ADP - Earnings call transcript Q1 2019 | 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 First Quarter Fiscal 2019 Earnings Call. After the speakers remarks there will be a question-and-answer session. Thank you. conference Mr. the turn will over to I Christian President, Investor Relations. Greyenbuhl, Vice ahead. Please go

Christian Greyenbuhl

at our as investors.adp.com accompanies are webcast. are good Thank quarter you Chief available These Financial fiscal Earlier on by ADP's and joining Investor you, Executive of Relations for XXXX our of results website SEC's this me morning, today's our call and reportable Siegmund, Christy, Officer. and Officer, everyone, and first find thank website our the also earnings history materials and where that President Rodriguez, will and quarterly Carlos well our fiscal the presentation pre-tax you Jan revenue segment. for earnings morning quarterly With XXXX. and released today investor as Chief first-quarter we call

During year fiscal differ in description will today to on to such that of also full you be these useful Today's non-GAAP of events to which the will XXXX. of quarter our first from factors actual that our measures filings current reconciliation contain materially review and to first future to our and these the year for involve well as refer information earnings could we forward-looking quarter SEC certain can in and be of and A some a additional call risk. financial of statements expectations. encourage release. non-GAAP found measures We results impact we fiscal that the XXXX with full cause exclude as believe investors as the items items our call reference and

various implemented. you reporting disclosures remind which like outlined are would I the our last fully to and quarter now to Finally, changes we

disclosures. we accompanying the Accordingly, will of have supplemental provided new additional with result these which of desire guidance. new our our you we investor understanding noted a help for As slides we enhance PEO disclosures presentation and believe some a of these regarding in information changes,

over please reach With out should have you always, to any I'll not As do hesitate call to Carlos. that, questions. the turn now

Carlos A. Rodriguez

you, quarter with and and of X% This morning, constant we Thank XXXX results up $X.X our reported billion, morning first currency. good revenue everyone. X% Christian, reported organic fiscal

with was our in growth was part above We by aided Services which are continued performance Employer which PEO of segment and the expectations revenue this better-than-expected downmarket pleased strengthen our offerings. and our

from share earnings share adjusted Our a well grew revenue and to outstanding as as rate. strong per effective to per lower benefited diluted in fewer $X.XX XX% and margin addition shares performance tax

in slightly which our new the grew our first bookings expectations. in We also Services Employer positive business momentum X% quarter, so ahead of

year enterprises. week employers that bookings the to Employer and report around at digit HR service, to overall PEO September saw In scores improvements attended to we and continued into In our fiscal addition double which we ability continue we in momentum fiscal our confidence were from retention especially annual accelerate supported long-term XXXX. revenue discuss from supports basis to our technology a satisfaction while pace changing the at the XXXX demands you anticipate the global point following XX excited Industry we At in we a fiscal with a our PEO, of we are Investor a to for in ES Analyst continue client of Las At XX Lab. opportunity to our once Services to our innovation one company start from great change basis offers had with the no pleased were innovation our in to strong expect last Vegas proven to discussions that Overall, and in the and Day our efforts our with point quarter renewed bookings, quarter company pleased by those improvement our we strategy with each the of also longer our has consolidated first these events both of we efforts in Chelsea June growth. transformation care. discussed and Day, Tech we technology, our small service when businesses with again

clients an as complex with has our our were of thrilled we served how year pleased accomplishment to business changing and and stakeholders. ADP's category, of wellness behind and needs HCM more Day, companies. in what and that Our this way address winning growth. XX in next-gen while award you unique kind impressive discussed believe similar of is nimble. our we challenges At start-ups, ADP are the are that the done. this of for ourselves change transformation increasingly journey we Awesome workers we At and the of ADP, solutions our unparalleled work. firmly we our about for take embrace excited the Analyst that Investor tech Tech landscape. we that we underscoring needs. New is are force driving evolution them taking innovative We help we rapidly than world reception the to company a also we financial it Day our our Each award, a our innovative to many Industry Tech HCM uniquely the shared always place spirit this Wisely earned manage HCM rapidly industry we year's represents of year received an is home work for our we their hosted analysts solutions. in have to means key built evolving fourth as and it believe midst Quite innovation consecutive were and with in by among literally, of find big Change what we This and We HR gets with our at our this and are redefining opportunities work

the the when new described event entire market. as after this HCM point the our change In well-respected he platforms one fact, could that analyst summarized disruption

have development new excited to live targets good on our we continue to make We and several progress efforts. and clients our on platforms are our

digital being work build traditional model to in about evolve, designed are size further new Wisely have continues provide better and of is as can wellness are traditional model As which and full tax calculations a in level. augmented engage real to access and mind, industry our payroll of instant pay-on-demand by with evolution management their today attractive a development efforts weekly worker this and such our scale other financial access it to pay, we to is which With and this features. tools time at providing ADP, engines workforce the biweekly Taking payroll the individual services excited replace by any payrolls. beginning employers step wallet, to by new and to to

can In with leveraging insights in can business pays One our insights. drives leaders with are DataCloud great employees and and solutions. to benchmarking leading actionable this data technology, addition unmatched set to one six our practitioners make offer data to through HR through empower such ADP clients, scale machine the and we we U.S. depth to our Mobile tool solution unmatched to ADP decisions. which already and executive leaders many types faster that of which and manager continually is other to our better, industry integrated into leverages smarter and time, use insights uncover location, HR wage, sift is Solutions learning the insights app

payment Celergo, further ex-pat services. completed new the a provider During and multicountry also including our acquisition cross-currency position services. The payroll payroll our leadership ability global capabilities of of acquisition we and enhances strong multicountry to management solutions and with solidifies our a deliver quarter HCM platform

In it addition to these significant extends new also brings of our experience talented with a team with key offerings, area over payroll, in remains to multicountry footprint ADP. and for Celergo which countries opportunity XXX a

global, recent and and of acquisitions WorkMarket our including of about are flexible payment and a freelance and demand solutions. collectively in changing ability Celergo workforce the to We which Global Card investments incredibly is other that address expand excited potential Cash increasingly

