Q1 2025 Dayforce Inc Earnings Call
Speaker Change: A question and answer session will follow the formal presentation. You may be placed into question, queued anytime by pressing star one on your telephone keypad, and the interesting time we ask you please let me yourselves to one question in the return to the queue. As a reminder, this conference is being recorded. Thank you, David.
Speaker Change: It's time my pleasure to turn the call over to David Niederman, Vice President and Best Relations. David, please go ahead. Let's go ahead.
Speaker Change: Thank you for joining and welcome to the day force first quarter 2025 earnings call. I'm David Niederman, Vice President, Investor Relations. As a reminder, all participants are in a listen only mode and a question and answer session will follow our opening remarks.
Speaker Change: Joining me on the call today are CEO David Ossip and CFO , Jeremy Johnson. We also have key strategy, product and technology officer, Joe Korngiebel, and our President and COO Steve Holdridge available for Q&A.
David Niederman: Before I hand the call over to David, I want to remind everyone that our commentary may include forward-looking statements. These statements are subject to risks and uncertainties that could cause DA forces results to differ materially from historical experience or present expectations.
David Niederman: A description of some of these risks and uncertainties can be found in the reports we file with the Securities and Exchange Commission, such as the cautionary statements in our filings.
David Niederman: Additionally, over the course of this call, we'll reference non-GAAP measures to describe our performance. Please review our earnings press release and filings with the FEC for our rationale behind the use of non-GAAP measures and for a full reconciliation of these gap to non-GAAP metrics.
David Niederman: These documents, in addition to a replay of this call, and also a transcript, will be available on the Day Force Investor Relations website. And with that, I'd like to turn the call over to David. Thank you.
Thanks, David, and thank you all for joining us.
David Niederman: I'll begin with some high-level commentary on our results and outlook before handing a core over to Jeremy, who will provide more detail on our financials and guidance.
David Niederman: DePaul's performed well throughout the first quarter. Our sales momentum continued.
David Niederman: Building off the strong performance we experienced in the fourth quarter of 2024, and our sales pipeline remains in excellent shape. [inaudible]
David Niederman: Project kickoffs are up significantly following two strong sales quarters and go lives remain on track.
David Niederman: Total revenue was 482 million, growing 14% on a constant currency basis, excluding float, total revenue grew 17% on a constant currency basis.
David Niederman: Dave Holtz, Recurian Revenue, excluding a float grew 16% on constant currency bases, adjusted EBITDA margin, or 32.5% up 240 basis points year over year.
David Niederman: And free cash flow of 19.5 million was up significantly versus last year, keeping us on track to achieve our full-year target of 12%.
David Niederman: Our value proposition of providing companies with the ability to simplify their people operations at scale by streamlining their HCM software stack continues to resonate with current and potential customers.
David Niederman: With day falls, customers can operate with confidence, empower their workers, and obtain a tangible ROI.
David Niederman: Even during periods of economic uncertainty, this value proposition allows our teams to continue building sales pipeline and result. [inaudible]
Speaker Change: From the sales perspective, Sam and his team are achieving superb results. [inaudible]
Speaker Change: We had the best first quarter in our history and we anticipate bookings in the first half of 2025 will continue to be strong and in line with the Q4 of last year.
Speaker Change: The results were distributed nightfully across most of our segments and geographies with healthy growth in each of our key segments.
Speaker Change: Our back-to-the-based sales strategy is performing well, with Q1 sales to existing customers growing 30 percent. [inaudible]
Speaker Change: In the first quarter, we secured several key new business wins, selected highlights include a large entertainment and leisure company that shows the complete day for suite as this unified HCM solution to support 61,500 employees across North America. Thank you.
Speaker Change: A leading uniform and workplace solutions provided that selected the full day full suite to support
Speaker Change: A leading North American utility infrastructure service provider that selected the full day full suite to modernize and unify its systems, supporting over 9,000 employees.
Speaker Change: A global safety solution provider that selects the full-day full-sweets, including managed pair-on-managed benefits, to support 8,000 employees across 30 countries in North America, Amir, Latam, and APJ. David Ossip, David Ossip, David Ossip,
Speaker Change: And a leading North America, civil engineering, heavy construction company that selected the full day for suite to support its more than 7200 employees, consolidating 14 systems into one.
Speaker Change: Live customers on day 4 platform grew 5.4% to 6,929 and day 4's recurring revenue per customer grew 11.5% to 167,600 dollars.
Turning to our partner ethics.
Speaker Change: Our System Integrated Channel is performing well, with our top SI partners delivering an outsized impact.
Speaker Change: We're seeing a growing partner-led pipeline and an increase in coastal velocity across regions.
Speaker Change: We also announced a partnership with Microsoft which puts day-force on the Azure Marketplace. This launch makes it easier for enterprise customers to adopt the day-force platform with the security, scalability and streamlined procurement. Thank you very much.
