Dayforce (DAY) TD Cowen Human Capital Management Summit summary

Cloud payroll adoption and client pipeline

• Cloud payroll adoption remains a significant growth opportunity, with many large enterprises still using on-prem solutions like PeopleSoft, SAP, and Oracle, especially in industries such as utilities and mining.

• New client sources have not shifted significantly since 2013, with migrations from providers like ADP and UKG continuing across market segments.

• AS/400 custom software is still prevalent in certain industries, highlighting ongoing legacy system replacement opportunities.

Product innovation and expansion

• Flexwork, launched recently, enables instant shift fulfillment and payment, expanding into the digital staffing market and is available to non-platform clients, broadening TAM.

• Flexwork is in early stages with 50-60 customers and could match HCM TAM if successful.

• Dayforce Wallet is the fastest-growing offering, expected to exceed $30M in FY 2024 revenue earned, with ARR projected over $40M.

• New Wallet features like instant transfers and direct-to-bank options are expected to boost usage, especially among banked workers.

Revenue growth and margin outlook

• Recurring revenue growth is targeted in the mid-to-upper teens, driven by both new client acquisition and upselling to existing clients.

• About half of remaining Bureau revenue ($70M) is expected to migrate to Dayforce, with the rest being end-of-lifed.

• Non-recurring revenue, including professional services, is expected to grow in line or slightly below recurring revenue, with value-added services and SI channel implementations supporting growth.

• Upselling add-on modules and managed services to the existing base is a key growth driver, with managed services currently at 2-4% attachment but expected to rise.