Dayforce, Inc. (DAY) Earnings Call Transcript & Summary

Good morning. Ready to get started. Thank you all very much for coming. We're really excited to present to you today. We can switch to the agenda slide, please. So just a quick overview of who will be speaking today. It will be David, Joe, Steve, then Jeremy and also Erik Zimmer as well. Next slide, please. This is our safe harbor statement. I encourage you all to read it. It is also available on our slide deck, which is available on our Investor Relations website for download, and please read it when you have time. We encourage that. And just with that, I will turn it over to David Ossip. Thank you.

Hey, everyone. Nice to see everyone. Thanks for coming. Appreciate it. What I thought I would do today is I'll talk a little bit about the vision of Dayforce, what our growth levers are, how we set out to tackle the marketplace, what our intent is going forward. And then after that, we'll bring Joe on stage. And Joe will talk about the strategy, the product and the technology in a way that reinforces the 5 growth levers that we have. And then we'll bring Steve on. And Steve will do the same from an operations, from a go-to-market or services perspective so you can understand how the pieces come together from the strategy side through the actual product side, all the way to the go-to-market, the implementation, the customer support, the managed components. And then Jeremy will come up, and he will tie all together from a financial modeling perspective so you can understand both the short-term revenue plan as well as our longer aspirations as we actually move forward. You'll hear us talk about Makes Work Life Better. It's the theme of the conference that we have going on at the moment. It's the brown promise of the company and really does define who we are, the products that we actually build. The conference, you'll hear me later today speak about it, but it's all about community, all about connections. For us, we believe it's very, very important that we have this intimacy partnership with our customers, with our partners, and we believe that leads to success. And if we're successful, it means that we actually see our customers, we listen to our customers, we empower them to make work life better for their employees. The brand promise has proven to be quite a strong differentiator, and I believe it's one of the reasons that the customers elect to do work with us. Where we are today is we have a history of delivering predictable, profitable and durable growth. Last 12 months, revenue is $1.7 billion. We have over 6,700 customers live on the Dayforce platform with a gross retention rate slightly above 97%. We've evolved as an organization. Last quarter, 46% of our new customers bought the full suite. A full suite would be core HR, payroll, benefits, time and the talent modules. For the fifth year, we're a Leader in Gartner's Magic Quadrant for cloud human capital management solutions for organizations over 1,000 employees. And that's effectively the segment that we play in. 37% of our bookings in the last quarter were back to the base. And this is a very important metric for us. We have 6,700 customers. We know that the average PEPM across those clients is probably just a little bit north of $12. However, our target for new customers is almost $40. It's about $10 to $12 on the payroll, time side, $10 to $12 on the talent side, another $10 to $12 on the managed side. And also on the data side now, there's another $10 to $12. And so the importance of this means -- is we can go back to the base, drive a lot of continued growth and very profitable growth because the gross margins on back to the base sales is above 90%. Our cloud recurring gross margin is 79.2%. And the next 2 points I would kind of call out. When we IPO-ed in 2018, until now, we have taken Dayforce recurring revenue ex float up by 4x. And during that period, on average, we've increased the gross margin on cloud recurring by 220 basis points per year. So over 13.2% over that particular period. And that I always -- to me, it's very meaningful because it's an example of Dayforce scaling and becoming more profitable, which I think is a very good sign of a scalable cloud company. The market that we play in, as I think you all know, is a little bit north of $50 billion. It comprises payroll applications, the HCM applications, which will be core HR, recruiting, performance, compensation, learning management, document management, et cetera, and as well managed payroll and benefit services. And the managed payroll and benefit services for us is a strong differentiator in market. Today, our recurring gross margins on the managed services is almost 77%. And we believe, in time, it will align with what we're getting on the cloud recurring gross margin side. We have 5 growth levers. We've had this from the inception of the company. The first is we acquire new customers each year. The second is we extend the platform, allows us to sell more to new customers and to go back to the base and continually get more wallet share from the customer base. We've expanded into the enterprise side quite successfully. If I benchmark it, I say, pre Joe, our largest live customer was about 50,000 employees. Today, our largest customers have hundreds of thousands of employees. We've accelerated on the global footprint, expanding our native capabilities, our ability to do core HR and talent and workforce management on a global basis. And finally, we innovate in adjacent markets like the Wallet and with the Flex product. The problem that we set out to solve at the very beginning of time was based on field research outbound calling. And what we typically found, and this was back in about 2010, we found that the typical organization we spoke to had 12 different components of their HCM stack. And each of those components had its own database, its own user experience, its own authentication. And because of that separation of data, it meant that all of the HR-related workflows were very inefficient. It meant that you couldn't do any type of data aggregation because if you looked at the underlying data fields across those 12 databases, you would find about 75% of the data fields were identical, but the values inside those particular tables were all different. So you have to be a genius to know how to write a report because you have to know which database to go to, to get the right value for a particular type of table. We set out to solve this, and we felt that if we could do this, we would be able to simplify the workflows tremendously for the customers. We'll be able to deliver more automation, less integration, which meant less manual workaround, less manual errors, less FTEs, higher efficiencies, better experience and better decision-making. And that's what we effectively set out to do and conquer. We started with looking at the intersection between pay and time, a perfect example of a data issue. The data issue was that payroll teams couldn't begin closing out their payroll until the pay records came out of the time system into the payroll record, which happened at the end of the pay period. And then they'll have this very small window to do all their busy work, usually meaning that we'll run out of time. And when we surveyed people, they said, we commit payroll when we run out of time, not when we're ready. And the way we did that to solve it is we built this continuous pay and time calculation engine. So any time there was a data change, we would automatically recalculate net earnings, present that to the payroll team, present that to the actual employees. And by doing so, it meant that at the end of the pay period, people would be done. And we found that the reduction in the time required to close payroll drops by between 80% to 90%. The way that we then extended the actual product is we started in 2013 with the payroll time, tax and benefits. We then extended it from where Ceridian used to play, which was around that 500 to about 3,000 space, and we extended out into slightly larger organizations. We then moved up into the core HR and talent component. And from there, we then went into the large enterprise and into global components. We then went up into the core HR and talent for the larger organizations, moved into the managed payroll, starting first with very large enterprises, and then we brought it down into the major markets and into the enterprise segment. And finally, we moved into the data component. And this for us is our growth strategy. There are 2 axes to this. The first one is we cover more of the segments inside the market. The first segment up to 3,000 employees, we call that major markets. The second segment is 3,000 to 12,000. We call that enterprise. Above that, we have large enterprise. And then we have global. And each of that is capturing more and more of the available TAM. The second axis we have is on a product level. We started with payroll benefits and time, again with a target price at 1,000 employees of about $10 to $12. And as we extend it up into the core HR and talent, that gave us the ability to sell another $10 to $12 to the customers. And then as we extend it up into the managed payroll and benefits, that allowed us to get another $10 to $12 of revenue per employee per month. And finally, on the data side, we have a very rich offering. It starts, obviously, with the dashboards and the measures, typical reporting or analytics. We have the Dayforce Integration Studio, which allows customers to do the integration with all the various types of systems, with the no-code or low-code bases. We have newer products like the Hub, which is the content management system. We have the Co-Pilot, which allows us to index all of the information that is stored in the Hub, whether it be employee policies, employee information, benefit information. But it extends also. Customers can load in their operational manuals things like how do I do maintenance on a particular machine, what is the maintenance schedule, what's the capacity of a forklift. They can load in their customer service, information and price list as well. So if I'm a retail employee on the shop floor, I could go into the actual Co-Pilot and ask the questions such as, can you recommend a running shoe in a particular price range for someone who has wide feet? And the product will actually come back. And this is a way of really empowering employees to get responses back in a gen AI type or fashion, which the answer is comprised from all the various different documents that I'm in the audience from and comes back with those reference links as well to the source documents. And for that, for example, we price it at about $3, $3.50 per employee. But the strategy has always been how do we ensure scalability, use ability to cover as much of the available TAM from a segment perspective and how do we continually innovate up on the vertical access so that we continually also can grow the addressable market. Today, and Joe will show you this, is we have a very full HCM offering, everything from the pay side to the time side, co-HR, talent and analytics. From a Gartner perspective, we are the only pure play that has been in the leadership quadrant for the last 5 years. So we're only pure-play HCM vendor. We still are ranked by Gartner #1 for compliance in the 1,000 to 2,500 area as well as above 2,500 area. And it talks about maintaining true to our roots being a leader in compliance, maintaining our lead in the mid-market space and as well extending our lead into the actual enterprise space. Today, 6,700 customers live on the Dayforce platform, right across industry, right across segment, right across global. Huge opportunity from the back to the base client sales, the ability to sell them the talent modules, the data modules, the managed services components as well. For each of those customers that we go into, the problem that we solve is this. We go into organization and we help them understand the different components in their HCM stack. Each of the different colors represents a different vendor. They typically are manual processes, paper processes, spreadsheet processes, a lot of risk, a lot of data flowing back and forth, integration, very time consuming. And for each of those different nodes, they're paying a vendor subscription, and they typically have a number of employees or consultants maintaining each of those particular nodes. What Dayforce does is we come in and we're able to reduce the number of vendors that they're dealing with, typically from about 12 to 1. And in doing that, we're able to deliver this form of quantifiable value, which is more automation, less integration, less manual workarounds, fewer manual errors, less FTEs, higher efficiencies, better experience and better decision-making. Quantifiable value to us means what is the cash IRR to the customer. The savings comes from the reduction in subscription. When you go from 12 systems to 1 system, you pay less subscription because you're not paying for 12 databases, 12 hosting environments, 12 support teams. So subscription goes down, and as well, the customers don't have as many people supporting this HCM stack. And so they get an FTE labor savings. Typically, our customers land up with a cash IRR over the life of the initial term of the contract between 2% and 400%. And at the same time, we're able to deliver a much better experience to their workers, to their managers and to their executives. And because all the data is well formed and in one database, we're able to help them with decision-making, Co-Pilot, predictive analytics, automation. And it's a very, very, very strong message. And this typically is how we compete. In terms of predictable and profitable and durable growth, our 6-year CAGR on cloud recurring is 23%. If you do it on Dayforce recurring ex float, it's higher. It's about 26% over that particular period of time. Effectively, we've taken up the cloud recurring by 3x. We've taken up Dayforce recurring ex float up by 4x since we IPO-ed in 2018. And that, I think, is really tremendous. And at the same time, we've increased the gross margin on recurring by about 220 basis points per year. Again, evidence of a scalable cloud software company. As it grows, the company gets more and more profitable. For the next 6 years, the goal is to continue with predictable, profitable and durable growth. The aspirations is to take the top line to $5 billion and to focus on free cash flow and to move to about a 20% free cash flow conversion of revenue along the same time to generate about $1 billion of free cash flow. And as we go into 2025, you'll see this become a very pivotal year for us. It's a year that as an organization, we're going to focus on building out the profitability muscle for the organization. We're going to be looking at what we do, for example, in revenue rationalization, making sure that all of the revenue that we have in the organization have the same margins that we get on the cloud recurring side. Looking at efficiencies across the organization, like we've been doing over the last 6 years or so, so that we can confidently get to that $1 billion of free cash flow over the next period of time. And just to close out before I bring on Joe, again, the 5 growth vectors. What I think is quite remarkable over here, these are the 5 growth vectors that we had at the time of the IPO. These are the same growth vectors that we had at the inception of Dayforce back in about 2010. Acquire new customers. Our market share today is still about 3% also. Extend the footprint so that we can drive more revenue from our client base. Make sure that we can continually extend to cover more and more of the TAM, both in terms of segment and globally. And look for ways to innovate around the actual product to drive additional revenue such like the Wallet or with the Flex type of product. But I want to thank everyone for coming today. It's wonderful seeing everyone inside the room, and thank you for those who are online as well. But let me call on Joe to take you through what I call The Joe Show.

