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Greetings, and welcome to Dayforce's Fourth Quarter and Full Year 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Niederman, VP of Investor Relations. Thank you. You may begin.

Thank you for joining, and welcome to the Dayforce Fourth Quarter 2024 earnings call. I'm David Niederman, Vice President, Investor Relations. As a reminder, all participants are in a listen-only mode and a question and answer session will follow our opening remarks. Joining me on the call today are CEO, David Ossip, and CFO, Jeremy Johnson. We also have Chief Strategy Product and Technology Officer, Joseph Korngiebel, and our President and COO, Steve Holdridge, available for Q&A. Before I hand the call over to David, I want to remind everyone that our commentary may include forward-looking statements. These statements are subject to risks and uncertainties that could cause Dayforce's results to differ materially from historical experience or present expectations. A description of some of these risks and uncertainties can be found in the reports we file with the Securities and Exchange Commission, such as the cautionary statements in our filings. Additionally, over the course of this call, we'll reference non-GAAP measures to describe our performance. Please review our earnings press release and filings with the SEC for our rationale behind the use of non-GAAP measures and for a full reconciliation of these GAAP to non-GAAP metrics. These documents, in addition to a replay of this call and also a transcript, will be available on the Dayforce Investor Relations website. And with that, I'd like to turn the call over to David.

Thanks, David. And thank you all for joining us. I'll begin with some high-level commentary on our results and outlook before handing the call over to Jeremy, who will provide more detail on our financials and guidance. We had a strong year with Q4 sales exceeding expectations and coming in above plan. Sales cycles returned to historical levels, and January proved to be a strong start to 2025. Looking ahead, we expect sales growth to outpace revenue growth throughout the year. Our pipeline coverage gives us confidence starting the year with approximately four times coverage of pipeline compared to our sales target. We had excellent performance in 2024. Total revenue was $1.76 billion, growing 17% on a constant currency basis. Dayforce recurring revenue excluding float grew 21% on a constant currency basis. Adjusted EBITDA margin was 28.5%, expanding 140 basis points. And free cash flow was $172 million or 9.7% of revenue, expanding 280 basis points. As guided during our Investor Day, we expect total revenue growth in 2025 of 14% to 15% excluding float and on a constant currency basis. Our guidance reflects our decision to focus on higher margin areas of our business while phasing out legacy segments. Therefore, recurring revenue excluding float is 15% to 17% on a constant currency basis during 2025. In terms of our mid-term operating model, we are confident in our ability to exceed the 20% free cash flow margin. Last year, we expanded free cash flow margins by 280 basis points to 9.7%. In 2025, we anticipate this increasing by another 230 basis points to 12%. And for this upward trend to continue over the midterm. On an adjusted EBITDA basis, we are raising our best today guidance by 100 basis points, increasing adjusted EBITDA margin guidance to 32% from 31%. Beyond 2025, over the midterm, we expect adjusted EBITDA to expand by 100 to 150 basis points per year. In the coming years, we anticipate that the total revenue growth will remain close to 15%, while profitability improvements, both free cash flow and adjusted EBITDA, will continue to outpace revenue growth. From a sales perspective, our CRO Sam? Has executed exceptionally well. In the last quarter, we secured several key new business wins including a 60,000 employee grocery chain, an 18,000 employee space exploration company, and a 66,000 employee member-owned retail cooperative. As well as success in expanding deals including a 60,000 employee global manufacturing distributor of paints and coatings, and a global air service provider with 48,000 employees across 35 countries. Many of these deals closed within weeks of customers attending Dayforce Discover event. A testament to the impact of the event and its role in accelerating Q4 sales. On the product side, we continue to lead in innovation and delivery. Our product roadmap