ADP - Earnings call transcript Q3 2018 | Automatic Data Processing, Inc.

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Operator

Good morning. My name is Christy, and I will be your conference operator. At this time, I would like to welcome everyone to ADP's Third Quarter Fiscal 2018 Earnings Conference Call. I would like to inform you that this call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank like conference now to turn to would over the Mr. I Vice President, Greyenbuhl, Investor Christian Relations. sir. ahead, go Please

Christian Greyenbuhl

Thank good I'm quarter our Christy, Executive Officer. Vice and Carlos you, Thank and call ADP's fiscal Officer; President, Greyenbuhl, is Rodriguez, joining ADP's webcast. Investor XXXX ADP's and Christian you Jan earnings Relations, Chief and for third and President here Siegmund, with morning, today Chief everyone. Financial This for us

you Carlos, look I be reminder new a agenda our the our in products, showcase give and over and want Before exciting initiatives. Day. held will there. have that to City, we on XXth brief business transformation to our event I and forward you Investor hand June upcoming New seeing include about York will update We planned an to call The on an

that morning's the of to non-GAAP quarter, our to remind today, results our supplemental release expectations. to as fiscal materially the with factors differ additional which you of such Relations statements as and the on XXXX third SEC also risk. these future could like on review filings can useful Investor that a these impact be to encourage involve current actual we We Moving that reference be some found events from that measures quarter in reconciliation this call on XXXX. we risk refer slides will information items forward-looking non-GAAP well the third will quarter cause I'd for the press financial contain of our the in and in as measures, website. include call investors, and during Today's to certain of our to description to and A of believe you items

to the over turn me let Now, Carlos. call

Carlos A. Rodriguez

currency XXXX basis. on quarter X% you, This constant and we an billion, to $X.X X% Christian, reported fiscal reported our morning, up good with organic results morning Thank third everyone. revenue

are we we revenue growth PEO down-market. revenue with quarter, in though strong X% our the to for and basis Employer with We continue which employee average segment, Services points. demand was our pleased growth retention, XXX pleased quarter below especially slightly quarterly are the for expectations, see increased the particularly worksite strong our In the

new growth Our bookings solid quarter our HCM with improving X% for continue in as business to was we line this demand solutions. expectations see

Our difficult to of continued down-market performance compared to we well, also offerings in our businesses international perform third and a were encouraged by up-market XXXX. quarter and fiscal the

from in see our investments we new broad-based force, fiscal guidance we to bookings XXXX to therefore, and increasing from X%. As results, X% you reported continue X% to our see X% business from to progress made can our growth sales are

adjusted from walk happy we outstanding. Overall, earnings improving adjusted our Our exceeded share in XX% to EBIT we're detail the share per a with quarter earnings diluted which as you tax $X.XX performance, our effective and growth our expectations performance rate delivered and lower benefited through and per grew Jan strong more will fewer shortly. shares in

big the Research data, user and and ADP Innovation global We're our in barriers navigate in workers today's learning, helping recognized leader as in Corner that Constellation recognized needs discuss be anticipate address will an invest our and innovative remain noted doing we we're machine HCM breed that for they we and innovation to the evolving a have like the enterprises efforts recently, millions suite of solutions leader core to day next-gen continuing it. of turned I'd Now, described strategy. how of experience. They business further of the solutions a a as of proud and new at our HCM economy. in HCM vendor in to every Most

FX conference, integration solution, Facebook's at with Facebook's earlier we week Workplace. Additionally, enterprise launched an this

clients to that Marketplace. Facebook by virtual information teams now in and for ADP our collaboration employee application This within and time-off Now, ADP can utilizes access for chat. available offer ADP Workplace through solutions pay assistant an is HR payroll Facebook's using and enterprise environment

enable strengths, migrations payments, workforce pace committed pool, to keep continue with Cash with drive with remain while our our with change higher we investments efforts, progress and mid-market client to supporting an make we our our now As strategic we and quarter, good transformation experience functionality. enables the established share for us, help worker clients' the make. to continue that acquisitions management broaden us the freelance acquisitions first acquisition flexibility. flexible as ADP labor manage top around invest engagement demand to and which we these HCM our organization the market and discussed we core clients also Last These Global with in Card, compelling increasing and with on provider with entire mind. WorkMarket will behind payment the transforming we to across us remain service our of business We innovation

we quarter, margin streamline XXXX help us in launched This expansion a and retirement our will fiscal early and beyond. operations voluntary help believe, we program, us incremental drive

shortly. and for us have continue In to initiatives efficiency. Jan you believe our we enhance our focused take our through our the details continue initiatives believe the will incremental of of will addition, ADP, quarter, initiatives value associates, to these we that help accelerated strategic We execution will productivity of deliver investors. long-term this some which some help and us

you XXXX proud our now to as two locations. I'm exceeded Alignment subscale it have associates of targets, of exceed our attention to takes Initiative As embarking to we progress our drive detail almost before, and mentioned successful to tirelessly meet XX happy targeted approximately our major increasing our and satisfaction. avoid that worked simultaneously service time this closed while we tell change ago, and exit on of have Since years have month, and client I'm and target Service our XX% fiscal disruptions.

in I'm proud while done large client and have to all migration mid-market, have which we announce more completed. We this multiyear now the undergoing a

