Q1 2024 Dayforce Inc Earnings Call

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Unknown Executive: And with that, I'd like to turn the call over to David.

And with that I'd like to turn the call over to David.

David: Thanks, Jeremy, and thank you all for joining us. Next to me, I have Steve, who will review customer and market highlights, Joe, who will highlight platform innovation, and then we'll hand the call back to Jeremy to provide details on our first quarter performance and update it for your outlook. In the first quarter, I'm pleased to report another strong quarter for Day 4. We grew both revenue and profit materially, and we exceeded guidance across all key revenue and profitability metrics.

David: Thanks, Jeremy and thank you all for joining US next to me I have Steve who will review customer and market highlights Jarrett, who will highlight platform innovation and then we'll hand the call back to Jeremy to provide detailed chart first quarter performance and updated full year outlook.

David: Day 4's recurring revenue of $337 million was up 24% including float and 23% excluding float, and total revenue of $431.5 million increased 16%. On the profitability side, gap gross profit was $205 million, up 28% from last year. Cloud recurring gross margin was 79%, up 170 basis points versus last year, and adjusted cloud recurring gross margin was 80%, up 130 basis points versus last year. Adjusted EBITDA was $130 million, up 23%, representing an adjusted EBITDA margin of 30.1%, up 170 basis points versus last year.

In the first quarter I am pleased to report another strong quarter for day Falls, we grew both revenue and profit materially and we exceeded guidance across all key revenue and profitability metrics.

Steve: Staples recurring revenue of $337 million was up 24%, including float and 23% excluding slipped and total revenue of $431 5 million increased 16% on the profitability side GAAP gross profit was $205 million up 28% from <unk>.

Last year cloud recurring gross margin was 17, 9% up 170 basis points versus last year and adjusted cloud recurring gross margin was 80% up 130 basis points versus last year, adjusted EBITDA was $130 million up 23% representing an adjusted EBITDA.

Steve: And of 31% up 170 basis points versus last year.

David: We remain confident in the business with strong momentum across sales, product, and operations, and we have raised our guidance across all key metrics. As we look at the rest of the year and well beyond it, the HCM market opportunity is very large and continues to expand. Estimates of global HCM and managed payroll spending are currently in the $50 to $60 billion range and growing at over 10% annually based on a day-fourth analysis of IDC data.

Steve: We remain confident in the business with strong momentum across sales product and operations and we have raised our guidance across all key metrics.

Steve: As we look at the rest of the year and well beyond the HCM market opportunity is very large and continues to expand.

Steve: Estimates of global HCM and managed payroll spending are currently in the $50 billion to $60 billion range and growing at over 10% annually based on the day four for analysis of IDC data.

David: This continues to be a resilient and durable market of growth. Day Force is well positioned to capitalize on this opportunity in front of us, as organizations of all sizes across the world need to be more productive and to optimize their technology and processes. Leaders need to create quantifiable value for their organizations and better experiences for their people with the platforms they choose, and they both meet that demand by providing simplicity at scale.

Steve: This continues to be a resilient and durable market of growth Dave.

Steve: <unk> is well positioned to capitalize on this opportunity in front of us as organizations of all sizes across the world need to be more productive and to optimize their technology and processes leaders need to create quantifiable value for their organizations and better experiences for their people with the platform they choose.

Steve: And Dave was meet that demand by providing simplicity and scale.

David: Simplicity at scale is at the core of our product innovation, particularly as we accelerate our AI capabilities with Davos Copilot for both our customers and inside our organization. As we've discussed, our approach to AI is built on our foundation of trusted compliance and a single source of data.

Simplicity at scale is at the core of our product innovation, particularly as we accelerate without AI capabilities, where staples crew pilot for both our customers and inside our organization as.

Steve: As we've discussed our approach to AI is built on our foundation of trusted compliance and a single source of data.

David: We launched the chartered version of Dayforce CoPilot and have seen our initial customers and their employees utilize CoPilot as an AI teammate to help supercharge productivity. We believe there are numerous use cases across our customer base to help them gain a competitive advantage by using Dayforce CoPilot. Internally, it's been very exciting to see how CoPilot has significantly enhanced the Dayforce experience within our own Dayforce environment, answering questions and surfacing critical company content to help our daymakers be more productive every day.

Steve: We launched the charter version of <unk> co pilot and have seen our initial customers and their employees utilized co pilot.

As an AI teammates to help supercharge productivity. We believe there are numerous use cases across our customer base to help them gain a competitive advantage by using <unk> for the pilot internally, it's been very exciting to see how copilot has significantly enhance the day force experience within our earn day force environment.

Steve: Answering questions and surfacing critical company content to help our day maker's being more productive every day.

David: Joe will share more on our progress shortly, but I'm very encouraged by our pace of innovation. Finally, I'm happy to announce the appointment of our new Chief People Officer, Amy, to join Dave Voss and our leadership team this week. Amy brings extensive experience driving business growth through talent training and development, workforce engagement and exclusivity, and operational efficiencies. Welcome to the team, Amy.

Speaker Change: Joe will share more on our progress shortly but I'm very encouraged with our pace of innovation.

Speaker Change: Finally, I'm happy to announce an appointment of a new Chief people Officer, Amy who joined <unk> and our leadership team this week.

Speaker Change: He brings extensive experience driving business growth through talent training and development.

Speaker Change: Workforce engagement and exclusivity and operational efficiencies welcome to the team Amy.

David: In summary, we had a strong start to 2024, and I remain excited for the year ahead. I'd like to thank our strong community, our customers, partners, and daymakers. I'll now pass the call to Steve to discuss customer and market highlights. Steve, over to you. Thanks, David.

Speaker Change: In summary, we had a strong start to 2024 and I remain excited for the year ahead.

Speaker Change: I'd like to think how strong community our customers partners and de makers I will now pass the call to Steve to discuss customer and market highlights Steve over to you. Thanks David.

Steve: In Q1, we delivered balanced and consistent growth across customer acquisition, activation, expansion, and retention. We had strong results for sales, kickoffs, and go live. We ended the quarter with Dayforce recurring revenue per customer up 19% year over year, and we now have 6,575 customers live on the Dayforce platform. From a sales perspective, we continue to see strong demand for Dayforce across the globe and saw an acceleration of competitive wins in our mid-market segment as a complement to the continued expansion in our enterprise segments we've talked about before.

Steve: In Q1, we delivered balanced and consistent growth across customer acquisition activation expansion and retention.

Steve: We had strong results for sales Kickoffs and go lives. We ended the quarter with de force recurring revenue per customer up 19% year over year and we now have 6575 customers live on the <unk> platform.

Steve: From a sales perspective, we continue to see strong demand for day parts across the globe and saw an acceleration of competitive wins and our mid market segment as a complement to the continued expansion in our enterprise segments, we've talked about before.

Steve: Sales pipeline remains healthy, and we see steady demand for the Dayforce full suite platform in all regions. Our partner ecosystem momentum continued into Q1, with SI-led sales growth up 35% year-over-year. We continue to demonstrate the strength of our overall Day 4 platform, attaching the full suite to nearly 50% of new sales. We also saw continued performance across our customer-based sales motion, with customer add-on sales comprising nearly 40% of total bookings, including significant growth in our talent intelligence.

Steve: Sales pipeline remains healthy and we see steady demand for the date for its full suite platform in all regions. Our partner ecosystem momentum continued into Q1 with ESI led sales growth up 35% year over year.

Steve: We continued to demonstrate the strength of our overall, Dave horse platform attaching full suite to nearly 50% of new sales bookings.

Steve: We also saw continued performance across our customer base sales motion with customer add on sales comprising nearly 40% of total bookings, including significant growth in our talent intelligence suite.

Steve: And on Dayforce Wallet, we saw healthy traction with over 1,200 customers live and 1,960 new customers added in total. Average wallet registration rates continue to trend positively, remaining above 65%, and we continue with healthy wallet usage of about 25 times per month.

Steve: And on <unk> wallet, we saw healthy traction with over 200 customers live in 1900 16, new customers added in total average wallet registration rates continue to trend positively remaining above 65% and we continue with healthy wallet usage of about 25 times per month, we also launched <unk>.

Steve: We also launched two new revenue-generating features for Wallet in the first quarter, Instant Transfer, which allows users to move money off the card instantly using credit rails for a fee, and Cash App Transfer, which allows users to move money to cash apps and provides day force with the interchange revenue. We received positive news from the Government of Canada, which secured additional budget to progress the payroll modernization project. We expect to see continued investment in the program and expanded opportunities for Dayforce and our partners with potential acceleration of related revenues in 2025.

Steve: New revenue generating features to wallet in the first quarter instant transfer, which allows users to move money off the card instantly using credit rails for a fee and cash app transfer, which allows users to move money to cash apps and provides day for us with the interchange revenue.

Steve: We received positive news out of the government of Canada with secured additional budget to progress the payroll modernization project. We expect to see continued investment in the program and expanded opportunity for data for us and our partners with potential acceleration of related revenues in 2025.