is built around compliance, IT simplification, data, and experience. On the compliance front, we delivered more than 900 compliance updates and were once again recognized by Gartner as a compliance leader for firms with more than 1,000 employees, and for firms with more than 2,500 employees. E compliance enhancements included a new workforce insight experience, machine learning-driven labor forecasting, and direct-to-bank capabilities for Dayforce Wallet. Speaking of Wallet, it had a tremendous 2024 with revenue increasing from $12 million to over $30 million. We expect Wallet to continue gaining momentum in 2025. Our IT simplification efforts align with our twelve to one strategy, which consolidates multiple HR systems into a single Dayforce platform. This approach reduces integrations, manual workarounds, and operational complexity while improving efficiency and decision-making. Our leadership in this area was reinforced by our recognition as a leader for the fifth consecutive year in Gartner's Magic Quadrant for Cloud HCM solutions for enterprises with more than 1,000 employees. Currently, now twelve to one value proposition we launched a new talent acquisition experience and replatformed Illumi into Dayforce, creating a best-in-class learning experience with strong analytics, content creation tools, and a content store featuring over 90,000 training modules. We expect learning management and content to drive significant client-based sales in 2025. On the data and experience side, we are already seeing strong adoption of our Dayforce integration studio and Copilot products, both of which we demonstrated at Discover. Since launching in November, we have sold more than 60 Copilot units. Copilot integrates with our Experian's hub, allowing CHROs and their teams to create engaging and immersive experiences for frontline workers, managers, and executives. Content within the hub is indexed using AI, enabling users to ask questions and receive contextual responses with relevant reference select. Additionally, Copilot facilitates workflow automation such as requesting time off. Innovation in this area will continue in 2025 with planned releases of AI agents and other new capabilities. At the core of Dayforce is our commitment to product innovation. This is what differentiates us in the market and drives our strong win rate, high customer retention, significant add-on sales, and industry recognition. Turning to customers and go-live. Q4 was impressive. We saw 146 net new customers go live, including a global aviation service provider with over 55,000 employees across 36 countries, a 23,000 employee American entertainment company rolling out full suite talent, a 10,500 employee UK contract catering and support service provider. We now have 6,876 live customers and 7.6 million live active users on Dayforce. Both are approximately 10% year over year. Additionally, Dayforce recurring revenue per customer increased by 11% and our gross retention rate improved from an already strong 97.1% to 98%. From a profitability standpoint, our improvement in adjusted EBITDA and free cash flow was largely driven by improvements in recurring gross margin. Adjusted cloud recurring gross margins were 79.8%, expanding 150 basis points. Resulting from efficiency gains in our support and managed services organizations, greater automation, AI-driven optimizations, and a higher proportion of add-on sales. In 2025, we will continue optimizing our cost basis by improving sales productivity, streamlining our organizational structure, and leveraging lower-cost jurisdictions, automation, and AI. Professional services and other revenues, historically a negative margin business, is expected to break even in 2025. This milestone reflects the investments we have made in automation and partnership systems integrated. Before handing the call over to Jeremy, I want to emphasize four key themes. First, our strength lies in our ability to innovate and deliver exceptional products. Second, we saw robust sales performance in Q4 and are confident this momentum will continue into Q1 and throughout 2025. Third, we have made meaningful improvements across all profitability metrics and we expect these trends to continue in the coming years. Finally, we are positioning Dayforce for sustained revenue growth at levels similar to 2025, while driving towards a 20% plus free cash flow margin. I'll now pass the call to Jeremy to discuss our financial results in more detail, Jeremy, over to you.

