And we’re really well positioned to go and capitalize on some of that. That’s what I – when I say we’ll take a balanced approach, we’ll definitely look at both taking and expanding margins, as well as continuing to invest in the growth opportunities that are out there.
Raimo Lenschow: Okay. Perfect. Thank you. Well done.
Erik Zimmer: Our next question comes from Siti Panigrahi from Mizuho.
Siti Panigrahi: Thanks for taking my question. So, David, when I look at your peers’ growth, it’s just writing in your payroll space, but you continue to deliver 20% plus, or guide 20% plus on your recurring Dayforce recurring explore. So, what gives you confidence that you’ll continue to deliver that kind of 20% kind of growth?
David Ossip: Thanks, Siti. The first thing that I’ll point out is that if you look at the actual quarter add-ons, which is adding the employer of record and the talent component, was 40% of our sales. And if we look at full suite sales in the quarter, it was 50%. So, when you look at day falls, we aren’t a payroll company. We are an HCM company, which gives us a much more durable growth profile than others in the market that are more focused on the actual payers. And when we look at the breadth of our application and the depth of each of the different modules, you’ll find that they are very competitive, even with the standalone talent vendors out there. Part of our growth as well is, as you know, we are cross-segment whether, it be the major market space, which goes up to about 1,000, the major markets – sorry, the enterprise – sorry, major markets goes from about 700 to about 1,000, a major market is from about 1,000 to about 3,000.
And then we have enterprise from 3,000 to 12,000, and large enterprise above. But the different segmentation gives us also the ability to emphasize differently based on the actual macro. And as well, we have a very strong global profile, which also allows us to balance growth across different markets as the macro changes as well.
Siti Panigrahi: Thanks for the color, and a follow-up. When I look at your pipeline, not pipeline, actually, the deals you closed since Q1 of 2022, large deals in terms of enterprise, you mentioned before that go live should be around two years or so. How is the go live trend right now in terms of your confidence of those companies going live with those large deals, and how is that going to help drive that growth as well this year and next year?
David Ossip: Well, Siti, as we’ve discussed before, the larger accounts give us more of that durable growth profile as the implementations do stretch typically across different years. If we look at the large logistic company, as you know, a nice proportion of their population went live previously, and we are expecting additional waves to go live shortly. But again, it allows us to plan out the business very, very carefully, and you see that reflected in the very tight revenue and EBITDA guides we give to the market. It’s a highly plannable business.
Siti Panigrahi: Great. Thank you.
Erik Zimmer: Our next question comes from Scott Berg with Needham. Scott, you may unmute the line. Maybe we can circle back on Scott. Next, we’ll go to Steve Enders from Citi.
Steve Enders: Okay, great. Thanks for taking the questions here. I guess maybe just to start, I think you called out mid-market win rates improving in the quarter. Just, I guess it would be helpful to get a little bit more clarity on what you view as driving that. And then maybe just a little bit more detail on what you’re seeing in terms of overall demand dynamics between mid-market and enterprise today.
Steve Holdridge: Yes, hey, this is Steve. I’ll take that and anyone can jump in on that. So, in the past, we’ve continued and you’ve seen some great wins upmarket in terms of the enterprise, and we continue to see that. What we have seen is our ability to, one, be in more deals in mid-market. As we’ve increased the sales coverage, we’ve got more focus on our go-to market and continue to increase our win rate. We feel our suite fits 100% and we tend to lead with the full suite there. So, we’re confident, and as David talked about, our advantage is that we have a balanced portfolio. We’ve seen some increase in mid-market, and we’re continuing to drive large enterprise, and we think it’s a combination of those that feed into our guidance and the predictability of the full year revenue.
Steve Enders: Okay, great. That’s helpful. And then maybe for Jeremy, just in terms of the thinking about profitability dynamics kind of through the year and 2Q has some seasonality in there, but I guess any kind of like change in investment cadence, or anything else that you would kind of call out as we think about EBITDA flowing down through the year?
Jeremy Johnson: No, I think – and hey, Steve, how are you doing? I think ultimately, we beat in Q1. We had a really solid quarter from a profitability side of things. I think 2Q always tends to come down a little bit from a profitability side, but ultimately, we remain confident in the full year, and we flowed through that beat into our updated guidance. And I think our overall adjusted EBITDA targets of 28% to 28.6% or 28.7%, so kind of midpoint 28.5%, or just under that, are a really good target for us to hit and push us toward that 30% kind of mid-range target that we’ve set for 2025. And I think it’s a nice stopping point along the way. So, we’re feeling pretty solid about that. And as I mentioned, it will take kind of a balanced approach here with that as we get incremental float revenue here.
