ADP - Earnings call transcript Q2 2022 | Automatic Data Processing, Inc.

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Operator

Good morning. My name is Michelle and I’ll be your conference Operator. At this time, I would like to welcome everyone to ADP’s second 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.

to then question your the like simply this telephone would star press number you ask during a time, keypad. If one on your withdraw question, the key. To press pound Thank you. turn now I to conference Mr. will the over President, Vice Hussain, Investor Danyal Relations. Please go ahead.

Danyal Hussain

our President you morning, joining quarter XXXX for second is us results Carlos our for earnings to McGuire, we Don Black, are fiscal CEO, today Q&A and and everyone of Participating our quarter. Thank this Michelle Rodriguez, ADP’s released ADP. welcome Earlier call. CFO. the Maria Also

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

impacts items, to their we found release. call, reconciliation believe useful and our in measures of to along During refer and of A earnings non-GAAP be the investors Carlos. information certain differ on contain of description our can with could reference review which items. the With from non-GAAP additional measures forward-looking for be call our a these financial measures to most we excludes will GAAP comparable Today’s encourage me expectations. risk. actual it let results SEC turn cause our that, filings future current to involve to statements factors to will you We materially some with also that over to events that that

Carlos Rodriguez

our call. and joining Dany, for you everyone Thank you thank

prospects, results. and basis in believe points adjusted EBIT challenging is drive dynamic ever, partner ahead retention, our with of delivered our have which the to in to a very continued It our all than upside remains as adjusted strong second compelling growth, continue as our we quarter and of for pleased environment of of a momentum XX X% reflected expansion, evidence our trusted satisfaction high and than We’re X% value more EPS, clients more well client of including and years results, margin with to business but this diluted levels increase and a see of sales very expectations. working ACM seven we expertise revenue

highlights As some with usual, let me the start quarter. from

strong quarter. booking Our business omicron the robust were ES a employers pre-pandemic services we our businesses, sales where We the record robust. saw we We of in in variant results productivity ahead segment, onset PEO in especially year, of and performance the levels. the experienced the growth pleased every at despite experienced and nearly like QX, demand end as of QX booking of one every is earlier stronger be level to we new our experienced were double-digit

As address of more extraordinary business environment provide decades-long We trend all we environments, global cases seeking a we and HR environment navigate a many within through a legislative and outlined help challenging our are and worker made November of assistance software to at seeking running intuitive comprehensive macroeconomic all organizations, new some our tight higher day, increasingly sizes across in yet levels looking in their more and while greater staffing strong than and outsourced investor pandemic PEO HCM. a fully value supports specifically believe their and clients. usual needs, the challenges Today reflect their today’s have fact our dynamic our secular continuation requirements, solution. market HR of our payroll for demand departments. clients in ES that segments the for across The labor expertise positive other the in turnover, clients cases cases offerings broad-based

we continued retention, employer have pleased onto to Moving strength. services are experienced

level levels. by have year, quarter, giving record had we year’s With the us. us exclude a of our level, were impacted is this confidence greater are retention record Moreover, the look in results last anticipated strong pandemic to less for we Although last reaching strong, rest surprising did and elevated the this would decline raising retention and you early satisfaction again QX declined retention again. quarter year’s once not a retention pleased January slightly to versus once represented very be if guidance overall our it client than to

Our ES control expected per than came in in growth slightly pays better the at quarter. metric X%

as We labor are U.S. we improvement workers. it X%, see rate higher continue force to benefit should the recovering back growth. reflects from to participation for than very resulting usual below pleased is the demand per Meanwhile, which and ongoing unemployment strong gradually U.S. economy’s and pays control does,

of expectations from several once the again slightly year, worksite despite growth full the last quarter our XX% adding be growth second tracked average representing bookings raising fiscal ahead In revenue client growth, had than and pays now our and are year. further contributing further and growth. employee outlook growth, than Over growth, we’ve hiring per retention by PEO performance control the well the with board expected employee in harder was our a our factors, revenue expectations to better to acceleration than within quarter, the including client of of base, levels to and stellar XX% the better worksite wage adding comparison. and half driven our better ahead strength first PEO expected continues PEO for to Across expected

in over these normalize business of PEO very remain over years. of coming we confident the outlook our will tailwinds the While time, some

One that most development that experience, discussed focus user During on future. healthy effort. the strategy overall an new also are and strategy existing unified will unit, is the key businesses day greater progress We product and we our key of our we tactical to and more our business investor continue a of optimistic growth second November near better is our we further and growth of One in during our sustaining look to have accelerating by in believe pleased a we marketing, scale transition initiative sharing at which ADP, we outlined allow about were value talked us on aspect about by very we cuts to activate investor fast-growing we about quarter in confident our growth day, growth businesses offerings. we to from modern our our of aspects that the investments, deliver distribution. to businesses incremental lot can believe product and forward across this in made our

those resulting clients the new to last in, a our platform, seamlessly quarter we IHCM our that Run As client we over ADP indicators fewer new base fact are the reminder, to only we base Europe, over suggest moved intuitive, our in shared now and In quarter ADP clients finding client to contacts. and over it a UX, UX. more early in that award-winning QX service we moved transitioning been gradually have in client

we makes pilot even for began differentiated for of We’re excited the for market. payroll already Workforce user solution which more coupled when gen target experience very this ADP offering that what new an HCM now next month, engine with Now, market-leading this a our just is our in

Innovation to other which In the other initial pleased of running expectations. spectrum, we our slips that the milestone that a have for our terms log-ins, another the highlighting share this solution, on X To app, with direct serves the to of new Business milestone single single ADP mobile Group’s XXXX time. app, by reached I’m mobile Intelligence to the day mobile continues X few outperform Big a managers return client In first we month Award. a around awarded and the the growing highlights, was At micro in part pay app engagement amount for employees world. our segment, calendar end workplace XXXX, of the had billion mobile point, of the a Roll over ADP million

believe who now to Don. deliver continuing to on represented products QX to strategic As our Wisely app. the users Wisely the service pay a Overall, as pay feature app, drive outstanding and exceptional bill the over engagement to and I’ll free turn thank has a clients, this addition the further retention, well our base. our will to user associates financial requested this both like front just continue to our final with launched feature expand fully I’d week integrated as look highlight, the is solid and call and been in these a Wisely initiatives. from to and forward respect to key top Bill we we ecosystem. into We and outcome