Thanks, David. We are pleased with the fourth quarter results. Top-line revenue growth remained strong while we scaled the business and continued to expand cash flow margins. In the fourth quarter, total revenue was $465.2 million, up 16.4% on a GAAP basis, and 17% on a constant currency basis. Excluding float, total revenue increased 17% on a GAAP basis and 17.6% on a constant currency basis. And Dayforce recurring revenue excluding float was $307.6 million, up 20% on a GAAP basis and 20.4% on a constant currency basis, underpinned by strong go-lives. Hour pay recurring revenue excluding float was $23.1 million, flat on a GAAP basis, but up 2.6% on a constant currency basis. And professional services and other revenue was $71.5 million, up 18% on a GAAP basis and 18.8% on a constant currency basis. Gross profit was $218.6 million, up 28.7%. Operating profit was $28.5 million, while recurring gross margin was 80%, expanding 300 basis points. And on a non-GAAP basis, adjusted cloud recurring gross margin was 80.4%, expanding 230 basis points. And adjusted EBITDA was $129.2 million, up 30.2% or a 27.8% margin, expanding 300 basis points. Turning to our full-year results. Total revenue was $1.76 billion, up 16.3% on a GAAP basis and 16.7% on a constant currency basis. Excluding float, total revenue increased 16% on a GAAP basis and 16.3% on a constant currency basis. Dayforce recurring revenue excluding float was $1.16 billion, up 20.4% on a GAAP basis and 20.7% on a constant currency basis. Hour pay recurring revenue excluding float was $83.7 million, up 2.2% on a GAAP basis and 3.8% on a constant currency basis, and professional services and other revenue was $242.7 million, up 12.2% on a GAAP basis and 12.5% on a constant currency basis. Gross profit was $812 million, up 25.6%. Operating profit was $104.1 million, including $84 million of amortization expense related to the retired Ceridian trade name. Outrecurring gross margin was 78.9%, expanding 190 basis points. And on a non-GAAP basis, adjusted cloud recurring gross margin was 79.8%, expanding 150 basis points. Adjusted EBITDA was $501.5 million, up 22.3% or a 28.5% margin, expanding 140 basis points and reflecting our continued improvement in gross profit margins and scale and adjusted G&A. From a cash flow perspective, full-year operating cash flow was $281.1 million, up 28.1%, and free cash flow was $171.5 million, up 63.2%. Free cash flow as a percent of revenue was 9.7%, expanding 280 basis points. It's a solid year from a financial perspective, with strong revenue growth, expanding profitability, and increasing cash flow metrics. If I look back at our original 2024 guidance issued in February 2024, we met or surpassed these targets with healthy performance throughout the year. If you recall, our initial guidance for 2024 was for total revenue to grow between 13% and 14% constant currency, and we grew 16.7%. Dayforce recurring revenue x float to grow between 20% and 21% constant currency, and we grew 20.7%. An adjusted EBITDA margin between 27.9% and 28.6%, and our margin was 28.5%. We also introduced free cash flow guidance for the first time this year, saying that we expected free cash flow margin between 9.5% and 10% of revenue, with conversion from adjusted EBITDA to operating cash to be in the mid to upper 50% range. While CapEx remained relatively flat year over year. And we ended at 9.7% of revenue, with 56% conversion from adjusted EBITDA to operating cash flow. We're pleased with our overall performance and financial results this year. During the fourth quarter, Dayforce recurring revenue excluding Flow, grew at 20% on a GAAP basis or 20.4% currency. Included in these results was a $2 million FX headwind versus our guidance rates, and while go-lives were solid, employee volumes, tax filing fees, and print fees missed our expectations. And we had impacts from customer contract amendments. The contract amendments were isolated to a few customers and represented changes to terms that caused a reallocation of contract consideration, increasing PS and other revenue, and reducing recurring revenue. Specifically, the impact from employee volumes was approximately $1 million, the contract amendments were approximately $1 million, and the tax filing fees and print fees were each about $500,000. Excluding these items, our Dayforce recurring revenue growth would have been in the middle of our guidance range. We have not changed our previously issued revenue guidance for 2025, which I'll dive into more next. A few other callouts about 2024 before I move on to our guidance. During 2024, Illumina revenue added approximately 190 basis points of growth to our Dayforce recurring revenue ex float, and 110 basis points of growth to our total revenue. During 2024, we executed $36 million of our $500 million share repurchase plan and are pleased that we have the profitability and flexibility to return capital to our shareholders and manage dilution from share-based compensation while maintaining investment in the business. Now turning to guidance, for the full year, we expect total revenue excluding float to grow at a constant 14% to 15%. At current FX spot rates, we estimate this to be $1.745 billion to $1.76 billion, or 11.9% to 12.8% growth on a GAAP basis. Dayforce recurring revenue excluding float to grow between 15% and 17% constant currency. At current FX spot rates, we estimate this to be $1.315 to $1.34 billion, or about 13.4% to 15.5% on a GAAP basis. Float revenue of $180 million representing an effective yield of 3.6% and balance growth in the mid to low single digits. Adjusted EBITDA margin of 32% of revenue, free cash flow margin of 12% of revenue, and in 2025, we now expect PS and other revenue to grow slightly faster than Dayforce recurring revenue excluding float. During 2025 as we continue to implement projects from the strong demand we saw in 2024 and as we continue to work on some larger projects including the government of Canada. For the first quarter, we expect total revenue excluding float to grow 15% to 17% on a constant currency base. Current FX spot rates, we estimate this to be $421 million to $427 million, or growth of approximately 13.5% to 15%. Quote revenue of $53 million representing an effective yield of 3.7% and balanced growth of mid-single digits. And adjusted EBITDA margin of 31% to 32% of revenue. With regard to FX rates, 2025, expect our revenue to be approximately 70% US dollar-based, 21% Canadian dollar-based, 4% to 5% Australian dollar-based, and 3% to 4% British pound-based, with the rest spread across multiple currencies. With the US dollar strengthening against each of these current and with the proportion of our UK and Australia-based revenue increasing, we will begin providing FX rates assumed in guidance for each of these currencies compared to the dollar. For our current guidance, the US dollar to the Canadian foreign exchange rate used is 1.44. The US dollar to British pound foreign exchange rate is 0.81, and the US dollar to Australian dollar foreign exchange rate is 1.61. Specifically, current foreign exchange rates are driving about 200 basis points of headwind to our full-year 2025 revenue growth ranges. A few other things to call out before we close out the call. On share repurchases, we still anticipate continuing to purchase shares in 2025. With the goal of minimizing dilution to our shares outstanding from stock-based compensation. Our current estimate is that we plan to repurchase more than a million shares during 2025, effectively doubling our 2024 purchases. Later today, we are launching a repricing deal for our existing $650 million term loan B with the goal of reducing the interest rate from our current levels of so far plus 250 to something lower. And with regard to our $575 million convertible debt, which matures in March of 2026, we're currently planning to retire this at maturity in 2026 with cash and liquidity on hand. Now with that, we can begin the Q&A portion of our call.