Now to create to objectives. our formalize, our has and the touch of some office which needed to been transformation out structure accountability I'd financial initiatives the helping key of like coming on achieve

not our pace, being compromise Maintaining our to for are we a progress our balance careful continues commitment speed While short-term focus the gains. to care, with clients, our ability the and our also productivity execute to transformation the and are to on objectives experience. transformation healthy with client underscoring and our on priority our long-term associate utmost pleased quality at shareholders while for we and standards highest is satisfaction, driving associates improvements in

this program retirement an is progressing early as voluntary manner. timely in Our and We on focused orderly remain planned. initiative managing

our in continue are to is to we service and we initiative, footprint new enhance our our locations clients. greater reduce locations, alignment we strategic and helping service of which provide collaboration service efficiency at subscale our level seeing the through Additionally

were we over Before Jan, I the Working Company. recently XXXX XXX call to that Best Mother to like named I'd highlight turn

proven and an the on and HR creating with first results work retaining top day. for I'm profound contribution to for company where his especially the for remain outlook. fiscal quarter has on This record leader turn that Jan has great talent. honor over competitive self XXXX every track is a credit an diverse I best attracting their a and a And HCM community, allows values commentary and that, the lead our can workplace dynamic As bring proud inclusive to success. am the growth in impact and ADP a each market continued and to thrilled a to in call everyone us receive this to I'll our see and of individual

Jan Siegmund

Carlos, and Thank good everyone. morning, you,

compared expectations. increased acquisitions billion, are write-off performance up beginning charge results adjusted certain continue XX%. XX% basis generate operating adjusted our from lapping this to alignment fiscal following the improving efforts successful including revenue our was that X% progress Celergo. pressure positive our related particularly interest initiative currency, and points consolidated automation or to increased a to the of up infrastructure spend, acquisition year's voluntary of basis broader of and our of above our pay service taxes about we're the internally-developed before income also continues EBIT about the businesses with and costs reported both efforts and EBIT while to related We we while a our early service Our software transformation our before X% quarter XX and margin costs to the Adjusted making. also Clearly, dual earnings improvements XXX momentum. was benefit retirement in expectation are to where execution and our IT initiatives our basis, to off reduce reported above were our Overall, margin taxes costs our program. pleased pleased of organic earnings from points slightly last international quarter $X.X our our constant of $XX despite with was million On

which benefits $X.XX tax effective rate points adjusted our approximately diluted tax compared the drove impacted per by adjusted and, share unplanned from ago. fewer compensation from a rate, grew diluted tax earnings shares quarter addition Our Adjusted positively on effective $X.XX XX% margin for share. per or benefit XXX lower and was performance our basis stock of was in outstanding also to year aided by a with earnings benefiting

can our outlined strategic plans results, off we're a tell start are Investor and you we June we progressing overall well that year we to our from on As this at as Day. these good execute

Now our segment let me you through take results.

corporate and our ahead revenues client X% points a client grew the client from X% grew and growth by improvement of by per funds collections. X% client lower in in unemployment investments year quarter, average both a control, a balances benefited organic fund currency, insurance offset on basis Employer combination pressure Services, from growth wage state and our fund to driven in our Interest growth, for expectations. average XX% was tax XX of of yield and constant This For growth in about the pays inflation ago. earned the reform from balances compared

X.X% in metric grew for the quarter. control per pays same-store Our U.S. the

wherever presence solutions in continued the service supported leveraging our well clients multinational double of perform our growth our offerings. to to for strong our be they were our to international a do global global quarter Our continued by and complement Investing digit to in remains pleased complete we key space. to recent our strategic Celergo able further strategic and especially acquisition of pillar this business us offerings this solutions

the increase an quarter, Moving basis saw points of pressure in points from basis included impact XX of about approximately the on to acquisitions. we XXX Employer Services margin, which of

is you the of throughout fiscal program retirement course multiple will being voluntary our this managed As early phases over year. recall,

revenue our backfill targets plans. our the early we the targeted we As we average quarter accelerate against quarter XXX,XXX. benefits grew to hiring with XX% progress backfill carry X% this to employees year not the from do which year, fiscal exits forward we for anticipate remainder growing PEO saw as the into of worksite for

see XXXX were client early in and a fiscal this our pleased bookings difficult in and in we retention. continued also new above our market, quarter of of a to recovery business the XX-employee PEO year Following some improvements signs signs

segment's While this quarter from performance, end calendar also industries offset the efficiencies, changes leverage we partially and nearing their to to for in PEO are pleased estimated it's our the margins the increased and we're points from are selling impact The more XXX that basis with likely in ADP when losses related important to Indemnity. remember operating reevaluate by clients our benefited provider.

Now XXXX on year to outlook. fiscal our

consolidated segment we This first quarter about start outlook. on outlook I talking by would like the to to before our move

in helpful We shared said, leverage revenue last as reminder, this this and are Day. Investor we our and at discuss long-term our of to outlook. revenue you will segment model a we that the that providing As guidance our you believe we With find incremental encourage quarter let's particular. for

quarter revenue our first was year ahead our progresses. Employer of expectations, Services growth the now FX incremental from While pressure as anticipate we

in of in to difficult fourth want ES our as X% Cash new growth anticipate more of XXXX. Global to control we no quarter, of in growth revenue per to the a we in of continue There's of business expect grow-over Card that our metric. second still year to to We X.X% anticipate such for and change and quarter lapping X% remind continue X% also we growth pays We the segment. fiscal our ES bookings X% acquisition forecasted are you the

also ES retention to XXXX. we points increase to As XX of basis points mentioned, anticipate Carlos continue fiscal an in basis XX year for

related margins quarter, stronger this as retirement ES our to plans were expected early voluntary a program. we to backfill continue hiring our while our resources we on than execute ramp-up anticipate Finally in

touch the the basis strong points inclusive therefore points anticipate expansion XX to and saw not anticipate a as continue margin drag. PEO we XXXX employees As do of such, first margin X% employees. to average the revenue increase forecasted X% our said, for year X% of now PEO. XXXX XXX half in that we expansion we the With now growth X% to prior let's of average in by We XXX as worksite acquisition as to growth year X% revenue to of X% of expect driven in worksite about latter to points to fiscal year basis in basis on for full X% fiscal compared and quarter, X%