Steve Enders: Okay, perfect. Thanks for taking the questions.
Erik Zimmer: Our next question comes from Dan Jester with BMO.
Dan Jester: Great. Thanks for taking my question. Maybe Jeremy to you, you called out kind of a few things about helping us think about the seasonality into the second quarter on the Dayforce line. Can you maybe just get a little bit more explicit about what you’re assuming in terms of macro for the rest of the year, any changes relative to how you guided last quarter for the full year? Thanks.
Jeremy Johnson: Yes, nice to speak with you, Dan. I think ultimately, employment levels remain kind of in line with our expectations, which was essentially flat with normal seasonality. I think if you look at any seasonal impacts, we always see that typical Q1 to Q2 drop off with some of the year-end and print revenue in Q1 that doesn’t happen in Q2, and we do – the seasonal and volume in Q1, that again drops off or tends to drop off in Q2. It’s something that’s been with our business consistently, and you’ve heard us talk about this in the last couple of years, and we’ll continue to talk through it in Q1 to Q2 dynamics. But for the rest of the year, no real changes in how we’re guiding or any macro factors that would impact our guidance at this point.
Dan Jester: Great. Thank you. And then maybe going back to the Co-Pilot and the comments about simple pricing, maybe we could just expand on that a little bit more. I think one of the things many people are thinking about is about how do you manage sort of compute costs and margins and usage for some of these tools. And so, maybe can you just help us think about how you’re thinking about this for your customers, and what does simple really mean? Great. Thank you.
Joe Korngiebel: Simply put, for Dayforce Co-Pilot, what we’re doing is a per employee per month cost, just like we do with the rest of our products. We can rationalize all the costs on what we’re doing with the innovation that’s happening with large language laws and the like, but we’re making it simple for our customers.
Dan Jester: Okay, great. Thank you very much.
Erik Zimmer: Our next question comes from Alex Zukin with Wolfe.
Alex Zukin: Yes. Hey guys, thanks for taking the question. I guess just maybe the first one, if we think about the commentary around bookings and kind of sales growth, as you now – you’re a month of the way through April. Any commentary about pipeline conversion statistics or just sales growth exiting the month and how that’s trending between kind of new versus selling into the base now?
Joe Korngiebel: April was a good month, came in slightly ahead of our plan.
Alex Zukin: Perfect. And then David, you talked a lot about how Dayforce is becoming an HCM company and how much talent is kind of critical to that notion over the next few years. If you think about just the penetration rate within your customer base today where you’ve sold kind of the most impactful pieces of the HCM portfolio in addition to payroll and time, what is that opportunity? How far through that are you, and how to think about that over kind of the next kind of year plus?
David Ossip: Yes, we’re in early stages. If you look at the average PEPM across our client base, you can still see there’s quite a delta between the average PEPM price and between, I would say our target price. If you look at the results within inside the quarter, both in terms of add-on sales back to the base and a number of full suite sales, you can see the numbers are very strong. What I can say is we did onboard a very strong client base leader in Q1, and we are seeing impact from that already. We also have a overlay talent team now, and they are really doing tremendously. If I look at the results year-to-date, they’ve come in well ahead of schedule. And if you look at the customers that we actually called out, the 100,000 employee plus grocery chain that has now purchased the full talent suite, where we are replacing one of the large ERPs with their talent suite across their entire enterprise, talks about the strengths, the capabilities, and the viability of our talent components.
Alex Zukin: Perfect. Thank you, guys.
Erik Zimmer: Our next question comes from Bhavin Shah with Deutsche Bank.
Bhavin Shah: Great, thanks for taking my question. And I guess, Steve, one for you, and kind of dovetailing on that, just on a customer base motion, you guys talked about impressive stats. Can you just elaborate on the typical customer that you’re able to upsell? Who are you displacing in terms of the talent suite, and kind of what are the other big opportunities outside of talent that kind of upsell into that base?