Thank you. Ladies and gentlemen, the floor is now open for questions. You may press star two if you would like to remove your question from the queue. We do ask that you please limit yourself to one question and one follow-up. Today's first question is coming from Siti Panigrahi of Susquehanna Securities. Please go ahead.

Jeremy, for Q4, Dayforce recurring x float, could you elaborate on the points that impacted the miss and is it something a surprise or and also is it one time or should we expect that in this year too?

Hey, Siti. Nice to speak with you. Let me start before I hand it over to Jeremy. I'd like to make four points that I think are quite key. First of all, Q4 sales and January sales were both up considerably. On a year-over-year basis, both were record, growing at over two times the revenue growth of the company. So we're quite optimistic on sales performance and sales momentum. As you know, generally, when we have a very strong Q4, we see a bit of a headwind going into Q1 and we do not expect that this year. Sales is strong. Second, we're holding the revenue guidance for the company. That's the guidance that we gave at the Investor Day. And at the same time, we're increasing the EBITDA guide for the company by 100 basis points. We're seeing meaningful profit strengthening across all aspects. So adjusted EBITDA, gross margins, and as well as free cash flow. In fact, if you look at it on an adjusted EBITDA basis, you can see that on an x flow basis, we're expecting adjusted EBITDA to go up by 560 basis points inside the year. And finally, we are positioning Dayforce for sustained growth around the current levels moving towards a 20% free cash flow basis. In regards to Dayforce recurring in Q4, there were three aspects that Jeremy can go into detail on those. All of them, I would say, are one-time items that do not impact the future of the company. Some of them have to do with amendments to contracts. There were some FX inside there as well. And as people obviously are moving to more digitization, there has been some impact on the printing and the shipping types of these. Jeremy, do you want to get some details for that?

Definitely. Yeah. So David mentioned the FX which, you know, we can put aside and talk constant currency and ultimately, there's three drivers to the slightly lower numbers, the roughly all equal weighted. At first, I'd say it's lower employee volumes than expected. Second, it's printed fees and tax filing fees, and third, these contract amendments that shifted revenue into professional services and other and away from recurring. All of them are small, on a dollar basis. On employee volumes, as you probably know, we historically see some a seasonal spike in Q4 employee volumes around the holidays. And that seasonality was slightly muted this year compared to the past. And on the print, a tax filing fee, that's revenue that's invoices used. And therefore, it's a little bit more difficult to forecast. We saw some lower consumption this quarter meaning, you know, for example, less printing than historical levels. And on the contract amendments, it's, honestly, a typical customer motion that we see frequently as customers grow with us and grow their HCM needs with us. It's a type of flexibility and partially what drives our strong gross retention of 98%. We're constantly working with our customers to ensure they're satisfied, and you know, with large customers, when they add services or products, we're required to reallocate that contract to between PS and other and recurring and this quarter, we saw some more services added, which is a good thing for the business and the tailwinds in CS and other. And the headwind in recurring revenue.

Yeah. Thanks for that color. And, David, that's impressive. And I think your fourth point on the key themes, driving sustainable revenue growth at this level 2025. That's definitely impressive when you compare to your peers who are more in the low double digit. But help us understand what are the factors assumed in that level of, you know, confidence to drive this level of growth.

We are seeing strong sales momentum. Again, if I look towards December, it was a record month. And then we saw the strength continue into January. And as you know, I typically give a bit of a color as to how the current order's going. The other number I'll point to, if you look at the cloud ARR, growth in 2024 it was up 17.9%. And remember, our business is very predictable. If I look at Dayforce recurring across the 2024, we will incur 80 basis points of the guide that we gave at the start of the very year, which I think is quite remarkable for a business of this scale. Thank you.

Thank you. The next question is coming from Mark Murphy of JPMorgan Chase. Please go ahead.

Oh, thank you so much. Congratulations on the strong sales performance at year-end. That's great to hear. Jeremy, I have two quick questions. First of all, Jeremy, regarding the employee volumes that you said came in slightly below expectations. You mentioned the Q4 holiday spike was muted. Do you attribute that to the timing of the holidays for both Christmas and New Year's? We're falling mid-week on a Wednesday. In other words, a temporary blip or, you know, did you see some other type of effect that might linger a bit into Q1?

No. I didn't see it had that level of detail, anything that I would point to that said would linger into Q1. You know, as I said, historically, we do see that Q4 seasonal spike around the holidays. I think you know, that slightly muted, but then also know, we did have some extreme weather events in the southeast, and, yeah, this year, they're in Q4. And but I it's it's a tough thing for us to forecast and to guide and historically, we've been pretty accurate. And think we still were very accurate. It just you know, was slightly below our expectations, unfortunately.

Okay. Understood. And then, David, you're thinking back to the fall. You had mentioned some willingness to consider more transformative M&A. And since then, we've seen Paychex announcing its intent to acquire Paycor. Is it safe to assume that Ceridian would have seen too much overlap with Paycor or isn't as interested in going down market and therefore, perhaps you didn't spend much time considering it and could you shed any light on just whether that acquisition might affect the landscape or open up any opportunities for you as they try to merge the two organizations.

We don't compete against Paychex, and we don't compete against Paycor. It is down market from us. I would expect in the down market side that there should be consolidation because I don't think there's much differentiation in product. Mark, what differentiates Dayforce is our ability to innovate and deliver product. And you see that across the gains that we're having in terms of competitive wins in market, the strength of the Q4 and the January sales of it. So to answer your question, though, I don't think there'll be any impact to Dayforce.

