ADP - Earnings call transcript Q1 2022 | Automatic Data Processing, Inc.

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Operator

Good morning. My name is Michelle and I will be your conference operator. At this time, I would like to welcome everyone to ADP's First Quarter Fiscal 2022 Earnings call. I would like to inform you that this conference 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. turn over now Mr. I'll Instructions] the to conference [Operator Investor Daniel President Hussain, Vice Relations. go Please ahead.

Danyal Hussain

Good And results are morning, first Michelle. morning, Don you Thank everyone. Earlier CFO. quarter. XXXX President CEO this calls. Maguire, our our quarter released welcome Earnings Participating the Rodriguez, today our Carlos we and and for Fiscal ADP's to

presentation call. you SEC Relations website Investor earnings Our will find and also website materials today's are available our that the investor investors.adp.com, on where accompanies the at

meeting in you. where complex as everyone Carlos. a I'd Don of me when done as series joined of over I job contain let it a During will to a with which of for since And a of that thank review held will of our found factors He's been with profitability business, we new forward the he's with information to our with believe that we We comparable Team responsibility, earnings refer events some to ADP CFO. you, current expectations. our A the SEC measures call to along items. looking environment. that encourage cause most Canada materially growth impact VP and recently be measures, like results, Finance. you And release. roles in the additional he's XXXX, Mcguire, he joining to call, and Today's forward-looking very with driving turn to a And GAAP financial our statements, non-GAAP Danny. you, reference non-GAAP to can involve to reconciliation that, know the differ risks. President of all is description start actual welcoming investors. increasing ADP from useful for call. on items Thank our most by certain Don of our could these has international includes filings measures of also our serving phenomenal future

Carlos Rodriguez

very resulting quarter. moving and in in to on the expansion, Now, year the to XXX a XX% growth of We're to with EPS. basis margin points XX% increase have strong diluted adjusted start delivered pleased revenue

growth range, the we result some our QX above Don was pandemic. the revenue let still expect this our full-year initial the forecast underscores I guidance be above cover prior I'll to we strong as are details after we While from emerge our did go through and in highlights. position,

more about year, stronger feeling of expectations. as after performance for employee of business now just confident the for as record was sales was across guidance one representing And Even CEO but expectations, quarter, ES our reason outline you. momentum. growth key in even bookings continued impressive year this bookings strength we average worksite our bookings bookings in our HR will our our for for are our guidance well performance, our that a results strong, ES raising ahead which for Don we're very driven the our another we're And pleased to performance QX raise the business. our Our bookings by ahead new amount. we're With international also enterprise, portfolio,

this pleased pre we -pandemic have you sooner expect to we and above trends We than well that result continue we over expected, pandemic the as we were months productivity to sharing we of As sales our and several QX the look been recall, will ahead. in I'm levels. course reached us report

incredibly Our ES well. strong retention as remained

out amongst decline not actually in record overall in QX, reasonable to Instead, we a despite was year. to it retention our believed our improvement meaningful we assume saw from last new we We're step deterioration. experienced and But compared year. the a levels far in quarter, last back small upward levels our to to see a slight losses where record are we XX.X% performance shared performance. pleased below retention slight ES did the last assume the business strong clearly, trend we division, As the QX we our level normal normal QX business for retention further level, to reflect continuing year. But outlook more so with retention started to revision decline in back the of in in our outlook

was force. number in per quarter, expectations. line ESP drive growth control Our with might the a these about We over we feel think months pass workers with until the about of X% pays labor our in questions solid what that back

that what that we don't question, is have to answer we see you can continue tell an we While to trends. positive

to are force, workers and gradual. are even if eager to Our we labor it's returned seeing clients hire the

we level result, per expect year. and above-normal control of the benefit a from over growth above-normal pays of to course the As

expectations There the quarter. addition performance another and than PEO growth in level retention, we full-year the hiring drivers we to I accordingly. momentum see in the growth. raising into coming XX% revenue worksite building the In bookings base, We're the the And XX% employee to client improved with and quarter including guidance mentioned resilient we're very with of PEO. performance, the high the were ES outlook performance Even better earlier. our PEO, strong within our the strong had delivered stellar - multiple the average very pleased

highlights I the few you. product are share wanted addition to with to financial In a highlights, there

share new we to our completed experience excited RUN. user I'm the initial roll First, of for that out

of thousands to to quarter, and were of small record have our refresh you scores higher launch even move most we've levels of with we quarter, since very we seamlessly already Early in satisfaction done division. to shared in trend client experience. represents proud the As the the matter And comprehensive we're that a than hundreds signs user indicate the better RUN. we this able business last a a new of clients

a consecutive tool been has Conference ADP's a a product. ago, execution Tech adds by the a a diversity, inclusion HR HR honored recognition to few also at it's our for and named This at the represents platform outcome the like great its history team. to ADP top an strong on weeks longstanding HCM innovative award innovative So Annual Technology. year really of very equity was unprecedented and wins that marking share conference, DataCloud seven I'd

strong You DataCloud of as we've we've for proud example, of the take team active committed that our solutions measures. can innovation talk record ADP's provide significantly have times that number an solutions push solution boundary in action on the [Indiscernible] market probably their has we positive over highlighted real that of With XX% drive velocity to agile change solution that that positive continue employees. demonstrates is of clients. [Indiscernible] DNA. growing of the and I'm R&D for delivering and can The X from employers solutions then we increased year a impact innovation part users of HCM do track the there. our to this what realized seen And

As outlook. for I the year. Dan to before, now quarter you said story November. at a to the upcoming fantastic the with I the over in detail pleased even Day with we're more Investor start the very the of turn to more forward ADP and on call We sharing look will And

Don Mcguire

nice to Carlos on and morning. meet you. good everyone you, call Thank And the

growth both with Our XX% first reported currency strong the revenue and a a to year quarter on represented constant basis. organic start