Don McGuire

growth Thank revenue a you currency basis. delivered Carlos, and and good constant organic we on morning everyone. X% both the second In quarter, reported

pass-throughs planned, our and revenue this Our headcount than I’ll than adjusted PEO our in EBIT points, partially share margin was discuss I up and XX on basis better growth supported our service increased point by more last when outlook. growth, organizations. and implementation offset better by expected

When year. lapping we X% of was up including year, slightly share driven our last from earnings we in rate benefit international share. in the per experienced tax quarter had tax adjusted one-time last benefit a the Our diluted the a increase repurchases, versus by

services basis on revenue X% Moving a an basis. on onto the increased our segments, reported and constant organic currency X% employer

higher In social performance social several retention employer control of from year’s the a was some grew the yield wages. included time client in first already since employment lapping a This pays of as client to the outlined, lower addition per taxes, pandemic strong contributed offset employers’ portion the trends, the growth, taxes for Carlos bookings, repayment growth higher the tremendous benefit average growth which of points benefit last and security of and together to funds incremental growth. and interest our count, growth deferred addition by from security XX% started robust from those balance

basis and better Our ahead expectations ES for the margin performance. by supported increased XX of our quarter than revenue expected points,

retention, was continued XXX,XXX per the as Average year-over-year the growth XX% our accelerated with figure in workers’ which to reached employee was in worksite primarily by average Key the quarter. worksite worker for zero-margin as SUI per down driven Revenues XX%, and client deliver was strong higher employees from growth due exceptional healthy were revenues pass-throughs well employee. performance pressure in to wages. worksite pays wages and margin and within bookings Included comp higher revenue basis contributors points grew on, PEO as mix PEO Moving the excluding control very XX% and well growth that SUI quarter. base. to as and PEO quarter. XX growth expenses

guidance the by for year, year and QX pays FX the control the performance, our The interest year, higher our range to previous funds for are updated outlook this revenues our growth primary back end now are dollar. narrowing stronger of the of expect X%. to offset incremental in on of of the the on per our outlook the growth, and for drivers recent X%, X% we higher ES strengthening client outlook guidance half U.S. our of about upper for from Moving partially an expectation higher headwind

to million funds million. rates. by $XX growth $XXX $XXX client the rate our our our to For raising securities. to client funds greater to raising purchase growth interest interest quarter, range because is outlook previously our meaningfully fixed a than yield performance balance XX% higher whereas creates before we’re assumption now revenue, XX%, despite Like stronger last expect million improvement of of expectation with a primarily investments our lag yielding This is expected temporary term unchanged we balance short in we’re

X% pays our we’re raising X% per outlook growth. to X% U.S. control, For expect by to now

gradual of to continue bit expectations. a was that will half ahead of force the ongoing recovery participation We and growth, in the support labor year first job expect a

are In year. be addition down guidance slightly now control, we per pays XX and funds and to retention our it basis to for points expect client the raising

far client in ES is this we’re and booking strength. time is normalization our some activity, a that switching this at anticipate so continuation guidance. year same have of like still positive, January not been thing trends One changing we looking very Although

bookings as has one As Carlos the pandemic. our was evolving strong, create omicron the variant we pandemic saw the where the to outset conditions but outlined, noise, is at place and QX performance of potential

think this still Although we of prudent wide a maintain range to it’s impact outcomes a in at seen haven’t material guidance. time, our we

to ES For are no we XXX basis making our outlook of to change our margin, points. up XX

control, and that caught on raising at interest the fully implementation bit service high is guidance up we revenues, of headcount same behind although funds coming time employees, pays and like are now a our earlier more and client to the also this service last per get implementation needs are from and and year and investment important their ahead growing look period critical is client teams current both because to late of the year. is as and our clients in we of year-end Although after margin running revenue some our we base. This

this implementation we With retention, exit the we now outperformance planning fiscal continued slightly grow as planned teams more in we’re had to previously and our year. than service

also took incremental broader outlook. we market. those In The in included in expenses in compensation our in growth trends with addition now associated one-time organization of actions this recognition to actions personnel, are the across our inflation

Although able are challenges year. us as a has of of the our to wage as market this most pleased to levels set our we and time own tight we increases give very past grow organization these created we did labor for busy companies, its regarding much staffing few confidence have been at layered in months,

We to ranges. without are detriment those to support existing changes also pleased to guidance able have our been

the PEO onto employees by two pass-throughs guidance first Moving in are growth and to we to following points XX%, and percentage worksite excluding for client PEO, employee growth, XX% raising our now half both each. grow are the zero-margin worksite strong and trends revenues likewise expecting we revenues average

bookings our client retention employment currently half the current growth contemplating trends trends to the of as Our base, lower so are performance, outlook could a we continue we in to although will bit back well sensitive continue to see and the robust year, if to within upside as be PEO be persist.

margin, flat XX PEO to are down change year. to of guidance points the making basis for For our we no

revenue raising to X% revenue together expenses SUI at outlook, we we time X%. offsetting create margin workers’ grow our the Although pressure. Putting expect expecting now are guidance, comp all consolidated to we higher same it and our to for are

For an basis expect adjusted we of points. EBIT continue margin, XX increase XX to to

following our recent shared personnel earlier be to in the concentrated down and margin the we As fourth and quarter improvement QX, be particularly year, wage expect we growth increases. to in our expect this margin

We’re to our change assumption. making rate no tax

now Q&A. to per share Thank back changes, XX%. in expect these XX% of and Michelle I’ll we diluted growth With turn adjusted earnings to you, it for now

Operator

first from comes Bryan Our DB. instructions] [Operator Keane with question

Your line is open.

