Dayforce announces workforce reduction, expects savings

Today, Dayforce, Inc. (DAY), a $10 billion provider of prepackaged software services with annual revenues of $1.76 billion, disclosed a restructuring plan that will lead to a workforce reduction of approximately 5%. According to InvestingPro data, the company has maintained impressive gross profit margins of nearly 51% despite recent market challenges, with its stock experiencing a 7.78% decline over the past week. The plan, detailed in an 8-K filing with the Securities and Exchange Commission, is part of the company's strategy to drive profitable growth and is expected to be largely completed by March 31, 2025, in compliance with local legal requirements.

The Minneapolis-based company, formerly known as Ceridian HCM Holding Inc (NYSE:DAY)., anticipates incurring pre-tax restructuring charges between $18 million to $21 million for severance and related costs in the first quarter of 2025. Additionally, non-cash charges for stock-based compensation are estimated to be between $6 million to $8 million. InvestingPro analysis indicates that despite these charges, net income is expected to grow this year, with analysts projecting the company to remain profitable.

In terms of financial impact, Dayforce expects the plan to result in pre-tax cost savings of approximately $65 million for the fiscal year 2025 and an annualized run-rate basis of $80 million. These savings have been factored into the company's increased adjusted EBITDA guidance released on February 5, 2025.

The company aims to reinvest a portion of the savings from the restructuring into strategic growth initiatives to foster long-term growth. However, Dayforce also cautioned that actual results may differ from current estimates due to various assumptions, and additional charges not currently anticipated may arise during the implementation of the plan.

The 8-K filing also included a message from the company’s Chair and Chief Executive Officer, David Ossip, to employees about the restructuring plan. This message, attached as Exhibit 99.1 to the report, is furnished and not filed, according to SEC regulations.

Dayforce, traded on the New York Stock Exchange under the symbol DAY, has made forward-looking statements regarding expected costs and savings from the restructuring plan. These statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations. Currently trading at $62.96, InvestingPro 's Fair Value analysis suggests the stock is undervalued, with 12 additional exclusive insights and a comprehensive Pro Research Report available to subscribers.

The information in this article is based on the press release statement filed by Dayforce, Inc. with the SEC.

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In other recent news, Dayforce Inc. has successfully amended its credit agreement, reducing interest rates on its term and revolving loans, which is expected to enhance fiscal sustainability. This amendment, facilitated by JPMorgan Chase (NYSE:JPM) Bank, led to a drop in the interest rate margin for secured overnight financing rate loans and alternate base rate loans. Concurrently, BMO Capital Markets adjusted their financial outlook for Dayforce, lowering the price target to $83 but maintaining an Outperform rating, citing robust bookings growth despite a slight deceleration in recurring revenue forecasts. Scotiabank (TSX:BNS) also revised Dayforce's price target to $72 while keeping a Sector Perform rating, noting a revenue shortfall attributed to delayed go-lives and one-time impacts.

Stifel analysts reduced their price target for Dayforce to $85 but maintained a Buy rating, emphasizing the company's strong fourth-quarter revenue and improved profitability measures. S&P Global has revised Dayforce's outlook to positive, affirming its 'BB-' credit ratings, and expects strong recurring cloud revenue growth to support solid credit metrics. The company's revenues grew by 16.3% in 2024, driven by an increasing customer base and higher revenue per customer. Dayforce plans to capitalize on favorable market conditions to reprice its credit facilities, aiming to reduce annual interest expenses modestly. These developments highlight Dayforce's strategic financial adjustments and positive growth trajectory.

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