Speaker Change: On the product side we continue to make excellent progress. In the quarter we extended our AI co-pilot to our native iOS and Android apps. Co-pilot is performing well. In Q1 50% of new deals had it attached.
Speaker Change: We also enhanced our talent modules with personalized updates for the Advanced Experience Hub.
Speaker Change: Improved the incursiveness and workflows of our learning and recruiting modules, and launched new direct-to-bank capabilities for day-of-force wallet that allows employees to root their pay to any personal bank account.
Speaker Change: And, as always, we continue to main a solid core of compliance.
Speaker Change: Releasing features like the Total Renumeration Package Calculation for comprehensive compensation management.
Speaker Change: And compliant enhancements for global statutory requirements in the United Kingdom, Singapore, Australia, and New Zealand.
Speaker Change: And finally, a brief update on our engagement with the Government of Canada.
Speaker Change: Our team has continued to work towards configuration and delivery milestones outlined by the government of Canada.
Speaker Change: The GEOC has signed a 15 month contract to extend the configuration work through their life. Thank you very much.
Speaker Change: I'll now pass the court to Jeremy to discuss our financial results in more detail. Jeremy, over to you. Thanks, David. We're pleased with our first quarter results.
Speaker Change: Top line revenue growth remained strong while we scaled the business and continued to expand cash flow margins.
Speaker Change: Before I get to the numbers, I want to highlight a refresh look to the face of our P&O, where we have removed the gross profit break and broken out depreciation and amortization on one line. [inaudible]
Speaker Change: We also simplified the disaggregation of revenue tables in our press release and M.D.N.A. to simply show four revenue lines, day force recurring, power favorite current, other recurring, and float recurring, with some to total recurring revenue as shown on our piano.
Speaker Change: With these changes, we will no longer refer to cloud revenue or profitability. [inaudible]
Speaker Change: As of this quarter, 96% of our recurring revenue excluding float is from day force or power pay, what we've historically referred to as our cloud solutions.
Speaker Change: Our goal with these changes was to improve comparability between day force and our software peers, and make it easier for users to analyze our financial performance as we continue to grow and scale the business.
Now turning to our first quarter results.
Speaker Change: Total revenue was 481.8 million, up 11.7% on a gap basis, and 13.6% on a constant currency basis.
Speaker Change: Excluding Float, Total Revenue increased 15% on a gap basis, and 17.1% on a constant currency basis.
Speaker Change: Dave Force Recurring Revenue, Excluding Float, was 323.1 million, up 14.4% on a gap basis, and 15.9% on a constant currency basis.
Speaker Change: Professional Services and other revenue was 71.3 million, up 46.1% on a gap basis, and 49.8% on a constant currency basis.
Speaker Change: Operating profit was 31 million, and adjusted Yvita was 156.7 million, up 20.6 percent, or a 32.5 percent margin, expanding 240 basis points.
Speaker Change: Operating cash flow was 49.6 million, and free cash flow was 19.5 million, versus negative 18.8 million last year. [inaudible]
Speaker Change: Free cash flow as a percent of revenue was 4% expanding 840 basis points.
Speaker Change: During the quarter, we announced an efficiency plan and the reduction of our global workforce by approximately five percent. [inaudible]
Speaker Change: In connection with this plan, we incurred a non-recurring and restructuring charge in the first quarter of 29.2 million.
Speaker Change: Including Severance, Employee Benefits, and Related Costs, and Non-Cache Stock Compensation.
Speaker Change: These savings were reflected in our initial 2025 guidance and of course remained reflected in our reiterated 2025 guidance. Thanks.
Speaker Change: On share repurchases, we repurchase $30.4 million of shares or approximately $519,000 shares during the quarter under our $500 million share repurchase program.
Speaker Change: Cumulative to date, we have returned more than $66 million of capital to shareholders under this program.
Speaker Change: We still anticipate continuing to purchase shares in 2025 with the goal of minimizing delusion to our shares outstanding from stock base compensation.
Speaker Change: Overall, it was a solid first quarter and it nice start to 2025. [inaudible]
Speaker Change: A few comments on what I'm seeing in the macro before we move to our guidance.
First.
Speaker Change: We saw solid demand environment in the first quarter. As David said, our sales momentum continued building off the strong performance we experienced in the fourth quarter of 2024. Our HCM solution than value propositions continued to resonate with buyers. [inaudible]
Speaker Change: It's also important to note that we haven't seen a change in customer attention and continue to expect retention rates at our historical ranges.
Speaker Change: Second, employment levels were largely in line with our expectations during the first quarter.
Speaker Change: As we invoice on a current plate for a month basis, employment levels that our customers do have a direct impact to our revenue. However, we do have minimums built into most contracts at about the 80% level.
Speaker Change: We'll continue to monitor these employment levels, and report to you as we progress throughout the year. But do not see any to adjust our outlook or guidance related to employment levels. Thank you very much.