Bryan Keane

Hi results. guys, the congrats on

or Is ask impact Just seen that January. out virus impact you’d especially on omicron? there anything the in December that omicron, any we’ve sales particularly of from from noticeable and the wanted retention, to rise call in or and the

Carlos Rodriguez

the weeks, growth is think, one the would just talking morning we quarter it, Obviously no, quarter, say multiple our but forward, the will the does seen increased, growth obviously at forth, in lowered now other you kinds answer think the think forecasts see quarters economy, big we’re calendar is a - because and think a didn’t say, things would to, I’m same to for growth--I then of answer of that have thereafter look economic the quarter about there’s prepared I next just in last Journal have back factors to think, you kind I full including I difficult pretty how pushing result probably normalize country, it least, so truth think bunch in of up to well. portion heard middle kind activity if it like things about when you’ve really that We from anything reports--I things a changed the believe because lowering northeast, terms growth and we’re predicted was works, range, year, next we’re fast should omicron, have not someone really I but shortly moving. it’s the it matter of December a calendar IMF about, omicron in, seen in think do think from start the quarter was, I or probably I I we weeks the ripple probably of GDP least that talking that reported. way their this It’s kept activity quote-unquote, recollection. in three slightly that we this, in robust incredible it’s down the appears my I of no, impact in at people is the we’re the comments haven’t the the guessing - start as it economists. fast a yet. as our and it’s these of but most the with the that people But be started into on in through few immune kind of GDP was really omicron, again, pick because so slope U.S., of now given now a so in But the saw about global and GDP first only, of by it some and quarter

back population, somehow So are careful people to anyway, going those asked--we the economic aren’t in insulated getting happens that’s are we the in a direction example yet. our any a much, assume a not saying and back our driving process long economy, That went what overall offices, just back already a to the but that of way major or little were our have economy. activity always and If from lowers local about completely people in things really, month bit no of decrease associate own or two. from activity ripple in we a - as other yet, people effect etc., but area, not traveling numbers for we signs less, demand the through we’re for of not into in they’re lunch proactively economic not

Bryan Keane

it, that’s Got helpful.

the XX% think well, be you balance could much up know guys the a but if growth the at I look this any as surprised as don’t to wanted know quarter, strength the in it ask inflation that strength how - raised and Just up guide follow-up, call-outs--I quarter. XX% other driving was at just you there. about I number there, last

Don McGuire

only those, the said, based for few was those and balances firm the in as certainly to prepared a we Yes, deferral, for towards at the a we we also the the in some in little in the last working the continue so year expect December. remarks, our we Certainly points month of of do it control the bit end but growth on of quarter, be were had balance from even few the to people number although the lapping growth. a Certainly days were growth wages clients. we the deferrals of driver the number per big said deferrals look the and with as of pays we have but represented expect increase that, of

think I biggest that’s the driver.

Carlos Rodriguez

in deferrals day said social the will, think was everyone security just day by be which in a and package, stimulus--part it just other the need to terms remarks, would through but terms of us, as social like to what refresher, tax to deferrals, a in And significant to pencil you went half--we something lives a half next deferral. of December next which in there’s Don helped I Not balances, his support some tailwind if repaid stimulus is that, our balances security well. and of year maybe That’s on provide those XX. is us

Bryan Keane

Okay, thanks for the taking questions.

Operator

Togut from Evercore question next Our comes with ISI. David

Your line open. is

David Togut

you, and there? outlook? expect As your quarter what ES embedded unpack traction announcement sort see HCM expanding Thank good bookings Vantage trends, with Workforce in follow-up, you looking the XX% demand you Now you’re that and a to in growth Now, recent at functionality, international to Thanks. on morning. Workforce could you comment Could do of Run, XX% your what’s if

Maria Black

double-digit definitely as the platform. Yes, morning, question the just issued. in the the second saw we to offerings, go the comment quarter, growth did in strength Maria. the get off well retirement in across really overall Now our your happy saw our we in With remarks, experienced strong this Thanks cover on release we in solutions, we respect was as stated in had Workforce question, as to the that both. good prepared David, is specifically We that press Run scaled strength market. I’ll for strength performance down our platform, the the on to

with the double-digit Additionally that in we services. strength was strength quarter, to saw so the we also quarter, so the growth second contribution really across very happy international in in GlobalView, the that saw employer our

payroll ability that Now press Now countries, offering. is U.S.-based in could couple offering, global in now Workforce issued have and on the release this a the offer the as to Workforce we I with for the you regarding to Canadian-based relates across that it days on think As imagine. our Celergo our excited multiple the basis, partnership companies process platform Very to last

to for support course the the the in Over growing is with employees of a demand able to to we’re certainly demand, but last on new to this customers really mid-market and pretty their that able decade satisfy years, last couple be offer. international excited ability end the be

David Togut

you very Thank much.

Operator

question Kevin comes Credit next from McVeigh Our Suisse. with

open. is line Your

Kevin McVeigh

Great, much. tougher things bit little in those a you against overall. from unpack improvement a would Carlos, pressure little I a retention bit? talked Can a still you challenging bit more thanks maybe you all environment I think you think a Can so maybe equal, because, client about perspective. reconcile comments that have little environment,

Carlos Rodriguez

tailwinds now, we’re is, stimulus and very our out of are clients low because in clients not--maybe and same all separate At planned those been I turnover tailwinds that think frankly very, retention. areas, in I of switching, where switching, it’s our tougher the really less those from a was as really because our was getting so was There’s on of it’s the right for Yes, retention tailwinds bankruptcy scores also so them for and lot moderation from going a go result elevated in difficult pandemic--there top of the it’s all portion comparisons, that, but lot lower the a to a of rates two, probably was there in NPS we’ve one a away. our strong, the to we term. market, think the our the significant were some of down quarters time, clients so of retention. government thesis client we’d feedback what saying gotten quote-unquote, of few the tailwind all tougher It’s satisfaction some isn’t business, the environment and

seen we’ve of a in our little I driven, down think economically market. and bit they’re that

course a strong previous retention, playing it’s which generally our plan to over expected, hold our alluded sure the of the the of kind also will down onto little we way we’re have we’ve market term SBS out to Our kind that, levels continuing what can down that company. achieve of that it? why is for of think is we the be forecast and implementation, that for is all a retention obviously up and little--is it, ahead that we on well, expectations creation our year, of of in comments better have to were, for despite hold our going bit but are you better levels we had we the if is a of we is plan improving, and because able value the impact other to making the growth question be The saw holding we net than and of which that parts are if service, all expected is, has right onto than of Don’s meaningful the not year, planned. long our I and right