Steve: Now, turning to key sales wins from across the globe in Q1, a large Canadian grocer is expanding its existing Dayforce partnership with the addition of Dayforce Talent to support more than 100,000 employees. Additionally, a U.S. energy company with 17,000 employees has selected Dayforce for payroll and workforce management. One of the world's leading independent insurance brokers has chosen the full Day-4 suite for 9,300 employees in 29 countries. Western Digital Technologies, a global provider of disk drives and flash memories, is expanding its existing partnership with Dayforth by adding managed payroll for 8,000 employees in the U.S. Carhartt selected Davos as a global people platform for 3,500 employees across seven countries.

Steve: Now turning to the key sales wins from across the globe in Q1, a large Canadian grocer is expanding its existing day for its partnership with the addition of Dave horse talent to support more than 100000 employees of U S Energy company with 17000 employees that selected <unk> for payroll and workforce management.

Steve: One of the world's leading independent insurance brokers has chosen the full day for suite for 9300 employees in 29 countries West.

Western digital technologies, a global provider of disk drives and flash memories is expanding its existing partnership with day fourth by adding manage payroll for 8000 employees in the U S. Carhartt selected <unk> as its global people platform for 3500 employees across seven countries.

Steve: One of the top 10 dental support organizations in the U.S. selected Day Force as a strategic partner to support 5,000 employees. Some of the key Q1 customer go-lives included an international real estate developer and property manager launching Dayforce Managed Payroll, Managed Benefits, and Time in Attendance for 22,000 U.S. employees. A global manufacturing and retail organization with 65,000 employees across 56 countries extended its day force use to include this Malaysian operation. Windstream Holdings went live with the full Day 4 suite for 9,500 employees across the U.S. and Canada.

One of the top 10 dental support organizations in the U S selected day parts as a strategic partner to support 5000 employees.

Steve: Some of the key Q1 customer go lives included in International Real estate developer and property manager launch day force manage payroll manage benefit time in attendance to 22000 U S employees, a global manufacturing and retail organization with 65000 employees across 50.

Steve: Six countries extended its de force us to include this Malaysia operations.

Steve: <unk> stream holdings went live with the full <unk> suite for 9500 employees across the U S and Canada, a global analytics professional services company with over 35000 employees in 40 countries expanded its day parts used to 6000 U K employees, and a California grocery chain with eight.

Steve: A global analytics professional services company with over 35,000 employees in 40 countries expanded its Day Force use to 6,000 U.K. employees. And a California grocery chain with 18,000 employees in 170 locations went live with Day Force Managed Pay, Time, Attendance, and Advanced Schedule. With that, I'm now pleased to hand off to my innovation partner, Joe Korngiebel, our Chief Product and Technology Officer. Joe, over to you.

Steve: 18000 employees in 170 locations went live with day parts manage pay time attendance and advanced scheduling.

Joseph B. Korngiebel: With that I'm now pleased to hand off to my innovation partner, Joe corn gable, our chief product and Technology officer, Joe over to you.

Speaker Change: Thank you Steve.

Joe: We had a fast and exciting start to 2024 in terms of product innovation. As you heard from David, with the launch of Dayforce Copilot to our chartered customers at the beginning of the year, our new generative AI teammate for the boundless workforce is empowering our customers, their employees, and also our own employees here at Dayforce with new levels of productivity and efficiency. This cutting-edge innovation marks a significant milestone in our commitment to make work life better for our customers and their entire workforce.

We had a fast and exciting start to 2024 in terms of product innovation as.

As you heard from David with the launch of D Force co pilot to our charter customers at the beginning of the year, our new generative AI teammates for the balance workforce is empowering our customers their employees and also our own employees here at day force with new levels of productivity and efficiency.

Speaker Change: This cutting edge innovation marks a significant milestone in our commitment to make work life better for our customers and their entire workforce.

Joe: Dayforce Copilot provides instant answers to common workforce questions from the data that is often buried within large employee handbooks, detailed benefits guides, and lengthy corporate FAQs. Powered by our best-in-class data and per-customer large-language model architecture, we are just beginning the innovation with Dayforce Copilot. We are now expanding beyond our initial answering questions and summarizing data use cases into full-fledged task automation and content generation with generative AI. And it's all within the seamless, in-context DaveForce CoPilot user experience.

Speaker Change: <unk> copilot provides instant answers to common workforce questions from the data that is often buried within large employee handbooks detailed benefits guides and lengthy corporate faq's.

Speaker Change: Powered by our best in class data and per customer large language model architecture. We are just beginning the innovation with Dave Horse co pilot.

Speaker Change: We are now expanding beyond our initial answering questions and summarizing data use cases into full fledged task automation and content generation with generative AI and its all within the seamless in context <unk> co pilot user experience.

Joe: As we iterate and continue this transformative journey, we extend our sincere gratitude to our early customers for their invaluable partnership and feedback. Together, we are truly shaping the future of work and setting a new standard of excellence in our industry. We are delivering Dayforce Copilot as a new, simply priced add-on to our entire suite of HCM products. As you can tell, I'm excited about the value that our customers are starting to realize with Dayforce Copilot and the massive impact that a single system that provides a single source of truth for their people data can have on their business.

Speaker Change: As we iterate and continue this transformative journey, we extend our sincere gratitude to our early customers for their invaluable partnership and feedback together, we are truly shaping the future of work and setting a new standard of excellence in our industry.

Speaker Change: We are delivering day force copilot as a new simply priced add ons to our entire suite of HCM products.

Speaker Change: As you can tell I'm excited about the value that our customers are starting to realize with Dave horse co pilot and the massive impact that a single system that provides a single source of truth for their people data can have on their business.

Joe: In addition to these innovations with Dayforce Copilot, we also delivered several key innovations to help our customers optimize their talent, manage compliance, drive productivity, and build great employee experiences. We deliver improved candidate and recruiting experiences within our talent products to enable faster and more efficient recruiting processes when they're needed most. We launched Dayforce Alumni Management, a new product that helps organizations maintain strong relationships with their past employees, who can become boomerang talent or even refer new talent to a business.

Speaker Change: In addition to these innovations with Dave Horse co pilot. We also delivered several key innovations to help our customers optimize their talent.

Speaker Change: One is compliance.

Speaker Change: Drive productivity and build great employee experiences.

Speaker Change: We delivered improved candidate and recruiting experiences within our talent products to enable faster and more efficient recruiting processes. When they are needed most.

Speaker Change: We launched de force alumni management, a new product that helps organizations maintain strong relationships with their past employees, who can become boomerang talent or even referred new talent to our business.

Joe: We enhanced our leading workforce management products to support companies that have multiple locations and departments in order to drive greater efficiencies through centralized and multi-week calendaring scheduling in a flash. And finally, on compliance, which is job one for us here at Dayforce. We added more than 160 global compliance updates in just the first quarter. This includes enhanced year-end requirements, optimized reporting functionality, expanded data import capabilities, and complete updates to our tax rates to help our customers operate with confidence. A truly exciting start to the year for us and our customers. But now, let's talk about the financials. Over to you, Jeremy. Thanks, Joe. We started 2020.

Speaker Change: We enhanced our leading workforce management products to support companies.

Companies that have multi location multi departments in order to drive greater efficiencies through centralized and multi week calendaring scheduling in a flash.

Speaker Change: And finally on compliance which is job one for US here at day Force, we added more than 160 global compliance updated updates just in the first quarter.

This includes enhanced yearend requirements optimize the reporting functionality expanded data import capabilities and complete updates to our tax rates to help our customers operate with confidence.

Speaker Change: Truly exciting start to the year for us and our customers, but now let's talk financials over to you Jeremy.

Jeremy: Thanks, Joe.

Jeremy: We started 2024 strong, underpinned by healthy top-line growth and continued profitability improvement. As David said, we exceeded guidance across all key revenue and profitability metrics.

Jeremy: We started in 2024 strong underpinned by healthy topline growth and continued profitability improvements.

Jeremy: As David said, we exceeded guidance across all key revenue and profitability metrics.

Jeremy: We deliver day force recurring revenue of $337.2 million, growing 24%. And excluding float, Dayforce recurring revenue grew 23%, underpinned by strong go-lives and healthy underlying customer trends. Total revenue of $431.5 million grew 16% on a gap basis and 17% on a constant currency basis, highlighting the continued convergence of day force recurring revenue and total revenue growth rates, as 78% of our total revenue is day force recurring revenue. Power pay recurring revenue was $26 million, growing 8% including float and 5% excluding float.

Jeremy: We delivered day force recurring revenue of $337 2 million growing 24% and.

Jeremy: And excluding float de force recurring revenue grew 23% underpinned by strong go lives and healthy underlying customer trends.

Total revenue of $431 5 million grew 16% on a GAAP basis, and 17% on a constant currency basis, highlighting the continued convergence of Dave horse recurring revenue and total revenue growth rates at 78% of our total revenue as Dave horse recurring revenue.

Jeremy: Power pay recurring revenue was $26 million growing 8%, including float and 5% excluding float.