Our better and revenue was supported much XXX by overall than expected, adjusted higher and EBITDA margin points containment. was up basis cost a

diluted versus debt the adjusted to up we elevated increase But Our our share the our XX% in those repurchases share. slightly tax benefited in pace contributed rate year. in May, from was quarter a earnings combined, last of also following issuance factors per

organic Moving currency revenue constant onto our and basis. increased Services reported the segments, on a Employer X%

Our lower last contributed a our we in recruiting revenues background performance. some screening. we had guidance QX, year to some bookings did ES the of and record to reminder, businesses, performance, continue strong of lap retention volume-related Though, including this and as

our points a clients the interest by basis growth wages XXX revenue growth, point, the client average point headwind cost slight growth the strong of in and driven offset Our overall decline payroll last increased higher as ES yield and represented margin planner lapping deferral finding containment. year. was on balanced basis by XX of fantastic in performance and tax only XX%, quarter,

terrific by employee QX operating practically XX year drag leverage. zero worksite modest strong was worksite excluding driven expectations our a from by As Total Carlos again, supported the in mix PEO throughs employee included base, XX%, rates. in start XX%, lower margin revenue from quarter. our of within growth $XXX,XXX growth pass-through grew the improving and XX% margin once to favorable another Overall, our as - PEO a all trends quarter delivered year-over-year PEO mentioned, pass PEO revenues, SUI as the to had and ahead on basis which as very increased fronts. margin Average employees well reflect results points zero expected. up

now outlook XX%. X% Let points we to me is expected several midpoint. ES X% growth underlying expect at driven Fiscal of basis our This which to XX range for XX raising bookings to XXXX for to ES turn growth by now for we're the We're updated factors. our raising new revenues,

performance earlier casted. we fore than reached productivity better-than-expected had - we mentioned, we -pandemic a As and QX in had pre

decline we've opportunity to versus if of ES of of of We our our momentum basis raising strong year may points haven't also upside. of decline highs as basis then assuming a all-time and outlook point, XX see now as we're remains made off significant We're changes deliver a points. rest seen outlook at this to our it but we retention additional XX FYXX prior

this strong As performance. QX of with the primarily function bookings, is a

over that continued we may decline slight re-engage the assumption as the experience the marketplace, is a course of to Our year. in clients continue

we activity. significantly most once have to get we of expect year-end more We typically switching the through calendar Where clarity see the period.

For to making X% our X% U.S. change no growth. of pays we're outlook control. to per

the our about about to as raising $XXX raising revenue, in by growth balanced our market, was X%, in to $XXX client to to funds XX%. And expect of gradual line about continue $XX outlook we're expectations. XX and interest a we're by growth a growth We million, in QX with labor X% our our recovery assumptions of range then overall the for to million

else clearly new us we'll yield curve certainly securities our in the client all outlook until overnight performance the the is are funds created outlook, actually stronger gradually purchased. But yield and said a Our helpful favorable that for our balanced Primarily, unchanged shift environment. funds meanwhile investments is client to despite to temporary shift multiyear in yield as mix equal. improvement benefit the

For ES range our about now points. of XX of up points, margin, to XX basis expect XX increase basis to we XXX from prior an

margin additional our year-over-year in digital increase did benefits, on our transformation to in expect we rest including in headcount office the initiative of including expenses. transformation continue to outsourcing year, return also higher meaningfully facilities, we seeing a and other some T&E businesses. offset While Meanwhile, QX, outperform we're over to the expenses expenses,

remainder to outlook. both revenues across-the-board and within could pass the XX to to pandemic. drive PEO very upside growing a the Moving RPO And client to from This XX%. X% revenues if onto X the to over base PEO worksite grow booking excluding outside represent expect out the that of performance, of coming grow PEO, of XX XX our contribute our performance as of rest is the year, levels grow stronger over to continue to function of year. on hiring an raise that to of throughs point our XX% QX Average capitalize was to and we bookings to overall demand further the strong well-positioned we expectation as now employees XX%. margin well -

range year, the the XX of points expectation on our to margin. we an now our points start basis strong flat improvement prior a from to for basis for to down expect down of XX our year, XX Following

X% a XXXX together elevated are expecting also outlook, consolidated we our and expect year strong growing over reminder, performance, this are a from selling X%. we to fiscal them revenue grow very all results bookings now strong in As Turning expenses for margin to

performance, QX than to closer the we X%, quarters which remaining XX% expect prior to strong our higher is now the forecast. Following grow

points. margin, EBITDA XX adjusted to we now expect For XX basis of an increase

last to be quarter, the we specifically, we expect improvement Most in margin Quarter. shared Fourth back-half-weighted. our As

QX a as no these with in and to in XX%, expectation and changes, you've diluted change early very is still Our assumption. a we're And We're us QX of raising times earnings are potential share guidance a believe wide given guidance our be to per we results growth in slight And pleased adjusted say This for dynamic this are decline our now to couple now we our conditions. happy the range year. environment, is balanced our rate appropriately there heard these of current expect with QX. and tax think I making we a outcomes. of margin is XX%

opportunity should our associates implementation. We see sales and better-than-expected to to additional service our continue outlook. satisfaction, drive However, would and upside client to deliver results, efficiency,

to in Q&A Before to share move I X wanted things.

forward always of turn eventually I will couple Operator on some Q&A. everyone associates all our to we financial of to First, our our meeting tell to our with Investor they're as a lot here and to virtually community. weeks I in-person of for you years, one excitement tends is ground. forward run XXth. back We that second the get look over hope I can to at But very meet to the road Having the the now on the much we in that And I now. in happening perhaps And picture, upcoming for November shareholders investment you excitement a back there out things much looking among it very are working for a ADP businesses tell Day And largest for of stable on up to you share November. roll can although that, there's it with on. is