Kevin McVeigh

rate thought I funds dynamics just that, a more so been we’ve it’s of a XX long, or little don’t the I Carlos if would could points, extended Don, I you the means? see I what sensitivity, us Then boost Then extended the in on helpful. the a was just--because guess client so obviously of surprised to effect been was this but maybe but given cycle, front very rate relative basis That’s investment. remind be in know to investment strategy, bit that lag of just there

Don McGuire

what we I increase or you us. instruments, pick-up had invest to significant. environment to and hugely the not our as in so the result, fund a longer a term you like investments rates in Yes, start means know, on million sensitivity question we into XX-month with opportunity But in if basis EBIT improvement to of give invest some have second only, on $X to speaking, Generally would basis, I the and see. the for that why would term in don’t much translate certainly instruments balances until short about that as see rate a XX can we when point term as don’t have short we as term respect rapidly, items short first the with we

the points so intermediate that impact the that before basis becomes over we a and saw period hand, On certainly other short XX-month about that of $XX both the meaningful. if would into XX taxes, translate in million term,

point a we look term we’d and opportunity think is we’d better direction, this some but rates in what continue as those As at to invest we in time, the think What of forecast going the in that not interest in talked a huge half. of guess to we fund we’re see we balance about longer funds is the client second improvement the have to have say--I in I over the amount today. what say future; go

Carlos Rodriguez

could clarify you’re where question extended the Kevin, specifically on portion, the you focused there?

Kevin McVeigh

investment as there client you’d investment extended not dynamics difference the I of obviously revenue guess side, the much extended extended from on the in the benefit funds of the what saw client just timing a those the element is of versus bit fund it, outlook, because the interest of little when term versus you strategy, see the but timing client funds. is on a two terms to in

Carlos Rodriguez

actually year-to-year balance type term, more in flows the credit can more and of average kind quickly funds low the of with our with quarters the the is of tied additional in quality lag effect do line to the we there’s different growth, within that balance Well, bit just a quickly is but a we effect. the volatility but basis, our cash whole that forecast. Long Don more to growth for growth a strategy to there deploy year-to-year to difference are to talking if often so about extended up, the of so a question lag the is market so on number has it’s balance opportunities the forecast year those you’re for do so is When The what more growth, going our the high, balance to actually short was it the basis, in with That the term, has of yes, from client balances. particularly extended a which funds noise. the client would driving balance client on us is balance, funds than little versus how of grow hard couple the growth seeking, we’re funds. catch forth it’s given a can referring reinvest in be

the in impact short it, re-classing the so terms then because strategy, think also the with happening strategy, happening I fund think right so a our and it do net our issue what’s is answer of terms I balance of way in forth, client strategy. how from of really we what’s is yields, happening accounting and with what’s at look to of growth, what’s our impact the with--overall, net there’s

is I answer front, that good. pretty think the it’s looking on short

of as were in new QX talk for ’XX term long at to thing yield, and Just five-years or so in we’ve interest client we in we’re be see The whatnot, two-years wage we’re been--you a X% say example, more a X.X%, QX environment inflation, of focused it’s in seen. the multi-year increases meaningful they rates. are moves a an mechanics from same more for of I this--there’s the portfolio, short term, ’XX, terms but a forth, and way. on anything balance and better funds in XX-years about have and of way our so and not could the our but were in the--you because are not lot oriented about because short re-investments people I long, interest here significant the growth purchases, even so the tailwind in know than of when not term all know, yet invest lot and finally could that it’s would us ready and seven, is on a that, say a version the about front, three, just long we we you our the so talk five, beyond

Kevin McVeigh

have to problem, a going margin You’re high class Carlos.

Carlos Rodriguez

Yes, have years. had waiting next said have at - year and next CEO, dammit, the I’ve right! hair listen But up to are. started I’m then next been XX and year, rates time, go I I we telling this the and when treasurer year, time, rates remember I up I as here to go

Kevin McVeigh

Thank you.

Operator

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

open. is Your line

Tien-tsin Huang

looking better at stuff. control, that bookings, growth, good retention, morning. guys, Really results, raising in-line much balance so Thanks better good and base all good

all that. Just trying keeping is just margin of better function is the well? of so costs as as so understand same, conservatism discussed, the you forces think or for a of expansion, that right, these margin to some you’re the I positive that

Carlos Rodriguez

if Well about question I’ll it. let is conservatism, handle Don the

Tien-tsin Huang

Thank you Carlos. you. Thank

Don McGuire

is think million. Yes, prior by got from we’re pretty think a though, is raised I think should we’ve of our by expenses But revenue forecast, that so prior--from that million I the in forecast and so raised consider, the what terribly you also conservative. we I our not the front answer we being $XXX us, have $XXX reasonable

on - of a If had is that break you start really to that think come down $XX we pass-throughs PEO bit drag margins having margins. to those million so increase, a been of million expectations the you I to better, million able really expense things expense increase would $XXX on be but and quickly in, the that of firming Otherwise, expenses, pretty do of our and we I $XX of up that, our that’s we’ve think more haven’t guidance we our do reason into preventing good margins. set. all baking job a But the clearly what’s done that’s really us,

Tien-tsin Huang

It’s sure. very for good. No,

Carlos Rodriguez

we should R&D think clear I question we that to we in also no particularly have the thing, point make we add pressure not around costs, from sure other that insulated terms so are one is to forth. technology tone, world. is wages, there and and a services There of want on so around costs here your we’re Just company we’re

we We you’ve typical the that prepared the that Don call I’d increases, people, we to do the mid-cycle, felt have wage so sure and mentioned comments our needed to things. around make are doing that something we’ve so actions not and onto because costs we what we some taken people some were of kinds of heard side that are also held attracting the right annual business, our service we in that

there’s come shown, but will Now, industry, we have well amount the of I’m I assuming other industry very question a that not side other and later have coin, but address fair many up the as than other This room a room. good and demonstrated exercise now, the has on and, is on that on. of, The from competitive, that and recent like more to industries. some are want business, a and elastic historically amount every on some signs it is which carefully competitors industries commodity you may because not to pricing there is think, of you and in a as do fair remain news problem

the by that experienced we years the You’ve retention go board. the it’s will are we across that market, can’t passing around we want that cost to through is win higher but increases willy-nilly we and many and rates, driven just in too, heard increases, really forces fact we from price can if us so want market story for

and do We’re thing, some confident are. them the same already of that our will competitors

Tien-tsin Huang

answered you Thank you my on follow-up pricing. Don. Carlos. You Thank

Operator

Our with next question from Jefferies. Samana comes Samad

Your line is open.

