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Dayforce, Inc. (DAY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered broad-based beats: total revenue $464.7M (+9.8% YoY) and Adjusted EPS $0.61 both topped S&P Global consensus; management said results were above the high end of guidance across all metrics . Revenue consensus: $457.7M; EPS consensus: $0.525* (Beat) (consensus from S&P Global*).
  • Profitability and cash generation accelerated: Adjusted EBITDA $147.2M (31.7% margin, +420 bps YoY); quarterly free cash flow $87.1M (18.7% margin). FY25 free cash flow margin guidance raised to 13.5%–14.0% (from 12%), aided by U.S. R&D expensing in the “One Big Beautiful Bill Act” (OBBA) .
  • Demand indicators remained strong: YTD bookings grew >40% for the third straight quarter; SI-led sales rose ~80% YTD and were 45% of new deals in Q2; back-to-base sales represented ~40% of bookings .
  • FY25 outlook nudged higher: total revenue to $1.935B–$1.955B, Dayforce recurring ex float to $1.324B–$1.344B; Q3 guide embeds Dayforce ex float growth of 12.7%–16.1% and Implies Q4 acceleration to 16%–19% as large deals go live (catalyst) .

What Went Well and What Went Wrong

What Went Well

  • Broad-based execution over-delivered: “We had a great second quarter and came in above the high end of guidance across all metrics” – CEO .
  • Margin and cash inflection: Adjusted EBITDA margin expanded to 31.7% (+420 bps YoY); free cash flow hit $87.1M (18.7% of revenue), underpinning an FY free cash flow margin guide raise to 13.5–14.0% .
  • Go-to-market momentum: YTD bookings up >40%; SI-led sales up ~80% and now 45% of new sales; back-to-base sales grew >50% and were ~40% of bookings. “Full suite” attachment in new wins exceeded 90% in Enterprise/Major Market .

What Went Wrong

  • Seasonal step-down QoQ: Total revenue fell from $481.8M in Q1 to $464.7M in Q2 (typical seasonality in year-end services and float), though YoY growth remained solid .
  • Dayforce recurring growth moderated YoY in Q2 (+13.6%) vs Q1 (+14.4%); management cited a “small air pocket” from earlier sales levels and expects acceleration in Q4 as recent wins go live .
  • Legacy portfolio drag continues: “Other recurring” revenue declined sharply YoY as DAY accelerates migrations/offboarding in APJ legacy businesses (expected to pressure that line through Q3) .

Financial Results

Headline metrics (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($M)$465.2 $481.8 $464.7
YoY Growth16.4% 11.7% 9.8%
Adjusted Diluted EPS ($)$0.60 $0.58 $0.61
Adjusted EBITDA ($M)$129.2 $156.7 $147.2
Adjusted EBITDA Margin27.8% 32.5% 31.7%
Operating Profit ($M)$28.5 $31.0 $42.3
Net Income ($M)$10.8 $14.9 $21.3
Free Cash Flow ($M)$54.2 $19.5 $87.1
Free Cash Flow Margin11.7% 4.0% 18.7%

Revenue mix (oldest → newest)

Revenue Component ($M)Q4 2024Q1 2025Q2 2025
Dayforce Recurring ex Float$307.6 $323.1 $315.5
Powerpay Recurring$23.1 $19.0 $19.9
Other Recurring$18.3 $13.1 $10.3
Float Revenue (total)$45.1 $55.3 $47.4
Professional Services$71.5 (incl. other) $71.3 $71.6

KPIs (oldest → newest)

KPIQ4 2024Q1 2025Q2 2025
Live Dayforce Customers6,876 6,929 6,984
Dayforce Recurring Rev per Customer (TTM)$163,101 $167,600 $171,075
Avg Float Balance$4.68B $5.86B $5.08B
Avg Float Yield3.8% 3.8% 3.7%
YTD Net Cash from Ops—$49.6M (Q1) $162.3M (H1)
YTD Free Cash Flow—$19.5M (Q1) $106.6M (H1)
FY24 Gross Revenue Retention (Dayforce)98% ——

Commentary:

  • Q2 QoQ revenue decline reflects seasonality (year-end services, float); Pro services remained elevated YoY (+22.8%) on robust project activity and SI scaling .
  • Dayforce recurring ex float +13.6% YoY (Q2) vs +14.4% (Q1) with management pointing to an inflection in Q4 as recent large wins go live .

Guidance Changes

MetricPeriodPrevious Guidance (Q1 release 5/7)Current Guidance (Q2 release 8/6)Change
Total RevenueFY 2025$1,929M–$1,944M $1,935M–$1,955M Raised
Total Revenue ex FloatFY 2025$1,749M–$1,764M $1,749M–$1,769M Raised (top end)
Dayforce Recurring ex FloatFY 2025$1,317M–$1,342M $1,324M–$1,344M Raised
Float RevenueFY 2025$180M $186M Raised
Adjusted EBITDA MarginFY 202532% 32% Maintained
Free Cash Flow MarginFY 202512% 13.5%–14.0% Raised
Total RevenueQ3 2025—$476M–$486M New
Total Revenue ex FloatQ3 2025—$434M–$444M New
Dayforce Recurring ex FloatQ3 2025—$329M–$339M New
Float RevenueQ3 2025—$42M New
Adjusted EBITDA MarginQ3 2025—30.0%–30.5% New

Notes:

  • FY25 free cash flow guide raised on OBBA (immediate expensing of U.S. R&D), a ~$40–$50M 2025 cash tax benefit and ~$20M benefit in 2026+; management also highlighted 57% incremental FCF conversion YTD on incremental revenue .