We are basis particular, to discussing making, we simplify the expectations. in of our with our strategy our point ahead the our to in of and this Investor upcoming our at increase We the XXX continue Day to extend progress retention quarter, in tools, and forward look service and and slightly strength pleased our efforts organization was which are June. business with

sustained ability their We continue unique anticipating our to drive believe today growth. that while of our tomorrow needs meet clients to our needs will the

the Jan, forward the associates associates take like to appreciation early who also helped moment have I the our call into voluntary and with accomplishments of turn associates. dedicated over proud our and recognize retirement service to are acknowledge Before would in we decided their our who period. our ADP reflective talented how program. want a to have transition I of to These I of upcoming I am The to participate and through and will to deep contributions them ADP. today, working shape be of transition managed tenured we thoughtfully to look

continue on also and attracting, to efforts focus top We training, our retaining talent.

our I to enhances top with value unwavering that our This growth. our impressed in continue honored strategy, LinkedIn's award In be proud fact, groundwork for our highlighted achievements and recognition affirms were the the commitment long-term lays proposition, associates. other most the of and by of companies be Companies. Top along XXXX this jobseekers. quarter, were we included among This XX demand to

third the because our our further in associates today solutions for And in Our to stakeholders the clients quarter tireless Jan I'll turn best with of of efforts and of place review the utmost the for confidence tomorrow. our us over that, providing call results.

Jan Siegmund

you, Thank and hello, Carlos, everyone.

like would initiatives. Before results, I talk bit a little our deeper proceed dive with I about our to on a financial transformation

Carlos are approximately excluded million transformation and this from highlighted, charges which to on execute As initiatives, our continue non-GAAP we we of quarter, recognized $XX our results.

anticipated the incremental are XXXX to investments presentation, in from to improvement the voluntary investments already were benefits on are also of us efforts. our productivity be announced against our these financial believe quarter our retirement I continue our that contemplated initiatives investments transformation Some objectives. to million our expanding related other the drive long-term not made to $XX early investor deliver charges previously while focused want further clear these benefits of program. We September this from help will

pre-operating of program With We the said, starting now expect let dive that us this the reduce early expenses XXXX. into year to fiscal our help begin financial benefit update.

$X.X As of sale we Carlos to mentioned, fully quarter the grew lapped billion, XXXX ADP businesses. from pressure in X% and the and reported revenues COBRA year now fiscal our the CHSA

acquisitions work strategic On this growth of recent with integrating to towards our basis, them continue with taxes of offerings. increased happy into X%. as our are income We before earnings a we the and reported suite performance revenue fully

from overcome decreased third operating ago. impact spend driven and approximately earnings better sales the infrastructure included adjusted of basis to expectations. outstanding as from were to Our with and incremental from efficiencies, rate in diluted as margin XX Adjusted our pleased points increased point adjusted the interest FX in taxes acquisitions. quarter performance fiscal and earnings or our lift EBIT EBIT before year's last We than one combined with XX.X% year XXXX margin from and X%, was lower and share to improvements per largely acquisitions a compared XX% and and from and $X.XX, as grew compared about pass-through fewer we in revenues, benefited benefited continued growth PEO our efficiencies. year tax our pressure by effective well shares Adjusted our

of release the related quarter of which was XX.X% uncertain in reserves accelerated and in benefit assets certain tax rate tax being effective resulted the to tax adjusted eligible for of expensing. by the of positions aided accounting change a Our investments

rate, excluding XXXX. year XX% fiscal expect We to an possible beyond of effective continue onetime XX% items, to tax any

received the directors increase portion funded quarterly Job (sic) Additionally, to XX% Act the $X.XX dividend This will Cuts of Jobs we from of and Act] in Tax per increase April, [Tax a to benefits by our in U.S. be and board a the our Cuts approved share.

consistent increase Our of XXXX returning cash and our board shareholders. consider to annual dividend record XX-year another dividend in November to commitment to increases ADP's expects track with

historically good has payout ADP reminder, Overall, to ratio. progress make XX% to continued targeted have a quarter. As this XX% we a dividend

XXXX now results Employer in revenues fiscal grew Services moving our X% you through take segment, segment In constant Let our quarter, to currency. before the X% our me on year organic outlook.

in collections were well revenues XX% combination employee pays Employer softer of pays driven to This per to the in on in combined walk per average our performance U.S., function metric growth market. growth. the basis from of as quarter our lower control a basis margin you. growth a and include XXX,XXX. quarter dollar the reform. Services decreased was businesses impact control, grew unemployment this pressure to worksite of to with quarter solid see expenses. expectations points growth fund XX X% our due year a same-store tax Average now or points X% from outlook continued from Outside PEO largely with a X% and in we inflation The with lower selling X% the balances above margins corporate about PEO state Our multinational XX growing by to, revenue moment basis a by This combined below about offset XX double-digit and ago. acquisitions insurance employees in slightly as client part, continued approximately grew segment's X.X% points third was the and worksite growth wage take will in a employee increased the which with U.S. I compared constant quarter. was our in XX through revised FX. of

X% bookings earlier, of X%. are to and of mentioned to previous consolidated Carlos forecast we guidance we full as new business reaffirming raising to from guidance X% growth revenue X% First, our year X%, to our growth are X% our

growth For previous revenue anticipate guidance X% segment, now about Employer to Services our of as the to X% X%. compared of we

