Are we live? Great. Good morning, everybody. My name is Mark Marcon, and I follow human capital technology and solutions for Baird. Our next presenting company is Dayforce, formerly known as Ceridian. We're very pleased to have Jeremy Johnson, the CFO, over here, with us. Jeremy first joined the company in 2012 and spent nearly a decade with the company, prior to, and he served as the head of IR prior to leaving and then rejoining the company again in 2024 as CFO. Jeremy, welcome. Thank you. Is there any feedback? Just curiosity. Good? Okay, great. So Jeremy, one thing, welcome back. Great to have you here. Can you talk a little bit about, you know, what changed over the years? Just to start out with a real softball. You know, what changed, you know, in the time period that you ended up leaving, and you came back? What are the major developments that you've noticed? Yeah. Well, it's good to see everyone, first of all, and, thanks for having me again, Mark. Look, Dayforce, I think as most of you know, human capital management company that really started through the acquisition of, you know, Ceridian's acquisition of Dayforce in 2012 timeframe, and that's when I joined the company. And from 2012 till really our IPO in 2018, we started with bringing a payroll, the legacy kind of payroll of Ceridian together with the innovative workforce management technology in Dayforce, and had the idea of building Dayforce as a single application that cuts across the entire HCM suite. That's really our competitive advantage. When we started in 2013 or 2014 with a GA product, it ultimately was payroll and workforce management and maybe a little bit of benefits, and that's what we call the compliance modules. Over the years, we worked to build out the entire full HCM suite, and I'd argue we have one of the most full or the best full HCM suite in industry. When I left the company in 2021, we had kind of worked on building out our five growth levers, which is one, to acquire new business. Two, it's to expand inside the customer through add-on sales and customer base sales. Three, it's to expand into the enterprise and grow, you know, beyond where we had been selling, which was largely major markets in the past. Four, it was to expand globally. And then lastly, it was to, you know, expand into adjacent markets through innovation, like the Dayforce Wallet. And I guess I was very surprised coming back at how, you know, the earlier this year, at how much progress we'd made across large enterprise, which requires us to move with SIs and involve SIs in the sales process, as well as global. And those are the two things that I, you know, I think on my first earnings call, I said was. were the things that surprised me most was how much progress we'd made there, as a business. So today, you know, basically starting from zero in 2012, Dayforce revenue all the way to this year, we're targeting kind of the mid-$1.7 billion in revenue, and approaching kind of mid-28% adjusted EBITDA margins. That's great. There's been a lot of discussion in the industry with regards to, you know, what level of penetration we have. And, you know, arguably, you have one of the most modern platforms, fully integrated. You've got a continuous calculation engine. When you look at the various segments that you're in, how would you describe the, the level of modernization? And I'm thinking about it both domestically as well as internationally. Yeah. Well, maybe it helps to kind of start with where we compete, and I mentioned kind of major markets and large enterprise, and I'll double-click on those for a second here. Major market is really where we grew up. For us, that's around 700 employees to kind of into that low enterprise space of about 12,000 employees. In that segment, we sell a full suite almost all the time, and that would be full suite for us is, you know, payroll, workforce management, benefits, some time and attendance, plus a couple other modules. And we also sell into, as I mentioned, the large enterprise. Now, large enterprise is 12,000 and above, usually involve an SI in that sale, doing the implementation. And there we sell a compliance kind of bundle. Usually the main bundles of payroll, workforce management, benefits, with a land there and a chance to expand into more of the talent modules in Dayforce. I think, you know, for us, I would say our market share from when we started in 2012 to today is still below kind of 4%, maybe in the 3% range, across the board. It's a fantastic growth story to get to here, but there's no reason our market share can't be into that 7%-10% range over the longer term. So that's really where we set our targets. When we sell, you know, for the most part, we're selling to multinational companies, based largely in North America, Australia, U.K., and now as we expand into Germany, you'll see us expand into the DACH regions. But we're selling into multinational companies based in those geographies, and that's really a, I think, a competitive advantage for us. Can you also