Good morning. Gosh, it's really good to be in person seeing faces that I normally see in 2D, in 3D, and you exist. So thank you for coming a long way. We really value your time. And thank you for your input continually because it makes us better. Let's talk product. Product is what drives any great company. And it is the biggest driver in our success and what you just saw from David, but it will be our continued success. We have a relatively small overall market share. We plan to grow that, and we plan to grow it substantially, and it starts with our products. You saw this. This is our full suite now, but it really is hidden behind the amount of work that in my 4 years here we've done, which is really take a company that was growing in the mid-market and take it to an enterprise leader. You see what Gartner has done with our position over the last 5 years in compliance. But it's starting to change across the board. It's starting -- we're showing up in all kinds of deals that -- I remember when I was first coming here and David and I talked. Can we compete in those areas? And now we are not only competing. We're winning. It's fascinating to see. This market needs a new solution. Most of the people we compete with are 20-, 25-year-old solutions that are bolting on AI, bolting on acquisitions and hoping. Hope is not a strategy. And so this is what we've done. We've really built the whole platform. And so we looked at what we were strong at. And so when we started -- if I look the timeline of when Dayforce truly was acquired by Ceridian at the time and started to grow, we were good at the compliance side of the house, especially in workforce management or time. We could record time for hourly workers really, really well. We could record global time at that time even. We had a very good start for our HR records. That is really one of the hardest things in the HCM suite. I've been in this business, it's crazy but true, and I'm getting more gray hair as it goes, but almost 30 years. And I'd tell you, when we started in my previous life working with other companies, we ran from time entry. We ran from payroll. This company did the opposite, and it's why I'm here. It took on the hard stuff because the very next thing that David and team did was, hey, we have a history in payroll. We've been in the payroll services business for decades. Let's take that knowledge and build a continuous calc payroll engine. So we added that. And by 2016, we had a phenomenal local and global payroll solution. Yes, we did native payroll for U.S. and Canada, and we were starting to really make a name for ourselves. We entered into the benefit space, starting to make some acquisitions and do some inorganic growth, but we had a discipline to it. And you'll see in the 4 years I've been here, I've been really focused on that. It's not bolt-on acquisitions. It's one platform that really drives us. And that has followed me in my career. If you focus on the architecture, you can scale. You can grow bigger customers. You can make customers happy because they're not running into walls where the user experience doesn't feel right or walls where all this integration work that you're trying to solve doesn't really work behind the scene. So then -- really, I started in 2020. It was middle of pandemic. Much like all of you, I didn't get to see people in person. I didn't meet David until I think it was 9 months in when the flights started to really go again. And we had a really great foundation for me to run with. We were really good in pay. We were really good in time. And we started dabbling in the talent space. And talent space is a huge TAM for us. It's a huge growth. It mirrors what we do with the compliance space. So it's an opportunity for me to come in and say, we can take this thing and put a rocket booster behind it. So look at what we've done in the last 4 years, taking this solid #1 compliance solution. And in a time when customers need efficiency, I need to save money. So if you can consolidate 12 systems into 1, now we have a solution to do that. And we're going to do the really hard things that matter most so you don't end up in lawsuits from employees or be out of compliance and state paying people wrong. You go out of business when that stuff happens. We do that really, really well. So boom, we started to add a whole bunch of stuff. I'll go back and forth just a second. Okay, we went from that to that. We added all the talent modules with bonus. I made -- first thing I did was acquire an AI company that was pushing on what you could do with AI and what's referred to as talent-powered -- AI-powered talent. So you use AI to drive the use cases behind AI and automation, make a ton of sense in recruiting. Don't go through all these resumes one by one and just waste your people's time. Do matching, look at resumes, scan the skills and create a skills ontology so you can run your whole people platform off of skills as the currency. So we ran into that with an acquisition. I knew that HR and HCM has been about transactions for the last 20 years. We went from just paper to digitizing it. That's a commodity now. What people want is insights out of that data. So we built a whole AI analytics stack. So AI talent, AI analytics stack off of a compliance foundation. And then we started to do things at a platform level, really powerful things, jumping into industries. So we did industry cloud extensions. That got us into the government of Canada, which you guys have heard about us from before. It's got us into new verticals like construction, retail at the right time as retail is starting to wake up from the pandemic. And so it's really empowered our services wing to run and be able to solve things that we couldn't solve before and not have to make everything a custom software development build but a really platform build for us. We'll talk about it in a second. We're now starting to do not just employees but your contingent labor, your alumni, your part-time workers, your temporary workers, your seasonal workers, starting to have one system for all of your people problems. And going into AI, we're pushing with a ton of things you're going to hear about tomorrow if you're able to make the keynote tomorrow. Innovation -- and it's been 4 years. We've built an incredible foundation around the data we have to be able to really extend what we're doing with AI. And it's not a bolt-on. It's part of one platform. It's part of that compliance foundation that we started. And so it's a unique advantage. It's a unique suite for us now. If I look at where the markets come from, we started with HR, pay and time, HCM solution from the smallest of vendors to the largest vendors, start and have to have that. Well, we happen to have the strongest compliance foundation on the planet. Cool. The center is [ really so ]. Talent. Talent has been around for a couple of decades now. All the talent companies that have been around a while. You've seen their numbers. They're struggling because they're not built with AI. They're not built with the use cases that can now be automated by AI. So they're quickly trying to replumb, replatform. They're getting acquired. They're figuring out, maybe we'll go into the HR, pay and time space because we're running out of TAM. We did the opposite. We started with that core. And now over the last 4 years, I've been here, we've built an AI-first approach to talent. It's resonating. Employee experience came next in our space. And again, a lot of people started early. AI is taking over in the employee experience space. I want to provide recommendations for you. I want to provide predictions for you. I want the UI to go away all together and just have a simple conversation with my -- the advances in generative AI, and you'll see that in a second. AI-driven analytics. I talked about that. That grew our market. Then you're starting to see predictive planning. We're going there next. We have a good announcement tomorrow that you'll hear about our push and to be more strategic and not just about analytics but getting into strategic workforce planning. Total workforce has become a bigger and bigger thing in our space. I have fewer and fewer full-time employees, and I have a huge volume of contingent labor. How are we doing that? And what I'm most excited about is this whole industry is changing. You have to build a new house. It's like the Golden Gate Bridge, as I say. Golden Gate Bridge -- I live in San Francisco. It's a wonder of the world. You ever watch it, it's painted from one side to the next. And as soon as you get done painting it, guess what you do again? Start painting it again. That's the world of HCM. It's moving so fast. And AI and automation. What's happening in that space is causing every vendor to say, how do I rewrite? Well, we have that really solid foundation. Been here for 4 years, had a really solid data foundation, compliance foundation that we're rewriting our applications one by one to really drive this new level of innovation. And the TAM is growing. You just look at our AI products. We anticipate 5% to 7% as we start to monetize our AI product with Co-Pilot, which we'll demonstrate in a second. We can grow just on our customer base and every net new sale. And then the fact that we're winning new deals, grabbing market share, 12:1 simplification. It's powerful. But as we extend, there's really always areas to add rocket boosters. And Erik Zimmer does a great job of providing innovation that continues. He's behind a lot of the Wallet innovation that we did a few years ago, which was the right product at the right time. It provided people instant access to pay with no fees. In the middle of the pandemic when shifts were tight, people needed money to help feed their family, Zimmer really pushed for us to be able to do that. Did a phenomenal job. Now we're exploring how we can be better with the total workforce. We have a product called Flex Work. So pleased introduce Erik here to talk a little bit about what we're doing with the innovation on Flex Work.

Thanks, Joe. So super excited to talk to you guys about what I think really separates us from the competition. So with Dayforce Flex Work, we are building on top of our platform and innovating in a business model that serves our customers in different ways. So Dayforce Flex Work is truly built on top of Dayforce, and it allows us to leverage all of these amazing innovations that Joe and his team are working on from time and attendance to payroll, to workforce scheduling, all the way to what we're doing with career explorer and skills ontology and even harnessing AI in the future. So for Dayforce Flex Work, what we did is we actually built 3 separate applications. So the first application is a web application where employers go to post shifts, check their schedules of upcoming work and actually analyze their workforce from end to end. And then we built 2 mobile applications as well, one on iOS and one on Android. And those mobile applications are where our workers go to pick up shifts, to clock in and clock out when it's time to work your shift and to get paid on Dayforce Wallet instantly when you complete your shift. Now this opportunity is actually a very exciting opportunity, but it's slightly different than our software business and that opportunity. We actually recognize revenue for every shift that our customers post and our workers work. Each shift is about $150 in revenue and $20 in gross profit. We're just getting started. It's the very beginning of what we're doing. And we already have some really, really good traction. So we announced this product, as you may remember, back in May. We are already over 50 customers just a few short months later. Those customers are signed up, ready to go. Many of them are activated today. And they're both Dayforce and non-Dayforce customers. In fact, 50% -- over 50% of those customers are not using the Dayforce platform for the rest of their HCM needs, which means we've got an amazing opportunity to cross-sell those customers over time. And the early data shows that we have not only a product that has market fit, but we're doing some really, really interesting things in the marketplace, right? So one of the stats that I love to talk about that's super exciting is that when our customers post shifts on the Flex Work platform, 50% of those shifts are picked up in less than 25 seconds. 80% of these shifts are filled in under 6 minutes. So we're doing something that's actually really different. If you think about the way that traditional staffing works, it's a game of telephone. We're leveraging not only the Dayforce platform, but we're leveraging innovative technology to totally change the paradigm and change the game there. Now I'll walk you through just a few examples of where customers are using this today. We're focused not on the full Dayforce 6,700 customers that David mentioned before, but we're actually focused on select areas where we think we can move the needle in the near term. Longer term, we'll be able to service all of our customers. But today, we've got customers like university. We have a large customer in the Southeast United States. It's a public university. They use Flex Work to staff food service locations in dormitories, in campus locations like the university memorial centers. And they're also staffing retail centers and retail areas. We serve a distribution customer in the state of Florida. They've got, I think, 15 distribution centers. Today, we're only serving a couple of those, but we plan to expand to all of them throughout time, right? If you take a look at what the potential is there, they're just doing 35 shifts per location. But you add that up over 52 weeks, multiply that out over multiple locations, and it becomes a real revenue opportunity for us. Sports and events, another really great area for us. So we've got a customer that is looking to use us right now to do ticket-taking and ushering at their stadiums, right? We've got a whole bunch of sports platforms already on Dayforce, and we're planning to serve more and more. So that's just a little bit of a preview of what we're doing. I think this is really exciting. As Joe mentioned, back in 2020, we launched Wallet. And Wallet has driven some of our growth and really driven the differentiation of our product. It's a great boost to our win rate. Flex Work is the same kind of thing, still super early days. We don't expect a lot of revenue this year or even next year, but we do expect over time that this is going to be something that's going to drive our durable growth in the future. So with that, I'll turn it back to Joe, and he can walk through a bunch of the other cool things we've got.