Operator

[Operator's first from the our Jefferies. Samad Samana Instructions] with take line question of We'll

open. Your line is

Samad Samana

my for year. fiscal start and the questions, the morning thanks good really taking new on strong Hi, to congrats

new Carlos, new the how and but I about on unpack the about want how the we drivers one, the side that was within should -- of maybe the strength think product think is where side, portfolio terms productivity to know in I So we product strength should clearly bookings? driving bookings

Carlos Rodriguez

bookings, to it. want don't by I put ES else start we really know about PEO the strong. So to is we talked Bookings what were that saying just incredibly though even -- how

growth So rate I bookings terms see. That quarter. call of in the good the higher it really orders of magnitude to for growth ES was than even

we little talent great clinical an should that we're and there HCM in there's department, we're software, are but and think outsourcers, right? that of are obviously some through that and as looking but really there's HR in is, out question you here we So take Company, also bit products of department, their our is shortages coming hire that's back-office of work going where people so also is, category them that people payroll issues for of which hearing our And help. their accountability for a of challenged and market do the own for solutions talent including these people kind sign to And pandemic, are in with talent. retain attract I to the people you have advantage So do of if think of, technology helped obviously or also a various the about when your in shortages the kind benefits -- department, outcomes. of internal every general categories then create model for people searching this a their to is another to this dynamic in of I terms know, there ADP, in or retracting to environment work sort provide we struggling labor

getting think are And outsourcing tailwind. I those lot a so of solutions

saw because of heard and I think comments. also it 's you've comps in We easy Dan the

very it our obvious the same recruitment well. was business Some having for year business, rebounded of workforce. really But the very things low time, and had our said across process that, booking we're strong screening like We outsourcing in reasons, the off selection levels at which board. at last incredibly have and really growth

had very growth in up-market. Now, even the in strong a down-market. we had growth We strong

we that when acquisition through M&A flowed of last to technically were that but the converted, time, is of business some we which that we able and we same mentioned client-base we that really large deal, our think call book buy bookings. Although had at I not

the SBS comparison just really now, little GDP that the our just was it's in was years here some out, strong we've are bit force. sales and made a some harder theory environment strong I side, I'd that side which bookings, economy. SBS if for great to we So on how for when a across give the that as for and had a It say comes but we it economy equally a is strong very would color, very something have the but it the could little well. it board. back recovery you of shows you -- And connected that to a on

Samad Samana

very That's on Don And you the then, helpful. Maguire, one maybe retention for side.

the I But moving that obviously help strength -- to you're little in quarter think one into signals and retention about that in on moving you it's outlook bit enterprise terms the the better-than-expected SMB of So it's side it the help business side? mid-market, How balance seeing. us more really the just the unpack Should maybe we to different think parts? slight a towards size uptick those the or there even normal customer impactful the raise across offset failure. spectrum? is in Can think

Don Mcguire

Yes. Sure.

say we QX. that all-time it's think is and for it I commented record the retention an at fair our on to

we extent into So smaller and the expectation a but back it slipped to that's particularly The we year has, that expected. statement, the back than nearly had better hasn't that business had see anticipated. see we slipped the little. in indeed it to And to fantastic was as went

there previously had thought. what So we against even we're better

levels Of in we course, that the did the upmarket. and that means to continue good then mid-market have have retention and

So to we that continue. to expect expect that -- we

cyclicality and of However, our as business the the seasonality of you our know business.

see new the most We which we drivers etc. calendar year switching because year is in starts activity the of will get through the need end, when the to of

expected. perhaps and are our and up see year retention the we did take if we for it's we'll So better estimate holds we positive than it and

Samad Samana

a Great, forward stand weeks. few the seeing thanks. I at to and look person And

Don Mcguire

Thank you.

Operator

proceed. comes America. Kupferberg question with Bank Please from Jason next of Our

Jason Kupferberg

for hear Jason. Good priorities role may This actually on morning can on the could then congratulations little your thank and I taking a [Indiscernible]. have And is Maybe talk just look about questions. multiyear next my relatedly, we Don, And bit you should a a the in role. on Day. CFO year's little targets at you. about and update, maybe firstly, how the the for expect follow-up. they an different than Thank Analyst you

Don Mcguire

Yes.

I in very I And time observed I a would that. been a am with XX I've guess continue we this a had been always with ADP we I to what I've now. So long is has I what with guess years want roughly for will. the ADP And I sure that is strong finance that make organization financial leader. Company sure strong say

that think that well we priorities the Days, plan Strat are set Investor etc. have I previous in out our

plan, on then So update we'll don't the and and We on changes. until you're an things have But see probably November any we to think together that dramatic provide let's along trajectory, will get when going and on wait you that on we the November and a pretty XXth. those with update XXth. well-disclosed well-discussed, much I

Jason Kupferberg

if just strong Understood. seeing about the you. could clearly for I Thank very And just momentum some spend, then just ask market. in sales

I the in for plans any logos in. sales in XXXX? or anything cross-sells just bookings Fiscal force And call in your those be of concentrated mix ads have to forecast. of you. Also Thank in the quarter growth new of was for the versus if would the So terms notable you wondering out market part which

Carlos Rodriguez

tailwind environment, and made have have economy, kind about comments the now of economy the we very and this of the the first you you the in in U.S. think I given both

think is more inclined that regulation kind to particularly I regulation. employer into, an of administration

would but is that say do for marketing very a you I plan you strong what would effective. advertising. force, And foreseeable In is in would as I labor historically, would digital our think more difficult add I we future. have, would backdrop so environment, say what the of what very ADP it's forth. exactly market. have growing tell onboard as had indiscriminately for we so to strong in also a it's marketing. possible. we we people or That appetite that, have that we train a mean that we've that capacity said But that's make hiring, hire people hire and and else, we because those sales everyone doesn't to And like traditional our do. much have And to growing for Whether investment Having challenges I terms sales and

able as expectations, way. I the growing those as see getting the our hopefully that which years, those possible. the that that I So We thing those derive we the then implemented, I have, many the that's you're of the once in. revenue could we But have clients dreams, business sales the the can capital, in depending the execute get of only if get be to think and think will, hope sales, fulfill we benefits and people hire XX-XX you we on obviously force desire have I unit to experience for, in cases to fast

guess I marketing, say for marketing, across-the-board. digital Whether it's but sales. so also And would headcount appetite strong investments both other I all growth, in tools, sales