describe a little bit, you know, going from sub 4% market share to 9%-10% market share, you're going to displace other folks. When you think about like, okay, what are the reasons why somebody would switch to you versus, you know, using ADP or UKG or Workday or SAP or Oracle? What are the key reasons there for people who don't know the space all that well? Most companies buy us for two reasons. One is a fantastic user experience. They want to make sure that their employees can use a software for their HCM needs that is easy to use, has a mobile experience, a mobile-first experience, and, you know, doesn't require you to log in to different pages to do different things throughout the HCM cycle. So a user experience and kind of modern technology, as well as an ROI. That's how we largely sell, and it doesn't matter if we're selling into the major markets or to the large enterprise. We, we kind of sell by mapping out existing tech stacks for our prospects and our customers and saying, "You've got." You know, largely it'll be 12 boxes on average that you see, and that's payroll is one of those. You'll get workforce management, you get time and attendance, you have benefits, you have a bunch of learning, normally a few different learning modules. You'll get recruiting, you have performance management, you have compensation management, and a lot of different people across both HR and finance and technology to support those modules. And what we do is when we sell is we show what it looks like with Dayforce, which is one box, and fewer people to support that. So we truly sell on an ROI basis, and that, combined with the user experience, is kind of what brings people to Dayforce. I know there's going to be a wide range of, you know, answers depending on the company that you're pitching to, but when you're talking about an ROI, like generally speaking, what sort of hard cost savings can they end up experiencing by moving over to Dayforce? And there's obviously the efficiencies because, I mean, your workforce management tools are extremely robust and predictive. You've got great tools in terms of, you know, things like early wage access, which can help companies with recruiting and retention. But in addition to that, you know, you can actually generate savings just in terms of the pure workforce management and efficiencies. When you characterize all of those different elements, what resonates with the clients and, and how do you, how do you, you know, size it typically? Yeah, we try to keep it as simple as possible because largely what we've seen in this, in this environment is we've got to sell to our buyer, and then the buyer has to sell internally to get that through the various gates, and whether that's a CFO approval, a CEO approval, or a board approval. So we try and keep it as simplistic as possible at hard savings, which is the cost of existing software that you're going to be able to retire, the people that are supporting that. And then we can, you know, obviously show what it is with Dayforce. You can get very complex, and we do that in some circumstances when it's required. Things like the amount of money that you can save by moving to our workforce management on labor planning. Things like the improved retention that you'll get out of the Dayforce Wallet and having your team, you know, actually feel financial stability. Obviously, the savings from, you know, user experience is probably some more of the softer costs savings in there. We can make an ROI work on the hard costs, and it looks even better when you add in some of the softer costs. Great. When you, when you think about, like, the growth trajectory, and it's been—you know, particularly if we take a look at Dayforce recurring revenue, you know, continues to be, you know, in the 20s to high teens. You've articulated some thoughts with regards to 2025 targets in terms of $2 billion in revenue. Can you just talk a little bit about the margin targets if you get to, to $2 billion in 2025, you know, how to think about the, the margins? Yeah. I mean, just for everybody here at our, our kind of midterm guidance has been for a, a number of years now, this $2 billion in total revenue, thirty percent adjusted EBITDA margin. And to get there, we think, recurring gross margins will be around 80%+. We actually hit 80% in Q1 this year. It bounces around a little bit quarter- to- quarter, but next year we're, we're targeting 80% recurring gross margins. You think about the margin profile of this business, and, you know, this year I mentioned the, the kind of mid-28% range on adjusted EBITDA, getting to 30%, next year. You know, we were in the low-20% range, a few years ago, actually, before I left the, the, the company, and have grown very nicely. We've expanded margins through largely expanding our recurring gross margins, scaling our G&A costs, and all the while, while investing in our product and technology to continue to expand the full HCM suite across the board. We are starting to pivot to more of a free cash flow