While growth XX%. for revising previous revenue we to the PEO, guidance compared of our guidance XX% XX% to about as are our of to

be interest $XX now We total million. revenue investment from our details $XX expected of which compared million forecasted in million Relations in [$XX compared the prior investor The to our million be forecast $XX strategy approximately increase million also forecasted on now expecting can million. presentation to with are funds client to to is $XX $XX impact client available increase increase X website. slide found in this about to The million] $XX of growth is prior extended to our up Investor funds (sic)

contraction make EBIT continue initiatives, of adjusted be our to benefits from XXXX. impact. you guidance to our we the now points forecasted acceleration our see Overall, as compared our can we accelerated begin some adjustment, of consolidated an the about As of from fiscal tell our anticipate in to from flat basis investments transformation year XX.X% margin to XX previously

now quarter, we fourth this year. most the continues is contraction basis basis easier of flat forecasted segment approximately incremental continue about of revised XX segment, expect This our where to finish compares have XX a performance Employer previously margin margins compared points. cost we XX anticipate acquisitions pressure to As from to the be Services strong we of for to in coming to from points anticipate and level, a At ES guidance FX.

our the to XX we margins to PEO, to flat flat compared previously points. For down now basis be anticipate about forecasted

compared XX.X% our result XX%. forecast performance incremental fiscal XX% with now As with adjusted third any a buybacks dilution we this momentum rate tax tax quarter forecasted of equity plans. anticipate our expect of rate, growth to were year of initiatives. transformation of quarter our we compensation to XX% previously We earnings compared diluted of related further an the effective to share XXXX share per adjusted now our does to benefits forecast not of effective contemplate for XX.X%. adjusted the pleased beyond prior This in XX% our to anticipated Accordingly, and

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

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

Operator

Thank you.

the our of Bank Jason will of line Kupferberg question America Merrill take first We Lynch. from of

Your is open. line

Jason Kupferberg

of Good increase Hey. nice results. to good just there. morning, margins, set and obviously, to the see wanted start guidance on guys, I

looking nonetheless previously almost implies at that I basis comp, think now be than you're envisioned. from year-over-year, benefits So, will June which that but points. quarter better flat easy I know an much your XXX up

you of last-September? program won't fiscal until start retirement we thinking the how next about start benefits expansion XXXX early multiyear margin relative to the even So, outlook should the potential had in fiscal given kicking that for year, given trajectory the

Jan Siegmund

you. thank Jason,

have progress you give relative that to As particular of Initiatives, compare addition guidance having we in making the Service Alignment will into and on sales last our easier our we later to migrations, number completed have a our But year in quarter, XXXX. we in made an know, force, fourth anticipate. the that investments sources for the initiative have chosen XXXX XXXX. we The hope early to early expansion that's those in as work we will who helpful. employees the drive then transition margin that retirement workers kicking quarter the of in I retirement really going in fourth in be – that chosen is on

Jason Kupferberg

Day. we'll color at get more sure the Yeah. I'm Analyst

growth? well I retention change follow-up, nonetheless mean, up. the forecast my big, know as on the for the callouts Just any bookings but isn't strong nudging result you as bookings strong I it are

the So, I line, along the it was notably market trends more are now have these does are sustainable retention, just that And curious then, same like others? if it complete? there to was any there underlying the than parts seem migrations relates end of improved mid-market that as

Carlos A. Rodriguez

force the right, I say bookings. meaningful, size would because new growth, a I in new dollars So, terms, on on it's – the the bookings business the think new absolute additional of change pretty for sales you're in but sales us business think percentage bookings, the business of modest given lot it's in – our relatively guidance that's

On retention have easier did an last we year. the versus side, compare

have that an I ADP's caution really If every a I – the basis, the retention given losses, you or we can size, large numbers, impact... of quarterly remember, call, we think because think it if calculate can just it even you I two one revenue have impact way on everyone

Jason Kupferberg

Right.

Carlos A. Rodriguez

a was quarter, to ...on one don't helps. I then, we have and the of here think have losses, have year when which third large I in didn't of quarter the opposite, And this is now a last again, the you great retention. And which say it quarters. quarter those you lot have

a I my of of the you kind a it. years the activity, good we our obviously that it's we've felt easier broad-based, multiyear a been But was back pressure so And had also result up-market is effort of that in in a in would that have say to know, of that back also results the retention think ACA was see I terms we that that undergone climb an by improvement as of But comments a as of result improvement part so, some which you can there. was lot and as migrations that really compare. of and the few mid-market,

that proud was. a think very in as of think it large of retention to in results we retention – geography, but the segment I somewhat also magnitude be to other mid-market so, I'm guess at I diversified and as So, ADP, have it has us since well, so places I terms of usual for improvement broad-based are and

Jan Siegmund

is positive two in that good components improvement our taking add very means time. a of into the operations I'll we also trend our one, satisfaction broad-based root, your year at by point Carlos. last really answer, scores, client retention in our a are which components as are Number undertook supported continued consequence, and service our improvement, Maybe this to investments service also

So, those some have I into retention supported on the we of saw improvement investments then and the broad-based translated quarter. that think

Carlos A. Rodriguez

admittedly night one leaders our some and actually incredibly stores note satisfaction years a on I I is positive. used now our trend have on scores. compares, We there with Yeah. service received have well. from satisfaction because of but doing a and our business think update quite term been we measure stumbles renaissance NPS a from kind They last and multi-quarter client the unit really some ago, an client of even the upward couple trajectory, difficult did struggles

Jason Kupferberg

comments. the for Thanks job. Nice Terrific.