Speaker Change: Regarding interest rates which impact day force through our float revenue, we now expect three rate cuts in the US in the back half of the year compared to one rate cut previously assumed in our original guidance.
Speaker Change: However, with Q1 float revenue coming favorable to our expectations on higher average balances and higher yield, we are comfortable holding our full year float revenue guidance.
Speaker Change: For a full year 2025, we still expect mid to low single-digit growth in average balances and an effective yield of about 3.6%.
and finally foreign exchange rates.
Speaker Change: In Q1, FX rates were in mind with our expectations. However, since the announcement of tariffs, we have seen the US dollar weakened. This weakening has the impact of increasing the US dollar amount to both revenue and expenses. [inaudible]
Speaker Change: So we've updated our Q2 guidance to align to the average FX rates we saw in April , but we've left the rest of the year assumption flat with our original guidance. Thank you.
Speaker Change: All of the rates that we've used in our guidance for U.S. dollars to Canadian dollars, Australian dollars, and British pound can be found in our press release.
Speaker Change: Just a reminder that we are naturally hedged from FX on an EBITDA perspective.
Speaker Change: We provide constant currency growth rates in our guidance for this purpose and to be clear, we are leaving constant currency growth rates unchanged to prior gradients.
Speaker Change: Now, turning to our guidance, as I mentioned, we are reiterating our previously issued full year 2025 guidance on a constant currency basis, but you'll note the dollar amount of guidance to reflect the Q2 ethics rates.
Speaker Change: Specifically, we expect total revenue of 1.929 billion to 1.944 billion.
Speaker Change: Total revenue excluding float of 1.749 billion to 1.764 billion, an increase of 12.1% to 13.1% or 14% to 15% on a constant currency basis.
Speaker Change: Dave Force Recurring revenue excluding float of 1.317 billion to 1.342 billion, an increase of 13.6 to 15.7% or 15 to 17% on a constant currency basis.
Float revenue of $180 million. Adjust the diva to margin of 32%? No.
Freakastral Margin of 12%
Speaker Change: And for the second quarter, we expect total revenue of 454,000,000 to 460,000,000, total revenue excluding float of 408 to 414,000,000, an increase of 9 to 11%, or 10 to 11%, on a constant currency basis.
Float revenue of 46 million. . .
and adjusted Eva Demarjan of 30.5% to 31.5% of revenue. [inaudible]
Speaker Change: With that, we can begin the Q&A portion of our call.
Speaker Change: Thank you. Now that you've got a new question and answer session, if you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation phone blended to your lines in the question queue. And as a reminder, we ask you to please ask one question, then return to the queue. Thank you very much.
Speaker Change: Our first question today is coming from T.P. Panigrahi from Azul Husker. Your line is now live.
Thank you. I want to... Can you hear me?
Yeah, we got you, City.
David, you talked about...
Speaker Change: Strong sales pipeline and project kick-up. Wondering if you are seeing anything different in the US versus international market, given what we have seen last month or so.
Speaker Change: Siry, thanks for the call. Let me start by saying this.
Speaker Change: Bookings in Q1 were very strong. They were in line with what we saw in Q4 of last year, and if you recall, bookings in Q4 were very strong as well.
Speaker Change: When we look at the month of April , bookings continued to be very strong. And in terms of numbers, we would expect the first half bookings to be approximately 40% year over year.
Speaker Change: As you know, it takes a bit of time for that to translate into revenue, but that obviously gives us tremendous confidence as we go into 2026 and beyond as well. If I actually dissect the sales. [inaudible]
Speaker Change: Ad on sales, as I mentioned on the call, we're up 30% here over here.
Speaker Change: And that means that we are seeing more new customers signed with day force.
We saw...
Speaker Change: 4-3 deals be approximately 50% of the total deals we do in the quarter, but when I actually dissect it and I look at the major market space...
Speaker Change: The Enterprise Space and Emerging Space, again Emerging 500 up to 500 employees, a major market up to 3,500, Enterprise above 3,500 employees but below 12,000.
We're seeing...
at almost a hundred percent.
Of those particular segments by full, sweet seals. [inaudible]
And obviously that's very encouraging. Thank you.
Speaker Change: We're also seen impact from the SI channels. SI prime deals were 50% overall. We're also seen impact from the SI channels.
Speaker Change: So, we haven't seen impact at all from the macro in terms of buying decisions. [inaudible]
Speaker Change: When we look at project kickoffs, obviously following a very strong Q4 and a very strong Q1 on sales, you will expect that kickoffs would be also up significantly year over year and again, that gives us confidence in 2020, 26 and beyond.
Speaker Change: Thank you. Next question is coming from Scott Berg from Geedman Company. Your line is our line. Thank you very much.
Bye.
Hi everyone, thanks for taking my questions, dear.
Speaker Change: David, on the fourth quarter call, you had mentioned some increased...
