BlueOrca-做空Dayforce公司（英）.pdf

1THISRESEARCHREPORTEXPRESSESSOLELYOUROPINIONS.Weareshortsellers.Wearebiased.Soarelonginvestors.SoisDayforce.SoarethebanksthatraisedmoneyfortheCompany.Ifyouareinvested(eitherlongorshort)inDayforce,soareyou.Justbecausewearebiaseddoesnotmeanthatwearewrong.UseBOCTexas,LLC’sresearchopinionsatyourownrisk.Thisreportanditscontentsarenotintendedtobeanddonotconstituteorcontainanyfinancialproductadvice.Investorsshouldseektheirownfinancial,legalandtaxadviceinrespectofanydecisionregardinganysecuritiesdiscussedherein.Youshoulddoyourownresearchandduediligencebeforemakinganyinvestmentdecisions,includingwithrespecttothesecuritiesdiscussedherein.WehaveashortinterestinDayforce’ssecuritiesandthereforestandtorealizesignificantgainsintheeventthatthepriceofsuchsecuritiesdeclines.Pleaserefertoourfulldisclaimerlocatedonthelastpageofthisreport.WeareshortDayforce,Inc.(“Dayforce”orthe“Company”),anS&P500humancapitalmanagementbusinesswhichwebelieveengagesinhighlyaggressiverevenuerecognitionandaccountingmaneuverstoinappropriatelypullforwardrevenuesandinflateprofits.WealsobelievethatDayforcemanipulateskeyprofitabilitymetricswhichnotonlymisleadsinvestorsbutunjustlyenrichesmanagement,whosecompensationistiedtosuchbogusprofitabilitymetricsordirectlybenefitfromtheCompany’saggressiveaccounting.Dayforceisplaguedbyworst-in-classGAAPgrossmargins,yetitsstocktradesatanunjustified25%+premiumaboveotherhumancapitalmanagementcompanies,likelybecauseofalatticeworkofmisperceptionscreatedaroundtheCompany’sbusinessandtrueprofitability.Thispremiumisevenmoreabsurdunderaproperapples-to-applescomparisonwhenweadjustDayforce’sfinancialstoremovetheimpactofwhatweconsidertobefinancialalchemy.OnceweadjustDayforce’sfinancialstoremovetheimpactofinappropriatelypulledforwardrevenues,accountinggymnastics,andnon-industrystandardcostexclusions,weestimatethatDayforcetradesataneye-popping38.8xFY23adjustedEBITDAand56.9xFY23adjustedEBIT.Anapples-to-applescomparisontootherHCMcompaniesimpliesa~50%downsideforthestock.Buteventhisislikelyconservative,asDayforceisagovernancemessbesetbyabsurdexecutivepaypackages,misleadingnon-GAAPmetrics,unusualadverseauditoropinionsoninternalcontrols,insidersellingandheavymanagementturnover.Ultimately,webelievethatDayforceissetupforanuglycorrectionasinvestorscometounderstandthepedestrianandchronicallyunprofitablebusinessbeneathafaçadeoffinancialalchemy.1.InappropriateRevenuePullForwardInflatesTopLineandProfits.WebelievethatDayforceisengaginginhighlyaggressiveandsuspectrevenuerecognitionpracticestoinappropriatelypullforwardrevenueunderitscontracts,therebyinflatingtoplinegrowthandprofits.Becausecustomersgenerallypayinmonthlyinstallmentsovertime,Dayforcehasdiscretion,forfinancialreportingpurposes,overhowmuchrevenueitcanpullforwardandrecognizeforprofessionalservicefeestowardsthebeginningofitscontract.Inexplicably,Dayforcerecognizesfarmoreprofessionalservicerevenues(16-19%oftotalrevenueexfloat)thanleadingHCMcompaniesWorkdayandADP(2Dayforce,Inc.│NYSE:DAYwww.blueorcacapital.cominvestors’attentiont