Jason Kupferberg

you. Thank

Operator

next Our comes Morgan. Tien-jian question JP Huang with from

Your open. is line

Tien Jian Huang

results much. here. so Thanks Good

versus Just improvement putting is sales cyclical? you Carlos, know about talked on of secular the I the well. there there energy as I'm more much PEO And side, how curious general

Just changed? curious, what's

Carlos Rodriguez

-- economical are it's the the recession. to pandemic. risk going had feeling out that the be different and coming recession. So the because strong out business of prior those been a was of coming PEO Because strong strong we of

I some So around predictions. we any it specific XX% I price with think coming pandemic and just But were about we're ballpark smaller. slightly of in out be selling the the that have smaller challenges, to careful had PEO the

So numbers. I'm to let's make the just the say average, up that going

in sudden, Let's with and X say growing to prior years. been over slightly pandemic over and that's a the the PEO the average the of new can all worksite quote, employees clients

like XX% down came XX, decline. it to All of a sudden so

you if same the XX% in are sell basically XX% at end units, the you smaller, if more place. even units up So

and expecting. of little a to the that bit with believe what was XXX% the a related that's pandemic. economy, what were We we So to happening

now year, as our has recovery recovered. it the the growth is is in prior seen still unit and we've what was strong both Now size unit

the really, out The transition combination things where the quarter EF. created wouldn't think, in XXth. a first call have quarter fiscal to we did given some -- our we growth those ended year I still as PEO. that I that year on businesses year come know, were is tend new of was clear cases, year, when well clearly would they I in June really bookings, it to were strong PEO, in really had first a the because year, caveat And been our X it when perform the what of of under-performance also the you into the last that add has only good so And seeing extremely recovery circumstances. it in in PEO the we very, But a trailing, in terms comes a

as has lead expected, now the the horse changed. the we horse race -- Now, in

PEO one now the is the race. the leading So

Tien Jian Huang

Thank you, Carlos.

Operator

Our with McVeigh comes Suisse. next Kevin Credit from question

Your is line open.

Kevin McVeigh

a around you any and despite on more sales there sales is that? a Thank more parameters wondered -- some you're Carlos, strategy force process. a perspective, had, in the helps congrats I'm to Don than way environment is there about as Great. tight and leverage put still you results you've saying from give think sense, guess cycle down-market this and maybe opposed maybe go-to-market way mix last technology of is how today there drive that I to what the any the that ever us Welcome. could and to delivering, the Hey, I maybe

Carlos Rodriguez

definitely versus in the terms been field. like for the like go what already -- handled of months, mean, because I'm number had of sales went back we a you're than maybe had in how leverage sales of sales. our competitor other and of virtual, learning I we've I which third ever alluding I that long we is think sales had have were XXX% force virtual of XX-XX we a think almost every force selling lot But to there process in a insights our what to for a force they sure to call they differently competitors when years, more our about

building our force portion were sales to so appropriate effectively. still some it sales in were a entire the sell And they sell their been and with that very They force of really training some from building, we and want and virtually. for They transition they to tools or an our force, matter sell to able inside was easy we able homes. sales learning then virtually. didn't moved had whether our really the really in That but

So going now I to where wants a we're the in think based to sold. on, we're period however really sell be client

And the an if wants once a client a combination client can WebEx, If or of that. start Zoom do want with close visits we'll call in-person that. so an on they if in-person, we do to we'll do the the an that with but video initial deal video,

if but So Salesforce question that has for I think for increased there's leverage no well. us, admittedly, probably our as competitors

but tools, been about in of also philosophically. that question extended. terms definitely There's reach has no Our

to able heavily and we think to now, in I use I omnichannel way. We're digital are cliche think in marketing. investing a, sell I a mean also

It to So you was other the some because of actually was mentioned quarter. I had just that the results that withdraw not would the down-market, comparisons add businesses. the all this of the sales down-market

we it's in comparison, not underlying but of in see reflected strength business. small do So the the But difficult the because percentages.

of trying to the digital in not in the the portfolio as marketing, everywhere leveraged So the market. minimize in quite not rest it strength trying benefit I'm down can in is the And the also as strength tools, digital it's momentum from portfolio. the emphasize but to the down-market, else

numbers. in positively we lot of the of combination and it's increased by I comment think surprised things, the what productivity think the of is very but be there frankly productivity. terms Salesforce you're sales average the a are I would in seeing there's I we overall, force So it call different that a leverage rebound no mean in it, question

how are selling they Fiscal us. in and level, actual is very selling pleasing that 'XX. year the they much level, to were And which what versus sales to, So rep that today is back above

Kevin McVeigh

more because terms over-performance just boost the any balance year? balance retention. maybe know how or That's Is that both? December's one big of the quick one much in I optimism real of feeling was quarter of year the just kind there over of is helpful. the that over like What you're And QX on retention, things QX way of was to the opposed or of a it boost how QX the as then to frame little the all over-performance

Don Mcguire

take will that. Maybe I

the I in our to NPS think along that's the success last what I that's we've we're to direction And linked I what go it's have, we go want seeing NPS. increases right the think over and years expect heavily improved, happy with in continues very QX our see retention, had with we're also our would happen. as we think and record we to improvements certainly on to with that, the but retention few general

I of of that a benefiting we're have is doubt during a it -- of some there concerns think retention many. The about still So there. may pandemic switching still with the and time virtual I relationship little from some the is bit out for clients that good think no of very the coming

our the progress said, as go well and we're along and to acknowledge those So with very service But happy our we're we're benefiting that. we making numbers. driving with from products the and that retention retention as that I

step said We back see up a soft down-market. than better the far, of bit a we living as in we expected. will little perhaps it's But so

Danyal Hussain

a did of function raise the share clarify, remarks as the October QX we prepared have stability well. results, to in obviously that which we because in primarily our the just And

Kevin McVeigh

Thank sense. That makes you.