Jeremy: On a gap basis, gross profit was $205 million, up 28%, and operating profit was $41 million, up 6%, including a full quarter of the amortization of the Ceridian trade name, which is in G&A expenses at approximately $21 million. Cloud recurring gross margin was 79 percent, up 170 basis points versus last year. And excluding float, our cloud recurring gross margin also continued to expand nicely, improving by 170 basis points year over year.

On a GAAP basis gross profit was $205 million up 28% and operating profit was $41 million up 6%, including a full quarter of the amortization of the ceridian trade name, which.

Jeremy: And G&A expenses at approximately $21 million.

Jeremy: Yes.

Jeremy: Cloud recurring gross margin was 79% up 170 basis points versus last year and excluding float our cloud recurring gross margin also continued to expand nicely improving by 170 basis points year over year.

Jeremy: On a non-GAAP basis, Adjusted Cloud Recurring Gross Margin was 80%, expanding 130 basis points year over year as the Dayforce platform continues to scale. We view adjusted cloud recurring gross margin as a key metric that shows how much we make from an average dollar of recurring revenue after customers go live on the platform. It's a great comparison to our HCM peers in the market, and it excludes non-cash items like depreciation, share-based compensation, as well as R&D-related costs.

Jeremy: On a non-GAAP basis adjusted cloud recurring gross margin was 80% expanding 130 basis points year over year as the day force platform continues to scale.

Jeremy: We view adjusted cloud recurring gross margin as a key metric that shows how much we make from an average dollar of recurring revenue after customers go live on the platform.

Jeremy: Great comparison to our HCM peers in market and it excludes non cash items like depreciation share based compensation as well as R&D related costs.

Jeremy: Adjusted EBITDA was $129.9 million, up 23%, or a 30.1% margin, expanding 170 basis points year over year and reflecting our continued improvement in gross profit margins and scale in adjusted G&A. From a cash flow perspective, operating cash flows were $9.1 million in Q1, $2 million lower than last year, primarily due to higher trade receivables. This was the result of timing, specifically related to the change in our brand name, as some customer payment cycles were delayed as a result of our name change to day four.

Adjusted EBITDA was $129 9 million up 23% or 31% margin expanding 170 basis points year over year, and reflecting our continued improvement in gross profit margins and scale and adjusted G&A.

Jeremy: From a cash flow perspective, operating cash flows were $9 1 million in Q1.

$2 million lower than last year, primarily due to higher trade receivables.

Jeremy: This was the result of timing specifically related to the change in our brand name is some customer payment cycles were delayed as a result of our name change today for us we.

Jeremy: We remain confident in our full-year cash flow targets of an upper 50% conversion from full-year adjusted EBITDA to operating cash flow. As expected, Illumi revenue added approximately 100 basis points of growth to our day force recurring revenue in the first quarter. Looking ahead for the full year, we now expect Dayforce recurring revenue of $1.163 to $1.168 billion, or growth of 21% as reported and on a constant currency basis. Total revenue of $1.73 billion to $1.74 billion, or approximately 14 to 15% growth as reported and on a constant currency basis.

<unk> confident in our full year cash flow targets of upper 50% conversion from full year adjusted EBITDA to operating cash flow.

Jeremy: As expected the lumi revenue added approximately 100 basis points of growth to our <unk> recurring revenue in the first quarter.

Jeremy: Looking ahead for the full year, we now expect de force recurring revenue ex float of 1163 to $1 $1 68 billion or growth of 21% as reported and on a constant currency basis.

Jeremy: Total revenue of $1 73 billion to $1 74 billion.

Jeremy: Or approximately 14% to 15% growth as reported and on a constant currency basis.

Jeremy: Adjusted EBITDA of $484 to $499 million, or 28% to 28.7% margin. And float revenue is now expected to be $183 million for the full year, reflecting fewer rate cuts than originally anticipated. For the second quarter, we expect a force recurring revenue ex float of $276 to $279 million, or growth in the range of 19% to 21% as reported or 20% to 21% on a constant currency basis. Total revenue of $414 million to $419 million, or growth of 13% to 15% as reported and on a constant currency basis, and adjusted EBITDA is expected to be in the range of $108 to $113 million, or a 26.1 to 27% margin.

Jeremy: Adjusted EBITDA of $484 to $499 million or 28% to 28, 7% margin.

Jeremy: Float revenue is now expected to be $183 million for the full year, reflecting fewer rate cuts than originally anticipated.

Jeremy: For the second quarter, we expect a force recurring revenue ex float of $276 million to $279 million or growth in the range of 19% to 21% as reported or 20% to 21% on a constant currency basis.

Jeremy: Total revenue of $414 million to $419 million or growth of 13% to 15% as reported and on a constant currency basis.

Jeremy: And adjusted EBITDA is expected to be in the range of $108 million to $113 million or 26, 1% to 27% margin.

Jeremy: Float revenue is expected to be $47 million for the second quarter. As you recall, there are typically a handful of items that impact sequential growth between Q1 and Q2, including year-end print and filing revenue that drives Q1 higher but doesn't reoccur in Q2, and seasonal employee volumes that tend to fall off in Q2. This is reflected in our guidance. We have also updated the FX rate assumptions used for our guidance as the current spot rate of approximately 1.37 USD to CAD has worsened from the 1.33 level observed at the beginning of 2024.

Jeremy: Float revenue is expected to be $47 million for the second quarter.

Speaker Change: As you recall there are typically a handful of items that impacts sequential growth between Q1 and Q2 <unk>.

Speaker Change: Including year end print and filing revenue that drive Q1, higher but don't reoccur in Q2 and seasonal employee volumes that tend to fall off in Q2.

Speaker Change: This is reflected in our guidance.

Speaker Change: We have also updated the FX rate assumption used for our guidance as the current spot rate of approximately $1 $3 7 million USD to cat has worsened from the 133 level observed at the beginning of 2024.

Jeremy: Before we go into Q&A, I want to remind investors and stakeholders that our financial reporting and accounting policies are underpinned by strong processes and procedures that undergo multiple layers of internal and external review. We stand behind our financial reporting and accounting policies, which have been carefully considered, reviewed, and audited, and transparently disclosed since becoming a public company in 2018. We encourage investors to review our financial statements along with our past earnings calls, transcripts, and press releases for a comprehensive view of our financial profile, our accounting policies, and our viewpoint on key financial and operating metrics. Thank you for your continued support and conviction in Dayforce. We are excited for the future. With that, we can begin the Q&A portion of our call.

Speaker Change: Before we go into Q&A, I want to remind investors and stakeholders that our financial reporting and accounting policies are underpinned by strong processes and procedures that undergo multiple layers of internal and external review.

Speaker Change: We stand behind our financial reporting and accounting policies, which have been carefully considered reviewed unaudited and transparently disclosed since becoming a public company in 2018.

Speaker Change: We encourage investors to review our financial statements along with our past earnings call transcripts and press releases for a comprehensive view of our financial profile, our accounting policies in our viewpoint on key financial and operating metrics.

Speaker Change: Thank you for your continued support and conviction and day for US we are excited for the future.

Speaker Change: With that we can begin the Q&A portion of our call.

Operator: Thanks, Jeremy. I'd like to remind everyone to please keep their questions to one question and one follow-up. Our first question comes from Mark Marcon with Baird. Mark?

Speaker Change: Thanks, Jeremy I'd like to remind everyone to please keep your questions to one question I wanted to follow up our first question comes from Mark Marcon with Baird.

Mark Steven Marcon: Hey, good morning, everybody. You know, I want to go. I've got two questions.

Mark Steven Marcon: Hey, good morning, everybody.

Mark Steven Marcon: One, the government of Canada, in their 2024 budget, they basically ended up committing $135 million Canadian to improve public service, human resources, and pay systems. That's up materially relative to the 52 million Canadian that they had allocated during the prior year. And so what I'm wondering is, you know, first of all, it sounds like things are really progressing. Well, you had mentioned on the call that you don't anticipate seeing a major step until 2025.

Mark Steven Marcon: I wanted to go.

Mark Steven Marcon: Two questions one.

Mark Steven Marcon: Government of Canada in there.

Mark Steven Marcon: 2020 for budget, they're basically ended up committing a $135 million.

Mark Steven Marcon: Canadian <unk>.

Mark Steven Marcon: To improve public service human resources, and pay systems lots up materially relative to $52 million in Canadian.

Mark Steven Marcon: <unk> allocated during the prior year and so what I'm wondering is.

Speaker Change: First of all it sounds like things are really progressing well you had mentioned on the call that you don't anticipate seeing a major step up until.

Speaker Change: Until 2025, I know that there's some sensitivities in terms of what you can disclose but it sounds like things are going really well and I'm wondering if you can give us any additional perspective in terms of what the next milestones are what we should be monitoring because this is obviously a huge deal.

Mark Steven Marcon: I know that there are some sensitivities in terms of what you can disclose, but it sounds like things are going really well. And I'm wondering if you can give us any additional perspective in terms of what the next milestones are, and what we should be monitoring, because this is obviously a huge deal.