Thank you.

Thank you. The next question is coming from Raimo Lenschow of Barclays. Please go ahead.

Hey, thank you and congrats for me as well on a great sales quarter. And how do you think about the sales kind of feeding into revenue next year? Obviously, you know, like, strong quarter, if I look at the guidance for Dayforce, they were slightly below consensus. It maybe might have misnrolled by us. But, like, the contract that you signed, were they kind of contract with longer go-lives, etcetera, that kind of really take should consider. Thank you.

Hey, Raimo. We had strong performance across segments. So we saw large enterprise, which for us is above 12,000 employees perform well. We saw the major market have considerable strength. As well. And we even saw our emerging business which goes up to about a thousand employees, also do very, very nicely. The Australian APJ also performed very well. So there wasn't really a concentration in any one segment. You know, given our scale, it's there we typically have, I'd say, well over a thousand ongoing customer implementations. And as you know, when we plan out or model out our revenue, we look at it from an individual go-live milestone of each of those specific projects. So by the way, the go-live number as well in the portal works very, very strong. The number was, I think, what was Jeremy, a hundred and forty-six net new customer thought it was actually very great. So we go in you know, really with a strong Dayforce recurring. I mentioned a bit earlier. The annual recurring revenue of sales went up by 17.9%. So it just flows throughout the system.

Okay. Perfect. And then, Jeremy, one for you. The I saw the EBITDA raise, so well done on that one, but you didn't raise the cash flow number, which is kind of where you know, a lot of investors will focus on. Can you talk a little bit about, you know, the puts and takes getting EBITDA higher, but not the cash flow. You know, talk to that maybe a little bit. Thank you.

Yeah. It's a great call, Raimo. We're raising the adjusted EBITDA guidance by 100 basis points from our previous guide 31 to 32. That represents 350 basis points of expansion. But if you actually exclude the float headwind, it's 560 basis points of expansion year over year. We're doing that through cost control and efficiency. If you think about last year, we invested heavily in sales and marketing, and we're reaping the benefits of the productivity from those investments in 2025. We're leaning into greater automation, we're leaning into AI-driven optimizations across the organization. And we're optimizing our cost base by streamlining our organizational structure and leveraging lower-cost jurisdictions. You know, this is our first year that we're kind of really providing a full free cash flow guidance. At the beginning of the year here. And I have optimism in this number, but I wanted to you know, just kind of hold it at where we're at for now.

Okay. Perfect. Thank you.

Thank you. The next question is coming from Mark Marcon of Baird. Please go ahead.

Hey, good morning and thanks for taking my questions. David, at the very beginning, you mentioned you know, the January was very strong. You also mentioned that sales cycles were going back to historic levels. I assume you mean that they were they aren't lengthening. And how unusual is it to have a really strong January? Typically, a lot of sales, you know, come in towards the end of the quarter. So wondering what that bodes and how much of that was basically an after effect of the release successful meetings that you had in Vegas.

That's actually quite good insight, Trevor, there. We saw an acceleration of sales following our Discover event. They just are numerous examples of where we had organizations come to the actual event. And within, I would say, four to eight weeks, following the event, we were able to complete the actual contracts. I think the way that the organization showed that the product showed at Discover this year was just spectacular. So we're very pleased with it. Generally, if we have a very strong Q4, you typically would go into Q1 with a bit of a headwind because it's tough to reach people in January following the December kind of, you know, craziness that you normally have. So if you see strong sales performance in January following an exceptional December, it is something that I did want to call out. Gives us a lot of confidence on the sales management, Sonny.

With regards to this the sales cycles being shortened, do you think that's specific to you, or is that just a general tonal change that's occurred, you know, now that we have some clarity with regards to interest rates as well as the election.

I do think there is an impact of the new administration think they're but, again, I'm not an economist. What I can talk about is what we're seeing in our business. And in our business, we are seeing buyers making purchasing decisions quicker than they did last year.

Great. And then can you talk a little bit just on the on the line of we're not the only country that's having elections obviously, Canada is going to schedule some elections coming up. Is there any impact with regards to, you know, the Canadian contract that's coming through either from the elections or from any sort of change with regards to procurement processes in Canada? And do you have any early thoughts this with regards to, you know, given that you've got operations in Canada as well as the US and joint headquarters, how do you think about you know, any sort of potential tariff impact?

Hey Mark, this is Steve Holdridge. Let me take the first part of that and then David may want to talk about the broader Canada environment. In terms of the government of Canada, no. The short answer is we don't expect any impact. We're continuing to work towards our deadlines with the most recent order in contract targeting April 2025. We're on track to achieve those milestones. We don't see we don't expect anything from the announced changes at the prime minister level. We continue to have support. I mean, frankly, we've been at this for four years. And leaders at all levels of government want to make sure people are paid properly. And know? The payroll choice does not get politicized, so we continue to be confident in business as usual.