PEO that some slight mentioned, progress PEO we that revenue solid our Carlos quarter pass-throughs. last targeted our With distribution improvement now driven performance this employee As have strong year made quarter growth prior in expect PEO some a see second to strong combination said, our and fairly We by of we our in expectations. relative last growth a part had to following process. worksite of in to a year seen adjustments bookings we

anticipate adjustments as to zero X%. growth of to the compared to in in excluding X% prior margin these With pass-throughs X% X% forecast mind, PEO revenues our we now

dynamics yourself experiencing provided quarterly we this in is in have As the additional better quarter impact affect with that With to our below growth. our familiarize a a our workers' fiscal help decline from year, illustrate and year does slides impact presentation. this environment We workers' reminder, growth the encourage that to which in questions lower appendix details to understand and as these regarding year is overall revenue of not XXXX that with you due the pass-through help few employees compensation reason contributor from received the Last they to the SUI as This anticipate average some of in you to relative we as our to remained the new rates well pricing stable business. rates the compensation SUI our administrative other has disclosures. the investor in XXXX. fiscal slightly mind worksite you services effort drivers in a we

on Moving PEO margins. to

points than as expect points decrease margin forecasted points. to we to XX our basis better XX decrease of margin our XX to the compared now this expected points XX With performance basis PEO in quarter, prior

before, backfill carry our few retirement voluntary overperformance reasons of quarter's mentioned the months. early over do hiring this year. Accordingly, For fully we through we the to we to expect not to next anticipate margin accelerate for remainder the continue the

like are Finally, I that to recorded of would remind segment. results the you within the Indemnity PEO ADP now

loss our as points basis from to points. full had approximately approximately estimates, XX pressure grow-over to we basis pressure grow-over compared on lower our and quarter, of a This as prior adjustments XX year basis a than result anticipated now of we reserve forecast anticipate

the on growth to we with outlook, for of X% dependent XXXX on of our forecast upper revenue steady our consolidated the fiscal range total of improvements now continued end X% the in year Moving anticipate the to performance PEO.

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

XXX We approximately XXX from expand including EBIT anticipate basis XX points that continue pressure our basis to to points acquisitions. adjusted of to basis margin points

related benefit, in fiscal rate effective an as of XXXX stock rate prior to impact our now the XX.X% we expect XX.X%. the compared adjusted tax year compensation With tax tax of quarter first effective of adjusted

grow start that momentum the expect and are the I the now tell adjusted think diluted we year with can with to we adjustments continued from our into With to in we're share outlook, earnings building to Overall, our investments you happy business. these XX%. various XX% our per

we bookings executing quarter. trend are our key our initiatives a to We well this pleased on positive were and in see

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

Operator

you. Thank ask Please follow-up. brief question one a with

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

open. is line Your

Jason Kupferberg

morning, guys. about Nice more Good just Thanks. I little to job here. wanted bit the bookings here. a ask

in full you but the last high like the the sounds especially on in based actually still It us highlighted. pipeline lot cetera? of you gave bookings supporting for from ES in year end whether you obviously X%. year, enterprise, of number? a which the got to range back et you'd comps at the downmarket, Just half, disclosures on highlight a So came Anything perspective, harder, the the full confidence get X% Thanks. lot in you've in a that it's QX, year confidence mid-market,

Carlos A. Rodriguez

I by, are kind think really and around new to productivity ways where our confidence head information driven have the we improvements, up of around add we we the are the we growth. are is are guess count, we which overall that that around sales product three around I where where rollouts

from As plan, the products, I productivity think we've right the great that I – you and to with know, have probably underlying third of think that right built support I quarters, shown a what over it I leads we but improvements can people, to four I of we've overall in with to growth. last quarter quarter, pillar think three number really the think think, then the vary

that of us, model. quarter, most but a for variability the is model our sales revenue has – as the is recurring every every and the is most in sale tone revenue is right one think So because we you're the probably new always, whereas volatility a the really sale – confidence, I that think I one feel number

the We full would strong more ability in nothing changed our that I of our So reach we fourth terms variability in say numbers. to there's have have quarter. very year of did always confidence level a has but sales, in

the Sometimes, just in historically, the because that has led first of our to incentives work. challenges quarter way

quarter, were year, the though strong had I to I that came an was presents respects, we off sometimes some fourth to think in headwinds. some – even of able say a with fact the prior that we easier So the I very fact pleased comparison we would that probably

the specific strong. our hit maybe numbers Services of though kind did results this quarter, which number, not you're giving were alluded as but we also we're obviously to guidance, PEO very Employer ability that the Jan to, So as seeing even

we're collectively, were adds year. So when f to we new that we you it the for extremely pleased the used say and anymore, we it, look bookings doing not did would business full you to way if our at do confidence which it

Jason Kupferberg

ahead, Okay. Jan. And let me just – yes. go Please,

Sorry.

Jan Siegmund

comment different of One force, components so a fairly was at and broad-based different I sales when market many. success segments really the into, the look that channels different it of sell the contribution is we the our and that broad-based was

focused So on broad-based at start actually single always a and it segment the all a is not was good participation into year.