Stephen H. Holdridge: Yeah, hey, Mark, this is Steve Holdridge. I'll take that, and anyone's welcome to jump in. Yeah, as I said on the call, we view this as positive news, right? This is a statement of continued commitment. It is a budget expansion going into that. So, in terms of the macro, this further cements that.

Speaker Change: Hey, Mark this is Steve voltage I'll take that and everyone's welcome to jump in yet as I said on the call. We view this as positive news right that this is a statement of continued commitment. It is a budget expansion going into that so in terms of the macro. This further cements that keep in mind that this is a long term program is probably a minimum of two years before we even.

Stephen H. Holdridge: Keep in mind that this is a long-term program. It's probably a minimum of two years before we even begin to see the first set of go-lives. A big chunk of this is to continue the funding from previous years. Another big chunk of it goes to the government in terms of their labor and infrastructure. And then there's a bunch of partners we have with it, but we do expect an uptick, a lot of it focused on the implementation and services sort of work, and then in early 2025, we'll expect to be seeing some increases in employee volumes there. So, overall, positive, but part of a long journey.

Speaker Change: Again to see the first set of go lives a big chunk of this is to continue the funding from prior years. Another big chunk of that goes to the government in terms of their labor and infrastructure and then Theres a bunch of partners, we have with it but we do expect an uptick a lot of it focused on the implementation and services sort of work and then in early 2025, we will expect.

Speaker Change: To be see some increases in employee volumes there. So overall positive, but part of a long journey.

Mark Steven Marcon: Got it. And then you, as my follow-up, Dayforce co-pilot.

Speaker Change: Got it and then.

Speaker Change: Follow up Jay Force co pilot.

Mark Steven Marcon: David and Joe, you both sounded extremely excited about it. Joe, you mentioned that there's simplified pricing around it. I'm wondering, can you give us any sense with regard to the incremental pricing and what the early customer feedback is, and how you expect that to translate, you know, to upsells to the existing client base? Mark, you did.

Speaker Change: David and Joe your bulk sounded extremely excited about it.

Speaker Change: Joe you mentioned with the simplified pricing around it I'm wondering can you give us any sense with regards to the incremental pricing.

Speaker Change: What the early customer feedback is and how you expect that to translate.

Speaker Change: Two up sells to the existing client base.

Joe: Mark, good to hear your voice and thank you for the question. Yeah, Copilot is a foundational transformation in how people use a people platform to be able to get answers and make more efficient and productive decisions for their employees. We started with an early design program. We brought customers in early to start to figure out how the value could be realized. That early partnership work with our customers has now been transformed into a charter program.

Speaker Change: Mark good to hear your voice and thank you for the question.

Copilot as a foundational.

Mark Steven Marcon: Transformation in how people use of people platform to be able to get answers and make more efficient and productive <unk>.

Mark Steven Marcon: Decisions for their employees.

Mark Steven Marcon: We started with an early design program that we brought customers in early to start to vet out how the value could be realized that early partnership work with our customers has transformed now into our charter program. We have our early customers leveraging with their customers uploading documents. So they can see the answers that are oftentimes buried.

Joe: We have our early customers leveraging it with their customers, uploading documents so they can see the answers that are oftentimes buried in different documents, as I mentioned, to be able to answer them so that it really takes the workload off of your HR admins and your staff. It can really optimize the performance of your staff in terms of their ability to get answers done and get back to their job. For us, that is rolling out now.

Mark Steven Marcon: And different documents as I've mentioned to be able to answer it. So it really takes the workload off of your HR admins and your staff. It can really optimize the performance of your staff in terms of their ability to get answers doesn't get back to their job.

Joe: We'll then go from that to general availability in the second half of this year. As I mentioned in my statements, we are simplifying the pricing. There's a lot in the industry going around about complex pricing and these types of generative AI tools. For us, it's an add-on to any of our products within our HCM suite. And so, if you just buy one product or buy our full suite, you can add that on to get the productivity boost. And our customers are giving us feedback that that's exactly what we want. We're already seeing the same kind of interest among our prospective customers, and it really moves us forward.

Mark Steven Marcon: For us that is rolling out now will then go from that to general availability in the second half of this year as I mentioned in my statements. We are simplifying the pricing there is a lot in the industry going around rail complex pricing of these type of generative AI tools for us it's an add on to any of our products with our HCM suite and so if you just buy one.

Mark Steven Marcon: The buyer pools, you can add that on to get the productivity.

Mark Steven Marcon: And our customers are giving us feedback that's exactly what our RCC.

Mark Steven Marcon: Within our prospective customers at the same kind of interest and it really moves us forward.

Mark Steven Marcon: Can I sneak one more in? Jeremy, did you build anything in, in terms of recurring revenue, for this?

Speaker Change: Can I sneak one more in.

Speaker Change: Jeremy did you build anything in terms of recurring for those.

Hi, Mark.

Jeremy: Mark, we at this point, probably not incrementally in. I think we were testing out the use cases. We're, we're, we're building this up with the customer base, and probably not incrementally at this point.

Jeremy: Mark at this point, probably not incrementally and I think we were testing out the use cases.

Jeremy: We're building that.

Jeremy:

Jeremy: Up with customer base, and probably not incrementally at this point.

Operator: Great. Thank you very much. The next question comes from Kevin.

Mark Steven Marcon: Great. Thank you very much.

Kevin Damien McVeigh: Our next question comes from Kevin McVeigh from UBS. Kevin. Kevin, you may unmute your line. Okay?

Mark Steven Marcon: Our next question comes from Kevin Mcveigh from UBS Kevin.

Mark Steven Marcon: Okay.

Kevin Damien McVeigh: Kevin you May mute your line.

Kevin Damien McVeigh: Great. Thanks so much. Can you hear me?

Kevin Damien McVeigh: Great. Thanks, So much can you hear me.

Unknown Executive: Yep. Hey, congratulations on the results. I think you'd reference kind of the SI-led sales growth in the quarter was about 35%. Give us an update on where that is in terms of, you know, some of the transition from professional services on the professional services side to the SIs and how that sales distribution channels going forward, because it seems like, you know, part of the story that's starting to kind of scale.

Yep, Hey, congratulations on the results.

Kevin Damien McVeigh: <unk> referenced the ESI led sales growth in the quarter was about 35%.

Kevin Damien McVeigh: An update on where that is in terms of some of the transition from professional services on the professional services side to the size and how that sales distribution channels going forward because it seems like it.

Kevin Damien McVeigh: Part of the story Thats, starting to kind of scale.

Unknown Executive: Yeah, and I think we've been consistent in that over the past few years; we've seen steady growth in that. We've also been very public that our strategy is to move to primarily an SI-led ecosystem, even broader than SIs, right, advisory partners, and partners with PE. We continue to see strength in that, both with the large global systems integrators, where we continue to see expansion, as well as a number of regional mid-markets. We expect for the balance of the year, growth in SIs to outpace even our growth in bookings.

Kevin Damien McVeigh: Yes, and I think we've been consistent in that over the past few years, we've seen steady growth in that we've also been very public that our strategy is to move to primarily in the <unk> side led ecosystem, even broader than sides right Advisory partners partners with pay we continue to see strength on that both with the large global systems integrators, where we continue to see expanse.

Kevin Damien McVeigh: And as well as the number of regional mid market, we expect for the balance of the year the growth in Si to outpace even our growth of bookings and we expect to see penetration across all markets. We have high penetration in EMEA and AP J, where we havent built up the sort of services capabilities, what that allowed us in the U S to do with folk.

Unknown Executive: And we expect to see penetration across all markets. We have high penetrations in EMEA and APJ, where we haven't built up the sort of services capabilities. What that allowed us in the U.S. to do is focus our services on new and emerging products and really support SIs with technology and product-specific capabilities.

Kevin Damien McVeigh: Our services on new and emerging products, and really supporting that size with technology and product specific capability.

Kevin Damien McVeigh: Yes.

Unknown Executive: Very helpful. And then just with the uptick in float, any change philosophically as to how we should think about just, you know, whether that gets redeployed or, you know, kind of just any impact is obviously somewhat unexpected given where rates are, but just remind us how we're thinking about those incremental float benefits. Yeah.

Speaker Change: Very helpful. And then just with the uptick in flows any change philosophically as to how we should think about just whether that gets redeployed or kind of just any impact because obviously it seems like somewhat unexpected given where rates are but just remind us of how we're thinking about that incremental benefit.

Jeremy: Yeah, thanks, Kevin. It's obviously a nice surprise that Float's going to stick around a little bit longer. We will continue to look for opportunities to invest. There is a significant amount of growth that we can go after. We've got a bunch that we can do on the product side of things, but at the same time, we know we have margin targets and free cash flow targets that we want to hit. So you'll probably see us take a balanced approach here with the Float.

Speaker Change: Yeah.

Speaker Change: Thanks, Kevin.

Speaker Change: It's obviously.

Speaker Change: A nice surprise that flow is going to stick around a little bit longer here, we will.

Kevin Damien McVeigh: Continue to look for opportunities to invest there are there's a significant amount of growth that we can go after we've got a bunch that we can do on the product side of things.

