ADP - Earnings call transcript Q1 2018 | Automatic Data Processing, Inc.

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Operator

Good morning. My name is Brian, and I will be your conference operator. At this time, I would like to welcome everyone to ADP's First Quarter Fiscal 2018 Earnings Call. Thank you. I will now turn the conference over to Christian Greyenbuhl, Vice President, Investor Relations. ahead. go Please

Christian Greyenbuhl

and and First ADP's Brian, today everyone. is and joining Executive This Carlos Officer. Chief Thank you Webcast. Fiscal Thank President, good XXXX Investor Greyenbuhl, for Officer Chief and Vice ADP's for here Siegmund, Relations, Christian ADP's Rodriguez, Financial our you, us President morning Jan Quarter and with Call I'm Earnings

for reconciliation measures, of call our we the non-GAAP is Relations to will which been updated financial we I Investor website. our today, is non-GAAP reportable of useful quarterly that measures have believe segments the slides revenue section These our available supplemental to During schedules the for include website. investors. fiscal highlight earnings measures certain A history the these financial on of GAAP in their be to XXXX. our wanted reference also also our Investor you quarter on Relations release first comparable and and to in to of pre-tax included earnings

begins, I'd expectations. like statements results you today's could to forward-looking review encourage contain future risk. from with Carlos refer filings actual SEC for current some our on everyone the information risk remind our factors to involve will and that call events, to that We additional cause as to such Before that differ materially

to over call the turn Carlos. me let Now

Carlos A. Rodriguez

from appreciate percentage your XXXX pleased reported of X% quarter currency. fiscal ADP. our which up Christian, our you, above quarter and disposition and billion. you pressure substantially COBRA in our the call includes expectations. from which approximately thank interest growth in revenue benefits fiscal and by $X.X We're revenue this Thank the offset We Revenue morning, morning. to organic for with were CHSA foreign our businesses, of the we was this point X This growth results, XXXX first with reported joining

benefited quarter our from our which share a more X% shares per very this the with rate we're Our Jan and fewer and to Overall, lower share outstanding. walk exceeded earnings $X.XX tax expectations, grew shortly. results, will detail in adjusted in through effective and solid per pleased diluted growth earnings

bookings elections. business investments with to first X% begin to of expectations and manage while through XXXX. of to as continue the regulatory be This Despite multinational short-term the the in since of quarter were businesses uncertainty quarter was compared first effects pressure, down continue very performance we bookings our during results XXXX has our of U.S. fiscal down-market benefits last realize solid in performance that New count head the with the the prevailed to our we line year's the we pleased our the business.

to our the we levels we bookings through expect previously, pre-ACA As communicated progress we gradually to as growth growth back expand continue to year.

year anticipate result, a full we As of X%. to business new fiscal XXXX bookings to growth continue X%

continued upgrade client the Markets. expectations contract due our improve the fiscal our strategic front, improvement of compare we clients XXX saw made first was to experienced service we've and platforms the federal XXXX investments the a as to quarter retention to This positive across easier point from also Employer On in part our of quarter, efforts while cloud government as the by experience OPM aided client well loss. all growth Services is which performance ahead basis to during

upgrade have more clients client to our XX% now and of solutions. our strategic progress we nicely continue than Our initiatives on

represents is X,XXX our to service where progress report. This software year. HR to We closure also in number associates solution Workforce for five in management our Technology now Conference review all and with a center continue suites quarter. the Vegas under to ago, total across X,XXX Now respect subscale scalable our have prominence new mid-market a leading make the weeks we centers progress business making on few in of over and this to payroll three The fall actual just Alignment A across XX% associates HR reviews Service good by with in Initiative nine one are planned platform grid Las satisfaction the our introduce of the of which in In one HCM to analyzing their facilities of to these initiative management it's us suites, users be named footprint innovations have we rationalize few of clients in delivering excited investments market applicant And of I'm had also this all of HR exits spectrum. service are locations, and an these opportunity payroll, attend HR, execute, the to industry. gratifying of evolving in total enabled exiting to I new our tracking our the products, performance our and of GX HCM systems. continue the these that needs strategic leader tell our efforts took We're story. workforce. across proud the service the core that innovations management to service to ADP clients five see recognized about categories: in clients HR was internal ranked platforms Crowd, our stage. are NPS continue and It to own month, scores. the improved happier innovation meet helping we metrics Last the dynamic where in leading helping and isn't just improvement speed software

collaboration For leadership the Year Product with magazine, Award our Compass Executive Tech, was boost Solution at Resources behaviors which year an time of for designed recognized of third employees. consecutive this the our is ADP HR Human the from and clients' HR to

to after recognition, on they Pay the Innovation Pay competitive that gender for in clients to or was Technologies. Awesome powerful the comes so one stay HCM, our it biggest second Cloud. Explore is uncover three-peat Solution and Explorer never named and New combines show benchmarking a race It is was a done. insights HR of science at to talent. pay a opportunities Executive's scored data ADP Data built In potential Equity the war gaps, identify Equity in job developed is data when this we that's tool addition sect and the help can

enables latest and At low delivered teams external incredibly the While about technology are a previewed segment about coming of organization. brief had to and by platform excited solutions the generation future. to industry the of applications, more development build in on the we the public out September, today, internal the we the even client-centered and opportunity analysts including are we products agile our and services HCM we technology market excited In delivering product event, the global application our next we and new are code that leveraging development country, innovation client-specific cloud.