Thanks, Erik. It's really, really powerful stuff that we're doing. I did want to talk -- I couldn't leave without talking about AI, right? We got to talk a little bit about AI. Our products. Our products are supported by a people platform. As I mentioned, that's where you get scale. That's why we're able to go upmarket to go from 50,000 or so, as David mentioned, to now hundreds of thousands of employees that we can now run with our platform. We have a complete, what I refer to as a global people platform. It allows for integration, workflows, identity and access, security, enterprise-grade security. What we do with AI models sit at the base. So foundational AI models are down there. But really, one of the things I noticed when I got here was our purposeful focus on data. So when I got here 4 years ago, I noticed that data here is not shared or co-mingled in any way. Our data is governed by the same compliance rigor that we have as we run payroll and run payroll globally for millions of employees. And that data advantage is different than the competition. You've seen some crazy partnerships where people are sharing data to go ahead and provide more AI. That gets you into massive problems, not only with that data leaking, and now the surface area for attack your data is everywhere. Your people data is so core to your business. You leak people data and you have massive problems. Our compliance lead and this focus on data has led us to a place where we're really running with this platform. We're really building a complete experience layer, and we're going to demonstrate that in a second, and our compliance advantage. And what I've been doing for the last 4 years is focusing right here in the middle, is to add a new intelligence layer to our platform to light up all of our products. And it's a really important step for us. It's a milestone for us. This conference is a huge milestone for us because we're really starting to light it up. But most importantly, our customers are seeing value. As you'll see in the keynote tomorrow, customers are starting to use this. We're working with customers, and they're seeing the value to have fewer staff, to be able to get more done, to be able to consolidate 12 systems into 1. AI is a big part of that. Those talent applications -- talent, having that powered by AI reduces the friction of onboarding and off-boarding employees. It reduces the friction of keeping your best and brightest and skilling them up to the new skills you need in this AI world. And so I'm really, really excited about what we're doing with that. Let me just run through each of the 3 core areas of our platform really, really quick. Compliance, you know, we've talked about it. Just this year alone, the scale in which we're doing our compliance leadership is jaw-dropping. Over 300 compliance changes that we instantly work in partnership with our customers around the globe and look at the global scale of our business now. It's not just a North America business anymore. ANZ, a huge growth vector for us. We've made some acquisitions, as you all know, over the past few years. We're really growing in that area of the world. And it's compliance heavy. Awards in different local -- Holiday Act in New Zealand, massive thing. And if you're not compliant with it, you can't buy software there. Just a great example of how important compliance is for sales in this day and age. APJ market, we're growing in there. Recently with our ADAM HCM acquisition, growing in the Latin America market, all of these become really powerful, and it's because of our compliance lead. Experience. We now do end-to-end. What was referred in the industry for a while with cradle-to-grave, I don't like that term. And so you can see this is much more friendly from the recruit all the way to pay. We handle the entire life cycle of an employee. One system, one source of data, one experience, one community that you're going to see in this conference, is a differentiated approach. While our competition are all starting to acquire, try to figure out where they go next, they're not focused on their people platform, a lot of them, they're focused on finance or focused on something else, we stay focused on what people need right now, which is a global people platform that can scale with my business. So I mentioned it, one system, one source of data, one experience behind this one growing community that you'll feel in this conference. It is Dayforce. This growing community is starting to innovate on top of our platform. You have to have a platform you can innovate on. And I showed you the cloud extensions that we're doing. We're not doing it alone. We have great partners that are working with Steve and team to start to use our platform to innovate on top of what we're doing. This is a signal to any great software company. You become a platform play and you grow. We're feeling that inertia, allowing them to integrate, allowing them to activate with our customers. It's a growing ecosystem that's really bubbling. We had an event last night with our partners. The energy was palpable. I'll end with intelligence. It is where we invest a lot of our R&D spend. We're referring to it as Dayforce Intelligence. It's really the embodiment of everything we're doing with AI across our platform. It's really 3 key areas that I'll just talk about really, really quick. First, we've been in the AI business for years or even before I got here. We've been doing interesting things with machine learning models with AI. But really with the advances, the massive advances 2 years ago almost to the day, I think, ChatGPT launch as the fastest-growing product in the history of the consumer world, with those tremendous advances in Generative AI, we're starting to really up-level our platform play, the models we use and how we provide recommendations, predictions and what if scenarios across our product. That's included. It's included with our products. It lights up the entire set of HCM suite products that we have. So predictive insights will continue to grow. It will continue to be an important part of how we provide recommendations and predictions throughout our application, changes the UI, changes everything. Next, last year, at this conference, we announced our Dayforce Co-Pilot. First, in our industry to have live customers on a generative AI product that's a conversational UI, completely changing our UI. We'll demonstrate it in a second. It provides step-by-step instructions, summarizes massive amounts of text and gives people instant answers which HR HCM is full of. You have these massive onboarding documents, these massive benefit guides. You all have them even in your companies. Go find something in your benefits guide that tells you something. Give me an hour or 2 to try to sift through the 20-page document, the 40-page document, the 200-page document that some companies have. The text summarization is phenomenal. And question and answering to save and allow your people to do the work they're meant to do. Don't have them to just answer the same questions 20 times. Your HR people that are so valuable to your organization, have them have human conversations, add the value to the business. And so Co-Pilot, new product for us. It works on any one of our products. You buy one product from us, payroll, you can buy Co-Pilot. You buy our whole suite, you can add Co-Pilot. And it simplifies work. Where we're going next, which will be a big announcement that we announce tomorrow and continue to push, is how agentic AI is really changing the game, how we can automate the mundane routine tasks and pull them out. So those automate tasks, generate text and initiate workflows on behalf. We're a people platform. We believe this can be an assistant to allow people to do the work they're meant to do more. It provides more productivity, more efficiency for your people throughout our platform. And it's a huge area of growth for us in our -- through line that David mentioned of making work life better. So a lot of vendors talk, a lot of show PowerPoint. I like seeing software. I think you all should see software. So I have one of my trusty colleagues who is phenomenal at what he does. Jason Gurgal runs our solution advisory organization. He is amazing to say the least. I'm going to have him just set up really quick. Let's show you a little bit of software. Jeremy is next. And I know he is the star of the show anytime we have a financial day. So we're going to have him -- oh, Steve is next and then Jeremy. So we're saving the best for last. But before -- Steve did take umbrage to that. All right. All right. There's a little competition. I like it. Last year, we had the 2 Super Bowl -- in the Super Bowl. And so you guys can kind of compete it out 2 work -- Dayforce as we go through work and seeing what we're going to do here. We got it. All right. So if we go through how Steve and Jeremy can battle it out like we had the Chiefs and the 9ers as 2 Dayforce customers in the Super Bowl last year. Let's look at software. All right. Here we go. This, Jason, is our employee experience. This is where all employees start. It provides a central place for you to put information and ground your employees on what they need.

Exactly. I can procure quite quickly access information about our company. I can look up policies, college information, like David said, or operational manuals on equipment I can come down and see things that are important to me like my earnings. I can go ahead and check my balances.

Wait, wait, Wait. Mobile. We always start -- you still look at everybody's phones. Phones, phones, phones. You start -- you got to start on the phone, right? Let's start on the phone, right? That's where the world of the work is.

Right. [indiscernible]. Here we go. Okay.

Everything you do on hub is available on mobile. Not 2 experiences. One. When an admin changes things in one place, it shows up everywhere. So you got everything you need right there as well.

I can come in. I can go ahead. I can clock into my shift. I can see who's on [indiscernible].

So hourly workers can just be on their phone, check in, check out of work. So if you are in the sports and entertainment industry, like we talked about before with Super Bowl, you can just go boom, boom, boom, you're in.

[indiscernible].

I actually love this.

Yes. So you can see here, on the 30th, there's a shift available. I can go ahead and pick it up and off we go. If I wanted to, I don't know [indiscernible].

A demo with me means like a day off, that's not bad.

What else do you want to do there?

Let's just take a quick touch at pay. We're so good at pay. We can do global pay. We can do it, but we can bring it all to the mobile devices really. If I need to see my payslip, if I need to download a PDF to give it to a financial institution, I can do that on my phone, right?

Best thing about Dayforce. Any device, any time, anywhere. So here, that will have functionality. You wanted to check out earings, no problem. I can see all earnings, historical. And when we need differentiators about Dayforce, because we're doing that continuous calculation, I can preview my earnings in advance. So here, we can see [indiscernible].

And it's all continuous calc. So as I get paid, boom, it's right there. And right from the device, I can do what I need. We challenged the team when I got here to do something audacious, which is to do full mobile benefits open enrollment. Do all the complexities of the open enrollment directly on your phone. Is that right?

Yes, we can do it. In fact, I've got benefits right here. And as an employee of Dayforce, I just did open enrollment. And I did it on mobile, and it saves across each of the different -- it saves across each of the different devices. So if I start on my mobile, it can then go right across over into my laptop.

So you stopped on your health care savings and it picked up exactly where you left off, and boom, you pick it up and go.

You got it. Did you want to show the intelligence embedded in it? Or should we leave that for another time?

Well, let's leave it because we got a lot to show on the desktop still. So maybe we go back.

You got it. Okay. Let me start mirroring here.

Because I want to show off some of the Co-Pilot stuff I've talked a lot about it. It's worthwhile to show.

Holding the mic and using my phone and why don't you trying to make me drop something, aren't you? Where do you want to go, Joe?

So I don't know, we've talked a lot about Co-Pilot. And yes, the simplicity of being able to get things done. You can see the Co-Pilot here. It's got -- you can upload your benefits manual here as an attachment. You can put policy information as you see policy center, you can put your company information, but we simplified it and changed the game with Co-Pilot. So let's have a look. So if you bring up and just with one click, you can just bring up our Co-Pilot and have a conversation in just like ChatGPT, just like Gemini, you can do that. But now it's personal. With our data advantage, and what, each customer has a unique data set, we've provided an LLM, a large language model that is tuned for our industry, tuned for pay, time use cases, talent use cases and is also tuned with the customers' data. And so this is unique to us. Each customer gets their own large language model, and you're going to see it in action. So let's ask a simple question. Let's do -- we started and said step-by-step instructions. If I need to worry about my availability, just how would I ask a question about that?

What I will just ask in Co-Pilot so how to un-edit my [indiscernible].

It will fix it. It's a Generative AI. It will figure out the intent of what you're asking and go ahead and provide it through. So now each customer gets their own large language model, that large language model will be trained on all of their data and uniquely, securely in their place, and boom, step-by-step instructions, 1, 2, 3, 4, here I go.

I can [indiscernible] the calender and take action if I wanted to.

What if I'm a new employee, I want to learn about our core values. I don't want to search through documents, I want to figure out. I just want to know, hey, can I learn more about the behaviors and what really makes this company successful, what are our core values?

Just type right in, what are the company values.

You'll notice something that as it comes back, ethical AI is super important and how you treat data is super important. But having transparency into where you're getting the data and where it's coming from and being able to provide feedback constantly, you can see actually the feedback that's there as well. But here, we just got a little bit of a background on the core values of this company. And with just a single click, you can go right to where you want to go, correct?

So if I wanted to, I could go right into our employee handbook, our code of conduct, [indiscernible], and, of course, there's the core value.

This document, this -- who knows where in your Internet, who knows how to get to it, it's a simple question. You get to your document, it takes you right to where you need to go. Brilliant.

I wonder if you talked about the ethicalness of our data. You are seeing, as Joe mentioned, just about how respecting our information so it's private. We are not going to use our private information shared [indiscernible].

Perfect. Benefits. One of the most important things from an HR team is just fielding questions about benefits. And benefits' documents are long, no one really -- does it -- I always have questions about this, that or the other. Let's ask a couple of benefit questions. Maybe hey, what's the local thing you want to run into on your eye care or how you think -- doctors or finding random phone numbers in a buried document somewhere in my benefits' guide?

You got it. [indiscernible].

That phone number, I got to call, I want to talk to a human, can I do that? It isn't simple, right? It's probably buried on Page 47 in some low fonts that I can't find. And I just asked a question to Co-Pilot being able to get back. You can imagine the time savings that you're going to have for your teams. You can imagine what companies will do to optimize their workforce around that.

Yeah, [indiscernible].

Needle in a haystack like that, and it scales to every employee, not just one-off request. I mentioned a lot about AI-focused talent. I love this aspect because now employees can be more empowered than ever before, the remote workforce, people working from home. You just ask a simple question. What should I do next in my career. And if you have that simple question, what we provide is an amazing ability to guide people through an AI-powered experience that looks at their skills, drives better decision-making for them in the day-to-day execution that they have, what training should they take, how should they move forward in their career. And so as Jason asked this, it's going to give them some advice on what they can do. But equally, it gives them links to tasks that are AI-powered within our applications. So Career Explorer, a great example where you can explore your career. So with just a click, right? You're going to go right into our Career Explorer module, which is, again, an AI-powered application that will drive you into what's next in your career, provide suggestions, provide people you can mentor with. And if I go into the new opportunities, I actually love what the team has done with the design of this, it will allow you to look at opportunities. You can swipe left or swipe right to go and see whether you like something or not, throw it that way, throw it that way. It learns from each of your recommendations, makes them smarter, and you can go ahead and build a career plan around it. This is where we're going with applications, simple, easy-to-use UI that guides you on what you need to do and then AI-powered application that takes you through it. Am I missing anything?

