As such, we expect full year ‘23 adjusted EBITDA margin to expand to 27%, up from 20.1% in fiscal year ‘22. Timing of spend with Q4 being typically our largest sales in go-live quarter, is driving quarter-over-quarter seasonality in Q4 adjusted EBITDA expected to be in the range of $97 million to $99 million, reflecting the trends I previously highlighted. Now a couple of words on the brand and its financial applications, as David mentioned earlier, Ceridian is becoming Dayforce. We do not anticipate investments in the Dayforce brand to affect our path to fiscal year ‘25 margin targets. And we plan to amortize the Ceridian tree name over a 2-year period effective August 2 of this year. This amounts to a non-cash operating expense of approximately $21 million per quarter in G&A or $14 million for 2 months in the third quarter.
With clear visibility into our 2025 targets of $2 billion in revenue and 30% adjusted EBITDA margins, we’ll continue to execute as we head into next year with more granular details around 2024 guidance when we report in February. With that, Matt, I’ll turn the call over to you for Q&A.
A – Matt Wells: Thanks, Noemie. Our first question will come from Mark Marcon from Baird.
Mark Marcon: Good morning. And thanks for taking my questions. Can you hear me?
David Ossip: Yes, Mark. Good to hear from you.
Mark Marcon: Great, thanks, David. Hey, congratulations to you and the entire team on the very strong quarter. I have two questions. The first one, it was really nice to see the upside from a revenue perspective, but even more upside with regards to the margins. And I’m wondering if you can give us a little bit more deconstruction with regards to the source of the margin upside. We basically ended up having a 2% beat on the top line and almost 20% beat in terms of adjusted EBITDA. And so I’m wondering, are there any things that are unusual, anything that we should think of with regards to the future? That’s the first question. And then the second question, David, relates to Leagh’s departure, I’m wondering if you can talk a little bit.
I mean, congratulations to Leagh obviously, becoming CEO of Coupa is a desirable position. But I’m wondering, you’ve had so much success in terms of selling to larger enterprises on a global basis that takes a big team effort. How should we think about the sales cadence and the impact of Leagh’s departure on some of those big enterprise sales?
David Ossip: Great. Well, Mark, thanks for those two questions. So on the first, what you largely are seeing is a shift of the revenue mix more towards the high margin recurring revenue. And if you look at the total results, you’ll see we vastly outperformed on the Dayforce recurring revenue. And as Noemie pointed out, we’re moderating the implementation side as we shift more and more implementations to our system integrator partners. That obviously drives a much stronger overall margin on the business, and you see that reflected in the considerable beat in the adjusted EBITDA margin. On a go-forward basis, I would expect that to continue. And as you know, we’ve given guidance to exceed a 30% margins in the near-term. Regarding Leagh, what I’ll say about this is Leagh joined the organization 5 years ago to bring really process and structure to the organization and she definitely delivered on that.
We now have – I would argue, the best team in the industry. In terms of sales, Sam is fully up to speed. Steve mentioned that in his actual talk. We also have really the entire team – really what I call profession expert in terms of the enterprise and into the large enterprise market. I’m obviously very, very confident, and I’m obviously personally very committed to the business.
Mark Marcon: Great. Thank you very much.
Matt Wells: Our next question comes from Siti Panigrahi with Mizuho.
Siti Panigrahi: Thanks for taking my question. Congratulations on a good quarter and also guidance. David, I want to ask you in terms of demand environment, what are you seeing at this point? And how is the pipeline looking for mostly your enterprise deals? It was very impressive last two quarters. So any color on that and also the go live of those large deals?
David Ossip: The pipeline this year has grown quarter-over-quarter. We go into Q4, and I expect it will go into fiscal ‘24 with a record pipeline.
Siti Panigrahi: Anything on the go live?
David Ossip: On the go-to live side, it’s tracking, I would say, according to plan. You see that reflected in the guidance and obviously, the raise of the actual guidance. What also with the actual go-lives, you’re actually seeing a shift to larger accounts going live, which I think we communicated earlier in the year. So a slight mix, if you look at the overall customer base, obviously, towards the larger scale customers.
Siti Panigrahi: And one follow-up, David. Lately, we have started getting questions from investors about the growth opportunity for payroll sector. So how do you see about – I know you don’t guide for next year, but when you look next year in here, what are the different growth drivers you’re thinking in midterm? And is this the typical question is it a 20% grower. So any comment on that would be helpful.
David Ossip: Look, we’ve given near-term guidance towards the $2 billion mark by 2025. We’ve also spoken about the 30% EBITDA, adjusted EBITDA and 80% gross margins. We believe we’re on track and will be consistent with that. I think we’ve been very good in giving near-term guidance to the actual marketplace. If I look towards next year, I’d expect us to be in the rule of 45% or so. And so you can kind of do the math to do the actual components on that. In terms of the payroll sector, I actually haven’t seen a change in the payroll sector. I think it actually is still very healthy. I think there is a lot of land for us to grab as we go forward. I’d also like to point out that we are a human capital management company, and we now have well over 20 different modules that are available to our customer base.
And as well, we’ve invested on the global cycle quite some time where there is even more land to actually capture. So in terms of durable growth, I think we will be consistent in terms of our performance, and we will keep focusing on our five growth levers that again, we’ve been very consistent since 2018.
Siti Panigrahi: Thanks, for the color, David.
Matt Wells: Our next question comes from Scott Berg of Needham.