Jan Siegmund

other have we comment But still actually objective early scores, number about and Strategic one strategic – of retirement of of I our flawlessly I'm to easy and client to satisfaction And that retirement, that which like gotten executed disrupt early one happy sure have careful not is, report think in those potential new Initiative didn't things terms we improve the to NPS locations. making the our side but Alignment things a do lot and Alignment Strategic the was great to have the – disrupt Initiative have Strategic good satisfaction new that, had, client locations, is to and that, the news is Alignment there that. those it we in satisfaction is Initiative, were in because on sorry, we on client have on, execute leaders obviously, last on the our our associates

Jason Kupferberg

Thank you.

Operator

Thank you.

Ashwin Shirvaikar is next from Our Citi. question of

Your line is open.

Ashwin Shirvaikar

you. to retention. the Obviously, go So, but I volatile are also mentioned, a new of it's Hi, as the back the you? linked that How want the attrition to with maintain of or delivery, I delivery guess topic assuming more on, sense? makes Thank to if is Carlos. up metric that service spend you on high have a spend service a is question do you of or level now there can more technology – the that scale is, of was that

Carlos A. Rodriguez

I Jan – retention, add NPS spend large – in we businesses could be client in has satisfaction actually our probably increases where some service couple large like had but and be and Well, we've of increases large to to clear, in increases mean, in a our comments, of declined.

of, So, at contacts for we're are our our know, part as key value in transformation reduce business number of but which better costs, drive get clients. to you – is – obviously, objectives our don't drive non-value-added our call, initiatives we efforts of the what one to

we years invested of operating kind for to invested to can our And hope a both actually, us important sales. also improve where see, X-number next drive client as improved improved that's for of and from places to are in and you us thing and service, standpoint. an be the accomplish. have places results able that's satisfaction we've able there leverage we've and retention a in better done be where to productivity, for obviously margin, So, efficiency, are there more But

Jan Siegmund

that our Yeah. in into service service reps. slew And our service and have cost. drive platform. to obviously, I've investments and we operating mentioned whole better, that only service obvious with augmented, have to additional in will our most the the of of is, locations to clients that finished environment, our mid-market But particular advantaged details improvements simpler Carlos mid- we one the are capabilities in initiatives two new migrations cost efficiency strategic optimization implement and in productivity dedicated that effectiveness labor single will faster our service a operations. a allow The add. of we productivity then made larger particular now and a our We up-market,

effectiveness will combination, paired we I higher initiatives, service with changes able to service with model, our to through levels that so and So, achieve and strategic both. be and efficiency think

Carlos A. Rodriguez

also growth, mentioned, and very the through might but distraction, think of be related went bookings over. issue I were to our would well. Obviously, business lot help And challenges just that force. as efforts over around Jan the other challenges some we say to was had to service I sales a force there as think satisfaction just I improved was directly couple that a really grow these not as ACA, a grow around not of things much ago, sales simplification, mean, years it when distraction of client difficult one our we new a should our some some of mention number the the I

overs a business pretty the I for bookings compares. modest and quarters growth very was getting an So, and of help think, that several new grow as bookings improvement was again, despite increase, this suffering I X% really Because, that with it difficult we're after guidance, quarter, in us, should very, growth fact proud well. think behind it here

Ashwin Shirvaikar

Those are good points.

benefit maybe voluntary then time So, you margin follow-up a from retention and there spend question from benefit service sounds delivery termination. down over but from on your the coming scale that combination I the comments, the – guess it as margin becomes, going is of

preference planning, you things the And other than if becomes bottom you of termination that about might your savings could degree, Thanks. question? those much voluntary other what how general, obvious in program is, reinvest the the it and to explicit – then, and you're is that? part other line the there would to talk to So, flow are

Carlos A. Rodriguez

the for of to the answer the reinvest question. it it. that flow to line and to I came all to wants some bottom right Jan want the place You

when between, over of truth the So, margins longer-term do view a give Day, we ensuing couple will will XXXX in we, when guess our we for the objective more of I be guidance give you'll you and and kind know also years. think of somewhere what in Investor

I think in are in to us about. premature just the you and a get want So, margin of the foundationally, This I what add out unfortunately kind terms all of improvement, we're being in for little able things said that dead-on talking about front to talk of but is there just is capability been improved the to drive we've margin. trying possibility to multiyear

little there for is far the so numbers what exactly question with three to last to But groundwork in the the that migrations, For all feel I that voluntary of trend a initiatives, to again, intended have that it's about these here very or add positive invest that. more get a some. the to been us are first stronger Strategic will are help these profitable just we you that stronger, be But and margin I company. terms Alignment completing all we've us, the in word is of too no years, ourselves sometimes means retirement, going out the premature underlying of front Initiative, early be. two laying is think good

Ashwin Shirvaikar

Got it. Thank you, gentlemen.