discussion as we mature the business. Adjusted EBITDA had been, I think, a nice way to kind of talk about the growth and profitability of the business. We love free cash flow because there's nowhere to hide in free cash flow, and it's great. It's a great indicator of how well we're, we're doing as a business, and you'll see us start to pivot that. You know, we talked about. This year, you're, you're hearing me say things like Adjusted EBITDA conversion to operating cash flow. Last year, it was about 54%, the year before that, it was about 53%. This year, we're expecting mid- to upper-50% range. To get to free cash flow, it's simply just CapEx that gets you down there, and we're working on expanding our free cash flow margins, and you'll see us move to that over a period of time. And so, like at a 30% EBITDA margin at $2 billion in revenue, what sort of free cash flow margin do you think would be reasonable to expect? We haven't given guidance on it, but I think you can do some math using the overall, you know, conversions that I talked through on Adjusted EBITDA to operating cash flow. For example, last year, I think, including our interest obligations on the debt, we were about 7.5% free cash flow margins as a percent of revenue. Mm-hmm. We'd expect those to expand this year, and expand next year. Aside from the lever of the CapEx, what else could you do in order to improve that free cash flow? Yeah, when you think about free cash flow for us, it's, it's driven by the overall Adjusted EBITDA profitability of the business. As that goes up, we're going to see free cash flow margins expand. And the, the method to do that is through recurring gross margin expansion, improving our professional services and other gross margin, and, and scaling G&A. We still have room, a lot of room to go there. You'll probably see us kind of hold our investment in pro-, product and technology at the level as a percentage of revenue that, that it's at today, with any difference going into sales and marketing, where we can capitalize and, and, and grow. If you go into kind of how to get to operating cash flow, it's balance sheet optimization for us, focusing on collections and payables, and cash taxes, and things like that that, you know, I think are really good for a business of our size to continue to focus on. Then, obviously, I mean, from you know, David's perspective, from the board's perspective, $2 billion isn't the ultimate target. What can you say about some of the longer term targets? Yeah. $2 billion's in sight, obviously, next year. And as we start to focus, set our sights on, you know, what's beyond $2 billion, we're starting to plan the business on what we look like as a $5 billion-dollar company. We haven't set a time range on getting there at all, but you would- you'll likely see us, you know, try to get to that $5 billion in overall revenues and be somewhere above $1 billion in free cash flow. Yep. You know, what we'll try to do is get us to, you know, a Rule of 40, where we're growing at a pace, and our our unlevered free cash flow is at a decent, you know, level where we can try and and maintain a Rule of 40 at that level on an unlevered free cash flow at that scale. In order to get to that free cash flow margin, I mean, would you basically need to get the EBITDA margins up into the 40% range? That's probably what the math would entail, yeah. Okay. The big levers there would basically be on professional services. That's actually reducing, becoming a smaller part of the overall mix- Yep That's got lower margins. On the flip side, Dayforce recurring has high margins, particularly with your older clients. That's right. Mark, I wouldn't look at. So it's correct assumption on professional services and other, it's going to become a smaller piece of our overall business, especially as we continue to push into the large enterprise and use SIs. So it will grow at a slower pace than revenue is the expectation. It will still grow, in our opinion, because we are selling more into the major market area, and we had great success in Q1, for example, in major markets, where we do most of the implementations ourselves. Budget envelopes for our customers in that you know segment size, they just don't support an SI being involved. So we'll continue to do most of our implementations there, where SIs will continue to do most of the implementations on the large enterprise side. Great. I think as far as the recurring gross margins go, I wouldn't look at 80% as a ceiling. We have room to expand beyond that. One of the key points for us is our ability to sell back into the base, and that is a probably a significant recurring gross margin lever for us. Because as we sell additional functionality into our base, we don't need to add additional customer support costs, we don't need to add additional hosting costs. And you know, it actually should allow us to expand margins beyond that 80% range. And we haven't set a new ceiling for that, but I do believe that it'll be beyond that. Great. We've got