Well, we made an acquisition, Joe. [indiscernible] continuous growth journey. We want to continuously grow. And so how do we learn, how do we access new information. So we can do that with Dayforce [indiscernible].

Powerful point here is we made the acquisition in February. I challenged the team. We talk a lot about rearchitecting and data being really important. We can't have a bolt-on acquisition. In under 9 months, they've delivered the whole application directly within Dayforce so that we have a single view of learning for our customers now, a single data source behind it, single skill sets behind it, and it's a beautiful user experience.

You got it. Now as an employee, I have access to courses that perhaps Jeremy has put out for me that I need to stay in compliance with and I have to do an insider training, I [indiscernible] over 96,000 curated courses for you [indiscernible] organizations to produce content either with you or as an organization produce your own.

Perfect. Jason, thank you very much. It's always great showing software. Thank you much. Mic drop. That's brilliant mic drop. Very well done. Very well done. Well, thank you. Thank you for letting me show a little bit of the product. I think it's really important for you to see what we're building and how the difference that we can make for companies to make their work life better. While I did pit Steve and Jeremy against each other, they are both phenomenal in their own right. And now we're going to hand over to Steve to talk a little bit more about our business. Steve?

All right. Before we jump into it, I'm going to pull on the go-to-market levers that we talked about and really kind of dig into each one of those. But one of the other things that we've done as an organization for the first time in our career, and I think it was one of the levers we should have pulled earlier is driving brand awareness, right? In terms of our product, in terms of our marketplace, one of the things you'll see us lean into more is especially that unaided brand awareness, they're filling the top of the funnel, every glass, the entire marketing and communications team is out there and you begin to see us out there, and I'll share with you one minute of what we're going to have as an example in the marketplace. [Presentation]

I smile every time I see that wrestler. If you see Eric Glass around, he's got a little icon of the wrestler on his laptop. We're going to have a Dayforce T-shirt with that going forward. So you will begin to see us out there in the market, press on that. And I got to tell you that do the work you're meant to do resonates across the company, across our customers and across our partners. So you saw David hit on this before. Very simply, I'm just going to talk through each of the growth levers, how we think about them, why they work for us and what we're doing to give you a little insight in terms of our go-to-market and how we take the strategy that David talked about, how we take the product that Joe and team have built and how we turn that into customers, into revenue and into durable long-time growth. So these are the levers, acquire, extend the Dayforce platform, expand within the enterprise segment, accelerate our global expansion and then innovate. And we'll just walk through each one of those. Number one, acquire new customers in our current markets, the motion of net new, obviously, critical for any software company. And one of the things about it is we have a very focused strategy in terms of where we play, how we play that's informed by the addressable market and it's informed by the product we have today. In terms of the major space, 500 to 3,500 people, full suite. This is where we started. We continue to be incredibly strong. We continue to take more than our fair share of that market. As we moved up into the enterprise space, which we classify into 3,500 to 12,000 over the last few years, as the talent modules, as the analytic modules have really matured, we now play with full suite in that market. You heard David talk about the stats of the percentage of full suite sales, the target of doing those. Our ability now with these customers who are both just U.S.-based and global to sell the full suite is the next driver in that. And then what we call the large enterprise space, while it starts at 12,000, goes all the way up to hundreds of thousands. We lead with pay and time. We lead with the compliance modules. We lead with global. But we were finding, in many cases, we're able immediately to do that 12:1 replacement or to set a foundation to start with and then quickly follow with that. We start with the hard stuff first. So these are the 3 markets we're going after, the go-to-market and the focus on the team of how we play and where we play is important. But obviously, within that is the focus on the things that we compete. And one of the things you'll see us do is continue to get incredibly more disciplined on our go-to-market on how we do it. We understand while we can play and win in every segment, there's certain segments and industries where we are far ahead of our competition. And if we get into the deal at the right time, we win. Anything with an hourly workforce, anything in terms of complex union rules, anything in terms of high compliance requirements. You saw Joe talk about the things across the product. You can see the sort of industries that we play in. Our win rate in these industries are far and above our competition. And while we go into all sorts of other areas, if we can lead with one of these, there is sufficient market share for us to go after that. So if you take a look at the segments we pursue and the industries we pursue, this is really how we go to market and acquiring new customers and how we focus our sales assets and our sales productivity on that, we've gotten much stronger with Sam, our CRO coming in of getting in deals quickly and getting out of deals quickly that aren't a fit for us because we have the luxury of a market share and a TAM that allows us to be very picky about what we do and then to put all our energy into win in that. So the other thing you see, and Joe talked about this, and I won't spend a lot of time on it, is you've seen the ability as we've gone from just pay and time to HCM in terms of the attachment of full suite, in terms of the amount of market share that we're going after. In the beginning, we were just starting with pay and time because that's all we had in terms of the product. Today, as a stat, David talked about, 50% full suite. We believe in the future as we both move up market and as the product continues to expand, 60% to 70% capability in terms of the full suite sale. A couple of customer highlights on here. Just some examples of this across all the segments. In terms of majors, Coury Hospitality manages hotel restaurants across that full suite, 3,000 employees. U.K. example, manufacturer in the U.K., 5,300 employees, selected Dayforce for the full suite across the suite. And then Omni Hotels, hospitality, we're continuing to win and expand our footprint in terms of there. 22,000 employees, won against all the major players in the business, leading with compliance, but frankly, our ability to provide the entire suite across the business, just a demonstration of our ability to win with full suite in each one of these sectors even if we lead with pay and time and compliance in the large enterprise space. So that's number one. Number two, you hear us talk a lot about this on the earnings calls. You heard David talk a lot about it. Our ability to go back after the base. A year ago, we set up a dedicated sales function and a dedicated team that does nothing but focus on the base. How do we expand the platform? And we're able to do that, number one, because of our strong retention rate. If you don't have a customer who's getting quantifiable value, who's using and adopting the product, who is turning, not having shelfware but turning it into real results, you don't have a place to start. And we've done that because we have focused from day 1 on quantifiable value. We focused in terms of our levels of support and success on NPS, and we focus on providing, frankly, simple solutions to complex problems. We're very sticky, and we have a product that expands across them. So that foundation of our retention rate is the starting point for our motion in terms of that. And there's really 3 key plays we run in terms of our ability to drive back to the base, product expansion, the entire footprint that Joe showed, the ability of the product over the last 5 years in the add-on for it, and you saw the percentage of customers that just have pieces of that, that entire customer base team is coming out, providing for them all the additional add-ons for product, the add-on to PEPM, the time to sell and the time to revenue and the marginal value of that revenue in terms of profitability are significantly higher for the additional product. Number two, managed services, and we're going to dig into this a little bit. Our ability now to go after this incredible differentiation to not only provide the software, but to help the customer run that complex payroll environment. We believe there's a future there, and we believe that we have a better competitive advantage to do that. And then global scale and global reach. Every company today is global. This is no longer a large enterprise play. And in fact, we see companies of 1,000 to 2,000 to 3,000 employees that have 6, 7, 8 countries around the world where they provide shared services. So product expansion. Joe talked a lot about this in terms of where we have -- this is really kind of a view for our different product sets, what is the amount of penetration we have. And so what in this is out of those -- what is the open set of penetration within our customer base. The net of this is there's tremendous white space within our existing customer base today, around the talent suite, around talent management, around the HR platform and expanding in terms of pay around other global entities and expansion in some of that and underpinned by everything Joe showed around AI, the incremental on that. So as we think about product expansion back to the base, we feel very bullish on our ability to come back with a true quantifiable value that increases the revenue and the PEPM per customer in a way that makes business sense for them. The managed services business is a true differentiator for us. About 6 years ago, we got in this business at a request of some of our larger customers, customers such as American Express. Today, customers such as is Accenture, PwC and others. And through that, we've been able to actually create a tremendously profitable business that scales, that feeds back into product, that engineers labor out of it, that creates a global workforce, and not only are we able to provide this at a price point that's competitive to the customer, we've been able to deliver it at a profitability level. David talked about high 70s percent, and we think that's going to continue to get better based on engineering it back into the product, based on our ability to run the product best of the customer and based on the ability to drive in terms of what the customers need in terms of that. You take a look in terms of the percent of our customer base that is using this from us today, and while the number of employees may be larger, there's tremendous in terms of both our ability to scale up our existing customers. And number two, we believe that the market is going to this. As we move forward, customers shouldn't and don't want to have to run their managed business. Most other players in the industry don't have the technology advantage to get there and don't have the ability to do this profitability. And lastly, we find that our customers that use our managed service no longer -- obviously, higher revenue per customer have a higher NPS and the higher retention rate because not only it's one of those beautiful one-plus-one things, higher revenue, we do it better for them, and we do it in terms of a better retention. Third, growth lever, expand within the enterprise. And our definition of enterprise has continued to grow, right? As David talked about, if we had a customer 30,000, 40,000, that was the very top of the curve we have. Today, when we say enterprise, and large enterprise, we're talking about customers up to hundreds of thousands and we continue to move up that and we continue to move in terms of how we do that. So in the large enterprise space, as I talked about before, we lead with the compliance modules where we're second to none. We lead with those customers have some of the most complex requirements and some of the most risk in terms of that, whether they're North America based or whether they're global based, we have the ability to get in there and improve ourselves. Large logistics company, 500,000 employees we're providing for them. We talked about government of Canada. We talked about some of the largest manufacturers around the world, all because we have the ability to pull together in terms of a global solution compliance that they couldn't do before that they were doing manual and that too, piece by piece. Along with that is a strong partner ecosystem, which we'll talk about. The ability to really play and win in the large enterprise market is tremendously dependent on not only the 5 global systems integrators, but the partners that are influencing those. And obviously, behind all of that, David mentioned and then Joe mentioned it, the external validation, the external credentialization of someone like Gartner and others for 5 years running that not only we are a player in pay and time, but we are a player in the HCM business. At the end of the day, the CFO, the CEO, the CIO of these major large enterprise cares about that branding. That's also why you're going to see us go into market with the advertising there. So compliance is really 3 things. It's about multi-jurisdictional compliance. It's about a proven payroll engine that accurately calculates. You've heard in terms of the continuous calculation, the ability today to do things that others can't do, and it's about our ability to provide money movement. So we talked about competitive differentiation with managed, we talked about our ability of compliance. A third lever to this, that is money movement and the ability to manage the tax side of it. So if you take a look in terms of our core application, you add on top of that managed capability, and add on top of that the ability to do money movement and tax. We provide a significant differentiation in the space, which is why we're winning in the large enterprise space. And then obviously, surrounded with that is the Dayforce Partner Network. And while the partner network plays at all levels in all segments, it's incredibly important. You can't win in the large enterprise space without the partners out there, getting you into the right deals, providing advisory services for that. And you can see in 2020, this slide would have been about 1/5 of the number of partners there. And in terms of global SIs would have had none of them on there. We put a significant amount of time and effort into doing this. If you walk around the conference, we had 150-plus attendees in terms of our Partner Summit today. You can see the sort of sponsorships. And the reason they're doing that is an economic reason. The partners take a look at us, what our opportunity in the market is, and they're voting with their wallet, they're investing in terms of that. And specifically within the systems integrators and the global systems integrators into that, we're seeing tremendous motion out of that. They provide us really 3 things. They provide us recommendations and advising as they advise our customers in terms of the market, entry points around that. Secondly, they take on the prime. They provide the systems integration, a large enterprise customer, a global customer, it's a transformation. The global partners do that better than anyone else, and they can take the Dayforce technology, surround it with the transformation story and help us further differentiate what they're doing. And third, they're helping us extend the platform. Joe talked about the extensibility capability. We're not just a software solution. We're a platform play. We have the ability for partners to take their special knowledge to extend it in a way that's upgradable and supportable and stays within the confines of the product going forward, but creates the ability for a partner to create their own value add-on built in terms of the platform that we have today. And last but not least, partner influence. This was probably single digits 5 years ago. Today, Q3 year-to-date, 40% of the deals we've closed year-to-date have had a partner influence, whether that's partner providing an independent adviser, whether that's partner winning the deal for us, whether that's a partner coming in and helping us build the pipeline that we track this very specifically in terms of that. This alone is one of the things that's driven the growth in the marketplace there. So global expansion. Large enterprise customers are global and not even just large enterprise, but certainly as we move up market, many of them, almost all of them, have employees in more than one country. They have the need for a global workforce. It's not just labor arbitrage, but it's really the ability to go into both commercial markets for them, to go on the cost savings market and the ability to derisk their workforce in terms of what they do it. And today, the systems as partners had David talked about 12 to 1, for large global partners, it looks more like 40 or 50 to 1 in there. These partners have bespoke systems across a whole variety of things. And for us, the move in terms of global was not a recent phenomenon. We've seen a lot of our competitors begin to go into market today. We've been working on this for 10 years because it's a hard problem to solve. But we're very focused on how we solve the problem. Our sales motion is not to occupy 200 countries around the world. It's not to put people in Thailand. It's not to put people in Vietnam. It's not to put people in Chile. Our sales motion is very focused on these global centers, on North America, on the United Kingdom and Germany and on Australia and New Zealand. And out of that, we cover the majority of the TAM in the world. And then along with that, while we sell out of those, we have the ability for those customers to cover more than 200 countries and territories around the world. 57 of those with Dayforce owned assets, both native engines that we built and engines that we've integrated into this. And then more than 150 with partner capabilities in-country providers, but our solution to this, as you heard others talk about, is unique, a single contract, a single provider with Dayforce, a single unified set of technology that all partners provide into and the view of our customers as a single view through Dayforce of that. That's what's helping us differentiate and win in terms of this. We have something that people are aspired to. But today, we're really the only one that can do this at scale and can do this in the amount of countries and can do this with a sort of compliance and a competitive model for them. Good example of that, a large global paint manufacturer, 30-plus countries around the world, 40,000-plus employees, all running on a single Dayforce platform, another 10 to go. This is many examples, large German manufacturer. This is an area that we continue to excel. And then over the next number of years, as their agreements come up with an Oracle, with an SAP or Workday, they don't want to ever have to change out what they've done with us globally, and it gives us the opportunity to begin to insert ourself for talent, to insert ourself for AR and to capture that TAM more than one step at a time. Last one, and then I'll turn it over to Jeremy, and I won't hit it that much, but there's a big focus on adjacent markets. And we're fortunate enough that we have a total addressable market that doesn't require us to go into completely different areas. We're not planning to build a financial management system. We're not planning to build a CRM system. We're not planning to go into supply chain. But what we do take a look at is things that are closely tied to what we're doing that do 2 things. They provide an incremental revenue stream, and they also make it more sticky and competitive advantage for that. You heard Joe and Erik talk about Wallet, launched a number of years ago. Wallet does both of those things. Wallet was an innovative solution that clearly provides an interesting revenue stream. But Wallet makes every deal we sell for these customers, competitive advantage because we provide within the Dayforce platform, not a bolt-on solution at no additional cost of Wallet capability. What Erik talked about in terms of going out to that contingent workforce, that ability to get to that, is another example of that. And while that's early days, Flex launch is the same sort of thing. It's an incremental revenue stream that will grow over time. But today, it's a competitive advantage as we talk to our customers, we're solving a problem that you're just starting to think about that no one else in the industry is dealing with. And you will see us continue to look for ways to do this. But all of this with a big focus on the profitable revenue stream that stays to the core of what we're doing. So in closing, I'd like to leave you with 3 things. One, we believe our ability to have continued durable and profitable revenue growth is tied to 3 things: expanded market access, the ability of the product, the ability of our ability to go global in there, provides us access to a market that will continue to give us place to sell there. The market-leading product, the expansion of what Joe has done in terms of the product, the expansion of what we've done from just a compliance engine to the entire HCM talent suite, the ability to double down on that. And then last but not least, a customer base that clearly values the platform that is getting what we talked about in terms of that quantifiable value and is now open and wanting to take advantage of that. If you don't have a customer base that embraces what you do, you're not going to have the ability to cross work, you're not going to have the ability to reference it. And underpinning all of that is our ability to drive additional productivity. And we have the opportunity and we have the privilege of focusing on the most profitable revenue streams, as David talked about, and not paying attention to the revenue streams that are less a distraction and going after the amount of market that can drive the sort of growth, the sort of profitability and the sort of cash flow we need. So with that, I'm going to turn it over to Jeremy, and he's going to dig down a little bit in terms of the financial backing behind each of that, so.