Speaker Change: Demand Strings on HRMS and payroll deals, a market in the kind of a larger enterprise segment that you all plan.
Speaker Change: Yeah, how's that played out kind of 90 days later? Are you still excited about that, you know, segment, I know you're overall, you know, sales and pipeline commentary is really good, but those deals, you know, tend to have along your sales cycles. So I guess just trying to understand how that setup looks like maybe in the second half. [inaudible]
Speaker Change: It's continued as well, Scott, thanks for the question. In fact, in the first quarter, we signed our largest deal ever.
Speaker Change: which is another government agency that will probably have similar characteristics.
to what we've seen from the Government of Canada deal.
Speaker Change: So, in other words, obviously, starts with scoping a bunch of service work and effortlessly to quite acknowledge recurring revenue into the actual future.
Speaker Change: We also are thinking of being quite successful at selling full suite deals into the large enterprise space as well. The entertainment and leisure company we spoke about would be a perfect example of that. That's about 62,000 employees.
Speaker Change: So we saw strong sales performance across segment and across geo in the first quarter, and we've seen that continue in the month of April as well.
Speaker Change: Thank you. Next question today is coming from Mark Marcon, from Berg alive, is that right? Thank you.
Speaker Change: A good morning, really nice to see the free cash flow margin improvement.
Speaker Change: I'm wondering if you can just talk a little bit about the cadence in terms of total revenue growth.
Speaker Change: It looks like you're basically projecting for the second quarter on a total revenue perspective.
Speaker Change: to see a little bit of a deceleration, and then pick up in the second half. Wondering if you can just talk to some of the dynamics.
That would be driving that.
Bye.
Speaker Change: Yeah, thanks, Mark. It's good to hear from you. Look, maybe I'll start with Q1 total revenue and then we can move into the full year. The primary drivers between that 14% constant currency revenue growth is...
Speaker Change: Look, we were up about $58 million a year over year. You can look at that as mostly dayports for curry, $45 million up. Professional services had a really strong quarter. That was up about $23, $24 million.
Speaker Change: Power Pay, it was relatively flat, and then we had the headwinds from other recurring, which was down about six and float was down about four. Now the day force recurring, you know, that drive is driven mostly by go-lives. You can generally think about that as...
Speaker Change: Mostly new business and now seeing a greater proportion of add-ons. We also had some migrations from the APJ business, which is driving that $6 million, part of that $6 million decrease in the other recurring. And professional services and other was a huge increase in Q1.
Speaker Change: As you move into Q2 and beyond, you've got some seasonality in there. You know, our seasonality primarily around the day force recurring side of things comes from the year end solutions. We're going to see you in the next episode.
Speaker Change: If you think about our year-end services in the past, you should think about that pretty consistently.
year-over-year.
Speaker Change: which drives that same seasonality between Q1 and Q2, and that's how I would think about it. [inaudible]
Speaker Change: In Q2 also, I wouldn't expect as much growth in the professional services side. We grew 50% in Q1. I would expect that still above the recurring growth, as I talked about in the first quarter. [inaudible]
Speaker Change: But not at 50% level. We're seeing strength in that number from obviously all the demand that we've seen in Q4 and into Q1.
Speaker Change: On Power Pace, side of things, expected relatively flat, and then obviously that other recurring in the Bureau side goes down. The last piece of that is the float.
Speaker Change: And think about float as I think we gave specific guidance on this one, kind of average balances in the, you know, $5 billion range, and an effective yield of about 3.6 percent. [inaudible]
for the second quarter.
Mark Murphy: Thank you. Next question, today is coming from Mark Murphy, from JP Morgan, Relive. Is that right? All right.
Thank you so much, I'll add my congrats, Jeremy.
Mark Murphy: I'm curious how you're seeing the trends in some of your industries that are most acutely affected by tariffs thinking about airlines.
Mark Murphy: Retailers, Maple Syrup, Energy Providers, all that. Is there anything in the pipeline or...?
Mark Murphy: Employment level that's reflecting any of the trade tensions yet. Would you look at the forward indicators and then just a...
Mark Murphy: On the Azure marketplace set up, can customers burn down their Azure credits to purchase day force?
Mark Murphy: So, Mark, I'll start with the easy question. Yes, they can burn down. There is your market credit, which is a big part of the actual...
Mark Murphy: Partnership, as well it does benefit the SI from the same perspective. To the first part of your question, we haven't seen impact from the tariffs.
Speaker Change: Thank you. Next question today is coming from Kevin McVeigh from UBS Reliance. Is that live?
Kelly McVeigh: Great. Thanks so much. David, you talked about that Canadian contract a little bit. I just want to make sure I understood. They extend that contract was the dollar amount increased. I just could please start there real quick.
Kelly McVeigh: Chair on the Canadian, so the two points over there, right? The first was Kevin, we actually signed another federal agency contract. French.