Regarding the impact of potential tariffs between the US and Canada, it's difficult to project that I suppose the biggest impact would be on the FX rate. Between the US and between Canada. About 21% of our revenue is in Canada. So we do have a there would be a revenue impact in terms of US dollars reporting. We are hedged probably about 70% on the cost side against that. So from an adjusted EBITDA percentage, I don't think there any impact?

Great. And then this one last one, number of really nice wins here. Can you talk a little bit about who you you ended up capturing these folks from?

Yes. We as I mentioned last time and for those of you who attended the SCROV, we typically nowadays compete mostly against the ERP. And we seem to be taking away shares from the competitor that we would competed against most historically. I would say that if I look at Q4, the majority of the wins were takeaways from them. Always competing against one of the ERPs. Yep.

Congratulations on a terrific sales quarter. Thank you.

Thank you. The next question is coming from Samad Samana of Jefferies. Please go ahead.

Hey, good morning. Thanks for taking my questions. Appreciate it as always. Maybe first just on the first quarter, I didn't Jeremy, I didn't see a 1Q Dayforce recurring xlope guide. I may have just missed it. I apologize if I did. But is this a change in guidance philosophy? Should we only expect an annual outlook going forward? And I guess any comments on the cadence of DataForce recurring growth as we think about the year?

Hey, Samad. Good to speak with you. Yeah. Look, we're given Dayforce recurring revenue ex low guidance for the full year. Along with the addition of that free cash flow guidance for the full year as we've grown larger over the years and also established a very strong focus on free cash flow generation. It made sense internally to focus on total top line, adjusted EBITDA, and free cash flow margin in dollars. And it's really how we're running the business internally and how we measure our own success. So we felt it appropriate to reflect this in our communications with investors. Will obviously still report on those numbers and the like, but ultimately, we think this is the this is how we're managing the business and makes a lot of sense to go forward here. Understood. That makes a lot of sense. And then David, you know, you gave some commentary on the midterm growth expectations beyond 2025 and, obviously, coming up. Off of the heels of the of the analyst day where you gave specific long-term targets. I guess maybe just as we think about how Dayforce recurring explode is expected for 2025, any comments maybe on what you're thinking there for the midterm targets or what you assumed? I just wanted to make sure I have clarity on what we should expect to remain at these levels going forward and how the view on Dayforce recurring is.

Yeah. As I mentioned in the call, we expect them to hold. If I look at the total revenue x float basis, I would expect should be able to sustain about a 15% growth rate into the midterm as we move towards the 20% plus free cash flow. On Dayforce recurring, remember that the business today is almost all a cloud. If I look at the total other recurring business you really are looking at about $43 million, you know, somewhere around there for the full year. So kind of as we kind of enter life, those types of platforms and do the migration to Dayforce, you'll see that line just decline by about 40% year over year in constant currency. And we believe it's time to simplify how we report to the app store market. And the goal over here would be to have the total revenue growing around that 15% at the same time that we get above 20% on a free cash flow basis. We're quite confident that we can do that and that allows us for the two keep that focus on driving profitability as we reach this level of scale. Great. And then maybe just one last one for me. I know this the sales organization is doing well. Clearly, you gave us some comments around sales activity, but in the fourth quarter and the first month of the year. How should we think about how the coverage, that four to one that you mentioned, how does that compare to this time entering 2024? So this time last year, and should we think about that holding fairly constant at current levels?

We try and model the business at about a four times sales coverage level. You know, it ties to the investments that we actually put in marketing pipeline development early sales types of activities, the summits, and etcetera. If your number is too high, your sales cost would go up. And, again, as we're trying to improve the actual profitability, one of the constraining factors is the sales and marketing. That's if you look at the actual numbers, you can see that from a sales and marketing productivity level, we're driving more efficient or higher sales productivity. If you look at the guide for the year, we've got into around 16% versus about 17% last year. And that really drives the size of your pipeline and the expected conversion. The sales productivity numbers that we're seeing now, I would say, are very close to testing class for enterprise software. So we're very happy. From the productivity of the actual Salesforce.

Great. Thank you, everybody.

Thank you. The next question is coming from Scott Berg of Needham and Company. Please go ahead.

Hi, everyone. Congrats for me on the strong sales quarter as well. I guess two things. David, wanted to start with your newly announced dig for CI. Agent strategy that you talked about at the conference. Just wanted to see how, you know, customers have responded to that. I know it's early. Probably just enabling the Salesforce and everything with that effectively. But, you know, agents are kind of the craze in our software spaces to your wanna see, how you guys might be benefiting from that.