Operator

Thank you.

question from of Evercore next Our is Togut ISI. David

open. is line Your

David Mark Togut

pricing clients, broader in you're surveys, increases in on manager seeing curious whether X.X% We're modest comment picking up base that your of I'm and you payroll our of discounting? of Could price at morning. as Good least net some clients well? from you. from improvement your Thank

Jan Siegmund

of would that increases discounts that immediate of or So, revenue any of quarters the for and impact we've growth now. of targeted net stable a X.X% is receive number about concessions we price our

Carlos A. Rodriguez

Yeah.

the the I might think, we pricing of our much the a standpoint. that – than of seen a think But obviously, broader the out do folks from matter is kind the I sampling marketplace. change have some think the no in in we I really maybe have environment dataset fact

think to to is intent I is our which remain consistent remain competitive.

bit there's As But multiple see, last accelerating power the trends play no and that can would these of themselves than with the upward future to costs more all a sense quarters over years. sudden are out say I not and that's you pricing decade. little environment an we – to the labor It's underlying past inflationary But kind trajectory. on think of the a terms obviously they I report changes. the things, But multiple like overnight, change. give news appears in right probably would beginning have you pricing if of now, to a

David Mark Togut

and then asked you were fall. a last of if what it. we about any engines, they've engine, that? if filing a talked of curious introduce our backend surveys, is timeline payroll aware I'm Only X% your have follow-up, about so to in And Understood. and the new timeline payroll tax and also tax as you're you processing clients filing heard backend your where replacing something

Carlos A. Rodriguez

is are clients So, and those on the them. both production actually that of pilot in good news have

to that back-office our said we've these occasions, systems of I As on are are transparent number think a relatively clients.

don't calculation with that and them clients really we fact, In contact gross-to-net expect have the future. to have today, in don't direct our engine our

any transparent – an hire really from of at Now, perspective reasons client-facing would modern be the from human infrastructure see someone doing is change maintain, company, would to capital to you the being Certainly, will their service employees largely, these technology reason this or that develop – be be besides the trying we're when there them. enhancements of will won't or to back-office obvious develop of manage is, associate and something is client that not should that their clients But on, a some typically as be easier someone it and think faster is they perspective. to our there to at not all. exposed to cheaper

will that engines. be solutions back frontend connected are gross-to-net new our Solutions Mobile Our to

efforts be say, that a I frontend might "client almost there also sitting what it's – the would operates to costs and and despite expect guess, single-stack anticipating. with it from HCM migration, I if going our always would We're a be – frontend but systems, it's here be everyone no there no, think migration" mostly talking I is is you we calc And technology, not almost I will. about HCM that from don't key So, to competitors, should well. positive in hear will I the connections gross-to-net you really you as is the there's guess, around really is separate that platforms even if add engine that

than modern it's – more we're on really different stack what doing no just is it's out what else technology. there, have not So, anybody would

mentioned I know clients system, now publicly, on low-code back-office number definitely that have our at positive as talked system, all of about but these is Investor if future developing that and about a not we're in of you on do think a we've that is we front-office And and Lifion, kind that talk of facing way platforms I don't platform more their the Day the in that impact in well. a June. we'll pilot organization a our

David Mark Togut

very you much. Thank Understood.

Operator

Thank you.

Huang question is of next from Our JPMorgan. Tien-Tsin

open. line Your is

Tien-Tsin Huang

does expect measurable retiring from the in done, old wanted segment? completing much. your mid-market I to ask the curious, retention platforms? so is also mid-market it being trigger a improvement in an cost to conversion savings And on I'm the migration Thanks here reasonable from

Jan Siegmund

there are follow on made has choices for continued path had as decisions retention and that hoping to a clearly or impact for that us of migrated, improvement either We and to not. be clients been

of don't six I if now, will the had in retention probably say, should or in the improving way quarters know trend because a continued we there improvement. I would so, mid-market. change be huge And seven

behind migration-related But the higher be newer call for And impact had so, it and – and there immediate cost for for the of the our short-term, rates, shutting savings long-term, it. the but major in now progress. plans here long-term smooth continued retention is because so more yes. there's kind should down In a improvement of us, platforms no system, everything continued strategic path

Carlos A. Rodriguez

Yeah.

is money where the down-market about talked standpoint, for support range our the is. we client a standpoint pure this technical to on down down-market And direct in service. the performance not several we story be around organization The – cost cost successful and really we you yet, improved accelerated retention, shut think The clients from from is just ago, reality years is et call as new incredibly but the migrated platform, continues improved and in the, and But to haven't satisfaction, savings business, I of was cost cetera. in great the of that we this our were cost the see a bookings, it, down-market sub-$XX the from money focus us. platform before, just that RUN. said can when frictional million a all business implementation then

we having so, that, a in the similar week. finished like expect I said last mid-market, all but just last story obviously, And think client we the

we an I the said, quarters, But And six in was very quarters of kind example, ago we quarters the took it story, in so, take if migrations still got have quarters right real But was in really just where have forces. execute. we down-market many, had and as great the it the but retention that the mid-market seven – traction, just laid be a or two like than fewer the several very, was like the in we several last like laid migrations heavy other or six fewer better. quarters quarter, despite a as They've retention go have two of also it'll is quarters to think And mid-market and five – story. of year that were moving is executing think probably foundation is retention many before in because we which hope – Jan this we've ago or mid-market. platform repeat not all to really was the cautious a and in but in we had strategic they last direction, retired. you to our the that competing helping I One rate, being platform alluding what was legacy the had Jan we higher

So, happen, hard optimistic. but here tell we're to going exactly what's to very

Tien-Tsin Huang

Okay.

or my just the then growth this Now, up XX sales issue on side PEO? with double-digit, below we'll that. in follow-up and the market a breaking PEO a unit the quick all And issue for secular consider is