Samad Samana

for well. of Hi, curious, business questions. continues good us, strength and PEO, for to of the we wanted source customers should up-selling it the conversions I think of to to about the perform the existing you’re for maybe circle of morning. bookings about that can potential the how much ADP new when time was over my there, SMB versus of remind new I taking PEO base the Thanks source first new How really PEO? to the bookings? we think is it back in side to you

Carlos Rodriguez

a XX%, I think at long consistent it’s pretty around been for time right?

Maria Black

right. That’s

Carlos Rodriguez

our It’s of a that own half, combination our also own own. force. our mine clients, we we sales but of It’s mine kind about mining

bring to, that, to alluded you is large onto as obviously but we very Our installed mine. also the a new able in clients have base sales force straight we PEO,

XX/XX, really if years. I the not It that think I’m much hasn’t changed mistaken. it’s over

Samad Samana

of I think I the of base the should we how as more gross spend clear one a on think guess, should line? Then side about that, base there’s margin standpoint and we onto as helpful. or about UI service of benefits to going how that’s in is tailwind on terms gross forward, the that but and maybe--is from, UI, single a to Great, maintenance more consolidation a on margin a user the think there the that unfolding about

Carlos Rodriguez

my things true where--you fair this matters to the a clients. to standpoint in are I don’t standardize that is that there would competitively know, think from to I’d standpoint. an be really face unified, of invest XX our technology used ago, with to clearly was on best that having of terms money market us the end now, know. to We better a say been, and It of and clients. get obvious will to I we a just But those point efficiency a back efficiently, It benefit be--I fragmented a that each a clearly able we’ve predecessor, intended trying the be winning, there’s our--and you was our got say and difference, us to opportunity think the do get only become it’s that’s our--the where starting we’re think little you it was that products. is it, to There’s allow more but think skin, etc., would ADP having best margin and this lot terms company from of bit I experience the if residual I user one the places in of years an quote-unquote, XX, and makes leverage, a as lot the from not that about make it really, will, was and it one some more to margin more and there best to those our some and primary of historically - and help our experience a that be be driver. about R&D, is is standpoint, products

interacting user matters obviously mobile of products, especially our a clients experience touching of terms with Now and and this app, stuff in the the our lot with are employees engagement.

Samad Samana

Congratulations solid results. on the helpful. Great,

Carlos Rodriguez

Thank you.

Operator

Our Bergin question from comes with Cowen. next Bryan

Your line is open.

Bryan Bergin

morning, you. good Hi, thank

retention. how you switching versus so in a want due the of pick-up behaviors? competitive basis to First, the underlying is out year-over-year XX versus forecasted, closure that dig closures a think I in much losses? follow about more point little about Can you rate up decline business drivers, When you on competitive to bit

Carlos Rodriguez

some down, other categories, Everywhere than really cases solid, say pandemic, but I categories it years. and in would obvious, track went the down. is would be normalization the losses. NPS we has than been losses you it more service nothing like I of know rates losses uncontrollable and but around to numbers but like the normalization in the--that’s all Controllable retention of that call--we one etc. closure way down in there you else, solid happened market. of is all rates. service, pre-pandemic, market wasn’t went the related not rate scores, that have right that word, uncontrollable is better the losses is just business, down bankruptcies, and and are improving fantastic and bankruptcies the in don’t what economic good category, some the of that, Almost there closure of that’s What could controllable to uncontrollable we prior that out product, All I there’s etc.; that during factors, and into of to anything read back to normalization many specifically think our tell

the we along those what’s our that’s taste international what has there retention would economic excuse tolerance as less because strong so We reflected not businesses all normalization those want to - the economically some the in be possible and and because and see going there’s normalization factors be been have that forecast. have the won’t they’re of maintain in in to just in--although in in that levels. we But and you less be we tolerance market to and there, in down a sensitive, it other now retention for mid-market international foolish in up-market, assume have

Bryan Bergin

or dig employees does little a just that? sequential retention, so more? talk worksite point makes in was a model. clients units, a Can sense. PEO but converting bookings, really this to better release so Okay, about increase just the Can here. like tipping better there’s in around here seem better strength, you Then been notable just heard the you bit on I

Carlos Rodriguez

way to back a ES but but few, be and that--we’re these in me good, of sales, we’re good think we’re just headwind year. noise. last clear, just our not the which by and comparisons let in I positive you as thrilled, PEO Part the give pandemic the Yes, as to

that’s because you normalization was growth about and of now pre-pandemic, so direction so back number was great the growth. where you’re to just is is as bit meaningful, pre-pandemic, flow assistance, from that’s tailwinds ES it other X% that through hopefully, but through little I client size more so where weren’t inflation in it the mentioned, and getting what a whereas come in average more growth it’s a it being things growth, news, to in size that little growing wage they from bit is, that going ES, also PEO. But all average size client impact all than back percent of much, do up new in turned some units. of a all an we on bit, not had just the of now, business there X% but it’s wages, which went which which kind the think have clients employee and most that’s particularly worksite and client the get and It maybe robust bit also important those now is wages a bigger it because a of like things the little of X% terms the than X% bigger a cuts color thing, forward, average average that, the know, right have I shared ES in PEO little is doesn’t billing flows so to helping. wage you is and a to, then down the it’s actually of of now, you have and have terms growth Those in sold, bookings. the we sold the through that of do PEO alluding and but the it’s are down Again,

Bryan Bergin

you. thank Okay,

Operator

Our El-Assal next Barclays. Ramsey question with comes from

open. is line Your

Ramsey El-Assal

accelerate sort process. to there my today. Hi where you of could your and HCM payroll of customers, question for that whether opportunity an base ask taking products the cross-sell there, are you your and into of I update terms wanted thanks you about potentially in