Jason Kupferberg

sure. For

actually PEO follow-up you concern a on rebound the controversy highlighted nice strategies improved just know ask can talk so bit and sustainability I there. of Maybe there the drive just that. you wanted the quarter, there. a to last Clearly, that me employed Let the about since or that. performance little test was And you've of outlook some a of to

quarter I about some programs, strategies were but any think you last would highlight other tweaking you incentive there? talking

Carlos A. Rodriguez

result that's think tweak would beginning was how smart way probably those some numbers. I all of a big it that think in affecting that that I incentives, but I that as to say the we say but those through, of we pipeline well, we I its – wish wouldn't but of say the of but in did could see incentive necessarily upmarket roll I as comments were yet I a changes, say couple incentives. changing Yeah, not would has in because Jan improvements I the

core PEO call this was I of kind a performance. So of rebound what ironically, really would

were again, incentive makes because to and that I we some the yet PEO think – or frankly, aggressive that benefits anything back of of have sense kind the couple which for externality. try incentives overcome to couple artificial quarters We year are of changed the of and to have some prior. we optimistic new really readjusting a bookings, level about adjustments some just makes to, full again, to We BPO other next didn't the of ago. HR I had So we very me, changes to do see normal business products back made, think years

all great I together, that to like think comes back when I it feels execution. things So the really as add just – it usual,

just think sales the attention more by focus basics the of new more sales they as other and sure of leads in from force ADP. getting that well more the on kind there's I core the effective force, as our in leads and making generating are parts of our

a strongest a I maybe last and – as challenging So that, to I have then, have when a you happen described here say been strong you much was so sometimes PEO. quarter. year in think effect parts have weak this think And did you just may better PEO, start overall challenging not it's I happens off in have we've execution. what of the finish, usually and us year, didn't the probably I lastly, – maybe this had the we just it's weaker first when get a quarter ever it growth I year into you a opposite you of But which come again, of sometimes think some have looked, in would as about first our the what organization

of QX since year corrected bigger big XXXX Sorry. I'm the even being here, XXXX, in and numbers already but today. were they're fiscal

rate value advantage, leadership has intact in shows get And of still to proposition the the the still execution quarter I kind a is quite generated and if ability it take way. sales growth and proposition is competitive you the this that that think it of and I the to we value will, that market to impressive sales So think. generate

Jan Siegmund

really just accelerated, I PEO brisk improvement few growth channel there very, our that digits, said. which had impressive for very only in in broad-base. a XX high We Carlos the support the data what double not new so points have but we saw overall logo a over deals we

in incentive also, drove new mid-market and we've a and only think the or satisfaction commission change to It's bookings not it's single that a with acceleration business client change broad-based like an for created solid of that scores I managed, improve the it a very mid-market, So management thing, execution. great a this. focus

So created, to really our then, guidance the up that for that segment. confidence

Jason Kupferberg

great. That's nice Okay. Thanks. Well, color.

Operator

you. Thank

from Our with next is Lisa question Ellis MoffatNathanson.

Your line is open.

Lisa Ellis

Hi. XXXX, the are client XX% Can color you I really you in as the to strong that the end look range, number. business share small In fiscal little the Good you in believe XXXX? morning, and give into lower guys. a continuing market as market in momentum of those a down whether grew gains growth and medium

Carlos A. Rodriguez

Yeah.

quarter. the think continued consistent I in had first into – the first the very trend XXXX. our was It think fiscal I with think as strong good quarter had it probably was the we've just XXXX, we've momentum momentum and and year I for don't I it quite but wasn't strong in think business, downmarket

Jan Siegmund

quarter line in XXXX, the with we right Lisa. that have trend is in First seen

Lisa Ellis

sort Workforce we know that complementary And competitive. where which of through transition, is the then to very think going your mid-market, as just Great. Okay. counts I one Now question market know I around the you client were the in on hanging it's were you

you improvement you're growth in Now the Workforce some the client migrations, base nothing through that that in are seeing by Now else, some retention? market, there, improvements just in if driven

Jan Siegmund

Yeah.

lows has So rates out so from we with that consistent X, had about and improvement and the steady, we're now retention improvement being improving. the clients part service new very, single models stabilization in initiative, rolled out platform, pleased we ago, very that – years improvement been we in on have have the the our very a a seen, the seen the all through as of retention and very of that X.X we A, the alignment service

much sales seen new last the turnaround new stages the months I to logo market I an well success stronger that, very we average for over so also execution think focus or a I still we this the logos this. new if sales on so, just have this new through rolling to time. for seeing take And reported force as more And pay like full on on partners focus distribution XX early that – focus of we're in leveraging signs the adjustments on if you will we're off good in as but that channels focusing seeing

Carlos A. Rodriguez

Yeah. And logo kind to this for mid-market call is, XXX us end growth to it, employees have the employees to actually which quarter we XXX happen the space that I would this XXX there. of or add employees XXXX in just quarter, upper that of in employees good

focus and sales attention, results. tricky case. XX the so about as to is in we we our And quarter we it ago ACA, call More, But get force work progress. again, on numbers say what we're these one in logo from into that of now the terms we to I sales talking tried like especially that along position, I think more working I do, we're think feel platform. a are were different PEO growth. still business focused getting stronger making improving with to we that it's retention, and combination on And that would And incentives definitely I mid-market months and adjusted our to core have XX there's is, we the of is but renewed that quarter think exited

Lisa Ellis

you. Thank Terrific.

Operator

you. Thank

Our Goldman is next from question Sachs. Schneider with Jim

Your line open. is

James Schneider

the Can directionally just your any question. my a Lisa's like or not explicit talked you kind on down, taking of there's about case for understand not, but satisfaction basis, upmarket or talk mid, Thanks improving consumer basis just or retention below is I are confirm about you're on and question. of expectations? the a metrics to that sounds above follow-up falling giving whether that's probably retention kind you of Maybe morning. the scores Good just pockets quarter-by-quarter if that up it maybe of year-over-year.