Thanks, everybody. It's really good to see you all here. I'm going to build upon what David, Joe and Steve have already discussed. I'm going to show you how we plan to translate our competitive advantage into a business with durable growth with expanding profitability and with disciplined capital allocation. We'll take a look at our goals for 2025 and some ways to think about the P&L in between 2025 and $5 billion in revenue and $1 billion in free cash flow. But before we go forward, I want to just take a minute and look backwards for a minute. We've executed really well since our IPO in 2018. We told you what we were going to do, and we've done it. We've grown total revenue at a 15% CAGR, and our Dayforce recurring revenue ex-float is 4x larger than it was in 2018. Today, we're approaching $1.75 billion in total revenue, with about 75% of that as recurring revenue, excluding float. Just as we planned, our business looks a lot different today than it did in 2018. Total company revenue was just under $740 million at the time, growing at 10%. Dayforce recurring revenue, excluding float, was only 52% of our total recurring revenue ex-float, meaning that half of our recurring revenue was non-Dayforce. Today, that number is 88% of our total. So Dayforce is 88%, which means it's almost doubled as a proportion of our recurring revenue ex-float. From a profitability perspective, we've expanded adjusted cloud recurring gross margin by about 1,300 basis points to near 80%. Adjusted EBITDA margins have expanded by nearly 700 basis points. And that adjusted EBITDA has translated into free cash flow with free cash flow margin growing -- with going from below 0 to about 10% this year or nearing 10% this year. And the profitability improvements plus our ability to manage debt has resulted in net leverage cut in half to just over 1 turn. It really is remarkable to see the transition that we've made, but it is simply just doing what we said we were going to do. The largest driver, one of the most critical drivers of our transformation is the improvement in recurring gross margin. We've expanded that by 200 to 225 basis points per year. And you'll recall that we've always said that our recurring -- cloud recurring gross margin will expand as the proportion of customers that are live on the platform for over 2 years, continues to increase essentially as our customers stabilize. But we've also proven that we can scale our customer support through automation, through lower cost geographies and shifting public cloud with better security, reliability and scalability. Recurring gross margin improvement will be a continued theme as we look forward into our profitability expansion. So now we're done looking back, let's look forward a little bit. We've been talking about our long-term objectives of $5 billion in revenue and $1 billion in free cash flow for about 0.5 year now. These are the coordinates we're headed towards with our North Star being a continued focus on predictable, profitable and durable growth. Our target is to arrive at these sometime 2031 and beyond. And I'd like to spend the rest of the time today kind of framing up how we plan to get there. Our future success revolves around 3 key pillars from a finance perspective. Number 1 is durable and predictable revenue growth. We've talked a lot about that today. Number 2 is consistent profitability improvement. And each of those allows us to create shareholder value through disciplined capital allocation. If you think about durable revenue growth, it really is our ability to layer on the growth against the 5 levers that David, Steve and Joe have each talked about. These growth levers doesn't mean achieving these -- doesn't mean we -- or excuse me, layering these growth levers, doesn't just mean we put our eggs in one basket. It means we are able to execute consistently across multiple areas. We've done the hard work, as Joe said, to allow us to diversify our growth, and that hard work will continue to pay dividends in the future for us. And durable and predictable growth allows us to plan the business very consistently, that can drive efficiencies, productivity and profitability improvements. And this allows us to be disciplined across our business. It allows us to be disciplined in our conversion into free cash flow and whether we put that into M&A, share repurchase programs or identify areas to -- opportunities to reduce leverage across the business. Now a few weeks ago, we provided preliminary guidance on 2025. That included 14% to 15% total revenue growth, over 31% adjusted EBITDA margin and over 12% free cash flow margin. And I'd like to spend a little bit of time thinking about between now and our $5 billion and $1 billion targets throughout the P&L. So starting with revenue. The key here is the Dayforce recurring revenue ex-float remains most of the story, remains the key part of our story. It's expected to continue to increase as a proportion of total revenue. And it will be our most critical metric going forward. We expect it to grow in the upper- to mid-teens for the foreseeable future here. Now other recurring revenue in the middle box is expected to continue to decline towards 0 as we migrate to Dayforce or end-of-life different business lines. Professional services and other, on the far right, is expected to grow in line or slightly lagging Dayforce recurring revenue ex-float. And when you combine all that together with Powerpay growing in the low single digits, you'll get to a total revenue growth of between 13% and 15%, and that will put you out to that 2031 and beyond kind of target. We'll spend some time later on talking about how we plan to accelerate against that target. But before we do that, I want to talk about float for a minute and then we can move to profitability. I get a lot of questions on float. As you know, float is revenue earned from our ability to invest customer funds. It's a really nice and highly profitable part of our business. But as we grow, it becomes less and less critical to our story. Today, float is about 11% of our overall revenue, but as yields moderate and our non-float revenue continues to grow, we expect it to become a smaller and smaller portion of our revenue. As far as guidance goes, I don't like to be in the business of predicting central bank actions, but I'll give you some insight into how to model this. First, average balances. We expect average balances to continue to grow in this kind of 4% to 6% range. That's consistent with what we've seen in the past. It does lag our overall total revenue growth because we're selling more add-on sales. We have a higher proportion of nonpayroll sales, and we have more global revenue where we actually don't earn float. Second, keep in mind that about 2/3 of our average customer balances are in the U.S. with the other 1/3 in Canada. That can help you model rates. And finally, we invest our portfolios in about 50% liquidity and 50% core funds. The core funds are invested over a longer period of time. They're held to maturity with average duration of about 2.5 years. We're still actually working our way up the core -- the yield curve on the core funds. On the liquidity side of things, you can think of those moving in line with the U.S. or Canadian central banks. Ultimately, as you can see here on the bottom, based on the current outlook today, which changes all the time of both U.S. and Canada, I'd expect float revenue to decline between $10 million and $20 million in 2025 and -- versus 2024. And after that, I'd model a longer-term yield of around 3%. So moving to profitability. The 3 key drivers that are going to help us get to this $1 billion: our gross margin expansion, scaling our operating expenses and free cash flow conversion. I'll hit on each of these separately, but ultimately, we're expecting to drive adjusted EBITDA margin improvement between 100 and 200 basis points per year and free cash flow improvement of between 100 and 200 basis points per year. Starting with our recurring gross margins. The point here is that we believe that we still have some way to go in improvement in our recurring gross margins. It was true in the past, and it will be true in the future. Some of the drivers of our -- in the future are the traction that we're seeing in the add-on sales side of this. As we move toward this goal of being 50% of our total sales from add-on sales. Now remember, add-on sales have a higher incremental gross margin and quicker time to revenue. We'll also continue to drive efficiencies in our support organization and with our managed services teams. Just taking a quick double-click on add-on sales. We have done a really good job of increasing the proportion of add-on sales, and that drives that recurring gross margin expansion, as I just mentioned. But this wasn't possible before Joe built out the platform. We're driving this towards 50% of our total sales. The benefits are really clear to us. There's a faster time to revenue. There's a higher margin with these sales. There's lower customer acquisition costs, and we have improved retention across the board here. It's a key area of focus for us. Professional services and other margins. As this revenue continues to grow, the key here will be transforming our implementation process. We have an opportunity to reduce the implementation time through automation and process improvement. Our goal will be to move this towards breakeven and reduce the overall cost of ownership for our customers. This can also benefit our SI partners, and they want to continue to play a successful role in our services organization, especially with some of these improvements as we can improve their profitability. As you move through the P&L here, from an OpEx perspective, most of the scale and efficiency comes from G&A costs. There will be some slight scale in both product and sales and marketing over time. The key with sales and marketing is that we believe we're underinvested in marketing. You saw this example of an advertisement that we are running out there right now. You also see us in podcasts and print ads across -- excuse me, in airports. As we get more productive on the sales side of things, you'll likely see us divert some dollars and reinvest some of those dollars to drive brand awareness to the Dayforce name. But we are efficient in our sales and marketing motion here. We're really proud of this efficiency. I believe that an efficient go-to-market engine is the starting point for profitable growth. We've been really consistent in the years when we make investment in sales and marketing like we're doing this year in 2024. We generally follow that up with productivity. Our average sales and marketing cost per dollar of new Dayforce recurring revenue has been pretty strong and consistent. $1.34 is where it's at for the last 3 years. It's among one of the best in the peer group, really the combination of an efficient sales to marketing go to -- excuse me, sales and marketing motion, strong gross retention rates of over 97%, which implies long customer lives and high cloud recurring gross margins nearing 80%. The combination of those gets you to a really nice-looking LTV to CAC ratio. The point of those last few slides is really that there isn't anything crazy that we're doing to drive $1 billion in free cash flow. Profitability is the key and it's the primary driver of expanding free cash flow margins and expand -- the primary driver of expanding free cash flow margins is actually expanding adjusted EBITDA margins, excuse me. We'll also get some scale from capital expenditures. I think increasing cash flow provides us with the ability to both accelerate growth through M&A, to opportunistically reduce leverage, and we can also repurchase shares to manage dilution and drive shareholder value. Speaking of that, we did launch a $500 million share repurchase program at our July earnings call. We, in the third quarter, purchased $30 million under that program. I think we've talked about this in the past, but really the key here is we're focused on controlling dilution from share-based compensation. We want to retain the ability to make opportunistic purchases. And then clearly, controlling our share count really does accelerate our per share profitability metrics over time, which is a key area of focus for us, and that's a shift for us. Now much of the presentation up to this point has been focused on growing organically, continuing to do the things that we've done to get us here at a larger scale in the traditional HCM markets we serve. But we do have an opportunity to accelerate our long-term growth through M&A and through success in both adjacencies and partnerships. From an M&A perspective, we continue to look for deals and great technology to replatform onto Dayforce. Something similar to what we've done with eloomi this past year that you just saw from Joe. Our M&A strategy remains focused on the key areas that we've been talking about for a while, looking for deals around expense management, maybe it's workforce planning or global. There may be an opportunity to do more transformative M&A, nothing on the horizon right now, but it's not out of the question in the future. And from an adjacencies and partnership perspective, we have the opportunity to really drive more revenue from both revenue-generating partnerships from our benefits offering. And then, of course, while it continues to be our fastest-growing product. We're also excited about Flex. I think we can change the mindset of the traditional sense of hiring for shift workers and allow employers to rethink the employee life cycle. In each of these opportunities, we kind of look forward to providing you with an update on as we have that information available. So the key takeaways from the finance perspective, we believe we're well positioned for continued success and our ability to execute against the $5 billion revenue and $1 billion in free cash flow target. The key drivers there, durable revenue growth, consistent profitability improvement and disciplined capital allocation. So I want to say thank you for joining us today. I know it was a long trip to get here to Vegas for some of you. I hope you found it very valuable and a valuable use of your time. At this point, I am going to invite David, Joe, Steve, to come back up on stage, and we'll start a brief Q&A, and then I think we can adjourn. I'll let you go through the rest of Dayforce Discover after this.