Kelly McVeigh: with another government in Q1, Symmetites of Dynamics to what you have with the Government of Canada deal.
Kelly McVeigh: In regards to the Government of Canada deal, yes, a design and extension, it was a dollar amount of 105 million dollars Canadian, 72 million dollars US, that was mostly for services or this was services over the next, I think 15 months.
Kelly McVeigh: So obviously that there's quite well for that project, but the comment that I made earlier was another government contract that we started in Q1.
Samad Samada: Thank you. Our next question is coming from Samad Samana, from Jeffries, your line is that live.
Samad Samada: Hey, good morning, and thanks for taking my question. Maybe just um...
Speaker Change: If I think about the guidance, it's a strong start to 2025. If you think about that range that you're reiterating, maybe help us understand what will allow you to get to the high end. Would that be?
Speaker Change: bookings that have already been captured, going live earlier than expected. Good.
Speaker Change: Or would that be more of a function of out executing on bookings in the first half just...
Speaker Change: As I think about that, 15 to 17% constant currency, you guys split the middle and one queue. How should we think about where you think you can land in the range and as of today, are you thinking closer to the middle where you started or towards the higher lower end? Thank you.
Speaker Change: So, hey, Samad, nice to speak with you. I'll start then I'll hand it over to Jeremy. As you know, we have a very predictable business.
Speaker Change: We model out the revenue based on individualized projects tied to each of the different customers that we currently have in process.
Speaker Change: And that shapes the revenue curve if you like for the various types of quarters.
Speaker Change: A portion of those will go live in October and then the remainder most likely would go live at the end of December for the fiscal year 26. Thanks.
Speaker Change: There are some assumptions that we do have regarding the macro in terms of employment levels and obviously the yields for the remainder of year that kind of Jeremy went through in a bit of the detail. Jeremy, what else would you add to that?
Jeremy Johnson: I think that's right, employment levels are the key things to watch for us, that's really out of our control from our macro side of things, and to be clear, we haven't seen an impact.
To our expectations from employment levels, yes. All right.
Speaker Change: If we kind of look at things right now, it's steady as she goes. I think otherwise no difference from prior years. It's add-on sales as David mentioned, it's go-lives. [inaudible]
Speaker Change: You know, we've got our wallet business which continues to go strong and in line with our expectations and retention which also as I mentioned is very strong as well. [inaudible]
David Ossip, David Ossip, David Ossip,
Speaker Change: Taken, next question, today is coming from Raimo Lenschow, from Berkley, Zilline, Azalea. Thank you very much.
Raymond Enschel: Okay, thank you. You said everything's on plan, the one question I had that is related to that is like on the go-lives in Q1. Is that just like the shape of where things were playing out with Q4 being very strong, etc. And in Q1 with bigger projects, they get more opportunities later part of the year? Or is there anything else going on there? Thank you.
Raymond Enschel: Raimo, that's exactly right. If you look at Q4 of last year, it was quite significantly relative to the year before 146 versus 47. When you look at it, you remember you have to look at really where the days of week aligned relative to the start of the payroll period for the customers.
Raymond Enschel: So in some years ago life was skewed towards Q4 and other years are skewed towards Q1 and you see that pattern as the progress is between the differences between the actual quarters. [inaudible]
David Ossip, David Ossip, David Ossip, David Ossip
Speaker Change: Bacon, next question today is coming from Jared Levine from TD Counter-Line, is that live? Yeah.
Speaker Change: Yes, thank you. With your recently announced efficiency plan, can you discuss the primary expense items and the income statement expecting to see the benefit from the efficiency plans, as well as the associated charges and how you're thinking about how much of those savings will be re-invested back into the business?
Speaker Change: Jared, it's good to hear from you. Thanks for the question. I talked about this a little bit on the scripted remarks, and we talked about this since.
Speaker Change: We review the entire company from a functional and geographic perspective, and the cuts really span broadly across both of those two actors.
Speaker Change: And then our plan has always been to continue to improve recurring gross margins and our professional services gross margins and we get towards that break even line.
Speaker Change: The impacts and the savings are around $65 million in year and $80 million annualized. That's offset by all about $10 million of investment that we put back into the business on some specific projects. [inaudible]
Speaker Change: As far as the one-time charges in connection with the plan, we incurred a non-recurring, restructuring charge in the first quarter of about $29 million.
Speaker Change: That includes severance costs and includes employee benefits and related costs. It also includes a non-cash stock compensation.
Speaker Change: And those savings, as we've talked about, were reflected our initial 2025 guidance, and of course, remain reflected in our rear to rear of the guidance. In Q1, it was about $11 million and you'll see this in the notes to our 10Q, $11 million of restructuring charges that were paid. And that means we have a liability of about 18.6, the combination of those two gets you to the $29 million. $30 million.