the on anticipating to of full-time only drive Card, in Cash which unique today, but in HCM the timely accurately, We and paid we employees we of not hallmarks At are securely also And the words ensuring will a for our our next-gen of DNA Cash also Jan, announced further needs core greater been is based are the I ability comprised payments. designed future like are tax years growth and their the Global filing workers. to Card, ahead. services and flexibility country sustained engines are other few payroll the acquisition to shared a of clients and needs the October. XX and engines clients is These acquisition say meet have ADP's both I'd progress their This on our and success in past deliver and on efforts with needs evolving years, call of with organizations contract will needs before turn this core the future Also our of our localization Global will to us to in while today expanding differentiation over which in strengthening paid our over ADP. our increasingly increase the multi fashion. deliver enable payroll as and of capability. of

not digital Global for From With Cash for less payroll. payment pay payments, an one and future such payments a a for digital option payment more perspective, checks. familiar, proprietary space as including digital financial in cards those is electronic expensive, The our with immediate exciting Card the this is of other platform means For being. digital paper processing accounts. a and of acquisition, picture leader with other The can solution let providing accounts, ADP of secure only the of expenses will wages the increasing the independent contract in various HCM provider experience. bring which integrated can which than pay contractors demand card these account, be employer's and becomes best single their a seamless into be aligned the well has more a gig the their economy workers use payments driven client

ADP the of welcome acquisition and the this We Global team are of we're excited I'm Cash the our to to Card pleased efforts proud associates. about family.

reflect and turning delivering further a to shareholders over good culture associates the our including technology the on commitments enduring to to strategy advancing is for our of great experience call quarter start, forward XXXX through stakeholders, review Jan attention Fiscal that in results to best-in-class unparalleled first Our delivering turn that, of and service. we our client with off all and ADP, qualities on quarter a focused look to is And a and clients, full continue relentlessly to over alike. I'll results. a the

Jan Siegmund

Service of certain found non-GAAP XXXX and will and commentary Carlos, Investor million be the in restructuring items supplemental fiscal you of about everyone. referencing slides our website. first charge related as quarter In on $XX the of Relations XXXX reconciliation much, Thank description this of my very morning's Initiative. a these measures A to measures exclude of and I morning as quarter impact that first good press a to charges release these well the follow, can fiscal non-GAAP in in Alignment our be

As better to in year's decreased points. earnings On X% despite net from dollar basis very dollar and before EBIT, growth by expanded constant was taxes, or additional adjusted and the our constant basis, to margin revenues in basis. declined first revenues points difficult about or a on quarter. X% XXX Adjusted grew EBIT pressure a basis our XXXX pass-through on ADP and $X.X quarter when XX.X% a margins expectations XXX fiscal Adjusted first in we decrease billion This interest basis. a compare last quarter organic compared reported Carlos a year slightly earnings than reported X% and on grew reported X% mentioned, basis.

strong was and operating As first have lower this which performance revenues, together a lapped. expenses, driven now fiscal year selling XXXX ACA-related quarter by incremental reminder, with efficiencies margin

continued distribution worked from anticipated revenue fiscal of quarter, pressure lower and our XXXX. investments growth year half the service short-term we into first through During in the the the innovation, planned while we

objectives. strategic financial our these service experience, help for continue per our year earnings Adjusted $X.XX and effective a and transform to benefited and dollar shares deliver fewer constant X% manage ago. we against X% to our believe efforts the long-term a share on transformation with basis to rate of diluted from we outstanding to will grew lower As pace and a clients our upgrade investments tax us compared

effective the overall by of impacted which adjusted adjusted unplanned quarter approximately earnings XX was the decline rate in $X.XX effective accounted tax diluted for tax per tax points to share. for Our benefits, rate adjusted or stock our basis positively compensation our

strategic in As and we Act-related with modules I'm we to a X% and Carlos as of our overcome we're our bookings and mentioned, our the quarter begin as the execute positive Affordable XXXX. expectations start additional Care against results new half with remaining reaccelerate fiscal business the for good sales to quarter, Overall, our for of making bookings off growth our year progress down were in the initiatives. first line pleased

let and X% In fiscal outlook. grew XXXX for Employer on our our basis. Services our revenues through quarter segment X% before to moving me you on take organic an year Now the results segments,

Employer X.X% performance of quarter. But its decrease this U.S., primarily Services perform basis worksite progresses. Outside to employees nicely margin both the a performance first on by pays operations, premiums. ago, growth was we with grew we margins well, double-digit growth XX% worksite This driven to per solid employees. increased XXX Our operations revenues average same-store Carlos decreased basis. the XX continued constant by And year this and in see segments innovation grew client U.S. in by quarter. accelerated to was to the in as from about fund the X% net multinational the with start. as business This to revenue premiums is quarter international in XX% points the our This PEO good compared in in expected with in for businesses. quarter. dollar the accelerated This new quarter. control growth year I'm also wage impact abate basis our to in of driven the prior investments continues employees Average was year's into growth revenue distribution. XXX,XXX in points our driver the continued quarter. driven a and first metric The balances mentioned, and was the primary of additions compared X% growing growing PEO the healthcare our growth and growth off healthcare average pass-through renewal decline And a pleased are to levels by

of expect I growth discuss detail results guidance. contribute will of XXXX to our Employer I Cash the fiscal it under Global Card. just be outlook, regarding to Before included highlight of The in to of X additional the revenue updated wanted Services year acquisition this I point and our operations some segment, percentage business

synergies, this these future into we costs. we year have by operational driven anticipate fiscal largely integration some anticipate to also our slight impacts XXXX year, outlook. pressure factors margins we Accordingly, updated While

incremental now in revenue business has As impacting fiscal half of impacts to CHSA revenues and year COBRA the XXXX the year than from year fiscal factors of lower of during year, disposal from fiscal a in and growth half impact which new margin mix reminder, the in of bookings margin growth XXXX ACA-related first the our XXXX, revenue to and anticipated fiscal also the XXXX. been November revenue year and and of lapped, fully XXXX a businesses the including first retention fiscal year lower the have

I these mind, you. take items will in revised a walk our outlook through now moment with to With

earlier, XXXX. in mentioned on are sold bookings growth Carlos business as our year new fiscal we First, of to X% $X.XX reaffirming full X% guidance billion year the

consolidated X% And of forecast we to PEO to Card XX% our of our prior currency Cash X% and X% are of to Separately, foreign acquisition our translation, to to to growth to the of compared X%. revenue X% revenue compared have With updated our prior growth we of reaffirming our forecast forecast from some adjustments guidance our Services Employer impacts X% to X%. X% Global to XX%. anticipated revenue

in with now $XX million total compared our client from increase of to the funds also are to expecting $XX forecasted to $XX million. fund investment revenue client $XX impact million We growth prior The million interest increase strategy extended to details $XX up to million $XX increase to Relations in forecast be the of the supplemental million can to found expected website. $XX compared million forecast on be our prior now slides this is The of $XX Investor million.