Carlos A. Rodriguez

heard you believe basis points I basis year. the retention as forecast we the I to think confirmed our So I it's comments, for of XX in XX for points increased think,

of be So to at think some interpret could of and providing probably of added lot up out, guidance we're you think contest, I as retention if proxy that's we we of that what response interpret that that of that I confidence a – trend directionally I extent amount the package and that after put quarterly the our our of But the year. the But for and that a add stuff guidance think not in on I additional items up. just as to look doing to retention we're we confidence got going is should we one into the historically as part disclosure. we're given And think of you disclosures can feedback not getting some reaffirmation of the the basis. you to

James Schneider

you and a as guidance, your of for That's in in harder what year for across But full the things grow-over then to to that reported comps of every metric slows respect know of almost that other follow-up. you respect helpful. implies the several to year year. think maybe about couple already And talked with full issues down With acquisitions get I relative it a terms I guidance growth QX. kind

Thank you. baked just the into wiggle there you growth potential I'm trying So is in understand a potentially some whether about anything pause guidance? whether room to is slowdown gives that or there

Carlos A. Rodriguez

optimism just you about As you are think sure and that in there important walked the issues we can one pride were noting. that But mathematical confidence time what spent talking is I imagine, and message to are right with really away make good which of results. guys some some

us So can companies, impact I lap, the Card growth. somewhere then X% not And but convey but for that of what not were. of me a we laid kind up revenue stand the on it's thought we out all impact of we It's guidance bit. October. we have while changes in the quite out and a change headwind, in for the think neighborhood little trying reasonable pressure, based the of But was are Global believe middle and on today And obviously Cash that positiveness is what FX to not sense really two was in but picking either results information direction. and that in for a that math, I X% confidence just in huge optimism our

we that make rolls everything that first optimism sure given also, math to want in across you three ahead board quarter, we we first of it's wanted to, the and out come sure quarter. to a and But manner. through hard it's still to appropriate quarters it's the have confidence But the in message of the got pride just us given frankly, for the make So change us. that hard and

James Schneider

clear. Thank you. and loud Received

Operator

you. Thank

from is question next Evercore with David Togut ISI. Our

open. Your line is

David Mark Togut

morning. I'd about Good head critical into you a the price you on ask basis? year-end to seeing like to year-over-year start as Strong discounting of are of kind FY XXXX. trends pricing season. What selling terms in net of

Carlos A. Rodriguez

say, one in mention issue don't want And in have seen, back I and pricing going take on. is to know so assume one discounting terms question to continue we terms I of competition thing we in that should no easier. and any that, the But overall is of way quarter it's the Well much getting how because environment scientific is, don't just that better funny a would of think to to previous that there – forth. is the you

getting and things client work into value probably our other our satisfaction that proposition and we're better I think scores. mix. stronger, There's that

like you confidence. a because environment deterioration level, during pricing force starts So short-term probably elevated sales of et service difficult little and some our of and had leaves bit lose the a high in on to ACA in cetera., pressure that challenges caused concessions its we where very volumes have

in through of So it regained in bookings, comes I it lot part, through, in think it retention, and pricing we've that through comes momentum, comes a through it in and discounting. comes and

guess, especially fierce logos. to the not order your be being And it we pencils, competition. the question when always in new competition very to out still is to better way I our much our had do long sharpening because related better what answer is of plenty because and can't has appears bringing say around us for to a there's so how would versus with we I it's there own saying I a competition on guess of of know I competitors. house If are versus focused economic don't the issues So we're environment in

job just So we're overall It into of to it's revenue doing – a retention. and that it's think a translates growth, translates into better impacts. translating our lot I positive just a And has better level.

David Mark Togut

about multicountry Understood. payroll. And very for follow-up, as you a Celergo the seem then potential and optimistic

us payroll internationally? you pulling We much that Celergo together tell in now international go how market about and you're processing GlobalView, Vantage Can haven't while. a to HCM heard to

Jan Siegmund

needs solutions. clients business had has good in David, multinational Celergo and had that in client each and are solution internationally. product serve will answers that sector, strong great populations expansion. become for multicountry strength our both extends Streamline always been that our targeted the call resulted in multicountry we particularly performance solid for well bookings have services very, Yeah, the that operations, we But our these those And for smaller When this very countries. in employee quarter solution. populations We fully an a that. our and in which of very two internationally international large be of where both service our today bundles clients or together integrated multicountry components basically we Actually great sold business components in integrated countries. performance And local as best-of-breed GlobalView multinational with as margin our talk countries outside this this U.S., we – in retention, quarter solid new as

scale, about in see excited who So claim only multicountry can at consistency basically, has because Celergo is we in would for into the differentiated been that made this successful ADP investment expand offer at – we us. we ability vendor that to truly different further are differentiation our so it solutions an the clients to we this of many space so needs. which that And

a as space. that that these kind addition our in competitors big and Celergo our service enhances view or enhance ability broaden versus of depth in particular will our small, and clients of So for technology many our differentiation

Carlos A. Rodriguez

is, echo to completely the those that think I only comments. all add thing I which I would

it the of we that our I think one remains comment made comments still prepared a opportunities. biggest in

So that's us. got because the of of we're excited large opportunity because and that it's we the technology, but quality acquisition excited. the of product team for and growth the the why a part We're also and

any So ability that markets big leader, a there's go we there. even though a large time exciting we there, opportunities, and opportunity into have to into obviously that that's there's a are, lot still have more market And to the us. market accelerate I out think,

David Mark Togut

you Thank very much.

Operator

Thank you.

McVeigh Credit with Our Suisse. question is next from Kevin

on feared? context is ADP line wasn't on little maybe a just more allowed you PEO McVeigh Great. side? It Just Thank that. margin Indemnity decrease Suisse to wonder more a you the sounds much. impact the Your give - like as open. Credit the what (USA) from little if LLC Kevin bad on it color very you Hey, us Securities could (Broker) as

Jan Siegmund

that that book if disclosures adjustments into change of the years, changes there largely quarterly evaluates anticipated, And performance picture our has losses warranted. PEO prior fiscal basically adjustments our expected year. on future XX adjustments. which of which to indemnity expected Kevin, and a of financial we August. with in booked we true of I these for basis book pressure these We to last for have to meaningful we these this in that include a our This that the we changed a reserve compensation we really points, we the loss for not appreciate when And indemnity segment. have disclosures the including adjustments a now created process reserve have the where in we undergo benefit with results these year, and financial had forecasted full have year, PEO PEO future historically question. we the grow-over are loss they payments, for gave belong us in Other do the you a so that basis workers' in instituted Last guidance we when

of and loss that our that quarter adjustment we favorable the a results better. PEO. was put the first reserve not And is guidance now the and over, so had the are into We and enhanced results booked now

the flow in positive expected through adjustment sector. to and basically adds profit So we PEO reserve loss that let that