Kevin Damien McVeigh: But at the same time, we know we have margin targets and free cash flow target that we want to hit so youll, probably see us take a balanced approach here with the flow.

Speaker Change: Thank you so much.

Operator: Our next question comes from Raimo Lenschow from Barclays. Raimo?

Speaker Change: Our next question comes from Raimo <unk> from Barclays Raimo.

Raimo Lenschow: Yeah, can you hear me okay? Yeah. Good, perfect. Can I just double check a little bit on what you're seeing out there in the economy, like in terms of interest in starting new projects. You obviously have a long list of new clients that you announced, which is really good to see. But what's the overall appetite in terms of thinking about digital transformation in the HCM space? And how much is AI kind of a talking point? Do you kind of open doors for that one? And then there was one follow up for Jeremy.

Raimo: Yes can you hear me okay.

Raimo: Yes.

Perfect.

Raimo: Can I, just double click a little bit what you're seeing out there and maybe like in terms of interest on starting new projects. You, obviously have a long list.

Raimo: And your clients that you announced are just really good to see but what's the overall appetite in terms of thinking about additional transformation in the HCM space and how much is kind of.

Speaker Change: Talking points, you've kind of opened doors for that one and I had one follow up for Jeremy.

Unknown Executive: Sure. Hey, Raimo. It's good to speak with you.

Speaker Change: Sure.

Speaker Change: Good to speak with you.

Speaker Change: Just check your math on your early reported as well in terms of the guide we actually pushed the full amount for the full year not half of it just a correction in your note.

Unknown Executive: Hey, Raimo, just check your math on your early report as well in terms of the guide. We actually pushed the full amount to the full year, not half of it, so it's just a correction in your note. In terms of your question, if we look at the actual pipeline, the pipeline levels remain very healthy and robust. What we're seeing in the industry is that there is a focus on increased automation. And the way that typically translates is that we would come in, and we often see a simplification of 12 systems to about one.

Speaker Change: In terms of your question, if we look at the actual pipeline the pipeline levels remain very healthy and robust.

Speaker Change: What we're seeing in the industry is that there is a focus on increased automation.

Speaker Change: And the way that typically translate is that we would come in and we often see a simplification of 12 system to about one.

Unknown Executive: And as we simplify the environment for the client, it means that you have more automation, less integration, less manual effort, less manual errors, less FTEs, higher efficiency. And that messaging is responding very well in today's economy. And I think it's reflected in the numbers and the accounts that Steve spoke about.

Speaker Change: And as we simplify the environment of a client that means that you have more automation less integration less manual effort less manual errors less FTE higher efficiency and that messaging is resonating very well in <unk>.

The economy, and I think thats reflected in the numbers in the account that Steve spoke about.

Unknown Executive: Good. Perfect. Thank you. And then Jeremy, you talked a little bit about that extra float revenue coming in there. Can you talk a little bit about some of the priorities if you think about balancing it out, some of the priorities in terms of kind of maybe giving us more versus kind of investing more? Like, where would that be?

Speaker Change: Okay perfect. Thank you and then.

Speaker Change: Jeremy you talked a little bit about the.

Speaker Change: That extra flow of revenues are coming in there can you talk a little bit about.

Speaker Change: Some of the priorities that if you think about balancing that with some of the priorities in terms of.

Jeremy: Kind of maybe giving us more versus kind of investing more like where would that be thank you and congrats from me as well look at.

Raimo Lenschow: Thank you. And congratulations from me as well. And I'll look into that, David.

Jeremy: David.

Jeremy: Yeah, thanks, Raimo. I think, you know, when we talk about getting incremental float dollars that either can flow right down to the bottom line, or we can choose to reinvest those funds, there is, as I mentioned, kind of a lot of room to grow in this business. We're talking about our ability to go global. We're talking about expanding across the HCM space and launching new products and investing in things like AI.

Speaker Change: Yes, Thanks, Raimo I think when we talk about getting incremental flow dollars that either can flow right down to the bottom line or we can choose to reinvest those funds.

Speaker Change: As I mentioned kind of a lot of room to grow in this business. We're talking about our ability to go global we are talking about expanding across the HCM.

Speaker Change: Space and launching new products and investing in things like AI. So I look at it really is.

Jeremy: So I look at it really as how much do we put into sales, marketing, to continue growth, and how much do we put into product and technology versus taking it to the bottom line. And I do think that our opportunity is huge out there. As you heard us talk about, the HCM market is a really big one with a huge TAM that's growing nicely. And we're really well positioned to go and capitalize on some of that. So that's why I say we'll take a balanced approach. We'll definitely look at both taking and expanding margins, as well as continuing to invest in the growth opportunities that are out there.

Speaker Change: How much do we put into sales marketing to continue growth and how much do we put into product and technology versus taken to the bottom line and I do think that our opportunity is huge out there.

Speaker Change: As you heard us talk to that the HCM market as a really big one with a huge Tam that's growing nicely.

Speaker Change: And we're really well positioned to go and capitalize on some of that that's what I. When I say, we will take a balanced approach we will definitely look at both taking and expanding margins as well as continuing to invest in the growth opportunities that are out there.

Speaker Change: Okay perfect. Thank you.

Unknown Executive: Okay, all right. Thank you. Well done.

Operator: Our next question comes from Siti Panigrahi from Mizzou.

Speaker Change: Our next question comes from any panic Rodney from Mizuho.

Sitikantha Panigrahi: Thanks for taking my question. So, David, when I look at your peers' growth, they're just writing in your payroll space, but you continue to deliver 20 percent plus or guide 20 percent plus on your record, therefore securing X floor. So, what gives you confidence that you will continue to deliver that kind of 20 percent growth?

Speaker Change: Okay.

Rodney: Thanks for taking my question.

Rodney: David.

Rodney: When I look at your peers.

Speaker Change: The decorating.

David: But we continue to deliver 20% plus organic 20% plus on your recurring therefore, securing ex Florida. So what gives you confidence that we will continue to deliver that kind of 20% kind of growth.

David: Thanks, Rajiv. The first thing that I'll point out is that if you look at the actual quarters, Add on, which is adding the employer of record and the talent components, was 40% of our sales. And if we look at full suite sales in the quarter, it was 50%. So when you look at Dayforce, we aren't a payroll company; we are an HCM company, which gives us a much more durable growth profile than others in the market that are more focused on actual pay.

Speaker Change: Yes, Thanks <unk>.

Speaker Change: Firstly there are points out is that if you look at the actual quarter.

Speaker Change: Add on.

Speaker Change: Which is adding the employee of record on the talent components was 40% of our sales and if we look at full suite sales in the quarter It was 50%.

Speaker Change: So when you look at day, four we arent a payroll company, we arent HCM company, which gives us a much more durable growth profile than others in the market that are more focused on the actual payors.

David: And when we look at the breadth of our application and the depth of each of the different modules, you'll find that they are very competitive, even with the standalone talent vendors out there. Part of our growth as well is, as you know, we are cross-segment, whether it be the major market space, which goes up to about 1,000, the major market, sorry, the enterprise market, goes from about 700 to about 1,000, a major market from about $1,000 to about $3,000, and then we have enterprises from $3,000 to $12,000 and large enterprises above.

Speaker Change: And when we look at the breadth of all of our application and the depth of each of the different module, you'll find that they are very competitive even with this stand alone vendors out there.

Speaker Change: Part of our growth as well as as you know we are cross segment, whether it be the major market space, which goes up to about a thousand.

Speaker Change: Major market sorry, the enterprise sorry, a major market goes from about 700 to about 1000.

Speaker Change: Our major market from about 1000 to about 3000, and then we have enterprise from three to 12 in large enterprise above.

David: But the different segmentation also gives us the ability to emphasize differently based on the actual macro, and as well, we have a very strong global profile, which also allows us to balance growth across different markets as the macro changes as well.

Speaker Change: In fact, the different segmentation gives us also the ability to.

Speaker Change: Criticized differently based on the actual macro and as well we have a very strong global profile, which also allows us to balance growth across different market as the macro changes as well.

Unknown Executive: Thanks for the call. And a follow-up, when I look at your pipeline, not pipeline, actually the deals you closed since Q1 of 2022, large deals, you know, in terms of enterprise, you mentioned before that go-live should be around two years or so. So how is the go-live trend right now in terms of your confidence in those companies going live with those large deals, and how is that going to help drive that growth as well this year and next year? Well, actually, as we've discussed.

Speaker Change: Thanks for the color.

Speaker Change: Sure.

Speaker Change: When I look at your pipeline <unk> pipeline.

Speaker Change: <unk> fluid since Q1 of 2022 large deals in terms of enterprise you mentioned before the go live submit on two years or so.

Speaker Change: How is the go live right now in terms of your confidence of those companies Gwen.

Speaker Change: Large deal and how is that going to.

Speaker Change: That growth this year and next year.