unchanged. Our margin forecast remains

continue first points. to adjusted with XX from consolidated to to XXXX. basis XX PEO earnings expect anticipate adjusted fiscal the to our to to fiscal not in offering compared contraction We margin at basis anticipated expected to to in from shareholders fully continue X% points, Services points debt margin beyond XX one the benefit. to to this returned we level, forecast basis anticipate growth per stock XX year XX.X% contract the our plans. about Employer quarter of segment our expand of by any X% We points prior aided XX year percentage share tax X%, now share in related EBIT compensation margins of dilution in And Having XX XXXX, diluted proceeds buybacks to contemplate does to equity further X% of forecast compensation-related

market to conditions. to shareholders, However, return to it cash subject intent our excess remains

questions. with So to it that, turn take I the to over your operator will

Operator

Thank you, sir.

our Huang take Please will line of We the first Tien-Tsin JPMorgan. proceed. with from question

Tien-Tsin Huang

morning. the for Good Hi. Thanks time.

color Is organization? greatest the to on convert in seeing across platforms? guess strategic Any as front, mid-market cloud the curious the I'm more retention the where improvement there. I it Just you're you

Carlos A. Rodriguez

scores think happy improvements we're in We you said this segments. as very the and mid-market. our quarter, quarter, finished to so, a up of of some that, very be about because the clients the ES with yet in I as as news and say mentioned And past all coming it. into many been good are things my Well, have really retention the the metric our very across But organization. volatile think this we with our your we've comments, We in volatility I I were we that. think doing market. because up think times, get can especially to question I our investments in that pleased of migrations I is would we've the but not about service just see NPS we're not around of mid-market, the happened

of on that a to X,XXX done, platform. our if to same the end be We holds strategic and our left. and stragglers. we've have about close put by year done, true, our because couple year. we be may the done and calendar legacy multiple between mentioned that does We expect have the think of But still still the by retention retention a substantial times, quite substantially pressure in the we'll do not of there's platform mid-market end as in difference We

what we mid-market migrations we the there was mid-market in we So, But to, from and expect of the all ES us. the you're will in be get happen a quarter. the not quarters as one why behind now would that and well rest improvement alluding as reasons these of couple this as hope

Tien-Tsin Huang

Right. for that. Thanks

Jan Siegmund

first a large comment, little the of don't this we that loss grow year. lapped an talked quarter. One client bit a We quarter we easier that over in of about additional last, the forget had

aided the lapping enterprise the So, the space that in client by of was large in but improvement particular partially loss. visible

Carlos A. Rodriguez

of last was large year. impact around loss that points basis think I XXX the

Jan Siegmund

exactly right. That's

Carlos A. Rodriguez

quarter. in look So, for basis improvement the at XX way the retention to right about point this is

Tien-Tsin Huang

Right.

You bit get better. a little but that still back

Okay, good. good, good,

that's Anything into think read below I follow quick unit up little trend. on there WSE PEO. in my up to PEO? a just XX%, growth, Just The bit

Carlos A. Rodriguez

do, employer growth. really to the I one pretty way and it's the becoming even compensation and we the U.S., the unit that we're happy you in of PEO, there look further employees. with very as treat an have a program largest there, as, cetera. That's clients but a for, large but employers – very our report have way more if we benefits, the retirement think at close getting Obviously million are anything And et don't way big. large, XX,XXX we're than there's which though that's we our it XX% the than sub-clients. X.X worksite still Other it's in we the workers' it

the a around are of the consider We some of purposes employment. co-employer co-employer responsibilities a for and ourselves

technically, terms of U.S. in probably five we're And I in large think top of we the size the a so is pretty kind But growth rate. now in satisfied very that with base. employers of happy becoming and pretty feel which

Jan Siegmund

The revenue are with going guidance is our we good. line in expectations right as development reaffirming and our saw you so,

Tien-Tsin Huang

the Great, thanks for update.

Operator

you. Thank

Our Jason Kupferberg from will line next the Lynch. of Merrill with Please of question Bank come proceed. America

Jason Kupferberg

comments the I to Good guys. migrations. on follow morning just the around wanted up

think we QX. of growth terms to Can I clients And comments you bookings stand Thanks. on a platforms. XX% the where have you been migrated new that? of tell range of reasonable next-gen said for then percentage revenue now around in any us

Carlos A. Rodriguez

just our So clear new terminologies. to make some sure we we because get introduced here, language have

handful to about Vantage talking refer mid-September multinationals have next-gen and it our next-generation mentioned So, Global View that in our our we which in a start Workforce platforms clients of on Now, RUN, industry strategic to platforms, we and which only today. we when we are did have comments talked analysts introductory We platform. we so our platforms,

So, want the clarified to language I make sure there. just I

we'll the we about that we be sure careful forward, go making right pick language. As more

rest what of sorry, I'm the and the was question? So,

Jason Kupferberg

percentage to has you Just the strategic think clients of I guess of then platforms, revenue said I XX% revenue. that because percentage of migrated but the

Carlos A. Rodriguez

do only our publicly think the a So since what to that's information work the of really I before we've migrations, still in have begun said up-market the consistent with we've we around where lot released proxy contest. in

to business about mentioned platforms there of included important names where a revenues number to no migrate I being talk or really we move our very there's of. plan immediate our on about platforms, our It's our think have I the when just clients. we of XX% areas of that note we strategic that strategic

our platforms some insurance services, movement planning with any there. happy example, our we're services, for have we we're So retirement international that that not

is migration, in But answer, some XXX%, you answer base what probably around able really is future So, addressable is to the. more we're be get quote-unquote but we provide part In right the if straight to could the words, client to of up market. will, XX%. not the the guess other aiming our color for I

