Dayforce's (NYSE:DAY) Posts Q4 Sales In Line With Estimates But Full-Year Guidance Underwhelms

Anthony Lee /
2024/02/07 7:26 am EST

Online payroll and human resource software provider Dayforce (NYSE:DAY) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 18.9% year on year to $399.7 million. The company expects next quarter's revenue to be around $425.5 million, in line with analysts' estimates. It made a non-GAAP profit of $0.50 per share, improving from its profit of $0.23 per share in the same quarter last year.

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Dayforce (DAY) Q4 FY2023 Highlights:

  • Revenue: $399.7 million vs analyst estimates of $399.4 million (small beat)
  • EPS (non-GAAP): $0.50 vs analyst estimates of $0.32 (57.9% beat)
  • Revenue Guidance for Q1 2024 is $425.5 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for the upcoming financial year 2024 is $1.73 billion at the midpoint, missing analyst estimates by 0.9% and implying 14% growth (vs 21.6% in FY2023)
  • Free Cash Flow of $63.8 million, up from $4.8 million in the previous quarter
  • Customers: 6.39 million, up from 6.35 million in the previous quarter (miss vs. expectations of 6.56 million)
  • Gross Margin (GAAP): 42.5%, down from 45.7% in the same quarter last year
  • Market Capitalization: $11 billion

“Dayforce delivered another strong quarter underpinned by record enterprise go-lives and operating cash flows,” said David Ossip, Chair and CEO of Dayforce.

Founded in 1992 as Ceridian, an outsourced payroll processor and transformed after the 2012 acquisition of Dayforce, Dayforce (NYSE:DAY) is a provider of cloud based payroll and HR software targeted at mid-sized businesses.

HR Software

Modern HR software has two powerful benefits: cost savings and ease of use. For cost savings, businesses large and small much prefer the flexibility of cloud-based, web-browser-delivered software paid for on a subscription basis rather than the hassle and complexity of purchasing and managing on-premise enterprise software. On the usability side, the consumerization of business software creates seamless experiences whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy-to-use platform.

Sales Growth

As you can see below, Dayforce's revenue growth has been strong over the last two years, growing from $282.1 million in Q4 FY2021 to $399.7 million this quarter.

Dayforce Total Revenue

This quarter, Dayforce's quarterly revenue was once again up 18.9% year on year. We can see that Dayforce's revenue increased by $22.2 million quarter on quarter, which is a solid improvement from the $11.6 million increase in Q3 2023. Shareholders should applaud the re-acceleration of growth.

Next quarter's guidance suggests that Dayforce is expecting revenue to grow 14.8% year on year to $425.5 million, slowing down from the 26.4% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $1.73 billion at the midpoint, growing 14% year on year compared to the 21.5% increase in FY2023.

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Customer Growth

Dayforce reported 6.39 million customers at the end of the quarter, an increase of 47,000 from the previous quarter. That's a little slower customer growth than what we've observed in past quarters, suggesting that the company's customer acquisition momentum is slowing.

Dayforce Customers

Key Takeaways from Dayforce's Q4 Results

Although total customer count missed expectations, revenue beat slightly. On the other hand, the company's full year revenue guidance was below Wall Street analysts' estimates. Overall, this was a mixed quarter for Dayforce. The stock is flat after reporting and currently trades at $71.12 per share.

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