So, Scott, we've as I think mentioned in my core script, we saw about 60 unit sales of our Copilot after we announced it, at Discover. So we're seeing you know, nice uptake of our AI products in market, and I do believe it does differentiate us relative to others because we're not talking about future capability talking about already generally available functionality that's inside the actual product. It's becoming front and central in the way that we actually position the product. In terms of agents, we've had some agents in market for for that time. Typically around the initiation of workflows like time away from work, and the others. I think you'll see that continue. Joe, I'm not sure if you're on the call, but if you'd like to add a bit more color about some of the enhancements we're doing around the agents.

Yeah. No. Thank you for the question, and I appreciate the insight. For us, really, the next working of how we can help customers realize value with Dayforce is with the promise of AI. But we're realizing that promise. Like David said, the 60 new sales just came in a month and a half. And customers are seeing that value and the differentiation of delivered AI innovation. The agents that we deliver in the year ahead will go across our entire suite. From HR through our talent modules, even down to analytics where reports a report writer will automatically build you the reports you need in an instant, just saving your company time and energy. So look for more innovation as we move ahead. It's a big, big differentiator for us as we hit 2025 at speed.

Understood. Helpful. And then David, on your commentary around partner excuse me, your strong sales pipelines going into this year, you know, you've been pushing on the partner ecosystem over the last you know, maybe twelve, twenty-four months and and spend it to the company. Or how how positively your partner's kind of impacting your view on the improved sales environment? And then as we think about your PS margins going forward, I know obviously some of that's being pushed to to partners. That breakeven viewpoint, is that, like, for the full year in terms of your guidance, or do you just break, you know, over that, you know, kind of get to that breakeven line at at one point one quarter during the year?

Yeah. I first, doctor, first of all, thanks for noticing that. Yes. The improvement in the professional services and other which we expect to be about break even this year is largely the result of the investments we've made with the system integrators and the success that we're seeing in them actually prime the implementation. So we're very excited with that. It's the metric that we look at internally to determine if we're seeing success across the SI channels. Obviously, with that, you would expect that to be partially behind what we're seeing in terms of pipeline development on version of actual sales as they help influence the actual deals. So it's going quite nicely.

Thank you. We'll move on to the next question. The next question is coming from Steve Enders of Citi. Please go ahead.

Okay, great. Thanks for taking the questions. I guess maybe just to start, I want to talk about some of the assumptions that maybe you're making for you know, 2025 from a high macro level in terms of, like, employment cadence and maybe some rate cut assumptions and kind of what's being accounted for in there. And I guess, secondarily, if there's maybe you know, any incremental conservatism being accounted for based on, you know, some of those factors you called out that impacted the 4Q, Dayforce performance?

Yeah. Thanks, Steve. It's good to speak with you. Yeah. We can go into a couple of those assumptions. I think, specifically on the rate cuts, you know, we're assuming bank consensus to kind of inform our forecast there. So Canada just cut rates by 25 basis points at the end of January, and US held flat. So with those cuts kind of built in, you would expect or we would expect about one rate in the US in the middle of the year, at about 25 basis points and also expect Canada rate cuts are to continue at about 25 basis points each meeting until October. So about five more cuts this year. With all of that, you think we'll I we think we'll kind of net out to a yield of about 3.6% on average balances growing in the low to mid single digits this year. On the float side of things. As far as the other assumptions on employment levels, you'd we'd expect that to kind of be in the you know, very low single digits from a growth rate perspective. And certainly are using what we learned in Q4 to inform our forecast and guidance in 2025.

Okay. Perfect. No. Appreciate the appreciate the commentary there. And then I just want to ask on the pro services performance and that outpacing the growth for the Dayforce recurring growth this year. Can you just maybe help us think through some of the factors impacting that? Like, is that a reflection of some of the managed services capabilities and that we're highlighting and all the say that kind of point through more yeah. Just kind of like what factors should be thinking about in there and kind of what continues moving forward.

Yeah. I think first and foremost is that we had a really strong sales Q4 to cap off a really strong sales year in 2024. And, you know, we haven't I think with that you see strong sales comes with implementation and services work. And that's kind of the tip of the sphere there, if you will. We've also got some of the larger, you know, projects that we're working through and large customers that we'll continue to do work for. And then if you think about the productivity, I think it's really a few primary drivers. It's, as David mentioned, the systems integrated relationships that it that we've matured. We're doing also a greater proportion of value-added services alongside those systems integrators. We're driving efficiency into our implementation process. We talked about this at the November day, but you know, a few years ago, we began building out these SI relationships and we're really pleased with how these have come together. And how we're driving that efficiency across that implementation process.

Okay. Great. Thanks for taking the questions.

Thank you. The next question is coming from Kevin McVeigh of UBS. Please go ahead.

Great. Thank you. Hey, I think you talked about the wallet basically $30 million in 2024 up from $12 million in 2023. Is that adoption or increased usage in any way to think about what that can contribute in 2025?

Yes. In 2024, we released AFT and IFT capabilities to the wallet, and we saw quite good adoption of those types of movements of money. In 2025, we just launched direct to the bank. So what direct to bank is if you do an on-demand pay, the employee can now select to pass that money to one of their existing debit cards attached to an existing checking or savings account. And, we're seeing that actually take off quite nicely as well. We also, obviously, as you would expect, continue to see increases adoption. In terms of more organizations and more employees, use the actual wallet as well. We would expect the momentum on the wallet to continue this year.