Speaker Change: David Ossip, David Ossip, David Ossip,
Speaker Change: Thank you. Next question today is coming from Steve Enders from City Group. Your line is now live.
Okay, great. Thanks for thinking of the question this morning.
Speaker Change: I wanted to ask just on the bookings and pipeline opportunity that you're saying, I think last quarter you talked about.
Speaker Change: New Sales, coming in above Total Revenue Graph, and it seems like it's looking my way for one cue based on what you're seeing. But do you feel the same way as you look out in the pipeline for the back half of the year? What are you seeing in the pipeline dynamics right now? [inaudible]
Speaker Change: Thanks for the question. As I mentioned on the call, the pipeline remains healthy.
Speaker Change: Q1 bookings were very strong. We expect that to continue through Q2 as well. Again, from a number perspective, we would expect year-of-year sales to come in, about 40%. We expect that to continue through Q2 as well.
Speaker Change: Greater than we saw on the prior year and in line with what we saw in Q4. So we're quite optimistic and confident on the sales front.
Speaker Change: Thank you. Next question is coming from Aleksandr Zukin, from Will Pre-Certraline, is that lies? Yes.
Speaker Change: Hey, guys. This is Ryan Krieger on for Alex. Thanks for taking the question. I just wanted to circle back on some of the AI commentary, David, that you provided. It sounds like a touch is really strong there, particularly around co-pilot. They're just kind of curious what type of maybe pepum uplift you're seeing in those AI deals versus the non-AI deals and how that compares to initial expectations. [inaudible]
Speaker Change: And then just beyond co-pilot, kind of what other AF features are you seeing good traction? Thank you.
David: So on the AI Assistant, which is the new name, if you like, for Co-Pilot, we saw a 50% attachment rate.
of that particular skew to new deals.
David: There's obviously very encouraging. We are launching a series of AI agents this year across all the various domains that we play in HR, Parallel Time and Calint. [inaudible]
David: You'll see those coming out through the year, and that obviously gives us another ability to see a revenue uplift or skew uplift. [inaudible]
David: We still have tremendous white space across almost 7,000 customers, where we can go back and upsell them the advanced experience hub with the AI assistant. Thank you very much.
David: What you'll see actually if you look at the application today and the features that we're releasing is that AI is everywhere. We have a distinct advantage over the others in that we have a single database, a single native code base. [inaudible]
David: And that allows us to really leverage that single database to drive AI in every touch point from the employee frontline manager all the way to the executive. In terms of the agents, we have two different types of agents. We have agents that are designed for their employee. [inaudible]
David: And we have agents that are designed for the administrator. And I think the customers will benefit greatly from the innovation that we're doing around AI.
David Ossip, David Ossip, David Ossip, David Ossip,
Speaker Change: Thank you. Next question today is coming from Brad Reback from Steepler. Your line is now live.
Brad Reback: Great, thanks very much. David, what appears to be meaningful acceleration in self-force productivity, is that coming from meaningful uptick in win rates out in the field, growing pipeline top of the funnel, the SI, maybe you can talk to that a little bit, thanks.
Brad Reback: I don't know how much further we could take the actual win rates.
What is resonating very well is our technology leadership. [inaudible]
Brad Reback: That we have that single code base, that single database. We do the 12 to 1 simplification. It's resonating with the actual market. We're seeing that reflected in percentage of full suite deals that we're now doing. If I would look at Joe's strategy, when he joined the organization about three, four years ago, which was to build a full suite, so from pre-higher to retire. We're seeing that. We're seeing that. We're seeing that.
Brad Reback: That is gaining traction. Again, when we look at kind of the major market space, which is at 500 to 3500 employees, or we look at the enterprise space, we've seen full suite deals in major markets of about 90% and full suite deals an enterprise of 100%. [inaudible]
Brad Reback: So, that's one of the reasons that you're seeing our win rates go up. You're seeing the acceleration of the actual sales. I do believe we are quite differentiated in the segments that we play on. Our global payroll story as well is very, very strong, and the saucy interaction on that. [inaudible]
Brad Reback: Our Advantage in Managed Services, which have to do with the payroll and the benefit side, is a very, very strong differentiator. That's up 70% year over year. Yeah.
Speaker Change: And I would say that the execution of the sales organization led by Sam. [inaudible]
is working very, very well. [inaudible]
Speaker Change: that they're able to articulate the only proposition clearly. Customers understand how that results in very strong ROI to their organization, much better experience.
We're obviously riding the AI kind of wave. David Niederman, David Niederman,
Speaker Change: I just given our advantage of having that single code base and that very well structured data set that allows us to leverage kind of large language models and other ML types of technology very very effectively to the benefit of our customer bases. [inaudible]
Speaker Change: But as you can tell, we're very optimistic on the satellite side.
Speaker Change: Thank you. Our next question is coming from Daniel Jester from BMO Capital Mark Future Light as allies. All right.