Unknown Executive: Well, actually, as we've discussed before, the larger accounts give us more of that durable growth profile, as the implementations do typically stretch across different years. If we look at the large logistics company, as you know, a nice proportion of their population went live previously, and we are expecting additional waves to go live shortly. But again, it allows us to plan out the business very, very carefully, and you see that reflected in the very tight revenue and EBITDA guidelines we give to the market. It's a highly predictable business. Great, thank you.

Speaker Change: As we've discussed before the larger accounts give us more that durable growth profile as the implementations do scratch.

Speaker Change: Typically across different geos.

Speaker Change: If we look at the large logistics company as you know.

Speaker Change: A proportion of their population went live previous named we are expecting additional way to go live.

Speaker Change: Shortly.

Speaker Change: But again it allows us to plan out the business very very carefully and you see that reflected in the very tight our revenue and EBITDA guidance, we gave to the market. It's a highly flammable business.

Speaker Change: Great. Thank you.

Operator: Our next question comes from Scott Berg with NIDA.

Speaker Change: Our next question comes from Scott Berg with Needham.

Speaker Change: Okay.

Operator: Scott, you may unmute your line.

Scott Randolph Berg: Scotland the Unmeet Eli.

Operator: Maybe we can circle back to Scott. Next, we'll go to Steve Enders from Citi.

Scott Randolph Berg: Maybe we can circle back on the Scott next we'll go to Steve Enders from Citi.

Steven Lester Enders: Okay, great. Thanks for taking the questions here. I guess maybe just to start, I think you called out mid-market win rates improving in the quarter. Just, you know, I guess it would be helpful to get a little bit more clarity on what you think is driving that, and then maybe just, you know, a little bit more detail on what you're seeing in terms of overall demand dynamics between mid-market and enterprise today.

Steven Lester Enders: Okay, great. Thanks for thanks for taking the questions there.

Steven Lester Enders: I guess, maybe just to start I think you called out mid market.

Steven Lester Enders: Win rate and provision in the quarter, just I guess it would be helpful to get a little bit more clarity on.

Steven Lester Enders: What is driving that and then maybe just a little bit more detail on what youre thinking in terms of overall demand dynamics between mid market and enterprise today.

Steve: Yeah, hey, this is Steve. I'll take that, and anyone can jump in on that.

Yeah, Hey, this is Steve I'll take that and anyone can jump in on that so in the past we've continued and you've seen some great wins up market in terms of the enterprise and we continue to see that what we have seen is our ability to one be in more deals and mid market as we've increased the sales coverage. We got more focused on our go to market and continue to increase our win rate we feel.

Steve: So, you know, in the past, we've continued, and you've seen some great wins in terms of the enterprise. And we continue to see that. What we have seen is our ability to, one, be in more deals in the mid-market. As we've increased our sales coverage, we have become more focused on our go-to-market strategy and continue to increase our win rate. We feel our suite fits 100%, and we tend to lead with the full suite there.

Steven Lester Enders: Our suite fits 100% and we tend to lead with the full suite. There. So we're confident and as David talked about our advantages that we have a balanced portfolio. We've seen some increase in mid market.

Steve: So we're confident. And as David talked about, our advantage is that we have a balanced portfolio. We've seen some increase in mid-market, and we're continuing to drive large enterprise. And we think it's a combination of those that feeds into our guidance and the predictability of full-year revenue.

Steven Lester Enders: And we're continuing to drive large enterprise and we think it's a combination of those that feed into our guidance.

Steven Lester Enders: The ability of the full year revenue.

Steve: Okay, great. That's helpful. And then maybe for Jeremy, just in terms of thinking about, you know, profitability dynamics kind of through the year, and, you know, 2Q has some seasonality in there, but I guess any kind of change in investment cadence or anything else that you would kind of call out as we think about, you know, EBITDA flowing down through the year.

Speaker Change: Okay great.

Speaker Change: That's helpful and then maybe for Jeremy just in terms of.

Speaker Change: Thinking about.

Jeremy: Profitability dynamics kind of through the year and Internet <unk> has some seasonality in there, but I guess any kind of change in investment cadence or anything else that you would kind of call out as we think about EBITDA flowing playing down through the year.

Jeremy: I think, and hey Steve, how are you doing? I think ultimately we've, you know, we beaten in Q1. We had a really solid quarter from a profitability standpoint. I think Q2 always tends to come down a little bit from a profitability standpoint, but ultimately, we remain confident in the full year, and we flowed that beat into our updated guidance. And I think our overall adjusted targets of 28 to 28.6 or 7, so kind of a mid-point 28 and a half or just under that, are a really good targets for us to hit and push us toward that 30% kind of mid-range target that we've set for 2025. I think it's a nice stopping point along the way. So we're feeling pretty solid about that. And as I mentioned, it will take kind of a balanced approach as we get incremental revenue flow here.

Speaker Change: Alright, I think and hasty in how you're doing I think ultimately.

Speaker Change: We beat in Q1, we had a really solid quarter from a profitability side of things.

Speaker Change: Two Q always tends to come down a little bit from a profitability side, but ultimately we remain confident in the full year.

Speaker Change: We flowed through that beat into our updated guidance.

Speaker Change: And I think our overall adjusted EBITDA targets of.

Speaker Change: 28% to $28 six or seven so kind of midpoint 28 and <unk>.

Speaker Change: Half are just under that a really good target for us to hit in <unk>.

Speaker Change: Push us toward that 30% kind of mid range target that we've set for 2025 and I think it's a nice stopping point along the way so we're feeling pretty solid about that.

Speaker Change: And as I mentioned, it will take kind of a balanced approach here with it as we get incremental flow revenue here.

Speaker Change: Okay perfect. Thanks for taking the questions.

Steven Lester Enders: All right, perfect. Thanks for taking the questions.

Operator: Our next question comes from Dan Jester with BMO.

Speaker Change: Our next question comes from Dan Jester with BMO.

Daniel William Jester: Great, thanks for taking my question. Maybe, Jeremy, you called out kind of a few things about helping us think about the seasonality into the second quarter on the Dave Forrest line. Can you maybe just get a little bit more explicit about what you're assuming in terms of macro for the rest of the year? Any changes relative to how you guided last quarter for the full year? Thanks.

Daniel William Jester: Great. Thanks for taking my question.

Daniel William Jester: Maybe Jeremy Teu, you called out kind of a few things about helping us think about the seasonality into the second quarter on the day Force line can you, maybe just get a little bit more explicit about what youre assuming in terms of macro for the rest of the year any changes relative to how you got it.

Daniel William Jester: Last quarter for the full year.

Daniel William Jester: Yeah.

Jeremy: Nice to speak with you, Dan. I think, ultimately, employment levels remain kind of in line with our expectations, which were essentially flat with normal seasonality. I think if you look at any seasonal impacts, we always see that typical Q1 to Q2 drop-off with some of the year-end and print revenue in Q1 that doesn't happen in Q2. And we do seasonality in volume in Q1 that, again, drops off or tends to drop off in Q2.

Jeremy Johnson: Nice to speak with you Dan I think ultimately employment levels remain kind of in line with our expectations, which was essentially flat with normal seasonality.

Jeremy Johnson: I think if you look at.

Jeremy Johnson: <unk>.

Jeremy Johnson: Any seasonal impacts we always see that typical Q1 to Q2.

Jeremy Johnson: Drop off with some of the year end and print revenue in Q1 that doesn't happen in Q2, and and we do the seasonal volume in Q1 that again it drops off it tends to drop off in Q2, its something thats been with our business consistently and you've heard us talk about this in the <unk>.

Jeremy: It's something that's been in our business consistently, and you've heard us talk about this in the last couple of years, and we'll continue to talk through it in terms of Q1 to Q2 dynamics. But for the rest of the year, no real changes in how we're guiding or any macro factors that would impact our guidance at this point.

Jeremy Johnson: Couple of couple of years, and we'll continue to talk through it in Q1 to Q2 dynamics, but for the rest of the year no real changes in how we're guiding or any macro factors that would impact our guidance at this point.

Speaker Change: Great. Thank you and then maybe going back to the co pilot and the comments about simple pricing.

Daniel William Jester: You know, maybe we could just expand on that a little bit more. I think, you know, one of the things many people are thinking about is how do you manage sort of compute costs and margins and usage for some of these tools. And so maybe can you just help us think about how you're, you know, thinking about this for your customers? And what really means simple? Great, thank you.

Speaker Change: Maybe we could just expand on that a little bit more I think one of the thing.

Speaker Change: People are thinking about is about how do you manage sort of compute cost and margins and usage.

Speaker Change: For for some of these tools and so maybe can you just help us think about how your.

Speaker Change: Thinking about this for for your customers and what is simple.

Speaker Change: Really mean, great. Thank you.

Unknown Executive: Simply put, for Dayforce Copilot, what we're doing is a per-employee, per-month cost, just like we do with the rest of our products. We can rationalize all the costs of what we're doing with the innovation that's happening with large language models and the like, but we're making it simple work.

Speaker Change: Specific code for deepwater copilot, what we're doing as a per employee per month cost just like we do with the rest of our products. We can rationalize all of the cost of what we're doing with the innovation that's happening with large language was alike, but we're making it simple brokers.