Operator

Ramsey comes with question from El-Assal Next Barclays.

Your line is open.

Ramsey El Assal

came really I and this this call I of model, strongest forgive but earlier, to move the a the my taking margins in forward. detail, speak of our to missed for call you it Thanks as ask morning. about and you above to can bit me quarter drivers Gentlemen. the well in if addressed their sustainability also wanted Hi, some beat we

Carlos Rodriguez

more both that, impressive had that, above year me other a of happy margin was comment start reported year a we higher the improvement quite quarter better PEO. gratifying it go last having way it it's pace had is record let is which had But ES that first Sure, year, margin And of you saying was lap. bunch control, victory us. above that to really we if different But impressive it one quarter up that about is was the revenue incredibly an in that anticipated, year a in very and was We're improvement was into we we the the and was It's last Then by last again, even places. than margin year. the the pandemic. Slightly last we we impressive prior said just were had as better. that part back given And -- retention per for

the all comments. heard You

service, have a so our and implementation of not We and have now, period. lot just things trying right here. we to for both the revenues in expenses capacity, are our favor of particularly caught up ahead to working The add year-end

we've that And a start most so able companies, be like execute and business sold. to able commitments be our to the to thing our on is other to important to clients, us for

terms And away performance, to top catching dynamic to And able be to so accomplish. going today margin we was do. anything that operating up is were the I to we known more of say where into the the we it's what would or factored leverage volumes, I that's have from the from than headcount anything we organization line a take want there because don't would in pretty away organization impressive but and But had some have. that

performance dollars a it point than and address guidance, by not we're someone's have as raising of yet case QX. really terms fine and the hit out of of, a what because our that's millions margin much first asked we hiring little hiring or there would've numbers in EPS strongly And and in we I and terms businesses. volume-related that's quarter, well in because I in deferred going question thought see helped implementation had at implementation. us continue to well. kind like still quarter, margin on that, behind, you obvious may it in believe When the the first head had headcount to with in it put rest our why year. strong seems put service the invest to in that of we just more very don't we the to of And had even for look sales should as I an think hundreds in the delay Now expense, add on and for are both a in service you And we but of the we distribution, performance that also bit

Ramsey El Assal

figure wondering products. the payroll customers into to how for process. of rates you sort human resources about of attach basic I trying That's organized? is human about you guess much about I of capital talk go just from of candor Quick that you management a I the products? runway those and cross-sell kit your how see follow-up do appreciate Can there. process cross-selling how your great And to and out I'm kind was me.

Carlos Rodriguez

isn't a We'll the attach to answer part. There simple to about I think back question first really the -- the to that, the second come rates.

The rate. me -- attach good I would there's could we CEO have higher. as be they Let answer always for, our and compensation rates, saying beyond a But call a our systems. has worker's high first. acceptable, are products and Like our attach one unquote, rates attach of quote, that tools, else a benefit payroll. our speak where of down-market which couple what is time products that also almost in admin But attendance everything is tool most

attach way to addition terms under of our penetrated core kind payroll in rates. in HCM we're So of solutions,

lot a well. improve is there to think I for So that potential, of as

a answer. isn't sales have very we of in In we cross-sell, have how part bundles. first to specialized in because even But the businesses, large a I answer on in question I That also a get the as people. some simple started force into have kind But able that is with also directly. accountants have services and each forces solutions And complexity on, products. share we incentives you force But certain distinct PEO call that depending get start in still then are the third-party through channels and primary basically would sales a business multiple a down-market that other, works our the and we And those do solution, think sales in sell the with other of is retirement they and sales What insurance your into distinct product. saying, well. and have all So have forces to of down-market our leaves our separate some also there to which portion circumstances, our are of down-market, sell whatever there I up-market organizations XXXK the feeds sales. sales primary terms like we simple sells then, isn't to of When the you business as products you incentives. cases, distinct our force PEO call sales so. or sales specialization mid-market, there or of the force

quarterback, if an account. you on the will, So

about and I'm specific talking a mid-market of really those and making our bring our some are appropriate, in charge solutions. Now we it's upmarket and specialized sure other that of that quarterbacks about people client a that in need when has when sales knowledge have HCM

to terms to that is this, of I'd but the could but some give Frank well. back do simple the part invented able right? this to all ability and answer, be secret I our grow sales - terms outperform XX goes XX the you've So this cross-sell. of and about a to from competitors something of that's you to that actually that like our new distribution. come just of well days roughly on our and roughly percent Wattenberg is to oiled fine a machine each again, sauce, logos in and bookings of And year. it the point put my of say I And come wish a In predecessors our I way to our is from percent And cross-sell bookings described specifically, [Indiscernible]. And

Ramsey El Assal

Appreciate you. Very helpful. Thank it.