Carlos A. Rodriguez

probably bookings think a short-term, sales to fair the business issue. a say I new in it's issue, that it's

think of kind I there's trend. secular don't any really So,

little back you of our of in units. We're that the if under business Jan other is will. looking in of think As that had you down-market business then in still from PEO, of know, closely. And and new driven we're we demand our a kind PEO we terms this in kind referrals business of very, XX, particularly watching at very of incentives strong mentioned, bit as because, in our a I the growth struggled we bookings and mid-market lot have quarter the

think forth. frankly so, more we're this States in the have and of never we're in a growth tweaking second is very competitors. United with and of always it's absolute acceleration. employee still of thrilled we – large, But But deceleration, is so the than now, still our adjusting I And employer PEO think our terms we and prefer I – pretty incentives growth worksite dollars in ways any

of And think look you it, but the a to feel look strong here we good have well. so, we performing really business we at dollars, when proud absolute I and one that. feel And pretty percentage like way very obviously size is it's at in

Tien-Tsin Huang

you. Thank Agreed.

Operator

Thank you.

is question David of next Grossman from Stifel. Our

Your line open. is

David Michael Grossman

you. Thank

any favorable last you other an execution count understand there still think So, for is you out XQ I underlying head out us kind bookings with the year. just that But comp. another hit those trying sales need can to mentioned in strong business? parse versus in investment to of the think fourth I the impact parse Any the to I'm the the can momentum Carlos, XQ very sales target uptick even metrics is year you the the And help of product quarter service. result, in that share? and and factors core way

Carlos A. Rodriguez

sales and is productive. force I you're productive. to point our quarter we one step made, sales think I scientifically become the goes any fashion, year, item. sure and Every an think more become a so to kind alluding change those in new single on for But hard people it's that it as as they investments more more last all time could more – when add have we to call and impact,

I think helpful. that's So,

The our business as help, are helping is have because well. we and number. bookings comparisons very think new always and that we're very stronger I products I large large think a

an compares impact as And well. so, the I think have

business I as good very So, investments portion color, I very Jan force is growth productivity driving has of but if other the expected any but don't some of we're is we our that think sales know which of from happy it's frankly nice see. number probably a things, bookings new a our to

Jan Siegmund

force in maybe X%. add that it you our a count can about David at sales year, I little Last number a grew X% are to head bit. and we currently our might help we

that So, to being driven productivity a growth product, Carlos is the or the productivity refers large largest chunk new of by one.

We channel, strategy. expanding year's sales our expanding we on presentations have strong our channel investor talked last about in sales strategies our are which are that focus

And so, for channel accountant great success we in to example, continue the our see, mid-market. with strategy

last pleasing products on are were have well. clients, success that's came our and large and supplemental now results new it's and executed to productivity, numbers law they're very year that to really gaining a out relative that improvement. inside sales we associates of and our continued an in building Those where sells We that strategy productivity predictable very

new In versus and AB on presentations basis a our talked addition, that haven't our regular to growth a investor component target is doing (XX:XX:XX). logo we drive accelerated

bookings to business logos, half new a clients mix than selling new now, product kind being believe sales between to clients. that we XX%/XX% force, our from of the also growth complement competitive the sales bookings additional to now And have capability winning have is product is them, because come we clients, And it's shift we comprised force. XX% new historically, have to about we by more set experienced new which business by and to competitive great ADP XX% great of business balanced sales. really existing addition to a of bookings and to seen So, logo a of being new the our and in a this of relative testament of driven new the new more

David Michael Grossman

engine. it on drills, that the about Thanks of just cost quick problems that next-gen the new business. are platforms a you new what more however quick give to are And more or follow-up Great. competitive of that a just being to the on give you're can know low us the for new to the frame sense kind at it's impact how I helpful. question whether trying code maintain they're products introductions solve? on kind product said update and Investor the going to key Very internally the get the and And that. Day, the that's platform you on developed, one just holes the processing

Carlos A. Rodriguez

with costs result gross-to-net of environment engine legacy the incredibly development maintenance to broad the in new of talk partly question exception and can in about we themes. cost a but think long productivity, changes implement does besides Again, And so efficiency, and ability these processing terms just obviously, are of deployment, is, just leapfrog managed competitive frictional very in expectations your you and I terms And forth, removing version-less competition those of each time engine, exist our two the broad I that, all but speed backend, you clients, of development, get that how our I platform flexibility think technology. people the as tax kind also it it of your the a of the powerful. obviously of address then are obviously around certainly code low and and tax In for cases think around case and how One it speed and really to you is that and think also business a people of strong paid. some for our intended said the of I'll categories. capabilities get at question I beginning had was on two give is ended maybe the the

David Michael Grossman

Thank you.