Unknown Executive: Okay, great. Thank you very much.

Speaker Change: Okay, great. Thank you very much.

Aleksandr J. Zukin: Our next question comes from Aleksandr Zukin with Wolf.

Speaker Change: Our next question comes from Al <unk> with Wolfe.

Speaker Change: Yeah.

Unknown Executive: Yeah, guys, thanks for taking the question. I guess, just maybe the first one. If we think about the commentary. Round bookings and kind of sales growth, as you now, you're a month of the way through April. Any commentary about pipeline conversion statistics, or just sales growth exiting the month and how that's trending between kind of new versus selling into the base? Yeah, the

al: Yeah, Hey, guys. Thanks for taking my question I guess just.

al: Just maybe the first one.

al: If we think about.

al: The commentary.

al: About bookings and kind of sales growth as you know you're a month of the way through April any commentary about.

al: Pipeline conversion statistics, or just sales growth exiting the month and how.

al: That's trending between kind of new versus selling into the base.

Unknown Executive: So April was a good month, planning slightly ahead of our plan.

al: April was a good month came in slightly ahead of our plan.

al: Yes.

al: Perfect.

David: And then, David, you talked a lot about how, you know, Dayforce is becoming an HRM company and how much talent is kind of critical to that notion over the next few years. If you think about just the penetration rate within your customer base today, where you've sold, you know, kind of the most impactful pieces of that HCM portfolio, in addition to payroll and time, what is that opportunity? How, you know, how far through that are you, and how to think about that over kind of the next year plus?

al: And then David you talked a lot about how.

al: Dave horses, becoming.

al: In HCM company.

al: And how much.

It is critical to that notion over the next few years.

al: If you think about just the penetration rate within your customer base today.

al: <unk> sold.

The most impactful pieces of the HCM portfolio in addition to payroll.

al: In time, what is that opportunity.

al: How far through that are you.

al: You and how to think about that over kind of the next kind of year plus.

David: We're in the early stages. If you look at the average PEPM across our client base, you can still see there's quite a delta between the average PEPM price and, I'll say, our target price. If you look at the results inside the quarter, both in terms of add-on sales back to the base and a number of full suite sales, you can see the numbers are very strong. What I can say is we did onboard a very strong client-based leader in Q1, and we're seeing the impact from that already.

al: We're in early stages, if you look at the average pet them across our client base you can still see.

al: It's quite a delta between the average paper price and between I'll say our target price.

If you look at the results with inside the quarter. Both in terms of add on sales back to the base and a number of full suite sales you can see the numbers are very strong.

al: What I can say is we did onboard a very strong client base later in Q1, and we are seeing an impact from natural already.

al: We also have.

al: Overlaid talent team now and they are already doing tremendously if I look at their results year to date.

David: We also have an overlay talent team now, and they are really doing tremendously. If I look at the results here to date, they've come in well ahead of schedule. If you look at the customers that we actually pulled out, the 100,000 employee plus grocery chain that has now purchased the full talent suite, where we are replacing one of the large ERPs with their talent suite across their entire enterprise, capabilities, and the viability of our talent components.

al: They have come in well ahead of schedule and if you look at the customers that we actually called out.

<unk> hundred thousand employee plus grocery chain that has now purchased the full talent suite, where we are replacing one of the large ERP with their talents wage across their entire enterprise talks about the strength.

al: Capability and the viability of our banners.

Operator: Perfect. Thank you, guys.

Speaker Change: Perfect. Thank you guys.

Operator: Our next question comes from Bhavin Shah with Deutsche Bank.

Bhavin S. Shah: Our next question comes from <unk> Shah with Deutsche Bank.

Bhavin S. Shah: Great, thanks for the question. I guess, Steve, one for you, and kind of dovetailing on that, just on a customer-based motion, you guys talked about impressive stats. Can you just elaborate on the typical customer that you're able to upsell? Who are you displacing in terms of the talent suite? And kind of what are the other big opportunities outside of talent to kind of upsell into that baseline?

Shah: Great. Thanks for the question I guess, Steve one for you just kind of Dovetailing on that just on a customer base motion you guys talked about a process that can you just elaborate on the typical customer that youre able to upsell quarter, you're displacing in terms of the talents, we and kind of what are the other big opportunities outside of talent to kind of upsell into that base.

Steve: Hey, so a couple things. Yeah, so one thing I'll point out double down on what David said is one of the things we did differently this year is that that is a dedicated customer-based motion versus an overlay motion. So we've invested in terms of the number of account executives and the focus on that. In terms of who we're displacing, it's all the usual players up and down the market, right? In the low end of the market, we're displacing the pays in UKG.

Speaker Change: Hey, So a couple of things, yes, I want to point out and double down on what David said is one of the things. We did differently. This year as that is a dedicated customer base motion versus an overlay motion. So we've invested in terms of the number of account executives and the focus on that in terms of who we're displacing.

Speaker Change: It's all the usual players up and down the market right and the low end of the market, we're displacing the pes in UK G.

Steve: In the mid and upper end of the market, we're displacing ERPs, and we're displacing them because of the capability of our pay and time solution and the stickiness of that, and the fact that our talent intelligence suite is now incredibly competitive, in fact, with the newest technology on the market. And as David talked about, this is around cost rationalization, and the value of an entire platform with our talent is what's helping us win.

Speaker Change: Mid and upper end of the market, we're displacing the erp's.

Speaker Change: And we're displacing them because of the capability of our pay in time solution and the stickiness of that and the fact that our talent intelligence suite is now incredibly competitive in fact with the newest technology on the market and as David talked about this is around cost rationalization and the value of an entire platform with our talent is what's helping us win.

<unk>.

David: Super helpful. Just as a follow-up, David, to another question that Raimo asked about the macro, I know there's been some conversations about some potential digestion period for back office software, just kind of post-elevated spend as we exited COVID. When you speak to customers, do you see this at all? How do you kind of describe customer scrutiny, and if it's changed at all in the past few months?

Speaker Change: Super helpful. Just as a follow up David to another question that rain last one on the macro I know theres been some conversations with some potential digestion period for back office software just kind of post elevated spend as we exited COVID-19 when you speak to customers do you see this at all how would you kind of describe customer scrutiny and if that's changed at all over the past few months.

Speaker Change: Hi.

David: You know, over the last 10 years, I can't say that there's really been an easy quarter. You know, we now have, as you know, almost 6,600 customers live on the actual platform, and every single one of those was a competitive RFP situation. When I look at the actual pipeline, and I would argue that under Sam's leadership, it's now a highly qualified pipeline. The ratios are very good in terms of coverage to our targets.

Speaker Change: Over the law.

Speaker Change: 10 years, I can't say that there's really been an easy quarter.

Speaker Change: We now have.

Speaker Change: No.

Speaker Change: Almost 6600 customers live on the actual platform and every single one of those was a competitive RFP.

Speaker Change: Uhm.

Speaker Change: When I look at the actual pipeline and I would argue that under <unk> leadership is now a highly qualified pipeline.

Speaker Change: The ratio is all very good in terms of coverage to our targets.

David: And as Steve mentioned, the simplicity of scale, the message that I spoke about earlier, which is more automation and our ability to go to a customer, and clearly identify, on average, about 12 different HR systems that they have in place. Simplifying that to one day full system, that typically yields a subscription saving for the client in the very first year, plus they have much better automation, lower manual error rates, fewer FTEs, and much more efficiency around different types of workflows, which also contribute to a very strong and quantifiable IRR on the day full system.

Speaker Change: And as Steve mentioned, the simplicity at scale.

Speaker Change: Message once I spoke about earlier, which is the more automation and our ability to go to a customer.

Speaker Change: Clearly identify on average about 12 different HR systems of the having.

Speaker Change: Simplifying that Q1 day full system.

Speaker Change: That typically yield a subscription saving for the client and the very.

Speaker Change: Plus they have much better automation lower manual error rate.

Less FTE is much more efficiencies around different types of workflows, which also contributed to a very strong unquantifiable IRR on day four system.

David: And at the same time, we are able to significantly lift the experience for their frontline workers, their managers, and their executives, all based on that single database that we have been powering Dave on for. And when you now begin to layer on what we're doing in terms of data and AI, the impact that we can have on decision making and on both the top line and the bottom line of the organization is very significant. And I would actually question that if it's not day force, why isn't it day force? Because we really do have quite a differentiated solution in marketing.

Speaker Change: And at the same time, we are able to significantly lift up.

Speaker Change: Darrin for their frontline workers and managers and their executives.

Based on that single agent base that we have.

Salary and day falls and when you now begin to layer on what we're doing in terms of data and AI the.

Speaker Change: The impact that we can have on decision, making and on both the topline and the bottom line of the organization is very impactful and I would ask the question Matt.

Speaker Change: April why isn't today falls, because we really do have quite a differentiated solution market.

Speaker Change: Okay Super helpful. Thanks for taking the question.

Bhavin S. Shah: Super helpful. Thanks for taking the question.

Operator: Our next question comes from Jared Levine with TD Cowell.