Operator

comes Research. Kartik question Northcoast next Mehta Our with from

line is open. Your

Kartik Mehta

through wanted your Carlos, especially sell to is now on down, it the about there do acquire and think seeing. the will this to acquire way sales get a lot was? I what move you're side pandemic to to that outside the going to wage thoughts. I'm Is as of cost clients talk I to them? wondering, new this go know you just that clients obviously inflation to cost Or back we you SMB new a

Carlos Rodriguez

ball terms from in answering I cost standpoint, of wish mathematical sale the because technical is go. had of going to I this definitely I down But it's or of pulling a productivity think increase. a just crystal where

expense, on it higher basically so seeing unless get many lot as volumes So definition well. higher on you're you businesses, and bookings this -- get productivity. by including is When indicates the happens same so industries add leverage revenue the you ours, in that many higher of the a you

see focusing Or went kind Well, few why on, people. up right set people you worker sustained productivity worker in now. up. pandemic went productivity revenues adding press all of it reported people's more down, is a down. hardly is Maybe is the So in is you're productivity recovered, aren't us how revenues worker the the being and that and reason people as volumes recovered, of about, because have time

simplistic, so hate mathematically. But to make it I what's some So of now. that happening is

We tends even a that, how medium cost year where and they But Company, the about on bookings massive, expenses. as conclusions to increase to now things, as would pre to to to here year to mean before is GDP it's ADP's because there's during careful increase with last will sale of regression regress the that jumping the mean back coming very require that though still But employment, So you right be productivity get rates of to or of that And s. our and our a bit it to be have to any our large this mean interest more expectation result of down sale tend to large little the large the do a very but to in economy a whether we definitely year. long-term compared we cost there. also not was -pandemic. are in hope similar the a is regress economy. or lot is and

know that so the won't you where I I things think on And understand we are, we're these it. past until unfortunately, just work of the to base So some have the and themselves will to comparisons, other you side get and effects, out. forth say really hate to and

Kartik Mehta

Thank Appreciate much. very you it.

Operator

with James from Our next comes Morgan question Faucette Stanley.

is line open. Your

James Faucette

the to for wondering market, much morning. current on forecasts? And can Are factored outlook seeing provide is you thanks you the And I of the obvious maybe anticipating headline with incremental thinking that on I and a having Thank you're about [Indiscernible] as tech the clients through just are in just product tied guidance? that. that into any to reported Thanks. question sales I question maybe labor to and your how you the all changes you and impact want year? and etc. guess your your hiring, guess how opportunities coming very and ask fiscal this tightness service-related the how for that some

Carlos Rodriguez

Thanks for the question.

for labor there's also part last the some you government to no answers hiring, and trying help part. in given This things on staff period -- for on anywhere environment going use who market the We see itself The tailwinds strong good might onto are that for that second help we much new all now. -- think see kind and us. some people, don't hold them. part of question, the near separate business Like, that m do change. now great I a doesn't future, a the hate some until more in changes. overnight to payroll mean, should of some towards future I horizon of staff is to part terms we formation assuming tight of our do. question, to GDP, tightness a is right combination again, that an some answer very day, that part and By growth, market. attracting I resolve but of is here first yes. government But to, what's The the point at administration etc. alluding And word, I'm of and backdrop The is is for what anticipate the terms that time, growth everyone the regulation, driven and pure But policy. for that of our think of with looking how us. R your people frankly, GDP inclined by which then that not That's stimulus hard this and is is in your I But labor prospects question the going just HR someday is in clients. at

get have, hire But like in a also it's of pressures, create we because which very for reason race more labor part talked years say ADP implementation first were one It of to and in years tight which even they've potential underestimated into what the higher, though your we about the I people else. which has the business. pandemic, growth. drive flow question. so of to we internal service tight of mentioned tight just upside And terms terms drives have I here and labor interest anyone changes is done But is would coming the people, nothing is challenges harder because a that XX last think they than I our comparison the inflationary go it in one most should could is that balanced stories, for upside, in us lower and of been rates question is for new underappreciated we before. your AEP. it's just market it associates our I thought like markets, But we part sure XX any the it's of our been for the affects On I'm pain of overwhelming on were in the out as headwind. tight impact now. for of of nothing pale the those markets and And it pretty labor we own positive harder lower go and labor market bookings drive it, pain,

there, that down file to medium the least an interest and at but certain it be here, bit feels making still the rate for suggesting long-term, real there's a that. statement years But, long-term back keep trend after increases. interest I'm ago may of getting I'm we around will to But not Although, upside saying years had I rates gradual have is on kind ten go that on rates. little knows there think at think that you demographics XX same us Hover ago. we interest from that whatever. XX-year or pretty interest AK a look everyone rates may now for that when rate. I And underlying

win activity and in It there's to Every creates a number for our labor the we're there's conversations, fair sales helps ways. our time going share. activity market So tight force. of

opportunities So that's for great balances. a creates It backdrop. our

will medium-term, won't wage driven the a percent creates of infinite our are as have So, of it we like indefinitely. of a if to allow tight on PEO labor from to go market. percentage those growth, because thing some adjust you of an are wage We'd you by wages some and revenue that's PEO tailwind think billings the see, I higher help, -- wages, have is because rates just in building I up whenever opportunities we our the to outcome actually wages. will which that for inflation, but think, not some from inevitable extent in And

James Faucette

great you. Thank That's color.

Operator

comes Our Cowen. question Bryan next with from Bergin

Your open. line is

Bryan Bergin

re can switching to assess competitive a between essentially first to bit follow-up engagement you there Thank solutions? win as around dig you. far around And within had business in on XQ HCM drivers little behavior or I broadly, the the performance, on versus as good still better rates, Hi, retention. the you lower more out Curious, of morning. retention closures record, comment anything can -- clients client

Carlos Rodriguez

first not can more we color how on the -- sure the much I'm On first you. part, give