Jan Siegmund

the we before, that other And metric guidance just then bookings if pick the is X%. regarding X% year XX% quarter, of don't refers up Carlos, number. to revenues. question business give for ES we for That's I quarterly to reaffirming our our really Jason, we're any And And the guidance offer. full our your second revenues nor new

Jason Kupferberg

trends R&D good Okay. we hear some the your to to for Any in And in investments some the terms any get and legacy directed of the budgets being maintenance then those that respect you're of is R&D innovation the can budget it's doing. of ratios? detail development, with to shifts how spending, platforms latest product of piece about there new on R&D overall the much and

Carlos A. Rodriguez

of it's last we've fact think things here thereabouts and recently five to of We've investments disclose like about Sure. on significant of our the around as so in increased doing that three a like in in out with of starting helping off already and mobile large that four business cloud with cases helping some that in again our or that our years. But bookings some about our for million over been of helping so amount innovation from to forth. $XXX a disclosed, the of $XXX We also was with announced things here also years. other new information big in that. and some solutions additional I products and actually we've in we've things increase efforts I and the and I think, investment. and or terms the retention six And we are we trying the to have drive we've around our neighborhood, million, us, clients platforms generation A that communicate been market I been innovations in shareholders lot the spend next just R&D our information, data working somewhere we've some that think made part think,

happened sense spend. a innovation what's the of with that's So,

On the government spend, for I it's maintenance of the sake work, guess flat. about

it's lot get the more news of But to employees shift world spend the inflation, that we've tax if that our again, constant, spending A our our our fact we paid, story. increased of good innovation focused is held mix, engine was and a as So both slightly. platforms of It a in balance that the some see payroll that that conscious engine. on in really maintenance. millions less serve will, of the and of effort you maintenance on to tens

we has a the expect of sure legacy And those out legacy platforms we years, so while several increasing next the and is spend. story really then maintenance But would on then to a obviously, platforms. to been spend when that reduce in spend technologies, last generation this develop and spending on as focused decreases for we down move these necessary road, clients innovation making that the is platforms, we build the actual ways retire the those which

legacy XX platforms. think I retired around it's have We

So, it's at in retired we've first time long the actually ADP that things. a time

some And items like months them on small service, any very kind of efficient, no way, are next by our to that dollar we scaled well the to big spend. chunks of are overall really reliable. spend relatively three large very So, six in any the the it's but and have legacy very or off haven't were terms not of platforms in secure plans like The timeframe those of we of maintenance made and that. very get progress,

So overnight as an process, this is we say, this change. always evolutionary an is a, not

Jason Kupferberg

thanks comments. Okay. the Well, all for

Operator

you. Thank

with Our W. line next come from Mark question Baird. will Please proceed. Robert the Marcon of

Mark S. Marcon

hurricanes to terms implementations, Thanks question. Two lines? those with of along Good morning. all the question. all taking impact That's of regards in any for cadence, questions. my sales first the at sort anything One,

rate last XX% pass-through basically this think long-term, on say this in we about range growth that we if from the just the the comment PEO impacting terms and And to few When pass-through underlying we months regards it's in perspective? the should think a been or longer-term that lastly, on with field about would of Second all question growth have in going is Thank the how PEO operations? XX%, folks you then distractions be expect and rate. you in out can growth how the over could have you.

Carlos A. Rodriguez

and were going want to in the quickly on here. numbers had a through moment maybe sense the business. in just few these massive Puerto a go of let and impact. I'm just Clearly, especially But So, Jan on I Rico. impact But it that will to also storms, hurricanes take Houston of Jan the give you a an to point out

continue clients have business crisis. sized and Tampa airplanes went a what also nothing incredible be make people they when obviously that the but have have And in to people no pay other usual, and payrolls but large sure and were what Rico necessarily to an functioning of served to to infrastructure our decent in specifically. Texas we We did our was presence a as Rico. business associates to and We in our our not Puerto to heroic, business, obviously Puerto short forward would from still planes very actually that Houston able was still that deliver in actually deliver including to the so for, to to businesses flying flying money wanting our be were into supplies associates their able

usual to I to was the perform continued you're of what and a shows think strength the situation. that asking So, the of that question, very challenging the fact business very, in we face ADP obviously deliver as

maybe the color bit of Jan numbers. a think has I little on

Jan Siegmund

we there new be losses bookings in some our expectations. But will over, impact strong full our and bleed performed bookings, It reaffirming on our quite or have Yeah, that overcame meaningful be the had on sales we see an can to be because year we're new to as not some actually and Puerto on our performance according but recovering. is we in could revenues impact business full and out. overall year you October there that the honest as business to force impact an material our experienced could is sorting on performance, that but our quarter Rico quarter, guidance from of

Puerto business. a But There's of of ourselves and a it a reasons. year. quarter would out. But to little think in months But high has longer run, little back So, positive be the in them the bit pass-through yet. long to a recovering but revenues, your we clients, this not expect we sense should business sometimes on assume through Relative material to In a large work our recovery could we're all variety I really your has and that it's just the working of XX to year going just the that XX% back is the of bit the experience it with and second number It side. impact throughout we're I are clients some impact. those impact to are not Rico calculations. be online there

we lower and year, ADP it a recall this and first PEO growth. of meaningful pass-through and then, the experienced expansion part, we in last by typical overall illustrated as you margin If was the for revenue than half

the that years. of played factors the multitude growth that in things pass-through revenue are a have couple so, all And last impact our

our PEO few throughout years, and of PEO. the The ACA the employee introduction increase in stabilized. in an participation seen have That has now first we rate participation in in last the the thing our is

Carlos A. Rodriguez

health And benefits.

Jan Siegmund

And health benefits. Pardon me?

Mark S. Marcon

Sure.