Maria Black

products as an our our drive Yes, bookings products business to business, from new on between HCM add-on to new comment of market go as well attached HCM to combination so the and happy logos perspective. our sellers how

As the that’s in initiatives about are you existing our UF HCM next existing the attached. impact for bookings make, make talked making the expand investments are and that that a that investments and our investments lot the new each of continue that our to coupled all impact new offerings will can to a imagine, and our products investments gen years logos and that making lot can in well existing into our several the we’re - just mix we’ve spoken execution to it a of of clients to anchored one new the and about down the about Excited belief products, products, with platforms bookings on continue of that the we into between we we’re market in the will as these as clients. making

Carlos Rodriguez

before, our we have rates, management, and attach this call time high to Our said good, pretty in labor, attach some workforce products attach used like rates. particularly general in it others high rates rates, have have categories like--we others and attach are those to tend low

but only come we still to categories penetration products. to of opportunity for market of we part fact many sell low-ish about grow of us. is logos, the is think years share, and because our a our now very of I for we’re our many in share obsessed is, wallet new have not want which huge whatever The opportunity to

Ramsey El-Assal

on a a Interesting, to would pulled before. you relates had you here. M&A that valuation can on is okay. But in on balance A couldn’t allocation deployment of now list a an as specifically and shopping lot that maybe your me the have and has shopping Thank the helpful. dream for created maybe a be maybe sheet it you if know whether--you update don’t for know, list, bit. capital you go after where quite a multiples M&A plans follow-up sector environment Obviously the situation that. I in

Don McGuire

always think and etc. desk done that I things being flowing of Yes, everybody’s evaluations there’s opportunities, across

to we extension be pursue sure to a weeks just it consider that’s has have While that has objective we we our objectives, so either it’s--it kind to that continue certainly If something and and and portfolio, haven’t take or by to whether really it’s of guidelines, to than niche, into look the anything make true more four the ago. those to fit three that? that look Carlos, if have, expand a become months I product I things or to the has opportunity to might those more seriously few be a or what last geography been and something filling currently going bit work companies, to harder to don’t want will. on changed falls categories, we’ll if don’t we’re know, you seriously say, our you we’ve affordable is some so we

Carlos Rodriguez

No, buy their pay in cases, was some all companies. thinking was that if we’ll I people us,

Ramsey El-Assal

All much. appreciate Thanks so I fantastic. it. right,

Carlos Rodriguez

And then we can clean up. them

Operator

with Baird. Our Marcon next from comes question Mark

is line Your open.

Mark Marcon

What’s could us generation next morning the congratulations to the update you Good terms what everybody, updates pay, wondering, that been the a of there? rolled of with products? extent some regards I out? quarter. was In couple of has give further to on and

Carlos Rodriguez

XX% new sold we’re midmarket, next it’s clients, get now portion think calendar-- it on in I our to had pay, we be it you midmarket, somewhere GA, we and XX really of selling because when between the is really of the think, new is I we gen call end, our expect as know at--we’re of the and call to think a of in the good, I would to so part say would XXX, I coming a of first--I call what which XX%, year core end platform, you being right businesses

Maria Black

year, calendar that’s This right.

Carlos Rodriguez

We going - that I we many got sold judging of call think, terms say January, good, in and to starts. of so investor a they at it’s important the of early December, had what so for that’s have are into would and good clients, clients, a for by clean then words, December, are calendar of in you fairly say December-January we start to talked terms avoid on of what late we the quarter getting and January. End X, of fairly day. because every of really about that’s and lot that, calendar on beginning ask of would started it us, and starts the we had of in and a that the year, end but we I of year end those then with I’d up because try this so and are a clients that going kind season sales sales results we other start forth, I would number We previously, how point those results happy, were season, well GA of guys January track running. quarter, specifics where you I want say, we’re

Mark Marcon

excited capabilities able is million you’ve know, doing like--you about give the at huge of then of of is comments much end you market? low is a the companies and it the that one penetrating that early Then possibility how of how single scale, the had client, great. market? with Roll, more Carlos, Can are on service top sounds obviously That’s day, was globally highlighting that about the you at a transactions expand how breadth, some flipside, much Roll talking which one for that--now how a being the terms you micro part and that of mentioning on had and to with end sense in in just just that it, that gave, experience impressive. us you also Then does the the

Carlos Rodriguez

a about and because in each because something well quite Roll that opportunity won’t it trying think--I’m now, on sense makes in were They’re give quoting that way rates a we for you client of answer, know, we good obviously call, million so these growth example you rate, say a segment about take performing think, the we’re forth, processed for HCM, different insignificant you the those preparing the allow the be $XX growth a process me little Roll we to think because up geography, to bit in ADP to terms segments. have it so extreme the that Roll segments start-up, unique, other my all, Dany get today, to a but all trying about we’re and give but as than its As are we and paychecks we if and non-answer when eyes they’re not roll, to we’re cut you GlobalView. to be Roll opportunity, excited love market compare. the all role the five other of years. it’s excited guess little let a us you if looking excited a me I the them you client, employees, to and XX that that exciting really would most excited to are payroll bit down that their lot I of one million--that within micro exciting you feel concrete, but in us. all--I it because and day. smart and Roll small I on of would is like growth They to for mean, excited a all-in I’m have across children, that because--like, in and market and opportunities were hardest million segment and when but and XXX% multiple That’s I a in frankly, really is that’s marketplace it’s Dany your company won’t in won’t is our make in make to a about hard up billion of but it’s versus really, insignificant that. so have It’s we versus the or but the I about clients market create we’re has we that, think processed for say ability and I multiple like compete little also

Mark Marcon

was Roll, capture just getting you’re guess that’s I terms how introduced way was it at, really I you in about of more traction, first talked there was on example, it’s when like thinking so it modest I some you wondering good big about be. in if what but getting manner, that a could the--for sounds it, to was eventually how

Carlos Rodriguez

traction. definitely It’s good getting

over-play not a because we large you think together, guys pieces you We’re so it, to need it that have very shouldn’t to trying into but organization, about forecast. and our excited about definitely how the it again over--I’m fits fit all