Operator

Thank you.

is from Morgan question next James of Stanley. Our Faucette

line Your open. is

James E. Faucette

from threads And the things about wondering can draw happening what's separate on we I think retention between seems but like contributors directly better on kind as what are you Thanks talked the drivers, economy that bookings to of it including ADP you've go control common wanted bookings the the of are of maybe a as you've in and retention? versus where market force kind you force that sales back if whole. rank highlighted kind can order new in thing. or has lot. any strong and and sales perhaps like factors, there the a being I'm

Carlos A. Rodriguez

a around onto, I for closely it as is improving think connection, of among think us there's is to momentum NPS, no linked. you which the of something The who in strong the onto that most not are just have momentum, a retention, we've empirical people the way that it – well. the I been there's other us when very, while most experience are has you're belief question, very that and any have they we but way don't of have drawing tell intuition seen improving thing satisfaction, because improving would you that some go business, and

the satisfaction, execution, order cetera, around up strong experiencing effect. item sales probably that a less that force sales client on now the momentum obviously incredible of one. to a our ran we on of just markets. quarters you selling six to is a company new when a say, at openly very the with having and labor really that refocus think and We new really issues, quarters service, bit manage very labor I talked opportunity environment focused on people that's on of So, ago logos number I'd probably standpoint, tightened if halo an fronts and rank was little what help difficult is regulation. et into about We compares ago ACA client is or the probably administration execution brought difficult Jan the about, talked a four I from least important practical think most But creating a

war so talent Employment on today, hard, National government and obviously a with again. our saw for getting consistent Report the it's reports definitely You that it's

we that they've done. different good that's optimistic to in business So, way, force what a was exactly and hopeful sales our were and new really opportunity for drive bookings and there retool

through of some through and been been it of has some has product, Some training, it been of it incentives. through has

James E. Faucette

we the there we a what a chance in just et then digest cetera, going improvement And rate, had cetera, you've should for quick expect Great. question is, tax tax expect change forward? further – et for opportunities Thanks. in law, to should as

Jan Siegmund

less to – items outlook what to those differential down rates I a we did of come beyond U.S. I excludes have bit XX% and gotten our tax between opportunities XX% XXXX, The typically that and have little efforts, onetime in hunt overall we that gave say, have XX% international the as Yeah. reduction that fewer and the the

as number. anticipating. honest think I an good what a XX% of we're is work can, clearly to good So, but forecast as We'll the we XX% that's really

James E. Faucette

a Thanks lot.

Operator

Thank you BMO. next Jeff our Silber question of from is

line Your is open.

Henry Sou Chien

Chien in Good calling Hey. Henry for morning. It's Jeff.

related providers, on comment is – Just kind wanted that much can on an in seeing competition those are impact? say to the and software if bit of could to cloud follow-up improvement the little sales some of still question bookings and bookings, having you versus that a the players of of you're you and sort how

Carlos A. Rodriguez

competitors competitors that kind how have we net and we difficult. in if Well, they still some from we've the lot will, from of clients every a versus win/loss of seen take look many segment. away we there's are you in a When take many how areas, then at us, couple ratios, improvement some

quarter, to But it's our should and much I crossing about line, that's feels the about diplomatic without that think our how competitors. depending those segment pretty are one but think say, that a that's our quarter we I strong particular I'd seems it or like give comments to we're on not changes as – of somewhat competitors. overall are be as but in are I figures give improving, versus happy because are around about color it can also position, that volatile competitive it we our try obvious

Henry Sou Chien

Yeah.

Jan Siegmund

other it's fair in this competitive. It the quarter Maybe meaningfully to to has competitive not highly changed environment remains say quarters. that

Henry Sou Chien

it. Got Yeah.

that. a new trying with of Thanks. and product is Fair seeing you efforts some from the mentioned some enough. the the that there, standpoint should or how think improvement about to sales we you're that down-market And of mostly think Okay. that on of logos? Just

Carlos A. Rodriguez

seen my positive client momentum career on many back that The the an in earlier question ADP, execution things performance it one. and in so the just focus in our to performance I've it's one specific connecting creating best at and about down-market to that things, it's are retention hard really is to there other are probably

strong the So, not as have just for Services retention. just that across business have and smaller business also services Insurance an new are incredibly business companies, to bookings our Services and business strong an executing Retirement growth, example, we we payroll double-digit consider we just board down-market really well, HR but be our a

the example, points to losing basis. less Our several growth, was retention that hundred clients. a in the as up on because top in ago much And revenue to with helps basis to years you for don't consistent line drive have our order you're course down-market, quarter it over quarter of several growth, is sell where because

businesses. continuing board And strength the just it's outstanding business fundamentals so, of in the great the that bookings think I are across just execution with and results, new by leaders really improving those business the driving all just of the

Henry Sou Chien

Great. great hear. That's so to much. Thanks

Operator

Thank you.

Goldman question James Schneider next is Sachs. Our of from

open. is Your line

James Schneider

question. you Good that you provided wondering return my the for morning. new detail I if was earlier. bookings could Thanks taking to maybe

in mid-market on you – complete, whether that think I but maybe international. touch in in the called after that, out you saw and And the quarters? about the down-market with was that platform that bookings? what you think whether coming also now in you driving Can can strengths talk the some strength improve also transition what

Jan Siegmund

bookings good can channels we the the that Part Yeah. across break about new Carlos saw the meaningful really news all of here. is a I little across give business improvement board.

The to only the that it the really down-market business look in bookings up-market, but the if growth we a had they mid-market, of continue good all it each channels international, not contributed basically down-market. focused new was was and by you So, performance it, to do quarter on have.

the mid-market, a a the there's the on the haven't change, and sense broad-based, mid-market. affected So, really and in the sales offering product the really in process not in migrations

and been mid-market. and competitive very product, continues selling Now that leading the our has to have We well version, do cloud-based current in Workforce been

particular the to it's a stand performance hard really segments, solid point in across out, the quarter really was So, because all Jim.