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
AI/TechnologyCo-Pilot GA; AI Agents announced at Discover Mobile AI Assistant; 50% attach on new deals “Over half” of new wins bought AI Assistant; 30+ AI agents roadmap; near-100% AI platform attach in new wins Strengthening adoption/roadmap
Sales Momentum & SI scale“Strongest sales quarter in our history” in Q4’24 Best Q1 in history; H1 bookings +~40%; growing SI prime YTD bookings >40%; SI-led +~80%, 45% of new; back-to-base ~40% Accelerating; partner-led mix rising
Macro/Employment/FX—Employment levels in line; FX USD weakness after tariffs; CC guides unchanged Employment +~1% YoY; demand strong; CAD/UK/AUS FX improved vs USD Stable to modest growth
Public Sector—GOC contract extended (~USD $72M services) Government of Canada formally selected Dayforce; U.S. federal project “going well” Program milestones progressing
Profitability/FCFRaised 2025 Adj. EBITDA% to 32% FCF margin target 12% FCF margin raised 13.5%–14% on OBBA; 57% incremental FCF on rev YTD Upward bias on cash margins

Management Commentary

  • “We had a great second quarter and came in above the high end of guidance across all metrics.” – CEO
  • “Adjusted EBITDA margin was up 420 basis points to 31.7% and free cash flow…$87.1M or 18.7% of revenue.” – CEO
  • “We are…increasing our free cash flow margins guidance from 12% to between 13.5% to 14%... We believe we can achieve $1,000,000,000 of free cash flow by 2031.” – CEO
  • “SI-led sales were up 80%…and 45% of new sales are SI-led.” – CEO (Q&A)
  • “Over half of new business wins also purchased Dayforce AI Assistant… nearly 60% included AI Learning.” – CEO
  • “We took live our largest customer to date with over 300,000 employees…expected to be over 500,000 by the end of the year.” – CEO

Q&A Highlights

  • SI-led channel and full-suite momentum: SI-led sales +~80% YTD; 93% Enterprise and 90% Major Market new wins were full suite; back-to-base add-ons up ~50% YoY and 40% of bookings .
  • Bookings-to-revenue timing: ~12 months to onboard net-new; add-ons ramp faster; management expects Q4 acceleration in Dayforce recurring ex float (16%–19% YoY) as large wins go live .
  • Macro/Employment: Customer employment levels up ~1% YoY (vs historical ~2%), with strongest exposure to frontline-heavy verticals; demand environment remains robust .
  • OBBA/taxes: Immediate R&D expensing yields a ~$40–$50M 2025 cash tax benefit and ~$20M annually thereafter; supports FCF guide raise to 13.5–14% .
  • Wallet/product updates: Expanding direct-to-bank and instant transfer features driving incremental wallet revenue; high utilization among unbanked users persists .

Estimates Context

How reported results compared to S&P Global consensus:

MetricQ4 2024Q1 2025Q2 2025
Revenue – Actual ($M)$465.2 $481.8 $464.7
Revenue – Consensus ($M)$455.0*$476.7*$457.7*
Result vs ConsensusBeatBeatBeat
Adjusted EPS – Actual ($)$0.60 $0.58 $0.61
EPS – Consensus ($)$0.445*$0.543*$0.525*
Result vs ConsensusBeatBeatBeat

Values marked with * were retrieved from S&P Global consensus via the GetEstimates tool.

Implications:

  • Three straight quarterly beats on revenue and adjusted EPS suggest models may need higher H2 Dayforce recurring growth (management guides Q4 acceleration) and higher FY25 FCF margins (raised to 13.5–14%) .

Key Takeaways for Investors

  • Durable growth + profit mix: Dayforce recurring ex float +13.6% YoY; pro services +22.8% YoY; Adj. EBITDA margin 31.7% and FCF margin 18.7% in Q2 underscore operating leverage .
  • CY25 cash story improving: OBBA R&D expensing boosts cash taxes, enabling an FY25 FCF margin raise to 13.5–14%; management reiterated $1B FCF by 2031 .
  • H2 setup: Q3 guide solid and points to Q4 Dayforce recurring ex float acceleration (16%–19%) as large wins go live — a potential stock catalyst into year-end .
  • GTM momentum: >40% YTD bookings growth, rising SI mix (45% of new deals), and expanding back-to-base penetration provide multi-quarter revenue visibility .
  • AI differentiation: High AI attach across new wins (platform, analytics, learning) and a 30+ agent roadmap support upsell/PEPM expansion over time .
  • Watch items: Legacy “other recurring” runoff to continue near term; employment growth at customers running ~1% YoY (below historical), modestly tempering volume-based upside .
  • Positioning: Narrative skewing toward cash generation and operating scale, with public sector and very large enterprise proofs (300k+ employee go-live) enhancing credibility for larger deals .