I move to did. it just points you be to math line the impact, we’re about that and to rate be That’s growth dollar thinking pretty on share the the should or this not feel a from way of back growth, against able and not that works. etc., to by ADP’s two to I segment that, but go certain market something as in Just that’s top going We the there competitors. hate good in two. what product to going terms wish one do percentage next competes about year

work things HCM, a gen lot Roll, are to together these get PEO that. gen to to of - together next All for us that things - to There GlobalView, like numbers, of - next and payroll, Celergo. come have the have we

I We’re, are portfolio more think that, I reporting all and success, a effectively, having businesses combination think, leads others we pretty at the results that to those forecasting. and times, manage the you’ve as of good some than we seen, of

Mark Marcon

that, thank you. Appreciate

Operator

question with MoffetNathanson. Eugene Simuni next Our comes from

Your is open. line

Eugene Sumuni

about another finance ask guys. strategy. Congrats Wisely morning. product Wanted and good you, Thank on to quarter, your personal general strong

this start providing maybe us that transactions, that amount help Thank metrics your overall at big as can like just the will area in the and you on? it’s you pay part what point frequency of the some number track remind of Can cardholders, businesses for highlighted offering prepared your and the of spent, a remarks. this like but are such milestones portfolio, provide, bill you. small some You I next growth know strategy, us some so of

Maria Black

overall where incredibly with and over then basis the for be those and give talk us, opportunity happy time. what we we’re so to Wisely it’s exciting Yes, to of comment strategy metrics - product heading solid growth the on can through could some

a pay processing bill have just a is the our that scan financial management. significant. and of the is overall app bill education, probably MyWisely strategy overall heard mentioned pay, app of the savings which to we relates exactly we that app of with the in use financial facilitate the financial in type we’ve management within the strategy you it is As believe today, employed. is well, That which through as tools, it launch the really happens Wisely portfolio, part we wellness, anchored that strategy budgeting, is rewards. think What feature, etc. bill and through device, to management actually the respect It’s end-to-end any check and financial mobile all where so an you what all - MyWisely can you online

Wisely. with we’re respect them, around many cardholders, as access our the is EWA refer to which employees etc., that for at right ability the they to really actively that’s launch that forthcoming how we wages that, to a this back other to also looking question addition or to it, to overall now, that. that earn of clients’ the our gain earned the monitoring as they’ve access, In early employees the big our equation is certainly wage so Things to overall is we’re piece thing

of competition at using other on quality cardholders the what the app feature type looking in There We’re we is of supersedes relates app, data it what functionality. space. reviews the types have that are the to certainly the some of look many as some could at how you of

the we’ll in comment let that of is We’re disclose tracking or pretty impact financial creating Carlos tool, the and our on cardholder that. Dany I’ll app market. when if proud wellness MyWisely and

Carlos Rodriguez

billion. mean, is see excited conversation open Roll. much takeaway not but like than that’s Roll, record, there’s ADP, to be as the always about of the wouldn’t again, broken to the as Roll, going a the Wisely Yes, disclosure, is it I to bigger we--I at of Wisely, things portfolio about of a are $XX excited relative--I we and top relative a to we’re different things equally think But as because that this again, things same have order the get results, are again, and to trying on we’ll--I we’re mean, be the to in but about about and list be overall else we right size get hate that for that open-minded growth of us. to We’ll that suggestions something if go have drive to so many the right

and parts the even, overall those is giving per companies us, how the card, I the of card a do is All is, don’t start other of need and would we know, money that smaller that, if we think lots to By can average. relevant, is about are clients in give not--there then have away X%, much tell our it really than would faster anything, business to this have how deal. we to math to - we’ve overall got around around that, would that--you that trying head, it, on probably--I’m math per But been bigger indications - things that, to Relative that mean, like terms want XXX% that bookings, it of going we ADP, way, that, things smaller and X% pays have that to anyway. make do will because is be it’s done to control, the going us it you it revenue. to more it’s because do if and misleading--because we it’s in growth you’re and my and Wisely, terms take get all, would overnight, have talking we all we and this or think a of of progress some to in deal because new they take we out the it think time about that’s all right, our silly, XXX where we’re much it we the get about not first not we’re disclosure could happen, distracting just asking I total--actually growing are but to you than our of a bigger and but other exciting things you rate I line about the it’s help are is we drivers and trying more things and things others pretend those you their give little business that have substance of results. go do like of what, if happy might than of maybe relative big

Eugene Sumuni

much, you very guys. thank it, Got

Operator

comes Faucette Stanley. question Morgan next from Our with James

Your line is open.

James Faucette

about, we related capabilities Thank you a Most very little strategy. my about mentioned service well ask past, much, to the takes just answered, been you areas. SaaS but bit a of the I your you’ve initiatives are cause be like would persistence being of morning. how love differentiated to needle, where the those In a to fits capability your should differentiator business. of about look and within guess look in I to thinking you’re grows more of talk probably get I’m at going should and that and players? services or recognize wanted own the a players. in questions comments, it I good service it wondering of to customer levels while have think AI service but may as recent own about traditional a like How future just we we importance implications self most what sense the move strategically think in and SaaS levels service your the few

Carlos Rodriguez

a for great a gate, whether a more have we because couple learning, used that up have a comes coming the information so but can not also to question whatever management it. AI, automated, like you we want there. lot among of data, obviously think, just from have be topic will, opportunity it’s of provide, of if Again, the we we--that’s that of the clearly we to because a advantages see team, term I machine use you out lot It’s board, the

about data we to then meaningful, disclosure that’s the going a for We to is things, from able them spent to of have You deployed and think data be the around onto that. all talked growing able way We’ve of the of them or have and in kind disclosure, of, longer, are to to think that how guidance of opportunity fair more real a the to our a can years we’ve recently for we in point those a of you’ve be clients, say are around for it’s of for clearly more would overseeing leveraged, it think then to that’s about about, some things investor you the us we someone I into who already XX owning information a I bots advantages our and day, and really giving press be but lot I done ADP. that which seen on like that take chief be in there’s I how five of value-add going because how have better if of releases, to us, time a it’s monetize monetized. AI, those things, find great or to to process some turn appointed can amount are question more true opportunity be over next officer, think, being which we then marshal actually that them you’re talking scaling, advantage so and can simplest our to will, and I and etc. that hold previous sell advantages resources have that already chat create Everything front more the that and substantial to area. kinds we on clients of that

