Dayforce Q3 2025: Pension Charge Drives Net Loss Despite Strong Operational Growth

Dayforce, a key player in the competitive human capital management (HCM) software market, recently released its financial results for the third quarter of 2025. To understand the company's performance, let's dive into the details from its latest 10-Q filing with the SEC. While the headline numbers show a significant net loss, a closer look reveals a story of solid operational growth overshadowed by a major, one-time accounting event.

Strong Revenue Growth Continues

Dayforce’s top-line performance demonstrates continued momentum. For the third quarter ending September 30, 2025, total revenue climbed to $481.6 million, a solid 9.5% increase from $440.0 million in the same period last year. This growth was driven by two key areas:

• Recurring Services: This core segment, which includes software subscriptions, grew 7.2% to $403.1 million. The "Dayforce recurring" component, the company's flagship cloud platform, was the standout performer, increasing by 14.0% year-over-year.
• Professional Services: Revenue from implementation and other services jumped 22.5% to $78.5 million, indicating strong demand and a healthy pipeline of new customer setups.

Interestingly, "float" revenue—the interest income Dayforce earns on customer funds held for payroll and tax payments—decreased by 7.5% to $42.2 million. This decline was attributed to lower average yields, slightly offsetting the strong growth in other areas.

The following flow diagram provides a visual breakdown of Dayforce's quarterly revenues and expenses, illustrating how the company arrived at its bottom line.

The Story Behind the Net Loss

The most striking figure in the report is the shift from a net income of $2.0 million in Q3 2024 to a substantial net loss of $196.8 million in Q3 2025. This dramatic swing wasn't caused by a collapse in the core business. In fact, operating profit, a key measure of underlying profitability, actually improved significantly, rising 46.6% to $30.5 million.

The culprit is a line item called "Other expense (income), net," which recorded a massive $176.7 million expense. The filing clarifies that this is primarily due to a $172.1 million non-cash loss related to the termination of its U.S. defined benefit pension plans. In simple terms, Dayforce is settling its long-term pension obligations by transferring them to a third-party insurance company. While this is a strategic move to de-risk its balance sheet for the future, it required the company to recognize a large, non-cash accounting charge in the current quarter.

Cash Flow and Future Outlook

Despite the accounting loss, Dayforce's financial health appears stable. For the first nine months of 2025, the company generated $193.5 million in cash from operating activities, a strong figure that underscores the cash-generative nature of its subscription-based business model.

A key development mentioned in the filing is the pending acquisition by private equity firm Thoma Bravo, announced in August 2025. This transaction has put a pause on the company's share repurchase program and is the most significant event on the horizon for stakeholders.

In conclusion, Dayforce's Q3 2025 results paint a picture of a company with a healthy, growing core business. The significant net loss, while alarming at first glance, is attributable to a strategic, one-time decision to settle pension liabilities. With improving operating profits and strong recurring revenue growth, the company appears to be on solid footing as it moves toward its acquisition by Thoma Bravo.