Carlos A. Rodriguez

Other, the a belong this conclusion the we believe think forecast it with exactly why I to be To there. it But these is – comment in the we PEO big is you quarter and which had does to these whether as of about as in that saying advance we used segment. year were we we and of that last intentions, good PEO think Jan we in really can't because you things side so I you Yeah, and avoid expected. bad to benefit these would worried year the have made first did clear wasn't We're the what kind a that ups have in and is, discussions in come segment. downs putting it

you we now understand of to, appropriate so have So make the give what's color sure happening. we forward, going amount you

Kevin does. points relative Awesome. benefit No, and McVeigh basis points. the - Credit Thank it first expectations any more guess points, of much. XX that first Suisse basis in I basis bigger was in for Securities sense. this So last just (USA) it quarter. what adjustment of had basis apologize gain gain that smaller the to was to compared we gain But smaller we year a of than if LLC very (Broker) the makes this XX points you I XX quarter verbiage, to essence to anticipated, large initial that a XX reserves was through an loss

Operator

you. Thank

next question with Guggenheim is Our Nandan Amladi Partners. from

is open. line Your

Nandan G. Amladi

question. Thanks my morning. for taking Good Hi.

early I plan guess more successful, the than were expecting. you the you being at a talked Day, initially retirement Investor June uptake higher So about

the business year you're a backfill You've on for bit little you and are more bit for plans. what of count Can a areas total little of the hiring plans in? remainder the what describe touched head the your

Carlos A. Rodriguez

Yeah.

we the So that. some places in a the one reemphasize and the of do had, was comments with execute the on efforts used of on kind so to great. implication I standpoint, prepared we more I June, care. if looks the in words But want care successful more financial was key all it have in these think from because of transformation just word That to that It's it it successful a we people. spreadsheets few more

have We good NPS high and maintain to scores execution.

of the on we that plan backfill and make on which was place in had of that to people the got. for us we right volumes, uptake were also to we, And so to volume adjusted year-end. exits right handle calendar critical, the based critical parts sure business the think, And it be at I our able timing of the based especially

imagine, can early backfill use position. capital. I good would've That was And all a that, of our not have every I And intention single we that think then retirement that, would program had was. a voluntary so to a not saying probably we our as and what plan plan think never you been

months, feels around So course thought some associates. to because like the doing of, transformation over had our we been And of take offer an that that the call work XX out tenured some previously to to it of work to, we this had it that opportunity it's attractive working. of we package

of And hade so if you waves different we think through what three departures. we've done is

scheduled planned XX-month to of over they're the date of different of we over had also early those we program. positions backfill so to time. same some the And over XX leave periods months since the time, the period announced retirement And

that process, So control quarter. on which the first PEO our feel is and if other of said But that one Services on terms sticking that rest it what you and that backfills, as us most in that's original and the you parts a the "behind" the in first is schedule. the And in comments of short-term all we a business, overall. the backfills that of forward the gives momentum But the of financial the little that, our in look process was all we our big performance Employer and we a business roll confidence the there that the and plan hearing look the exactly at you're on track year, departures. saw in we when you to in we're the benefit plans a were creates for around Having at which creates not benefit it quarter. bit

I this and would issue backfills. it first solely a not performance small part. the financial was of part So It say relatively quarter timing was only one because and was of the around

we we we the not year-end for thought quarter, was more as but we we to to in we we to the able now, quarters feel do to might next of first had plan. than to on backfills NPS scores and out in backfills the more most clarified If we like out, take So the forward, taken were work impression is that many thing our than we some timing. sure us have the But few want just wanted wrong we and the focus original had in give retention. confidence due think that make we've going client don't future the and as about and important for you of we have quality in

ready not to And off come our of plans original so yet. we're

Nandan G. Amladi

helpful. Very Thank you.

Operator

you. Thank

Our next Bank. from Bryan Keane Deutsche question is with

open. Your line is

Bryan C. Keane

Good morning.

Just why year Services, any other would up back on that. follow there hiring, XXXX Employer the to additional down is range? drop fiscal On margins besides to guidance wanted the reasons

Carlos A. Rodriguez

talking time one another spent Again, we lot about. of a

that's think fair I a that question.

one. the of that is One items

had in faster down I quarter, costs the think headwind FX because we the – we some is that we even probably more side, headwind first of than did clarify, revenue what it we that some have than have benefit planned some to of or the some FX have went our we just planned. had part benefit, though a FX on we FX had as overseas

the offshore we in favorable I first quarter India, ahead cost Specifically, large a and in think in operation very plan. have of well and that our came

providers prepared roll and raised third other to strength early visibility so would and we in of until year-end is the not companies until just prepared guidance better it's fact quarter PEO as including but you unusual calendar and because get for I us. reminder, them it's I'm what for they're forth, our this sure us it's only we for and do, – when and think of So for first you improvement the the so prudent a the December fact that we year is and more we're mentioned not because you that a and not I XX an have things to number just I fourth represents an we think in The second, next that than measure that if the think things assume I quarter. – there's expect quarter, going bookings quarter probably of – business the to important are example also we of And clients continue, those time new switch pricing tend in today, that of forward important retention in and the our year. a roll part concessions at this that the We're traditional together, and year. now terms

coming So position. I have the should you quarter us out to of and think second a stronger view expect

Bryan C. Keane

helpful. No. That's Okay.

Jan Siegmund

could I add... If

Bryan C. Keane

Go Go ahead, Yeah. ahead. Jan.