We amount up which trend the to And speaking to They're to normal non-controlled etc. we not but have again. terms detail bankruptcies, losses retention and around, a they in business, fair back those back of started back. call trend started losses have are of broadly out levels, of

not I stimulus new lot a lot still there's that's if a surprising you of not think of it's because if will, liquidity, and stimulus. even

small it's than in be the if it's business of downturn normal like you in planned consumer we spending small sector. the tends we'd probably would slower. what when or natural months have probably guess had So I rather hindsight, It you and experienced turnover have ago, X would've supportive crystal the we have have putting doing, business we you ball, -- that and doing a pandemic, the together X when activity to be that's what had we doing. doing with were our plan, retention to with

of the fortunately, In are long been a down And wasn't U.S.. get to measured our layoffs pandemic, we able was through our regress because to retention to it Having the being during we've incredibly in for lost were there's as in We volume in parts said We they positively other trying organization difficult Don relative should going thing I over PPP are huge surprised know those help happened that they've go. of people didn't to mass controllable. those the satisfaction So going stimulus that all XXX losses, all of the maintained personally, a And how the to scores the controllable had call that common this be back them But loans, clients. also increase an bunch government our you, which headcount. controllable. think NPS, of by in normal. world, etc. losses taking see for do that, it's client for well. what don't to credit programs in just let backs they're % give I made we regress And and because [Indiscernible] on And not our we time as been. our by the highest ever terms is stability we a that

the to correlation where have know retention. maintain -- how to being efforts levels, maintaining So that I there's to our a a is also those don't haven't strong very actually combination were it. NPS able help we and And described staying between strong Make and we and go people NPS up. believe there to at to, able of investment that clients,

permanent highs it's record to on that early too new see make basis, to way prediction. but a able be for retention may we So

Bryan Bergin

And and the just on Can any sold update on, to follow-up metrics next-gen pipeline versus provide you're platform. then there? sales share? an new lifelines, willing HCM Okay. updates Maybe or clients on you

Carlos Rodriguez

Sure.

particularly particularly couple the large I pandemic, of think couple talked the industries as over quarters last we're we about that kind entered in we hard clients of obviously we a were that of in hit. had

put if got starts. a implementations on off So in little our of terms and bit course, we've you our will,

also, tools. We focus on to I implementation think, started

we Investor that turn that I of we more last think set hopefully we I clients. said And that starts don't as still fair think say, of know terms some the in had help that, said making some and third-parties clients. the growth sure to that X, make many is focus good with about started enter recognize to lot out on where hear a and sold. quite a implementations in to to We And been has Day accelerate tools to can business had that integrators talked to, started we these those -- a and -- that really sure or quite have and it's XXth. strong quarters have how focused made that ed we in get when third-party work to We to And a of of sure and in when of to how business. us There have of able we the that we time intend period I actually And couple in the we that evaluation. to us that making we November want as those -- now But our our the we we we investments get if on to in the we do hopefully also the foundation starting to you'll which with implementation help quite implementing use many we about details some implementation right to we need -- I this cases, had the build year be the think in and we lot build that it. about the tools of last tools. quarter effort. bring we a more next feel

Bryan Bergin

Okay. Thank you.

Operator

from comes question Nathanson. Eugene with next Simuni Our Moffett

is line Your open.

Eugene Simuni

be-all little are One demand? is other the are contrast Solutions non-PEO non-PEO, my at compare to thank relative you have that, any broadly PEO using one look might in very seeing upfront. outsourced who switch that the and each clients into will just PEO bit the you for to PEO? the the And and a them much your in I HRO second, can first are curious. HRO Solutions solutions, How So between and that the be benefits I without be the asking the growing and switching was actually do us seeing win hopefully you positioning very franchise post-pandemic PEO, environment, questions. a sure you the you so taking wins secular But given you that badge in make ADP you how how to really be Hi, growth offerings, favorable. share if to so seems couple market for I'm share?

Carlos Rodriguez

services, we kind in -- services as you're is to of have alluding addition a would There the What employment. is our of we early Solutions, are the Up-market what traditional very, of the up-market, first across-the-board, software in and the HRO other call think my tax we my I traditional knowledge the I market the a lot in mid-market, And implies, name it provides we the it assortment mid-market, and we first we and the in Solutions, Solutions have them -- all broader comprehensive comments in down-market. have non-core our question, the HRO in strong in also have but because right? to Outsourcing that the PEO, services. said have I So which in call on on to, -- Corporal in down wants very clients from doing would are typical of across standpoint, I'd Again, maybe a a switching I it the TLM, what payroll because are, whether if of you ADP our HRO into benefits is mid-market typically. from clients my and these to there not switching in of job we're have lot that down-market in that a payroll call Solutions, sales right for then it's knowledge etc., would client. the you find you In do department In the their admin, some XXX-K. the cases, provide - to be of fit client and wants non do the solutions. trying other cases, HR comp, which in to to the benefits, only PEO their the really client workers the benefits and department their the the provide administrative a back-office

tend rates think on that growth I of multiples be chosen. the them this I think are in services. have do we So those -- upgrade growing job our process, the process, at if stay which clients on our solution they those employer in to we clear, and whatever at of point both But well, sales are do to in

quite HRO so growth terms impressive rates have tailwind the the that of we and of in the it's all businesses. And in

part PEO last question, positioning terms of forth. On I which about the of market and in was think so share your

have it's and the quarter year it think fiscal XXX,XXX years XX first in tripled, reported this I ago We of last XX. what we worksite was That's XXX employees quarter. roughly, worksite average employees,

market and than so years XX it higher ago. a share was And that's

in other faster know record the that answer don't drive to a PEO of the markets. we to execution track growth else question say continue I than to to that So proven that's how than have

So drive any evidenced by think to as positioning there's share about our market ability execute. to our question I or don't our ability

Eugene Simuni

it. you. Got Thank

Operator

from comes question with Marcon last our Baird. Mark And

open. is Your line

Mark Marcon

of payroll working next-gen give you us and the out update you. look please? there, morning, an roll terms Don, Good Carlos to can forward with On in

