Yahoo Finance Dayforce (NYSE:DAY) Beats Q2 Sales Targets But Quarterly Guidance Underwhelms
Online payroll and human resource software provider Dayforce (NYSE:DAY) reported results ahead of analysts' expectations in Q2 CY2024, with revenue up 15.7% year on year to $423.3 million. On the other hand, the company expects next quarter's revenue to be around $427.5 million, slightly below analysts' estimates. It made a non-GAAP profit of $0.48 per share, improving from its profit of $0.02 per share in the same quarter last year.
Is now the time to buy Dayforce? Find out in our full research report.
Dayforce (DAY) Q2 CY2024 Highlights:
Revenue: $423.3 million vs analyst estimates of $417.4 million (1.4% beat)
Adjusted Operating Income: $94.9 million vs analyst estimates of $86.69 million (9.5% beat)
EPS (non-GAAP): $0.48 vs analyst estimates of $0.36 (33.2% beat)
Revenue Guidance for Q3 CY2024 is $427.5 million at the midpoint, below analyst estimates of $430.4 million
The company slightly lifted its revenue guidance for the full year from $1.74 billion to $1.74 billion at the midpoint
Gross Margin (GAAP): 44.1%, down from 46.7% in the same quarter last year
Free Cash Flow of $72.7 million is up from -$18.8 million in the previous quarter
Customers: 6,657, up from 6,575 in the previous quarter
Market Capitalization: $8.48 billion
“Our business momentum continued in the second quarter of 2024, with Dayforce recurring revenue up 20%, and year-to-date cash flows from operating activities up 16%. Our success is rooted in the simplicity that organizations around the world are seeing with the Dayforce platform, enabling them to create significant efficiencies in their businesses while delivering a best-in-class HCM experience for their employees,” 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 decent over the last three years, growing from $250.4 million in Q2 2021 to $423.3 million this quarter.
This quarter, Dayforce's quarterly revenue was once again up 15.7% year on year. However, the company's revenue actually decreased by $8.2 million in Q2 compared to the $31.8 million increase in Q1 CY2024. Sales also dropped by a similar amount a year ago and management is guiding for revenue to rebound in the coming quarter, which might hint at an emerging seasonal pattern.
Next quarter's guidance suggests that Dayforce is expecting revenue to grow 13.2% year on year to $427.5 million, slowing down from the 19.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 12.5% over the next 12 months before the earnings results announcement.
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Customer Growth
Dayforce reported 6,657 customers at the end of the quarter, an increase of 82 from the previous quarter. That's slower customer growth than we have seen previously, suggesting that the company's customer acquisition momentum is slowing.
Key Takeaways from Dayforce's Q2 Results
It was encouraging to see Dayforce top analysts' revenue, adjusted operating income, and EPS expectations this quarter. On the other hand, its gross margin declined and its customer growth decelerated. Overall, this quarter could have been better, but the market is rewarding the company for its headline beats. The stock traded up 3.6% to $55.60 immediately following the results.
So should you invest in Dayforce right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