Daniel Jester: Great, thanks for taking my question. Maybe two real quick ones for Jeremy. First on free cash flow, first quarter is very strong. I think historically your first quarter of cash generation is a little bit lighter. So can you help us think about the seasonality for the rest of the year? And then secondly on the government of Canada contract that knew...
Daniel Jester: 72 million U.S. dollars that David mentioned. Is that net new or with some of that already contemplated in your guidance for the year? Thank you.
Daniel Jester: Things like bonus runs for our employees. You've got annual subscription to go out the door.
Daniel Jester: And those things impact our cash flow. You'll see a very similar trend obviously with the tide rays with our increased cash flow, but a very similar trend to pastures on a quarterly basis.
Daniel Jester: And as we progress towards that 12% pre-cashable margin in our guidance.
Daniel Jester: I do think about the government of Canada. The work is continuing, I think, really, really nicely. That substantive contract that we signed continues the professional services work.
Daniel Jester: And that will continue to help drive that growth professional services revenue growth above the recurring growth for the near term here as we continue to work through that project. David, anything to add on government of Canada? No, just I do think it is a sign of confidence.
Speaker Change: On the actual project is consistent with what the government has said in prior years. [inaudible]
Speaker Change: Obviously there was some risk going into the quarter with the elections that were going on, but I think we came out of that rather well. I think you'll see that reflected as well on the professional services and other line, which if you look at the professional services and other adjusted margin. You'll see that the professional services and other adjusted margin.
It's really improved very, very nicely.
Speaker Change: In terms of the guidance, comment, we had made assumptions that the project would continue and this obviously did risk that item. It's assertion to you about the revenue strength.
Speaker Change: Thank you, next question today is from Jason Celino, from Keeping Capital Markets, your line is our line.
Speaker Change: Great. Thank you. This is Zayn Nehan on for Jason's morning. Thanks for taking my question. Just a question on wallet.
Professor is that they're using wallet. [inaudible]
Speaker Change: What level of utilization are you seeing by their employees? And in periods where macro might, you know, be more uncertain or typing, would you expect for that utilization to increase? Thanks.
That's an interesting question. We...
Speaker Change: With the actual wallet product, we have an on-demand pay where the employees are able to move their earned wages onto their master cards and they can go off and obviously spend. This is the end.
Speaker Change: For that particular product, it's largely for, I would say, the unbanked employees in the United States, which allows them to avoid check cashing fees. It allows them to not have to do pay-date loans to bridge their finances.
Speaker Change: For those employees, we're seeing a very, very high utilization rate. Typically, they use the product about 25 times per month with an average spend of about 25 dollars. It's been largely consistent. That type of utilization since we launched. [inaudible]
Speaker Change: We also have direct deposit capability, which is at the end of the pay period instead of having the money deposited to a direct deposit account.
or a paper check.
Speaker Change: Whereas when we do direct deposit to other bank accounts, we go through the HTH system which takes between $24 and $48. Again, with the unbanked employed, this gives them effectively a bank account which allows them to get the money very, very quickly. Thank you very much.
We also have capabilities employees have other cash apps.
Speaker Change: Or if they wanted to instant transfer, we call that AFT and IST, where people can do the transfers immediately or pull the money from the other wallets. We launched that last year and that immediately got a lot of traction. And we'll continue to see that traction grow. Good.
Speaker Change: Earlier this year, we launched direct to bank capability. We started first.
Speaker Change: with the ability of when someone doesn't on-demand pay transaction, instead of going to the master card that we provide, they have the ability to use any debit card. Thank you very much.
Speaker Change: And there is a fear for that. We launched that. That's going very, very nicely. We've seen effectively the revenue from that go up by a few thousand dollars each day of week relative to the same day of week last June . [inaudible]
Speaker Change: So we're very confident that will generate several million dollars of revenue over there.
Speaker Change: And, more recently, we just launched the ability for someone to do an on-demand transfer action to any direct deposit account that they actually have as well. [inaudible]
Speaker Change: The last two items that I'll talk about are largely focused around not the unbanked employees, but rather the banking employees. So we would expect to see a benefit to wallet this year from those capabilities much like we saw from AFT and IFT last year.
David Ossip, David Ossip, David Ossip,
Speaker Change: Let's take your next question today is coming from Bhavin Shah and Dutra Bank. Your wine is alive. Good bye.
Thank you.
Speaker Change: Alright, thanks for taking my question. I think earlier you spoke about migrating customers from the APJ Legacy business over to Dave Forest. How is that going relative to your expectations and kind of what kind of uplift are you seeing as you migrate the Amazon Legacy platform to the more modern Dave Forest solution? Yeah, I think so.
Speaker Change: Thanks for the question, Bob. And, yeah, you can see in our other, this most clearly in our other recurring line where that was down about 29, 30 percent. Thank you very much.
Year over year.