Carlos A. Rodriguez

existing migrations I as bit our this legacy a force of example, the the an a they're because will in happened to distraction. technology, sales mid-market little to they the rep a a being with in still there's when an platform, sales rep, when that sales new distracted we they and migrate does client get sometimes our say have doing has call also told relationship down-market the were that and

a sometimes force additional that opportunities Now, was our products as client historically the to new for to provided platform. sales sell migrating also

there's be less but a for to distraction, takes, going puts So, that's it's lot sure. and

James Schneider

little That's there of have color. Obviously, have follow-up expected you you normally just in a mid-market bit made, the a risk maybe complete And then just that point transition. would Carlos, the happen. as retention a to metrics that to helpful as could I been that didn't the

may have what like of about a kind or So, sense tactics whether board? Is And you can to across those mid-market? think something you up realignment broadly numbers kind be more the continuity, you service retention us keep used in maybe give it else? can of those the applicable

Carlos A. Rodriguez

were the dedicated smart, people creative. think very who tactic I was

due of lifetime just taught out when white-glove our the on of us clearly very mentioned a to ACA legacy And had We when the really so, were to we these ACA, of as in in are made they large but be version service accelerate only lot and losses in could've new could've some kind in of our that higher migrations platform migrations I been. big that what they value about as retention products difference because came having because what you in they was our platform, a to challenges platform meaningful rates not worse. think think terms called legacy experienced approach than the current as big of heavier been I way losses our our the had our we using the a available the we clients platform,

and it the just of swarming with impact creativity just execution, frankly think great it order white-glove good a so, to the work. And transitioning and in to those service I negative try around did minimize really commitment, great migrations was clients

hats So, leaders to there. the off

James Schneider

Good to hear. Thank you.

Operator

you. Thank

from is Baird. Marcon Our next R.W. Mark question of

Your line is open.

Mark S. Marcon

morning. Good Hi.

I seeing the source new new logos Just wondering that more what of just I'm wondering bit competitors, could is, How have would some are necessarily provide maybe expansion logos? And new characterize color traditional some you the the not little that players with of of you out if a are Specifically a then an other coming from logos? regards but follow-up. to there? maybe you

Carlos A. Rodriguez

Again, hate of to we specific more and of be it's meaningful, that just for business that for look but maybe example, a I think stuff – think we losses to broken great in it's of one competitors, nobody a that so the deal accounts there's think but we it's and so our to some broad-based and close related when safe record, new really because our then, market same I XX% that the But many up-market And kind competitor logos, at is losses. is really are true our I've isn't there in of a mid-market competitors that to also said thing losses, before who I I both even this that our say with bookings. couple come new the that share. have

success sales would be also generally we force. That each really the most speaking so, is competitors but to, of the execution clients but case where by true, segment, obviously and lot I clients. the that's difference ones have maker we the directionally would in pulling varies And think our in biggest lose of a

Mark S. Marcon

you're regards to on Now and about internationals then Workforce little about seeing Now push Can expanding been up there with some And you Vantage? with what your have Workforce discussion talk a bit that there. Okay. versus nationals,

Jan Siegmund

logo the think years being last Workforce that offered the new achieve. Vantage that incremental Yeah. and had up-market, the to two above X,XXX for to Now is growth growth the for now Workforce We continues in I Now new clients logo product

of both our helped combination logo them the has new So, of growth. of broad-based acceleration

Carlos A. Rodriguez

last had low us to I years. up-market year compete we kind definitely the we I think available a But safe of And been say has it doubled-down of end – so, it's in for in few of a helped the desired that think I of and kind competitors the that lower I put very, strongly we and it's up-market the little impact. the or think something Like emphasis, bit, where and more more and Workforce our in the think lines is Now end having and are and particular focus very – it's working. in strategy up a there few

Mark S. Marcon

Thank Great. you.

Operator

Thank you.

Our from of last line Autonomous of O'Neill Research. Matt question comes the

Your line open. is

Matt C. O'Neill

and All you. questions have asked my Thank Yes. answered. been

Jan Siegmund

Thank you.

Carlos A. Rodriguez

you. Thank

Operator

Q&A over Rodriguez Thank I'd you. like And for that today. conclude to does for Carlos to Mr. turn session closing program our remarks. the

Carlos A. Rodriguez

we're afraid think orderly it So, and at pretty and thoughtful, at of we've to demonstrates way. in we the change, not looking a – that have strong obviously, a had so culture we do want we're the one ADP to final just terms of happy lot balanced couple and about it's the I but year that a achievements of comments, I momentum this we and have,

to with board. as transformationally the news done June the how board I looks of mention the And June. at forward operationally things the who and And the progress to you'll to you some a know look our of Alignment and of the migrations members both doing from you lot all for I'll look program, to dividend is brighter Service value add we with and in our and for making did new also great in make shareholders want these Investor standpoint, with I the we for increase, among want us forward again of which reemphasize other a our build to With rest seeing proud I a two forward protect them ADP. that, Day, of I am at and besides I bring initiatives we to retirement they're these the sure future I that board more think I Day ADP. working the enhance experience, thank and associates of about initiatives mid-market joining governance hear of that really Investor efforts we're and the just our early

Operator

may you program disconnect. great all a Ladies you This conclude thank and have gentlemen, today's conference. today's Everyone, and does for participating in day.

Automatic Data Processing (ADP) 2 May 182018 Q3 Earnings call transcript