about 12 minutes left, and so I want to cover some, you know, big topics that have been coming up. You know, one, I was, you know, visiting with investors in the Midwest and New York last week, and in almost every discussion, you know, that, you know, report from Blue Orca came up, and so I was wondering if I could give you a public forum here to, you know, kind of go through a few of the different points. So one would basically be, you know, if we take a look at the auditors' opinions, you know, it sounds to me like the issues have been corrected, but I'm wondering if you just want to expand on, on, you know, a few of the deficiencies and how they came up, and then, you know, your confidence that those have been addressed. Yeah. And I thought you put out a great report about some of the things that were mentioned in the Blue Orca report. So I appreciate that. I encourage everyone to read his report on more of our accounting background, which we've been talking about for years. Nothing's changed on our accounting and our accounting policies. It's all documented in our SEC filings, and, you know, we fully support our accounting policies. We have a great relationship with KPMG, our independent auditor, and they've been our auditor for a long time. And unfortunately, this year we had a material weakness in our internal controls over financial reporting around ITGCs. And it's a kind of a culmination of a bunch of deficiencies, not one single deficiency that was a material deficiency, but the culmination of a bunch around things like access control, segregation of duties. I ultimately feel like KPMG raised the bar this year on their audit, which is completely fine for them to do, but left us little room to plan to, you know, avoid the material weakness. All these issues either have been or are being remediated right now, and we look forward to having a very clean audit opinion towards the end of this year. Great. One other thing that they, you know, brought up, I mean, there's a whole slew of things, some of which were completely legitimate. But one thing that they brought up was, you know, just the opportunity in terms of, you know, pulling forward professional services. You've been changing how you do your professional services. You're doing more with SIs. The scope of the contracts are bigger. I'm wondering if you can go into some of the details with regards to that. Yeah, and your note did a good job of explaining it. Essentially, our accounting is very different than some of the other smaller business HCM players in the space. And the reason that it's different is because we charge a lot for our implementation. They're longer projects, they take a long time to complete the projects, whereas on the smaller side, they don't have to, you know, do an implementation that lasts longer than a month usually. So for us, when we actually recognize revenue, we have two performance obligations when there's no SI involved. Two performance obligations on the contract are professional services and recurring services. And because we typically discount when we're doing the implementation, the professional services, but we're required to recognize that revenue at a fair value, well, it means that we're recognizing more revenue than we can actually invoice, and the difference between those two is a contract asset. That contract asset is created during the implementation time period, and then reduced or as we bill and invoice for the recurring side of this. So essentially, we're required to, under ASC 606, pull forward revenue, and reduce our recurring revenue, during the initial contract term. It is. it's a pain. We don't like it. I'd much rather not do this if I didn't have to, but we have to follow the accounting rules that are in place. And yes, we do likely look different than some of the smaller business players from our revenue recognition policies, because of the way we do business, the markets we serve. The other thing that's been coming up with a lot of investors is, you know, whether you look at, you know, all of the different peers, which are all going to be here at this conference, or you take a look at Workday, or even CRM, or UiPath, across the board, we're basically seeing a little bit of a slowdown, you know, with regards to, to revenue growth rates. Couple of different reasons that have been cited. One is just a slowdown in terms of employment, which is something that every single company that we follow is employment-related, and we're seeing that across the board. And then the other thing is just, you know, longer decision cycles, particularly in the upmarket. I'm wondering if you can talk a little bit about, like, how much of an impact is that on you, at Dayforce? How does the pipeline look right now? You guys just had a Chicago summit. Maybe you've got some recent data points just in terms of the level of interest that's out there. Actually, the Chicago summit's later this week, but- Later this week. Yeah. It. Look- But you know how many people are signed up