No questions, interesting. I think we're good. David, do you want to moderate? David Niederman. I think David Niederman and some of us, Ankit and Shawna will be walking around with microphones as well.

Sitikantha Panigrahi from Mizuho. Congratulations, that's quite a path from IPO to your first Investors Day. I want to focus on, David, your goal, $5 billion revenue and of course, 20% free cash flow margin. You talked about a lot of growth drivers. In that, what's the mix -- current mix right now between your majors, enterprise and larger enterprise? And how do you see that to be when you think about $5 billion revenue growth? And how does this global expansion -- like you are one of the few companies who focuses global payroll and HR? How do you see that going to play out?

Sure. Nice to see you, Siti, currently, it's about 1/3, 1/3, 1/3. So 1/3 into major markets, 1/3 into enterprise and 1/3 into large enterprise. We do that on purpose. It allows us to really have a balanced growth and not be overly exposed from a risk perspective to anything on the actual macro side. On the global side, we're focusing on commercial centers, which effectively means we look at the productivity of the sales side and we look at the product -- we look at the profitability of delivery. In terms of commercial centers, obviously, North America being U.S., Canada and Mexico being our commercial centers, where, as you know, we have native capability in all 3 of them. U.K. and Ireland, again, we've had native capability there as well. Germany is also becoming quite a big market for us because Germany at the moment, it's really more towards the majors, enterprise space at the moment, but we have the full stack there from core HR, the talent components, very strong, workforce management and now payroll. And then we have in the ANZ world, Australia, New Zealand, very strong capability. Now we do have native capability in over 30 different countries at the moment, but we find that when we go off and sell, say, in geos like Vietnam, there isn't a big enough market to justify having dedicated sales teams, sales support, marketing in that particular geo. When we look towards 2025 in profitability, we use the 2:1 rule, which I think everyone in the room is kind of familiar with, that in order to get 1% of growth on Dayforce recurring, we will invest up to 2% on the probability side. If we are able to get more than 2% of a profitability improvement, then we'll take down the actual growth rate. And I think it's very important that we look at it from that perspective in terms of all investments because our goal over here is to hit the free cash flow number as we believe the enterprise value of the company over time is more driven by the free cash flow multiples than on the revenue side.

And just a quick follow-up to the partners, like it's good to see the list of partners there, some of the top-notch SIs there. How do you think the partner is going to play out in that? And what's your partner strategy right now? And are you engaging them on the professional services and co-selling?

Yes. And our partner strategy has been pretty consistent over the past years or so, right? We have advisory partners. We have software partners. With the global SIs, our end game is 2/3 to 75% of the implementations that will lead, higher in terms of the upper end of the market. And we're continuing to pivot towards that because they not only get us in the deals, but they help in terms of Jeremy talking about, well, we can make profit on the professional services and then they're going to be at the same level. So the degree that partners can take that off our books and recommend it, it's a win-win.

Right here in the middle. Mark Murphy with JPMorgan. I wasn't sure if I was really next or not. Joe, I wanted to ask you a couple of things on the agentic model. First of all, what type of actions do you wanted to be able to take? Do you want it to be able to post a job, react or onboard an employee or change a benefit selection? And I think more importantly, we have seen that the transition point from going from a copilot to an agent for a couple of software companies recently, it has turned into a very big catalyst, Salesforce with Agentforce, HubSpot rolled out a bunch of agents. And it just feels like there's some kind of a linchpin that occurs when they get into this autonomous capability, the solve rates go higher. What has come along with that, in some cases, is a pricing structure then where they'll tell us, "Here's how we're pricing it." And they'll start kind of thinking through bookings and monetization. And I'm wondering if you see that kind of an unlock potentially coming as you get into your agentic model.

I appreciate the question. For me, the agentic AI stuff is the next generation that really drives us to our vision of making work life better. And effectively, the ad you saw, to do the work you're meant to do, agents really can do that. And so our first set of use cases around AI systems for human tasks that are routine and mundane, which there are quite a few of them across our suite. I look at things that we're doing like creating reports. Oftentimes in our world of HCM, to create a report, you have to contact IT. You have to wait until next Friday when we release new reports, and you need the data now. And so to have an agent that is a report writer simplifies work. Course creation in learning. Oftentimes, we have phenomenal PowerPoints or phenomenal PDFs throughout the organization, and you want to train your people on it. Well, to convert that into a SCORM-compliant training course that has quizzes and verification that you understood and took the skills away from it that you could takes time. It takes a lot of time. And so now you can just upload your PDF and automate those things. So our first use cases are through to our goal and our brand promises to make work-life better. So we're simplifying common HR tasks that your HR professionals will have. We're simplifying things, especially in the talent space. I mentioned how ripe, there are a lot of use cases in the talent space for AI, especially agentic AI, things like resume parsing and scanning and giving recruiters more time to spend with the humans that they want to find in their business. On payroll, we're looking at anomaly detection to simplify close of payroll runs. So it doesn't have payroll professionals staying up until midnight to try to close on time, looking at inaccuracies and being able to validate compliance of your clocking in time laws. And so you look at those, those are the use cases we're really tackling. The second part of your question is how do we monetize. We're starting very simple. We have a PEPM model for our copilot. Copilot works hand-in-hand with our Dayforce AI Agents. And so we add additional PEPM for copilot. We had additional PEPM for agents on top of it as a package. And like we said, it looks to provide a 5% to 7% lift in the value we can provide to our customers.

It's Mark Marcon from Baird. First of all, just absolutely fantastic to see all the progress that's occurred. I mean I remember seeing David at HR Tech back in 2014 and 2015 doing the demos himself, and it's really come a long way. First of all, it's great. Jeremy, when you were going through the path to profitability and cash flow expansion, you mentioned the Dayforce recurring gross margin expansion is key. You've obviously been doing a great job on that. You're getting up into the 80% range. How do you think about the upper limit of that? How does that start tapering off? How should we think about the taper? So that's the first question. And then the second question is probably for Joe or -- when you went through the copilot, one thing that I was just fascinated by was when you talked about a retailer actually using the product information, and it seems like that would be something that would be interesting to an HR manager at a client, but it would also be really interesting to a COO of a client, et cetera. How many clients are actually doing that? How easy is that to communicate? Because then you're really making the employees more productive.

Maybe I'll start, and then we can hand it over to the guys. Look, I think when you look at our cloud recurring gross margin, we've made a bunch of progress. That's 66% to almost 80%. And we put ourselves amongst probably a pretty good group that's around that 80%, and we've done that without pulling the add-on lever too far. And I think that's a really key point, that we believe we still have room to drive efficiencies across our support organization, to continue to drive efficiencies in managed services, but then also layer on that add-on lever. And where do we think it can go? I mean I gave guidance on kind of how to think about the expansion on an annual basis, and that gets you up into the kind of mid- to upper 80% range. And I don't know beyond that, and I want to hold off, but let us execute on that and pull on this add-on lever. And I think we can have some confidence going there.

I think that's helpful. And Mark, I think you bring up a very good point. And I'll show that at, I guess, in about an hour and a bit. But Joe and Jason today showed the HR cases of AI, which is tell me about the values, explain the values to me, tell me about the benefits, give me actionable items around the benefits. There's an agent side to that as well, that it can initiate the workflow for things like time away from work, open enrollment. All of that can be done from that perspective. But the power of the copilot extends way beyond that. It starts with the Hub, and the Hub is a tool designed for that HR professional that allows them to design this beautiful experience, and as Joe and Jason showed, renders on web and on mobile. Whatever you create in the Hub renders so you can meet the person where they're at. The Hub allows you to create as many pages as you would like. And for each page, you can specify the audience for the page. HR perspective, you could have an employee handbook for one region, a different employee handbook for a different region, different type of company. But you can create pages that have more of an operational focus. So operational focus, again, would be I'm a mechanic in a factory. I have a ton of maintenance manuals. I don't want to be shifting through papers and searching for things and going back and forth and file shares and SharePoint. This allows me to ask a question and to get back a summarization of that content with the reference link to the actual maintenance document that I require, whether it be on web or on mobile. If I'm a frontline worker in a retailer, and I had this example a few days ago, I took my son in to get tennis shoes. And the individual I was speaking to knew about basketball shoes. Didn't know anything about tennis shoes. But the ability for that person now to use copilot and say, hey, I'm looking for a running shoe or a tennis shoe in a price range of around $150 to $200 for an individual with wide feet. What recommendation should I do? And for it to come back with the recommendations as to which shoes are appropriate with the appropriate price point with the reference link to the actual customer sales support pricing documentation. It's very, very, very powerful. And it's smart. I mean you can ask a really it technical questions. You can go crazy. Like what's a W-2, T4, P60? Give me the differences. And it comes back, because it goes to all of the content, PDF, PowerPoint, Word document, HTML, whatever is inside the Hub, and it indexes it and it answers it for me based on all of the documents from which I'm in the actual audience. It's very, very powerful. And when we show it to CEOs, they're like, this is the best thing I've ever seen, and it's real. It's not aspirational. This is available now. We use it internally now. We use it for our briefing. It's amazing as to what the product can actually do.

