch of data sets and worry about having our customers wonder if there's data leakage around them.

Speaker 3: our architecture is incredibly sound when it comes to data governance and I'm looking forward to the continued innovation with our own language models and our own use of this technology.

Speaker 3: Our architecture is incredibly sound when it comes to data governance. And I'm looking forward to the continued innovation with our own large language models and our own use of this technology. Thank you.

Speaker 10: And our next question comes from Samad Samana from Jefferies. Hey, all. This is Jordan Beretson for Samad. Congrats on the strong results. So David and Lee, not to beat a dead horse, but you spoke to the really strong 1Q Dave Horse Go lives. Obviously, really, really impressive. I'm trying to understand what specifically drove that.

Speaker 10: significant increase year-over-year. Were there any notable changes to call out around your partners' ability on board clients? Were there any initiatives that you maybe started with them or is it more so just greater productivity on that end?

Speaker 1: There was greater productivity on the go live front. There also was a little bit of a tailwind from employment levels with inside the quarter of about, not about 600, 700K, 700, that came into the actual quarter as well. But largely, it was just good execution.

Speaker 10: in perpetuity. So you should expect that this is a trend that will persist in our business. Great, that makes a lot of sense. And then a quick question for Noemi, just on the guidance. So on the full year adjusted EVA guidance, you spoke to the increase there, and it looks like there was really nice app performance in one queue, but maybe the full amount wasn't carried through to the full year. So I'm just curious, was any of that related to the accounting change you called out last quarter, and were there any, you know, where are those incremental dollars being invested into the business? No, it's really more like seasonality of spend. We're obviously carrying and flowing through some of the performance from the first quarter as we continue to focus on profitability and scale.

Speaker 4: But we're also continuing to invest in our product organization. You heard Joe talk about all the innovations around generative AI, as well as global expansion, as well as the wallet. So those are areas of investments for us. We continue to invest in sales and marketing as well.

Speaker 4: in demand generation, in pipeline build and marketing campaigns, which you'll see materializing throughout the year. Those are areas that we are continuing to invest throughout the year, but again, we're flowing through a pretty large portion of the profitability, be it from the first quarter through the year. The other thing I would want to pull out as well is the cloud...

Speaker 4: in the product to ease the...

Speaker 10: the burden on the support. So all those things that we've started a couple years ago start to materialize now and we continue to expect cloud recurring growth margin to grow throughout the year as well. Great, it was definitely great to see it increase, you know, even as the flood. So congrats on the strong results there and thanks for taking my questions.

Speaker 10: Our next question comes from Matthew Fow, William Blair. Hey, great. Thanks for taking my questions. Wanted to first follow up on the generative AI discussion and just get your view in terms of how you're thinking about the sort of initial wave of impact in your business from the products you're developing. Is it?

Speaker 10: more furthering your competitive differentiation, or do you also envision a PEPM opportunity here with these products you're working on?

Speaker 3: Okay, that. So I appreciate the question. Yeah, we're going to a Renaissance right now in all aspects of text.

Speaker 3: but especially in the people applications that we really serve for our customers. The first and foremost is automation and efficiency.

Speaker 3: I think what we're able to do with tech is to start to drive more efficiencies and automation in a time of need. We can take what tasks would take a long time to do. Look at what we're doing with some of the things to really recruit candidates and find candidates into a...

Speaker 3: Very labor intensive to go through resumes. Very labor intensive to have interview after interview to answer their questions. You look at what chatbot technology can do and really powerful large language models. It can pre-write a lot of the content that you need and then it can provide those answers instantly instead of a lot of back and forth. Those type of efficiencies we're seeing from our customers. They're making a meaningful value add to their business when they need to drive efficiency.

Speaker 3: Are we looking to monetize that? Yeah, as we look through, I mentioned the concept of copilots. I look at the technology and again the business we're in is making people's work life better. We feel like fundamentally we can do that with this technology.

Speaker 3: We can start to elevate people's work and provide them with more time for the value add that they can add to the business as opposed to the more automated. And so we are looking to provide copilots for the different personas that we support, a copilot for an employee.

Speaker 3: in their career, help them through it. A co-pilot for a recruiter, a co-pilot for a payroll administrator who spends a lot of time in non-value-added work. And so yes, we feel like the co-pilot concept that we're doing is over time going to be monetized. New products that we can offer to our customers to really make work more.

Speaker 3: a co-pilot for a recruiter, a co-pilot for a payroll administrator who spends a lot of time in non-value-added work. And so yes, we feel like the co-pilot concept that we're doing is over time going to be monetized in new products that we can offer to our customers to really make work more efficient for their employees.