Speaker Change: And in the future, in Q2 and Q3, I actually think that that percentage could even accelerate above that into the 40 percent ranges. We made some decisions to really aggressively and move customers and target customers either over to day force or off. [inaudible]
Speaker Change: So that we can drive the efficiency and the profitability of the company a little bit faster.
Speaker Change: As the customers move over and migrate over, we do get an uplift. [inaudible]
Speaker Change: That uplift varies in a contract to contract, but it's a pretty decent uplift, probably on average 50% or so, and we continue to see that as we move customers over.
Michael Churn: Thank you. Next question is coming from Michael Turin from Wells Fargo, your line is now live.
Michael Churn: Mid-Market and Enterprise as well as speak to some of the consolidation opportunities you're highlighting and the press release, that's all helpful. Thank you.
Speaker Change: So regarding the competitors, as I mentioned, we've seen our wouldn't rate go up by almost double, if you like, year over year. And so that gives evidence that I think our product is performing very well on the organic market share. Thank you very much.
Speaker Change: Our overall market share still is relatively low, probably under 4%, so it gives us a lot of optimism that we should be able to be a market taker for quite some time going forward.
Pay less subscription, they save a tremendous amount. [inaudible]
Speaker Change: of labor costs and that they don't have to support 12 different systems when they move to a single day force application and equally important. They have the ability to do much better decision making because the data is all accessible and it's all in the same data store.
Speaker Change: And they can leverage newer technology like language models, machines, learning and other AI type of tech, which obviously benefits everyone from their frontline worker to the executives.
Speaker Change: In terms of the competitive market set, we haven't really seen much of a change. Our competitive market set has been largely the same, which is one other HCM provider that obviously has a few headwinds. [inaudible]
Speaker Change: And then the typical ERP players as we go more and more upmarket. David Niederman, David Niederman,
Speaker Change: We've seen, again, tremendous success with both wheat sales all the way from emerging to the enterprise space.
So up to 12,000 employees space.
Speaker Change: And we are beginning to see success with full suite sales in the large enterprise market. Again, like I mentioned, the entertainment and leisure company of about 62,000 employees behind the full suite. And we are beginning to see success with full suite sales in the large enterprise market.
Speaker Change: Our focus, again, remains on organizations that have frontline workers, which is the majority of the actual workforce.
Speaker Change: As you know, we have always focused that we have the continuous calculation. We've been the literary and compliance for quite some time. We continue to invest in compliance.
Speaker Change: Last year we did over 900 compliance features. I called out some of the compliance features. We did them on a global basis in the first quarter of this year. And I think that continues to be a very, very strong differentiator. There.
Speaker Change: And now when you couple that with our really competitive talent, our friends and data, our friends and managed services, our friends, we're a difficult organization to compete with.
David Ossip, David Ossip, David Ossip,
Speaker Change: Thank you. Next question, today is coming from Alan Pekowski, from Scotia Bank, your line is now live.
Speaker Change: Hey, guys. Thank you for taking the question and great to hear about all the booking strength in the quarter. I want to follow up on SIs' priming implementations. Could you just go deeper on what business trends you've seen there over the past three months, maybe compared to the year ago period? That'd be great.
Speaker Change: and Jeremy Johnson. And I'm going to leave you with the last two minutes of the session. So, thank you for joining us. I'm going to leave you with the last two minutes of the session. So, thank you for joining us.
Speaker Change: So, let me start by saying that building a powerful SI ecosystem is very important to our organization.
Speaker Change: Sam, RCRR, and his organization has specific targets that we measure in terms of SI involvement in each of our sales. And as well, we measure the percentage of kickoffs and projects that are primed by the SI's. And as well, we measure the percentage of kickoffs and projects that are primed by the SI's.
Speaker Change: We have different layers of different levels of SI partnerships. We started at Tier 1s. For example, if we look at the Government of Canada, you'll find E&Y would be the prime on that particular deal. We also deal with CGI on that particular. Let's go.
Speaker Change: But we are very strong tier one SI partners that we used to be in the large enterprise space. [inaudible]
Speaker Change: When we go into the enterprise, major markets and emerging spaces, we typically bring on a different set of our size along the lines of groups like BDO and such, which are very well geared for delivering a quantifiable value to that particular market set. [inaudible]
Speaker Change: The use of the SIs really allows us to scale the organization without building out a tremendously large services organization.
Speaker Change: It also helps us in terms of building out the pipeline influence of the actual pipeline as well. And so we're encouraged with what we're actually seen on the ASI side. Thank you very much.
Speaker Change: Thank you. We reached out to our question and answer session. I want to turn the floor back over for any further closing comments. Thank you very much.
Speaker Change: I just want to say thank you very much for the attending the call today.
Speaker Change: We look forward to hosting you on the Q2 call and also just want to send a special thank you to all the day force employees that are out there supporting this company as we continue to do really, really good work for our customers, existing customers and attracting new customers as well. Thank you very much. Thank you very much.