Jan Siegmund

has And now benefits. that stabilized. Because, health rate and participation

out a of have which higher-quality rate, year-over-year quarter, as bit to overall And the market this most of in to So, now we the stable would trend as of obviously anomaly we client is our employee a the diverted you consumer overall relative dependent inflation. health-oriented the plans of on last And unusual. inflation which was an bit then deductible, we're have What where solution little a is general little a skinny renewal a base, plans experiencing opted But health employee the and actually seen actual rate. in that's participation plans. little of higher healthcare medical comes now choice employees component medical is seen development describe.

pass-through high in anticipate. is And overall of I pass-through would a plans our published little say Day the approximately XX% our the is to XX% So, XX% growth of Investor on we growth the long-term to bit Mark. relative employee this side growth to worksite in XX%,

Carlos A. Rodriguez

point where just it's PEO been to And out, history the have been than in even in our this. higher there times

own company, on It not of entire environment. reform this healthcare standpoint. for So that eventually. just It's why have healthcare economy just said, of the with, work from because inflation depends begin doesn't care from there period is general a PEO you can't kind becomes as inflation not or clearly it it's but Jan – it our was an about health long our sustainable the to this a time, really GDP

probably And at out our growth. that bit. growth it's it's say some it's the probably that by to right. employee up highest to, and maybe regress has picking the back year or year, have a had we've or is a point been differential times between in and one we or revenue number mean. to is So, where definition, over not Which probably little from is had three has safe that what you're to with bigger over but this hearing healthcare But or the number this pass-through is even converge a in four quarter two this inflation's line worksite world, standpoint, a

Mark S. Marcon

an how not towards with about the longer-term When of get we to okay, trying around, the pass-through. Sure. think to a well so right profit the growth and going I reference going end to was growth and the what's rate be factor much some much in? is just subtle margin having, we're impact operating of the that discussion to how pass-throughs to up net

Carlos A. Rodriguez

growing Yes. to for to we We're look actually model we're is and again, is people a a we number our to what even fixated and what margins We'll the not that value help building and to is though margin Services margins but number creating specific works. try Because economic shareholders. on realize model at overall focused important and that profit and EPS with growth the margin growth. PEO's do to on the that, encourage Employer profit

Mark S. Marcon

on capital, of it's end the day, the invested return right? At

Carlos A. Rodriguez

Services that's profitability capital Right. Exactly, return in and the business. and mean I in and to Employer focus Employer ultimately – on the on would really growth growth the way invested drive that's ultimately Services right PEO

As you know, successful, business. most best our most profitable, PEO business our is

their to us the for to it's about realize So, really models, to focus and impact to get that with talk right I business. about overly mix have not we people address what and margin, it's concerned and help but way the the we has on something have on overall

Mark S. Marcon

really appreciate Thanks. that. I

Carlos A. Rodriguez

about because on One may you I wanted distraction did question same the that last mention thing, answer just the – to the have question. because others

there's same been, investors lot I of small extremely an the the distraction proxy a think the of would it's people. concern contest asking distraction of had I because an that and have a I about extremely way lot group for of thing, high the is say

not quarter, can our you from distract it force. see As our results this sales the did or of associates

Mark S. Marcon

you. Great. Thank

Operator

Thank you.

Eskelsen from Our Rick the with Wells Please next proceed. come line of Fargo. question will

Rick M. Eskelsen

Hi. Good just question taking follow-up for the on to quickly wanted my earlier PEO. Tien-tsin's question. morning. Thank you I on

I'm Just color be the there's worksite PEO forward question anything the of employees Did more for the Just is, helpful. pulled slightly ordinary anything the on did get see curious client's that sequentially. out PEO, just the quarter? That's little maybe on. onetime would down if business. ending last going you a

Jan Siegmund

interpret. while like sales And of have once in dynamics. growth different they and over do fluctuations This little are bit think, bit a wouldn't happens I I how quarter ended. how a of a Yeah, little last we the in come and

it out field is noticed could report. in myself the the I but nothing there of ordinary I that So, here

Rick M. Eskelsen

helpful. That's Thanks.

quick a follow-up. Just

tool about talked little the pay data You a cloud. and the bit equity

about on that wondering believe big I Just has the you doing talk to lead. what you thing are could helping guys of know been Jan if more sort that's I long-term data.

data helpful. more any progress analytics big would just details on and be So, the the

Jan Siegmund

many more long-term solutions one our going of data of have that we viewed to on actually. and and to delivers benchmarks be selling in today you of of to know, is we it and new a believe product base core so, core Yeah, We're benchmarks as our already client strategic differentiators analytics which clients, is And top Cloud and reporting. as a our do XX that sophisticated now than emerging called you released strategy. a platform is Data numerous value-add we incremental see or analytical

working misalignment compensation way outcomes, released company because continued employee analytics ease data we tool of is equity part having been problems variety pay platforms out into to employees likelihood of manage is reaping platform. potential And diversity tool we fully will the exciting and a that allow cloud can and the to leaving performance. areas actual incremental the to all there So, And and our over employers that retention now is of one the verticals, that relative first platform, is better into are see go on towards benefit towards allows innovation that tool which a of integration And all the from we and these that the now tool the to cloud-based of insights relative integrated these on being you strategic going measures. a employee manage addressed. companies the predict identify data the which specific to have to be and it you're in the loss then risk services and the coming in a our your compliance of tools is explorer, richness tool helps

to it's a really very this So, the differentiation, Carlos driving mentioned And explore and leading increase the us specific and tool. that to ones client innovation rates. discussions going helping important win our be

truly Data is a buy. a also recurring It's There's model around tool clients revenue we And it it's we carrying. and for for this so, Cloud. And revenue been question exciting. do that charge do charge

Rick M. Eskelsen

very you much. Thank

Operator

next from proceed. line the Instructions] you. Berkley will Barclays. come with Thank Our James question Please of [Operators

James Robert Berkley

Looks combined. line up an just guys. high-end range, or points, and surpassing this Global improvements like guidance a trends prior coming your Thanks XXX the about top versus the at your Cash rounding ticked basis expected expectations? of FX from function incremental Thanks. of XXX Is

