Dayforce Inc. (DAY)

Interest coverage

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	132,100	93,900	62,900	21,900	-34,300	-40,600	-50,400	-66,000	-54,400	-76,200	-57,200	-25,600	5,100	45,800	51,100	64,600	66,700	56,700	64,100	28,200
Interest expense (ttm)	US$ in thousands	36,100	35,900	34,400	32,000	28,600	30,300	32,900	36,100	35,900	31,200	27,100	23,800	25,100	26,600	28,500	30,400	32,400	34,000	35,000	69,900
Interest coverage		3.66	2.62	1.83	0.68	-1.20	-1.34	-1.53	-1.83	-1.52	-2.44	-2.11	-1.08	0.20	1.72	1.79	2.12	2.06	1.67	1.83	0.40

December 31, 2023 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $132,100K ÷ $36,100K
= 3.66

The interest coverage ratio measures a company's ability to cover its interest expenses with its operating income. A higher ratio indicates a stronger ability to meet interest obligations.

In the case of Dayforce Inc., the interest coverage ratio has shown some volatility over the past few quarters. From March 2020 to March 2021, the company's interest coverage ratio improved significantly, reaching a peak of 2.12 in March 2021. This indicates that the company's operating income was more than twice its interest expenses during that period.

However, starting from June 2021, the ratio started to decline, falling into negative territory in the last quarter of 2022 and the first quarter of 2023. A negative interest coverage ratio suggests that the company's operating income was insufficient to cover its interest expenses during those periods, which could be a cause for concern regarding its financial health and ability to meet debt obligations.

The ratio improved in the later quarters of 2023, reaching 3.66 at the end of the year. While this shows a positive trend compared to the previous periods of negative ratios, it is important for the company to sustain and improve this ratio further to ensure it has a comfortable cushion to cover its interest payments in the future.

Overall, Dayforce Inc. should focus on improving its operating income to ensure a healthier interest coverage ratio, which will be crucial for its long-term financial stability and ability to meet its debt obligations.