Blue Orca Capital short Dayforce on ‘accounting maneuvers, unjustified premium’

In a recently published report, Blue Orca Capital says it is short Dayforce, “an S&P 500 human capital management business which we believe engages in highly aggressive revenue recognition and accounting maneuvers to inappropriately pull forward revenues and inflate profits.” Blue Orca says it also believes “Dayforce manipulates key profitability metrics which not only misleads investors but unjustly enriches management, whose compensation is tied to such bogus profitability metrics or directly benefit from the Company’s aggressive accounting.” “Dayforce is plagued by worst-in-class GAAP gross margins, yet its stock trades at an unjustified 25%+ premium above other human capital management companies… Once we adjust Dayforce’s financials to remove the impact of inappropriately pulled forward revenues, accounting gymnastics, and non-industry standard cost exclusions, we estimate that Dayforce trades at an eye-popping 38.8x FY23 adjusted EBITDA and 56.9x FY23 adjusted EBIT. An apples-to-apples comparison to other HCM companies implies a ~50% downside for the stock,” the report adds. Shares of Dayforce have dropped about 2.5% to $63 in morning trading.