Carlos A. Rodriguez

it's both. think I probably, it's

We mentioned our that into because think going the that had, the retention line. income I numbers obviously to little business. we you you're bit I have fall feel as better on we just as our the trends in what's and think a I well. from, the of top well correct be actually as way But as float got bottom flows happens into think that from line out about even help with

things. think it's So I both

Jan Siegmund

our of in FX Global tiny bit It's is pass-through Cash also. increased Card, guidance a and then

third So, be you're a that factor. factor the may looking if for third

James Robert Berkley

All quick right. just then a And Thanks. follow-up.

mid-market down-market say, doubled your just a you up here. The longer-term replatforming, up-market expectations thoughts then did over talk over your six-year period the six-year guys obviously Could as another period. wrapped your well? margin like You about for from almost expansion margins on and mid-market's the

Carlos A. Rodriguez

Sure.

making terms larger improvement for that one small the margins business in the I everyone opportunity we've an of out the make kind starting of point folks, mid-market. now been been market in of to things is this talking there think to is the the understands it in that of for than is sure was as that sure we've room going amount

has implementation in a objective fairly business brings it retention margins on a in achieve we impact including margins. because if what the successful good big same rise that potential mid-market We that important of see do business to business based think small is which business around less the So to healthy have retention cost, the one cost, you we amount improvement really the on which the of will. have the division the sales with real, to you sell, because growth in was

about business, long through in is any which in to business we're will, really way begin retention our in all picture, give choose do higher worlds conditions both higher it's seeing starting far, small rates data the the it onto would They clients of that higher. of what do the the in you I were to get our And and platform. want can replatforming you out. the that modest am that driving will. you as platform. so good that situation. once have migrations part same retention. important if rate mid-market on improvement But important the grow And on the that any margins SBS the as to retention all one in our that we going impact best of based it get as point either have hopeful, and of improvements strengthening the you don't I our segment margins again, in point improvement was Neither always sense specifics market experience But much had can same order move. get or in so we're is we is you position, is to competitors, just we should that on sell in of to well you achieve an are you growth the less faster, on are mid-market retention depending one in like absolute as some mid term clients growth if sub well to our faster with hopefully we competitive in because expect fact Better

James Robert Berkley

you. Thank

Operator

you. Thank

question Sachs. come next Jim will Please the from Our with line of Goldman proceed. Schneider

James Schneider

normalized margin XXXX? as XX of to of this the And couple to, is half that's whether XX Can we'd of products into maybe XXXX, update to expansion your guided an I expansion the kind contributing back into reasonable of to heading follow-up that maybe kind would, margin margin short-term in a expect side to of you you on year things. the you as margin to service and then it get quarters. bps Good us and give and kind morning. of above my long-term next on investment we wanted other year see you've head terms exit in of realignment compounded just question the degradation any ask question. the in for and programs how the just taking Thanks new

Jan Siegmund

of Yeah, year, This about a Jim. similar operations we have amount costs. dual

and pressure service And basis to making XX in company initiative, the fiscal for this of think I we're then XXXX with our mentioned, which think XX about to margin nothing characterized and is presentations. provide think year, actually we I and disappear points the in an there's going this complete that it's Carlos changed to alignment see and in as settling are we idea we good that, then around XXX year. the what investors associates new dual nine going on level we time. points locations and in at track time. exited really point our expansion progress year enterprise on this ops We XXXX, basis fiscal about margin view our in on it. already be next did be at be And to would that We on we in fiscal doing those year I the

So benefit improvements cost also that and alluded the we dual the that and presentation the then be we efficiency, forth so and offer of our think in the I that productivity wage efficiencies. then elsewhere strategic it, to incremental would to advantages ops see workflow dissipating the and locations fact contributing

think the plan. what is I kind of we're So presenting current

Carlos A. Rodriguez

opposite quarters fiscal it year of you first to experiencing from two what's second the from bookings the standpoint, half I to think it's multiple of the the from half fiscal year, and in the that having are fiscal plus margin the place, quarters really in calendar in the two grow-over just normalized two as almost because so numbers that year, of and terms quarters of XX% standpoint of And still of images calendar comparisons. the year, gets standpoint, lapped right in first revenues, the these of mathematical Because last the our a last then grow-overs we're operating want two will. then the had these last been more we're I also now, quarter growth, note a And of income our that of want of we've numbers is from comparisons more we're the we guidance, if reporting the clearly some year, first just we year, investing say quarters force the in sales important times having to two investments, of direction. calendar out revenue have the the pressure example. because said for reasonable we But ACA the a to our point in quarters happening and in some is in a the mirror the again, time one growth year. this ended go comparison, quarter, of next up back that Yeah,

whether some So acquisition this to covers. to happening what's guys like anyone than way look whenever, ACA or have an else it's really or the – you that unfortunately really factor, know better other the understand – you beneath beyond

before of And XX couple months months and then so hard now, we easy a had we And comparisons. get had comparisons, have, comparisons. we those of right through months I more XX difficult guess we

James Schneider

helpful context. the follow-up side, Carlos. you. And then a product maybe That's on Thank maybe for

a this product that are are resonating them? sense code staying platform you about and on sense the over how that switching think development about enterprise platform potentially stages? elements And you and mind their about ADP of have application referenced the of shopping any or early ADP or us maybe with get this? a an are in do be give Can you enterprises of clients of you that your around it conversations platform the may off suite the swayed changed What an because As you time, low plan with refresh augment your to platform.