And your point is spot on. It opens the conversation to us talking to the CHRO, Chief People Officer, to start to talk to the CEO, CFO, COO. And your point is very valid, and it is a really impactful way we're looking at the future of the company.

Guys, over here. Middle. Alex Zukin with Wolfe Research. I echo the congrats for a very efficient and solid presentation. That's always very much appreciated. So to get to that consistent 13% to 15% growth rate per year, given you've guided next year to, I think, 14% to 15%, it seems like the critical growth factor is going to be selling into the base, and the growth rate there from a booking standpoint is going to be well in excess of the rest of the business. So breakdown for us maybe what is the kind of critical path there that you're going to rely on, like the 2 confidence-inspiring areas where you feel like there is just a tremendous amount of opportunity to get those products into the base? And then maybe just touch on what does transformational M&A mean? Because you had that word there, which is always something that catches investor attention.

So I'll leave the transformational piece up to Jeremy because that's an interesting concept. There are a few pieces. The first is the hardest part about getting the customer, keeping the customer, is putting in the compliance modules, and we've done that very nicely. We've got 600 to 700 customers where we effectively have done payroll, benefits and time. And you see that high, high retention rates, 97.1% retention rate. The second component -- so the first point is the customers stay for a very, very long time. Decades. The second part is, as Steve showed, our penetration of the talent and core HR modules into the base is very low because we only really built them out robustly I would say 4, 5 years ago. So we have a tremendous white space in our customer base, and I spoke about that at the very beginning. Average PEPM about $12 across our client base. However, when we look at what we're selling to new customers, it should be about 3x that. And even if you look at the numbers that we speak about, average recurring revenue per client, every single quarter, they're going up by double digits every single quarter. So there's a tremendous potential. From a motion perspective, and Steve can speak more about this, is last year, we stood up a back-to-base sales team that's been doing very, very well this year. And when I look outwards at other organizations that have grown beyond us, the back-to-base sales motion is something that should be about 50% of overall sales. Steve?

Yes. I mean that's -- we're early days on our execution against this. We're one year into a dedicated back-to-base team on the enterprise and major segment in North America. Next year, we are going to a dedicated back-to-the-base team in large enterprise and the following we were go under that in terms of global, right? So we're not even pulling all the levers in terms of our customer base to do it. So yes. And then obviously, the other 2 pieces: the ability to go global with customers we have in North America, the ability to expand to managed. And then David talked about all the places of product white space and that we've only begun to really lean into the sales motion to execute.

Maybe which white spaces are you [indiscernible]? What's going to be the lowest hanging fruit that drives that to next year?

Talent. Talent, #1; global, #2 in both global pay in many countries or taking the customers in North America and doing full suite in Europe and Australia.

Yes, Alex, you have to bring it back to who we service. We serve predominantly frontline worker organizations. The talent modules, most important for them has to do with talent acquisition, so the recruiting and the onboarding side of the house. Very important, learning management, the acquisition of [indiscernible]. Joe mentioned very, very quickly, we replatformed it into Dayforce. That's a very big opportunity. We'll be showing that in the demo later on, but it's more than just the learning. We have now learning content that we can sell on top of that as well. Managed services is becoming quite significant that if I look at the percentage of managed services in the client base, it's probably hovering about 20% of the client base sales. And there's a tremendous amount of white space. And if I look at the problem we're solving, which is payroll teams have a very high turnover rate, it's over 20% per year. Very, very difficult to get a payroll professional who is up to speed on the global compliance changes. And you saw what Joe spoke about in a number of compliance changes we made in the product. Over the last year, it was about 800, I think. It's impossible for any individual to stay up to speed on all of that. We -- when we do it -- by the way, even if a payroll team is great, they're operating on a learning curve of one. What we can do is we can do this in a way where there's scale, there's automation. We're on top of the actual compliance side, so we can load the liability to our clients, deliver a much better experience and allow their teams to focus more on the decision-making and the understanding of their actual business. And so I think the future state of the payroll and the benefit market, if I go out about 5 to 10 years, that will be what is a modern payroll, a modern benefit type of system.

And to answer the question on M&A real quick. Look, free cash flow and generating free cash flow provides us with the ability to have some optionality. As you know, we have done M&A in the past. It's been product M&A, it's been geographic expansion. We've also just announced the share repurchase program, and we carry some debt. We can allocate free cash flow across those in which ways we see are going to drive the largest or the best shareholder value. Transformative M&A is something that we haven't pulled. The point of the slide that we talked about was that these are things that aren't contemplated in our model that could be in the future. Again, we don't have any plans to do anything larger at this point, but it's not built into the model, and that's really the point on those things.

Raimo Lenschow from Barclays. Two questions. One is if you think about the evolution of the company, professional services is kind of -- you initially kind of -- it's kind of a loss leader. You kind of got the clients in, now you're talking about like kind of more breakeven. But if you think then as you become bigger, it's kind of you think like, well, professional services should be like 20%, 30% gross margins, that's kind of where you should run it. How do you think about that dynamic, especially as you want to do more partner revenue now to think, well, why do I do it at -- like you should be in the more strategic projects and shouldn't be running at breakeven. So that's the first one. One for David, then. You've always been a technologist, and it's kind of more a bigger picture GenAI question, but like on the front office side, everyone is like, oh, yes, I get it. In the call center, you do call deflection, agents can kind of help me there. If you think about your space, what do you think -- what's the most exciting thing for you to think like, okay, they are small agents everywhere, but is there anything that you see on the horizon where you think like, okay, this could be bigger for us?

So on the first one, it's exactly the right way to think about it. And there's really 3 drivers that are going to allow us to improve the profitability of that. Number one, a continual focus on reducing time cost of value overall. That's updates to the product, that's infusion of things of AI in terms of our implementation process, that's the ability in terms of labor arbitrage. And that benefits both us and our partners, and you'll see us lean into that, our ability. I gave the team the challenge a year ago. Within 3 years, we want to cut that in half, the time and cost to implement, and we're halfway there to doing it. So that in itself, there's just going to be less about required to make us competitive. Number two, in terms of the shift to SIs, they will continue to have a bigger part of that market, so we'll do less of that. But third, professional services and other is this big category, but there's multiple things in it. There's implementation. Over time, that implementation will slowly move up the profit curve, but there will be less of it as a percentage. And then there's a whole series of things in the category of value-added services, education, customer success packages, which frankly carry up 30%, 40%, 50% profitability. So one, we will be doing -- the implementation work will become more profitable breakeven, but the percentage of services we do will be more shifted towards the higher probability and higher profitability stuff. You put those 2 together and you get to what Jeremy forecasted.

So when I look at our space, and one of the things that inspires me about our brand promise, which is right behind us, is the fact that most people go through their career, and it's a series of fortunate things that have to happen. Did I have the right mentor? Did I learn the right skill at the right time? Did I happen to know there was a job opening over here that I was passionate about? And what's happened with agentic AI is the concept of a career assistant that everyone gets. And it's transformational to the way you think about our software, where everybody can know what opportunity would be a great next step for them in a career, everybody would know when I need to learn that next skill, especially with everything that's going on in the world right now. Skills are so important to keep yourself valuable. If you're not inquisitive, if you're not learning, you will get lapped, and you have to. And that skill -- and what we're working on with -- right now, it is a composition of these agents, but they will come together in a career assistant that will be very impactful for our business.

Raimo, the way that I look at it is back to the quantifiable value for the customer. And the quantifiable value for the customer has been important to date because it's allowed us to get more market share. We're going to sell you more software, but as we sell you software, you're going to get a cash IRR, and that cash IRR is going to come either from removing some other software, or lowering the number of people you have to have around this HR environment. The agents are very much the same. The use case that Joe is going to actually show tomorrow, which is amazing is, hey, I've got a PowerPoint, create the SCORM course for me with the actual quiz and it does it in seconds, right? So if I'm speaking to a CEO, the message over there is, you can increase your throughput around training, be more conformative around their actual training and consistent in the look and the feel of the actual courses, you're not going to need as many people to actually do that. So if you have a training group of 20 people, you can take that down to 2. And that gets the customer a cash IRR. The same thing applies around HR service desk delivery which starts with the copilot conversation, which immediately reduces the number of inbound tickets to the HR business partners just by answering the actual content, and right in there is the ability to go thumbs down, create the ticket for me, write the ticket for the actual employee, put it into the actual workflow and then to make the HR business partners more efficient in responding, capturing their responses back into the knowledge base, so it retrains the actual model. Again, if I am speaking to the CEO of the organization, it is you can have better experience for your people, better answers, more accuracy, with fewer people inside your HR organization. So GenAI, for me, always comes back to there will be a price for the copilot, for the actual agent, offset by the FTE savings that the customer is going to go, and that goes back to the quantifiable value. And I think that's led to a lot of our success. When we speak to our customers, we are very clear. This is your current workflow, this is your future workflow. This is your current software spend, this is how much it will come down. This is your current FTEs, this is how much it will come down. Here's your cash IRR expectation. We're going to measure it. We'll do a case study for you in 2, 3 years' time. We don't go in speaking about aspirational visionary fluffy stuff. It has to be a hard cost benefit and a much better experience and moving on the actual decision inside. That defines us.

Samad Samana from Jefferies. It's great to see all of you. Thank you for spending all this time with us. David, this question is probably for you, but anybody can answer. If I think about some of the features and what you're talking about, like Flex Work, managed services, Wallet, some of Erik's babies, I'll give him a shout out as well. But as I think about some of the -- they're clearly based on the strong foundation of the technology platform, but they move a little bit more towards that services or value-added services part of the world when it helps the employer and the problems they're trying to solve for. So I guess my question with that context is, as we think forward to that long-term $5 billion aspiration, do you see Dayforce moving more towards maybe what an ADP provides, where they're really monetizing and wrapping the services around as well and allowing you to get even bigger as a business? And is that contemplated in the outlook?

So the first thing I look at is what's the profitability profile of the revenue stream. Long-term goal is a free cash flow goal. That's the first part. The second part is what leverage can I get from the actual technology stack that we have? And is it aligned to what our customers are looking for and where they're going to get actual value. So if I take, for example, Flex. Flex, we'll have to report on the gross revenue, but internally, we look at it from a net basis. And then we look at the profitability of that net, which is effectively almost 100%. It's very, very profitable. That I think, can grow tremendously. It's not incorporated in our $5 billion number at the moment. I'm excited because I've been this kind of serial entrepreneur for now about 30 years, and I can tell you, when you have a new product launch,and you get rapid new customer adoption, 50 in the first, I don't know, 4 months or something. That's a tremendous sign. And we're not talking mom-and-pop shops. We're talking about sizable organizations. In fact, this afternoon, one of the earlier customers will actually be speaking about it, a huge company. So I think that's very, very, very promising. In terms of leveraging the base, Erik mentioned this at the start. Flex is built completely on the API layers of Dayforce. So when you're in Flex as a worker and you go through the onboarding process, you are being onboarded into a Dayforce instance without actually ever seen the Dayforce instance purely through API calls. And that allows us to leverage all of the compliance smarts of Dayforce, all of the onboarding workflows, verification of the actual employee, all of the money movement, the Dayforce Wallet payment side. And that really separates us from anyone else who's doing that because they have to bring in a payroll solution or they're going to do 1099s, we actually W-2s for the employees. They're going to have to get some add-on bolt-on system to do the same day pay. We do it directly through -- next year, we'll be able to do basically directly to any debit card or directly into the bank account through kind of the BYOC framework we've put in into the Wallet [ type of thing ]. And I think that makes us kind of special. Managed services, as I spoke about, it's really a product. It's just a higher level of service and reliance on the actual vendor. And in terms of your reference to like an ADP or so, I admire that. I look at the profitability profile coming out of there. The cash flow generation that they've actually done, the size of the actual organization. Yes, I'd love to be able to get to that profitability in that type of revenue side.