James Faucette

That’s Carlos. great, appreciate it

Operator

We That America. have from Bank time Kupferberg for comes with one of Jason more question question.

is open. Your line

Jason Kupferberg

the Thanks fiscal guys. to it start so midpoint, the for guess going at up $X.XX. guidance just I EPS with X% ’XX wanted we’re call I -

math float that breaking to down, outlook. correct. just looks Just it and that presumably revenue raise is the $X.XX income the if see is expectations I rest like [indiscernible] in of that, wanted about the

Carlos Rodriguez

pretty That good. sounds

with, and we bad and not is a or to forth. mean, should you’ve that us in, you and rates the exactly noise this economy not, in growing this opportunity our are first that good maybe lead ADP. growing, understand and forth. are and growth improvement preparing going thing a of stock front think investing, so bookings theme--whether for to expect terms like really robustly heard that I but call right that’s hear should that the big, in This environment is market is--I end is the of the are despite you second--we us, our The theme hopefully, the is the time it’s so you long term from and should margins ourselves, is so the the our to in

the up market think short of haven’t during term the right, it yet with you’re whatever talking have all levers by if distracted wage keep it’s get a like don’t because in Just that hit that the the we company. implication been the probably because of we seem panicky necessarily not noise, I about by we’re growth, we’ve which rest the we’re is but is call, the price is but making we doesn’t answer raised much, profit things we sure terms

wait sense. there, we normal We’re our and not going and to base, action hiring have will that not that, we on doesn’t to that but tomorrow but times an going we increase until do make get forth where to we’re wages price take are natural do unplanned so and to because

make forth, it. little schleppy deliver it’s guys careful now that the hiring to at. our in we’re and still When the pretty execution think that the feeling have of needs this you about happens that right and described a to We everyone timing, felt, started damn about look as factor the wages there’s able the it. But way down be to and now like are things same so so and you lap picture. frugal thought of and company is do still and not we we’re proud it. very delivering pressures and revenues into and the sure going delivering, we that and two, The if inflationary we’re grow the opposite, in, the to admittedly, pressure We’re good you able quote-unquote all add pretty we the came and results months timing damn damn a how definitely our feeling fact by ago, think on we hit or when, we’re staffed, and panic, we’re that to more what that at and expenses the missed went quarter but way than But very thought, the have that comparisons, were numbers you back some down we it we quote-unquote the expenses It’s we’re to increase is call XX so right? and we things we’re never pretty very that go now as to and and doing, up, we’re and because terms pandemic stingy as to stuff our have much time and up way is good.

Jason Kupferberg

all those good Okay, are points.

any me, wanted see on market, from seeing in down the elaborate the changes to mix midmarket, or the any across one little Interested Just you last what of just you. competitors Thank bit landscape, competitive in the enterprise-wide. if just aggressiveness I a spectrum. you’re could

Carlos Rodriguez

if any--there’s share, lot us, maybe I rising our on been look not have don’t each balance environment trade, think competitors are don’t there’s I share on other’s couple I trying in because we’re that about you is before better think at may of steal as than and usual, now the know, a growth not--I been we others hard a we’re broad I feels one all stable That to recently no--I only so if don’t see--I segments, Again, some before, say segment, to mean, a very we’re like so be opportunity usual. the Maria, I’d of happy it, on. but But boats? we’ve of, make now but you with focused than know see think gaining business people fair than when a and different all tide a pretty don’t is mean, as exciting, industry I our compete in statement doing sweep--I more but us there’s it’s sweeping there’s we getting It environment. many the know, our any--? other compete that has ground don’t it’s good lifts it’s which general and--what that overall of

Maria Black

win has I would concur. overall anything to share intend I echo I materially the and and our fair the sentiment we the and changed. HCM continue certainly think on space environment, But more. don’t to

Jason Kupferberg

Okay, that. guys. appreciate Thanks I

Operator

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

Carlos Rodriguez

you. Thank

of help basis allocation, environment able they and where all the the obsessed it like general and focus the world. side, was of market that this I work government the We of XX I’ll grateful I capital to further one discussion cost dividend, important economic as whatever may the question anyone and up something year increasing in expense be is through be our where pandemic, XXth the all capital. we’re we forth, too a cost times is away so in are the so in still the our functioning. the hurts That of I’m important and the Listen, will an in a of our forever cares structure happening we dividend, it - economy before. proud but is would incredibly conditions I a had intended the love because and market of to of did glad we ADP dividend, it fewer to doing basis period. company years we money is took difficult the so place trucks early someday every changes. we how in mentioned at some basis, the our be regulation and still we and changes, But dividend, terms because we’re people, was felt were, I’m of you Amazon one created stepping because how the stock day-to-day deliver besides competitively what where asked us and we’re associates, and machine, just--I commitments, the is about a things--we might today positioned careful issues I we XX much thing not but being if people, as not I to ton in a than of dividend. I’m XX the had factor it hurts without us on think get now because I we which matter for on environment our clearly for look would which market some entering were that I in this with I’m and today’s and five, of as dividend, that were what’s and are workloads the I clients the where running dividend, focus maybe years of like consecutive think about back on else, but allocate Nobody get given of a careful, clearly did, little to understaffed and and capital like be obviously, downdraft across most you sure balance so much the and the as as and can’t go that sheet, were forth, we help gains our we positioned because omicron no and our wishing of not again, quarter have associates, and increases ago, our so all and and but what and years we’re on, better I’m we forth, about that back get way that get were XX from--despite Just on ago, ago, stimulus, important dividend other indebted yield, years people the a think, on bit - but the the whole were for the a our a we parts questions

the us, economy, I forward they you. to the the you catching credit quarter. think, a world we the appreciate Thank deserve and listening in all and role in associates up pandemic, that, through With think I role you played. look again we I helping get our with next for played the to

Operator

concludes This conference. today’s

disconnect. great a day. now have Everyone may You

Automatic Data Processing (ADP) 26 Jan 222022 Q2 Earnings call transcript