Carlos A. Rodriguez

just first working to of hand Well not some of we're the our we example things York visit the invite in basis New that Center Innovation And regular knowledge Chelsea it's do clients a in get hope, about on kind platform. City of we on. for to

that working our we as on things well we We have other are clients. with that share

effort an with of New as the understand York platforms. to product development to our we roadmap transition and then that through obviously, a clients make get they So so part that us sure stick is and our eventually

segments, I in think very up-market long. our in obviously client very important that the space of each very, enterprise would business be true it's the are where lifecycles but

XX in our And already have rates with XX stay with we are they've very means changes high retention up-market ADP obviously long, technology on staying years. that to business. been the average. years that multiple for ADP in they over So Client if through

use, this for service, better the to So is easier evolution them, to easier easier you products another to will, upgrade. just if makes which

think, six one five is themes the for which of of last technology, had I part all, here or are these that the we've years. leveraging central So

So we're ago. many do XX, XX change really years product in been to historically a with on emphasis ADP's doing X, greater and technology had emphasis, had what with maybe trying than for years slight we

James Schneider

you. Thank

Operator

Thank you.

the come Our from Stifel. David next line question will with Grossman Please proceed. of

David Michael Grossman

you. while rate Thank been any environment. we've since a favorable It's been in

or with rates is how So to client time? review us perhaps and shared ADP through help, pricing that of flow in how could just gets a you higher and just for much over reflected

Carlos A. Rodriguez

we the with to on it gets second makes all rates. our here in of – was But isn't So dramatic answer a have there's out of I you tricky help be because upside. of other on It's to, company of way helicopters really, downside, of as the a sudden out hasn't theoretically, the going better that direction. than – changed appreciate anything. we getting it's because of are guess bit felt and a it. portfolio though our haven't is know an were we multiple of is, little of rates overnight, to there's and of that money are we the the we because if it even of you But we that laddering, the Like example, when mean the laddered, part pressure years change is sense raining overnight figure do the to will, for this in careful more way what But it. increases. allows kind with I like it so price stronger. the the shared, which it It was don't not None us question, definitely it is if

it's So positive. all

probably prices lowering float didn't really plan We more rates don't completely don't And there's historically, up. prices, So mechanism. I when and think to be raise no when it pricing competitive. us down. goes direct. think guess I I went – interest went it income But make we stronger, on down we

Jan Siegmund

of It more business There with actually with an we you reflects share have revenue Can products and updates, fee price if I our no, next in that of float the we explicit is not couple any clients. income. float some the our relationship them is technical ask negotiated give and share negotiate a we But of value don't it of our declines David? it of contractual clients, of income is then model. float the with have revenue more really,

Carlos A. Rodriguez

in lost to be in income And, we balances actually to Jan, have million add, balances even the flat, during more that about to our to over that of terms like period assuming $XXX the And billion float float stayed that's XXXX billion $XX from peaked XXXX just when am and $XX just income. back clear, grew I and of thinking but time. we

so back arrangements. for go get don't Jan a and prices to not those didn't that be and even And kinds long to that We said, when $XXX have inflation as going for adjusting way on. there's our was to that And just million growth. would of increase we

face in we our to business that grow So improve and our of managed of margins the headwind. kind

way to to would better a And the us fruits a on would fair at it we environment feels go-forward it. the think enjoy basis so of I be now look

David Michael Grossman

about in new the then of what expect mind, asked you, give for you that that on. some Can bit about better the product if a future little when or sense how will, a Understood. working timing Okay. roadmap last that. the the making you Thank functionality of just roll are to the up-market And you you're At follow-up what for the version a was your least to up-market. changes, major of out product? question you're have I new to us of you the

Carlos A. Rodriguez

a version there's new We to never up-market an said product.

either. And say it so you shouldn't

a the platform of apps up-market we number in mid-market. globally. used that someday, in and It serve can built different can we a we could built could be what could was, be on build used be It used clients. the frankly So which

as of analysts and sharing We with it of information problem not that trying so information without us. information shared industry So competitive a much all to a we're with ready. for creates much lot share we're you

obviously exactly development. say But to and doing of not not ready to and what we're maintenance, that cost are can so we're change And I development, going. cost to usability, speed you the to mention of speed where tell we're benefits

that's So efforts. there number benefits really a we from of And platform. our low about the that get code development development will talking are only product

We large systems. also investments back-office in have two very

are engines expect just, the are Now, they to our outcomes. engine gross-to-net as tax visible well. products. payroll These transparent. this is clients. create that back-office The engines Workforce There So not our is other and be front engine to some front-end really Vantage, ends completely that and the we and plan of They have our are

things kind tax really that execute expectation there's gross-to-net sense will, to we in well we'll new for can more so no have transition, The flexibility a impact And a assuming if the the engine. we do lot that are of expected payroll fairly also around you improvements, payments. significant around though, the in and

and the down speed the payments, we'll payments. cost significantly make So we cases We'll not to for changes, around real-time cost our we support systems. we business may will same-day these in on may have choose it, maintenance go flexibility engines. back-office they're changes to, competitive lot that do necessarily And or whether to have but of then have statutory based more of the a our ability do

road, more these we that a So down But because based the two, those us on business that serve help technology services efforts it's high really can believe provide seven reliability leverage whether well in that years modernization five, high we scale, are those obviously, efficient high much at platforms incredibly us security. today our and manner. new cases

David Michael Grossman

Very helpful. Thank right. All you.

Operator

you. Thank

from of the come proceed. BMO. Please line with will question next Jeff Our Silber

Henry Sou Chien

for Chen calling Hey good Jeff. it's morning, Henry

of is much break could? guidance you the EPS much how a acquisition Just is changing the the and for how EPS. Could adjusted if on FX impact the of out you or question that

Carlos A. Rodriguez

the it's impact great and describe It's it's the fortunately be way Well it. good-sized a acquisition of the zero. zero breakeven would because we business business is it's around revenue a would

breakeven, margins doesn't would reasonable not I'm other, impact our it's terms not on a margins. say drag second But guidance It with revenues, huge no from So part obviously EPS because I of your at on acquisitions. and has the our huge small and a drag in help. question it's help some sorry it the was? earnings of And a

Jan Siegmund

less a flow-through. X% comes from the on side. of we you Actually, tax bit that good as give can a the chunk just and that's that's increase $X.XX big a I we'll little tax have that well It's little performance of it. that than had as the in

Henry Sou Chien

Got Okay. And it, FX?