Carlos Rodriguez

PEO, billion are revenue. figure next-gen we equally for a have next-gen excited this issue. of challenge as of out the terms So holds we us to The ADP. Like, way XXth, about in as for address terms HCM we'll and try XX in for to on this what in we November communicate future

that was this not of for standpoint. terms Company are mark, you're a a bookings, absolutely quarter I differentiation performance quarter, next going ability competitive a next critical. there. drive kind for to that's well is what's And financial as of driving positioning payroll next-gen they're to of not years out the next-gen asking about really HCM and year, ADP., X going, just the is future that going know as next to for of and the quarter. this So opportunity -- growth the X and question is good I think future, from but it in the in it and That impact be throw doesn't so ADP -- the to in it's But new not creating terms a this

is on selling we we're would the payroll, next-gen selling we're progress to right payroll, we're both gone seeing different HCM, the so in of old XXX major say happy our we're accounts in kind as still general next-gen what XX I core no but measurements our the excited of down-market. platform in So to transition this we use from availability, that of that terms only of a with now is call lot the of playbook which next-gen by and to have well run a those and mid-market, as with not we

we're in more our which version Workforce of mid-market now. our to legacy platform next-gen on then some And Now

of some that the business So to same we're We're on and to and that next-gen going large of platform. our -- doing not clients thing very satisfaction base. scores levels with clients. have some carefully with And that are have, HCM, doing next-gen the are cash same we're and eventually happy we we're record installed we clients, move those the thing the which flow move existing payroll those and is with a begin we the But very

So There's want faster a hear we that of have to to have competition. beat any faster scale, have get because that. I and is do not no sure panicking. these because I sense there's the the crisis, no two urgency but want this urgency, people make we don't you -- of we we we think all the sense -- solutions Like, crisis, not to no

Mark Marcon

I that, there. for thanks the and appreciate color

end established -- regulatory that impacted the states you're we of come the about the I different are kind to talk to a to a catch the come dimensions? about bit elective just having and now then secondly, PEO health seeing but are just would of the on little demand states and pricing? X what mature overall thinking growth seeing back, directly procedures would should What extent starting the impact less legislative the costs you're margin insurance environment. perspective, the that elective And that surgeries you really how growth, less Particularly just are to can states back. you in two think that mature some given up starting about on? know relative On from not backdrop. be, necessarily

Carlos Rodriguez

great a It's question.

sales. to follow-up so were because of we'll -- in that states, forget I PEO we're we growth. first or question, you'll regions we'll all terms about prepare because our off that terms and have what with that they to of in in you the on any part strongest state strong to of can't what hopefully up question. second think one, I'm everything charts, honestly, like we that were double-digit part have the follow don't But the results wasn't going be try suspect for on there strong

for right usually mean. losses but large what impacted, we're So we're a you're this uncanny decline of -- and back mean question, always not indirectly to that workers usually are they I healthcare think the the imply usually regressing the insurance matter, what that but either or clients of way. terms in hate people simplistic, they're have comp economies so There's it that all healthcare. be to to companies costs. rate healthcare thinks similar that explains the On sudden right does you're they also right? also It the world and regression healthcare work costs to why regresses and to caution because right? our that And That's mean. to it matters directly It someone actual the paying I have in big way when regress, I doesn't something it of an impacted

hate there to in their transitory that temporarily. back. that costs is talk was and frankly, and answer People about that word come physicians in to use I if word decreased healthcare -- decline question, And think, general. that like transitory, seems elective the it's was try inflation, so but I that stop healthcare now that is forth, I what clear it start to going I favorite your to care will and a surgery, of healthcare very temporary the primary think even implication can things costs

paying their have increase to costs and other companies, really extent insurance a situation healthcare risk are in When be normal those you because at costs, we you we that business much They're on get, can't margins are don't to back below as in prescription criticism hospitals, costs structure. XX had would the we XX you drugs, we we as think so say, not which largely And renewals that would see the cost back pass so they margins renewals, renewals, and the where it's etc. our extent it our take would expect percent. providers, because wouldn't I normal costs to percent they normal pass-through below because to healthcare, go as this pass-through. And and we can healthcare had slowly, in healthcare normal even would be to to But those healthcare look go entities. expect our

through. etc. those is is markup pass networks or costs in that which margin so a doing for But managing they of And the do business they terms straightforward, they very to what try end, to in earn have

some costs those time. healthcare see will And on also, risk entity those passive think up We as we're who I because over go a have to well. probably take of period

Mark Marcon

the comments. XXth. Appreciate forward the Look seeing to on you

Carlos Rodriguez

here. Same

Operator

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

Carlos Rodriguez

joining be of Don not want associates meet finance his to as line in I'm get very which ADP within experience organization. to be front say other not able because you're ADP There's for going our thank goals in people happy has I kind going particularly in is the we I but just well. beyond. accomplished and The him want above to the the more I and without terrific results. would he broadly, besides sure real-world experience end Because our had I more really as get can think on much benefit to all going -- organization we our way just I and to what's usually end not thanking business companies. and of

say a our in that's mentioned An I appreciate really just increase we're that it, an our means bit tight hard. think people economist that hiring, working are said, behind that terms I'd of extra in hard. our working labor And the productivity, little appreciate clients market we and people we it.

seeing terms us, And businesses I whether whole the is our think that, out and are and call, appreciate a And But so bunch hard see of there this and of listen a happening we'd a of really, they're have the here show of don't this of consumers each these things function, which I to we're have that a should to People mean, mobility back think pushing there's happening to of get to quarter to many other given buyers we hard our slowly across other people some in of in whether to normalize of But what's economy needs associates they've going it's the the for as aware fulfill want to I Because frustrated function. I will think it, things. and last recedes, clients. the think people you in of try that this do but as what you're to this by the really all I I and companies, will supply chain some deliver. these lot is to be little to it's get really I or supposed come back now so already force. data, that's labor way lot through we we're the whether And to what it's our going we other. patience be normal. products bit volumes and this done far, will have. variant all with capacity will thank the And working into year-end, have economy. and shareholders of challenging great very meantime,

that, of for you being of listening all So thank you. I for I but also Thank ADP. them, for and thank supporters

Operator

program. concludes And the this

have disconnect. now may a great You Everyone, day.

Automatic Data Processing (ADP) 27 Oct 212022 Q1 Earnings call transcript