Jan Siegmund

I'm comments sorry. To add a the of of help few you margin more insights that about drivers to may do. our expansion

in for out, years. hire – this as as little think also I margin the anticipation our not the in it of there but to good is part asymmetry first so a bit that turns half second And think is that prior I And half. left of our as we we are work, is compares

the of initiatives initiated grow-over that some I&O for fiscal example second in is success the and of the the half our year. scale, had the we I more So last bit some in we for a think half great little that difficult with had us, of organization. We

start is progress productivity level type to of our assume the go had improvements in throughout not year the would year, reasonable that Our be IT is the that We making force of we sales through. as infrastructure productivity exceptional continuing for and of contributed. improvement that

business kind reasons like of fiscal think as them. had keep early that margin you some as in So expectations we this just natural make are year there to the

Bryan C. Keane

a economy it. outlook. you this of the to Got wanted cracks lots the I And seeing look U.S. it. about Got currently at in point? any Are concern in the ask great guys and has then U.S. at ADP U.S. the economy market.

Carlos A. Rodriguez

Zero.

Bryan C. Keane

Well, right. All All much. a so right. Yes. that's sign. Thanks good

Operator

you. Thank

Financial. Our is from with David question next Stifel Grossman

open. Your is line

David Michael Grossman

talked feel bit making? morning. are, making could necessarily Good that sale the about Could you. we that a progress more little strategies in Obviously, you spend focusing Carlos, little in about a and upmarket. kind time bit you just give the business and Thank a just detail upmarket. the been terms little quarter, how on some you where more modifications but we've us the you product not you're maybe of of on

Carlos A. Rodriguez

making good that there. Feeling we're really progress the about

that or we several institutionalized worksite I think about, end X,XXX to certain worksite employees Think employees the kind employees upmarket. the worksite competes really employees worksite that even in more the think in in complex ago, compete we talked the that Now Now very strongly ability Whereas, to fact but Workforce X,XXX of upmarket. of compete more can can clients quarters of with where parts sell in segment. lower our X,XXX X,XXX to larger, Workforce that we better segment Vantage

progress. And logo revenue other progress think I also you in sales that the the we're to metric, incremental still adjustment has growth. new growth, a on And in Now Vantage, soul the about can that we're we're love comments, upmarket. clients. and new constantly of good upmarket but logo talking the days some think market early by When strength you very So that from we're heart I the would making think feeling say in new off. logo hear combine making the we It's but clients, we of between and about have in selling, handful of the solutions that we're and paid products, share the love of business headway some as our the is existing because we where I for I we're there next-gen strategy additional that growth Workforce pleased

a marketplace. at our clearly size it's the and scale, force So handful a in in confidence numbers, building making our but both isn't clients on and difference our of sales the

indicators usually also retention in have if the satisfaction work of at to feeling are the progress. We last that in bookings. about it's by which we're we're do, than underlying was upmarket but so, I new even client business better the And leading look year. scores business, good seeing also the and of think of growth still progress really And way, revenue it good I

David Michael Grossman

should we dates milestone of anything any like that product in or up? coming think terms there are about enhancements And

Carlos A. Rodriguez

to saying high competitors that are because we who think us the try but to our accurate transparency Investor people some for of situation. of those we've so unfortunately, we things had provide about with gave forth. I marketplace take I you helpful and product. some and road. won't were strategy, that. and next-gen Vantage decent a with are, advantage investors our that we're clarity that products in specific we shame, not not a mention back information also you, competitors around with challenges around usually I what then because think take And, plans think But dates, we Well what terms is talk our because I were our amount of doing and would not And can refer I trying it's Day share to in around probably the at to which

Jan Siegmund

And plans. feeling we're those plan about on and good

David Michael Grossman

And competitive sense happening marketplace right one of it's have I just any Thanks. know. of know it. Or one just you've how last in an I impactful, these or just don't the maybe capabilities? important timing can you us those terms you But And made mentioned of in when Got models. changing dynamic that to some give Okay. acquisitions employment there. now, really becomes the

Carlos A. Rodriguez

I important think right I mean an it's dynamic now. competitive that

the it deliver. outcomes the think story you our I our the proposition of is part which is what's helps important – and value value proposition and

think think our a of be they value marketplace. medium as terms term, going of our even very proposition I does And of significant the believe our base, what client or to the given force our these that have client But to products I long in of these it sales front, base. to a rolled on scale X% haven't it's strength we the and to to of size we XXX% enhancement. acquisitions, add even out probably in

even product it's large benefit has and to short probably because it's such good term, in-demand already biggest in say and some I'd proposition. of short-term the Cash Card the Global a So value somewhat to they're be And strong well. the will And such were in continue and an impact. all they executing these been so would comparison big share win Buckingham other that to WorkMarket But TMBC, short-term acquisitions acquisitions marketplace. immediate proposition I The that are and that I'll value one has our Marcus go our we've to Company, most to made and the strengtheners I Celergo, the think in that's the say ability back

David Michael Grossman

Thanks it. Got much. very

Operator

Thank you.

JPMorgan. from is question next with Huang Tien-Tsin Your

open. is line Your

Tien-Tsin Huang

Good here. results Thanks.

X% PEO we've benchmark group. X% against mixed had because the from worksite you On the or reviews industry PEO, to curious, mixed – for how employee growth, I'm growth figures peer that numbers, would the

I'd thought I So ask you.

Carlos A. Rodriguez

I would to that say higher. and two that ours that you're have if you them, you numbers take you referring is average the

Tien-Tsin Huang

Yeah. math. Simple Yeah.

Jan Siegmund

our we're that market that we story in our double been help obviously industry The Day. us growth are on – well And gains. shared you continue big in of market has to Investor discussion all and share particular since the And long with PEO be us, And quarter. getting last we digits, would way. aiming to drive has for which long-term to the a back

Carlos A. Rodriguez

is quarter generate each is growth like we impressive. generated that And and to PEO new of rate impressive, of big number employees. kind sell employees of month a It's this this the quarter have now, a with just to the worksite lot worksite each we that

Tien-Tsin Huang

Yeah.