Steve Holdridge: Yes. Hey, so a couple things. Yes. So, one, I’ll point out and double down on what David said is, one of the things we did differently this year is that that is a dedicated customer base motion versus an overlay motion. So, we’ve invested in terms of the number of account executives and the focus on that. In terms of who we’re displacing, it’s all the usual players up and down the market, right. In the low end of the market, we’re displacing the Pays and UKG. In the mid and upper end of the market, we’re displacing the ERPs, and we’re displacing them because of the capability of our pay in time solution and the stickiness of that, and the fact that our talent intelligence suite is now incredibly competitive, in fact, the newest technology on the market. And as David talked about this, is around cost rationalization and the value of an entire platform with our talent is what’s helping us win.
Bhavin Shah: Super helpful. Just as a follow-up, David, to another question that Raimo asked on the macro, I know there’s been some conversations with some potential digestion period for back office software, just kind of post elevated spend as we exited COVID. When you speak to customers, do you see this at all? How would you kind of describe customer scrutiny and if it’s changed at all over the past few months?
David Ossip: Over the last, I don’t know, 10 years, I can’t say that there’s really been an easy quarter. We now have, as you know, almost 6,600 customers live on the actual platform, and every single one of those was a competitive RFP situation. When I look at the actual pipeline, and I would argue that under Sam’s leadership, it’s now a highly qualified pipeline, the ratios are very good in terms of coverage to our target. And as Steve mentioned, the simplicity at scale message, which I spoke about earlier, which is the more automation and our ability to go to a customer, clearly identify on average about 12 different HR systems that they have in place. Simplifying that to one day fall system, that typically yields a subscription saving for the client in the very first year.
Plus, they have much better automation, lower manual error rates, less FTEs, and much more efficiencies around different types of workflows, which also contribute to a very strong and quantifiable IRR on the Dayforce system. And at the same time, we are able to significantly lift up the experience for their frontline workers, their managers, and their executives, all based on that single database that we have empowering Dayforce. And when you now begin to layer on what we’re doing in terms of data and AI, the impact that we can have on decision-making and on both the top line and the bottom line of the organization, is very impactful. And I would actually question that if it’s not Dayforce, why isn’t it Dayforce? Because we really do have quite a differentiated solution in market.
Bhavin Shah: Super helpful. Thanks for taking the question.
Erik Zimmer: Our next question comes from Jared Levine with TD Cowen.
Jared Levine: Thank you. In terms of looking at your professional services revenue and other revenue, can you discuss the mix of that currently that’s implementation-related versus non-implementation-related, and how you’d expect each of those to grow over the medium term?
Steve Holdridge: Yes, and we think of that really in kind of two broad categories, implementation and then what we call value-added services around that. And within implementation, over time, we expect the core implementation to continue to decrease year-over-year as our partners move into that. The one exception is obviously we mentioned with government of Canada, and we expect our value-added services and our focus on new and emerging products and supporting the SIs to increase, but with that, we also expect to see a continued slow growth and profitability as that mix increases as well.
David Ossip: Yes, and Jared, maybe I’ll add there. Also inside of professional services and other gross margin, we have things like clocks and custom training revenue, and that will continue, and we still have a good opportunity to continue to grow that. And then the last thing I’ll say is, as we move and continue to move into Sis, not all of that is on the SIs paper. Some of that is – when we say SI-led, some of that is actually contracted on our paper, which means we’ve got to account for it under ASC 606 with a couple of – two performance obligations and things like that. So, I think just to clarify, I think that that might be a misnomer out there.
Jared Levine: Got it. Thank you. And then both Powerpay recurring ex-float and bureau recurring ex-float, both came in below your expectations for 1Q. Can you discuss what drove those lower-than-expected results? Is it more so a push out of revenue later in the year?
Jeremy Johnson: Yes, I think we had – so we set some lofty expectations, I think for Powerpay and on that side of things. The employment levels, I think, in Canada aren’t as solid as we had expected. And I still think in general though, we grew that business by 8% in total, or 5% excluding float. So, just slightly behind our expectations on that one. And on the bureau side, it’s really about end of lifeing products and migrating over into Dayforce, and that’s really what you’re going to see continued on that kind of other revenue line. And we expect that to continue to decrease year-on-year.
Jared Levine: Just a quick follow-up here, if I could. What is the updated Dayforce recurring ex-float guide assume for a bureau migration contribution there?
Jeremy Johnson: I don’t believe we’ve disclosed that specifically.
David Ossip: It’s immaterial.
Jeremy Johnson: Yes.
Jared Levine: Okay. Thank you.
Erik Zimmer: Our next question comes from Mark Murphy with J.P. Morgan.