Speaker 1: Just a couple points. We also have a number of initiatives with generative AI internally.

Speaker 1: Specifically, if we look at the support group, 70% of the inbound tickets are what we classify as knowledge based. In other words, asking questions about the product, how do I do something? We have built a tool that when we are now testing it across 60 different support reps, I see that I have a lot of information from the business camp, I have a lot of help and just share some sinkhole information.

Speaker 1: We have found that the tool can answer 75%.

Speaker 1: of the inbound question. And we've trained it only with our knowledge faces and our implementation guide. In other words, we're to set the model not to look at the public internet for any information, only look at the documents that we've actually provided. And the ability for it to answer with a very high degree of competence.

Speaker 1: is 75% of the inbound questions can be answered by the tool. There are some other smaller features inside the product that we're looking at. If you're configuring the application and you require a description, say, for a job, we can call an API that basically returns the job description based on the name of the actual job. When you're working in different languages, when you create a record in the database for one language,

Speaker 1: for natural copilots. The same tool that we're using for support we'll be seeing quite a good return. You need to be able to actually do some of the configuration work, writing reports, data migration types of tasks. So I do think you'll see an impact as well to the cloud recurring growth margin over time as well.

Speaker 10: Great, very helpful detail on that. And then, you know, one on the full suite uptake you're seeing, and good to see the over 50% of new deals in the quarter taking the full suite. Is there any trend in terms of customer size that's adopting the full suite?

Speaker 1: It's right across the board. I'm seeing some very, very large organizations looking at the full suite. The hub experience and its attachment to the knowledge base of inside the actual system is very, very powerful.

Speaker 1: because it allows you to centralize your communications tied to the HR model that is present at the moment. The right experience gets in front of the right person.

Speaker 1: And that cuts right across the whole HCM spectrum. So you can have a candidate experience, a retiree, an alumni, an active employee. And you're always publishing pertinent information to that individual. And obviously, the more modules you use within our system, the more information that you can make present will make.

Speaker 2: engagement and communication perspective. The only other thing I would add if I could is just we said this last quarter and we would underscore it again because it's showing up both on the sales side and the go live side. Is it during a tough macro platform players win? That's just all there is to it and we're really seeing that in our pipeline.

Speaker 10: Perfect. Thank you so much. We'll take our next question from Jared Levine from Colin.

Speaker 7: Thank you. In terms of the demand environment, were there any notable differences in terms of by employer size, geography, or vertical here? And then in terms of the qualified pipeline, any noticeable change relative to the beginning of the year as well?

Speaker 1: A large enterprise and enterprise pipeline continues to grow relative to last year, but that's tied largely to the changes we made from a go-to-market perspective and the build-out of the actual team. It's a healthy pipeline, I'll say, right across segment and across GF.

Speaker 2: We were fully staffed out of the gate, which is critical to a really good launch of the year and a good successful good market. Our company ...

Speaker 2: considering adding a headcount in areas where we're seeing real buoyancy and we're doing that judiciously but you should expect frankly that you know once you launch a go-to-market they are only tweaking it really at the mid-year point and we think we have a great go-to-market that's producing excellent results so that's about where we're at

Speaker 6: Great, thank you.

Speaker 5: And we'll take our next question from Raimo Lynchau. Thank you. Can I stay on the pipeline question please? Obviously we were in the economy is impacted at the moment. The question is to what degree?

What are you seeing in terms of early stage pipeline and willingness of clients to think about these projects that will usually take a while to move over payroll etc. What are you seeing in early stage pipeline? Thank you and congrats from me as well.

Thanks a lot. Well, first, Remo, I would argue it's not a long implementation. We've had very successful implementations at the large enterprise side in that five to nine month time frame.

So the move from one payroll system to Dayforce is very streamlined, very effective, and typically it solves a lot of compliance and inefficiencies for the organization right off the actual bat. As Lee pointed out, the strength of our platform. And I would argue now that each of the modules that we have in the platform are very, very effective.

competitive even against the best of breeds. In other words, they're very, very deep. Tied to the fact that we can really lift up the overall experience to the person through the way that it flows, information flows across the different modules.

It gives us a strong advantage. There is a significant savings to the customer when they move to Dayforce from a whole range of different types of technology. The savings come from reduced subscription fees. You eliminate unnecessary IT integration.

and unnecessary IT resources. And at the same time, you can make the processes that the employees and the managers go through much more efficiently.

And there's a further benefit from an analytical decision-making perspective that the information is all together which makes reporting and visualizations possible.

So those we find are actually driving it. And as I, in my kind of longish type of talk today, the macro in many ways is a big wave. And we're riding that wave successfully. So a lot of that has actually become a tailwind through our business.

