Online payroll and human resource software provider Dayforce (NYSE: DAY) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 11.7% year on year to $481.8 million. On the other hand, next quarter’s revenue guidance of $411 million was less impressive, coming in 11.4% below analysts’ estimates. Its non-GAAP profit of $0.58 per share was 6.9% above analysts’ consensus estimates.
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Dayforce (DAY) Q1 CY2025 Highlights:
- Revenue: $481.8 million vs analyst estimates of $476.8 million (11.7% year-on-year growth, 1.1% beat)
- Adjusted EPS: $0.58 vs analyst estimates of $0.54 (6.9% beat)
- Adjusted EBITDA: $156.7 million vs analyst estimates of $150.7 million (32.5% margin, 4% beat)
- The company slightly lifted its revenue guidance for the full year to $1.76 billion at the midpoint from $1.75 billion
- Operating Margin: 6.4%, down from 9.4% in the same quarter last year
- Free Cash Flow Margin: 4%, down from 11.7% in the previous quarter
- Market Capitalization: $9.21 billion
"We kicked off the year with strong first quarter results and excellent sales momentum,” said David Ossip, Chair and CEO of Dayforce.
Company Overview
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.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Dayforce grew its sales at a 18.7% annual rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds.
This quarter, Dayforce reported year-on-year revenue growth of 11.7%, and its $481.8 million of revenue exceeded Wall Street’s estimates by 1.1%. Company management is currently guiding for a 2.9% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 9.8% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.
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Key Takeaways from Dayforce’s Q1 Results
We enjoyed seeing Dayforce beat analysts’ EPS and EBITDA expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed significantly. Overall, this was a softer quarter. The stock traded down 6% to $54.68 immediately following the results.
Dayforce underperformed this quarter, but does that create an opportunity to invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