Speaker Change: Our next question comes from Jared Levine with TD count.

Jared Marshall Levine: Thank you. In terms of looking at your professional and professional services revenue and other revenue, can you discuss the mix of that currently, that's implementation-related versus non-implementation-related, and how you'd expect each of those to grow over the medium term?

Jared Marshall Levine: Okay. Thank you in terms of looking at your professional and professional services revenue and other revenue can you discuss the mix of that currently that implementation related to not personally not implementation related and how you would expect each of those to grow over the medium term.

Steve: Yeah, yeah, and we think of that really in kind of two broad categories, implementation and then what we call value-added services around that. And with implementation, over time, we expect the core implementation cost to continue to decrease year-over-year as our partners move into that. The one exception is obviously the Government of Canada, and we expect our value-added services and our focus on new and emerging products and supporting the SIs to increase. But with that, we also expect to see continued slow growth and profitability as that mix increases as well.

Speaker Change: Yes, yes, and we think of that really in kind of two broad categories implementation and then what we call value added services around that and with an implementation over time, we expect the core implementation to continue to decrease year over year as our partners move into that the one exception is obviously, we mentioned with government of Canada, and we expect our <unk>.

Speaker Change: <unk> added services and our focus on new and emerging products and support EMEA site to increase but with that we also expect to see a continued slow growth in profitability asset mix increases as well.

Jeremy: Yeah, and Jared, maybe I'll add there, also, inside of professional services and other gross margin, we have things like clocks and custom training revenue, and that will continue, and we still have a good opportunity to continue to grow that. And then the last thing I'll say is, you know, as we move and continue to move into SIs, not all of that is on the SI paper. Some of that is, you know, when we say SI-led, some of that is actually contracted on our paper, which means we've got to account for it under ASC 606 with a couple of, you know, two performance obligations and things like that. So, just to clarify, I think that that might be a misnomer out there.

Speaker Change: And Jared maybe I'll add there is also inside of professional services and other gross margin, we have things like Clarkson and custom training revenue and that will continue and we still have a good opportunity to continue to grow that and then the last thing I'll say is.

Jared Marshall Levine: Got it. Thank you.

Speaker Change: As we move and continue to move into <unk>.

Speaker Change: Not all of that is on the <unk> paper.

Speaker Change: Some of that is when we say ASI, let some of that is actually contracted on our paper, which means we've got to account for it under ASC 606, with a couple of two performance obligations and things like that so I think just to clarify I think that that might be a misnomer out there.

Jared Marshall Levine: And then both PowerPay recurring ex-float and Bureau recurring ex-float both came in below your expectations for 1Q. Can you discuss what drove those lower-than-expected results? Is it more so a push out of revenue later in the year?

Speaker Change: Got it. Thank you and then both our powerplay recurring ex Florida Bureau, recurring ex float book.

Speaker Change: Came in below your expectations for <unk> can you discuss what drove those.

Speaker Change: Lower than expected result is a more so pushout of revenue later in the year.

Jeremy: Yeah, I think we had, we set some lofty expectations, I think, for power pay, and on that side of things, that the employment levels in Canada aren't as solid as we had expected, and, you know, I still think, in general, though, we grew that business by, you know, 8% in total, or, you know, 5% excluding float, so just slightly behind our expectations on that one. And on the Bureau side, it's really about end-of-life products and migrating over into the day force, and that's really what you're going to see continued on that kind of other revenue line, and we expect that to continue to decrease year on year.

Speaker Change: Yes, we had so we set the mark the expectations I think for power pay.

Speaker Change: And on that side of things that the employment.

Speaker Change: Levels I think in Canada arent as solid as we had expected.

Speaker Change: And I still think in general, though we grew that business by.

8% in total or 5% excluding float so just slightly behind our expectations on that one and on the Bureau side, it's really about end of life Ing.

Speaker Change: Products and migrating over into day for us and Thats really what youre going to see continued on that kind of other revenue line.

Speaker Change: And we expect that to continue to decrease.

Speaker Change: Year on year.

Jared Marshall Levine: Just a quick follow-up here if I could. What is the updated Day Force Recurring Exploit Guide assumed for a Bureau migration contribution?

Speaker Change: Just a quick follow up here if I could.

Speaker Change: What is the updated day force recurring ex float guide assume for our Bureau migration contribution there.

Jeremy: I don't believe we've disclosed that specifically. It's immaterial. Yeah.

Speaker Change: I don't believe we've disclosed that specifically immaterial now.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Operator: Our next question comes from Mark Murphy with J.P. Morgan.

Speaker Change: Our next question comes from Mark Murphy with JP Morgan.

Mark Ronald Murphy: Thank you very much. David, I'm wondering if you could give us your perspective on the labor market. When we look at non-farm payable growth in the US, it slid from 5% a few years ago to about 1.8, and 1.9% range recently. I'm wondering, because obviously you're performing pretty well, how does that trend look comparatively within your installed base? Do you think that might continue to grow at the lowest single digits for the time being? Then I have a quick follow up.

Mark Ronald Murphy: Thank you very much David I'm wondering if you could give us your perspective on the labor market.

Mark Ronald Murphy: Looking at non farm payroll growth in the U S. In the cleared from 5% a few years ago to about 181, 9% range recently I'm wondering.

Mark Ronald Murphy: Because obviously, you're performing pretty well how does that trend look comparatively within your installed base do you think that might continue to grow in the low single digits for the time being that I have a quick follow up.

David: Hey Mark, so I would say the volumes came in slightly ahead of what we had forecasted, and we're still seeing healthy employment rates at our customers. On top of that, I'll point out again that part of our durable growth profile is the fact that we have a very strong employer of record and talent capabilities inside the system. And our ability to go back to the base and do the add-on to drive that cash IRR for our clients does lead to consistent growth for our business.

Speaker Change: Hey, Mark.

Mark: So I would say the volumes came in slightly ahead of what we had forecasted.

Speaker Change: And we're still seeing healthy employment rates at our customers.

Speaker Change: On top of that I'll point out again that part of our durable growth profile.

Fact that we have a very strong employer of record.

Speaker Change: Capability inside the system and our ability to go back to the base and do the add on to drive that cash IRR for our clients.

Speaker Change: Does need to consistent growth.

Speaker Change: Our business.

Mark Ronald Murphy: OK, understood. I wanted to ask as well because we saw the comments on full suite bookings and add-on bookings. I think you said those trends were positive in April as well. I'm just curious, did you see total bookings bounce back relative to some of the softness you'd seen around the holiday selling season? Or is it still a bit of a measured buying environment out there, as we've seen across the broader industry? Yeah, Mark, we saw that very early on.

Speaker Change: Okay understood.

Speaker Change: I wanted to ask as well.

Speaker Change: The other comment on full suite bookings and add on bookings.

Speaker Change: I think I think you said the trends were positive in April as well I'm. Just curious did you see a total bookings.

Speaker Change: <unk> back relative to some of the softness <unk> seen around the holiday selling.

Speaker Change: Selling season or is it still a bit of a measured.

Speaker Change: Buying environment out there as we've seen across the broader industry.

David: Yeah, Mark, we saw that very early on in the actual year, with January coming in very strong, and as I mentioned, April came in ahead of plan as well. So we're pleased with sales year to date. Thank you.

Speaker Change: We saw that very early on in the apps full year.

Speaker Change: With January coming in very strong and as I mentioned April came in ahead of plan as well.

Speaker Change: So we're pleased with sales year to date.

Speaker Change: Thank you.

Operator: Great. Looks like our final question will come from Kevin Kumar with Golden Sax. Hi, thanks for taking my question.

Speaker Change: Alright, it looks like our final question will come from Kevin Kumar with Goldman Sachs.

Kevin Kumar: Hi, Thanks for taking my question in terms of the demand environment, we saw differences or trends that you would call out in the mid market versus enterprise and any color there would be helpful. Thanks.

Kevin Kumar: In the mid-market, which we call major markets, and as well in our enterprise space, which goes up to 12,000, what we are seeing is simplicity at scale. Again, that on average, 12 different systems to one day, four systems seems to be the kind of theme in the market. What we're hearing from both prospects and customers, they ask for more automation, less integration, less manual work, less FTEs, more efficiency. It seems to be quite topical at the moment.

Kevin Kumar: Indeed.

Kevin Kumar: The mid market, which we call major markets and as well in our enterprise space, which goes up to 12.

Kevin Kumar: What we are seeing is the simplicity at scale again that on average 12 different systems to one day full system seems to be the.

Speaker Change: Kind of the theme in the market, what we're hearing from both prospects and customers.

Speaker Change: The asked about more automation less integration less manual work less ftes more efficiency gains.

Speaker Change: <unk> can be quite topical at the moment.

Speaker Change: Very helpful. Thank you.

Speaker Change: Okay.

Speaker Change: Great.

Operator: Thanks, everyone, for dialing in today. This concludes our call.

Speaker Change: Thanks, everyone for dialing in today this concludes our call.

Speaker Change: Yeah.

Speaker Change: Goodbye.