Dayforce
A sticky, AI-enabled payroll platform with high switching costs but rate‑sensitive cash flows
Dayforce operates a single-database cloud HCM suite spanning HR, payroll, time, benefits, and talent, with growing AI features and an embedded on‑demand pay product (Dayforce Wallet).
Customer adoption, revenue retention, and recurring gross margins are strong, supported by complex payroll compliance and multi‑module workflows that raise switching costs.
However, a material portion of revenue and cash generation is tied to float income on client funds and to employment levels at customers, which adds macro and interest‑rate sensitivity.
The company reported 98 percent gross revenue retention for 2024, cloud recurring gross margins near 79 to 80 percent, and continued customer growth through 2025. As of February 4, 2026, Dayforce has been acquired by Thoma Bravo for approximately 12.3 billion dollars and its shares have been delisted.
This analysis therefore focuses on the underlying business quality and a notional fair value using trailing metrics, in case the company returns to public markets or to benchmark the private take‑private price.
Using the last four reported quarters through Q3 2025, we estimate trailing twelve‑month free cash flow of roughly 166 million dollars, net debt near 586 million dollars, and TTM revenue near 1.89 billion dollars. With a fair EV/FCF multiple of 25x, our notional per‑share fair value would be about 22 dollars.
Does Dayforce have a strong competitive moat?
Moat drivers and durability: 1) Switching costs (score ~85, weight high). Payroll, tax, time, benefits, and talent run on a single database and are woven into compliance and scheduling processes. Implementation effort, data model differences, and regulatory risk make switching costly.
Gross revenue retention was 98 percent in 2024 and live customers rose to roughly 6,876 at year‑end and over 7,000 by Q3 2025, supporting stickiness. 2) Intangibles (score ~70, weight medium).
Dayforce is repeatedly recognized by major analysts and highlights AI features and Wallet adoption; brand credibility in mid‑market and enterprise remains solid. 3) Cost advantages (score ~55, weight medium‑low).
Scale in payroll operations and hosting plus float revenue support unit economics, but competitors are also scaled. 4) Network effects (score ~25, weight low). Limited two‑sided effects; value scales more with product breadth than user network. 5) Efficient scale (score ~50, weight low).
HCM is competitive but oligopolistic in payroll for larger enterprises. Key erosion risks: aggressive competition from Workday, ADP, UKG, Paycom/Paylocity; potential AI feature parity; and macro shifts that reduce customer employee counts.
Evidence: 98 percent gross revenue retention (2024), ongoing customer adds, Gartner leadership mentions, and Wallet milestones.
Does Dayforce have pricing power in its industry?
Software breadth and consolidation value (12‑to‑1 system simplification) provide room for module cross‑sell and measured price increases, aided by compliance value and AI add‑ons. Cloud recurring gross margins near 79 to 80 percent indicate healthy software economics.
That said, intense competition and visible take‑rates for modules temper outsized pricing power. Importantly, a non‑trivial slice of revenue and cash flow is float income determined by short‑term rates, which is not price‑driven. Net: moderate pricing leverage with room for mix‑led margin expansion rather than aggressive price hikes.
How predictable is Dayforce's business?
Predictability is supported by recurring revenue, high retention, and a large installed base. However, 2025 updates noted headwinds from lower employment levels at customers and declining float as balances and yields eased from 2024 peaks.
We view core Dayforce recurring ex‑float growth in the low‑to‑mid teens as reasonably steady, but reported revenue and cash generation will remain partially exposed to the interest‑rate cycle. Overall: above‑average predictability for the software core, partly offset by macro sensitivity.
Is Dayforce financially strong?
As of Q3 2025, cash and equivalents were about 628 million dollars against roughly 1.21 billion dollars of debt (including a larger current portion as maturities approach), implying net debt near 586 million dollars. Trailing adjusted EBITDA from Q4 2024 through Q3 2025 sums to roughly 580 million dollars, placing net leverage near 1x.
Trailing FCF over the last four quarters was about 166 million dollars, temporarily depressed in Q3 by restructuring related to the Thoma Bravo transaction. Liquidity and leverage look solid for a software business with recurring revenue.
How effective is Dayforce's capital allocation strategy?
Management has prioritized product investment and durable cash generation while initiating a 500 million dollar repurchase program in 2024. The company repurchased roughly 30 million dollars of stock in Q1 2025 and around 60 million dollars year‑to‑date by Q3 2025. SBC remains meaningful (about 139 million dollars over the first nine months of 2025), diluting some repurchase benefits.
M&A has been focused and product‑adjacent. The 2026 take‑private crystallized value for public holders but removes transparency on future allocation. Net: generally sound, with room to moderate SBC.
Does Dayforce have high-quality management?
Founder‑operator David Ossip returned to the sole CEO role in late 2023 and continues as Chair and CEO. Execution through the brand transition to Dayforce, sustained product leadership mentions, and steady growth underpin credibility.
Leadership also framed a long‑term FCF ambition (e.g., 2031 target referenced in 2025 communications), signaling focus on durable cash generation. We note solid investor communication and operating metrics, balanced by SBC levels typical of software peers.
Is Dayforce a quality company?
Dayforce is a good quality company with a quality score of 74/100
- Switching costs are the core moat: payroll, time, and compliance embedded across workflows make rip‑and‑replace painful, with 98 percent 2024 gross revenue retention and continued customer adds in 2025.
- Recurring economics are attractive on software, with cloud recurring gross margins around 79 to 80 percent, though overall cash generation is damped by services and rate‑sensitive float.
- Float revenue meaningfully contributes to results and varies with interest rates and client employment levels, as flagged in 2025 updates. This improves cash conversion in high‑rate regimes but is a headwind when rates fall or employment weakens.
- Balance sheet is solid with about 1x net debt to adjusted EBITDA on a TTM basis into Q3 2025; SBC remains meaningful and should be monitored.
- Going private in February 2026 removes public access but validates franchise value; if re‑listed, valuation should reflect durable growth balanced by float cyclicality.
What is the fair value of Dayforce stock?
Is Dayforce a good investment at $70?
The following analysis is provided for informational and educational purposes only. It does not constitute financial advice, investment advice, or a recommendation to buy or sell any security. The opinions expressed are based on publicly available information and historical data. Beanvest and its contributors may hold positions in the securities mentioned. Investors should conduct their own due diligence or consult a licensed financial advisor before making any investment decision.