Great. And then at this point, are the SIs driving any sales volume, should they be is that still something that that probably starts in 2025?

Yes, we are. As I think I answered, I think we'll start off question. We're seeing a nice traction with the system integrators. Obviously, strengthened year over year. And you can see that reflected in the professional services and other margin which as we move the implementations more to the SIs, the professional services and other margin now moved towards breakeven. But we're also seeing increased amplification of the brand and increased pipeline with not only the SIs, but with our community advisory partners and our technology partners.

Thank you. The next question is coming from Alex

Hey, guys. Thanks for taking the question. Maybe just the Canadian government deal, can you guys remind us how that's gonna play into the fiscal 2025 guide given kind of a slightly longer ramp time. And, Jeremy, maybe just I know we're not guiding today for us recurring, but maybe help just from a modeling standpoint, how we should think about that flowing through the year, maybe relative to last year.

Yep. Alex, good to speak with you. Look, on the Canadian government deal, I think as Steve kind of spoke to a little bit is we're continuing to work towards those deadlines that we talked about in the most recent. Timelines, which is targeting April 2025. We're on track to achieve those milestones, and that's more on the kind of recurring side of things. On the professional services, we have been seeing, you know, work and we've doing work, and we continue to do work with the government of Canada. On the recurring side of things, I think you'll see, you know, kind of a continuous cadence there or consistent cadence with how things have looked in the past. And, you know, stop me short of giving, you know, kind of full guidance. I think that 15% to 17% constant currency number for the full year is a good guide, and we should kind of remain in those balance for the quarterly basis as well.

Got it. And then, David, maybe just I'll reask one of the earlier questions, but I think when you were when when when you've spoken last time on the earnings call, you kind of talked about a you know, just watching out for lengthening sales cycles as you go up market as those deals take more time to actually execute on, but it seems like something changed in that visibility given the December and January. So I'm just curious, is it is it the demand environment? Is it you know, something you figured out on the execution? Is it tailwinds from AI? Like, what what changed in your from your perspective, from you know, ninety days ago to now with respect to that visibility.

I think that the impact of Discover client conference did have an impact in terms of purchasing cycles. So I think the work that the product and technology team has done in really differentiating very clearly our Dayforce relative to the others had impact. As Steve mentioned, I think the branding work that we invested in last year is also getting us more mind share, and it's making it easier for us to get the final approvals. In the very large types of deals. So I do think that the sales team really is performing very well, and I'm very proud of the way that they go to market and the way that they tell the story and the way that they show the product as well. I think that as an organization, Dayforce and how they make it the way that we interact and partner with our customers is reflected. You can see that as well in the retention rate is now 98% on tables, which has got to be best in market. And then lastly, as I mentioned, I do think on the macro side, that there's much more optimism across business leaders about the economy and that is helping with purchasing cycles as well.

Thank you. Our final question today is coming from Brad Reback of Stifel. Please go ahead.

Great. Thanks very much. Maybe two quick ones. Did you all mention what the percent of new sales back to the base was?

We haven't yet, but it was above 40%. 42% was the number this past year. And we're really pleased with that. And we also sold the same number actually, 42% of all suite deals as well.

Great. And then, Jeremy, given some of the unusual puts and takes in 4Q things that snuck up on you a bit, have you taken a different guidance philosophy? Maybe increased conservatism at all as it relates to you know, 1Q in all of 2025? Thanks.

Yeah. Look. I think we've ultimately taken what we learned in Q4 and use that to inform our guidance for the future. I think we still kind of give tight ranges, but you can ultimately see that we're kind of giving these constant currency growth ranges and then setting down the FX rate that we're using and then trying to be really clear about the flow to some there. And know, you think about the total revenue growing 14% to 15% ex float, on a constant currency basis and Dayforce recurring revenue at 15% to 17%, and we're really pleased with those numbers and our ability to do that and while we're also expanding margins. On that adjusted EBITDA and free cash flow.

That's great. Thank you very much.

Thank you. This brings us to the end of the question and answer session. I would like to turn the floor back over to Mr. Ossip for closing comments.

Great, Derek. Thanks everyone for joining us. Sorry for those of you that we didn't get to get to the actual questions today, but we'll have the one on one following. Just a few pieces I'd like to end with one again. Reiterating the sales momentum we saw in Q4 that continued into January and our confidence in sales for Q1 and for the year. The second is I want to reiterate that we're holding the revenue guide for the year while increasing the adjusted EBITDA by 100 basis points. And that we are seeing that meaningful improvement in profitability across all aspects. And lastly, we are positioning Dayforce in the midterm for the same growth. Around the current levels while moving towards that 20% plus free cash flow. Again, thank you everyone for joining us today.