If I could just add two things, Remo. I'll say to echo what David's last point, market leading companies with strong balance sheets are focusing on the fundamentals in their investing. That's just the basics.

And we're seeing that at the top of our funnel. The second thing I would say, just answer your question very directly, you asked about deployment strategies. I mean, we cited in our sales wins in our press release, the humanitarian aid organization in Australia with 27,800 employees with plans to double. So they go in with one trot.

So, global multinationals look at taking bite-sized pieces. They make a holistic commitment. They roll them out one region at a time, generating results and using that result to drive further growth and efficiency.

Okay, excellent. Hold on. And our next question comes from Robert Simmons of DA Davidson.

Hey, thanks for taking the question. Could you update us on the ideal talent marketplace? Yeah, the progress is going quite nicely. We're in the phase where we now are signing up customers. We expect to launch it towards the end of the year. Got it. Great. Can you talk about what you're seeing in terms of the sales cycles?

And it's obviously now a cyber piece that typically you have to go with as well. So as long as you basically go through the processes in parallel, you're not really seeing a elongated sales cycle. And our next question is going to come from Michael Turr.

Just any commentary you can provide on what you're expecting from employment trends, it seems like those are holding in steady. So is it fair to assume that that is also what's assumed in the guide for the rest of the year? And then any color on just how you're thinking about the mix of growth from new customers, expansion, or any additional drivers you'd flag for us just in thinking through the rest of the year. Thanks.

Yeah, we're not being economists, so we're basically holding the employment levels rather constant for the remainder of the year. Obviously, we did see some tailwinds come into Q1, but we're not assuming that continues for the year. We're focusing, as Lee pointed out, in the cross-sales across the actual base and the focus on new customers.

investments with the SIs accelerating their generation of pipe and their ability to implement the actual product to get us to revenue quicker. Thank you. And we'll take our last question from Dan Jester of BMO.

Great, thanks for squeezing me in. Good evening everyone. So to start with, maybe I wanted you to expand on the comments you made in the prepared remarks about the tailwinds from compliance and reporting. It feels like in Europe in particular that the compliance and reporting piece is going to get.

a lot more stringent over the next couple of years. So, you think about sort of adding new customers and expanding that new customer pipeline. Is compliance and reporting, how much of that alone can be sort of a driver of a new conversation and then expands or is the conversation always going to start with pay or workforce management?

And compliance is a piece that fits in nicely. So what I'll say about compliance is that it gets us to the finish line very quickly. That many of the other players in market really don't have the same capabilities that we do around compliance.

And as people go deep into the actual product, they can understand what is truly meant about compliance. And now remember, compliance is multifaceted today. You've got the basic wage and hour compliance. And if companies aren't compliant from a wage in our perspective, the liability that they carry.

is very, very high. There's a piece around internal audit and SOX compliance and make each of it you actually have a system that is able to be used and to actually report correctly to your audit to maturity and your external audit is very important. There's a HR reporting compliance.

which all the different GOs, the various types of HR reports and employment reports that have to go to the various types of GOs. There is obviously the cyber piece that flows into that as well. If you're dealing with Europe as well, they have data residency requirements, but you also have to adhere to. If you are of g setting, we're allowed to speak to a national work group, so there is a ingeking and there is a regulated and we

which is both where the actual data is hosted, and second, who is allowed to actually see that organization typically tied to where that person actually resides as well. And on top of that, effectively, does the vendor have enough process.

that are audited and conformed to the required standards.

You also get into various types of GAs, are complied by function like in Germany, there's effectively payroll compliance standards that you have to adhere and to report to as well. But we definitely do have an advantage in compliance.

Zee, do you want to talk about the other one? Yeah, I mean, I think the only other thing I would say is, first of all, Gartner rates is number one in compliance. So just to attest to David's point. Second, you can imagine, right, we sell to a variety of different personas, CFOs, CHROs, heads of operations in every jurisdiction, frankly, in which we operate. And each of them have different needs. And as I mentioned before, in this macro, buyers are looking to consolidate point solutions. And we are having a little bit of a bounce. And so I would say it is typical of all

While it go live, if I do my math correctly, it seems like it was a slower pace in the first quarter than you had for a while. Anything you'd call out there, thank you very much.

We're focused mostly on penetration or increasing the eligibility of the wallet across the actual base. But if I look at actual loads, they're up 3x relative to last year. So we loaded I think about 350 million.

inside the quarter. So we've now passed $1.5 billion in terms of loads onto the actual wallet.

to quarter so we've now passed 1.5 billion in terms of loads onto the actual wallet. Thank you.

Thank you everyone that concludes our conference call.