Jan Siegmund

meaningful I don't up. We're don't looking think here. it that it's really. anything I have

Henry Sou Chien

Okay.

just Okay, a got And how on the for it's it. bookings question year. tracking growth second and

by some market a for you new if it's the rest curious the or Just are growth? bookings have year, the whether of sense what drivers Thanks. of product for of

Carlos A. Rodriguez

had for bookings at first, didn't pretty the growth, the think noise significant we last because ACA been I months the in then what and to ACA. in we have is look has system try XX we

So I been to lead head increase force, to a as increase, we have our sales usual have in business accompanied productivity ADP, hasn't for a sales result. exactly of my which preface would count by saying, usual. by as our comments would it But typical business

just sales increasing or buttons of products is could that our capacity then to give and so expect force And be that products each some because way. like our any productivity, mechanisms more try also increase business, will bit to we that other and better money they sell head little to new our around to so grow them also in our if to try that make And the sales, what business can digital things the the improve can their spend around on also better we of tools would, we would because you we efficient. sales productivity drive we year. force a push do But productivity our do would more generally bookings that or we count, the to marketing

of of did become year we So three face where one We'd having, last we And in to order or were of challenges two of the business invested to a the years were really that we in It head And count. think six into good or over us years we're those head sure people last up. we those immediate at people for time. head count doesn't become to of things new should we in as ACA, we we have had getting the years. put get productivity. into have mature, were to we come count They able, to now at decided become from for growth as those to productive for have new and pay productive. because X% of to, the tailwind is, years That's But invest had in healthy the make pretty when you look reps our They less sales an last that year more the more ramped opted head more about year-over-year. have investment field. several count. bookings, impact couple mature us to actually because the because get I off an five that's

a about change we your which as ago. government good guess by, fairly the feel to just direction is I subject months question forecast, nine the is, So had large we again our answer reason interference saw in the

it's can't we have XXX% mainly we're that ever improvement. metrics terms and around in modest productivity and we guidance at sure, So say of in certain of us but count confidence terms head what look give we

Henry Sou Chien

it. Got

thanks. Okay,

Jan Siegmund

count what And maturing. sales is force as grow-over. becomes throughout that naturally year, And it's that an that the more growth then accelerated head secondly, basically, productive easier see is we'll

two growth second the of in accelerate look for those your are of drivers make the the So type major think modeling, growth of the year – the the will will the year. second that that I comparison, half half

Henry Sou Chien

it. Got

Okay. All much. right. Thanks so

Operator

gentlemen, you. have we one final and for question. time Thank Ladies

RBC with question proceed. come Gary the final line of will Markets. Bisbee Please Our Capital from

Jay Hanna

guys. on for in Thanks the today. end. me for Hey, Hanna Jay sneaking at Gary This is

should you laid recently, guidance out XXXX framework three-year this fiscal the on to the increase regard any quarter? Just to change given based we expect that

Carlos A. Rodriguez

that and you of our We I a about future. premature. about I on We come. mean results. the We help good help all, from said, did I growth get it's through feel Jan because We're I the bit first floating But from good think rate tell it's feel from get so quarter we tax. little the think the it's did think think early. I as of don't first could

it's feel the it's I But quarter how for too early. about we good. us. think first to way just So But I think think XXXX too early directionally, impacts

Jay Hanna

is Okay. recently associated to well? you that of And then the XXX points in as with with spoke spoke the margin to basis accretion next-gen that you've tools any and migrations earlier,

Jan Siegmund

No, we margin scale horizon, making which is for next-generation not counting meaningful illustrated products XXXX. a ends and planning that long-term outlook at the operational improvement these that impact on in our

Carlos A. Rodriguez

of hardening invested getting each I dollars in way, over that These the platforms. platforms on that of quote-unquote also and clients, think are We have the we're is years. of of do we've already. But and real Yeah, clients. of part by for multiple hundreds we've next-generation the in a now obviously invested reason the process millions three lot

improvements for, us they're long-term question for have stronger profitability are those no of or So that I competitiveness think meaningful think and expected XXXX, impacts we costs, the feel half a on lower or last early to forecast. our sales, clearly going good in to there from standpoint, But its XXXX XXXX ADP's investments too into way They're these real as or XXXX well. is to it's But whether in experience. be I types about factoring and it's of it. timing better drive efficiency, client

Jay Hanna

you. Okay. Thank

Operator

to hand for for to the you. This remarks. Thank our today. concludes question-and-answer Carlos pleased program portion Rodriguez over closing I'm

Carlos A. Rodriguez

Thank you.

off continue have those we of latter As that deliver our the to results especially and products fiscal have around that expected you our will the working. service, we're enhancing I innovation And half really from in think of expanding investments, could initiatives obviously of see, a investments the the XXXX to happy we we're are that our and beyond. we the a distribution and lot start, good confidence model

to but of Over been like in that several also proxy think just clients I and they've of involved this to some from our been thank inevitably the in the may expect the them last has obviously, mentioned, as And during hear And distraction in I our we've out minute our months, put because feel question small our to the I continue acknowledge associates to thank the the what more clients. continue encouragement to associates services given our us integrity, this and to is importantly, deliver to beyond they've think, our attentiveness for to to board. want company extension it's with going The dedication, put also to of successful. And management them want and distraction our valuable move by thank great makes the what and also our they've want I I shareholders And I obviously ADP. had for our associates just largely the some associates, to for and I'm this want been to resolve into efforts I the a their we're to make founder support, insisted the noise have process. their what and delivering a and and confidence their continue the help group, our in market. that clients ADP confident think on. contest I

our to gone their the to right I and around them, talking continue behalf. and from visiting do for investors, also thing the we've on think them, strengthened just resolve gotten to encouragement we've that As

that, to with and thank you for for ADP. thank in so your again want joining And interest you us, I

Operator

day. for program, may wonderful all does you This thank disconnect. your we a conference. have gentlemen, and conclude on Everybody, Ladies the participation today's and

Automatic Data Processing (ADP) 2 Nov 172018 Q1 Earnings call transcript