for it. It's actually a fantastic event right now. We've got, I think, record pipeline attending that event. And we're excited to host that. Over, I think it's over 100 prospects attending that event. So we do those around the country a couple of times a year. And they're a great event to kind of herd pipeline through. And I think, you know, for us, we talked about in our Q4 call that we did see some elongated sales cycles. And we didn't, you know, we fell short in Q4 of kind of our aggressive sales targets. We also talked about having a fantastic January, where we saw much of that come back, and Q1 was in line with our expectations. And you know, a record Q1 for us from a sales side of things. We had, and still do have, record pipeline. And usually we go into a year with anywhere from kind of 2.5-3 times coverage on our pipeline. This year we had 5x. It was above, just short of 5x, coverage on our pipeline. So we're seeing the demand, the demand environment's there, and we were pleased with what we saw in Q1. We continue to be pleased with what we've, you know, seen, throughout Q2 here. And you know, I think with regard to employment levels, as you mentioned, you know, we bill on a per employee, per month basis. So we don't see that at renewal, you have this either kind of upsell or downsell- Mm-hmm. And what's recently, with some of our competitors, been more of a downsell, related to a churn from employment levels or even, you know, lower employment levels than expected. So, we see that in our numbers on a consistent basis, on a per employee, per month basis, and we went into this year expecting employment levels to remain relatively flat, and that's what we've seen so far. So we've been, I think, in line with our expectations there. Great. We only have 3 minutes and 50 seconds. Luckily, we have a breakout session after this, so plug for that. But one thing would basically be, you know, if we take a look at the initiatives that you have in place, you basically have, you know, a lot of AI initiatives, you've got global initiatives. Let's start with global. That's something that distinguishes you. Number of companies or number of countries that you. The roadmap in terms of countries where you'll have native payroll. Can you discuss that and what that's done for you in terms of some of those multinational wins? Yeah, that's right. And, you know, we built Dayforce, U.S. and Canada, so as a global, to start, a global product to start. And, and the ability to expand to places like the U.K. and Ireland and Australia and New Zealand, we just announced, Singapore payroll. Obviously we've got, Germany live now, and, and we'll likely move into some of the more DACH areas over there. And we have a couple in, in, smaller ones, like a Mauritius payroll that our team built down there. Mm-hmm. Obviously, we have a big population of people in Mauritius. Yeah. What you'll see us do, and our focus is to sell into multinationals based in those key geographies. And that strategy's worked really nicely for us. And we may go in and build native payroll in a couple of others, but you start to think about where global multinationals are headquartered, and we've covered the majority of those areas. And we use a group of a nice network of in-country payroll providers for the rest, and we connect everything, you know, into our technology, so you can actually see one screen with, you know, kind of all your global payroll, even if you don't use, you know, Dayforce natively for outside of the companies we have, or the countries we have, excuse me. Unfortunately, there's more topics to cover than we've got time for, but one recent announcement is, you know, Flex, and kind of your entry into the EOR space. In the 1 minute and 40 seconds that we've got left—how should investors think about that? That's very nice of you. Dayforce Flex Work, it's our on-demand marketplace that really helps augment companies kind of augment their workforce with shift work. So if you think about it, we're kind of taking the burden off of our employers from an onboarding side of things, from a payroll side of things, from a background check side of things, and we're allowing them to post shifts and have those shifts be filled with either gig workers, alumni workers, retired workers. And those shifts then, someone can actually go and work a shift, get paid directly through the Dayforce Wallet and go on their way. It's a really unique way to kind of expand the workforce and allow employers to, you know, meet the demands of the changing employment environment. We're excited about it. I think the tech is fantastic, and it's a vision that's been in the works for a number of years, excuse me, and an extension of the Dayforce Wallet, ultimately. That's terrific. Unfortunately, we're out of time. Please join me in thanking Jeremy for a thoughtful discussion. We are gonna be going into a breakout session, so I've got a bunch more questions, but we're going to go into Astor Suite B, so I'll leave it there. Thanks, everyone.