You're that. us. on lost the player; that's not for Thanks biggest

clarify. to tougher the noted comps. On the you've just second know bookings, I half

zone in second that you comp can year to the X%, progresses. Just low backlog sales a such X% at the curious, suppose of curious go X% produce the I I'm and big be you still as because year? the the can But end. to and half mathematically enough land and it's replenish in X% still new

Jan Siegmund

our us our in Yeah, good. good. seasons as markets I look, achieve high, clearly the sales guidance, quarter and When the overall obviously looks of there's quite business, establish to recognize has the different confidence different our it Not different difficult, pretty different half to growth half have have things. helped a fourth in we so. so is growth, plan, is but to second compare force the selling of thing, first the We which

Carlos A. Rodriguez

trying to We're year to full definitely not manage number. the

Jan Siegmund

as go can. No. to as We want we fast

Carlos A. Rodriguez

need I described, in get want and forecast. you what to mean, our goal to just outperform just would is be meet do which what we we not to the order

Tien-Tsin Huang

the Thanks time. Understood. for

Jan Siegmund

Thank you.

Operator

you. Thank

James Our last Wolfe from question Berkley Research. is with

open. is Your line

James Robert Berkley

on for in. Congrats guys. the and Hi, me thanks squeezing quarter,

XX% question. downgrades you growth there's headwind XX% incentive point basis medium related quarter's the that last risk follow-up to quick you you a from or of now. saw so get a and quantify other could still in see reason you to changes the seeing assume term then back no seeing you're strength terms we Do call, an ACA and some from any on guidance? or the to off PEO And your the I can extent earlier is mentioned Just maybe just on that feel? are factors what given

Jan Siegmund

Yeah.

this targets Investor that this outlook about our revenue tie are achieving the two thing is gave longer which is we for the think me the the actually back factor. PEO One pass-through biggest revenue as don't control zero of that related which margin I factors in Day. would our the to in main that we is long Let growth, a There growth term term. to our

health don't And that the we inflation, that we changes industry driven control. and have by healthcare rate in in rates insurance are changes so participation dynamics

year And so that really, the so. think is and trend we had shown some pressure ongoing fiscal last if in

acknowledged reacts no will of that is a put so term that as for from upticking to is quarters we on we enough and momentum that's impact clients already of economic pressure long I goal. been of increased But optimism after the there you though saw number, which is this our growth quarters revenue the execution the good sales revenue worksite the of pressure gives sales component last success. that that sales two on have bottom model of couple worksite that us what are growth, have which our ADP, in second the that employee and of drive is it. to our And then that the we new retention. call clearly But work. optimistic potential So number. to would for have sell hard think And have force we scale would line our the It will well our as it employee the is in is zero but factor big and impact. even has our sales that focusing course these a And feel

good So PEO. it this aided particularly that and very the works been in for quarter by has retention us, also

on the a lot anything the more drive and revenue of factors we those that it. management So have we than growth team control, on focus

don't make pass-through that aside the think strategic the number, I in good feel we So the we, revenue really here from of pressure I that order PEO. outlook about work to offset to

James Robert Berkley

your Thanks. for just you acquisitions know just think if that maybe kind digits and your international in just the in in it on recent double I multinational quarter. potential you side the to And don't is I the of the space And what market TAM maybe that? talk plans said size Okay. or kind the multinational about possibly accelerate? could lastly, that general? of grew then think And and you low for

Jan Siegmund

Yeah.

really For multinational grown those solutions a very our outlook. are no the plans. change and there's in very long and really time, consistently, execute, have our in mid-teens our We

growth the ambitious differentiation, enhance for rate. the an I is our opportunities Celergo think think term will our if just longer drives that thing in component another you

Carlos A. Rodriguez

large. think the I And TAM is

Jan it We have I of when in Day materials refer his you even honestly used think go comments the it. at I may in multicountry our to But somewhere to if have get, that data and you of the share he but you and market, one it look mentioned at back we in size can't I Investor things had the look term the payroll. want our offhand. – that actually the remember market But

we're are other countries, cases, XX, maybe there be three companies but and in in two are or countries, multinational are countries midsize two referring companies. countries also XX in So may we are a in that some companies or of these a have – Asia they that large operating to have France very Europe in which you in solutions but lot couple

that the is is probably over So people what we the as thought. also than market actually growing realize TAM something that is bigger time

would this very say of size payroll think talk if very, international because of that market I was that was multicountry you to our the they underserved. leaders, So crucial that

opportunity as well. So we're opens new up that that hoping

Jan Siegmund

clients on HCM partner with large not ourself, And who ERP for lot clients and are clients multicountry vendors just ERP the a us partner in payroll to only to systems of state market this but choose our a we obvious, with solution.

a which address we So variety revenue really spans types of allows the longer size sustained really client that a us growth. market

James Robert Berkley

a Great Thanks lot. quarter.

Jan Siegmund

Thank you.

Operator

I Carlos for over And Rodriguez for this closing the today. am pleased conclude to does program Thank you. portion our remarks. to hand Q&A

Carlos A. Rodriguez

today. very you for much thank So your questions

made. leaders. have a our lot accomplish you the thank we're happen of change with really As want our off associates having Even though to associates without we've I investors to transformation, to very can't probably tell, also pleased still, could and we because we're start. I that our think good progress our besides in it our support a embrace the

we referred I and sustainable create, really for our we support as drive so to, the internally that another Jan appreciate XX just growth revenue getting transformation a long as years. we're So

XX another is we we in next economic to be cycles. June, I actually multiple this us effort didn't intended through position transformation successful it get by and believe So and And – it's to next technology reach birthday years. not changes XX our for making here

of doing we're but very for environment of our including positioning well a the on least not support all stakeholders also years, XX think way you the our us. all I years, that, So actual to for ourselves appreciate XX in fast-changing of at but the has we been associates what our obviously

appreciate ADP. once in your continued and I that, again will with So thank you interest

Operator

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

Automatic Data Processing (ADP) 31 Oct 182019 Q1 Earnings call transcript