But to add one more color to that, and the managed services is a great use case. So 3 or 4 years ago, as the management team, we said, are we going to lean into it or not? And the reason we leaned in, it was 3 things. One, can we drive the profitability of a SaaS business? And yes, we could, a whole bunch of reasons in terms of product and efficiencies. Two, can we actually productize it? Because we're not interested in just service revenue streams to expand the total revenue that aren't profitable and that aren't differentiating, can't be productized. And three, does it have a multiple effect in terms of our competitive differentiation? Will it help us sell more of the rest of the platform? And only when all 3 of those things are true will we lean into something like that.

Great. And then maybe just a follow-up for Jeremy. On the guidance, does that contemplate -- when you say transformative M&A, is there M&A assumed in that? Or is the growth outlook based on the current business today? And then M&A would be additive?

M&A would be additive. Correct.

Jared with TD Cowen. In terms of that nonrecurring revenue growth being in line to slightly below Dayforce recurring ex-float, it does imply somewhat of an acceleration here. What drives that, just given the focus on shifting more of the implementations to the SI channel?

Yes. I mean I'll jump in, then Jeremy, you can go. It's some of the things I hit earlier. One, that category has a whole bunch of things, right? It's not just the implementation. That category has value-added services, it has education, it has customer success packages, much more profitable interesting assets. That category has the work we do on some very large strategic customers, government in Canada, for instance, and there's a few others like that, that is more profitable business for us across that. So there's a whole bunch of other things, and that's why we also expect the profitability to increase, because the weighted average of where that business comes from is going to shift from implementation to other more profitable items in the PS and other category.

Got it. And then one quick one here. In terms of the mid- to upper teens growth for Dayforce recurring ex-float, so how should we think about the cadence there? Is it fair to assume that should decelerate over time? Or are you anticipating fairly consistent growth on an annual basis there?

Consistent. It's largely planned that our focus at the moment is getting the gross margins and the EBITDA and the free cash flow side. There's that rule that I spoke about, the 2:1 kind of rule that we're kind of using. If we want to grow quicker, then we have to spend more on sales and marketing that comes out of free cash flow generation. And I think we want to take 2025 to really build out that particular type of muscle.

Dan Jester, Bank of Montreal. Joe, I just want to make sure I understood what you had said in your part of the presentation, that you're actually rewriting applications to embed AI in them. And so I guess, one, is that correct? And if it is correct, I guess how far are we along in that process? And as you think about resource allocation, what's the prioritization between going and improving the core of the platform versus developing new applications?

So it's kind of 3 buckets, 1 brand new product. We've delivered new products like HR Service Delivery last year, delivered new products like all our analytics products. Those products are built from the ground up AI first. And so in a sense, they're built from scratch in that way. Two, we've done some M&A, where we've brought on companies that have some phenomenal AI. Ideal.com, a great example. We acquired a company that had a tremendous resume parsing engine, skills engine, and we replumbed them to make sure they're part of our architecture. We changed their data model to make sure that they're compliant with our data model, so we switched out the data and move it into ours. We change out the user experience and make sure it's a Dayforce user experience. But the engines themselves stay whole. That's why we acquired them. We look a lot -- like a great example of our eloomi acquisition. We made sure that they were within kind of our guide of what we look for, for good technology. And also if they also swim in our same public cloud, Azure, it worked really well. So that's why we're able to get to the scale of which we were able to rearchitect in such a short time. Then you look at the examples that we have where we want to say, hey, we have an existing product and how we uplevel it, how we bring it into copilot. Payroll is a good example of that. Time away from work is a great example of that. We try to plumb our applications to have APIs and then allow those APIs to plug and play into some of the AI capabilities we have. So one of the things David will demo in about hour is a great example of our time away from work. You can simply just work directly with a copilot to automate that whole thing for you. No longer do you need a UI. Copilot is your UI. And so we've done all that behind the scenes with API work. And so to say completely replatform is an overstatement when you look at the technicals of all 3 of those use cases, and each one have a different profile in terms of investment that we do to make it happen.

Yes. The one piece I'd add, Dan, is that, the life of a user experience today is probably 3 to 5 years. And AI is part of that new, right? So you kind of went from HTML to HTML5. We've done a lot of work over the last about 3, 4 years around accessibility, making sure that the product is usable by people with various of disabilities and such. AI is now becoming a common way of using enterprise applications, whether it be voice, whether it be a copilot type of dialogue. Even if I'm looking at analytics, hunting for a dashboard and constructing it yourself is moving to really an AI conversation. Give me a list of all my locations sorted by over time showed to me in a bar chart. There are a type of it. So I think you'll see it continually. There are specific kind of capability. So if I look at workforce management and move from a moving trend of averages forecast to machine learning algorithm, looking at optimization from metaheuristics to, again, machine learning in order to do that type of piece. All of the analytics. We launched measures, I think, about a year ago. So we have those ISO 30414 measurement in the product. We showed the measures up year-to-date, Q1, Q2, Q3. We now show predictively where that measure is going to be going in the next quarter and the next year, again, leveraging machine learning to do that. We did the same with things like engagement service, brought in the sentiment analysis so that it reads the actual comments and the workflows associated with comments and need action by the HR team, the HR service desk delivery. So it's part of the revitalization. I think what we've done really well is we've proven to the market and to our customers that we have this laser-focused ability to bring product to market predictively. And that gives us a lot of confidence that we'll continue to be differentiated in market. We used to talk about continuous calculation, the tax side. We're very unique at the moment that we have that 12:1 simplification in a native platform, no bolt-ons, common code, common data model powered by AI, right? So it's kind of evolved type of thing.

Make no mistake, though. I used the Golden Gate Bridge analogy for a reason. Everybody has to stay current, and the amount of tech that you have hurts right now. And if I look at our platform and a big reason why we're here, we're the newest of anybody else in our space. Everybody else is crawling after decades of technology baggage to try to repaint their bridge. And so it is a distinct advantage for us.

And then maybe just a quick follow-up on Mark's question earlier about agentic AI. Is a PEPM the right model sort of going forward if we're going to be doing more agent AI-type activities? Is there any negative correlation between seats versus copilots and agents? And how I should be thinking about that, philosophically, of course?

Look, I think we're going to evolve our pricing model. Currently, we have a PEPM pricing model, which is between a payroll bureau company, which does per pay controls or whatever and a cloud company. Long term, we have to move to a subscription model, which will give more predictability to our clients and allow us to price in kind of the value we can create in a way that's just easier to understand and such.

David Unger, Wells Fargo. On the HCM consolidation opportunity, can you please step through the go-to-market efforts and how you prioritize? And are there certain industries or customer segments you view as most ripe for consolidation?

Yes. I mean -- we think every industry and segment is ripe for consolidation because they've all built on the systems that were individualized. But really, what we're focusing on in our go-to-market is the areas we have strength. Number one, strong hourly workforce, highly complex distributed workforce, global workforce, the industries around that, retail, hospitality; the ability of professional services and teams across that, a whole series of industries that we showed on one of those slides there. When we get into those at the right time, we win. And our competitors can't beat us. We're #1 in terms of compliance for that. We do the really hard stuff well. And then we find our ability to begin to surround it. Classic sales case is, we come in, they say, I want to look at your compliance suite. We say, hey, let us show you talent. No, we're good. Hey, let us show you full HR. No, we're good. Let us show you global and workforce management. Three months into it, we end up winning the entire suite because we're better than everyone in the rest, and frankly, we're as good or good enough in the rest of it and the cost and the value of that in terms of the platform. I mean, platforms win out, and that's why we're winning.

Dave, I see Scott's got his hand up as well.

We've got time for one more question because David has to get to his keynote, so I'm going to hand the mic to Scott.

Two questions. First one is actually for Jeremy. If I think about the Flex product that's coming out, if you have to report it on a gross basis, those numbers can get really large really quickly, because the example that you had up there was equivalent of just for a single day work, 5 or 6 employees on the platform for an entire month, they're PEPM, right? How should we think about that impacting your free cash flow target? Because obviously, it's going to be a negative impact to that. But do you think about reporting those revenues separately so we can segregate that? Because I can see a vision there that's going to kind of mix that up a little bit.

Yes. And look, first of all, it's early days. And the point of bringing Erik up, wanted to talk about this opportunity that we see as a really transformative opportunity in the market, but it's early days. As we start to get to revenue and it's more material, we'll report it, we'll talk about it, similar to what we've done as Wallet. And to the extent that it gets big enough, we may have to get to a point where we talk about it as a segment. But the reality is that it's gross revenue, the kind of direct gross margin, which will be reported in professional services and other at this point, talking about 10% to 15%. And that's a pretty good gross margin, I think.

Yes. And now Scott, it should produce cash that -- the funding model of that is a prepay by the customer. So you basically buy kind of credits and you withdraw. So the customer pre-funds. So it should be -- it self-funds itself at the moment from a model perspective.

And then from a product perspective, I think an interesting undertone in the space that's really developed over the last 10 years is vendors starting to expand outside of the HCM market, whether it's Workday on the high end, they have the financials platform, right? They certainly win deals because of that. But on the low end, you have Paylocity that made an acquisition outside of the space. You have companies like Rippling that have some products outside the space. There's about a dozen of them that do, and they do win some deals because of those products. I certainly heard today that you all are doubling down on 100% HCM platform going forward, right? That's been your DNA, obviously, for a long time. But why not venture outside of that core HCM box just a little bit?

Look, our market share is still quite low. We've got a ton of white space. We need to get predictable, durable and profitable growth. We don't think that we're market constrained from a growth perspective. We think that we can get to the $5 billion of revenue as a pure-play HCM organization. Jeremy spoke a bit about the potential of transformative, which, to be clear, is not being looked at, at the moment, but if we're looking out years from now, we may like to do something transformative in that regard in order to expand. But currently, it's not been looked at. We have a ton of white space to address in HCM, and as we continue to layer more on the product side, I think that will allow us to drive a much higher wallet share per each of our actual clients. And I think we are quite differentiated in market from the purity of our technology stack. And for us, it's not just a wide kind of description of different modules. We go very, very deep. We do the hard stuff in all of that. And if I go into recruiting, we do the things like texting, we do the things like scheduling of the actual interviews, pulling out the actual availability of hiring managers from the Outlook or from the Google types of calendars. We do the ML, the grading of the actual candidates. We do the job matching. When a candidate comes in and they apply for job A, we can actually make recommendations where their skill set goes very well. We do the whole career explorer piece for the actual employee based on the skill set of the employees based on what they've actually worked and such. So it's a very, very, very deep capability. And today, we can go against the best-of-breed vendors in each of the individual talent slivers out there, and we can win on that. We can go against the ERPs in core HR and talent only, and we can win on that. And of course, on the compliance modules, we are very, very differentiated against any vendor in the actual space. And when we talk about things like global, we're actually proper global, all the way down to how do we actually data host and how do you do data residency, how do you handle things like GDPR as you go into kind of the EU and such, the whole concept of privacy, the compliance going to things like Joe mentioned, the New Zealand time away from work act. If I go into Australia, multi-awards type of constructs. If I go into EU, how do you handle the working council from a scheduling and approval of the actual schedules perspective? No one does that. We're very, very unique from that perspective. Others talk about it, but help depth and capability is quite unique.

So that's all the Q&A we have time for. Thank you very much for coming. We hope you have time to stay for David's keynote in some of the other sessions. And we'll be around for a little bit more Q&A, but David has to take off. Thank you very much.

If I could recommend, Joe is doing the innovation keynote tomorrow morning. I think that's a must. That's just amazing, and he'll be showing the agents and the whole AI stuff in a way that I think is really, really special. Jason and I this afternoon will be doing an end-to-end demo of the actual product, and its interactive with people. And so if you're available to kind of attend that, it will give you a sense of the capability, and you can get the excitement from the actual customer base as well. And then we've got deep dives into Erik's session, which I think will be great. We'll be going into actual Flex, showing it actually working, which I think is really, really amazing. Again, I just want to thank everyone for attending in person and those again, online. Thank you very, very much. Always available to answer questions. Either contact Jeremy, David or myself, we're always happy to kind of be available. Thank you.